Gower v. Turquoise Props. Gulf, Inc.

• Decision Date: 20 December 2013
• Docket Number: 1120045.
• Citation: 191 So.3d 776
• Parties: Charles A. GOWER v. TURQUOISE PROPERTIES GULF, INC., et al.
• Court: Alabama Supreme Court

191 So.3d 776

Charles A. GOWER

v.TURQUOISE PROPERTIES GULF, INC., et al.

1120045.

Supreme Court of Alabama.

Dec. 20, 2013.

Rehearing Denied Sept. 11, 2015.

Adam M. Milam of Milam & Milam, LLC, Fairhope, for appellant.

Daniel G. Blackburn, Mark H. Taupeka, and Rebecca A. Gaines of Blackburn, Conner & Taupeka, P.C., Bay Minette, for appellees.

MURDOCK

, Justice.

Charles A. Gower asks this Court to vacate an arbitration award in favor of Turquoise Properties Gulf, Inc. (“Turquoise Properties”), Caribe Realty, Inc., Larry Wireman, and Judy Ramsey Wireman (hereinafter collectively referred to as “Turquoise”) that concerned Gower's preconstruction agreement to purchase a condominium unit in a complex developed by Turquoise Properties. We reverse the judgment of the circuit court affirming the arbitration award and remand the case.

I. Facts and Procedural History

Gower is a practicing attorney who, according to the arbitrator's award, “has had numerous real estate developments and still owns condominiums in the Gulf area.” In April or May 2005, Gower found out about Turquoise Place, a condominium development Turquoise Properties was developing in Orange Beach (“the complex”).¹ Gower contacted Judy Wireman, an employee of Caribe Realty, Inc., and the real-estate agent for Turquoise Properties, about the prospect of purchasing a condominium unit in the complex. Gower testified that Wireman advised him that Tower I of the complex was completely sold out and that there were only a few units left to purchase in Tower II. Gower further testified that sales personnel for Turquoise Properties created the impression that if a person did not act quickly, he or she would miss out on owning a condominium unit in the complex.² Wireman testified that she never communicated with anyone that the units in Tower I were sold out, but the arbitrator concluded that,

“[h]owever it was related, the emphasis was that the commodity was hot, Tower I had nothing available (and most common Purchasers would have assumed that it meant it was sold out) and that you better rush if you want to get a unit in Tower II because they are selling out quickly.”

On May 11, 2005, Gower, through his son, signed an escrow agreement to purchase a unit in Tower II of the complex for a purchase price of $1,270,900. Gower put down a deposit of $254,180 on the property. The purchase agreement contained an arbitration clause that provided that disputes relating to the property would be arbitrated and that arbitration would be governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq.

(“the FAA”).

In 2008, Gower visited the site of the development and discovered that several units in the complex, including units in Tower I, had not actually been sold. The arbitration award stated that “all of the units in Tower I were never sold out.” Gower testified that as a result of Turquoise's misrepresentation regarding the units available in Tower I, he decided not to close on his unit. On August 10, 2009, Gower sent his “Notice of Rescission” of the purchase agreement to Turquoise Properties.

On September 17, 2009, Gower filed an “Arbitration Demand” with the American Arbitration Association against Turquoise. Among other claims in this first demand,³ Gower made claims of common-law fraud and misrepresentation, alleged violations of Alabama's Uniform Condominium Act, § 35–8A–101 et seq., Ala.Code 1975

(“the AUCA”), and alleged violations of the Interstate Land Sales Full Disclosure Act, 15 U.S.C. § 1701 et seq. (“the ILSFDA”)—specifically for violations of the ILSFDA's regulatory-requirement provisions in 15 U.S.C. § 1703(a)(1) and its antifraud provisions in 15 U.S.C. § 1703(a)(2).⁴

On October 5, 2009, Gower filed his “First Amended Arbitration Demand.” In this amended arbitration demand, Gower essentially repeated the claims he had originally made against Turquoise. On October 15, 2009, Turquoise filed its answer to Gower's first amended arbitration demand. In that answer, in a section titled “Affirmative Defenses,” Turquoise stated that Gower's “claims are barred by the applicable statute of limitations.”

On April 13, 2011, Gower and claimants Steven J. Becker and Hazel Denise Becker, Mike Alfred, B. Todd Davis and Keith Holland, Mark D. Stephens, and Weiser Properties, LLC (collectively “the claimants”), filed an “Amended & Consolidated Arbitration Demand” against Turquoise. In relevant part, the claimants alleged violations of the ILSFDA's antifraud provisions—specifically 15 U.S.C. § 1703(a)(2)(A)–(C)

, violations of the AUCA, and common-law fraud.⁵

On May 6, 2011, Turquoise filed its answer to the amended and consolidated arbitration demand. The answer contained a section titled “Affirmative Defenses” in which Turquoise stated that “[c]laimants' claims are barred by the applicable statute of limitations.”

On October 14, 2011, Turquoise filed a “Request for Interim Award” in which it asked the arbitrator

“to enter an interim award against Claimants for their claims under Sections 1703(a)(1), 1703(a)(2)(D), 1703(b), 1703(c), 1703(d), and 1703(e), of the [ILSFDA] because said claims are time- barred by the statute of limitations period under 15 U.S.C. [§ ] 1711

.”

In this filing, Turquoise noted that

“[s]ection 1711(a)(1) of the [ILSFDA] provides that no action at law or equity shall be maintained for civil liabilities under Section 1709 of the Act with respect to a violation of Sections 1703(a)(1) or 1703(a)(2)(D) of the [ILSFDA] more than three (3) years after the date of the signing of the contract of sale or lease.”

Turquoise further observed that all the claimants had “filed their original arbitration demands more than three (3) years from the date they signed their purchase and escrow agreements.” Accordingly, Turquoise requested that the arbitrator dismiss “[c]laimants' claims for violations of Sections 1703(a)(1) and 1703(a)(2)(D) of the [ILSFDA].”

On October 19, 2011, the claimants filed a “Response to Motion for Interim Award” in which they stated that Turquoise's

“motion for interim award only concerns [ILSFDA] statutes that [c]laimants have not asserted claims under, specifically 1703(a)(1), (a)(2)(D), and 1703(b)-(e). These are [ILSFDA] regulatory provisions. Claimants' claims, however, do arise under §§ 1703(a)(2)(A)

, (a)(2)(B), and/or (a)(2)(C). These are [ILSFDA] misleading sales practices provisions which are subject to a longer statute of limitations.”

The claimants further noted that 15 U.S.C. § 1711(a)(2)

provides that claims based on “violation[s] of subsection (a)(2)(A), (a)(2)(B), or (a)(2)(C) of section 1703 ” are barred if they are brought “more than three years after discovery of the violation or after discovery should have been made by the exercise of reasonable diligence.” The claimants contended that they filed their arbitration demands within three years of their discovery of Turquoise's misrepresentations. Accordingly, they argued that Turquoise's motion for an interim award was due to be denied. The claimants also asserted that “although specific claims arising under the regulatory provisions have not been brought, it is well settled, that evidence of regulatory violations can and will support claims under [§] 1703(a)(2)(A), [§] 1703(a)(2)(B), and/or [§] 1703(a)(2)(C), the misleading sales practices provisions.”

Gower asserts that following the parties' submissions relating to the request for an interim award, counsel for the parties conferred and agreed that the claimants were not asserting claims barred by the statute-of-limitations provision of 15 U.S.C. § 1711(a)(1)

. In an order dated October 31, 2011, the arbitrator confirmed that he “was advised that the issue raised by [Turquoise] in [its] motion for an interim award has been resolved and said motion is rendered moot.”

Before the arbitration hearing, the parties submitted briefs on the claimants' claims. On November 1, 2011, Turquoise submitted its “Pre–Hearing Brief.” In the brief, Turquoise first argued that “there were no misstatements or omissions of material fact” pertaining to the development of the condominium complex. They next argued that “[c]laimants' [ILSFDA] claims regarding Sections 1703(a)(1)

pertaining to the property report regulatory provisions [and] 1703(a)(2)(D) pertaining to recreational amenities are time barred by Section 1711 since [c]laimants' arbitration demands were filed more than three years from their signing the [purchase] Agreements.” This was the same statute-of-limitations argument Turquoise had made in its “Request for Interim Award.” Turquoise further argued that “[t]he evidence will show that [Turquoise] did not mislead, deceive or defraud [c]laimants.” Turquoise did not argue that a statute of limitations was applicable to the claimants' ILSFDA claims under its antifraud provisions.

As to the AUCA, Turquoise argued that “none of the alleged omissions or failures to amend asserted by [c]laimants are required to be disclosed or amended in the Offering Statement” and that “the express warranty provisions of the AUCA do not encompass these types of alleged misrepresentations claimed by [c]laimants.” Turquoise did not argue that a statute of limitations was applicable to the claimants' AUCA claims. In the conclusion of this brief, Turquoise stated that the brief was “designed to apprise the arbitrator of various issues, evidence and testimony expected at the hearing of this matter. [Turquoise] will fully brief the arbitrator on all issues of law and fact after the hearing and receipt of transcripts of the testimony therein.” (Emphasis added.)

The claimants also filed a pre-hearing brief. Regarding their ILSFDA claims, they generally argued that “[Turquoise] repeatedly engaged in numerous [ILSFDA] misleading sales practices in order to induce the [c]laimants to pay substantial deposits and sign substantial purchase agreements.” The claimants repeated that “[t]he applicable misleading sales practices provisions” of the ILSFDA were in 15 U.S.C. § 1703(a)(2)(A)-(C)

. The...