In the booming Brunswick County real estate market of not too long ago, all was well between the Chirico and Hyson families.
James and Bridget Chirico and Rodney Hyson Sr. and his son had a longstanding business partnership to develop property and build high-end condominium projects like The Preserve at Oak Island and South 0port Crossing, close to the Fort Fisher Ferry.
The families are now central figures in a contentious tangle of at least 50 lawsuits that includes Preserve primary contractor Superior Construction Corp., numerous
subcontractors and a host of other parties.
The relationship between the Chiricos and Hysons began deteriorating long before the lawsuits were filed, according to court documents. James Chirico and Rodney Hyson Sr. first met about 10 years ago when Chirico was a senior vice president of quality control at Seagate Technologies, Inc.
The Chapel Hill couple was looking for a vacation home on Bald Head Island and found Cape Fear Realty in an Internet search, court documents state.
Hyson located a beach vacation home on Bald Head Island in 1999 for the Chiricos, who used Cape Fear Realty as their real estate agent. The Chiricos’ net worth of $2 million in 1999 had grown with Seagate stock holdings to more than $15 million by 2003, according to their lawsuit.
Meanwhile, a personal and business relationship with the Hysons blossomed. The requirements of Chirico’s job prompted a move to Singapore in 2000. Through the Hysons, the couple acquired several lots on Bald Head Island and began a cooperative business relationship with the purchase of the former Shrimp House restaurant and surrounding property, which was renamed Fishy Fishy.
Vernon acted as the mortgage broker on the transactions, which increased in size and scope in ensuing years.
The Chiricos’ lawsuit alleges that Cape Fear Realty and Rodney Hyson Sr. “made misrepresentations about Hyson Sr.’s business success in order to convince the Chiricos to personally invest over $13 million dollars into the Trading Groups,” and also “to convince the Chiricos to utilize their financial net worth to obtain loans in excess of $45 million for the Trading Groups.”
The Chiricos eventually invested in other projects like the Yacht Basin, Stevens Park and Southport Crossing. By the time they moved back to the U.S. full-time in 2006, the Chiricos were partners in many projects with the Hysons, including The Preserve, and were personal guarantors of project-related loans through Wachovia and other banks exceeding $40 million.
In about 2006, James Chirico began looking into the workings of the trading companies formed with the Hyson family, leading to a 2007 civil suit. By then, according to the complaint, loans on several of the projects were past due and Chirico realized that financial information furnished by the Hysons was not accurate.
“There’s corporate layer after corporate layer in their stuff,” said Kenneth Andresen, the Chiricos’ Charlotte-based lawyer.
The Chiricos’ liquid net worth has dropped by 90 percent, court documents claim.
Julie Minter, wife of Rodney Hyson Sr., said millions of dollars in debt owed to subcontractors and other creditors were wiped off the slate when The Preserve went into foreclosure.
Part of the project was reacquired by the Chiricos at a foreclosure sale. Andresen said the Chiricos are only trying to recover losses incurred during the partnership and that their actions are legal and above board.
The Chiricos “had a plan all along to get Rod out and do what they did and that is evident at The Preserve,” Minter said. “They used the lawsuit as just another means to intimidate us and wear us down financially and devastate us.”
Andresen said the Chiricos’ lawsuit “essentially speaks to the falling out the parties had with development projects in the Southport area. Certain obligations were not fulfilled.”
The Chiricos fired the first shot in May 2007 in a civil action including claims of fraud and financial mismanagement on the part of Hyson and his son. Also named were Cape Fear Realty, Minter, Hyson’s daughter Mary Vernon, a mortgage broker, and 12 separate trading groups incorporated to market and sell various projects bankrolled by the Chiricos.
A countersuit was filed a few months later by Cape Fear Realty refuting the Chiricos’ allegations. The Hysons’ claims include breach of contract, breach of fiduciary duty and unfair and deceptive trade practices.
When the trading groups were formed between 2003 and 2005, they were organized so that the Chiricos and Cape Fear Realty each had a 50 percent stake in projects and
businesses that include Southport Crossing, the Yacht Basin, Stevens Park and the Fishy Fishy Restaurant. Intracoastal Living LLC, with a 25 percent stake, was an additional partner in The Preserve development.
Since the first lawsuits were filed in 2007, the economy and real estate market have gone into a tailspin, complicating the situation.
Lost and found
Some Chirico-Hyson projects like The Preserve were foreclosed on and later reacquired by the Chiricos at foreclosure proceedings. A third company called Intracoastal Living LLC, with Rodney Hyson Jr. as its principal agent, was incorporated for The Preserve project and is listed as either plaintiff or defendant in various lawsuits.
The civil actions have since been consolidated in N.C. Business Court and designated as mandatory complex business cases.
A receiver has been appointed by the court to dissolve the contested assets and properties. Progress is slow. Members of the Hyson family say much damage has already been done to their reputation.
“We were the sweat equity partners. They knew what their role was,” said Minter. Minter does marketing for Cape Fear Realty, including work promoting The Preserve.
After some of the projects like The Preserve were foreclosed on, the only way to realize a return on their initial investment was to try and reacquire the properties, Andresen said.
“It’s a lawful process of foreclosure. Refinancing was obtained. We’re got a lot of condos that will be sold. We’ve got to take this over and find a way to finish it,” Anderson said.
The Chiricos are proceeding “because it is the only way to recoup their investment is to move forward with the project, complete the project and sell the units,” he said.
Minter sees the situation differently. “Everything was foreclosed on and then they basically attempted to purchase all the projects out of foreclosure. With The Preserve, they didn’t lose the money. It’s on track,” Minter said. “The Preserve was 80 percent complete when the Chiricos did what they did.”
Intracoastal Living LLC defaulted on loans provided by Wachovia Bank, prompting a lawsuit by Superior Construction Corp., primary contractor on The Preserve project. The developers owe Superior more than $8 million for the work, according to court documents. The Chiricos have a 25 percent stake in Intracoastal, documents state.
The Superior lawsuit against Wachovia was dismissed without prejudice in 2008. Another Superior Construction lawsuit names the Chiricos, Intracoastal, Cape Fear Realty and other parties. It includes claims of unjust enrichment, breach of contract and fraud.
“Superior Construction is basically claiming self-enrichment. You can’t be the person in development and let it go to foreclosure and then buy the foreclosure and cancel millions of dollars in debt and start over. It’s crazy,” Minter said.
Intracoastal Living has also been sued by at least 10 business entities involved in The Preserve project, while Superior Construction is named as a defendant in about 30 lawsuits filed by subcontractors. As related lawsuits are filed, they fall under the supervision of Judge John R. Jolly Jr., special Superior Court judge for complex business cases.
Minter said her family has been approached about settling the lawsuit out of court, but no serious offers have been made.
She acknowledges operating pacts with the Chiricos were not highly detailed. “The corporate agreements were pretty much boilerplate. They weren’t real clear about who did what,” she said.
Minter said projects like The Preserve would have been successful if the Chiricos did not pull the financial plug.
“There were contracts in place to pay off the debt and they bought it out of foreclosure,” she said.
“You don’t know how many times my husband has (said) let’s sit down like businesspeople and work out a plan to exit. They refuse to talk to us.”
With the recession and moribund real estate market, “The Chiricos have not found it as easy as they thought it would be,” Minter said.
Andresen said the Chiricos are waiting for the judge to act on various motions and counterclaims and clear out “what we regard as the underbrush in these matters.”
“They still hope they can move forward. It’s a tough market, as you are aware,” Andresen said.
“They’re focusing as hard as they can in developing the projects. We have just a bunch of players in this thing right now and we’re trying to make heads or tails of what the judge is trying to achieve.”
Sign in with LinkedIn, Facebook or create an account:
Already registered? Login here.