Court Opinion

ID: 9493742
Source: CourtListenerOpinion
Date Created: 2023-08-05 15:17:57.63479+00
Date Added: 2024-06-11T17:56:00.754639
License: Public Domain

LOKEN, Circuit Judge,
dissenting.
My problem with the court’s resolution of this difficult case stems from its sleight-of-hand treatment of the statute of limitations issues. The court concludes that the original developer was guilty of constructive fraud when its promise of permanent access to the Hotel’s amenities induced plaintiffs to purchase their time-share units. That alleged fraud clearly occurred when plaintiffs made their time-share purchases in 1985 and 1986. The court concludes these fraud claims are not time-barred under the second limitations period set forth in § 18-14-403 of the TimeShare Act:
However, with respect to the enforcement of provisions in the contract of purchase which require the continued furnishing of services ... the period of bringing a judicial proceeding will continue for a period of four (4) years for each breach.
(Emphasis added.) On its face, this is a breach-of-contract statute of limitations. Plaintiffs’ constructive fraud claims do not seek to enforce the purchase contracts; these claims seek rescission of those contracts on the ground they were fraudulently induced. The remedy for plaintiffs’ fraud claims — as opposed to the remedy for their breach of contract claims — is not, to use the court’s phrasing, an “equitable remedy, sought in lieu of actual contract enforcement.” Id. at p. 1014.
Therefore, these constructive fraud claims must be timely under the three-year statute of limitations for misrepresentation claims found in ark Code Ann. § 16-56-105. See Wilson v. General Elec. Capital Auto Lease, Inc., 311 Ark. 84, 841 S.W.2d 619, 620 (1992). Absent concealment of the misrepresentation, that statute begins to run when the injury occurs, not when it is discovered. See Chalmers v. Toyota Motor Sales, USA, Inc., 326 Ark. 895, 935 S.W.2d 258, 261 (1996). Here, the alleged misrepresentations occurred when plaintiffs purchased their time-share interests in 1985 and 1986. Plaintiffs were injured at that time, for the unknown flaw in the License Agreement existed, and plaintiffs could have sued the developer for rescission (in the event the License Agreement could not be reformed to provide permanent access, for example, by the Hotel granting an easement).
Under Arkansas law, fraudulent concealment tolls the statute of limitations until the constructive fraud is discovered. But concealment is not presumed. “There must be some positive act of fraud, something so furtively planned and secretly executed as to keep the plaintiffs cause' of action concealed, or perpetrated in a way that it conceals itself.” Wilson, 841 S.W.2d at 620 (quotation omitted). In this case, plaintiffs do not allege fraudulent concealment by the original developer, and there is no factual basis in the record for such an assertion. Therefore, because plaintiffs did not file this action until November 1996, their claims of constructive fraud are time-barred under the Arkansas statute of limitations governing actions for fraud.11
I also have substantial doubt whether, on this record, the Supreme Court of Arkansas would find a material misrepresentation of fact by the original developer that can support plaintiffs’ claims of eonstruc-*1017tive fraud. To establish constructive fraud under Arkansas law, there must be a material misrepresentation of fact. See Scollard v. Scollard, 329 Ark. 83, 947 S.W.2d 345, 348 (1997). All the express representations contained in the Master Deed and the developer’s public offering statement were true when plaintiffs purchased their time share intervals in 1985 and 1986. The record does not reflect whether plaintiffs also reviewed the developer’s License Agreement with the Hotel before purchasing their time-share intervals. If they did, they would have seen that the agreement purported to be “irrevocable.” That was a true statement. Plaintiffs argue it was also an implicit misrepresentation they would enjoy permanent access to the Hotel’s amenities. But Arkansas fraud law requires proof that the defendant had an insufficient basis upon which to make a representation that turns out to be false. Here, the developer renegotiated the License Agreement to be “irrevocable,” and the Real Estate Commission accepted that change as satisfying its demand that timeshare owners be provided permanent access to the licensed amenities. This sequence of events provided a strong basis in fact for the developer’s alleged representation that time-share owners would have permanent access to the Hotel’s parking, utilities, and recreational facilities. See Titan Oil & Gas, Inc. v. Shipley, 257 Ark. 278, 517 S.W.2d 210, 221 (1974) (no constructive fraud if the defendant proves he “did not know, or in the exercise of reasonable care could not have known, of the untruth or omission”).
Finally, I conclude the district court was correct in granting judgment in favor of NEI on plaintiffs’ breach-of-contract claims. These claims are not time-barred, but plaintiffs cannot point to any contractual promise that was breached. Plaintiffs’ contracts to purchase their timeshare real property interests were initially reflected in Interval Ownership Purchase Agreements, which then merged at closing with the Warranty Deeds they received. See Thompson on Real PROPERTY § 99.06 (David A. Thomas ed.1994). The Warranty Deeds conveyed title to the time-share unit weeks; they contained no promises regarding amenities, utilities, or parking. The Warranty Deeds incorporated by reference the Lakeshore Resort Master Deed and By-Laws, but those documents likewise contained no absolute promise of amenities, utilities, or parking. The Master Deed simply recited that the developer “is presently contemplating construction of certain recreation facilities on property” adjacent to the Lakeshore Resort, and it established that time-share owners would be liable for maintenance fees.12 Thus, plaintiffs received, and continue to be able to receive, exactly what their purchase contracts promised — ownership of their time-share intervals, and the right to use the common areas of the Lakeshore Resort during those intervals. There was no breach of contract by the original developer entitling plaintiffs to rescind.
For the foregoing reasons, I conclude that plaintiffs have no surviving breach of contract or constructive fraud claims against the original developer, NEI therefore has no successor liability, and the judgment of the district court must be affirmed.

. Alternatively, these claims are governed by, and time-barred under, the first limitations period in § 18-14-403 of the Time-sharing Act, which provides that actions seeking "rescission of the contract or damages” based upon "the accuracy of the public offering statement” must be commenced "within four (4) years after the date of the contract of purchase.” This statute reflects the traditional principle that rescission is not appropriate when a contract has been performed to the point that the parties cannot be returned to the status quo. See Herrick v. Robinson, 267 Ark. 576, 595 S.W.2d 637, 644 (1980). Here, for example, plaintiffs enjoyed use of their time-share units with full access to the Hotel's facilities for at least seven years.

. The Master Deed also referred to a Management Agreement as "Exhibit C.” There is no copy of this agreement in the record on appeal, and plaintiffs do not allege that the Developer breached any management contract.