Orsi v. Kirkwood

• Decision Date: 14 July 1993
• Docket Number: No. 92-1582,92-1582
• Parties: Matthew A. ORSI; Arlene J. Orsi; Alan B. Hare; Amelia P. Hare; Paul A. Castiglia; Sharon A. Castiglia; Frank Sabatino; Denise Sabatino, Plaintiffs-Appellants, and Albert J. Sbarbaro; Diana Sbarbaro; John Nicora; Susan Sbarbaro, Plaintiffs, v. Eileen KIRKWOOD; Kirkwood and Associates, Incorporated; Kirkwood Realty, Incorporated; Northampton Investment Company, Incorporated; Lassiter Realty, Incorporated; Noel W. Crisler; Crile Crisler; Blue Heron Realty, Incorporated; M.H. Cree; L.B. Cree, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 86

999 F.2d 86

26 Fed.R.Serv.3d 234

Matthew A. ORSI; Arlene J. Orsi; Alan B. Hare; Amelia P Hare; Paul A. Castiglia; Sharon A. Castiglia Frank Sabatino; Denise Sabatino Plaintiffs-Appellants and Albert J. Sbarbaro; Diana Sbarbaro; John Nicora; Susan Sbarbaro, Plaintiffs, v. Eileen KIRKWOOD; Kirkwood and Associates, Incorporated; Kirkwood Realty, Incorporated; Northampton Investment Company, Incorporated; Lassiter Realty, Incorporated; Noel W. Crisler; Crile Crisler; Blue Heron Realty, Incorporated; M.H. Cree; L.B. Cree, Defendants-Appellees.

No. 92-1582.

United States Court of Appeals, Fourth Circuit.

Argued May 7, 1993.

Decided July 14, 1993.

Francis Bosley Crowther, 3rd, Crowther & Bresee, P.C., Palmyra, VA, for plaintiffs-appellants.

William McCardell Furr, Willcox & Savage, P.C., Norfolk, VA, argued (James C. Howell, Ronald P. Donn, Willcox & Savage, P.C., on brief), for defendants-appellees Northampton Inv. Co., Crile Crisler and Noel Crisler.

Cecelia Ann Weschler, Weinberg & Stein, Norfolk, VA, argued (Jerrold G. Weinberg, Weinberg & Stein, on brief), for defendants-appellees Eileen Kirkwood, Kirkwood & Associates, and Kirkwood Realty.

Walkley Elmes Johnson, Jr., Walker & Johnson, Exmore, VA, on brief, for defendants-appellees Blue Heron Realty, M.H. Cree and L.B. Cree.

Deborah Shea O'Toole, Cowan & Owen, P.C., Richmond, VA, on brief, for defendant-appellee Lassiter Realty.

Before RUSSELL, WILKINSON, and WILKINS, Circuit Judges.

OPINION

WILKINSON, Circuit Judge:

This case presents issues arising under both the Interstate Land Sales Full Disclosure Act, 15 U.S.C. § 1701 et seq., and Fed.R.Civ.P. 56. Plaintiffs appeal the district court's entry of summary judgment against them on their claims under the Act and state contract law. The district court determined that either the statutory claims were time barred, or that defendants were exempt from the Act's requirements. On the contract claims, the court refused to consider as evidence unauthenticated documents submitted by plaintiffs on the morning of the summary judgment hearing. Plaintiffs offered no other evidence to counter defendants' proof that no issue of material fact existed. Because we find no error in the district court's analysis of the Act or its refusal to consider the documents, we affirm the award of summary judgment to defendants.

I.

This lawsuit arises from the sale of several undeveloped lots in a 23-lot subdivision called Peaceful Beach Estates in Northampton County on Virginia's Eastern Shore. Eileen Kirkwood began marketing the property in 1987. She sold three lots to Dr. and Mrs. Crile Crisler and eleven to Northampton Investment Company, which the Crislers controlled. In 1988, Kirkwood also began developing approximately 110 lots in other subdivisions on an adjoining 674-acre tract.

Kirkwood and Northampton both listed their Peaceful Beach Estates lots with KCL Realty and Lassiter Realty. In 1987, KCL prepared at its own expense a promotional brochure listing together all of the Peaceful Beach Estates lots. KCL prepared the brochure without the knowledge or approval of either Kirkwood or Northampton.

Plaintiffs Orsis, Sabatinos, Castiglias, and Hares are four couples who purchased lots in the Peaceful Beach subdivision in 1987 and 1988. The Orsis bought their lot on July 7, 1988 from Northampton through Lassiter. The Sabatinos also purchased a lot from Northampton through Lassiter on November 21, 1987. The Castiglias purchased their lot from Kirkwood through KCL on April 10, 1988. The Hares purchased through KCL as well, but from Northampton, entering into a sales contract on June 14, 1988.

The Orsis initially filed this suit as a putative class action on July 5, 1991. Amended complaints were filed in October of 1991, adding the Sabatinos, Castiglias, and Hares as plaintiffs. Class certification was denied, and plaintiffs eventually dismissed all but Counts I and IV of their complaint. Count I alleged various violations of the Interstate Land Sales Full Disclosure Act, a statute designed to protect purchasers of real property sold through interstate commerce by imposing disclosure requirements on sellers. These alleged violations included failure to file a Statement of Record with the Department of Housing and Urban Development, failure to provide printed property reports, and failure to set forth the right to rescind in the purchase contracts. Count IV of the complaint alleged breach of contract because of defendants' failure to build a private road to the subdivision that met state specifications, as provided in three of the four sales contracts.

After discovery, each side moved for summary judgment. The district court granted summary judgment to each of the defendants on all counts. On Count I, the court held that the Act's limitations periods barred rescission and monetary damages claims by the Sabatinos, Castiglias, and Hares, as well as the Orsis' rescission claim. 15 U.S.C. §§ 1703(c), 1711(a)(1). The court also determined that Northampton, from whom the Orsis had bought their lot, was exempt from the Act's requirements because of the limited size of the development, id. at § 1702(a)(1), and because Northampton and Kirkwood had not combined in a common promotional scheme to market their lots. Accordingly, the court granted the defendants summary judgment on the Orsis' damages claim as well.

On Count IV, the district court found that plaintiffs failed to rebut defendants' sworn deposition testimony that the road to the subdivision substantially met state specifications. The court declined to consider the evidence offered by plaintiffs on this issue because the court deemed the offer of proof untimely and the documents themselves unauthenticated. Fed.R.Civ.P. 56(c), (e). Absent any other proof, the court concluded that plaintiffs had failed to raise a genuine issue of material fact and entered summary judgment against them. During its analysis of both counts, the district court also dismissed the claims against various defendants, such as Dr. and Mrs. Crisler, the realty companies, and two realty agents, who were not direct parties to the sales. Plaintiffs then brought this appeal.

II.

Plaintiffs make several arguments under the Interstate Land Sales Full Disclosure Act. The first set of arguments deals with the Act's statutes of limitations, and why various claims by the plaintiffs should not be time barred. The second applies to the extent of the Act's coverage, and why Northampton Investment Company should not be exempt from that coverage.

A.

We shall address the limitations arguments first. The Act provides a two-year statute of limitations for rescission of a contract to buy property. 15 U.S.C. § 1703(c). It provides a three-year statute of limitations for monetary damages for violations of its various sections. Id. at § 1711(a), (b). Plaintiffs originally filed suit on July 5, 1991, seeking alternatively rescission or damages. To be within the limitations period for rescission, plaintiffs should have entered into their sales contracts with defendants no earlier than July 5, 1989. To be within the time bar for damages, the contracts should have been signed no earlier than July 5, 1988.

The Hares signed their sales contract on June 14, 1988. They nevertheless argue that they are within the limitations period for a damages claim. The Hares contend that they backed out of their initial agreement because they could not make a downpayment, but then entered into a new agreement to buy the same piece of property. They claim to have signed this new agreement on the closing date for the property, July 13, 1988, and that the limitations period only began to run on this date. This argument fails, however, because the Hares presented no evidence of any new contract. All of the sworn proof submitted to the district court indicated that the June 14 contract controlled the transaction, and that the Hares merely closed on July 13, as provided for in the June 14 agreement. Courts uniformly hold that the Act's limitations period begins to run when an initial sales contract is signed. See Markowitz v. Northeast Land Co., 906 F.2d 100, 104 (3d Cir.1990) (collecting cases). Accordingly, the Hares' claim for damages is time barred.

The Sabatinos signed their sales contract on November 21, 1987. They nevertheless argue that their damages claim should not be barred because of equitable tolling. They maintain that the limitations period was tolled in August of 1990 when Kirkwood allegedly told them that their property could be sold for $190,000, some $30,000 more than their purchase price, but urged them not to sell it until the Army Corps of Engineers issued "wetlands" rulings on the whole subdivision. The Sabatinos contend that Kirkwood misrepresented their property's worth, thus tolling their limitations period until October 1991, when the Corps of Engineers issued its report finding no wetlands on the property.

This argument is meritless. To toll the Act's limitations periods, plaintiffs must show (1) that they exercised due diligence to discover their cause of action before the limitations period ran; and (2) that the defendant committed an affirmative act of fraudulent concealment to frustrate discovery despite due diligence. Lukenas v. Bryce's Mountain Resort, Inc., 538 F.2d 594, 597 (4th Cir.1976). The Sabatinos showed neither. They exercised no efforts to discover their cause of action; they never even attempted to determine the value or wetlands status of their own property. Even if Kirkwood's statement of the lot's value were false, which plaintiffs have not shown, the statement would not rise to the level of fraudulent concealment. Having the lot appraised or ascertaining its status under the Federal Clean Water Act was always open to the Sabatinos; Kirkwood's statement did not prevent them from taking such steps. The Sabatinos simply did nothing. In the absence of due diligence, they cannot seek...