Charles E. Atteberry Janice Atteberry Jack L. Avery Neta Avery Robert W. Balentine Pamela Kay Balentine Glenn E. Banks Estate of John F. Barnard, Jr., Deceased Betty Jo Barnard John M. Bates Susan K. Bates Sydney F. Baustian Lovelle Baustian Patricia J. Beck Clovia J. Beck Richard D. Berry Joyce A. Berry Jeff D. Blakely Dorothy R. Blakely Hubert H. Blanchard Janive S. Blanchard David Brewer Susan Brewer Anna M. Brizendine William M. Brumley Dea Joanna Brumley Anolia Bynum Robert Carlisle Laura Carlisle Gary D. Clark Sarah J. Clark Fred Cobin Brenda F. Cobin Bob Collins Judy Collins Elsie L. Creswell Marvin W. Crow Margaret Crow Jimmy D. Curtis Carolyn Curtis Douglas W. Damron Heidi W. Damron Faith v. Dasher George Davis Carolyn Davis Roy E. Davis Connie W. Davis Luis Fermin De Orbegozo Harold R. Dixon Freda E. Dixon Robert E. Duncan Christina E. Duncan Eugene L. Dunn Rhonda L. Dunn the Estate of William C. Durham, Deceased Deann E. Durham Golden Alfred L. Edwards Dorothy M. Edwards the Estate of Louis Evans,
Docket: 94-2349
Court: Court of Appeals for the Eighth Circuit; August 24, 1995; Federal Appellate Court
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The case involves numerous plaintiffs, including individuals and estates, who are appealing against several defendants, including Maumelle Company and Dehaven Todd Company. The appeal was heard in the United States Court of Appeals for the Eighth Circuit, with the case number 94-2349. It was submitted on December 14, 1994, and decided on July 11, 1995, with a rehearing denied on August 24, 1995. The legal representatives for the appellants included James Gerard Schulze, while the amicus curiae, the United States, was represented by Jeffrica Jenkins Lee from the Department of Justice. The appellee's counsel was George F. Pike, Jr. The judges presiding over the case were Circuit Judges Bowman and Loken, along with Senior District Judge Bogue. The document lists a significant number of plaintiffs and intervenors, reflecting the case's complexity and the broad scope of claims involved.
An appeal was filed regarding a District Court order that granted summary judgment, dismissing claims under the Interstate Land Sales Full Disclosure Act (15 U.S.C. Secs. 1701-20) and related state law claims. The plaintiffs, 178 individuals and couples representing about 2,000 purchasers from The Maumelle Co. in Arkansas, alleged that they were misled by fraudulent representations from sales agents and that the company failed to provide required property reports. Their complaint included federal claims under the Act and supplemental state law claims for fraud, breach of contract, and intentional infliction of emotional distress.
Defendants sought summary judgment, claiming exemption under 15 U.S.C. Sec. 1702(a)(2), which applies to the sale of improved land where a seller is contractually obligated to build within two years. They argued that Maumelle was contractually bound to construct houses on the lots sold to the plaintiffs. In response, plaintiffs contended that the exemption was inapplicable, asserting that the building provision was intended to evade the Act and did not create an unconditional obligation to build within the specified timeframe. The court ultimately affirmed the District Court's ruling.
The District Court granted summary judgment in favor of the defendants, determining that the building provision in the sales contract constituted reasonable steps in the construction process and met the criteria for the exemption under Sec. 1702(a)(2) of the Act. The court found that the plaintiffs failed to provide sufficient evidence to demonstrate that the defendants adopted the building provision to evade the Act. Consequently, the court denied the plaintiffs' motion for summary judgment and other pending motions as moot. On appeal, the plaintiffs argue that the District Court erred in concluding that the building provision sufficiently qualified the defendants for the exemption. The relevant building provision requires the buyer to submit detailed plans for a residential home within 180 days and outlines the seller's obligations upon approval of those plans, including construction financing arrangements and pricing details based on costs incurred plus a percentage.
Plaintiffs, with support from the Department of Justice as amicus curiae, argue that the conditions precedent in the building provision of the sales contract disqualify the seller from the Sec. 1702(a)(2) exemption. The government’s brief cites 1979 HUD guidelines regarding exemption provisions, which plaintiffs did not reference or rely on in their arguments. The court expresses skepticism about an amicus curiae advocating for a reversal based on an authority not relied upon by the party it supports. However, the court finds the HUD guidelines consistent with its interpretation of the statute and affirms the District Court's decision. The guidelines stipulate that for a seller to qualify for the exemption, there must be a specific contractual obligation to complete the building within two years of the buyer signing the contract. Contracts that allow the seller to avoid performance at their discretion are deemed unenforceable. While the guidelines require a specific obligation to build, they do not necessitate an unconditional obligation. Plaintiffs contend that the building provision's contingencies—such as buyer-submitted plans and payment of costs—negate the exemption, asserting that these conditions undermine the seller's duty to build.
The 'contingency' identified is categorized as a 'provision for purchaser financing,' which, according to HUD guidelines, is determined by the contractual parties under local laws and does not undermine statutory exemption. The plaintiffs do not argue against the validity of cost-plus contracts under Arkansas law. The evaluation of architectural plans is not solely at the seller's discretion; the contract mandates that plans must align with the Bills of Assurance and subdivision requirements, establishing an objective standard for assessment. Arkansas law dictates that contracts should be interpreted reasonably to reflect the parties' intentions, and any conditions imposed require a reasonable effort from both parties to fulfill. The building provision does not allow the seller to avoid contractual obligations arbitrarily and provides the buyer with remedies like specific performance, indicating a binding obligation. The trial court's conclusion that the cited conditions are reasonable and do not infringe on purchasers' rights is supported. The plaintiffs argue that even if the building provision qualifies for exemption, the trial court mistakenly found no substantial circumstantial evidence of intent to evade the Act. The relevant statutory language references evasion concerning the Act's purpose, which is interpreted as preventing fraudulent practices in land development and ensuring buyers are adequately informed. While a good-faith application of exceptions might also be seen as evasion, the term 'adopted for the purpose of evasion of this chapter' is interpreted as requiring a fraudulent intent.
Plaintiffs must demonstrate that defendants included the building provision in the sales contract with fraudulent intent, meaning defendants did not intend for Maumelle to fulfill its obligations under that provision at the time of contracting. The case of *Maumelle Co. v. Eskola*, where defendants were found guilty of fraud, was reversed on jurisdictional grounds and holds no preclusive effect in this action. Testimony from defendant Jay DeHaven regarding property sales under an exception to the Act does not, by itself, indicate fraudulent intent. Evidence from Maumelle employees at the Eskola trial suggested that while Maumelle did not build homes, it aided lot owners in planning and bidding, which complicates claims of fraud. Testimony from lot owner Jeffrey Ellison indicated non-compliance with the building provision but reflects a more intricate situation due to disagreements rather than outright fraud. The building inspector's testimony about the number of houses constructed was deemed non-probative of fraud, as it depended on individual demand. There is no evidence that defendants discouraged construction; rather, they claimed to promote building to enhance property values. Testimony from Glenn Eskola regarding the removal of the building provision for sale closure lacks probative value on fraud. The District Court found no genuine issue for trial regarding fraudulent intent and affirmed that the evidence against defendants was insufficient to demonstrate evasion. The judgment of the District Court is upheld.
