A Jackson County grading company was left holding the bag on more than $200,000 in site work after the developer who hired it went bankrupt.
The grading company has filed a lawsuit targeting the current property owner in hopes of collecting. But the current property owner says he has no obligation to make good on work performed under a past owner. The case is slated for a trial in September unless a settlement is arrived at in the meantime.
Buchanan and Sons was hired in 2007 by a Georgia developer to grade a 20-acre mountainside tract across the road from Harris Regional Hospital in Sylva.
But he “never paid a nickel,” said Mark Kurdys, an attorney for Buchanan and Sons. He also never made a single payment toward the purchase of the property.
The Georgia developer bought the property from James Vanderwoude, a developer and businessman based in Franklin.
After not getting paid, Buchanan and Sons quit the job and filed a lien against the property when Vanderwoude appealed to them to stay on board. Vanderwoude promised that they would be paid down the road, according to Chris Buchanan, vice president of the family grading company.
Specifically, Vanderwoude asked Buchanan and Sons to keep up with necessary erosion maintenance.
“Vanderwoude said ‘You have to maintain this property. You can’t just walk away from it. Otherwise it is just going to wash down the road,’” Kurdys recounted during a court hearing earlier this year.
Meanwhile, Vanderwoude foreclosed against the Georgia developer. Vanderwoude regained title to the property less than a year after selling it.
“In that intervening year, $214,000 worth of improvements had been made to the property,” Kurdys said.
Prior to the foreclosure, Buchanan and Sons had filed a lien against the property. The company also planned to bid on the property at foreclosure.
“I couldn’t afford to let $214,00 just go away,” said Buchanan. The company was out the cost of the labor and equipment to do the job and was never reimbursed for it.
If Buchanan and Sons got the property, the company would flip it to a new buyer and hope to recoup its costs on the selling price.
If someone outbid the company at foreclosure, it would at least drive up the price of the property. Whatever was left over after paying off Vanderwoude’s loan would have gone to satisfy Buchanan and Sons’ lien for the grading work.
“We would have been second in line and gotten our money,” said Buchanan.
Verbal promise means little
But before that could happen, Vanderwoude came to Buchanan and instead suggested the idea of a joint venture to develop the property together, Buchanan claims.
“He enticed my client into believing there would be a way for everyone to be made whole,” Kurdys said. “He convinced my client to forgo opportunities to protect himself.”
Once Vanderwoude foreclosed and got the property back, he backed away from the idea of a joint venture. He also hired another grading company to take over the work at the site.
Vanderwoude’s attorney disputed the notion that his client had an obligation to Buchanan and Sons. He said talk of a joint venture was just that — talk.
“There is nothing in writing where my client agreed to pay that debt,” attorney Bill Coward said in a court hearing earlier this year. “Those are just proposals.”
Vanderwoude did write Buchanan and Sons a letter confirming that verbal discussions for a joint venture had taken place. The letter talks about various options for joint ownership and shares under a newly formed LLC. But it falls far short of a legally binding contract.
Coward argued in court filings that Buchanan and Sons was owed money by the Georgia developer, not Vanderwoude, and that Vanderwoude has no contractual obligation to pay Buchanan and Sons anything. Coward further suggests Buchanan and Sons “overbilled” for the grading work they performed.
Kurdys argued that even after selling the property to the Georgia developer, Vanderwoude remained involved in the property’s development.
Vanderwoude advised the Georgia developer on how to develop and market the property, called Villages of Sylva. They were “agents of and for each other,” Kurdys claims.
“The value of that property has been increased by virtue of my clients’ labor and material, and there is evidence that all along [Vanderwoude] had an interest in the property,” Kurdys said.
However, Vanderwoude asserts that is not at all the case.
“There is no evidence of that at all,” Coward said. “There was absolutely no connection between Mr. Vanderwoude and the former propery owner.”
So far, the only thing built on the 20-acre site is a Nick and Nate’s restaurant. At one time, Nantahala Bank had expressed interested in building a branch on the site. Both had contracts to purchase lots in the commercial development for $350,000.
Buchanan said he should have been more savvy and less trusting when performing the original work. Buchanan said contractors and graders have to be far more careful today than they did a few years ago when hired by developers given the economy.
“People are coming up with any reason they can not to pay you,” Buchanan said.