Bruno v. Mona Lisa At Celebration, LLC (In re Mona Lisa at Celebration, LLC)

• Decision Date: 16 May 2012
• Docket Number: Adversary Nos. 6:09–ap–49,6:09–ap–769,6:09–ap–859.,Bankruptcy No. 6:09–bk–00458–KSJ.,6:09–ap–770
• Citation: 472 B.R. 582
• Parties: In re MONA LISA AT CELEBRATION, LLC, Debtor. Laura Bruno, et al., Plaintiffs, v. Mona Lisa at Celebration, LLC, Westchester Fire Insurance Company, SunTrust Bank, and BankFirst, Defendants. Karen Dodsworth, et al., Plaintiffs, v. Mona Lisa at Celebration, LLC, Westchester Fire Insurance Company, SunTrust Bank, and BankFirst, Defendants. Moire McKibbin, et al., Plaintiffs, v. Mona Lisa at Celebration, LLC, Westchester Fire Insurance Company, SunTrust Bank, and BankFirst, Defendants. Kathryn Bennett, et al., Plaintiffs, v. Mona Lisa at Celebration, LLC, Westchester Fire Insurance Company, SunTrust Bank, and BankFirst, Defendants.
• Court: U.S. Bankruptcy Court — Middle District of Florida

472 B.R. 582

In re MONA LISA AT CELEBRATION, LLC, Debtor.

Laura Bruno, et al., Plaintiffs,

v.Mona Lisa at Celebration, LLC, Westchester Fire Insurance Company, SunTrust Bank, and BankFirst, Defendants.

Karen Dodsworth, et al., Plaintiffs,

v.Mona Lisa at Celebration, LLC, Westchester Fire Insurance Company, SunTrust Bank, and BankFirst, Defendants.

Moire McKibbin, et al., Plaintiffs,

v.Mona Lisa at Celebration, LLC, Westchester Fire Insurance Company, SunTrust Bank, and BankFirst, Defendants.

Kathryn Bennett, et al., Plaintiffs,

v.Mona Lisa at Celebration, LLC, Westchester Fire Insurance Company, SunTrust Bank, and BankFirst, Defendants.

Bankruptcy No. 6:09–bk–00458–KSJ.

Adversary Nos. 6:09–ap–49, 6:09–ap–769, 6:09–ap–770, 6:09–ap–859.

United States Bankruptcy Court,

M.D. Florida,

Orlando Division.

May 16, 2012.

John L. Urban, Gregory W. Stoner, Urban, Thier, Federer & Chinnery P.A., Orlando, FL, Mark C. Rutecki, Celebration, FL, for Plaintiffs.

Raquel M. Fernandez, Cozen O'Connor, Miami, FL, Robert McL. Boote, Cozen O'Connor, Philadelphia, PA, John R. Stump, Swann, Hadley, Stump, Dietrich & Spears PA, Winter Park, FL, L. William Porter, III, Lowndes, Drosdick, Doster, Kantor & Reed PA, Orlando, FL, for Defendants.

MEMORANDUM OPINION ON CROSS MOTIONS FOR SUMMARY JUDGMENT

KAREN S. JENNEMANN, Chief Judge.

The numerous plaintiffs in these four adversary proceedings each signed a purchase agreement to buy units in a hotel-condominium project developed by the debtor, Mona Lisa at Celebration, LLC.¹ The buyers no longer want to go forward with their purchases and have requested the return of their sizeable deposits alleging violations of various state and federal laws. Plaintiffs and defendants each have moved for summary judgment on some or all of the sixteen counts in plaintiffs' amended complaints.² Although the Court will analyze all counts in numerical order, and the defendants are successful on many, really most, of the disputes, in the end, the plaintiffs have established they are entitled to summary judgment on key portions of Counts VII, VIII, XV, and XVI, such that each plaintiff is entitled to void their purchase contracts and receive a refund of their deposits with interest, legal fees, and costs.

Mona Lisa marketed, developed, and sold units in a luxury hotel-condominium development in Celebration, Florida. From June 2005 through September 2007, plaintiffs entered into one of two types of agreements with Mona Lisa to purchase specific units. Initially, the contracts did not require Mona Lisa to complete construction within two years. These are the “Original Purchase Agreements.” Starting in 2006, Mona Lisa changed the form of the contract to impose an obligation on itself to complete construction within two years. These are the “Updated Purchase Agreements.”

Almost every buyer, regardless of which version of the contract was signed, made a deposit of more than 10% of the purchase price with Mona Lisa.³ Most buyers made a down payment of between 15–20% of the unit's purchase price to Mona Lisa, who deposited the funds into an escrow account maintained by SunTrust, the escrow agent. In total, plaintiffs' deposits equal $3.38 million.⁴ On December 1, 2006, Mona Lisa obtained a surety bond from Westchester Fire Insurance Company to allow it to withdraw the first ten percent of plaintiffs' deposits from the escrow account, as permitted under Fla. Stat. § 718.202.⁵ Mona Lisa relied on Fla. Stat. § 718.202(3) to withdraw the balance of plaintiffs' deposits and to use the funds for purposes characterized as construction and development of the project.

Construction of the project is now complete. The development consists of 240 one- and two-bedroom suites within two separate buildings arranged in a semi-circular arc. Between the two hotel-condominium buildings lies a circular pool and hot-tub surrounded by approximately 23,500 square feet of decking and landscaping features. Also within the arc is a separate two-story multi-use building with visitor and resident amenities, including a reception area, bar, restaurant, and meeting facilities. Mona Lisa finished construction in early 2008 and obtained a certificate of occupancy on May 7, 2008.⁶ By the end of 2008, over 70 unit owners had closed on the sale of their units. ⁷

Mona Lisa's business (like that of many other businesses in Orlando) was crippled by the financial recession of 2008. Property values plummeted. Many buyers refused to close on their sales contracts. To add to Mona Lisa's troubles, construction delays pushed back completion of the Mona Lisa development over a year from its original estimated closing date of April 30, 2007.

From May 2008 through January 2009, some plaintiffs brought individual actions against Mona Lisa in the United States District Court for the Middle District of Florida, seeking rescission of their purchase agreements. On November 7, 2008, the District Court consolidated these civil cases.⁸ On January 15, 2009, Mona Lisa filed for Chapter 11 bankruptcy, automatically staying all District Court actions.⁹

During 2009, seventy-one plaintiffs filed four adversary proceedings against Mona Lisa alleging violations of various state and federal laws.¹⁰ In two of the four adversaries, the parties filed cross motions for summary judgment on the ten counts asserted in the original complaint.¹¹ The Court granted summary judgment ¹² in favor of the defendants on most counts (Counts I–III, and V–VII) but concluded a trial was needed on the remaining counts (Counts IV, VIII, and X).¹³

Plaintiffs from all four adversary proceedings then filed amended complaints now asserting these similar sixteen causes of action against the remaining three defendants—Westchester, SunTrust, and Mona Lisa:

• Counts I–IV—Mona Lisa violated various provisions of the Interstate Land Sales Full Disclosure Act in 15 U.S.C. § 1701 et seq.

• Count V—Mona Lisa failed to file a registration statement in violation of the Securities Act of 1933.

• Count VI—Mona Lisa failed to file a registration statement in violation of the Investor Protection Act in Florida Chapter 517.

• Count VII—Mona Lisa failed to maintain separate escrow accounting for purchaser deposits, and Mona Lisa used purchaser deposits for improper purposes, in violation of Florida Condominium Act § 718.202.

• Count VIII—Mona Lisa failed to file with the Division of Florida Land Sales, Condominiums, and Mobile Homes all the required documents and amendments, in violation of Florida Condominium Act § 718.502.

• Count IX—Mona Lisa failed to deliver a prospectus and disclosure statement with all exhibits to prospective purchasers, in violation of Florida Condominium Act § 718.503.

• Count X—Mona Lisa made material misrepresentations in advertising material for the purchase of a condominium, in violation of the Florida Condominium Act § 718.506.¹⁴

• Count XI—Mona Lisa's alleged violation in Counts I–X constitute per se violations of the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”) in Fla. Stat. § 501.201 et seq.

• Count XII—Mona Lisa failed to notify purchasers that their units were part of a Community Development District, in violation Fla. Stat. § 190.04, which constitute a per se FDUTPA violation.

• Count XIII—Mona Lisa failed to notify purchasers of the type, thickness, and R–Value of insulation that was to be used in their units, in violation of 16 C.F.R. § 460.16, which constitute a per se FDUTPA violation.

• Count XIV—Mona Lisa failed to disclose that the units were subject to a home owner's association in violation of Fla. Stat. § 720.401.

• Count XV—Breach of Contract.

• Count XVI—Declaratory Relief.

Some of these counts are identical to ones the Court addressed in the first summary judgment decision,¹⁵ and others are causes of action brought for the first time. For clarity, the Court will discuss whether summary judgment is appropriate for each count, taking them in numerical order. Plaintiffs have moved for summary judgment on Counts I–IV, VII, VIII, XI, XV, and XVI,¹⁶ and defendants have moved for summary judgment on all counts of plaintiff's amended complaints.¹⁷ On October 6, 2011, the Court consolidated all four adversary proceedings and took plaintiffs' and defendants' cross motions for summary judgment under advisement.¹⁸

Under Federal Rule of Civil Procedure 56, made applicable by Federal Rule of Bankruptcy Procedure 7056, a court may grant summary judgment where “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” ¹⁹ The moving party has the burden of establishing the right to summary judgment.²⁰ However, under Rule 56(c), the nonmoving party, in responding to a properly made motion for summary judgment, “may not rely merely on allegations or denials in its own pleadings; rather, its response must—by affidavits or as otherwise provided in this rule—set out specific facts showing a genuine issue for trial. If the opposing party does not so respond, summary judgment should, if appropriate, be entered against that party.” ²¹ Conclusory allegations by either party, without specific supporting facts, have no probative value.²²

In determining entitlement to summary judgment, “facts must be viewed in the light most favorable to the nonmoving party only if there is a “genuine” dispute as to those facts.” ²³ “Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.” ²⁴ A material factual dispute thus precludes summary judgment.²⁵

THE INTERSTATE LAND SALES FULL DISCLOSURE ACT (COUNTS I–IV)

The Interstate Land Sales Full Disclosure Act (“ILSFDA”) ²⁶ is a federal anti-fraud statute regulating the sale of certain real estate developments containing more than 100 “lots” of land.²⁷ The ILSFDA was enacted to stop shady developers from foisting undesirable realty onto unsuspecting or ill-informed investors and consumers.²⁸ The statute's...