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Bessinger v. Indian Valley Greenes, Inc.

United States District Court, Third Circuit

November 13, 2013

RAYMOND BESSINGER, et al., Plaintiffs,
INDIAN VALLEY GREENES, INC., et al., Defendants



Plaintiffs, all purchasers of homes in the same adult residential community, bring a number of state law claims, as well as one federal claim, against the sellers and builders of the homes they purchased. Essentially, Plaintiffs claim that the Defendants made promises with respect to the quality of the constructed homes that they never intended to keep. Defendants have all moved to dismiss the Complaint.[1] Their motions will be granted.

Factual and Procedural Background

This case arises out of the development and sale of homes in Indian Valley Greenes, an adult residential community located in Montgomery County, Pennsylvania. Plaintiffs each entered into independent Agreements of Sale (“Agreements”) with Indian Valley Greenes, LP (“Indian Valley”) for the purchase of homes in the development. Defendants are various entities responsible for the construction, development, and/or sale of the homes. Plaintiffs seek compensation for damages sustained to the homes from alleged construction defects and for allegedly making representations, guarantees, and promises that the Defendants allegedly never intended to keep regarding construction of the homes.

The Complaint advances nine claims: (1) Interstate Land Sales Full Disclosure Act (“the Disclosure Act”), (2) fraud, (3) Pennsylvania Unfair Trade Practices and Consumer Protection Law, (4) breach of contract, (5) breach of implied covenant of good faith and fair dealing, (6) breach of implied warranty of habitability, (7) breach of express warranty of habitability, (8) breach of express warranty of workmanship, and (9) negligence. The Disclosure Act claim provides the sole basis for federal subject matter jurisdiction, as the parties are not diverse.

Pending are three motions to dismiss filed by various groups of Defendants, all of which raises substantially the same arguments.

Legal Standard

A Rule 12(b)(6) motion to dismiss tests the sufficiency of a complaint. Although Rule 8 of the Federal Rules of Civil Procedure requires only “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), “in order to ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests, ’” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citation omitted) (alteration in original), the plaintiff must provide “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do, ” id.

To survive a motion to dismiss, the plaintiff must plead “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Specifically, “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. The question is not whether the claimant “will ultimately prevail . . . but whether his complaint [is] sufficient to cross the federal court’s threshold.” Skinner v. Switzer, 131 S.Ct. 1289, 1296 (2011) (citation and internal quotation marks omitted). Thus, assessment of the sufficiency of a complaint is “a context-dependent exercise” because “[s]ome claims require more factual explication than others to state a plausible claim for relief.” W. Penn Allegheny Health Sys., Inc. v. UPMC, 627 F.3d 85, 98 (3d Cir. 2010).

In evaluating the sufficiency of a complaint, the Court adheres to certain well-recognized parameters. For one, the Court “must consider only those facts alleged in the complaint and accept all of the allegations as true.” ALA, Inc. v. CCAIR, Inc., 29 F.3d 855, 859 (3d Cir. 1994); see also Twombly, 550 U.S. at 555 (stating that courts must “assum[e] that all the allegations in the complaint are true (even if doubtful in fact)”); Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010) (“[A] court must consider only the complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly authentic documents if the complainant’s claims are based upon these documents.”).[2] The Court also must accept as true all reasonable inferences that may be drawn from the allegations, and view those facts and inferences in the light most favorable to the nonmoving party. See Rocks v. City of Philadelphia, 868 F.2d 644, 645 (3d Cir. 1989); see also Revell v. Port Auth., 598 F.3d 128, 134 (3d Cir. 2010). The foregoing admonition does not demand the Court turn its back on reality, however. The Court “need not accept as true unsupported conclusions and unwarranted inferences, ” Doug Grant, Inc. v. Greate Bay Casino Corp., 232 F.3d 173, 183-84 (3d Cir. 2000) (citations and internal quotation marks omitted), and “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Ashcroft, 556 U.S. at 678; see also Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997) (explaining that a court need not accept a plaintiff’s “bald assertions” or “legal conclusions” (citations omitted)). Finally, “if a [claim] is vulnerable to 12(b)(6) dismissal, a district court must permit a curative amendment, unless an amendment would be inequitable or futile.” Phillips v. County of Allegheny, 515 F.3d 224, 236 (3d. Cir. 2008).


The primary defense argument centers on the sole federal claim raised by Plaintiffs, namely, the Disclosure Act claim. The Disclosure Act is a federal statute intended to ensure full disclosure of facts important to the purchasing decisions of prospective buyers of subdivision lots. See Cost Control Mktg. and Mgmt., Inc. v. Pierce, 848 F.2d 47, 48 (3d Cir. 1988). Among its exemptions is one for “the sale or lease of land under a contract obligating the seller or lessor to erect such a building thereon within a period of two years, ” 15 U.S.C. § 1702(a)(2) (emphasis added). For purposes of this exemption, the “sale occurs when the purchaser signs the sale agreement and incurs an obligation.” Markowitz v. Ne. Land Co., 906 F.2d 100, 104 (3d Cir. 2000). Defendants argue that they are entitled to invoke this exemption because the Agreements at issue obligated them to complete construction on the homes within a period of two years, and, therefore, the Disclosure Act claim must fail because of the exemption. If the Disclosure Act claim fails, they contend, the remainder of the case should also be dismissed for lack of federal jurisdiction.

In Markowitz, the Third Circuit Court of Appeals held that the two-year exemption under the Disclosure Act does not apply where the buyer’s sole remedy for the seller’s non-completion of the building within two years is the return of the buyer’s deposit, with interest. Id. at 105-06. The Markowitz court determined that because the parties’ agreement precluded the remedy of specific performance, it essentially rendered the promise to complete the condo at issue in that case in two years illusory, and therefore the contract did not fall under the Disclosure Act’s exemption. Id. at 106. Just as most courts interpreting the Disclosure Act’s exemptions have done, the Third Circuit Court of Appeals relied on the HUD guidelines associated with the Disclosure Act. Those guidelines state, in essence, that a seller may not take advantage of the exemption if the sales contract allows it to breach “virtually at will” or waives the buyer’s right to specific performance. See 61 Fed. Reg. 13596, 13603. The guidelines also advise that if provisions discussing nonperformance or delays beyond a two-year period are included, they are acceptable if they boil down to legitimate defenses to contract actions, such as impossibility, frustration, or “events which are beyond the seller’s reasonable control.” Id.

Here, the Agreements of Sale provide for a “Settlement Date, ” which Indian Valley, as the Seller, has the exclusive right to extend no more than 90 days (the “Extended Settlement Date”). Doc. No. 3, Ex. A at ¶ 2. The “Extended Settlement Date” may be further extended if completion of the premises is delayed for specified circumstances “beyond ...

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