Winant v. Bostic
| Decision Date | 27 September 1993 |
| Docket Number | 92-1976 and 92-2164,Nos. 92-1975,s. 92-1975 |
| Citation | 5 F.3d 767 |
| Parties | 38 Fed. R. Evid. Serv. 1516 Jeffrey WINANT; Doree M. Gerold, Plaintiffs-Appellees, v. Marlowe F. BOSTIC; F. Roger Page, Defendants-Appellants, and Peter P. Green, III; Patricia F. Green, Defendants. Robert T. DeSMEDT; Dale S. DeSmedt, Plaintiffs-Appellees, v. Marlowe F. BOSTIC; F. Roger Page, Defendants-Appellants, and Peter P. Green, III; Patricia F. Green, Defendants. James N. STANARD; Janet G. Stanard; John S. Donnell, Plaintiffs-Appellees, v. Marlowe F. BOSTIC; F. Roger Page, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Roy Connelly Bain, Wilmington, NC; Harrell Powell, Jr., Law Offices of Harrell Powell, Jr., Winston-Salem, NC, argued (Mary Elizabeth Wertz, Wilmington, NC, on the brief), for defendants-appellants.
Gary Keith Shipman, Joel Robert Rhine, Shipman & Lea, Wilmington, NC, argued, for plaintiffs-appellees.
Before POWELL, Associate Justice (Retired), United States Supreme Court, sitting by designation, and WIDENER and NIEMEYER, Circuit Judges.
Marlowe F. Bostic and F. Roger Page undertook the development of approximately 18 acres of oceanfront property in Onslow County, North Carolina, calling their project Ocean Ridge Village. The project, consisting of 88 individual homesites and common areas, was advertised and marketed as a "world class resort by the sea." Contending that Bostic and Page misrepresented material aspects of the project and made false promises, purchasers Jeffrey Winant & Doree Gerold, Robert & Dale DeSmedt, James & Janet Stanard, and John Donnell brought four separate actions against Bostic and Page. These actions, brought in federal court by virtue of diversity jurisdiction, alleged fraud, deceptive trade practices in violation of a North Carolina statute, and breach of contract.
The actions filed by Winant & Gerold and the DeSmedts were consolidated for trial, and a jury returned a verdict in their favor on all counts, awarding compensatory and punitive damages. The actions filed by the Stanards and Donnell were likewise consolidated for trial, and a different jury returned a verdict in their favor on all counts. It awarded restitution but no punitive damages. Applying N.C.Gen.Stat. Sec. 75-16, the district court trebled the restitutionary awards and entered judgments in favor of the Stanards and Donnell for three times the amount of their respective investments. These appeals followed.
On appeal, Bostic and Page challenge evidentiary rulings by the district court in both trials, and they contend that the evidence was insufficient to support the verdicts. With respect to punitive damages awarded in the first trial, they argue that the jury was given "unlimited discretion" in reaching a monetary amount, thereby denying them due process of law. Additionally, Page contends that he should not be held vicariously liable for punitive damages simply because he was Bostic's partner when the evidence was insufficient to show that he personally participated in the fraud. With respect to the second trial, Bostic and Page contend that it was error for the district court to treble a restitutionary award when the North Carolina statute provides that only damages be trebled.
Because these appeals arise out of the same nucleus of facts and raise similar issues, we resolve them together in this opinion. As we explain below, we vacate the judgment in favor of the Stanards and Donnell, reversing only the amount added by the district court's trebling of the restitutionary awards, since those awards represent the restitution of the total amounts invested by the purchasers in Ocean Ridge Village and not damages. In all other respects, we affirm.
Bostic and Page as partners undertook to develop Ocean Ridge Village, intending it to be a luxury, oceanfront, single family residential community consisting of 88 lots in Onslow County, North Carolina. To attract "high-end" buyers, they promised to include various common areas and amenities, including a swimming pool and club house, croquet lawns, "exotic" landscaping, walkway areas, designer lighting along the walkways, sprinkler and irrigation systems, beach access areas, proper drainage facilities, concrete driveways, and parking areas. Bostic employed Fred C. Hayler as an agent responsible for selling the lots.
In response to those who expressed interest in purchasing lots at Ocean Ridge Village, Bostic and Page sent attractive brochures and other materials that contained aerial drawings and maps, with a swimming pool and croquet lawns marked, and plans for different house styles. Ocean Ridge Village was compared favorably with resorts such as Hilton Head and touted as a development of the "highest quality," a "paradise with all the amenities," and "a world-class resort by the sea."
In April 1988 after Winant and Gerold contracted to purchase a lot in Ocean Ridge Village, they traveled to North Carolina to meet with the sales agent, Hayler, who told them that Page and Bostic "were two of the richest people in North Carolina" and that Bostic was a highly knowledgeable and experienced land developer. Hayler assured Winant and Gerold that "environmental permits" were in place and that the common areas and amenities would be completed quickly, with a substantial portion of the project to be done by late 1988.
Also in April 1988 the Stanards contracted to purchase four lots in Ocean Ridge Village. At that time, James Stanard inspected the site with Hayler. Although no construction had yet begun, Hayler showed Stanard the location of the lots, the swimming pool, and the main complex, and he assured Stanard that all permits had been obtained. In August 1988 the Stanards closed on the purchase of six additional lots.
In February 1989 Robert DeSmedt visited Ocean Ridge Village where Hayler told DeSmedt that DeSmedt and his wife closed on the purchase of a lot in March 1989.
John Donnell toured Ocean Ridge Village with Hayler in January 1990, after responding to an advertisement and receiving a brochure and other materials. Hayler told him of the amenities to be built and assured him that all necessary permits were in place. Hayler also showed Donnell the neighboring golf course and country club, the construction of which Page had been involved in and in which Donnell would receive a life membership with the purchase of a lot. Donnell purchased 14 lots.
Although Bostic and Page had promised that the various governmental approvals and permits necessary to facilitate completion of Ocean Ridge Village had been obtained, most had not. Under the North Carolina Coastal Area Management Act (CAMA), permits of varying kinds and complexity are required to develop real estate depending on whether the development is classified as "major" or "minor." Because a sewer permit and an approved sedimentation and erosion control plan were required for the Ocean Ridge Village, a CAMA Major Development Permit was required. The fact that Ocean Ridge Village was also to contain common areas and amenities provided a second, independent reason that a Major Development Permit was required. Yet no such permit was ever applied for or obtained for Ocean Ridge Village. Instead, Bostic obtained a CAMA Minor Development Permit, submitting a plat of Ocean Ridge Village to Onslow County officials that showed a common driveway, a boardwalk, and a clubhouse, but none of the other common areas and amenities promised to the purchasers. Although the purchasers were promised that the common areas and amenities of Ocean Ridge Village would be substantially completed by summer 1988, this never happened.
By August and September 1990, the North Carolina Department of Environment, Health & Natural Resources notified Bostic of violations of the sedimentation and erosion control plan for Ocean Ridge Village, due to erosion problems at the site. In response to a letter informing him that he was responsible for the violations, Bostic wrote the Department a letter stating that he had resigned from the Ocean Ridge Homeowners Association and suggesting that the matter be taken up with the Association's new officers. In March 1991 another notice of violation was issued to the Homeowners Association and Bostic and Page for failure to obtain a CAMA Major Development Permit for the Ocean Ridge Village. Finally, in April 1991, all minor permits previously issued for development of individual lots in Ocean Ridge Village were suspended. At that time no swimming pool or clubhouse had been completed and no croquet lawns, parking areas, or walkways had been constructed. Landscaping, lighting facilities, and sprinkler systems had been only partially installed. Four driveways had been constructed, but each experienced erosion and washout and needed to be redesigned and repaired.
Winant & Gerold and the DeSmedts brought separate actions against Bostic and Page, seeking compensatory and punitive damages or, alternatively, rescission, based on fraud, breach of contract, and unfair and deceptive trade practices in violation of N.C.Gen.Stat. Sec. 75-1.1. The cases were consolidated for trial, and a jury returned a verdict against Bostic and Page on all issues. On the common law claims, the jury awarded Winant & Gerold $213,960.52 in compensatory damages and $500,000 in punitive damages, and awarded the DeSmedts $199,944.53 in compensatory damages and $500,000 in punitive damages. The jury also answered special interrogatories on the deceptive practices statutory claim, as mandated by the North Carolina statute, finding that Bostic and Page had committed several acts that proximately caused injury to the plaintiffs. The district court subsequently entered memoranda of judgments finding that Bostic and Page had engaged in unfair and deceptive trade practices,...
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