Waddell v. Ferguson Home Builders, LLC , 2017 Ark. App. LEXIS 70 ( 2017 )

Cite as 2017 Ark. App. 66
ARKANSAS COURT OF APPEALS
DIVISION I
No.CV-16-426
Opinion Delivered: February 1, 2017
DAVID W. WADDELL APPEAL FROM THE SALINE
APPELLANT COUNTY CIRCUIT COURT
[NO. 63CV-13-93-3]
V.
HONORABLE DAVID N. LASER,
FERGUSON HOME BUILDERS, LLC, JUDGE
AND G. BART FERGUSON
APPELLEES AFFIRMED
LARRY D. VAUGHT, Judge
David Waddell brought an action for rescission of a real-estate contract against
Ferguson Home Builders, LLC, and Bart Ferguson (collectively, Ferguson) based on
constructive fraud for failing to disclose that the house was built in a floodplain. Waddell
appeals from the judgment of the Saline County Circuit Court ruling that he failed to meet
his burden of proving that Ferguson had made a fraudulent misrepresentation. Waddell
argues four points on appeal. We affirm.
I. Facts and Procedural History
In October 2005, Waddell purchased a home in the Timberlake subdivision of
Haskell, Arkansas, that was constructed and sold by Ferguson. As part of the sale, Waddell
was given a “Seller Disclosure Statement” (“Disclosure”) in which Ferguson made
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numerous representations about the property. The representations at issue in this case are
numbers 8, 19, 33, and 47. 1
On April 4, 2008, a heavy rain caused flooding, and Waddell and his family had to
be evacuated. They refused to return to the house after the flood, and Waddell asked
Ferguson to repurchase the house. Ferguson refused.
After originally filing suit in October 2008 and taking a nonsuit in February 2012,
Waddell filed the present suit against Ferguson on February 1, 2013, seeking to rescind the
purchase. 2 He contended that the Disclosure did not disclose that the property was in a
floodplain area or designated wetlands when Ferguson knew that it was. Waddell further
contended that, because the construction of the home was not completed until the day of
closing, he was unable to inspect the home. He asserted that he was entitled to his purchase
price, consequential damages such as closing costs, and property damage, together with
interest, costs, and attorney’s fees. Ferguson answered, denying the complaint’s material
allegations.
1
The disclosures were dated April 2003. Number 8 asked whether there had been
any flooding, drainage, grading problems, or had water ever stood on the property or under
any improvements. Number 19 asked whether any of the property was in the floodplain or
floodway. Number 33 asked whether Ferguson was aware of any facts, circumstances or
events on or around the property which, if known to a potential buyer, could adversely
affect in a material manner the value or desirability of the property. Number 47 asked
whether there had been any past or present water intrusion. Ferguson answered “no” to
each question. In addition, Number 28 asked has any part of the property been designated
as wetlands. Ferguson also answered “no” to this statement.
2
Suit was filed by Waddell and his wife, Tracey Waddell. Tracey Waddell is listed in
the caption of all papers up to and including the judgment. However, she is not listed in the
caption of Waddell’s notice of appeal.
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In 1985, Haskell adopted a flood-control ordinance that applies to subdivisions of
fifty lots or five acres. The ordinance requires a builder to have hydraulic or hydrological
studies prepared and to obtain floodplain permits before construction can start. Among the
calculations required before development is the establishment of a “Base Flood Elevation”
(“BFE”) for the property. 3 The Federal Emergency Management Agency (“FEMA”) has
created maps, known as “Flood Insurance Rate Maps” (“FIRMs”), which delineate the
boundaries within a community of flood-hazard areas. Sarah Fox, This is Adaption: The
Elimination of Subsidies Under the National Flood Insurance Program, 39 Colum. J. Envtl. L. 205,
215 (2014). The FIRMs are divided into insurance-risk zones according to the likelihood
of a flood occurring within a particular region. Id. The FIRM for Haskell was prepared in
1987 and does not contain BFEs. The Haskell FIRM shows two zones: Zone “C,” an area
of minimal flooding, and Zone “A,” an area of special flood hazard.
Ferguson filed a motion in limine seeking to prevent the ordinance from being
entered into evidence because, according to Ferguson, it did not apply to the construction
of Waddell’s subdivision. Ferguson also sought to preclude Waddell from using as evidence
a study conducted by Thomas Black, an engineer hired by Haskell in 2010 to conduct a
study to determine the BFEs and to have the 1987 FIRM redrawn with the established
BFEs. The study was still ongoing at the time of trial. Ferguson argued that, because the
3
A BFE is the computed elevation to which floodwater is anticipated to rise during
a “base flood” (a flood having a one percent chance of being equaled or exceeded in any
given year) and is the regulatory requirement for the elevation or flood proofing of
structures. Beth Davidson, How Quickly We Forget: The National Flood Insurance Program and
Floodplain Development in Missouri, 19 Wash. U. J.L. & Pol’y 365, 372 n.48 (2005).
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BFEs determined by Black in 2010 were not available in either 1999 when the subdivision
plat was approved or in 2005 when the sale to Waddell occurred, the study should not be
allowed. Ferguson argued that the 1987 FIRM showed Waddell’s Lot 56 to be in a minimal
flood Zone “C” and that Ferguson relied on that map as the basis for his representations
concerning floodplains.
The court denied Ferguson’s motion to preclude use of the 1985 ordinance but
granted the motion to preclude consideration of Black’s study and any proposed revisions
of the 1987 FIRM.
Following a bench trial, the court issued a letter opinion in which it found that, based
on the information available to Ferguson at the time of the transaction, Ferguson committed
no fraud in his representations and dismissed Waddell’s suit with prejudice. The court also
adopted Ferguson’s proposed findings of fact and conclusions of law. After judgment had
been entered, this appeal followed.
II. Arguments on Appeal
On appeal, Waddell contends that the circuit court erred in (1) failing to allow expert
testimony on the floodplain status prior to construction of Timberlake subdivision, (2)
failing to follow Haskell’s flood ordinance in determining whether Waddell’s property
should have been studied to determine the proper flood zone, (3) finding that Haskell had
determined that the 1985 ordinance did not apply to Timberlake subdivision and did not
require BFEs to be studied for the Trace Creek Drainage Basin, and (4) requiring Waddell
to prove an incorrect element of his cause of action.
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III. Standard of Review
In civil bench trials, the standard of review on appeal is whether the circuit court’s
findings were clearly erroneous or clearly against a preponderance of the evidence. Tadlock
v. Moncus, 2013 Ark. App. 363, 428 S.W.3d 526. A finding is clearly erroneous when,
although there is evidence to support it, the reviewing court, on the entire evidence, is left
with a firm conviction that a mistake has been committed. Id.
This case also involves issues concerning the admissibility of evidence and whether
the circuit court erred in granting Ferguson’s motion in limine. Because the introduction
of evidence is a matter within the sound discretion of the circuit court, we must determine
whether or not it abused its discretion in excluding Black’s study from evidence before we
reverse its findings, and in the absence of abuse of that discretion, we will not reverse. See
Benson v. Shuler Drilling Co., 316 Ark. 101, 107, 871 S.W.2d 552, 555 (1994).
IV. Discussion
Waddell’s first point is that the circuit court erred in excluding expert testimony on
whether the property was located in a floodplain. He breaks the point down further into
two subpoints: that the court erred in using the motion in limine to decide the case and in
excluding Richard Penn’s testimony concerning the Thomas Black study.
In the first subpoint, Waddell argues that the circuit court improperly granted the
motion in limine and eliminated his entire claim based on Disclosure 19. See Schichtl v. Slack,
293 Ark. 281, 737 S.W.2d 628 (1987). Here, the motion in limine was directed at Black’s
study that began in 2010 and was still ongoing. In granting the motion, the circuit court
ruled that it was limiting the information to that which was available at the time of the 2003
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Disclosure. The court also found that the probative value of Black’s study was outweighed
by the likely confusion of the issues and that it unduly penalized Ferguson.
The circuit court properly decided whether Black’s study could be used via the
motion in limine. A motion for summary judgment and a motion in limine address two
different questions. Summary judgment determines whether there are issues of material fact
to be tried, Neal v. Sparks Reg’l Med. Ctr., 2012 Ark. 328, 422 S.W.3d 116, while a motion
in limine is to be used to prevent some specific matter, perhaps inflammatory, from being
interjected prior to the circuit court’s having decided on its admissibility outside the hearing
of the jury. Schichtl, 293 Ark. at 285, 737 S.W.2d at 630. Waddell relies on Schichtl to argue
that the circuit court erred because its ruling on the motion in limine excluded Waddell’s
claim based on Disclosure 19 stating that the property was not located in a floodplain.
Here, Black’s study was prepared after Waddell had purchased his home and, more
importantly, was still not complete at the time of trial. Moreover, the study had not been
used to update or revise any FEMA maps. The truth or falsity of the representation is
determined as of the time it was made and it was intended to be relied and acted upon. See
Clark v. Ridgeway, 323 Ark. 378, 914 S.W.2d 745 (1996).
Nor did the court’s ruling on the motion in limine disallow all testimony by Richard
Penn, Waddell’s expert. Instead, the court determined that the period for which evidence
was relevant was that existing at the time of the disclosures in 2003. The fact that Black’s
study was the only evidentiary support for Waddell’s Disclosure 19 claim should not mean
that it cannot be excluded if there is a proper basis in the rules of evidence for its exclusion.
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Here, the court found that the study was not relevant because it was prepared after the time
Ferguson had made the disclosures at issue.
We address Waddell’s second and third points together because they both concern
whether the circuit court erred in failing to find that the Haskell’s flood-prevention
ordinance applied. For his second point, Waddell argues that the circuit court erred in failing
to follow the ordinance that required determination of BFEs prior to the development of
subdivisions. Waddell’s third point is that the circuit court erred in finding that the city had
determined that the ordinance did not apply to Waddell’s subdivision and thus there was no
requirement that BFEs be determined.
We first point out that Waddell’s argument that Ferguson and the city failed to follow
the city’s flood-prevention ordinance is misguided because Waddell’s ability to prove that
Ferguson made a fraudulent misrepresentation does not depend on whether there was
compliance with the ordinance. While the failure to comply with a statute or ordinance is
prima facie evidence of negligence, see, e.g., Bolstad v. Pergeson, 305 Ark. 163, 806 S.W.2d
377 (1991), Waddell did not bring this as a negligence case. Had he done so, the issue of
compliance with the ordinance would be relevant. Instead, he brought it as a case for
rescission based on misrepresentation.
We cannot say that the circuit court’s findings are clearly erroneous. Richard Penn,
Waddell’s expert and a former floodplain administrator for the City of Bryant, testified that
the 1987 flood insurance rate map did not show Waddell’s home to be in Zone “A,” an
area of special flood hazard, but in Zone “C,” an area of minimal flooding. He also testified
that the survey prepared when Waddell purchased the home also showed that the property
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was in Zone “C.” He further stated that Haskell’s ordinance applied only to Zone “A,”
areas of special flood hazards. He added that if there are no BFEs, there is no
misrepresentation as to the property being within a floodplain. According to Penn, the
floodplain administrator has the authority to establish BFE numbers or to determine if the
property is not in Zone “A.”
Jeff Arey, the county judge of Saline County, testified that he was the mayor of
Haskell and ex officio floodplain administrator when Ferguson began to develop the
subdivision in 1999. He testified that, prior to development of the subdivision, he and city
manager Bobby Westbrook met with Bart Ferguson and personally inspected the
subdivision property. Arey testified that it was reasonable for a builder or developer to rely
on the 1987 FIRM and that Haskell relied on the 1987 FIRM. Arey testified that it was the
responsibility of the floodplain administrator and the city planning commission to determine
whether the 1985 ordinance applied. He confirmed that Haskell determined the 1985
ordinance did not apply to the Timberlake subdivision because no homes were designed or
developed in a Zone “A” area. He said that he had used the surveyed plats and the 1987
FIRM, together with his personal inspection and knowledge of the property, to determine
that no homes were being developed in Zone “A.” As floodplain administrator, Arey said
that he had never required a developer to determine BFE.
Finally, Waddell argues that the circuit court erred in finding that he failed to meet
his burden of proof because the court misstated the elements of the cause of action he was
required to prove. We disagree.
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In order to prove fraud under Arkansas law, a plaintiff must prove five elements: (1)
that the defendant made a false representation of material fact; (2) that the defendant knew
that the representation was false or that there was insufficient evidence upon which to make
the representation; (3) that the defendant intended to induce action or inaction by the
plaintiff in reliance upon the representation; (4) that the plaintiff justifiably relied on the
representation; and (5) that the plaintiff suffered damage as a result of the false representation.
Muccio v. Hunt, 2016 Ark. 178, 490 S.W.3d 310.
At issue is the second element. 4 In its judgment, the circuit court concluded that
Waddell “failed to prove by clear and convincing evidence that [Ferguson] knew or believed
any of the representations in the seller’s property disclosure were false.” Waddell argues that
the court misstated the element of his cause of action because, according to Waddell,
Ferguson lacked sufficient information to assert that the property was not in the floodplain
or floodway. However, this argument ignores the court’s next conclusion that Waddell
“failed to prove by clear and convincing evidence that [Ferguson] did not have a sufficient
basis of information to make the representations in the seller’s property disclosure.”
Ferguson points this out in his brief, but Waddell fails to address the sufficient-information
conclusion in either his brief or in his reply brief. Because the circuit court in fact addressed
the very issue Waddell complains of, we cannot say that the court required Waddell to meet
an incorrect burden or that it was clearly wrong in its conclusions. Therefore, we must
affirm the court’s finding on this point.
4
The circuit court also concluded that Waddell failed to prove that Ferguson had
made false representations in the Disclosure. Waddell does not directly challenge this
conclusion.
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Affirmed.
VIRDEN and HIXSON, JJ., agree.
William G. Almand, P.A., by: William G. Almand, for appellant.
Anderson, Murphy & Hopkins, L.L.P., by: Michael P. Vanderford, for appellee.
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