Developer hit with $2.5M verdict

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“Blame, bully and delay.”

Hyannis, Mass. attorney David V. Lawler hammered home those three words in his closing argument to describe to jurors the conduct of a sophisticated real estate developer accused of swindling his elderly clients out of more than half-a-million dollars.

When all was said and done, Lawler was able to convince the jury that a Connecticut-based realty company and its trustee had engaged in fraudulent misrepresentation, breach of contract and unfair and deceptive acts.

For Joseph and Ruth Black, that added up to $2.5 million.

“When the real estate market … collapsed, the developers felt that they were on the losing end of a bad deal and thought nothing of tormenting my clients and dragging them through this process for almost four years,” Lawler said. “Having to carry and maintain … property without even being able to use it created a tremendous amount of stress for them. This couple was in a complete and utter state of flux.”

The lawyer for the developer, Christopher J. Kirrane, who practices in Mashpee, Mass., unsuccessfully argued at trial that his client acted in good faith and was, in fact, the victim of breach himself — at the hands of the Blacks.

Delay tactics

According to Wisconsin real estate attorneys, cases like this could start to pop up around the country, although they haven’t hit the state yet.

“There have certainly been allegations of stuff like this,” said Milwaukee attorney Lawrence J. Glusman, “[although] it’s easy to make a fraud claim, but harder to prove.”

Glusman is currently representing the developers of Park Lafayette, a 281-condo unit development on Milwaukee’s east side, in approximately a dozen lawsuits seeking termination of condo purchase agreements.

He is also involved in a foreclosure action that was recently filed against the development. A hearing on a pending motion for receivership is scheduled for October 26.

Another Milwaukee condo complex, Wisconsin Tower, also recently had a foreclosure suit filed against it by M&I Marshall & Ilsley Bank.

“It does leave people in limbo when you are putting money into a new build and then you wait,” Glusman said of the recent developments gone bad. “Then you are subject to weather delays and turns in the financial market.”

Creditor rights attorney Seth E. Dizard said he has had developers coming to him because they are being “squeezed” by banks.

He is the receiver on a condo high-rise project in downtown Milwaukee where the owner attempted to “strong arm” his bank to get money for improvements and control of the complex was wrested away.

“I’ve seen lenders who have forced developers’ hands, more so than developers who are trying to shift risk of developments to proposed buyers,” said Dizard, of O’Neil, Cannon, Hollman, De Jong SC.

‘Reasonable efforts’

Boston real estate litigator Donald R. Pinto Jr. noted that there is nothing unique about the Massachusetts case.

“These kinds of cases are filling up the court system these days,” Pinto said. “I’ve seen any number of disputes in the past year or two that are a direct result of plummeting prices and a chill in the real estate market, which causes people to see the benefits of going forward with a transaction differently than when they signed it.”

The plaintiffs in the Massachusetts case, Joseph Black and his wife, Ruth, entered into a purchase and sale agreement with Capital Trust of Connecticut and Falmouth Ox-Bow Realty Trust. The transaction was for the sale of a home that Ruth’s family had owned for nearly 100 years.

Under the terms of the agreement, which was reached without an attorney, the developer was required to use “reasonable efforts” to obtain approvals needed for a multi-unit development.

The Blacks reportedly were under the impression that he would obtain the permits from the state and then “flip” the property. They subsequently accused the developer of failing to take adequate steps to close the deal.

Pinto said the Massachusetts case erupted into litigation because the purchase and sale agreement was drafted in an imprecise manner. Contracts like the one the Blacks entered into, which call for one of the parties to make “reasonable efforts,” allow too much room for interpretation, he said.

“It sounds like in this case there was some discretion in the developer’s hands,” Pinto said. “If you have a term in the contract that calls for something like ‘reasonable efforts’ to be made, you’re creating some wiggle room, which can lead to some lively debate about whether that standard was met.”

But Lawler said that he had no doubt “there was an intentional delay by the developer to put himself in a better position, with the hope that market conditions would improve. “While a better agreement would’ve helped… what the developer did was wrong and it was, in fact, an unfair and deceptive act under the law.”