Home buyers beware: Land owners didn't need to disclose bomb range

Gregg Fields

Daily Report

05-25-2012

In the case of an Orlando, Fla., subdivision built next to an abandoned military bombing range, the U.S. Court of Appeals for the Eleventh Circuit concluded a district judge got it right when he dismissed allegations against the former owners of the subdivision land. In addition, the lower court decision that shielded companies that marketed the subdivision also was affirmed.

The 2008 class action, Virgilio v. Ryland Group listed Luis and Norma Virgilio as lead plaintiffs for residents of the Newport subdivision of Vista Lakes. The Virgilios bought their house in 2003.

The problem for the homeowners: "The Newport subdivision is adjacent to land known as Pinecastle." And during World War II, Pinecastle was used as a bombing range and remains "laden with unexploded bombs, ammunition, ordnance and related chemicals," according to the appeals court decision.

The suit said the homes had lost significant — though unspecified — market value once it became known that the Pinecastle property was next door. The bombardier-training ground is big at about 12,000 acres. The U.S. Army Corps of Engineers undertook a cleanup in 2007 that unearthed 400 live bombs and other explosives.

Early last year, Ryland Group settled with homeowners for $1.2 million, which was divided among 118 homeowners. After fees and expenses, payments to each class member ranged from $1,000 to $15,000, according to news reports at the time.

But the plaintiffs also sued a number of other entities, saying they, too, were liable for damages. The other defendants included Terrabrook, Terrabrook GP, Newland and Westerra. Terrabrook sold the land to Ryland before the subdivision was developed, Terrabrook GP marketed the development, Newland marketed the Vista Lakes community, and Westerra "was actively involved" in the sale of the undeveloped land.

NO AGENCY

The homeowners brought their case partly on the basis of a 1985 Florida Supreme Court decision, Johnson v. Davis, which held that a seller of a home is under a duty to disclose facts that "are not readily observable" but could materially affect the value of the property.

The problem for the homeowners was that Ryland sold them their houses, not the marketers and previous owners, according to U.S. District Judge Gregory Presnell's decision. The homeowners' claim that other defendants acted as agents of Ryland was dismissed.

"Plaintiffs would have us hold that entities engaged in creating a residential community by subdividing the land and selling lots to builders for the construction of houses for sale by the builders to the public are liable to the purchasers of those houses for the economic loss they suffer," the appeals court noted.

In affirming the decision, the appeals court decided no agency relationship was actually proved. The count "is missing an essential allegation — the critical element of an agency relationship," the appeals ruling noted.

'INEQUITABLE' COMMISSION

Separately, the homeowners also failed to convince the judge that it would be "inequitable" for Terrabrook to keep a 1.5 percent commission it received on every home Ryland sold. Again, the district judge found there was no inequity in Terrabrook receiving the commissions because "defendants were not unjustly enriched." The reason: "Ryland, not plaintiffs, conferred the benefit."

A third allegation was that the defendants violated the Florida Deceptive and Unfair Trade Practices Act. But the district court found no obligation by the defendants to disclose the bombing range to Ryland's customers.

In a fourth claim, which alleged negligence, the district court issued a summary judgment in favor of the defendants. Terrabrook informed Ryland of the Pinecastle problem when selling the property, and that was the extent of its obligation, the appeals court said.

Circuit Judge Gerald Tjoflat wrote the opinion Friday with concurrences from Circuit Judge Rosemary Barkett and U.S. District Judge Richard Smoak in Panama City, sitting by designation.