And The Saga Continues – 4th Installment

A brief summary of previous posts (installments) pertaining to the SOA/SGCC Purchase and Lease Agreement litigation follows, for details just click on the referenced post:

Installment 1  – In our July 22nd Post “SOA Legal Complaint Against the SGCC“, SU documented the civil action that the SOA filed against the SGCC for breach of the Purchase and Lease Agreements  by failing to live up their warranty obligations with regard to Rockery Wall repairs, as well as their liability for a water well pump replacement.

Installment 2- On July 23rd SU published the “SGCC Response and Counterclaim to SOA Complaint“, in which the SGCC denied all the SOA allegations, accused  the SOA of misconduct, misrepresentation and withholding of information (i.e. implied fraud?) when entering into the Purchase and Lease Agreements, and countersued for their own damages and re-formation of the Agreements.

Installment 3 – On August 5th SU published the “SOA Response to the SGCC Counterclaim“, in which the SOA contended that the SGCC allegations were too vague, too ambiguous and lacked particularity to respond to, thereby seeking more definitive statements and a dismissal of their claims.

Which brings us to the latest legal filing, this one by the SGCC, which may be read in its entirety via the following link:

SGCC Opposition to SOA Motions for More Definitive Statements and to Dismiss

In the above filing, the SGCC basically refuted the SOA’s claim that the SGCC counterclaim was too vague, too ambiguous, lacked particularity and hence provision of more definitive statements were not warranted nor was dismissal of their counterclaims.

So how did we get here?

It all began with the ill conceived SGCC Purchase and Lease Agreements, when the SOA paid $2.75M to purchase the SGCC Land and water rights back in August 2014 and then leased it back to them at $2,200/year for 90 years.  Under these agreements the SGCC had certain obligations, which the SOA felt they were not living up to. This came to a head with the controversy over liabilities associated with the Rockery Wall failures adjacent to Hole 5 of the golf course, which involved both SOA Common Area and SGCC leased properties. This liability controversy was placed on hold via a “Tolling Agreement”, under which both parties agreed  to put any litigation on hold pending the outcome of the SOA’s lawsuit against the Somersett Development Company. Under this agreement the SGCC was to pay the SOA $500/month while it was in effect. The Tolling Agreement was terminated December 31, 2019 and a SOA Executive Committee was established to negotiate a settlement with the SGCC. The Executive Committee consisted of SOA Board members Hanson, Baker and Fitzgerald.  This Committee apparently met four times (February 11th, February 25th, March 16th and April 11th) without reaching an agreement. Information derived from the meeting minutes, which were not very inclusive, provided the following information:

  • Feb 11th Meeting  – The SGCC claimed they spent $74K of their own money to repair the golf course. Seth Padovan, SOA Consulting Engineer, recommended that the SOA and the SCGG split the repair costs.
  • Feb 25th Meeting – The SGCC offered to pay the Association $30K, over time, to the Association toward the repair costs. That they have already spent $129K, including the Tolling Agreement, of their own money toward repair costs. (SU Note – The Tolling Agreement ran for 18 months, at $500/month this equates to $9K paid to the SOA, not sure what the other $120K applies to as the meeting minutes were  not very complete).  The Committee then passed a motion to extend to the SGCC a counter offer of a 50%-50% total cost split.
  • March 16th Meeting  – The Committee rejected the SGCC’s $30K offer and extended a final counter offer in which the SGCC would pay half the total cost amounting to $264K, the amount due after all credits and expenses have been applied (SU Note – The meeting minutes did not provide a breakdown of what these credits and expenses consisted of).
  • April 21st Meeting  –  No SGCC representatives at this meeting, only the SOA Board members. They discussed an April 15th letter from the SGCC wherein the SGCC advised they could not accept the SOA’s $264K offer and were unable to provide any counter offer at this time.  The Committee then passed a motion to instruct the SOA Attorney (Michael Schulman) to proceed with litigation.

SU Comments

  • It is a sad situation when one Somersett entity has to sue another, but SU believes the SOA was left with no choice here. The SGCC’s $30K offer was obviously unacceptable given their liabilities under the Purchase and Lease Agreements. In addition the caveat to pay the $30K over time was somewhat laughable.
  • The offer by the SOA to settle for $264K was more than generous, given that, per the Tolling Agreement, the total costs for the hillside repairs was established at $680K. It is still unclear where the $129K in credits and expenses, apparently accepted by the SOA, came from, as $264K is certainly not half of $680K.
  • At $264K, the SGCC could have met this by simply assessing their equity members $1000 each (they had 274 equity members at the end of 2019).  Not an unsurmountable amount, but then again the SGCC has always been willing to take from the SOA, while providing little in return.
  • Unfortunately there is no doubt that the SOA will now rack up significant legal fees in pursuing the litigation. Perhaps encroaching significantly on the $264K the Board was willing to accept as a settlement.  The SGCC will most likely not have this problem as their Attorney of record is also a SGCC member (pro-bono or contingency?), or perhaps the SGCC will yet come to their senses, accept the $264K and we can all be done with it.
  • It is also curious that the SOA Board chose not to apprise Association members of the filing of the civil action and the basis therefore.  An issue clearly of utmost interest to many owners.

Copies of the above referenced Meeting Minutes, including the SGCC refusal letter, may be accessed via the following link:  SGCC Executive Committee Meeting Minutes

Reader comments are always solicited.  Likewise, if any SGCC member wishes to post their own article in response to the preceding, they are welcome to do so by submitting it to somersettunited@gmail.com