Berlin v. Renaissance Rental Partners, LLC

• Decision Date: 06 May 2013
• Docket Number: Docket No. 12–2213–cv.
• Citation: 723 F.3d 119
• Court: U.S. Court of Appeals — Second Circuit
• Parties: Bruce BERLIN, Nancy Berlin, Plaintiffs–Appellees, v. RENAISSANCE RENTAL PARTNERS, LLC, d/b/a Renaissance Condominium Partners II, Louis R. Cappelli, Defendants–Appellants, DelBello Donnellan Weingarten Wise & Wiederkehr, LLP, Defendant.

723 F.3d 119

Bruce BERLIN, Nancy Berlin, Plaintiffs–Appellees,

v. RENAISSANCE RENTAL PARTNERS, LLC, d/b/a Renaissance Condominium Partners II, Louis R. Cappelli, Defendants–Appellants,DelBello Donnellan Weingarten Wise & Wiederkehr, LLP, Defendant.^*

Docket No. 12–2213–cv.

United States Court of Appeals, Second Circuit.

Argued: March 19, 2013.

Decided: May 6, 2013.

Robert Hermann, DelBello Donnellan Weingarten Wise & Wiederkehr, LLP, White Plains, NY, for Defendants–Appellants.

Lawrence C. Weiner, Wilentz, Goldman & Spitzer, P.A., Woodbridge, NJ, for Plaintiffs–Appellees.

Nandan M. Joshi (Meredith Fuchs, General Counsel, To–Quyen Truong, Deputy General Counsel, David Gossett, Assistant General Counsel for Litigation, on the brief), Consumer Financial Protection Bureau, Washington, DC, for the Consumer Financial Protection Bureau, Amicus Curiae in Support of Appellees.

Before: JACOBS, CABRANES, and STRAUB, Circuit Judges.

JOSÉ A. CABRANES, Circuit Judge:

The Interstate Land Sales Full Disclosure Act (“ISLA”), 15 U.S.C. § 1701 et seq., “protects individual buyers or lessees who purchase or lease lots in large, uncompleted housing developments, including condominiums, by mandating that developers make certain disclosures.” Bacolitsas v. 86th & 3rd Owner, LLC, 702 F.3d 673, 676 (2d Cir.2012). The question presented in this appeal is whether a single-floor condominium unit in a multi-story building is a “lot,” thus triggering ILSA's protections. See15 U.S.C. § 1703(a)(1) (statutory requirements apply to the “sale or lease of any lot” that is not otherwise exempt).

The Consumer Financial Protection Bureau (“CFPB”) and the Department of Housing and Urban Development (“HUD”)—the agencies presently and formerly charged, respectively, with administering ILSA¹—have defined the term “lot” to mean “any portion, piece, division, unit, or undivided interest in land located in any state or foreign country, if the interest includes the right to the exclusive use of a specific portion of the land.” 12 C.F.R. § 1010.1(b).² As relevant here, the CFPB and HUD have consistently maintained that this definition applies to condominium units, including single-floor units in multi-story buildings. In particular, the CFPB and HUD have interpreted the phrase “exclusive use of ... land” to mean exclusive use of realty, see, e.g., CFPB Letter Br. at 6, thus concluding that the statutory term “lot” applies to condominiums,³ because they “carry the indicia of and in fact are real estate,” Land Registration, Formal Procedures, and Advertising Sales Practices, and Posting of Notice of Suspension, 38 Fed. Reg. 23,866, 23,866 (Sept. 4, 1973).

We hold that the CFPB and HUD have reasonably interpreted their own definition of the term “lot.” Accordingly, the United States District Court for the Southern District of New York (Frederick P. Stamp, Jr., Judge of the United States District Court for the Northern District of West Virginia, sitting by designation) properly granted summary judgment to the plaintiffs. We also hold that the District Court did not err or “abuse its discretion” by awarding attorneys' fees.

BACKGROUND

The facts in this case are straightforward and undisputed. In 2007, plaintiffs-appellants Bruce and Nancy Berlin (jointly, “Berlin”) contracted to purchase a condominium unit on the sixteenth floor of The Residence at The Ritz–Carlton, Westchester—a building then under construction in White Plains, New York—from the developer, defendant-appellee Renaissance Rental Partners, LLC, and its principal, defendant-appellee Louis R. Cappelli (jointly, “Renaissance”). Two years later, and before title was transferred, Berlin renounced the agreement and demanded a full refund of the $167,625 deposit. Berlin argued that the contract was voidable because Renaissance had not furnished a “printed property report,” as required by 15 U.S.C. § 1703(a)(1)(B).⁴ When Renaissance refused the rescission and denied the refund request, Berlin brought this suit pursuant to 15 U.S.C. § 1709, which provides a right of action “at law or in equity against a developer or agent if the sale or lease was made in violation of section 1703(a) of this title.” Id. § 1709(a).

Applying principles of agency deference, the District Court granted summary judgment to Berlin in a memorandum decision and order dated April 27, 2012. See Berlin v. Renaissance Rental Partners, LLC, 09 Civ. 8477(FPS), slip op. at 8–12 (S.D.N.Y. Apr. 27, 2012) (“Dist. Ct. Op.”). The Court explained that the agency definition of the term “lot” does not reveal “any intention to limit the application of ILSA to ‘horizontal’ condominiums, and to exclude high-rise or ‘vertical’ condominiums.” Id. at 8. Because “ ‘condominiums carry the indicia of and in fact are real estate,’ ” id. at 10 (quoting 38 Fed. Reg. at 23,866), the Court continued, “the proper focus regarding the analysis of whether a unit has exclusive rights to the use of land under 24 C.F.R. § 1710.1 is whether the purchase of the unit gave the purchasers the exclusive right to a unit, or any type of ‘realty,’ ” id. (referencing Winter v. Hollingsworth Props., Inc., 777 F.2d 1444, 1448 (11th Cir.1985)). Finally, the Court noted the marked absence of “an opinion by any court which has found that ILSA is inapplicable to any type of condominium, much less a high-rise condominium in particular.” Id. at 14.

Also relevant to this appeal, the District Court's decision and order partially granted Berlin's motion for attorneys' fees by awarding fees incurred “from the date of this Court's memorandum decision and order denying the defendants' motion to dismiss on August 19, 2011 until the date of this memorandum decision and order.” Id. at 15. In support of its decision to award fees, the District Court explained that Renaissance's argument that the condominium unit was not a “lot” within the meaning of ILSA “had been all but foreclosed by other case law interpreting ISLA.” Id.

On appeal, Renaissance asserts that ownership of a condominium unit in a multi-story building does not include the right to “the exclusive use of a specific portion of the land,” 12 C.F.R. § 1010.1(b), because the term “land” refers to the “tangible surface of the earth,” Appellants' Br. 14. Renaissance also contests the District Court's decision to award attorneys' fees.

After receiving the parties' briefs, we invited the CFPB, which did not participate in the District Court proceedings, to submit a letter brief offering its views. The CFPB responded by letter brief on March 12, 2013, explaining, in part:

HUD explained when it promulgated the definition of “lot” in 1973 that “condominiums carry the indicia of and in fact are real estate.” 1973 Rule, 38 Fed. Reg. at 23866. Accordingly, “the proper focus regarding the analysis of whether a unit has exclusive rights to the use of land under 24 C.F.R. § 1710.1 is whether the purchase of the unit gave the purchasers the exclusive right to a unit, or any type of ‘realty.’ ” [Dist. Ct. Op. at 10.] In that regard, the preamble to the 1973 Rule makes clear that a condominium is “equivalent to a subdivision, each unit being a lot.” 38 Fed. Reg. at 23866 (emphasis added). Because the condominium unit is itself a lot for purposes of ILSA, a purchaser of the unit need not have a separate interest in “raw land” to be entitled to the protections of ILSA's disclosure and anti-fraud requirements.

... As HUD explained in 1973, the “application of [ILSA] to condominiums has been consistent [HUD] policy since the issue was first raised in 1969”—the year that ILSA took effect. 1973 Rule, 38 Fed. Reg. at 23866;see ILSA § 1422, 82 Stat. at 599 (effective date provision).⁵ HUD consistently reaffirmed that determination in subsequent guidance documents. See, e.g.,40 Fed. Reg. at 47166 (“For jurisdictional purposes, a condominium ‘unit’ is a ‘lot.’ ”); 1996 Guidance, 61 Fed. Reg. at 13596 (stating that the definition of “lot” applies to the “sale of a condominium or cooperative unit”)....

...

... Appellants argue that the 1973 regulation, by using the term “land,” was intended to apply only to condominiums that were “horizontal developments and ... campgrounds,” Br. 7 (quoting 1973 Rule, 38 Fed. Reg. at 23866), and not “condominiums where purchasers have [only] exclusive use of their ‘unit,’ ” ibid. That argument is contradicted by contemporaneous HUD statements that demonstrate its understanding that ILSA applies to multistory condominium developments. In the preamble to the 1973 rule, HUD made clear that ILSA would apply to “condominiums intended as primary residences in metropolitan areas” that did not qualify for the two-year construction exemption. 1973 Rule, 38 Fed. Reg. at 23866. As the district court found, HUD's discussion of condominiums “in metropolitan areas” reflected its view that ILSA's protections extend to purchasers of “high-rise or ‘vertical’ condominiums.” [Dist. Ct. Op. at 8.] Indeed, less than six months after issuing the 1973 Rule, HUD removed any doubt on the matter by issuing guidelines designed to accommodate “the realities of condominium construction, especially high-rise construction.” 1974 Guidance, 39 Fed. Reg. at 7824 (emphasis added). The 1974 Guidance thus makes clear that the term “lot” is not confined to “horizontal developments” and “campgrounds.”

... Appellants argue (Br.13) that the definition of the term “land” used in 24 C.F.R. § 1710.1 is determined by New York state property law, which they claim defines “land” to exclude “structures or improvements constructed on the land.” As this Court observed, however, ILSA creates “a national standard to guarantee full disclosure for the benefit of prospective buyers.” Bacolitsas, 702 F.3d at 682 (emphasis added). ILSA's national reach requires that the meaning of the federal regulatory term “land” be determined under federal law.

CFPB Letter Br. at 6–7, 10–11. The CFPB also participated in oral argument.

DISCUSSION

A.

The only merits dispute at issue in...