Condo owners win lawsuit

August 21, 1994|By Patricia Horn | Patricia Horn,Sun Staff Writer

A $6.7 million Montgomery County jury award to a Rockville condominium association -- one of the largest jury awards in a condominium construction defect case in Maryland -- may help other homeowners win compensation in similar cases, lawyers familiar with the case said.

The case is significant because it allows plaintiffs to collect money for attorney's fees, which would enable more groups to sue builders, according to the plaintiff's attorney, Barry L. Steelman of Baltimore.

For the first time, a jury granted condominium owners compensation under the state's Consumer Protection Act, an act that protects consumers from products sold using unfair or deceptive trade practices. Under the act, homeowners who win their cases may sue to collect attorney's fees and litigation expenses as well as damages.

In addition, Mr. Steelman said, the case strengthens and clarifies previous rulings stating that homebuyers may hold builders and developers responsible for failing to inspect and supervise work done by subcontractors. And it reinforces the right of condominium owners to have warranty rights both as homeowners and condominium owners, he said.

The case -- The Council of Unit Owners of Bentley Place condominiums vs. The Milton Company, et. al. -- involved the Bentley Place Condominium, a 240-unit wood-frame Rockville development built by the Milton Co. and Tuckerman Lane Development Co. between 1987 and 1990. The condominiums sold for $130,000 to $220,000, according to the condominium association.

Milton Schneiderman, a Vienna, Va., developer, an officer and director of both the Milton Co. and the Tuckerman Lane Development Company Inc., was also named in the suit. The Milton Co. has since stopped constructing homes, said Mr. Steelman. Miles & Stockbridge, the attorneys for the Milton Co. and the Tuckerman Company, declined to comment on the case.

The condominium owners alleged that their homes had numerous construction defects, including leaky roofs, inadequate insulation, improper drainage, faulty air conditioning and heating units, and inadequate soundproofing.

According to Mr. Steelman, all 20 buildings in the development ++ had roof repairs before the trial, 18 units had their pipes burst this winter, and more than 70 percent of the units had deficient soundproofing. Even when repairs were done, said Mr. Steelman, homeowners had to get them fixed again or found new problems.

As a contrast, the plaintiffs cited advertising by the building company: "Our goal is 'zero defects.' So every piece of material we put into your home has to be the best available. Every new state-of-the-art technique we can use -- for weather proofing, soundproofing, roofing, energy conservation, you name it."

It was that type of advertising -- which the Milton Co. argued was mere puffery or, at the very least, an unenforceable promise because it is so general -- that allowed the condominium owners to use the state's Consumer Protection Act. Attorneys for homeowners say they have long believed that they could win a case brought under the act but have simply lacked the opportunity since most cases settle out of court.

"That is a positive development since it costs the consumer or the homeowner so much money to pursue these cases," said David Freishtat, an attorney at Freishtat & Sandler in Baltimore who frequently represents homeowners in similar cases. "It is a vehicle to recover from a developer for an inferior product or misrepresentation. It allows them to be made whole to recover attorneys' fees."

After the trial, the Bentley condominium association petitioned the court asking for attorneys' fees and litigation expenses, said Mr. Steelman. These remedies aren't available through warranty law.

In addition, the act allows plaintiffs to "pierce the corporate veil" and hold individuals responsible who misrepresented the quality a home or deceived a buyer in some way, added Mr. Freishtat. In this case, Mr. Schneiderman was found personally responsible for $1.06 million of the $6.7 million in damages awarded.

Unless plaintiffs "pierced the veil," only the corporation could be found liable. Since the home building business is composed mostly of small companies, many of which don't have the assets to pay a judgment, plaintiffs who can't enforce personal liability may not be able to collect any money.

Attorney William Shaughnessy of Kaplan, Heyman, Greenberg, Engelman & Belgrad, which generally represents builders and developers, says those aspects of the case will make many builders rethink their advertising.

"Six million is a significant judgment," Mr. Shaughnessy said. "He [Mr. Steelman] was able to obtain a judgment personally against the principal developer and I think that is going to cause builders and sellers to look twice at what they put in their sales literature because they will be held to that standard if there are any problems."

Damage awards are rising in general in defective-condominium cases, he said. Condominium associations are becoming more familiar with their legal rights and are pursuing more claims in cases of defective construction, he said.

"The money award is probably the largest jury award in a condominium case in Montgomery County that I am aware of," said Jeffrey Van Grack of Kass, Skalet, Segan, Spevack & Van Grack, P.C.

"If those issues are analyzed and affirmed in an appellate court, that would be more valuable to condominium associations around the state. That would give me a Maryland reported case to argue to a judge and jury."

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