Cumberland Capital Corp. v. Harris

• Court: U.S. District Court — Middle District of Tennessee
• Writing for the Court: MORTON
• Citation: Cumberland Capital Corp. v. Harris, 490 F.Supp. 551 (M.D. Tenn. 1977)
• Decision Date: 20 September 1977
• Docket Number: No. 76-16-NA-CV.,76-16-NA-CV.
• Parties: CUMBERLAND CAPITAL CORPORATION v. Patricia Roberts HARRIS, Secretary of Housing and Urban Development, and Alan J. Kappeler, Acting Administrator, Office of Interstate Land Sales.

490 F. Supp. 551

CUMBERLAND CAPITAL CORPORATION v. Patricia Roberts HARRIS, Secretary of Housing and Urban Development, and Alan J. Kappeler, Acting Administrator, Office of Interstate Land Sales.

No. 76-16-NA-CV.

United States District Court, M. D. Tennessee, Nashville Division.

September 20, 1977.

COPYRIGHT MATERIAL OMITTED

James F. Neal, Nashville, Tenn., for plaintiff.

Hal D. Hardin, U. S. Atty., Nashville, Tenn., for defendants.

MEMORANDUM

MORTON, Chief Judge.

Plaintiff Cumberland Capital Corporation ("Cumberland Capital") filed this action on January 15, 1976, seeking a declaratory judgment that its land sales operations were not subject to the provisions of the Interstate Land Sales Full Disclosure Act ("Interstate Land Sales Act"), 15 U.S.C. § 1701, et seq., and further seeking injunctive relief against defendants Patricia Roberts Harris, Secretary of the Department of Housing and Urban Development ("HUD"), and Alan J. Kappeler, Acting Administrator, Office of Interstate Land Sales, to prevent them from taking any further administrative action to subject plaintiff's operations to the provisions of the Act.¹ On March 29, 1976, defendants answered the complaint and counterclaimed against plaintiff for enforcement of an administrative subpoena issued to plaintiff on December 5, 1976, pursuant to 15 U.S.C. § 1714, to compel the production of certain books, records, and other information by plaintiff in furtherance of defendants' investigation of possible violations of the Interstate Land Sales Act by plaintiff. Plaintiff answered defendants' counterclaim on June 9, 1976.

This case was submitted to the court for decision on the pleadings, a stipulation of facts, the affidavit of Richard Dance, plaintiff's Vice-President and General Counsel, and cross motions for summary judgment. Based on the stipulation of facts and the affidavit of Mr. Dance, the court makes the following findings of fact.

FINDINGS OF FACT

Plaintiff Cumberland Capital is a corporation organized and existing under the laws of the State of Indiana, and is qualified to do business in, and does business in, the State of Tennessee, with principal offices in Nashville, Davidson County, Tennessee. Plaintiff is engaged in the finance and loan business, and lends money on security at lawful interest rates.

Defendant Patricia Roberts Harris is the Secretary of HUD, an agency of the United States government. Alan J. Kappeler is the Acting Administrator, Office of Interstate Land Sales, a division of HUD. Defendant Harris is ultimately responsible for the administration of the Interstate Land Sales Act, while defendant Kappeler has primary responsibility for such administration.

By letter dated October 8, 1974, HUD, by and through its then Interstate Land Sales Administrator, George K. Bernstein, requested information from Cumberland Capital concerning sales of certain lots it had made in the Timberlake Subdivision located in Sevier County, Tennessee. Included in said letter was a questionnaire which Cumberland Capital was to complete and return to HUD within fifteen days from the date of the letter. The questionnaire was answered and returned by Cumberland Capital by and through its Vice-President, A. C. Spain, on October 23, 1974. Trustee's deeds by which Cumberland Corporation acquired certain lots in Timberlake Subdivision were also attached to the questionnaire and submitted to HUD.

By letter dated February 5, 1975, John R. McDowell, the Acting Interstate Land Sales Administrator for HUD, requested that plaintiff clarify some of its responses to the questionnaire. Plaintiff submitted its responses to the requests for clarification in a letter from Richard Dance to HUD dated February 28, 1975. On May 21, 1975, the following letter was sent to Mr. Dance by Mr. McDowell:

This is in response to our recent inquiry regarding lot sales in Timberlake and other subdivisions in which Cumberland Capital Corporation has an interest.

The Interstate Land Sales Full Disclosure Act, which this Office administers, applies to lot sales programs containing 50 or more lots pursuant to a common promotional plan where any means or instruments of interstate commerce or the mails are used to sell or lease lots. The sale of lots exclusively to residents of the situs state does not of itself constitute exemption from the Act. Advertising in publications that have an interstate circulation, signs on interstate highways, use of the telephones or any use of the mails in the operation of the subdivision, including the billing or collection of installment payments is sufficient to bring the subdivision under the jurisdiction of the Act.

From the information we have obtained, it appears that the lot sales program of Cumberland Capital Corporation is subject to the requirements of the Act. Indications are that there has been a common promotional plan to sell or lease more than 50 lots. In determining a common promotional plan, the developer's overall operation is considered. Among the most important characteristics which are evaluated in determining a common promotional plan are: a thread of common ownership, common sales agents, common sales office or common facilities, common inventory, common advertising, etc.

Under the circumstances, any non-exempt lot sales or leases made before Cumberland Capital Corporation is in compliance with the Act are a violation of Federal law and may be voidable at the option of the purchasers. If you wish to continue selling or leasing lots, you must first register the subdivision(s) with this Office or obtain an exemption from the registration requirements of the Act. Detailed instructions for the preparation of a Statement of Record can be found in 24 CFR, Section 1710.105, a copy of which we enclose. Instructions and qualifications regarding exemptions can be found under 1710.10, 1710.11, 1710.13, 1710.14, and 1710.15.

As requested in our letter of October 8, 1974, we again ask that you submit to this Office a list of all subdivisions in which Cumberland Capital Corporation has offered lots for sale since April 28, 1969. The list shall indicate the subdivision names, the number of lots owned by Cumberland Capital Corporation, the location of the subdivisions, the date(s) of sale, and the method of sale.

In addition, we request that you submit the list of the names, addresses, lot numbers, dates of purchase, and approximate amount of payments to date for all sales made in the following subdivisions subsequent to January 27, 1972: Davis Hills, Big River Overlook, Hidden Mountain, Greater Boyds Creek, Timberlake, and Bluff Heights. The list should be accompanied by an affidavit, signed by an executive of the company, attesting to the list's completeness and accuracy. In addition, we ask that you designate those sales which may have qualified as exempt transactions pursuant to 24 CFR, Section 1710.10. Please specify the relevant provision of Section 1710.10.

We shall expect to receive the above requested information within 20 days of your receipt of this letter. We wish to remind you that Section 1415 of the Act confers upon the Secretary of HUD or her authorized designee the authority to subpoena records, require testimony, and to initiate injunctive action.

Please direct your response to the attention of Ms. Jane Scott. If you have any questions concerning this correspondence, you may contact Ms. Scott at (202) 426-0938.

Various correspondence was then exchanged by the parties. An informal conference was also held in defendants' offices in Washington, D. C. On November 3, 1975, Mr. McDowell corresponded with Mr. Dance and informed him that pursuant to plaintiff's request, a hearing regarding the applicability of the Interstate Land Sales Act to the sales program of Cumberland Capital would be held on November 12, 1975, in defendants' Washington, D. C. offices.² On November 11, 1975, Mr. Dance advised Mr. McDowell that Cumberland Capital would not attend the meeting scheduled for the following day.

On December 5, 1975, a subpoena duces tecum et subpoena ad testificandum was issued by HUD to Paul R. Rogers, one of plaintiff's vice-presidents. A motion to quash the subpoena was filed by plaintiff with HUD. The motion to quash was denied by HUD in a letter dated January 2, 1976. This suit was thereafter filed by plaintiff.

CONCLUSIONS OF LAW

Plaintiff asserts that this court has jurisdiction under the Declaratory Judgment Act, 28 U.S.C. §§ 2201-02, the Administrative Procedure Act, 5 U.S.C. §§ 701-06, and 28 U.S.C. § 1331(a). Defendant contends that the court lacks jurisdiction because no final agency action has been taken, and because review of HUD's determination that plaintiff is subject to the provisions of the Interstate Land Sales Act may only be obtained in the appropriate United States Court of Appeals. For the reasons hereinafter stated, the court finds that it lacks jurisdiction to grant the requested relief.

5 U.S.C. § 704 provides as follows:

Agency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review. A preliminary, procedural, or intermediate agency action or ruling not directly reviewable is subject to review on the review of the final agency action. Except as otherwise expressly required by statute, agency action otherwise final is final for the purposes of this section whether or not there has been presented or determined an application for a declaratory order, for any form of reconsideration, or, unless the agency otherwise requires by rule and provides that the action meanwhile is inoperative, for an appeal to superior agency authority.

Thus, if the agency action in question is not final, it may not be reviewed under the provisions of the Administrative Procedure Act. See Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967). Moreover, since the Declaratory Judgment Act does not afford...