Opinion
Case No.: 07-80903 CIV-MIDDLEBROOKS.
March 30, 2009
ORDER GRANTING MOTION FOR SUMMARY JUDGEMENT [DE 86], DENYING AS MOOT [DE 90]
THIS CAUSE comes before the Court on Defendant, The Edge Investors, L.P.'s ("Defendant") Amended Motion for Summary Judgment [DE 86] against the claims of Kenneth J. Colson; Joanne Conti and Thomas Simone; Mark D. Rosenstein and Sherry Rosenstein; and Steven Seldin and Celeste Seldin (collectively, the "Plaintiffs") and a statement of material facts in support of the motion [DE 87], filed on April 8, 2008. Plaintiffs filed a memorandum in opposition to defendant's amended motion for summary judgment [DE 102], a statement of material facts in opposition to defendants motion [DE 103], and appendices to the same [DE 104, 105] on April 18, 2008. Defendant filed notices of supplemental authority for its motion for summary judgment [DE 112, 113, 116, 118, 120, 127, 129, 131, and 133], and plaintiffs filed responses [DE 114, 115, 117, 119, 122, 123, 128, 130, 132, and 134]. I have reviewed the record and am advised in the premises.
The Court is aware that in recent years, suits such as this have become increasingly common, and therefore, this area of law is in the process of being developed and refined by the Courts. However, such ongoing developments should not trigger a notice-response cycle as it has in this case. Filing a notice of supplemental authority to inform the Court of a new judicial opinion that has been issued is appropriate, but it is an improper occasion to argue outside the pleadings. And, it certainly does nothing to promote a speedy resolution of the Parties' matters.
I. Factual Background
On or about July 7, 9, and 16, 2005, Plaintiffs Conti, Seldin, Colson, and Rosenstein, respectively, and as the Plaintiffs, entered into identical Purchase Agreements (the "Contract") with Defendant, as the Seller, for the sale and purchase of preconstruction condominium units in the proposed Defendant Condominium No. One ("the Units"). Pursuant to paragraph 7 of the Contracts, Defendant agreed to "substantially complete construction of the Unit" by no later than two (2) years from the date Plaintiffs signed the Contract, "subject, however, only to delays caused by matters which are legally recognized as defenses to Contract actions." That is, Defendant was required to substantially complete construction of the Units, by July 7, 2007 for Plaintiffs Conti, by July 9, 2007 for Plaintiffs Seldin and Colson, and by July 16, 2007 for Plaintiffs Rosenstein, pursuant to their respective contracts.
Plaintiffs bring three counts against Defendant. First, Plaintiffs allege that Defendant breached the Contracts by failing to complete construction of the Unit with two (2) years from the date on which Plaintiffs signed the Contract. Defendant responds that it substantially completed construction of the Units in accordance with the terms of the Contract within two years and/or was otherwise excused from such deadline based upon force majeure, and that the Plaintiffs' purported revocation was untimely.
Second, Plaintiffs allege that Defendant violated the Interstate Land Sales Full Disclosure Act, 15 U.S.C. § 1701, et. seq. ("ILSA"). More particularly, Plaintiffs allege that the sale of the Units was not exempt under ILSA as Defendant failed to unconditionally commit to complete construction of the Units within two years in compliance with 15 U.S.C. § 1702(a)(2), which states:
Unless the method of disposition is adopted for the purpose of evasion of this chapter, the provisions of this chapter shall not apply to . . . the sale or lease of any improved land on which there is a residential, commercial, condominium, or industrial building, or the sale or lease of land under a contract obligating the seller or lessor to erect such a building thereon within a period of two years.15 U.S.C. § 1702(a)(2).
Plaintiffs accordingly allege that the sale of the Units were subject to, and Defendant was required to comply with, the provisions of 15 U.S.C. § 1703. Defendant does not dispute that it did not comply with 15 U.S.C. § 1703. Rather, Defendant alleges that it was not required to comply with the same because the sale of the Units is exempt from the disclosure requirements of the ILSA because the Contracts allegedly provide for an unconditional commitment to complete construction of the Units within two years.
Finally, Plaintiffs Seldin, Colson, and Rosenstein allege that the revisions to the offering documents issued by Defendant, after the execution of the Contracts, were material and adverse to Plaintiffs in violation of Florida's Condominium Act, Fla. Stat. § 718.503(1)(a), which states that contracts must include the following language, in relevant part:
THIS AGREEMENT IS ALSO VOIDABLE BY BUYER BY DELIVERING WRITTEN NOTICE OF THE BUYER'S INTENTION TO CANCEL WITHIN 15 DAYS AFTER THE DATE OF RECEIPT FROM THE DEVELOPER OF ANY AMENDMENT WHICH MATERIALLY ALTERS OR MODIFIES THE OFFERING IN A MANNER THAT IS ADVERSE TO THE BUYER.
Defendants contend that any revisions to the offering documents were not material and/or adverse to Plaintiffs.
Plaintiffs argue that there are material facts in dispute precluding summary judgment. However, the Parties do not dispute the content or authenticity of the Contracts, and they do not dispute several other key facts and dates as set forth in the Join Pretrial Stipulation [DE 94]. Furthermore, although it was later stricken, Plaintiffs also filed a motion for summary judgment, so at one point in the proceedings, they too agreed that there were no material facts in dispute. Based on the foregoing and my review of the record, I find that there are no material facts in dispute to preclude summary judgment as to all counts. The following facts are not disputed by the parties.
Paragraph 33 of the Purchase Agreements defines substantial completion for the purpose of paragraph 7:
Substantial Completion. Whenever this Agreement requires Seller to complete or substantially complete an item of construction, that term will be understood to be complete or substantially complete when so complete or substantially complete in Seller's opinion. Notwithstanding the foregoing, however, neither the Unit nor the Building of which the Unit is a part will be considered complete or substantially complete for purposes of this Agreement unless the Unit (and such portion of the building intended to be used exclusively by Buyer) is physically habitable and usable for the purpose for which the Unit was purchased. The Unit (and such portion of the Building) will be considered so useable if the Unit is ready for occupancy and had all necessary and customary utilities extended to it. Other units (and other portion of the building) may not necessarily be so complete and useable.
Paragraph 26 of the Purchase Agreements, later called the "savings clause" states:
The following sentence will supersede and take precedence over anything else in this Agreement, which is in conflict with it: If any provisions serve to: (1) limit or qualify Seller's substantial completion obligations as stated in Section 7, or (2) limit Buyer's remedies in the event that such obligations are breached, or (3) grant Seller an impermissible grace period, and such limitations or qualifications are not permitted if the exemption of this sale from the Interstate Land Sales Full Disclosure Act pursuant to 15 U.S.C. § 1702(a)(2) is to apply or this Agreement is to otherwise be fully enforceable, then all of those provisions are hereby stricken and made null and void as if never a part of this Agreement. For purposes of this paragraph only, the words "this Agreement" include in their meaning the Condominium Documents.
Pursuant to their respective contracts, Defendant was required to substantially complete construction of the Units, by July 7, 2007, for Plaintiff Conti; by July 9, 2007, for Plaintiffs Seldin and Colson; and by July 16, 2007, for Plaintiffs Rosenstein. It is not disputed that Defendant was issued a certificate of conditional occupancy on June 27, 2007, and a second certificate of conditional occupancy on July 27, 2007. Defendant then obtained a permanent certificate of occupancy for the subject property on August 27, 2007. The building department records for the City of West Palm Beach reflect that Defendant did not obtain its first "pass" inspection until July 20, 2007, and failed to obtain the final certificate of occupancy on June 26, 2007, June 27, 2007, July 16, 2007, and August 8, 2007 inspections.
Pursuant to paragraph 7 of the Contracts, Defendant agreed to substantially complete construction of the Unit by no later than two (2) years from the date plaintiffs signed the contract subject, however, only to delays caused by matters which are legally recognized as defenses to contract actions.
Defendant alleges that hurricane Wilma, which struck Florida on October 24, 2005, constitutes an excuse for any delay in the completion of the subject property due to a shortage of labor and materials caused by the hurricane. It is not disputed that as of October 24, 2005, no above-ground construction (other than the pouring of concrete) had commenced on the subject property.
Furthermore, it is not disputed that at no time prior to Plaintiffs' signing the Contracts was a statement of record submitted or filed by Defendant with HUD, and at no time prior to the Plaintiffs' signing the Contracts was a property report ever provided to Plaintiffs. There is no provision on the face of the Contracts informing Plaintiffs of their right to revoke the Contracts within two (2) years from the signing thereof in the event Defendant fails to timely provide Plaintiffs such property report.
II. Jurisdiction
This Court has jurisdiction pursuant to 28 U.S.C. § 1331, 15 U.S.C. § 1719, and 28 U.S.C. § 1367(a).
III. Legal Standard and Choice of Law
Summary judgment is appropriate only when there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party bears the burden of meeting this exacting standard. See Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970). In applying this standard, the evidence, and all reasonable factual inferences drawn therefrom, must be viewed in the light most favorable to the non-moving party. See Arrington v. Cobb County, 139 F.3d 865, 871 (11th Cir. 1998); Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997).
The non-moving party, however, bears the burden of coming forward with evidence of each essential element of their claims, such that a reasonable jury could find in their favor. See Earley v. Champion Int'l Corp., 907 F.2d 1077, 1080 (11th Cir. 1990). The non-moving party "[m]ay not rest upon the mere allegations and denials of [its] pleadings, but [its] response . . . must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). "The mere existence of a scintilla of evidence in support of the [non-movant's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-movant]." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). Further, conclusory, uncorroborated allegations by a plaintiff in an affidavit or deposition will not create an issue of fact for trial sufficient to defeat a well supported summary judgment. See Earley, 907 F.2d at 1081. The failure of proof concerning an essential element of the non-moving party's case necessarily renders all other facts immaterial and requires the court to grant the motion for summary judgment. See Celotex, 477 U.S. at 322-3.
The parties agree that Florida law applies to the common law breach of contract claim.
IV. Analysis
As stated above, the Plaintiffs put forth three claims in order to rescind their Purchase Agreements. First, the Plaintiffs allege that Defendant failed to make certain disclosures pursuant to the Interstate Land Sales Full Disclosure Act, 15 U.S.C. § 1701, et. seq. ("ILSA"). Second, the Plaintiffs allege that Defendant made adverse and material changes to the condominium offering documents in violation of Fla. Stat. § 718.503(1)(a) (the "FCA"). Third, the Plaintiffs claim Defendant breached the Purchase Agreements because Defendant failed to complete construction within the agreed two year time period. I will review these claims in turn.
Plaintiffs Ms. Conti and Mr. Simone do not allege a claim under the Florida Condominium Act.
A. Violation of the ILSA
The Parties agree that the Units are subdivisions under 15 U.S.C. § 1701(3), and thus subject to various ILSA regulations. The Plaintiffs allege that Defendant failed to unconditionally commit to substantially complete construction of the Plaintiffs' Units within two years in compliance with 15 U.S.C. § 1703. In addition, the Plaintiffs allege that Defendant violated § 1703(b) for failing to clearly provide the Buyer's right to revoke the Purchase Agreements at their option until midnight of the seventh day following the signing of the Contract. Further, the Plaintiffs allege that Defendant violated § 1703(c) for failing to clearly provide for the Plaintiffs' right to revoke the Purchase Agreement within two years from their signing of the same, due to Defendant's alleged failure to timely furnish the Plaintiffs with a property report. Finally, the Plaintiffs allege that Defendant violated § 1703(d)(2) by failure to provide for notice of a default or breach by Plaintiffs along with a twenty-day curative period to remedy the Purchase Agreement prior to Defendant calling the Plaintiffs in default or breach.
ILSA requires the developer to provide various contractual provisions and documents for the purchaser:
(d) Additional authority for revocation of nonexempt contract or agreement at option of purchaser or lessee; time limit; applicability
Any contract or agreement which is for the sale or lease of a lot not exempt under section 1702 of this title and which does not provide —
(1) a description of the lot which makes such lot clearly identifiable and which is in a form acceptable for recording by the appropriate public official responsible for maintaining land records in the jurisdiction in which the lot is located;
(2) that, in the event of a default or breach of the contract or agreement by the purchaser or lessee, the seller or lessor (or successor thereof) will provide the purchaser or lessee with written notice of such default or breach and of the opportunity, which shall be given such purchaser or lessee, to remedy such default or breach within twenty days after the date of the receipt of such notice; and
(3) that, if the purchaser or lessee loses rights and interest in the lot as a result of a default or breach of the contract or agreement which occurs after the purchaser or lessee has paid 15 per centum of the purchase price of the lot, excluding any interest owed under the contract or agreement, the seller or lessor (or successor thereof) shall refund to such purchaser or lessee any amount which remains after subtracting (A) 15 per centum of the purchase price of the lot, excluding any interest owed under the contract or agreement, or the amount of damages incurred by the seller or lessor (or successor thereof) as a result of such breach, whichever is greater, from (B) the amount paid by the purchaser or lessee with respect to the purchase price of the lot, excluding any interest paid under the contract or agreement,
may be revoked at the option of the purchaser or lessee for two years from the date of the signing of such contract or agreement. This subsection shall not apply to the sale of a lot for which, within one hundred and eighty days after the signing of the sales contract, the purchaser receives a warranty deed (or, where such deed is not commonly used in the jurisdiction where the lot is located, a deed or grant that warrants at least that the grantor has not conveyed the lot to another person and that the lot is free from encumbrances made by the grantor or any other person claiming by, through, or under him or her).15 U.S.C. § 1703(d).
The section of the statute that provides an exception, § 1702, states:
Unless the method of disposition is adopted for the purpose of evasion of this chapter, the provisions of this chapter shall not apply to —
(2) the sale or lease of any improved land on which there is a residential, commercial, condominium, or industrial building, or the sale or lease of land under a contract obligating the seller or lessor to erect such a building thereon within a period of two years;15 U.S.C. § 1702(a)(2).
Paragraph 7 of Contract between the parties provides, in part, that:
Seller agrees to substantially complete construction of the Unit, in the manner specified in this Agreement, by a date no later than two (2) years from the date Buyer signs this Agreement, subject, however, only to delays caused by matter which are legally recognized as defenses to contract actions in the jurisdiction where the Building is being erected (the "Outside Date").
ILSA is "an antifraud statute utilizing disclosure as its primary tool," enacted to "protect purchasers from unscrupulous sales of undeveloped home sites." Winter v. Hollingsworth Properties, 777 F.2d 1444, 1447 (11th Cir. 1985). ILSA makes it unlawful for a developer or agent to make use of interstate commerce to sell or lease any lot unless a printed property report, meeting certain requirements, has been furnished to a purchaser before the signing of the contract. 15 U.S.C. § 1703(a)(1)(B). Where a developer fails to provide the property report prior to the purchaser signing a contract, the contract may be revoked at the option of the purchaser within two years from the date of signing. § 1703(c). However, sales of "improved land on which there is a residential, commercial, condominium, or industrial building, or the sale or lease of land under a contract obligating the seller [] to erect such a building thereon within a period of two years" are exempt from ILSA's coverage. § 1702(a)(2).
ILSA, a federal statute, is interpreted under federal law, and the Department of Housing and Urban Development's ("HUD") regulations are entitled to great deference. Winter v. Hollingsworth Properties, 777 F.2d 1444, 1448 (11th Cir. 1985). Whether a contract "obligates" a seller to erect a building within two years is a question of state contract law. Samara Dev. Corp. v. Marlow, 556 So. 2d 1097, 1099-1100 (Fla. 1990).
HUD has provided guidelines for exemptions available under ILSA. Guidelines for Exemptions under the Interstate Land Sales Full Disclosure Act, 61 Fed. Reg. 13596 (Mar. 27, 1996) [hereinafter ILSA Guidelines]. HUD's interpretation of what constitutes an obligation to construct relies on general principles of contract law. ILSA Guidelines, 61 Fed. Reg. 13596, 13599. HUD's guidelines also state that the "contract must not allow nonperformance by the seller at the seller's discretion," because such an obligation is "not an obligation in reality." ILSA Guidelines, 61 Fed. Reg. 13596, 13603. Further, HUD provides that
[c]ontract provisions which allow for nonperformance or for delays of construction completion beyond the two-year period are acceptable if such provisions are legally recognized as defenses to contract actions in the jurisdiction where the building is being erected. For example, provisions to allow time extensions for events or occurrences such as acts of God, casualty losses or material shortages are generally permissible.
Id.
The ILSA Guidelines further provide that
Although the factual circumstances upon which nonperformance or a delay in performance is based may vary from transaction to transaction, as a general rule delay or nonperformance must be based on grounds cognizable in contract law such as impossibility or frustration and on events which are beyond the seller's reasonable control.
Id.
In addressing ILSA, the Supreme Court of Florida has stated that, "in order for the developer to be `obligated' to complete the building within two years, the obligation must be unrestricted and the contract must not limit the purchaser's right to seek performance or damages." Samara Dev. Corp., 556 So. 2d at 1100.