State Sen. Ray Cleary said Friday he will appeal a circuit court judge’s decision this week denying a new trial in a case where Cleary claims the bank he helped found defrauded him in a $2.9 million property deal.
Judge Knox McMahon – who presided over the November trial between Cleary and Bank of North Carolina, the successor to the failed Beach First National Bank – said in a ruling Tuesday that Cleary’s arguments for a new trial lacked merit and are insufficient to warrant a new trial. Cleary said he will ask the S.C. Court of Appeals to overturn that decision.
A jury on Nov. 7 agreed with bank officials who said Cleary – the owner of Waterfall Investors 2 LLC – is solely to blame for defaulting on a mortgage loan because he failed to do his own due diligence in buying property that contained mostly wetlands. The jury found that Cleary owes Bank of North Carolina $2.9 million on the loan, including interest.
Cleary, in his request for a new trial, argued that there was insufficient evidence to support the jury’s verdict and that the jury was confused about the facts in the case because its initial verdict supported both sides. The jury then found in favor of the bank after further deliberation. Cleary argued the jury was exhausted after deliberating for more than four hours after the fourth day of the trial. Cleary also argued that the jury’s verdict was tainted because the bank’s lawyer made references to Cleary’s personal wealth during closing arguments.
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“We feel like we’ve got credible grounds for an appeal,” Cleary told The Sun News. No further hearing dates have been scheduled.
Bank of North Carolina defended the case as the successor to Beach First, which was shut down by federal regulators in 2010. Cleary was chairman of Beach First’s board of directors, a member of its loan committee and one of the bank’s founders. Bank of North Carolina assumed Beach First’s assets, including the Cleary loan, in an agreement with the Federal Deposit Insurance Corp.
Cleary alleged that Beach First committed fraud by providing him with a property appraisal that overstated the value of land backing Waterfall Investors’ loan and understated the amount of undevelopable wetlands on the property. Waterfall Investors planned to build a residential community at the site.
The bank’s 2007 appraisal stated the 160-acre tract had just 39 acres of wetlands and was worth nearly $6.9 million. The U.S. Army Corps of Engineers later determined the property – located along S.C. 90 near North Myrtle Beach – had 107 acres of wetlands, greatly reducing the tract’s value.
Cleary, who signed a personal guaranty for the loan, testified during the trial that Beach First officials knew he was relying on the bank’s appraisal to decide whether to take the loan. The appraisal proved to be flawed, relying on a developer’s conceptual drawing rather than an engineering study to determine wetlands.
Bank officials testified that the appraisal was for the bank’s use only and that Cleary shouldn’t have relied on it to make his own financial decisions.
“It’s like having a bank appraise a ring as a three-carat diamond ring and then finding out you’ve got a cheap cubic zirconia,” Cleary told The Sun News. “The appraiser didn’t do his job.”
Cleary, a Surfside Beach dentist, has served in the state Senate since 2005 as a Republican from Murrells Inlet.