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Waddell v. Ferguson Home Builders, LLC

Court of Appeals of Arkansas, Division I

February 1, 2017




          William G. Almand, P.A., by: William G. Almand, for appellant.

          Anderson, Murphy & Hopkins, L.L.P., by: Michael P. Vanderford, for appellee.

          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 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.

         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 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 ...

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