San-Ken Homes, Inc. v. New Hampshire Attorney General, Consumer Protection and Antitrust Bureau

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THE SUPREME COURT OF NEW HAMPSHIRE

___________________________

Hillsborough-southern judicial district

No. 2017-0008

SAN-KEN HOMES, INC.

v.

NEW HAMPSHIRE ATTORNEY GENERAL, CONSUMER PROTECTION AND

ANTITRUST BUREAU

Argued: January 25, 2018

Opinion Issued: October 16, 2018

Bernstein, Shur, Sawyer & Nelson, P.A., of Manchester (Michael A. Klass

on the brief, and Gregory E. Michael orally), for the plaintiff.

Gordon J. MacDonald, attorney general (John W. Garrigan, assistant

attorney general, on the brief and orally), for the defendant.

HANTZ MARCONI, J. The plaintiff, San-Ken Homes, Inc. (San-Ken),

appeals a decision of the Superior Court (Ignatius, J.) requiring it to apply for

registration or exemption with the defendant, New Hampshire Attorney

General, Consumer Protection and Antitrust Bureau (Bureau), under the Land

Sales Full Disclosure Act (Act), and to make certain improvements to Old

Beaver Road in the Oakwood Common subdivision in New Ipswich. See RSA

ch. 356-A (2009 & Supp. 2017). We reverse.

I

For context, we provide a brief overview of the provisions of the Act. The

purpose of the Act is to “prevent fraud in the sale of house lots in the State.”

N.H.S. Jour. 373 (1970). In furtherance of that purpose, a subdivider of

subdivided land of more than 15 lots may not offer or dispose of any lot before

the subdivided lands are registered with the Bureau. See RSA 356-A:3, I(a), :4,

I (2009). A “subdivider” is “a person who is an owner of subdivided land or one

who offers it for disposition. Any successor of [a subdivider] who comes to

stand in the same relation to the subdivided lands as his predecessor did shall

also come within this definition . . . .” RSA 356-A:1, V (2009).

A subdivider must register subdivided land by submitting an application

to the Bureau. See RSA 356-A:5 (Supp. 2017). Upon receipt of an application

for registration, the attorney general must initiate an examination to determine

whether, inter alia, “there is reasonable assurance that all proposed

improvements will be completed as represented,” including “evidence of

adequate funds to complete any infrastructure, such as roads.” RSA 356-A:7,

I(b) (Supp. 2017). The attorney general must also determine whether the

“general promotional plan is not false or misleading . . . and affords full and

fair disclosure.” RSA 356-A:7, I(c) (2009).

The Act allows for exemptions from registration under certain

circumstances. The Act “shall not apply” to an offer or disposition of

subdivided land of not more than 15 lots. RSA 356-A:3, I(a). In addition, a

subdivider of subdivided land of no more than 50 lots may apply for an

exemption from the registration and annual reporting requirements. RSA 356-

A:3, I-a(a) (Supp. 2017). Such a subdivider “shall be entitled to an exemption”

if certain conditions are met. RSA 356-A:3, I-a(b) (Supp. 2017). Further, the

attorney general may exempt from any of the provisions of the Act any lots in a

subdivision “if it finds that the enforcement of all of the provisions of [the Act]

with respect to such . . . lots . . . is not necessary in the public interest and for

the protection of purchasers” because of the “small amount involved or the

limited character of the offering, or because such property, in the discretion of

the attorney general, is otherwise adequately regulated” by town ordinances or

state or federal statutes. RSA 356-A:3, II (2009).

“If, subsequent to the issuance of an exemption from registration . . . the

bureau has reasonable grounds to believe that exemption in the particular case

is not in the public interest, the bureau shall . . . revoke the exemption.” N.H.

Admin. R., Jus 1305.03(a). Grounds for revocation shall include the insolvency

of the subdivider. N.H. Admin. R., Jus 1304.03(b)(3).

The attorney general may bring an action in superior court “[i]f it appears

that a person has engaged in or is about to engage in an act or practice

constituting a violation of” the Act. RSA 356-A:10, III (2009). The attorney

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general may issue a cease and desist order, RSA 356-A:12, I (2009), or revoke a

registration, RSA 356-A:13, I (2009).

In addition, any time the attorney general has “reasonable cause” to

believe that the subdivider may be unable to complete the development, it may

require the subdivider to “provide evidence of financial security” to assure the

completion of the development, and any person aggrieved by the subdivider’s

failure to complete the development “may proceed on such bond . . . to recover

damages.” RSA 356-A:5, VI (Supp. 2009). Furthermore, “[a]ny subdivider who

disposes of any lot . . . in subdivided lands in violation of [the Act] or who in

disposing of any lot . . . makes an untrue statement of a material fact, . . . or

omits a material fact . . . , is liable to the purchaser of such lot,” RSA 356-A:16,

I (2009), and “[a]ny purchaser, who is eligible for relief” may bring an action for

injunction and other specified damages, see RSA 356-A:16, II (2009). The

attorney general may intervene in any suit alleging a violation of the Act. RSA

356-A:10, IV.

II

The record supports the following facts. Oakwood Common is a 16-lot

subdivision originally developed by 112 Chestnut Street, LLC (112 Chestnut).

In June 2006, the New Ipswich Planning Board (Board) approved the

subdivision, conditioned on 112 Chestnut paving to Town standards Old

Beaver Road — the single road providing access to the subdivision’s lots from

the adjacent public way.

In August 2006, 112 Chestnut applied to the Bureau for a certificate of

exemption from registration under the Act. In its application, 112 Chestnut

represented that the “roadway servicing the subdivision (‘Old Beaver Road’)

shall be constructed by [112 Chestnut] and held as a private way by the future

owners of the Lots.” The application stated that the subdivision would be

constructed and completed in two phases: phase I, consisting of six lots “and

attendant road work,” to be completed by September 2006; and phase II,

consisting of 10 lots “and attendant road work,” to be completed by December

2007.

112 Chestnut established an irrevocable letter of credit to “guarantee

completion of construction of [the] road . . . according to the specifications as

shown” on the subdivision plan. 112 Chestnut stated that the letter of credit

had been posted with the Town as assurance to secure the completion of the

promised road improvement. Additionally, 112 Chestnut stated that, although

the total cost of the promised improvement was not fully covered by the

assurance, “a second Irrevocable Letter of Credit [would] be posted upon

commencement of Phase II.” The purchase and sale agreement included with

the application provided that 112 Chestnut “shall have the obligation, which

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obligation shall survive the delivery of the deed to BUYER, to have installed

upon the Premises . . . a private roadway.”

In October 2006, the Bureau granted a certificate of exemption to 112

Chestnut “as to the offer and sale of” the 16 lots “because of the limited

character of the offering and because the subdivision is adequately regulated

by municipal ordinances.” See RSA 356-A:3, II. 112 Chestnut constructed the

road but, contrary to the promise it made, the road did not meet the Town’s

required paving standards. After 112 Chestnut developed and conveyed seven

lots within the subdivision to third parties, it defaulted on its mortgage, and TD

Bank, N.A., the mortgagee, foreclosed on the remaining nine lots. For reasons

that are unclear on the record, the irrevocable letter of credit posted with the

Town to assure completion of Old Beaver Road as promised by 112 Chestnut

expired.

In June 2014, San-Ken, which has no relationship to 112 Chestnut,

purchased the remaining nine undeveloped lots from the bank at a foreclosure

sale and recorded title to the property. In August 2014, San-Ken’s application

to the Town for a building permit was denied, based upon a recommendation

from the Board “that no further building permits be approved for the Old

Beaver Road subdivision until such time as a road bond is posted or the road is

completed.” At an August hearing before the Board, the Board’s chair

suggested that San-Ken “work[ ] with the homeowners with a plan for

modifying the subdivision plan for road standards that [could] be met in time

certain, and the Board [would] consider the modification.”

On September 3, the Board held a hearing on San-Ken’s application for

modification of the Board’s original conditions for Old Beaver Road. As an

alternative to the Board revoking the subdivision approval, Town counsel

recommended that it entertain a motion to waive the prior road completion

requirements and specifications on the condition that San-Ken complete

certain improvements to the road at its own expense.

At a September 17 hearing, the Board unanimously approved a

modification of the original subdivision approval for Oakwood Common by

replacing the previous conditions in their entirety with five “clarifications and

conditions” including:

2. The existing road constructed within the subdivision (with one

course of asphalt), is satisfactory as a private road, with no

second asphalt course required, subject to the following

improvements to be performed within 90 days from the date of

this approval by and at the expense of the owner of the 9

remaining unimproved lots in the subdivision (presently San-

Ken Homes, Inc.):

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- fix cracks by cleaning and filling

- seal coat the entire road

- repair all potholes[.]

Shortly thereafter, San-Ken completed the sealing and the pothole and

crack repairs, thus satisfying all of the Board’s requirements. In November,

San-Ken applied for a certificate of exemption from registration. See N.H.

Admin. R., Jus 1304.07. In a December letter, the Bureau stated:

It is the Bureau’s position that the rules obligate the subdivider to

provide for the completion of the roadways to established local

standards. The planning board’s decision does not serve to modify

those established standards. Rather, it merely reflects the

planning board’s decision not to require that a road bond be in

place as a precondition to the issuing of building permits. Such a

decision neither alters the regulatory requirements set out in Jus

1304.07, nor requires the Bureau to ignore the clear language of

the rule.

The original subdivider met its obligations to bond the

completion of the roadway to local standards, absent which, the

Bureau would not have issued the certificate of exemption. All

those who have purchased homes in the Oakwood Common

subdivision did so under the understanding that the purchase

price included funds for the completion of the roadways to

established town standards. It is fundamentally unfair for [San-

Ken] to now seek to both reduce the standards to which the

roadways will be constructed and then require the current

homeowners to pay more money to complete the roadways to those

lower standards.

(Footnote omitted.) Accordingly, the Bureau indicated that it would require

San-Ken to pave the road to the original specifications promised by 112

Chestnut and approved by the Board in 2006. San-Ken disagreed with the

Bureau’s position but, in order to market its lots, it applied for an exemption

“without prejudice and reserv[ing] all rights, defenses, and other claims

including but not necessarily limited to” whether San-Ken is the successor

subdivider, whether it is required to register its nine lots, and whether it is

obligated to further improve the subdivision’s road.

Thereafter, as part of an escrow agreement with the Bureau, San-Ken

obtained a performance bond to guarantee completion of Old Beaver Road to

specifications set forth in the escrow agreement in the event that San-Ken’s

instant appeal proved unsuccessful. The Bureau issued a certification of

exemption in May.

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San-Ken appealed to the trial court. San-Ken asserted that the Bureau

lacked authority under the Act to require it to be registered or exempted, and to

require it to make improvements to Old Beaver Road. Following a bench trial,

the trial court found that “San-Ken’s purchase of 9 of the 16 lots, [its]

application . . . for building permits, negotiations with the Board for some

improvements to Old Beaver Road, and commitment to create a homeowners

association . . . [were] sufficient to demonstrate that San-Ken has come ‘to

stand in the same relation to the subdivided lands as [its] predecessor did.’”

However, the court found that the Bureau had “no authority . . . to disregard

and countermand the Board’s modification of the original road standards.”

The Bureau moved for partial reconsideration. The trial court reversed

its original decision in part, finding that the Bureau was “within its authority

under RSA 356-A to require the successor subdivider San-Ken to complete Old

Beaver Road to the original specifications” and that, although the original

seven purchasers “could have, and perhaps should have, appealed the

Planning Board’s 2014 modification, that failure to appeal [did] not obviate the

authority of the Bureau to enforce the subdivision commitments made during

the regulatory process.” This appeal followed.

III

On appeal, San-Ken argues that the trial court erred in: (1) applying a

mistaken standard of review; (2) finding San-Ken to be a successor subdivider

under the Act; and (3) determining that the Bureau was within its authority to

require San-Ken to further improve Old Beaver Road as a condition of

obtaining a certificate of exemption.

Resolving these issues requires that we engage in statutory

interpretation. We are the final arbiter of the legislature’s intent as expressed

in the words of the statute considered as a whole. See Woodview Dev. Corp. v.

Town of Pelham, 152 N.H. 114, 116 (2005). We first examine the language of

the statute, and, where possible, ascribe the plain and ordinary meanings to

the words used. Id. When a statute’s language is plain and unambiguous, we

need not look beyond it for further indication of legislative intent, and we will

not consider what the legislature might have said or add language that the

legislature did not see fit to include. Id. We construe all parts of a statute

together to effectuate its overall purpose and avoid an absurd or unjust result.

Appeal of Local Gov’t Ctr., 165 N.H. 790, 804 (2014). Moreover, we do not

consider words and phrases in isolation, but rather within the context of the

statute as a whole to enable us to interpret statutory language in light of the

policy or purpose sought to be advanced by the statutory scheme. Id. We

apply the same principles of construction in interpreting administrative rules.

Appeal of Town of Pittsfield, 160 N.H. 604, 606 (2010). We review the trial

court’s interpretation de novo. See Appeal of Local Gov’t Ctr., 165 N.H. at 804.

6

For purposes of this appeal, we assume without deciding that San-Ken,

by purchasing nine lots in subdivided land from a bank at a foreclosure sale,

became a “subdivider” within the meaning of the Act. However, we disagree

that San-Ken is a successor subdivider of 112 Chestnut.

The Bureau contends that under its authority to “protect purchasers” by

assuring that “promises made by subdividers are kept,” the “only way for

consumer protection laws to be effective is by expressly not allowing bad actors

opportunities to circumvent them.” (Quotation omitted.) Thus, the Bureau

argues, because 112 Chestnut “promised the original seven homebuyers that it

would build the subdivision road to the full town standards,” the Bureau has

the regulatory authority to require San-Ken to complete the road. The Bureau

asserts that San-Ken, “[f]or all intents and purposes . . . has picked up where

the previous subdivider left off and stands in the exact same shoes as [112

Chestnut] at the time of the foreclosure.”

Neither the Act’s purpose or plain language nor the regulations support

the Bureau’s position. As set forth above, the purpose of the Act is to “prevent

fraud in the sale of house lots.” N.H.S. Jour. 373 (1970). In furtherance of

that purpose, the provisions of the Act and its regulations operate prospectively

to protect potential purchasers of homes in subdivided land. Each application

for registration or exemption under the Act is personal to the particular

subdivider, including a successor subdivider. As the rules provide, “[a]ny

person who comes to stand in the same relation to the subdivision as the

original subdivider shall be required to make separate application to the

bureau for registration as a successor subdivider.” N.H. Admin. R., Jus

1306.19(a). An exemption may be granted only as to those lots in the

subdivision that, at the time the application is filed, the subdivider owns. See

N.H. Admin. R., Jus 1304.07(a)(5)a.

San-Ken applied for an exemption for the nine lots it owns in the

Oakwood Common subdivision. Under the regulations, San-Ken’s obligations

under the Act operate prospectively to future home buyers of the nine lots it

purchased at the foreclosure sale. Thus, we reject the Bureau’s position that

San-Ken stands “in the exact same shoes” as 112 Chestnut, as San-Ken never

owned any of the seven lots developed by 112 Chestnut, nor did it have any

relationship with 112 Chestnut.

We acknowledge that 112 Chestnut promised to the seven original home

buyers in Oakwood Common that it would complete Old Beaver Road to Town

standards and it obtained an irrevocable letter of credit to assure its

completion; however, it did not fulfill its promise to complete Old Beaver Road.

The Act sets forth remedies available to the attorney general to ensure that

subdividers complete developments as promised, as well as remedies available

to consumers who purchase lots in subdivided land. However, there is no

provision in the Act that allows the Bureau under the circumstances presented

7

to bind San-Ken to promises made by 112 Chestnut and we will not add

language to the statute that the legislature did not see fit to include.

We conclude that the trial court erred as a matter of law in finding that

the Act authorized the Bureau to require San-Ken to complete Old Beaver Road

to the standard promised by 112 Chestnut as a condition of obtaining a

certificate of exemption. Accordingly, we need not address the remaining

issues raised.

Reversed.

LYNN, C.J., and HICKS and BASSETT, JJ., concurred.

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