Barker v. Hostetter
| Decision Date | 15 April 2014 |
| Docket Number | CIVIL ACTION NO. 13-5081 |
| Parties | DANIEL AND KRISTEN BARKER, h/w, et al., Plaintiffs, v. WILMER L. HOSTETTER AND JOYCE L. HOSTETTER, et al., Defendants. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Currently pending before the Court are (1) the Motion by Defendants Wilmer L. and Joyce L. Hostetter ("Hostetters") to Dismiss Plaintiffs' First Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b), and (2) the Motion by Defendants Keystone Custom Homes, Inc. ("Keystone") and Willow Creek, LLC ("Willow Creek") to Dismiss Plaintiffs' First Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6) and for a More Definite Statement pursuant to Federal Rule of Civil Procedure 12(e). For the following reasons, the Motions are granted in part and denied in part.
According to the Amended Complaint, Plaintiffs are homeowners in the Hopewell Ridge Planned Community ("Hopewell Ridge"),1 a twenty-nine lot subdivision located in EastNottingham Township in Chester County, Pennsylvania.2 (Am. Compl. ¶¶ 3, 4-26.) The Hostetter Defendants were the owners and developers of Hopewell Ridge and acted as Declarant for the planned community of Hopewell Ridge. (Id. ¶ 27.) Defendant Keystone is a Pennsylvania corporation that entered into an agreement with the Hostetters whereby Keystone would manage the Hopewell Ridge Homeowner's Association ("HOA") and construct improvements in Hopewell Ridge. (Id. ¶¶ 28, 33, 90.) Defendant Willow Creek is a Pennsylvania limited liability corporation that sold homes in Hopewell Ridge to third parties, after the Hostetters conveyed the lots to Willow Creek beginning in March 2007. (Id. ¶¶ 29, 88.) Willow Creek's principal place of business is an address used by companies affiliated with and/or controlled by Keystone Custom Homes, Inc. (Id. ¶ 29.) Willow Creek and Keystone entered into agreements with Plaintiffs for the construction and sale of new homes in Hopewell Ridge. (Id. ¶ 96.)
In 2002, Wilmer Hostetter owned a 65.76 acre parcel of land which he wanted to subdivide and sell as individual residential building lots. (Id. ¶ 37.) The Hostetters hired a firm to prepare a plan proposing a twenty-nine lot subdivision, where each lot would be approximately one acre in size and would eventually have a four bedroom home. (Id. ¶ 38.) The plan called for the homes to be serviced by on-lot sewage disposal and on-lot wells. (Id. ¶ 39.) The Hostetters prepared a Sewage Planning Narrative, last revised in 2005, stating that all Hopewell Ridge lots would be serviced by on-lot sewage disposal and private on-lot water wells. (Id. ¶ 51.) The Sewage Planning Narrative indicated that twenty of the twenty-nine lots were unsuited to standard septic systems due to "groundwater nitrogen plume migration off-site" and that a "workable solution proposes the use of individual on-lot nitrogen control treatmentsystems (MicroSepTec EnviroServer wastewater treatment systems) on these 20 lots." (Id. ¶ 52.) Standard on-lot septic systems could not be used for those twenty lots because a standard system would increase the elevated nitrate levels in the groundwater. (Id. ¶ 53.) As high levels of nitrates in drinking water are an environmental hazard and pose health risks to humans, the United States Environmental Protection Agency regulates maximum levels for nitrates and nitrate-nitrogen. (Id. ¶¶ 56-60, 61.) The Hostetter Defendants and the Keystone and Willow Creek Defendants were aware of the high nitrate levels in the groundwater at Hopewell Ridge. (Id. ¶ 55.)
In 2004, a Preliminary Hydrological Evaluation indicated that having twenty-nine planned lots, each measuring approximately one acre in size, on the Hostetters' parcel would result in excess nitrate-nitrogen concentration at the site's downgradient property line unless the minimum lot size were 2.72 acres or greater. (Id. ¶¶ 38, 40.) The Defendants did not increase the planned lot size, but instead obtained a permit to use experimental septic systems called MicroSepTec EnviroServers ("EnviroServers") on the properties in an effort to reduce the nitrate-nitrogen concentration. (Id. ¶ 41.) These systems were considered experimental because they had never successfully reduced the nitrate-nitrogen concentration on properties in Pennsylvania. (Id. ¶ 42.) Around the time that the Preliminary Hydrological Evaluation was prepared, certain buyers who had each entered into agreements with the Hostetters to purchase lots and homes in Hopewell Ridge became aware of the problems with the on-lot sewage systems and water supply for the subdivision. (Id. ¶ 43.) All buyers who were under agreement at that time terminated their agreements in light of that information. (Id.)
As stated in the Hopewell Ridge Sewage Planning Narrative, the Pennsylvania Department of Environmental Protection ("DEP") has not approved EnviroServer technology fornitrogen control, so it required the Defendants to obtain an "experimental Water Quality Management Part II permit." (Id. ¶¶ 45, 63.) As a requirement for obtaining that permit, the Defendants identified a contingency plan for sewage and drinking water on the lots if the EnviroServers failed. (Id. ¶ 45.) The DEP issued permits for twenty EnviroServer systems in May 2006. (Id. ¶ 78.) That permit contained the following conditions: (1) a conventional back-up contingency plan, as outlined in the permit application, would be implemented if it was determined that the EnviroServers were unable to meet the discharge limits outlined in the permit; and (2) the municipality was to be provided with a bond, escrow account, or bank letter of credit, which would be forfeited to the municipality upon notice by DEP of continuing noncompliance with the permit and used to cover the costs of connecting sewers at Hopewell Ridge to the Oxford Wastewater Treatment Plant. (Id. ¶ 79.)
In October 2005, the Hostetter Defendants entered into an installation and maintenance agreement for on-lot sewage disposal systems with East Nottingham Township. (Id. ¶ 64.) Under that agreement, and in order to obtain a sewage septic permit, the Hostetters were required to maintain, repair, and replace the system in perpetuity at their sole cost and expense, in accordance with the regulations of the DEP and the Chester County Health Department. (Id. ¶ 65.) That agreement also stated that the Hostetters intended to create the Hopewell Ridge Homeowner's Association ("HOA") to budget for and establish a systems fund for expenses related to the system disposal facilities. (Id. ¶ 66.) In November 2005, the DEP approved a revision to the Township Official Sewage Facilities Plan regarding Hopewell Ridge. (Id. ¶ 69.) In its approval letter, the DEP noted that (Id. ¶ 70, Ex. C.)
In March 2006, the Hostetters, as Declarant, recorded in the Chester County Recorder of Deeds Office a Declaration of Covenants, Restrictions, Easements, Charges and Liens for Hopewell Ridge, A Planned Community ("the Declaration"). (Id. ¶ 75.) The Declaration states that the Hopewell Ridge HOA will be responsible for the maintenance, repair, and replacement of small flow sewage treatment and disposal systems and/or lot septic systems in the development. (Id. ¶ 76.)
On March 26, 2007, the Hopewell Ridge HOA was created with the Pennsylvania Department of State. (Id. ¶ 77.) The following individuals associated with Keystone were on the Hopewell Ridge HOA Executive Board: Jeff Rutt, a principal of Keystone; Diane Frame, a Keystone employee; Robert Weaver, Esquire, an attorney with Keystone; Gregory Hill, Keystone's Vice President; and Howard Hirsch, Keystone's Chief Financial Officer. (Id. ¶¶ 90-95.)
On March 1, 2007, the Hostetters issued a Public Offering Statement ("POS") for Hopewell Ridge, in which they are identified as the sole Declarants. (Id. ¶¶ 30, 31, 81.) The POS states that "The Declarant's primary representative in developing Hopewell Ridge is Wilmer L. Hostetter." (Id. ¶¶ 31, 81.) The Purchase Agreement section of the POS provides that the Declarant and Keystone Custom Homes, Inc. will construct and sell the homes within Hopewell Ridge. (Id. ¶¶ 32, 82.) In March 2007, the Hostetters began conveying the lots in Hopewell Ridge to Willow Creek. (Id. ¶ 88.) The role of Willow Creek as a seller was not mentioned in the POS, but it is the entity listed on Plaintiffs' deeds. (Id. ¶¶ 33, 89.)
The POS states that Hopewell Ridge would have "small flow sewage treatment and disposal systems, known and sometimes referred to herein as 'enviro server' systems; on-lot septic systems and street lights, all of which are 'controlled facilities.'" (Id. ¶ 83.) The POS also stated that "[p]ublic water will be available to all lots within the Community." (Id. ¶ 84.) The POS further stated that:
The Declarant initially received an 'experimental' permit for the EnviroServer systems, and a requirement thereunder is that public sewer facilities be available as a backup system. The Declarant anticipates having the permit designated as a regular permit, as opposed to experimental, in which case public sewer facilities will not be required. Until such time as the sewer permit is redesignated from experimental to regular public sewer will be available as a backup system to the lots containing EnviroServer systems. For that reason the Community will be subject to easements in favor of the public authorities and utilities providing water service. In addition, the Declarant intends to offer to dedicate the water lines themselves to authorities or providers.
(Id. ¶ 85.) The POS also states that...
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