author: JAMES C. FOX, District Judge.

text:
    H. Morrison SMITH and Dwight S. Smith, Plaintiffs, v. CENTRAL SOYA OF ATHENS, INC., and Sun City Industries, Inc., Defendants.
    No. 82-70-Civ-8.
    United States District Court, E.D. North Carolina, Wilson Division.
    March 5, 1985.

      George R. Kornegay, Jr., Mount Olive, N.C., for plaintiffs.

      Robert W. Spearman, Raleigh, N.C., for Cent. Soya.
    William R. Rand, Wilson, N.C., for Sun City.
   ORDER

JAMES C. FOX, District Judge.

Plaintiffs initiated this action by complaint filed against defendant Central Soya of Athens, Inc. (hereinafter Central Soya), an Indiana corporation, in Wayne County Superior Court on December 10, 1982. Central Soya removed the case, on the basis of diversity of citizenship, to this court on December 23,1982. Plaintiffs then filed an amended complaint, with leave of the court, on April 6, 1983, adding Sun City Industries, Inc. (hereinafter Sun City), a Delaware corporation, as an additional defendant and, further, adding a claim for relief under North Carolina’s Unfair and Deceptive Trade Practices Act, N.C.GEN. STAT. § 75-1.1 et seq.

This matter is before the court on Sun City’s motion for summary judgment and Central Soya’s motions to strike and for judgment on the pleadings or, alternatively, summary judgment. The parties have expertly briefed the relevant issues and following oral argument, defendants’ motions are now ripe for disposition.

Plaintiffs seek compensatory and punitive damages for injuries allegedly caused by defendants’ breach of contract and violations of § 75-1.1. Plaintiffs assert that defendants induced plaintiffs to build four (4) poultry houses by representing defendants would supply the chickens for such houses and that plaintiffs would “have an income for twenty (20) years on the poultry houses.” The amended complaint alleges defendants later refused to provide additional chickens, thereby breaching their promise and damaging plaintiffs. Plaintiffs further contend defendants’ representations were “fraudulent, unfair and deceptive.”

Both defendants deny the breach of any contractual duty. Extensive discovery has occurred and the following discussion constitutes a summary of the undisputed material facts of record taken in a light most favorable to the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962).

Plaintiff H. Morrison Smith began housing chickens for Central Soya pursuant to a written egg production contract in 1971. Prior to that time, Smith had engaged in a variety of commercial enterprises, including developing and selling farmland, building chicken houses, managing a profitable pullet raising business, selling fertilizer and owning an Oldsmobile dealership.

In 1973, 1976 and 1977, Smith built three (3) additional chicken houses and, after the completion of each house, entered into a new egg production contract with Central Soya to house an additional specified number of chickens. Smith’s nephew, plaintiff Dwight S. Smith, participated in building the fourth house, under the partnership name “Prima Layers.”

Each egg production contract related to a particular chicken house and specified the number of chickens to be housed therein. The chickens were supplied by Central Soya. The contracts were renewed approximately every year by Central Soya supplying replacement flocks of chickens and by the continued performance of the parties under the contracts.

In December, 1981, after supplying chickens to plaintiffs for ten years, Central Soya sold its business to Sun City, assigning to Sun City all of its interests and rights in the egg production contracts with plaintiffs. Sun City agreed to assume all duties and obligations of Central Soya under the contracts. With H. Morrison Smith’s agreement, Sun City completed performance under the contracts for the production period then in progress.

In April, 1982, Sun City offered plaintiffs replacement chickens and a new egg production contract for the fourth (Prima Layers) chicken house. Plaintiffs refused to accept the offer. As a result, Sun City removed all chickens in plaintiffs’ houses at the end of the laying cycle in August, 1982 and supplied no further replacement chickens. Plaintiff subsequently initiated this action.

Between 1971 and 1976 five (5) written contracts were entered into between plaintiff H. Morrison Smith and Central Soya. Contract 4, entered into on February 16, 1976, superceded contracts 1 through 3 and covered the first two chicken houses. Contract 5 related to the third house, and was executed on June 6,1976. A fifth and final contract was executed between Central Soya and the Prima Layers partnership on September 12, 1977. It covered the fourth house. Pursuant to each contract, H. Morrison Smith or Prima Layers (the “producer”) agreed to furnish the “necessary housing, equipment, utilities, litter and labor necessary for the proper care and housing of the chickens and the proper production and care of eggs covered by [that] contract.” In return, Central Soya (the “owner”) agreed to supply each house with a specific number of chickens (a “flock”) and to pay the producer a designated sum per month for the producer’s services. Furthermore, Central Soya agreed to transport and deliver all eggs produced by the chickens and to pay the cost of delivering the chickens to market when their usefulness as layers ended.

Critically, at all times the chickens and any eggs they produced remained the sole property of the owner. The owner retained the right to sell, mortgage or dispose of the chickens at any time “at its pleasure.” Contracts 4-6, § 3. The owner retained the right to enter the producer’s premises to remove the chickens or to feed and care for them should they become endangered “for any reason in the opinion of the owner.” Id.

Finally, each contract contained an express and unambiguous merger clause providing that “[t]here are no agreements, understandings, representations or warranties between Owner and Producer except those herein set forth ...” Id. at § 10. Each contract further provided that it “may not be modified by agreements hereinafter made unless the same be attached hereto in writing.” Id.

Under each contract, Central Soya was obligated to supply and plaintiffs to house and care for, one flock of chickens. Id. at § 12(b) The size of the flock varied depending on the poultry houses involved, but each contract specified the exact number of chickens to be supplied under the contract. Central Soya faithfully supplied the specific number of chickens required by each contract.

Thereafter, each contract was renewed, one flock at a time, and the parties continued performance under the contracts without incident until December, 1981. At that time, Central Soya assigned its contracts with plaintiffs to Sun City. As previously detailed, plaintiffs and Sun City did not renew the contract after completing performance for the laying period then in progress.

Plaintiffs’ complaint focuses on alleged oral representations made to them by agents of Central Soya to the effect that they “would continue putting poultry in the houses” and that plaintiffs “would have an income for twenty (20) years on the poultry houses.” H. Morrison Smith testified in his deposition that the agents made these oral representations during negotiations and prior to the execution of the 1971, 1973, 1976 and 1977 written contracts. In reliance upon these representations, plaintiff alleges he constructed the chicken houses and, therefore, Sun City’s decision not to supply the replacement chickens breached oral and written contracts plaintiffs had with the defendants.

(A). Breach of Contract Claim

The primary issue before this court on plaintiffs’ breach of contract claim is whether or not the purported oral representations of Central Soya’s agents should be excluded as impermissible parol evidence. If the statements are inadmissible, then defendants must prevail on summary judgment for they have fulfilled all of the obligations of the contracts as written. By the same token, if the representations are admissible, then summary judgment must be denied as genuine issues of material fact would remain.

Preliminarily, in deciding whether the parol evidence at bar is admissible, the court must determine which law governs the analysis. It is generally agreed that the parol evidence rule is a rule of substantive contract law and not a rule of evidence. United States v. Bethlehem Steel Co., 215 F.Supp. 62, 68 n. 12 (D.Md.1962), aff'd. 323 F.2d 655 (4th Cir.1963); Rock-Ola Manufacturing Corp. v. Wertz, 282 F.2d 208, 210 (4th Cir.1960). Under the Erie doctrine, a federal court sitting in diversity must apply the substantive law of the forum in which it sits, including the forum’s choice-of-law rules. Klaxton Company v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). In North Carolina, issues of contract construction are determined by the law of the state where the contract was made. Tanglewood Land Co. v. Byrd, 299 N.C. 260, 261 S.E.2d 655 (1980). In this instance, the contracts involved were executed in North Carolina and, therefore, must be interpreted according to North Carolina’s substantive law of contracts, including the state parol evidence rule.

North Carolina provides for the exclusion of parol evidence both by common law, see Neal v. Marrone, 239 N.C. 73, 77, 79 S.E.2d 239, 242 (1953) and by the sales article of the state’s Uniform Commercial Code (UCC), N.C.GEN.STAT. § 25-2-202. The UCC’s sales provisions focus on contracts for the sale of goods and are not applicable to contracts for the rendition of services. N.C.GEN.STAT. §§ 25-2-102 and 25-2-106(1) (Supp.1983). See Wells v. 10-X Manufacturing Co., 609 F.2d 248, 254 (6th Cir.1979).

The contracts involved in this action are clearly for services and not for the sale of goods. Plaintiffs were not buyers of the chickens, rather they were paid for the care and housing of the chickens and the production of eggs. Moreover, no transfer of title to either the chickens or the eggs occurred; the owner retained title to both at all times. Defendants simply paid plaintiffs for providing the necessary services for the care of the chickens and eggs, both of which were eventually returned to defendants for sale. Therefore, since the contracts were strictly for services, the parol evidence rule of North Carolina’s common law and not that of the UCC governs this action. Cf. Moore v. Allied Chemical Corp., 480 F.Supp. 364, 375 (E.D.Va.1979) (where chemical company supplied raw materials to a chemical manufacturer, the manufacturer processed the raw materials and returned the finished product to the chemical company which paid the manufacturer for its services, and the chemical company retained title to both the raw materials and finished product, a contract for services existed).

Although it is impossible to reconcile all of the statements of the parol evidence rule contained in North Carolina cases, a general statement of the rule, as succinct as any, is set forth at 2 Brandis on North Carolina Evidence § 251 (1982):

Any or all parts of a transaction prior to or contemporaneous with a writing intended to record them finally are superceded and made legally ineffective by the writing. The execution of the final writing may be termed the ‘integration’ of the transaction. By it all prior and contemporaneous negotiations or agreements, whether oral or written, are ‘merged’ into the writing, which thus becomes the exclusive source of the parties’ rights and obligations with respect to the particular transaction or part thereof intended to be covered by it. (emphasis in original).

The North Carolina rule applies where the writing is a total integration, that is, where the writing integrates all the terms of the contract and supercedes all other agreements relating to the transaction. Craig v. Kessing, 297 N.C. 32, 34-35, 253 S.E.2d 264, 265-66 (1979). In this situation, evidence of prior and contemporaneous negotiations and agreements are not admissible to vary, add to, or contradict the writing. Rowe v. Rowe, 305 N.C. 177, 185, 287 S.E.2d 840, 845 (1982). Prior or contemporaneous evidence may only be admitted to clarify an ambiguity in a totally integrated written contract. Id., Root v. Insurance Company, 272 N.C. 580, 158 S.E.2d 829 (1968).

If, however, the writing supersedes only a part of the transaction, that is, if the writing was not intended to be a complete and exclusive statement of all the terms of the agreement, then the writing is a partial integration. Rowe v. Rowe, 305 N.C. at 185, 287 S.E.2d at 845; Borden, Inc. v. Brower, 284 N.C. 54, 199 S.E.2d 414 (1973). In this situation, not only may prior or contemporaneous evidence be admitted to clarify any ambiguity, but evidence of consistent additional terms may also be introduced and incorporated into the writing by means of parol evidence. Hoots v. Calaway, 282 N.C. 477, 193 S.E.2d 709 (1973); A & A Discount Center, Inc. v. Sawyer, 27 N.C.App. 528, 219 S.E.2d 532 (1975).

The representations by Central Soya’s agents, if made, were clearly uttered prior to the execution of the 1971,1973, 1976 and 1977 written contracts. Thus, the initial inquiry is whether the relevant writings (Contracts 4-6) were intended by the parties as final expressions or integrations of the terms contained therein, i.e. did the parties intend the writings to evidence their final agreement with regard to the included terms in the contracts.

Plaintiffs do not really contest the fact that the writings were intended as final expressions of the terms contained therein nor could they reasonably do so. Even a cursory review of the formal documents in question, the negotiations between the parties, and the circumstances surrounding the parties’ faithful performance under the signed writings between 1971 and 1982 unambiguously indicates all concerned intended the writings to be final expressions of the terms contained therein. The writings are formal instruments that clearly seek to codify the negotiations betwéen the parties. Based on subsequent performance, both parties obviously viewed them as binding.

Having determined the existence of an integration, it now becomes necessary to ascertain whether that integration is total or partial. In resolving this issue, courts and commentators have used at least four different approaches.

The first approach is that espoused by Professor Corbin, wherein the court looks at the surrounding circumstances and conduct of the parties in an effort to determine their actual intent as manifested during the course of the particular transaction. 3 Cor-bin, Contracts § 573-596 (1963); Calamari & Perillo, Contracts § 3-3 (2d ed. 1977); Restatement, Contracts (2d) § 240(b), Comment a and § 236, Comments a and b. This test, in effect, emasculates the traditional parol evidence rule by admitting evidence of prior conversations and conduct to discern intent. See Calamari and Perillo at § 3-3 n. 45.

A second approach is that asserted by Professor Williston which essentially asks whether the additional terms were such as might naturally be made in a separate agreement and not included in a writing by parties situated as were the parties to the written contract. 4 Williston, Contracts §§ 633 and 636 (3d ed. 1957); Restatement, Contracts § 240 (1932). If this question is answered affirmatively, then the writing is a partial integration and consistent additional terms may be added. However, if the parol terms would normally have been included in the writing, then the parol evidence rule bans their admission.

The third standard is set forth in the Comments to the UCC parol evidence provision. N.C.GEN.STAT. § 25-2-202, Comment 3. “If the additional terms are such that, if agreed upon, they would certainly have been included in the documents, then evidence of their alleged making” is barred by the parol evidence rule. Id. (emphasis added).

The final test is one that simply looks at the four corners of the document and if the oral agreement varies, contradicts or supplements the written contract in any manner it is deemed of no effect. See, e.g., Hite v. Aydlett, 192 N.C. 166, 134 S.E. 419 (1926).

A review of state cases reveals that North Carolina does not clearly and consistently follow any of the above tests, rather, the North Carolina courts have formulated their own standard, seemingly combining elements of all four:

“... where the parties have deliberately put their engagements in writing in such terms as import a legal obligation free of uncertainty, it is presumed the writing was intended by the parties to represent all their engagements as to the elements dealt with in the writing. Accordingly, all prior and contemporaneous negotiations in respect to those elements are deemed merged in the written agreement.”

Neal v. Marrone, 239 N.C. at 77, 79 S.E.2d at 242; Metropolitan Furniture Leasing, Inc. v. Horne, 29 N.C.App. 400, 224 S.E.2d 305 (1976).

This approach reflects the view that situations will often arise in which the writing, on its face, clearly embodies the sum total of the parties’ agreement. In these instances, further inquiry beyond the terms of the contract is not required.

By the same token, when the terms of the writing are not so definitive, then implicitly, the court must view the surrounding circumstances to ascertain the intent of the parties with regard to whether the writing was meant to be a total integration. In this latter situation, North Carolina decisions provide few useful guidelines for analyzing the circumstantial evidence of intent. Therefore, in fairness to plaintiffs, should the writing appear uncertain, the court will apply the liberal standard set forth under the UCC test. If plaintiffs fail to meet that standard, a fortiori, their complaint would not withstand application of the stricter standards. The court will now proceed to review the terms of the contracts and, if necessary, the pleadings, deposition testimony and affidavits.

Central Soya agreed, in each successive contract, to supply a designated number of chickens (one flock) for the poultry house or houses covered by the contract. Contracts 4-6, § 3. When the usefulness of the chickens as layers ended, after approximately one year, Central Soya agreed to pick them up and deliver them to market. Id. at § 6. Central Soya retained the right to replace the birds in the flock when above-normal mortality occurred and, further, retained the right “at any time” to “sell, mortgage or dispose of said chickens at its pleasure without regard to any of the provisions of the contract.” Id. at § 3.

Critically, each of the written contracts executed by the parties also contained a merger clause, providing that “[t]here are no agreements, understandings, representations or warranties between Owner and Producer except those herein set forth...” Id. at § 10. Defendants contend the merger clauses create, ipso facto, total integrations. Although the court finds the inclusion of merger clauses in the contracts decisive in this case, it declines to adopt the view that merger clauses effect a mandatory or conclusive presumption.

Merger clauses were developed with the parol evidence rule in mind in order to protect the parties to the contract. North Carolina clearly recognizes the validity of merger clauses and the state courts have repeatedly enforced such clauses. See, e.g., Tar River Cable TV, Inc. v. Standard Theatre Supply Co., 62 N.C.App. 61, 65, 302 S.E.2d 458, 460 (1983); Elizabeth City Hotel Corp. v. Overman, 201 N.C. 337, 341, 160 S.E. 289, 291 (1931); J.B. Colt Co. v. Turlington, 184 N.C. 137, 113 S.E. 600 (1922).

The existence of a merger clause generally provides unambiguous and unassailable evidence of the parties’ intent with reference to the terms of the contract. It clearly precludes a court from admitting extrinsic evidence on a theory that the writing was not a final expression. White & Summers, Uniform Commercial Code, § 2-12 (2d ed. 1980). It further creates a rebuttable presumption that the writing is a complete and exclusive statement of the contract terms. See Id. In order to rebut the presumption and, in effect, invalidate the merger clause, a party must offer evidence to establish the existence of fraud, bad faith, unconscionability, negligent omission or mistake in fact. Id., See Neal v. Marrone, 239 N.C. at 77, 79 S.E.2d at 242; A & A Discount Center v. Sawyer, 27 N.C.App. at 530, 219 S.E.2d at 534-35. In this case, plaintiffs have failed to meet their burden of rebutting the presumption created by the merger clause.

There is no evidence in the record to support any allegation that defendants fraudulently or, in bad faith, included the merger clause or failed to include the alleged twenty year agreement in the contracts. Plaintiffs, who were experienced businessmen, acknowledged in their depositions that they read and understood the contracts prior to signing them. H. Morrison Smith admits that he “couldn’t have had better relations” with Central Soya and that Central Soya always met its contractual obligations to him. He further admits that he knew the contracts were for one year and that he never asked for the twenty year term to be incorporated into the contracts. Similarly, this same evidence establishes that the twenty year term was not negligently omitted nor was there a mistake in fact.

Plaintiff’s major challenge to the inclusion of the merger clause is that it is unconscionable. Unconscionability is a question of law and may properly be decided on summary judgment. Stanley A. Klopp, Inc. v. John Deere Co., 510 F.Supp. 807, 810 (E.D.Pa.1981), aff'd mem., 676 F.2d 688 (3rd Cir.1982). In order to prevail on a theory of unconscionability, plaintiffs must demonstrate that (1) they had no meaningful choice but to deal with the defendants and accept the contract as offered and (2) the merger clause was unreasonably favorable to the defendants. Blalock Machinery & Equipment Co. v. Iowa Manufacturing Co., 576 F.Supp. 774, 778 (N.D.Ga.1983). RJM Sales & Marketing v. Banfi Products Corp., 546 F.Supp. 1368 (D.Minn.1982).

Neither of these elements is present in the ease at bar. While the contracts are essentially preprinted standardized contracts used by Central Soya in connection with other “producers,” thus making the merger clause basically non-negotiable, plaintiffs did not have to enter into the contracts. Plaintiffs have not alleged nor is there any evidence to suggest they were under economic duress when they executed the contracts. Furthermore, Central Soya, under the circumstances of this case, did not occupy a grossly superior bargaining position. See Id. at 1375.

The merger clause is also not unreasonably fair to defendants. The clause simply attempts to grant preclusive effect to the written terms of the contracts. Under other circumstances, the clause might as easily have benefited plaintiffs as it now does defendants. Finally, all the evidence in plaintiffs’ depositions points unerringly to the fact that plaintiffs voluntarily signed the contracts with a complete understanding of their terms and with full knowledge they were for one year — not twenty.

For the foregoing reasons, the court concludes the merger clauses were not unconscionable, the contracts on their face constitute total integrations, and plaintiffs’ parol evidence should be excluded.

However, assuming arguendo, that the writings were not definitive on their face, evidence of the parties’ prior negotiations and conduct evinces a clear intent that the documents embody the complete and exclusive terms of the transaction. Plaintiffs read the contracts and all terms contained therein. Plaintiffs voiced no objection to the inclusion or exclusion of any provision. The contracts were fully performed by both parties without complaint for a number of years. No attempt was made to re-negotiate the terms, incorporate any new term (with the exception of the modified payment schedules in 1979 and 1981) or further explain any term of the contracts.

Furthermore, H. Morrison Smith’s deposition states the contracts incorporated the terms as he understood them. Those terms specifically were for one-year, “one-flock” contracts in which Central Soya retained the absolute right to sell or dispose of the chickens at any time for any reason.

It is not the court’s intention to apply the parol evidence rule in a vacuum by the use of any rigid or mechanical approach to the issue at bar. However, the record in this action unambiguously establishes the intent of the parties at the time the contracts were executed. If the twenty year term had been agreed upon, if there had been a meeting of the minds and mutual assent as to that term, it most certainly would have been included in the contracts. It was not.

Plaintiffs’ problem boils down to the fact they now want more than they contracted for. Unfortunately for plaintiffs, it is too late in the game to change the rules. Accordingly, having determined the contracts constitute total integrations, the court excludes plaintiffs’ offer of parol evidence and will determine defendants’ summary judgment motions based upon the contracts as written.

A few comments are in order prior to a final ruling on defendants’ motions with regard to the breach of contract claim. First, even if the contracts could be construed as partial integrations, only evidence of consistent additional terms is admissible. Substituting a twenty year contract for a one year contract can hardly be interpreted as consistent. Therefore, for this reason as well, the parol evidence is inadmissible.

Second, again assuming a partial integration and further assuming the parol evidence was somehow found to be consistent, Central Soya’s alleged representations constitute at best mere expressions of belief or opinion regarding the future of plaintiffs’ and defendants’ respective businesses. The comments “we’re in the chicken business to stay” and “the chicken houses will last for twenty years,” even if uttered by defendants and relied on by plaintiffs, create absolutely no contractual obligation on the part of either party.

Finally, plaintiffs raise the issue of whether an implied contract with the twenty year term existed between the parties after the express expiration of Contracts 4-6. Plaintiffs are correct to the extent that after the completion of the express terms of each contract, the parties, in effect, “renewed” the contracts a number of times on a yearly basis by Central Soya’s supplying replacement flocks and by continued performance of the parties under the terms and conditions set forth in the written contracts. Such continued performance may indeed create “implied contracts,” but the performance must clearly be under the same terms as the prior written contracts.

Parties who have made an express contract to be in effect for one year (or any other stated time) frequently proceed with performance after expiration of the year without making any new express agreement, or extension or otherwise. From such continued action a court may infer that the parties have agreed in fact to renew the one year contract for another similar period. Illustrations can be found in leaseholds, employment transactions, and contracts for a continuing supply of some commodity. 1 Corbin Contracts § 18 (1950).

North Carolina has recognized implied renewal of express contracts by continued performance in the leasehold context, where a tenant remains on the premises at the end of a one year lease, continuing to pay rent which the landlord accepts. See, e.g., Kearney v. Hare, 265 N.C. 570, 573, 144 S.E.2d 636, 638 (1965). In such situations, the courts have considered the tenant as a holdover under a year-to-year tenancy with the same terms as the original lease, terminable at the expiration of any subsequent one year term. Vernon v. Kennedy, 50 N.C.App. 302, 303-04, 273 S.E.2d 31, 32 (1981).

Here, analogously, the parties by their conduct “held over” or impliedly renewed the contracts beyond their original terms. However, the same terms governed their relationship and the parties clearly continued to operate on a year-to-year (or flock-to-flock) basis, subject always to expiration of the contracts at the end of any year and the right of the defendants to sell or dispose of the chickens at any time for any reason.

Returning to the ultimate issue on plaintiff’s first cause of action, with the parol evidence excluded, the entire agreement of the parties is set forth in the written contracts. The basic premise behind the law of contracts is to enforce the written agreements of parties. The express terms of the contracts in this case are unambiguous and, therefore, summary judgment is appropriate if no genuine issue of material fact remains regarding the parties’ performance thereunder. See Freeman v. Continental Gin Company, 381 F.2d 459 (5th Cir.1967).

Plaintiffs do not contend Central Soya or Sun City improperly removed any chickens prior to the end of the laying cycle. In fact, plaintiffs do not allege a violation of or failure to perform any term of the written contracts. Rather, the Smiths contend only that Sun City failed to supply new flocks of chickens for all of the chicken houses at the end of the 1981-82 laying cycle, when the prior flocks were removed. By such action, Sun City did nothing more than decline to renew the contracts by ceasing performance after the end of the contract period. This conduct fails to constitute a breach of any of the written or implied contracts between the parties. Therefore, defendants’ motions for summary judgment are GRANTED as to plaintiffs’ breach of contract claim and that claim is DISMISSED from this action.

(B). § 75-1.1 Unfair Trade Practices Claim

Plaintiffs also allege, in paragraph 13 of their amended complaint, that “the representations and assurances by defendants and their agents were fraudulent, unfair and deceptive acts under the North Carolina Unfair and Deceptive Trade Practices Act ...” Having found no breach of contract and, therefore, implicitly no fraudulent, unfair or deceptive act on defendants’ part in the formulation or execution of the contracts, this claim should be and hereby is DISMISSED on the basis of the court’s discussion with regard to plaintiff’s breach of contract claim.

However, assuming arguendo, that a § 75-1.1 claim could remain viable despite a holding that the contracts entered into were not breached, the court will briefly address plaintiff’s § 75-1.1 claim on independent grounds.

The alleged “representations and assurances” referred to in the amended complaint are that the defendants “would furnish chickens to the houses and that the plaintiffs would have an income for twenty (20) years on the poultry houses,” and that the defendants “would continue putting poultry in the houses.” Amended Complaint at §§ 5 and 10. Plaintiffs allege that they constructed four poultry houses in reliance upon the first representation, thereby incurring “a substantial indebtedness which was being paid off by the income from the housing of the poultry,” and that the plaintiffs started housing poultry for the defendants and continued to do so up until the defendants failed to provide further poultry for the houses. Id., at §§ 6, 7 and 9.

First, as a matter of law and contrary to plaintiffs’ contentions, the allegations in the amended complaint are insufficient to state any claim for actual fraud. Fraud clearly constitutes a type of deception prohibited by N.C.GEN.STAT. § 75-1.-1. Hardy v. Toler, 288 N.C. 303, 218 S.E.2d 342 (1975). The essential elements of actual fraud are:

(a) that defendant made a representation relating to some material past or existing fact; (b) that the representation was false; (c) that defendant knew the representation was false when it was made or made it recklessly without any knowledge of its truth and as a positive assertion; (d) the defendant made the false representation with the intention that it should be relied upon by plaintiffs; (e) that plaintiffs reasonably relied upon the representation and acted upon it; and (f) that plaintiffs suffered injury. Johnson v. Phoenix Mutual Life Ins. Co., 300 N.C. 247, 253, 266 S.E.2d 610, 615 (1980). See, e.g., Ragsdale v. Kennedy, 286 N.C. 130, 138, 209 S.E.2d 494, 500 (1974); Rosenthal v. Perkins, 42 N.C.App. 449, 451-52, 257 S.E.2d 63, 65 (1979).

The pleader must allege material facts and circumstances sufficient to support each element of fraud. Id., 42 N.C.App. at 452, 257 S.E.2d at 65-66. In addition, Rule 9 of the Federal Rules of Civil Procedure requires that the factual circumstances supporting all allegations of-fraud be stated “with particularity.” Likewise, North Carolina courts require the pleader to state “with particularity the time, place and content of the false misrepresentation ...” Coley v. North Carolina National Bank, 41 N.C.App. 121, 125, 254 S.E.2d 217, 219 (1979). A mere conclusory allegation of fraud is insufficient to meet the particularity requirement. Id., Patuxent Development Co. v. Bearden, 227 N.C. 124, 128, 41 S.E.2d 85, 87 (1947).

Plaintiffs simply have not alleged facts sufficient to support the essential elements of a claim of fraud with any degree of particularity. The amended complaint fails to allege the essential element that the purported representations of the defendants were false when made. See Myrtle Apartments, Inc. v. Lumbermen’s Mutual Casualty Co., 258 N.C. 49, 127 S.E.2d 759 (1962). At most, plaintiffs have alleged a promissory representation by Central Soya of its intent to supply chickens in the future, which representation was in fact carried out for over 10 years; and an opinion as to the expected productive period of the chicken houses. It is well recognized, however, that an unfulfilled promise alone cannot be made the basis for an action for fraud unless the promise was made fraudulently with no intention to carry it out. Gadsden v. Johnson, 261 N.C. 743, 747, 136 S.E.2d 74, 77 (1964) (demurrer sustained where complaint merely alleged failure by defendants to carry out promissory representations). Moreover, mere statements of opinion as to the future quality or value of a product “are not regarded as fraudulent in law,” since they are not misrepresentations of a “subsisting fact.” American Laundry Machinery Co. v. Skinner, 225 N.C. 285, 290, 34 S.E.2d 190, 193 (1945) (plaintiff entitled to judgment on pleadings where representations relied upon by defendant to establish defense of fraud were mere statements of opinion).

In addition, the few facts which plaintiffs do allege concerning the purported representations lack the particularity required by Rule 9. The amended complaint fails to provide any detail as to the time or place of the purported representations, or as to the identity of the speaker or speakers. See Coley v. North Carolina National Bank, 41 N.C.App. at 125, 254 S.E.2d at 220. Accordingly, as a matter of law, any § 75-1.1 claim premised on actual fraud must be DISMISSED.

Second, plaintiffs’ own evidence fails to support any § 75-1.1 claim and, therefore, summary judgment must be granted as to plaintiffs’ second cause of action in toto. To violate § 75-1.1, the act or practice in or affecting commerce must be either (1) deceptive or (2) unfair and (3) such act or practice must result in’injury to the plaintiff. Marshall v. Miller, 302 N.C. 539, 276 S.E.2d 397 (1981). A trade practice is deceptive if it has the capacity or tendency to deceive. Id. at 548, 276 S.E.2d at 403. A practice is unfair, according to the North Carolina courts, when it “offends established public policy as well as when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” Id., Overstreet v. Brookland, Inc., 52 N.C.App. 444, 279 S.E.2d 1 (1981). Apparently, “unfairness” is broader than and subsumes the concept of “deception.” Id. Whether a trade practice is unfair or deceptive depends on the circumstances of each case and the impact of the practice in the marketplace. Marshall v. Miller, 302 N.C. at 548, 276 S.E.2d at 403; Johnson v. Phoenix Insurance Co., 300 N.C. at 262-63, 266 S.E.2d at 621.

Plaintiffs evidence, as forecast in H. Morrison Smith’s deposition testimony concerning Central Soya’s purported representations and assurances, is inadequate to support any claim of deceptive acts or conduct. As for plaintiffs’ allegation of fraud, no evidence exists to establish any misrepresentation related to a past or existing fact nor is there evidence of record to support a reasonable inference that any representation made was false at the time it was uttered.

As previously discussed, Central Soya’s purported representation that it was in the chicken or commercial egg business to stay, at most can be characterized as a promissory statement of future intent. There is no evidence that any past or existing fact was misstated by this expression of opinion as to the expected future status of the corporation.

Plaintiffs’ evidence merely establishes that, after more than ten years of doing business with plaintiffs, Central Soya sold its egg production business to Sun City in late 1981. This fact alone, however, raises absolutely no inference that the previous representations were false. No evidence exists to infer fraudulent intent when the statement was allegedly made.

In addition, plaintiffs contend Central Soya represented it would take plaintiffs from seven (7) to ten (10) years to pay for the chicken houses, but that the houses themselves would last at least twenty (20) years. H. Morrison Smith’s deposition at 35, 38-39, 42, 67 and 79. This purported representation can be considered nothing more than a statement of opinion as to the quality and duration of the houses and their potential for generating income. The statements, if made, are legally insufficient to support a claim for fraud, see American Laundry Machinery Co. v. Skinner, 225 N.C. 285, 290, 34 S.E.2d 190, 194 (1945), and furthermore, H. Morrison Smith admitted in his deposition that he had no complaint against Central Soya for the condition, quality or cost of the houses. H. Morrison Smith’s deposition at 40, 46.

Similarly, nothing in plaintiffs’ evidence supports a finding that defendants’ statements or actions were deceptive in any non-fraudulent manner or unfair. H. Morrison Smith was an experienced businessman who clearly knew the obligations imposed by the contracts he signed and who operated under the provisions of the contracts, without complaint, for a number of years. Dwight Smith testified that he thought the contract on the fourth house was a “good deal,” even knowing Central Soya had the right to remove the chickens at any time. D. Smith’s deposition at 8-9. The contracts were for one year terms and after the “implied” 1981 contracts ended, Sun City offered plaintiffs a contract on the fourth house, which was refused. Accordingly, Sun City had every right to remove the flocks in May and August of 1982.

Further recitation of the evidence would be repetitive and serve no useful purpose. There simply is nothing in the record to support a finding of deception or unfairness on the part of defendants, even assuming all the alleged representations were made.

Therefore, defendants’ motions for summary judgment are GRANTED as to plaintiffs’ N.C.GEN.STAT. § 75-1.1 claim.

CONCLUSION

Although the court sympathizes with plaintiffs’ plight, their present situation was not caused by an illegal or deceptive act of the defendants and relief in this court predicated on such allegations is unavailable. Based on the foregoing, defendants’ motions for summary judgment as to both causes of action contained in plaintiffs’ amended complaint are GRANTED and this action is hereby DISMISSED.

SO ORDERED.

      . Central Soya answered plaintiffs’ amended complaint on May 10, 1983, and cross-claimed against Sun City. Sun City answered Central Soya’s cross-claim on May 31, 1983 and the amended complaint on June 14, 1983.

      . Written supplements were issued in November, 1979 and January, 1981 modifying the payment schedules and were attached to the original contracts.

      . Although not specifically defined in the contracts, the parties agree that the useful laying period of a flock, as those terms were intended to be used in the contracts, was roughly one year. See Contracts 4-6 at § 12(b).

      . Interpretation and analysis of the common law rule by the North Carolina courts has recently begun to substantially mirror the analysis used under the UCC, see Rowe v. Rowe, 305 N.C. 177, 185, 287 S.E.2d 840, 845 (1982), thus, the outcome of this case would be no different under the Code. The only significant distinction appears to be with regard to the test used to determine whether a writing constitutes a total or partial integration. See infra at 524-525.

      . Although the common law parol evidence rule applies, the UCC contains a basically similar and certainly better-drafted rule:
      Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented
      (a) by a course of dealing or usage of trade (§ 25-1-205) or by course of performance (§ 25-208); and
      (b) by evidence of consistent additional terms unless the court finds the writing to have been intended as a complete and exclusive statement of the terms of the agreement. N.C.GEN.STAT. § 25-2-202 (1965).

        . See also the discussion infra at 530-531.

      . Smith alleged he relied on discussions he had with Central Soya’s agents where they "implied I'd be in the business for twenty years.” The twenty year term was discussed, but not included in the contracts because "I was willing to live with what Central Soya told me.” In effect, plaintiff’s own testimony shows he voluntarily and intelligently waived inclusion or insistence on inclusion of the twenty year term in the contracts.

      . N.C.GEN.STAT. § 75-1.1 provides that "unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are” unlawful. N.C. GEN.STAT. § 75-16 provides that a person injured by such acts is entitled to treble damages. See discussion infra at 530-531.

      . Breach of contract alone has been held insufficient for a violation of N.C.GEN.STAT. § 75-1.1. Atlantic Purchasers, Inc. v. Aircraft Sales, Inc., 705 F.2d 712 (4th Cir.1983); United Roasters, Inc. v. Colgate-Palmolive Co., 649 F.2d 985, 992 (4th Cir.), cert. denied, 454 U.S. 1054, 102 S.Ct. 599, 70 L.Ed.2d 590 (1981) (noting holding in Marshall v. Miller, 302 N.C. 539, 276 S.E.2d 397 (1981) that showing of bad faith unnecessary, but holding still that violation of § 75-1.1 requires “something more than an ordinary contract breach”). As a result, the plaintiffs allege that "representations and assurances" of the defendants were fraudulent, unfair, and deceptive, and do not contend that the purported breach of contract alone violated the statute.

      . “Proof of actual fraud would necessarily constitute a violation of the prohibition against unfair and deceptive acts; however, the converse is not always true.” Hardy v. Toler, 288 N.C. at 309, 218 S.E.2d at 346.

      . Defendants' motion to exclude from consideration the February 28, 1984, letter of plaintiffs’ counsel, George R. Kornegay, is ALLOWED. Defendants’ motion to exclude from consideration the attached three-paragraph affidavit of plaintiff H. Morrison Smith, is DENIED and that affidavit has been considered of record by the court. However, as defendant Central Soya argued in its response, filed March 1, 1984, this affidavit fails to raise any issue of material fact for trial. See response at 3.


source: Caselaw Access Project

author: MYRON H. THOMPSON, District Judge.

license: Public Domain

text:
    Eric Ashley KITCHENS, a minor, suing By and Through his father and next friend, Darrel KITCHENS, Plaintiff, v. The UNITED STATES of America, Defendant.
    Civ. A. No. 83-T-1290-N.
    United States District Court, M.D. Alabama, N.D.
    March 6, 1985.

      J.- Paul Lowery, Montgomery, Ala., for plaintiff.
    John C. Bell, U.S. Atty., Kenneth C. Vines, Asst. U.S. Atty., Montgomery, Ala., for defendant.
   ORDER

MYRON H. THOMPSON, District Judge.

Plaintiff Eric Ashley Kitchens, a child, has brought this lawsuit against defendant United States of America, pursuant to the Federal Tort Claims Act, 28 U.S.C.A. §§ 2671-2680. He claims that the United States is liable for a fall he suffered at a military base in Montgomery, Alabama. Based on the evidence presented at a non-jury trial limited to the issue of liability, the court concludes that the United States is liable for the child’s fall.

I.

Eric, now nearly nine years old, is the son of U.S. Air Force Sergeant Darrell Kitchens and his wife. In April 1981, the Kitchenses lived in noncommissioned officers quarters at Maxwell Air Force Base in Montgomery, Alabama, where Sergeant Kitchens was stationed. The Kitchenses lived in an area of identical buildings each of which has two apartments side-by-side. A notable feature of the buildings is a garage underneath each apartment with a cement ramp leading up through the backyard to the street. Each ramp has a metal railing on either side, consisting of four vertical posts and two horizontal bars attached to the building at one end. Each building shares a backyard with its neighbors on either side. The Kitchenses’ apartment shared a yard with that of the family of Sergeant Claude Kennedy.

On April 25, 1981, Eric was playing with one of the Kennedy children and another neighbor’s child in the backyard between the Kitchenses' and the Kennedys’ apartments when Eric suffered a fall. Standing at the railing of the Kennedys’ garage, he grabbed hold of the top horizontal bar at the section nearest the building. The bottom horizontal bar at this section was not in place. Eric fell through the gap in the railing created by the missing section and landed on the cement pavement below.

The Air Force houses over one thousand families at two bases and one annex in Montgomery, of which Maxwell Air Force Base is the largest. Air Force personnel and their families choose between living on or off the base. If they choose to live off the base, they receive a housing allowance which they forego if they choose to live on the base. Air Force regulations and agreements signed by personnel living on the base establish conditions governing their occupancy. Occupants of base housing agree to give thirty-days notice before leaving; correspondingly, the Air Force agrees not to evict occupants without cause. Housing is allotted according to rank and family size; occupants must notify the Air Force when these factors change or when they are stationed elsewhere so that they can be allotted new housing.

With regard to the maintenance of housing, occupants agree to undertake the duties of homeowners. They are responsible for minor repairs and must maintain their yards in proper condition. The base housing manager regularly inspects the yards and notifies occupants of deficiencies. When in need of assistance with repairs, occupants are to call on the base civil engineer who provides a maintenance service. This service is provided by a staff of military personnel. In addition, in April 1981, the base civil engineer contracted with a private contractor to make certain repairs. Repairs “within the contract” were handled by the contractor, while those “outside the contract” were handled directly by the base civil engineer, that is by military personnel. Both the contractor and base civil engineer operated service desks where residents could report problems. Finally, the Air Force operated a safety office to investigate potentially hazardous conditions on the bases.

A few days before Eric fell, Sergeant Kennedy had seen the bottom horizontal bar detached from his building, though not fallen out completely. He called Air Force personnel at least once to report the problem, but no one came to fix it.

Also, this particular section of the railing had detached in this way many times before, and on two or three prior occasions had fallen out completely, as it had before Eric fell. Neighbors were even aware of the defective railing. Each time the railing became defective, the Kennedys reported the problem to the Air Force and someone tried to fix it. Air Force personnel testified that they considered such missing railings as serious and urgent problems.

II.

According to the Federal Tort Claims Act, the court is to determine liability by applying the appropriate law of the forum state. 28 U.S.C.A. §§ 1346(b), 2674. See Massey v. United States, 733 F.2d 760 (11th Cir.1984). Thus, the court must determine whether under Alabama law the United States owed Eric Kitchens a duty of care, the breach of which caused his fall. See Quillen v. Quillen, 388 So.2d 985, 988 (Ala.1980).

Under Alabama law, “a landowner’s duty to one upon his premises depends upon the status of the latter with regard to the land,” that is, whether the latter is, for example, a trespasser, a licensee, an invitee, or a tenant. Frederick v. Reed, 410 So.2d 95, 97 (Ala.Civ.App.1982). In Alabama, a trespasser is one who enters land without the owner’s permission. Tolbert v. Gulsby, 333 So.2d 129 (Ala.1976). A licensee is one who enters land with the owner’s permission, most typically as a social guest. Frederick v. Reed, 410 So.2d 95, 97 (Ala.Civ.App.1982). An invitee, on the other hand, enters with permission but also to bestow some material benefit on the landowner. Quillen v. Quillen, 388 So.2d 985, 988 (Ala.1980). A tenant has additional, more substantial connections with the land and the landowner. “An invitee is a visitor, a transient____ A tenant, on the other hand, does not merely visit, but acquires an interest in the property, including the exclusive legal possession of the leased premises.” Osborn v. Brown, 361 So.2d 82, 87 (Ala.1978) (citations omitted).

Alabama courts have found a variety of factors to establish a landlord-tenant relationship even absent the parties’ explicit agreement, as most typically in a lease. Exclusive legal possession, as stated, is such a factor. See Rehfuss v. McAndrew, 33 So.2d 16, 18 (Ala.1947). “The payment and receipt of rent has been held to establish the relationship of landlord and tenant.” Osborn v. Brown, 361 So.2d 82, 87 (Ala.1978); see also Hackney v. Griffin, 244 Ala. 360, 13 So.2d 772 (1943). In King v. Reid, 428 So.2d 611 (Ala.1983), an agreement simply to pay the taxes and insurance in return for permission to stay in the premises created a landlord-tenant relationship. Id. at 614.

Weighing these factors in light of the evidence, the court finds that the United States had a landlord-tenant relationship with the occupants of the noncommissioned officers family housing. The evidence was that the occupants forewent a housing allowance in order to live at Maxwell Air Force Base and that the Air Force had the benefit of this allowance. For this, the occupants obtained exclusive legal possession of their apartments. The Air Force agreed not to evict them without reasonable cause. The occupants agreed to maintain the apartments and the yards. That they could leave with thirty-days notice did not mean that they were not tenants. See Marcrum v. Embry, 291 Ala. 400, 282 So.2d 49, 52 (1973). Indeed, the Air Force required that the occupants undertake the duties of homeowners.

Accordingly, at the time Eric fell through the partially missing railing, the United States owed the Kennedys and the Kitchenses that duty of care owed tenants. As the child of a tenant and the guest of another tenant, Eric enjoyed the protections of tenants under Alabama law. Uhlig v. Moore, 265 Ala. 646, 93 So.2d 490, 492 (1957) (landlord owes a tenant’s guest the same duty of care owed the tenant).

III.

Having determined what relationship Eric and the United States had, the court must consider what duties the relationship imposed on the United States. A landlord in Alabama may have various obligations to a tenant; however, most depend on the landlord’s explicit agreement or affirmative conduct. Unlike many states, Alabama recognizes no implied warranty of habitability in residential leases. Martin v. Springdale Stores, Inc., 354 So.2d 1144, 1145-46 (Ala.Civ.App.1978). Thus, a landlord is responsible for defects in the premises only in limited circumstances. One is with hidden defects existing before the tenancy of. which the landlord has knowledge, Taylor v. Leedy and Co., Inc., 412 So.2d 763 (Ala.1982), and the tenant does not. Cohran v. Boothby Realty Co., 379 So.2d 561 (Ala.1980). Another is where the defect is in an area where the landlord has retained control. Hancock v. Alabama Home Mortgaging Co., 393 So.2d 969, 970 (Ala.1981). In addition, the landlord is responsible if he affirmatively agrees to make repairs. Martin v. Springdale Stores, Inc., 354 So.2d 1144, 1146 (Ala.Civ.App.1978). This may result from a general express warranty or a single instance where the landlord undertakes repairs. Thus, although “a landlord is not an insurer of the safety of the premises,” it is well settled that “ ‘where the lessor, under no duty to repair, voluntarily undertakes so to do, he is liable for injuries proximately caused by negligence in so making repairs ____’” Dunson v. Friedlander Realty, 369 So.2d 792, 795 (Ala.1979), quoting Faucett v. Provident Mut. Life Ins. Co. of Philadelphia, 244 Ala. 308, 13 So.2d 182, 186 (1943).

The defect involved in Eric’s fall was the loose bottom horizontal bar in the railing around the Kennedys’ garage. This certainly was not a hidden defect, and there is no evidence that it existed when the Kennedys moved in. However, the evidence does reflect that the United States is liable under two other theories.

A.

First, the United States is liable because the garage where Eric fell was in an area over which the Air Force retained control. Whether a landlord has retained control is a question of fact. Hancock v. Alabama Home Mortgage Co., Inc., 393 So.2d 969, 970-71 (Ala.1981). The evidence was that the railing through which Eric fell was located in the yard between the Kennedys’ and Kitchenses’ buildings. According to the evidence, those living in the area considered this a community yard. No fences divided it among the apartments. Furthermore, the Air Force itself treated the yard as an area under its continued control. The base housing manager conducted regular inspections to ensure that occupants maintained their yards. Most significantly, the base civil engineer testified that his permission was necessary for occupants to make improvements in the yard, and that occupants could not have erected fences around their garage railings without the permission of his office. He explained that such prior permission served to ensure that any such fences would be uniform throughout the area. Furthermore, the occupants of the housing were to report problems with the railings to the Air Force, rather than make repairs or improvements themselves. In light of these circumstances, the court finds that the Air Force retained control of the area where Eric fell.

Where a landlord has retained control, “he has the duty to maintain the common areas in a reasonably safe condition in order to avoid liability for injury to tenants or their guests.” Hancock v. Alabama Home Mortgaging Co., 393 So.2d 969, 970 (Ala.1981). Furthermore, “[kjnowledge, either actual or constructive, must be present in order to hold the landlord liable in a retained control situation.” Osborn v. Brown, 361 So.2d 82, 88 (Ala.1978).

Here, the Air Force was fully aware of the defective railing and the serious safety hazard it posed. The Air Force had on several prior occasions attempted to repair the railing. The Air Force’s negligence is apparent because the railing kept falling out after each attempted repair. Furthermore, the Kennedys specifically complained to the Air Force about the missing railing just before Eric’s fall, and the Air Force negligently failed to respond to the complaint.

B.

Finally, even if the Air Force had not retained control of the garage area and was under no general duty to repair the railings, the United States would still be liable. As already observed, where a landlord, “even though under no duty to make repairs, voluntarily undertakes to do so, he is liable for injuries proximately caused by negligence in making the repairs so as to render the premises dangerous to the life or limb of those rightfully occupying the premises.” Baker v. Wheeler, Lacey & Brown, Inc., 272 Ala. 101, 128 So.2d 721, 723 (1961). Here, the Air Force voluntarily undertook to provide for the repair of the railings and, accordingly, undertook the duty to assure that the repairs were not done negligently. Nevertheless, as previously observed, the Air Force negligently repaired the defective railing on prior occasions. Furthermore, just before Eric’s fall, the Air Force negligently failed to respond to the Kennedys’ request to repair the railing.

IV.

In conclusion, the Air Force breached its duty of care to Eric, and this breach was the proximate cause of Eric’s fall. The United States is therefore liable to Eric for any damages suffered from his fall.

Accordingly, it is the ORDER of the court that judgment be and it is hereby entered in favor of the plaintiff and against the defendant on the issue of liability.

It is further the ORDER of the court that the issue of damages be and it is hereby set for trial on May 23, 1985, at 8:30 a.m. in the fourth floor courtroom of the federal courthouse in Montgomery, Alabama.

      . A finding of constructive knowledge is also appropriate here. As already stated, since the Air Force retained control, it had a duty to maintain the area of the railings in a reasonably safe condition. Here, the defective railing was open and readily apparent. The Kennedys had observed it on many occasions, and their neighbors were aware of it. The court finds that under these circumstances the Air Force should have been aware of the defective railing in the general and reasonable exercise of its duty to maintain the area of the railing in a reasonably safe condition.
      More specifically, in Coggin v. Starke Brothers Realty Company, Inc., 391 So.2d 111, 112-113 (Ala. 1980), the Alabama Supreme Court reaffirmed the adoption of the Restatement (Second) of Torts, § 360 (1965), which provides:
      A possessor of land who leases a part thereof and retains in his own control any other part which the lessee is entitled to use as appurtenant to the part leased to him, is subject to liability to his lessee and others lawfully upon the land with the consent of the lessee or a sublessee for physical harm caused by a dangerous condition upon that part of the land retained in the lessor’s control, if the lessor by the exercise of reasonable care could have discovered the condition and the unreasonable risks involved therein and could have made the condition safe.
      For reasons given above, this court finds that in the exercise of reasonable care, the Air Force could have discovered the defective railing and the unreasonable risk posed by it and could have made the condition safe.

      . The evidence reflected a factual dispute over whether the Kennedys had reported the defective railing just before Eric fell and whether on prior occasions the Air Force had tried to fix it. Sergeant and Mrs. Kennedy testified that they had reported it just before Eric fell and that on prior occasions the Air Force had attempted to fix the railing after they had filed complaints. The Air Force, on the other hand, offered evidence that there was no record of the Kennedys’ having ever reported the defect. However, upon close scrutiny by the court, this evidence appears flawed.
      The log of complaints admitted in evidence purported to document the details of every request for repairs between October 1, 1980, and May 1, 1981, and showed no request from the Kennedys to repair the railing. Although there is no reason other than occasional deviations from chronological order to doubt that the log contains every request, the log entries appear to be incomplete. Separate records of individual complaints also admitted in evidence, when compared to their corresponding log entries, show that the log entries are only abbreviations of complaints. Thus, if an occupant reported several problems at once, the log might show only one. The log does indicate that the Kennedys reported many problems over the five months covered. Therefore, that the railing is not mentioned does not mean that they did not report it. On this basis, the court credits the Kennedys’ testimony that they had reported the defective railing on several occasions before Eric fell through it.

      . It appears that where one voluntarily undertakes to make repairs there may be a duty of care even in the absence of a landlord-tenant relationship. However, in light of the presence of such a relationship here, .the court need not reach this issue.

      . The United States contends that, assuming there was a duty and a breach thereof, it is not liable under the independent contractor exception. See Logue v. United States, 412 U.S. 521, 93 S.Ct. 2215, 37 L.Ed.2d 121 (1973); McCorkle v. United States, 737 F.2d 957, 961 n. 3 (11th Cir.1984). This contention is meritless. The missing railing was considered an “urgent problem" and under the contract with the private contractor was the responsibility of military personnel rather than the private contractor. The court finds that on prior occasions the Kennedys reported the defective railing, and it was the military personnel rather than the private contractor who negligently repaired the railing. The court further finds that just before Eric's fall, the Kennedys again complained about the defective railing to military personnel, and that it was military personnel that negligently failed to respond to the complaint.


author: SPELLMAN, District Judge.

text:
    Larry H. SCHATZ and Ellen H. Schatz, his wife, Plaintiffs, v. JOCKEY CLUB PHASE III, LTD., Defendant.
    No. 82-589-CIV-EPS.
    United States District Court, S.D. Florida, Miami Division.
    March 7, 1985.

      Irving B. Levenson, Miami Beach, Fla., for plaintiffs.
    Larry S. Stewart, Miami, Fla., for defendant.
   MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT

SPELLMAN, District Judge.

This is an action brought by condominium purchasers seeking the rescission of a contract for the purchase from Defendant of a condominium unit in the Jockey Club Condominiums, Phase III. The Second Amended Complaint based jurisdiction on section 1719 of the Interstate Land Sales Full Disclosure Act, 15 U.S.C. §§ 1701-1720, alleging that Jockey Club violated the Act by entering into the contract without providing the purchasers with a printed property report as required by section 1703(c) and section 1707. The Plaintiffs have additionally submitted an affidavit verifying the allegations contained in the Second Amended Complaint. Specifically, Plaintiffs aver that they “never received, and the defendant, Jockey Club Phase III, Ltd., never furnished to them a ‘Property Report’ of any kind.”

Jockey Club has not responded with any evidentiary matter which would tend to refute this point. Instead, Jockey Club seems to base its defense on its claim that the Interstate Land Sales Full Disclosure Act is inapplicable to this case. Defendant first claims that the Act does not apply to the sale of condominium units. “[Ejven if the Act were to apply,” the Defendant continues, this sale is exempt because the contract “obligat[es] the seller or lessor to erect [the condominium] within a period of two years.” 15 U.S.C. § 1702(a)(2). The Defendant’s final argument is that the purchasers are, in any event, precluded from recovery because “there is no claim of a violation of the Act which has injured Plaintiffs.” Thus, the Jockey Club has moved to dismiss the Second Amended Complaint, pursuant to Fed.R.Civ.P. 12(b)(6), for “failure to state a claim upon which relief can be granted.” Additionally, Jockey Club, in its “Notice of Intent to Rely upon Additional Authority,” has renewed its Motion for Summary Judgment.

In response to Defendant’s Motion to Dismiss, the Plaintiffs “renew[ed] their previously-filed Motion for Summary Judgment” as well. Because this Court concludes that Jockey Club is not exempt from the provisions of the Act, it was required to furnish a property report to the purchasers in advance of the signing of the contract. Since the uncontroverted facts establish that no property report was furnished, the purchasers have a statutory right to rescission and the refund of their deposits. Accordingly, Plaintiff’s Renewed Motion for Summary Judgment is granted.

Fed.R.Civ.P. 56(c) provides that summary judgment should be entered only if “there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.” The party seeking summary judgment bears the exacting burden of demonstrating that there is no actual dispute as to any material fact in the case. See Impossible Electronics Techniques, Inc. v. Wackenhut Protective Systems, Inc., 669 F.2d 1026, 1031 (5th Cir.1982). In assessing whether Plaintiffs have met this burden, this Court must view the evidence introduced and all factual inferences from that evidence in the light most favorable to the Defendant. See Environmental Defense Fund v. Marsh, 651 F.2d 983, 990-91 (5th Cir.1981). All reasonable doubts about the facts should be resolved in favor of the non-moving litigant. See Casey Enterprises v. American Hardware Mutual Insurance Co., 655 F.2d 598, 602 (5th Cir.1981).

In this case, there are no disputed facts. The Jockey Club’s position has always been that the instant transaction falls within an exemption to the Act or that the Act is otherwise inapplicable. Jockey Club’s arguments will be discussed in turn.

1. “THE ACT DOES NOT APPLY TO THIS CASE”

Because this case involves the sale of a condominium unit, Defendant argues that the Interstate Land Sales Full Disclosure Act does not apply in that the Act “by its terms does not apply to condominium units but only to “sales ... of any lots.” Defendant cites Winter v. Hollingsworth Properties Inc., 587 F.Supp. 1289 (S.D.Fla.1984), as authority for this proposition. In Winter, Judge Jose A. Gonzalez, Jr. concluded, after a lengthy discussion of the legislative history of the Interstate Land Sales Full Disclosure Act, that “[a] condominium unit when completed is not a ‘lot’ within the meaning of the Interstate Land Sales Act.” With all due respect to Judge Gonzalez, however, this Court must disagree.

It is true that Congress imposed the Act’s requirements only on the “sale or lease of lots.” 15 U.S.C. § 1703. The Act, however, does not define “lot.” But the Code of Federal Regulations does. The word “lot” is defined as “any portion, piece, division, unit or individual interest in land ... if the interest includes the right to the exclusive use of a specific portion of the land.” 24 C.F.R. § 1710.1 (1981). Moreover, the Office of Interstate Land Sales Registration (“OILSR”), the federal body charged with administering the Act, has consistently taken the position (with some variation in degree) — first, in the form of a position paper dated August 20, 1972 and later in the form of regulations issued in February 1974 — that sales of condominium units are within the coverage of the Act. See Nargiz v. Henlopen Developers, 380 A.2d 1361 (Del.1977).

In commenting on this aspect of the definition of the term “lot” as used in the Act, the Administrator of OILSR stated:

The application of the Act to condominiums has been consistent with OILSR policy since the issue was first raised in 1969. The bases for this position are that condominiums carry the indicia of and in fact are real estate, whether or not the units therein have been constructed. A condominium is accordingly viewed by OILSR as equivalent to a subdivision, each unit being a lot.

38 Fed.Reg. 23866 (Introduction to Regulations).

That this has become the accepted view, see 15A Am.Jur.2d, Condominiums § 20 at 850 (1976); Comment, Condominium Regulation: Beyond Regulation, 123 U.Pa.L. Rev. 639, 660 (1975). See also Inversiones Romar, S.A. v. Jockey Club Phase III, Ltd., No. 82-0695-CIV-JE (S.D.Fla. September 18, 1984), a case in which Judge Joe Eaton disagreed with Judge Gonzalez’ interpretation of the Interstate Land Sales Full Disclosure Act. Judge Eaton decided:

Although the Act uses the undefined term “lot”, Congress’s addition in 1978 of the term “condominium” to the § 1702(a)(2) exemption presupposes that the Act applies to sales of condominium units generally. Study of the legislative history of the 1978 amendment shows no Congressional intent to the contrary. Moreover, condominiums carry the indicia of and in fact are treated as real estate under the laws of Florida, thus making it consistent with the remedial purpose of the Act to view a condominium project as equivalent to a subdivision, each unit being equivalent to a “lot.”

This Court sides with Judge Eaton. It has been held that the general purpose of the Act is to prohibit and punish fraud in certain land development enterprises and consequently, it has been said that the Act should be liberally interpreted to attain that end. It should be construed not technically, but flexibly to effectuate its remedial purposes. See McCown v. Heidler, 527 F.2d 204 (10th Cir.1975). Therefore, to implement this national public policy of protecting the consumer, this Court chooses to accord the Interstate Land Sales Full Disclosure Act a liberal construction. Accordingly, this Court holds that condominiums, or unit properties, are within the application of the federal statute.

2. “JOCKEY CLUB IS AN EXEMPT PROJECT”

“[E]ven if the Act were to apply to this transaction,” Jockey Club argues, “this action should be dismissed because the Jockey Club condominium project is an exempt project within the terms of the Act.” Defendant contends that the instant transaction comes within the exemption which states that the Act’s provisions are inapplicable to “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).

Jockey Club asserts that paragraph nine (9) of the contract obligated it to complete the condominium within a period of two years. That paragraph provides, in pertinent part that:

The apartment shall be ready for occupancy approximately on the estimated closing date but not later than two (2) years from the date hereof unless delayed by circumstances or conditions beyond the control of Seller and are legally supportable under Florida law as impossible of performance.

Paragraph nine, however, goes on to limit the purchasers’ remedies: “Seller shall not be obligated to make, provide or compensate Buyer for any costs, expenses or losses that may result in a delay in the estimated date of occupancy. Such delays shall not cancel, amend or diminish any of the Buyer’s obligations undertaken.” In addition, paragraph seventeen (17) states that “Seller’s sole liability and obligation to Buyer in the event Seller fails to complete construction or otherwise fails to close this transaction, is the return of the Buyer’s deposits together with interest thereon. No action of specific performance of this agreement shall lie in favor of either party.” Finally, paragraph eighteen (18) grants the seller the right to reject the buyer for any reason whatsoever, and if so “this contract shall be terminated and of no further force or effect.”

Faced with identical arguments and an identical contract, Judge Eaton in Inversiones Romar, S.A., granted summary judgment in favor of the purchasers. Judge Eaton held that “[tjhese provisions of paragraphs 17 and 18 so qualify the seller’s promise to erect the unit within two years that it cannot be said that the contract ‘obligates’ Defendant to do so, within the meaning of the Act.” This Court agrees with Judge Eaton. The obligation which a seller must undertake in order to come within § 1702(a)(2) is to erect the building within two years. Here, the sole obligation which Jockey Club undertook was to give the purchasers an option to cancel the contract and recover the deposit in the event the condominium unit was not ready for occupancy within two years. This obligation, however, is no different than the obligation that the Act itself imposes upon Jockey Club by virtue of its failure to furnish the required property reports to the purchasers.

In Eaton v. Dorchester Development, Inc., No. 81-1615-CIV-EPS (S.D.Fla. November 26, 1984), this Court adopted Judge Daniel Pearson’s well-reasoned opinion in Dorchester Development, Inc. v. Burk, 439 So.2d 1032 (Fla. 3d DCA 1983). Judge Pearson was quoted as follows:

Where the seller is obligated to complete by a time certain, the purchaser is not limited, as here, to the remedy of rescission, but he may affirm the contract and seek damages. See Marshall v. Karl F. Schultz, Inc., [438 So.2d 533] (Fla.2d DCA 1983) ____ Since the Act is to be construed to effectuate its remedial purpose of protecting the land sale consumer, we can hardly conclude that a contract which has the effect of limiting the purchaser’s remedies conforms to the requirements of the Act.

Id. at 1034-35 (footnote and citations omitted).

In this ease, as in Burk, the contract limits the purchasers' ability to enforce the promise to complete the condominium within two years. Therefore, the contract does not comply with § 1702(a)(2) which has been interpreted to require an “unconditional commitment” to complete the units within two years. Jockey Club is thus not exempt from the provisions of the Interstate Land Sales Full Disclosure Act by virtue of § 1702(a)(2).

3. “THERE IS NO CLAIM OF A VIOLATION OF THE ACT WHICH HAS INJURED PLAINTIFFS”

Defendant notes that “Plaintiffs do not claim that they were misled, induced through fraud or ‘bilked’. Plaintiffs do not claim that there was a nondisclosure of information which, if disclosed, would have caused them to not enter into the Sales Agreement.” Although Defendant is correct, it makes no difference.

Such allegations are not required by the Interstate Land Sales Full Disclosure Act. The Congressional purpose behind the Act was to protect the consumer. This Court is of the opinion that this purpose would be thwarted were this Court to burden the purchaser with the requirement of claiming actual injury when Congress does not require such a claim. See Inversiones Roman, S.A., (“because the Act is a remedial statute, the Court finds Defendant’s third contention to be without merit.”).

The requirements of the Land Sales Full Disclosure Act are clear. And it is Jockey Club, not the purchasers, that must comply with the requirements. Section 1703(c) and section 1707 obligated Jockey Club to provide the purchasers with a printed property report. Since the uncontroverted facts establish that no property report was furnished, the purchasers are entitled to a judgment as a matter of law. Accordingly, Plaintiffs’ Motion for Summary Judgment is granted.

Plaintiffs are directed to submit to this Court, within ten (10) days from the date of this Memorandum Opinion and Order, a proposed Final Judgment in accordance with this Memorandum Opinion and Order.

      . In addition to rescission, Plaintiffs also prayed for “the entry of a Preliminary Injunction ... regarding the status quo,” (the refund of all deposits), declaratory relief, interest, attorneys’ fees and costs.

      . In its Answer and Affirmative Defense, Defendant does state that ”[a]Il remaining allegations of the Second Amended Complaint are specifically denied and strict proof is demanded thereof.” This denial, however, does not controvert the fact that no property report was furnished. When a motion for summary judgment is made and properly supported as it is here, the "adverse party may not rest upon the mere allegations or denials of his pleading,” but instead must respond by affidavit or otherwise setting forth specific facts showing that there is a genuine issue for trial. "If he does not so respond, summary judgment, if appropriate, shall be entered against him.” Fed.R.Civ.?. 56(e); e.g., Ferguson v. National Broadcasting Co., 584 F.2d 111 (5th Cir.1978).
      Defendant has responded with the affidavit of Marvin M. Green. This affidavit, however, does not controvert the fact that no property report was furnished to the purchasers. The affidavit cannot be construed, even in the light most favorable to the Defendant, as setting forth any facts showing that the report was furnished.

      . On January 11, 1985, Defendant filed its Answer and Affirmative Defense. Defendant’s first Affirmative Defense challenged the sufficiency of the Second Amended Complaint. Because no support was given for this challenge, this Court, on January 18, 1985, directed the Defendant to file a Memorandum of Law in Support of Affirmative Defense “1.” In this requested memorandum, Defendant moved to dismiss the Second Amended Complaint.

      . The Amended Complaint named three Defendants. The first Defendant was Jockey Club Phase III, Ltd. The second Defendant was Sun Bank of Miami, a Florida corporation acting as Land Trustee of Land Trust dated October 13, 1978, and alleged to be the developer pursuant to 15 U.S.C. § 1701(5) of Jockey Club III. The third Defendant was a law firm, Green, Rose, Kahn and Piotrkowski, P.A., a Florida Professional Association acting as Escrow Agent for the purchasers. On July 9, 1984, this Court adopted United States Magistrate Charlene H. Sorrentino’s January 17, 1984 Recommendation and granted summary judgment in favor of Sun Bank of Miami and Green, Rose, Kahn and Piotrkowski, P.A. The Plaintiffs were also granted leave of court to amend their Amended Complaint because they "failed to allege that [Jockey Club] committed any actionable wrong under the Act.” A Second Amended Complaint was filed on January 30, 1984.

      . Judge Gonzalez therefore granted summary judgment in favor of the developer. That decision is currently pending before the United States Court of Appeals for the Eleventh Circuit. The appellate case number is 84-5576. Oral argument has not yet been scheduled.

      . In Inversiones Romar, S.A., Judge Eaton granted the Plaintiff's Motion for Summary Judgment. Defendant Jockey Club Phase III, Ltd. filed a Notice of Appeal on December 26, 1984, but moved to dismiss that appeal on February 27, 1985. The eleventh circuit, however, has not yet closed the case.

      . In its Notice of Intent to Rely Upon Additional Authority, Defendant cites Mosher v. Southridge Associates, Inc., 552 F.Supp. 1226 (W.D.Pa.1982). In Mosher, the developer's claim of a § 1702(a)(2) exemption was sustained. But as Judge Eaton pointed out in Inversiones P.omar, S.A.:

      in Mosher, the district court seemingly overlooked a limitation of remedies clause barring specific performance of the contract. To the extent that the result in Mosher would have been the same had the court there considered the clause, this Court declines to adopt the reasoning underlying Mosher, especially in light of the fact that the instant contract bars not only an action for specific performance, but a damage action as well.
      Inasmuch as Judge Eaton was interpreting the same contract at issue here, this Court chooses to adopt Judge Eaton’s persuasive reasoning in rejecting Mosher. Instead, this Court agrees with the views of the Third District Court of Appeals in Burk, that a developer is "obligated” to complete construction within two years, within the meaning of the Act, only if the purchaser’s ability to enforce the promise is not limited by the contract.