Opinion ID: 1119218
Heading Depth: 2
Heading Rank: 3

Heading: the uniform land sales practices act

Text: After the trial court dismissed the Consumer Protection Act claim against Brown, the State amended its complaint to allege violations of the Uniform Land Sales Practices Act (ULSPA), AS 34.55.004-34.55.046. Throughout the remainder of the proceedings, the State consistently asserted and Brown consistently denied liability under this Act. At the conclusion of the case, the lower court declined to rule on the applicability of ULSPA, relying instead on the common law. The State contends that the judgment would have been proper under ULSPA. Brown, on the other hand, maintains that ULSPA cannot constitutionally apply to him since the 1977 amendments, which made the Act applicable to in-state land sales, were enacted in violation of article II, section 13 of the Alaska Constitution. Brown also claims that a court is without authority to award restitution in a suit brought under ULSPA by the Attorney General. Finally, Brown argues that even if the court could award restitution, it could not do so as to those purchasers who bought their lots prior to the effective date of the ULSPA amendments.
Article II, section 13 of the Alaska Constitution [15] requires that every bill be confined to one subject which must be expressed in its title. The 1977 amendments to ULSPA find their genesis in House Bill 67, entitled An Act Relating to the Uniform Land Sales Practices Act. 1977 House Journal 63. The bill was introduced at the Governor's request and all of its provisions related directly to ULSPA. See Governor's Transmittal Letter, id. at 63-66. The primary impact of House Bill 67 was to amend ULSPA to bring in-state sales of subdivided land within the Act's scope and to add a general antifraud section. With only minor changes, the bill received the House's approval and was sent to the Senate for its consideration. At the instance of the Senate Rules Committee, a Senate Committee Substitute was approved. 1977 Senate Journal 1517. This version of the bill was entitled An Act Relating to Land; And Providing for an Effective Date. Id. at 1489. The sections relating to ULSPA were essentially the same as those approved by the House, but the Senate Committee Substitute also contained various amendments to the Alaska Land Act, AS 38.05.005-38.05.370. These amendments pertain to the leasing of state-owned lands and to the Division of Lands' zoning power. It was this version of the bill that ultimately became law. Ch. 138, SLA 1977. That every section of Chapter 138, SLA 1977 in some respect concerns land is not disputed. However, it is just as clear that many of its provisions have nothing else in common. Thus, the issue to be resolved is whether the general heading land can be considered one subject for purposes of article II, section 13. Were we writing on a clean slate, we would be inclined to find this subject impermissibly broad. Permitting such breadth under the one-subject rule could conceivably be misconstrued as a sanction for legislation embracing the whole body of the law. Trumble v. Trumble, 37 Neb. 340, 55 N.W. 869, 870 (Neb. 1893). Nevertheless, while the issue is indeed close, we are unable to say that the legislature has transgressed the limits of article II, section 13 established by prior decisions of this court. To determine if a bill is confined to one subject, [a]ll that is necessary is that the act should embrace some one general subject; and by this is meant, merely, that all matters treated of should fall under some one general idea, be so connected with or related to each other, either logically or in popular understanding, as to be part of, or germane to, one general subject. [16] Thus, what constitutes one subject for purposes of art. II, § 13 is broadly construed. [17] And [n]o act will be set aside for failing to comply with this provision except where the violation is both substantial and plain. [18] In Gellert v. State, 522 P.2d 1120 (Alaska 1974), we upheld a bill that provided for the issuance of bonds to finance flood control and small boat harbor projects. These two topics were found to be confined to one subject because they both pertained to one ongoing plan for the development of water resources. Id. at 523. More recently, in North Slope Borough v. Sohio Petroleum Corp., 585 P.2d 534, 545 (Alaska 1978), we upheld An Act Relating to Taxation; And Providing for an Effective Date. Because its various provisions, although diverse, all related to state taxation, we found no violation of the one-subject rule. Id. at 544-46. In light of these decisions, we must likewise conclude that land is not an unduly broad subject for purposes of article II, section 13. Consequently, Chapter 138, SLA 1977, the provisions of which all relate to this subject, is constitutionally valid. [19]
Unlike the Consumer Protection Act, ULSPA does not expressly authorize the court to award restitutory relief in a suit instituted by the State. Although restitution is expressly available in a private action under ULSPA, AS 34.55.030(b), with respect to public enforcement, the Act merely provides that the State may bring an action in the superior court ... to enforce compliance with this chapter or a regulation or order under this chapter. AS 34.55.020(c). According to Brown, the absence of a provision authorizing restitution in a public action impliedly circumscribes the court's power to award such relief unless the State proceeds under Civil Rule 23, and the case is properly certified as a class action. While we agree that in a case of this nature the State must proceed in a representative capacity, we conclude that certification as a class action is not a prerequisite to an award of restitutory relief. In People v. Superior Court, 9 Cal.3d 282, 107 Cal. Rptr. 192, 507 P.2d 1400 (Cal. 1973), the California Supreme Court was confronted with substantially the same issue involved here. In that case, the California Attorney General brought suit under a statute that authorized the Attorney General to sue to enjoin misleading advertising, but was silent as to the power of the trial court to order restitution in such a proceeding. Id. 107 Cal. Rptr. at 194, 507 P.2d at 1402. Noting that the statute involved did not restrict the court's general equity jurisdiction `in so many words, or by a necessary and inescapable inference,' id., quoting Porter v. Warner Holding Co., 328 U.S. 395, 398, 66 S.Ct. 1086, 1089, 90 L.Ed. 1332, 1337 (1946), the court held that a trial court has the inherent power to order, as a form of ancillary relief, that the defendants make or offer to make restitution to the consumers found to have been defrauded. 507 P.2d at 1402. In support of its holding the court relied on a number of analogous federal cases that had reached the same conclusion. See Mitchell v. DeMario Jewelry, Inc., 361 U.S. 288, 291-92, 80 S.Ct. 332, 334, 4 L.Ed.2d 323, 326 (1960); Porter v. Warner Holding Co., 328 U.S. 395, 398-99, 66 S.Ct. 1086, 1089, 90 L.Ed. 1332, 1336-38 (1946); Securities and Exchange Comm'n v. Texas Gulf Sulphur Co., 446 F.2d 1301, 1307-08 (2d Cir.1971); McComb v. Frank Scerbo & Sons, 177 F.2d 137, 138-39 (2d Cir.1949). See also Interstate Commerce Comm'n v. B & T Transportation Co., 613 F.2d 1182, 1184-85 (1st Cir.1980). But see United States v. Parkinson, 240 F.2d 918 (9th Cir.1956). We find the California Supreme Court's reasoning persuasive and therefore hold that the trial court has the inherent power to order restitution in an action brought by the State under ULSPA. Nothing in that Act or in its legislative history suggests that the legislature intended to restrict the court's traditional equity powers when properly invoked. That the legislature saw fit to provide a private right of action for restitution under ULSPA does not, in our judgment, operate to curtail the court's power to award such relief at the instance of the State. See Pierce v. Superior Court, 1 Cal.2d 759, 37 P.2d 460, 461 (Cal. 1934). There remains, however, the question of how the State must proceed in a case of this nature; an issue that has received scant attention from the courts. As we perceive it, the principal difference between this case and one brought as a private class action is that the State is not a member of the class of persons whom it seeks to represent. [20] While the State here denies that it is representing anyone other than itself, asserting that its action is predominatly founded in law enforcement, it is clear that as to the restitution claim the State is attempting to enforce the rights of a class of private individuals. Thus, we believe that the State must be regarded as acting in a representative capacity. This conclusion finds support in the case of Kugler v. Romain, 58 N.J. 522, 279 A.2d 640 (N.J. 1971), in which the court sustained the Attorney General's authority to maintain an action for restitution on behalf of defrauded consumers as a suit in the nature of a class action. Id. 279 A.2d at 649. Although the court did not discuss at length the procedural aspects of such a suit, it did note in passing that guidance may be found in [New Jersey statutes] which relate generally to class actions. Id. We likewise conclude that guidance as to the procedural aspects of a case such as this may be found in our own rule governing the maintenance of representative actions, Civil Rule 23. Of particular importance is that part of the Rule relating to notice to members of the class being represented. Subsection (c)(2) of the Rule in relevant part provides: [T]he court shall direct to the members of the class the best notice practicable under the circumstances, including notice to all members who can be identified through reasonable effort. The notice shall advise each member that (A) the court will exclude him from the class if he so requests by a specified date; (B) the judgment, whether favorable or not, will include all members who do not request exclusion; and (C) any member who does not request exclusion may, if he desires, enter an appearance through his counsel. Alaska R.Civ.P. 23(c)(2). Following this procedure will assure that those individuals who elect to be represented by the State will be bound by the judgment, like any other persons whose claims are prosecuted by an authorized representative. McComb v. Frank Scerbo & Sons, 177 F.2d 137, 140 (2d Cir.1949) (Hand, C.J., concurring). And ensuring that the judgment has this res judicata effect will promote judicial economy by lending finality to litigation and protect the defendant from the unfair risk of being subjected to multiple lawsuits arising from the same claim. See Note, New York City's Alternative to The Consumer Class Action: The Government As Robin Hood, 9 Harv.J.Legis. 301, 345-47 (1972); California Corporations Code Section 25530(b): Government Agency Suit Versus The Private Class Action, 27 Hastings L.J. 265, 279-80 (1975). In the instant case, the trial court instructed the State to notify all Windsong lot purchasers of the State's action against Brown. The purpose of such notice was to determine which purchasers wished to participate in any order of restitution ultimately decreed by the court. This notice, however, did not comport with the requirement discussed above that the notice state that those electing to participate will be bound by the final judgment, whether favorable or not. Consequently, whether the lower court's judgment in this case would be binding on each Windsong lot purchaser remains open to question. However we do not believe that this defect requires that the case be remanded for further proceedings. Before an individual lot purchaser receives money under a judgment ordering restitution, he should first consent in writing to be bound by that judgment. That will, under the circumstances of this case, in large part accomplish the goals of the notice requirement of Rule 23(c)(2).
We must now determine whether the lower court's restitution order can be upheld under ULSPA. AS 34.55.006 provides: It is unlawful for a person, in connection with the offer, sale or purchase of subdivided land directly or indirectly, to knowingly (1) employ a device, scheme or artifice to defraud; (2) make an untrue statement of a material fact or omit a statement of material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or (3) engage in an act, practice, or course of business which operates or would operate as a fraud or deceit upon a person. A person who disposes of subdivided land [21] in violation of this section is civilly liable to a purchaser ... unless in the case of an untruth or omission it is proved that the purchaser knew of the untruth or omission or that the person offering or disposing of subdivided land did not know and in the exercise of reasonable care could not have known of the untruth or omission. AS 34.55.030(a). See Stepanov v. Gavrilovich, 594 P.2d 30, 33 (Alaska 1979). With respect to the eighteen individuals who purchased Windsong lots on or after September 21, 1977, the date when ULSPA became applicable to sales of in-state land, Brown does not seriously dispute his liability. The trial court found that Brown knew, prior to developing Windsong, of the facts relating to the flood hazard. Brown does not contest those findings, nor does he contest the trial court's findings that the facts he misrepresented or omitted to mention were material. Since Brown had ample opportunity but failed to show facts which could constitute a defense under AS 34.55.030(a), ordering restitution under ULSPA was proper as to those individuals who purchased their lots on or after September 21, 1977. The vast majority of purchasers on whose behalf restitution was ordered bought their lots prior to this date, however. Liability as to those purchasers under ULSPA, Brown argues, would require impermissible retrospective application of the Act to in-state subdividers. The State contends that because ULSPA is remedial, it can be given retroactive effect. The State further claims that liability as to the pre-September 21, 1977 purchasers can be predicated on conduct by Brown that occurred after that date, thereby avoiding retrospective application of ULSPA. AS 01.10.090 provides that [n]o statute is retrospective unless expressly declared therein. Chapter 138, Sections 1-8, SLA 1977, which added AS 34.55.006 and amended ULSPA to apply to in-state subdividers, contains no such express declaration. Nor does its legislative history indicate that retrospective application was intended. [22] Recently, we observed: We have heretofore closely adhered to the clear mandate expressed in the statutory language. Statutes are not to be applied retroactively unless the language used by the legislature indicates the contrary. City and Borough of Juneau v. Commercial Union Ins. Co., 598 P.2d 957, 958-59 (Alaska 1979); Davenport v. McGinnis, 522 P.2d 1140, 1142 (Alaska 1974); Stephens v. Rogers Constr. Co., 411 P.2d 205, 208 (Alaska 1966). Matanuska Maid, Inc. v. State, 620 P.2d 182, 187 n. 8 (Alaska 1980). In that case we did hold that mere procedural changes which do not affect substantive rights are not immune from retrospective application. Id. at 187. But the broad prohibitory language of AS 34.55.006 can hardly be characterized as bringing about mere procedural changes. Thus, we hold that ULSPA cannot be retrospectively applied to hold Brown liable for conduct predating its application to in-state land sales. [23] We note that this conclusion is in accord with the construction given to the Interstate Land Sales Full Disclosure Act, ULSPA's federal counterpart. See Davis v. Rio Rancho Estates, Inc., 401 F. Supp. 1045, 1048 (S.D.N.Y. 1975). The State alternatively argues that liability for restitution to pre-September 21, 1977 purchasers can be premised on Brown's later lulling activities, which, the State urges, constitute fresh ULSPA violations. Reference is made to the trial court's findings that Brown's letter to all Windsong lot purchasers, sent in January 1978, contained numerous misrepresentations designed to induce purchasers to continue making their property payments. According to the State, these misrepresentations were made in connection with the offer, sale or purchase of subdivided land, thereby triggering liability under AS 34.55.006. The State's argument in large part centers on the Act's definition of offer. [24] AS 34.55.044(2) defines that term as including every inducement, solicitation or attempt to encourage a person to acquire an interest in land, if undertaken for gain or profit. The State reasons that Brown's lulling activities were inducements or attempts to get purchasers to acquire further interests in land. We think it would be straining the language of the Act to hold that post-sale conduct designed to induce the continuation of payments constitutes an offer as that term is defined above. The continuation of payments under the land sales contracts involved here did not result in the acquisition by purchasers of further interests in land. Legal title to the property vested in the purchasers at the time the contracts were signed. [25] The State's reliance on Husted v. Amrep. Corp., 429 F. Supp. 298 (S.D.N.Y. 1977) is misplaced. That case involved the question whether a violation of the antifraud provisions of the federal Interstate Land Sales Full Disclosure Act could occur after the sale of land so that the plaintiff's claim would not be barred by the applicable statute of limitations. The court held that such a violation could occur, but emphasized that unlike S.E.C. Rule 10b-5, upon which the section at issue was in part modelled, the Act did not require that the violation occur in connection with the sale. Id. at 307. See also Fogel v. Sellamerica, Ltd., 445 F. Supp. 1269, 1274-75 (S.D.N.Y. 1978). AS 34.55.006, like the S.E.C. Rule, requires that the conduct complained of occur in connection with the sale. This is not to say that fraudulent post-sale conduct could never constitute a violation of AS 34.55.006. If such conduct in fact occurred in connection with the offer, sale or purchase of subdivided land, then it would be actionable. Our review of federal decisions construing the scope of the in connection with requirement of S.E.C. Rule 10b-5 suggests that activity post-dating the time that the initial contract to purchase is signed is not necessarily immune from liability. For example, in Goodman v. Epstein, 582 F.2d 388 (7th Cir.1978), cert. denied, 440 U.S. 939, 99 S.Ct. 1289, 59 L.Ed.2d 499 (1979), the court noted that the crucial fact ... is whether an investment decision remains to be made by the party from whom disclosure is withheld, and not upon when the agreement to purchase or sell was executed. Id. at 413; see also Issen v. GSC Enterprises, Inc., 508 F. Supp. 1278, 1286-87 (N.D.Ill. 1981). Goodman involved a limited partnership agreement in which the plaintiff limited partners were in an on-going relationship with the defendant general partners. 582 F.2d at 412. From time to time, the limited partners were called upon to make additional capital contributions based upon the partnership's performance. Although the conduct complained of occurred after the partnership agreement was signed, the court held that later nondisclosure of material facts by the general partners to induce continued payment of capital contributions by the limited partners was actionable under Rule 10b-5. However, the court was careful to distinguish the situation where ... the investment decision was completed at the time the parties entered into the agreement, the contract being, in effect, a one-shot deal. No continuing relationship was contemplated. All that was left undone was the ministerial exchange of money for the stock. Id. at 412. In such an instance, the fraudulent conduct must occur at or before the time when the parties to the transaction are committed to one another. Id., quoting Radiation Dynamics, Inc. v. Goldmuntz, 464 F.2d 876, 891 (2d Cir.1972). See also Clinton Hudson & Sons, v. Lehigh Valley Cooperative Farms, Inc., 73 F.R.D. 420, 425 (E.D. Pa.), aff'd mem., 586 F.2d 834 (3d Cir.1977). Applying these principles to the instant case, we conclude that Brown's post-sale lulling conduct directed at pre-September 21, 1977 purchasers was not in connection with the sales to such purchasers. Brown's relationship with these purchasers was in effect, a `one-shot deal,' Goodman, 582 F.2d at 412, rather than one involving a series of `investment decisions.' Id. at 413. The parties were committed at the time the contracts were executed and the continued payments required thereunder involved nothing more than a means of effectuating the ministerial exchange of the money for the land. Id. at 412. Accordingly, Brown's liability, if any, to pre-September 21, 1977 Windsong lot purchasers cannot be predicated on violations of ULSPA.