Katherine E. Hedges
An associate at Hage Hodes in Manchester practicing civil litigation and corporate law.

No. 2017-0008
Oct. 16, 2018
Reversed.

  • The Court examined whether an unrelated purchaser of several lots at foreclosure sale was a successor subdivider pursuant to Land Sales Full Disclosure Act, RSA 356-A and if the Attorney General could bind it to promises made by the prior owner.

 

The plaintiff, San-Ken Homes, Inc. (San-Ken) appealed the trial court’s ruling that it was required to apply for registration or an exemption with the Consumer Protection and Antitrust Bureau (Bureau) pursuant to the Land Sales Full Disclosure Act, RSA 356-A (the Act). The Act regulates subdividers, which are defined as including persons that own or are offering subdivided land for disposition and their successors. The Act requires subdividers of more than 15 lots to register their plan for the subdivision with the Bureau. The Bureau is then charged with examining whether there are reasonable assurances that the project will be completed, among other requirements. The Bureau can exempt subdividers of fewer than 51 lots upon request, and the Bureau can also revoke them if the exemption is no longer in the public interest. The Act provides the Attorney General enforcement power, including the ability to require financial security for the project. Individuals that are harmed by violations of the Act  can seek for damages and injunctive relief.

The original owner of the 16-lot subdivision in question, 112 Chestnut Street, LLC, received a certificate of exemption from registration. The application for the exemption stated that Old Beaver Road, which provided access to the subdivision lots from the public way, would be a private road owned by the owners of the subdivided lots. The Bureau approved the exemption on the condition that Old Beaver Road would be paved to Town standards, and that obligation was to survive transfer of the lots to buyers. Ultimately, 112 Chestnut Street, LLC did not pave the road to the Town’s standards. 112 Chestnut Street, LLC had provided a letter of credit to guarantee construction of the first phase of the road and promised a second letter when the second phase began; however, the irrevocable letter of credit expired for reasons not in the record. After selling seven lots, 112 Chestnut Street, LLC defaulted on its mortgage, the remaining nine lots were sold at a foreclosure auction. San-Ken bought the nine undeveloped lots at the foreclosure sale.

San-Ken requested the Town to modify the requirements for completing the road. The Planning Board granted San-Ken approval to use the road in its current state, so long as certain repairs were made. San-Ken then applied to the Bureau for exemption from registration, but the Bureau found that the Planning Board’s modification of the roadway standard did not change the subdivider’s obligation with the Bureau. The Bureau asserted that because San-Ken was the successor subdivider to 112 Chestnut Street, LLC, San-Ken was required to complete the paving as the prior subdivider promised, without any additional cost to the lots that were previously sold to third-parties.

On appeal, the Supreme Court assumed without deciding that San-Ken became a subdivider pursuant to the Act by purchasing the nine lots. But, it found that San-Ken was not a successor to the original subdivider. The Court found that because San-Ken never owned the other seven lots and had no relationship with 112 Chestnut Street, LLC, it did not stand in the same shoes as the original subdivider and only had prospective obligations. The Act provided the Attorney General and aggrieved landowners certain remedies in cases such as this, which did not include binding an unrelated subdivider to the earlier promises. Because the legislature did not include such a remedy in the Act, the Court would not add it. The Court reversed the trial court.

 

Michael A. Klass (on the brief) and Gregory E. Michael (orally), Bernstein, Shur, Sawyer & Nelson, Manchester, for the plaintiff. Gordon J. MacDonald, attorney general (John W. Garrigan, assistant attorney general), for the defendant.