Burns v. Duplin Land Development, Inc., 7:07-CV-172-D.

Decision Date27 March 2009
Docket NumberNo. 7:07-CV-172-D.,7:07-CV-172-D.
Citation621 F.Supp.2d 292
PartiesDarryl T. BURNS and wife, Lily Yee, Plaintiffs, v. DUPLIN LAND DEVELOPMENT, INC., a North Carolina Corporation, d/b/a River Landing, Defendant.
CourtU.S. District Court — Eastern District of North Carolina

Auley McRae Crouch, III, Christopher K. Behm, Block, Crouch, Keeter, Behm & Sayed, LLP, Wilmington, NC, for Plaintiffs.

Gregory S. Camp, Randall R. Adams, Poyner & Spruill, LLP, Rocky Mount, NC, for Defendant.

ORDER

JAMES C. DEVER III, District Judge.

Plaintiffs Darryl T. Burns and his wife Lily Yee ("plaintiffs") bought a lot in Duplin County, North Carolina from defendant Duplin Land Development, Inc. ("Duplin" or "defendant"). Plaintiffs contend that Duplin violated various provisions of the Interstate Land Sales Full Disclosure Act ("ILSFDA"), including 15 U.S.C. § 1703(a)(1)(C). Section 1703(a)(1)(C) makes it unlawful for a developer such as Duplin to sell a "lot where any part of the statement of record or the property report contained an untrue statement of material fact or omitted to state a material fact required to be stated therein pursuant to the [Act] or any regulations thereunder." 15 U.S.C. § 1703(a)(1)(C). Duplin denies violating the ILSFDA, but concedes that the "property report" required by 15 U.S.C. § 1703(a)(1)(C) mistakenly omitted that plaintiffs' lot was in a flood plain. Duplin argues, however, that this court should interpret section 1703(a)(1)(C) to preclude liability. Although defendant makes various statutory interpretation arguments, defendant focuses on plaintiffs' admission that they knew that the lot was in a flood plain before they signed the contract to purchase the lot. Plaintiffs disagree with defendant's proposed interpretations of section 1703(a)(1)(C), rely on the plain meaning of section 1703(a)(1)(C), and seek partial summary judgment as to defendant's liability under 15 U.S.C. § 1703(a)(1)(C) [D.E. 21]. In response, defendant seeks summary judgment as to all of plaintiffs' claims [D.E. 26].

As explained below, the court rejects defendant's proposed interpretation of section 1703(a)(1)(C) and grants plaintiffs' motion for partial summary judgment as to defendant's liability under section 1703(a)(1)(C). The court also grants summary judgment to defendant as to all of plaintiffs' other claims.

I.

Duplin is a North Carolina corporation that develops and sells real property in Duplin County, North Carolina. P'ls.' Mot. for Partial Summ. J., Ex. A [hereinafter "Def.'s Admiss."], at ¶ 1. Duplin developed the River Landing real estate subdivision in Duplin County, North Carolina. Am. Compl. ¶ 2; Answer ¶ 2. This subdivision is a 1,400-acre community containing distinct neighborhoods, one of which is River Stone. Def.'s Mem. in Resp. to Pls.' Mot. for Partial Summ. J. & in Supp. of Def.'s Cross-Mot. for Summ. J. 4 [hereinafter "Def.'s Mem."]. River Stone is located on a 152-acre peninsula along the Northeast Cape Fear River. Id. at 4.

Plaintiffs are citizens and residents of Alexandria, Virginia. Am. Compl. ¶ 1; see also Def.'s Cross-Mot. for Summ. J. & Req. for Hr'g [hereinafter "Def.'s Cross-Mot. for S.J."], Ex. D [hereinafter "Burns Dep."], at 6. In 2004, they learned of Duplin's River Stone development during a resort property show in Reston, Virginia. Burns Dep. 28-29; Def.'s Cross-Mot. for S.J., Ex. C [hereinafter "Def.'s Resp. to Interrogs."], at ¶ 3. At the show, plaintiffs met representatives from River Stone who invited them to a grand-opening event for the sale of lots in River Stone. Burns Dep. 29; Def.'s Resp. to Interrogs. ¶ 3. On October 22, 2004, plaintiffs traveled to North Carolina to visit River Stone. Burns Dep. 29-30; Def.'s Resp. to Interrogs. ¶ 9. Plaintiffs met with Duplin sales representatives, examined various lots in River Stone, and made several visits to the lot they ultimately purchased: "RS-32" ("Lot 32," "Lot RS-32," the "Lot," or the "Property"). Am. Compl. ¶ 5; Compl., Ex. A [hereinafter "Purchase Contract"]; Answer ¶ 5; Burns Dep. 30-31.

During meetings with Duplin representatives, plaintiffs admit to being told that the Lot and the whole River Stone community were in a flood plain. Burns Dep. 23-26; Def.'s Cross-Mot. for S.J., Ex. A [hereinafter "Yee Dep."], at 13-16, 30-31. Plaintiffs never asked whether the Lot had flooded, and no one discussed the history of flooding in River Stone. Burns Dep. 39-40.

After visiting several properties, plaintiffs decided to purchase Lot RS-32 located on the Northeast Cape Fear River in River Stone. Burns Dep. 31-32; Am. Compl. ¶ 5; Purchase Contract 2; Answer ¶ 5. Although the Lot was "more than what [plaintiffs] had originally planned [to spend] by a couple hundred thousand," plaintiffs "felt what [they] were getting and the view [were] just really tremendous." Burns Dep. 31. According to Yee, the Lot "was the prime piece of property within the community, probably the largest[,] most expensive lot of wooded waterfront property." Yee Dep. 12.

On October 23, 2004, plaintiffs met with Kevin Hine, Duplin's Executive Vice President and General Manager, to purchase the Lot. Def.'s Resp. to Interrogs. ¶ 4; Burns Dep. 33. Hine gave plaintiffs a copy of the property report associated with the Lot. Def.'s Resp. to Interrogs. ¶ 4; Compl., Ex. B [hereinafter "Property Report"]; Def.'s Admiss. ¶ 4. At or about the same time, Hine gave plaintiffs the purchase contract, along with copies of the "Covenants," the "River Landing Architectural Guideline Procedures and Requirements," the "Additional Declaration of Covenants, Conditions and Restrictions for Estate Properties," and the "Supplementary Additional Declaration of Covenants, Conditions and Restrictions for Estate Properties Regarding RiverStone." See Def.'s Resp. to Interrogs. ¶ 4; Purchase Contract 4.

Hine discussed various provisions in the property report and stated that the Lot was in the 100-year flood plain and that portions of River Landing flooded in 1999, during Hurricane Floyd. See Def.'s Resp. to Interrogs. ¶ 4. The property report discusses "subdivision characteristics and climate" and states:

*In September, 1999, Hurricane Floyd caused unprecedented flooding in parts of eastern North Carolina, but only a very small part of River Landing was affected. During Hurricane Floyd, waters rose to 34 feet above sea level and the 100 year flood plain is measured at 28 feet above sea level.

Property Report 46. At the time of Hurricane Floyd, none of the River Stone lots had yet been subdivided. Def.'s Mem. 7. Burns admits to reading this disclosure later in the evening after he had signed the purchase contract. See Burns Dep. 86-87. However, Burns did not inquire further about the disclosure. See id. at 87.

The property report omits in two places the fact that the Lot is located in a flood plain. See Def.'s Mem. 7-8; Mem. in Supp. of Pls.' Mot. for Partial Summ. J. 4 [hereinafter "Pls.' Mem."]; Def.'s Admiss. ¶ 8. The first omission is in a paragraph which lists the properties in the "100 Year Flood Area" in River Landing:

All or a portion of lots 13R, 14R, 1-22, 613-615 in River Ridge, Phase 1 and 2, lots 72-78 and lots 97 and 98 in Red Fox Run, Phase 1; lots 387, 388, 397-399 in Maple Creek, Phase 2; lots 496-500, 511-514, 622-628, and 630-631 in Red Berry, Phase 1 and 2; and lots 515, 515A, 516, 516A, 517, 517A, 518, 518A, 519, 519A, 520, 520A, 521, 521A, 522, 522A, 523, 523A, 524, 524A, 525, and 525A in River Bend; lot RS1 in RiverStone are located within the 100 Year Flood Area. None of the lots in Candlewood, Phase 1 and 2, Red Fox Run, Phase 2, Maple Creek, Phase 1, River Landing, Phase 1 and 2, Firefly Meadow, Phase 1, 2, and 3, Cedar Point, Magnolia Bay, Cardinal Crest, Legacy Lakes, Legacy Woods, Phase 1 and 2, Legacy Oaks, Sycamore Glenn, Phase 1 and 2 and Sycamore Forest, Phase 1 are located within the 100 year Flood Area.

Property Report 28 (emphasis added). The first sentence reads: "All or a portion of ... lot RS1 in RiverStone [is] located within the 100 Year Flood Area." Id. The sentence omits plaintiffs' Lot RS-32 from the flood plain list. According to Duplin, the sentence should have read: "lots RS1-RS70 in RiverStone are located within the 100 Year Flood Area." Def.'s Mem. 7.

The property report repeats the omission in a paragraph entitled "FLOOD PLAIN":

All or a portion of the following lots in River Ridge, Phase 1 and 2, are located within the 100 year Flood Area: lots 1-16 as shown on Map Book 14, Page 153, Duplin County Register; lots 17-22 as shown on Map Book 14, Page 154, Duplin County Registry; lots 13R and 14R as shown on Map Book 14, Page 196, Duplin County Registry; and lots 613-615 as shown on Map Book 19, Page 274, Duplin County Registry. A portion of the following lots in Red Fox Run, Phase 1, are located within the 100 year Flood Area: lots 72-78 as shown on Map Book 15, Page 67, Duplin County Registry. All or a portion of the following lots in Maple Creek, Phase 2, are located within the 100 year Flood Area: lots 387, 388, 397-399 as shown on Map Book 15, Pages 326 and 327, Duplin County registry. All or a portion of the following lots in Red Berry, Phase 1 and 2, are located within the 100 Year 4 Flood Area: lots 496-500 and 511-514 as shown on Map Book 15, Page 334 and 335, Duplin County Registry and lots 622-628 and 630-631 as shown in Map Book 19, Page 374, Duplin County Registry. All or a portion of the following lots in River Bend, are located within the 100 Year Flood Area: lots 515, 515A, 516, 516A, 517, 517A, 518, 518A, 519, 519A, 520, 520A, 521, 521A, 522, 522A, 523, 523A, 524, 524A, 525, and 525A, as shown on Map Book 15, Page 324, Duplin County Registry. All or a portion of the following lots in RiverStone, are located within the 100 Year Flood Area: lot RS1 as shown on Map Book 19. Page 371, Duplin County Registry.

Property Report 47 (emphasis added). According to...

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