A series of lawsuits filed in federal court recently claim a group property developers engaged in an elaborate scheme to sell parcels of land near the North Carolina coast at “grossly inflated prices” while failing to provide the required infrastructure and amenities they had promised.
More than 100 plaintiffs have signed onto the five lawsuits filed in the U.S. District Court for the Eastern District of North Carolina late last week. Most of the plaintiffs come from outside North Carolina. However, many state residents, including several based in Wake County, are among those claiming they were defrauded in the alleged scheme.
The plaintiffs claim multiple counts of breach of contract and fraud. They do not specify the amount being sought in damages.
The lawsuits allege Brunswick County-based developer Mark Saunders used a number of companies he owned and operated to artificially inflate the price of properties in four subdivisions through an aggressive marketing campaign.
The marketing materials allegedly promised prospective buyers generous financial incentives to entice them to purchase parcels of land in the subdivisions without paying interest for two years. The subdivisions were supposed to be outfitted with the necessary infrastructure and amenities within that two-year window, the lawsuits claim. The lawsuits go on to allege the subdivisions were not ready in time, which cost the purchasers hundreds of thousands of dollars apiece.
Wes Hodges, a name partner with Wilmington’s Hodges Coxe Potter & Phillips representing the plaintiffs in the lawsuits, says his clients lost out on millions of dollars because many of the subdivisions are still not finished more than eight years after the lots were sold.
“Our theory is that the defendants took the proceeds from land bought in one subdivision and used it to buy land for the other subdivisions, rather than paying for the infrastructure they promised,” Hodges says. “That was all fine and well until the economy collapsed and everything went to pot.”
The subdivisions named in the lawsuits include Coastal Communities at Ocean Ridge Plantation, Inc.; Ocean Isle Palms, Inc.; Rivers Edge Golf Club & Plantation, Inc.; Seawatch at Sunset Harbor, Inc. The lawsuits also name several of Saunders’ companies, including MAS Properties, L.L.C.; Old Dock and Timber, L.L.C.; and The Mortgage Company of Brunswick, Inc.
The lawsuits were originally filed in the N.C. Business Court in April, but were moved to federal court at the request of the defendants. Hodges says his clients do not believe the case raises a question of federal law. “We expect the cases to be remanded to state court in the near future,” he says.
The defendants are being represented by Christopher Graebe and Mark Sigmon of Graebe Hanna & Sullivan in Raleigh. Graebe and Sigmon did not return calls seeking comment.