Wiggins v. Lynn, B-74-90-CA.
| Decision Date | 31 July 1975 |
| Docket Number | No. B-74-90-CA.,B-74-90-CA. |
| Parties | Bonnie Maud WIGGINS, Individually, and as Administratrix and Substitute Trustee of the Estate of Barney Wiggins, Deceased v. James T. LYNN, Individually, and in his capacity as Secretary of the Department of Housing and Urban Development, and George K. Bernstein, Individually, and in his capacity as Interstate Land Sales Administrator of the Department of Housing and Urban Development. |
| Court | U.S. District Court — Eastern District of Texas |
Richard R. Morrison, III, Daniel, Morrison & Strahan, Liberty, Tex., for plaintiff.
Roby Hadden, U. S. Atty., Dennis R. Lewis, Asst. U. S. Atty., Beaumont, Tex., for defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
FINDINGS OF FACT
Plaintiff, Bonnie Maud Wiggins, Individually, and as Administratrix and Substitute Trustee of the Estate of Barney Wiggins, Deceased, is a citizen of the State of Texas and originated this action on March 27, 1974, against James T. Lynn, Individually, and in his capacity as Secretary of the Department of Housing and Urban Development, and against George K. Bernstein, Individually, and in his capacity as Interstate Land Sales Administrator of the Department of Housing and Urban Development, both of whom are citizens of Washington, D. C. This action is based upon diversity of citizenship and involves a federal question, and the Plaintiff seeks injunctive relief against Defendants, restraining the enforcement of Section 1710.14, (24 C.F.R. 1710.1, et seq.), issued by the Defendants effective March 31, 1972.
On April 26, 1974, Defendants answered Plaintiff's complaint and by way of counterclaim filed on May 13, 1974, seek a permanent injunction restraining Plaintiff from continuing to operate in violation of the Act.
On August 29, 1974, Plaintiff answered Defendants' counterclaim and by way of a supplemental petition, seeks a declaration that Plaintiff's subdivisions made the subject of this lawsuit are exempt from registration requirements under the Act.
Plaintiff is the widow of Barney F. Wiggins of Polk County, Texas, who died on November 19, 1970, leaving Plaintiff and four minor children surviving. During the lifetime of the said Barney F. Wiggins and about 1960, he began purchasing and developing tracts of undeveloped real estate in several Southeast Texas Counties, namely, Polk, Liberty, San Jacinto, Tyler and Hardin, that were within easy driving distance of the heavily populated metropolitan area of the Texas Gulf Coast, namely, Houston, Beaumont, Baytown and Pasadena. Plaintiff's subdivisions vary in size from 25 lots in Corrigan Heights to over 3,000 lots in Lake Run-A-Muck. The lots average in size about 50 feet by 125 feet, and the average price range is Three Hundred Ninety-Nine and No/100 ($399.00) Dollars to Five Hundred Ninety-Nine and No/100 ($599.00) Dollars per lot.
The Defendant, James T. Lynn, is the Secretary of Housing and Urban Development; the Defendant, George K. Bernstein, is the Administrator of the Office of Interstate Land Sales Registration, Department of Housing and Urban Development.
The following described tracts of land are situated in the State of Texas, are owned by the Plaintiff, and are "subdivisions," as that term is defined by 15 U.S.C. § 1701(3):
All of the lots in all of Plaintiff's subdivisions are offered for sale as a part of a common promotional plan under the name of Wiggins Land Company, an assumed name under which Plaintiff does business. Plaintiff employs approximately seven (7) clerical personnel and currently uses the services of approximately five (5) or six (6) salesmen who work on a commission basis.
All lots in all subdivisions are sold only after an on-site personal inspection by the prospective purchaser. The salesmen have been instructed not to sell lots to anyone having an address outside the State of Texas.
The advertising brochures of Plaintiff were directed entirely to the surrounding local market and were distributed either at the Livingston office of Plaintiff or by mailing in response to telephone request. From the records of Plaintiff only one telephone call was received from outside the State of Texas requesting an advertising brochure of Plaintiff for the period of 1969 to the middle part of 1973.
Plaintiff has never engaged in any direct mail advertising schemes to sell lots, never engaged in any scheme or plan using the telephone for lot sales and never transported prospective purchasers to subdivisions by any means for the purpose of selling lots.
All of Plaintiff's subdivisions are wooded, have dirt and some oil streets, and small lakes suitable only for fishing. There are no marinas on any of the lakes, there are no concrete swimming pools, no golf courses or tennis courts, or other such attractions normally associated with large subdivision offerings designed to attract prospective purchasers from great distances and across state lines.
Plaintiff's advertising, consisting of an occasional use of radio ads over Houston station KIKK and small classified ads in the Houston Post and Houston Chronicle, was concentrated in the northeastern section of Houston. As a result "90% or better" of all lot sales in all subdivisions were to Houston residents. Plaintiff has also advertised in the East Texas Eye, a newspaper owned by Plaintiff with some interstate circulation.
Since 1969 there have been 5451 lots sold in Plaintiff's subdivisions, of which only three lots have been sold to two individual purchasers who were residing out of the State of Texas.
The Interstate Land Sales Full Disclosure Act was passed by Congress on August 1, 1968, and its effective date was April 28, 1969. On April 28, 1969, all of Plaintiff's subdivisions listed in the stipulations filed herein, with the exception of Natasha Heights, were developed and sales were well under way.
On March 29, 1969, the first set of Federal Rules and Regulations was issued by Defendants and Section 1710.10 thereof stated as follows:
Plaintiff received a letter dated March 23, 1971, from Defendants signed by Mr. Herbert H. George, Director, Administrative Proceedings Division, Office of Interstate Land Sales Registration, wherein Plaintiff was asked to determine whether or not their lot sales program was within the purview of the Act.
Plaintiff replied to the letter dated March 23, 1971, by letter dated April 29, 1971, signed by Price Daniel, Jr., Attorney, wherein he stated that the Interstate Land Sales Full Disclosure Act was not applicable to Plaintiff's sale of lots in its various subdivisions because the offering of lots for sale is intrastate and, therefore, exempt under the Act and, more specifically, under Section 1710.10(1) of the Rules and Regulations. Further, in the reply letter dated April 29, 1971, from Price Daniel, Jr., he inquired of Defendants if they needed any further information regarding Plaintiff's exemption to let Plaintiff know.
Defendants did not contact the Plaintiff in any further manner after March 23, 1971, until February 28, 1973, a period of almost two (2) years. Further, during the period between March 23, 1971, and February 28, 1973, the Defendants did not dispute or contest the intrastate exemption claimed by Plaintiff in Plaintiff's letter of April 29, 1971.
During the period of time from March 23, 1971, to February 28, 1973, Plaintiff conducted its subdivisions operations based upon a reasonably good faith belief that the Government's failure to contest or question Plaintiff's claim of an intrastate exemption in its letter of April 29, 1971, amounted to the granting of or acquiescence in the claim to such intrastate exemption.
On March 31, 1972, the Federal Rules and Regulations were amended by Defendants, and Section 1710.14 was added as follows:
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...that appellants sold lots from a number of variously named developments does not avoid the Act's requirements") (citing Wiggins v. Lynn, 406 F. Supp. 338 (E.D. Tex. 1975) (finding that a similar sales scheme for eighteen variously named developments constituted sales of a "subdivision" for ......
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U.S. v. Dacus, CA
...fact that appellants sold lots from a number of variously named developments does not avoid the Act's requirements. See Wiggins v. Lynn, 406 F.Supp. 338 (E.D.Tex.1975) (similar sales scheme involving 18 variously named developments constitutes sales of lots in a "subdivision" for purposes o......