Gentry v. Harborage Cottages-Stuart, Lllp

• Decision Date: 13 February 2009
• Docket Number: Case No. 08-14020-CIV.
• Citation: 602 F.Supp.2d 1239
• Parties: James D. GENTRY, et al., Plaintiffs, v. HARBORAGE COTTAGES-STUART, LLLP, et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

Page 1239

602 F.Supp.2d 1239

James D. GENTRY, et al., Plaintiffs, v. HARBORAGE COTTAGES-STUART, LLLP, et al., Defendants.

Case No. 08-14020-CIV.

United States District Court, S.D. Florida.

February 13, 2009.

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Owen Schultz, Esq., and Robert Payne Summers, Esq., McCarthy, Summers, Bobko, Wood & Sawyer, P.A., Stuart, FL, Robert J. Gorman, Esq., Robert J. Gorman, P.A., Fort Pierce, FL, for Plaintiffs.

Sandra Jessica Millor, Esq., Greenberg Traurig, Miami, FL, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT; GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT

K. MICHAEL MOORE, District Judge.

THIS CAUSE came before the Court upon Defendants' Motion for Summary Judgment (dkt. # 85) and Plaintiffs' Motion for Summary Judgment (dkt. # 89).

UPON CONSIDERATION of the Motions, the Responses, the pertinent portions of the record, and being otherwise fully advised in the premises, the Court enters the following Order.

I. BACKGROUND

This case involves a group of individuals who contracted to purchase pre-construction condominiums. In 2005, Plaintiffs entered into purchase agreements (the "Purchase Agreements") with Harborage Cottages-Stuart, LLLP ("Harborage") to purchase condominiums in the Harborage Yacht Condominiums in Martin County, Florida (the "Harborage Condominiums"). Plaintiffs allege that Harborage made a number of misrepresentations in materials provided to the buyers, including the Harborage concept site plan, the Yacht Slip Membership Agreement, and marketing and promotional materials, as well as in verbal statements.

The alleged misrepresentations include that the Harborage Condominiums: (1) are a luxury development; (2) are extraordinary; (3) blend tropical charm with contemporary elegance; (4) combine materials and finishes of exceptional quality with timeless craftsmanship; (5) provide spacious patios from which to enjoy glorious sunrises over the water; (6) that Altman Development Corporation (the corporate parent of Harborage) consistently delivers products and services of the highest caliber to clients and residents; and (7) that no buildings or structures exist in the area to the South designated as the "Future Development" area.

Certain Plaintiffs also paid deposits to Northside Marina Venture, LLC ("Northside"), for Yacht Slip Membership in the Harborage Yacht Club & Marina, allegedly under the belief that they would be able to obtain an ownership interest in the dock slips at the marina and that such ownership could be held jointly without restrictions on use. In fact, no ownership interest in the dock slips was available. Harborage Yacht Club Yacht Slip Membership Agreement, Section V, ¶ 1 (dkt. # 86-4). Plaintiffs do not possess ownership in a dock slip but are merely entitled to use the dock slip while a member of the Harborage Yacht Club and Marina. Aff. of James Gentry, ¶ ¶ 12-14, sworn to January 22, 2009 (dkt. # 86-2); Aff. of Donald Hunt, ¶¶ 11-13, sworn to January 23, 2009 (dkt. # 94-2). Plaintiffs also contend that non-married joint members do not enjoy the same benefits as married joint members. Id.

Plaintiffs, alleging violations of federal and state law, brought an action to rescind the Purchase Agreements and recover their deposits because the Harborage Condominiums and facilities do not conform to representations relied on by the buyers upon entering into the Purchase Agreements.¹ Plaintiffs' claims originally included: (1) violations of the Interstate Land Sales Full Disclosure Act ("ILSFDA"), 15 U.S.C. § 1501 et seq.; (2) publication of false and misleading information under § 718.506, Florida Statutes; (3) violation of the Florida Deceptive and Unfair Trade Practices Act ("FDUTPA") under § 501.204(1), Florida Statutes; (4) breach of contract; (5) declaratory judgment; (6) negligent misrepresentation; and (7) fraudulent misrepresentation. Defendants moved to dismiss each of Plaintiffs' claims. In three separate Orders (dkt. #'s 25, 53 and 55) this Court dismissed the breach of contract and declaratory judgment claims. This Court also dismissed Plaintiffs R. Scott Stone, Jr. and Patricia Stone's (together, the "Stones") revocation claim under the ILSFDA. However, the Stones' claims for damages under § 1709 of the ILSFDA remains intact.

II. STANDARD OF REVIEW

The applicable standard for reviewing a summary judgment motion is unambiguously stated in Rule 56(c) of the Federal Rules of Civil Procedure:

The judgment sought should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.

Summary judgment may be entered only where there is no genuine issue of material fact. Twiss v. Kury, 25 F.3d 1551, 1554 (11th Cir.1994). The moving party has the burden of meeting this exacting standard. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). An issue of fact is "material" if it is a legal element of the claim under the applicable substantive law which might affect the outcome of the case. Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir.1997). An issue of fact is "genuine" if the record taken as a whole could lead a rational trier of fact to find for the nonmoving party. Id.

In applying this standard, the district court must view the evidence and all factual inferences therefrom in the light most favorable to the party opposing the motion. Id. However, the nonmoving party "may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, 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 [nonmovant's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmovant]." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

III. ANALYSIS

A. The ILSFDA

1. Applicability of the ILSFDA

Harborage contends that it is exempt from the ILSFDA's requirements. The ILSFDA is "an antifraud statute utilizing disclosure as its primary tool with the principal purpose of protecting purchasers from unscrupulous sales of undeveloped home sites." Kamel v. Kenco/The Oaks at Boca Raton LP, No. 08-13692, ___ Fed.Appx. ___, ___, 2008 WL 4601715, at *2 (11th Cir.2008) (per curiam) (internal quotation marks omitted). Section 1702 of the ILSFDA provides a number of exemptions, including an exemption which provides, in relevant part:

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 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). Although a sale of land where the seller is obligated to complete construction within two years is exempt from the ILSFDA, the seller's obligation to complete construction within two years may not be illusory.² Kamel, ___ Fed.Appx. at ___, 2008 WL 4601715, at *2. "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."³ Guidelines for Exemptions Under the ILSFDA, 61 Fed. Reg. 13596, Part IV(b), ¶ 7 (hereinafter, "Guidelines"); see also Kamel, ___ Fed.Appx. at ___, 2008 WL 4601715, at *2 (holding that purchase agreement provision was not illusory in light of requirement that construction be completed within two years, subject only to "delays caused by the Buyer or acts of God, the unavailability of materials, strikes, other labor problems, governmental orders, or other events which would support a defense based on impossibility of performance for reasons beyond the Seller's control").

It is clearly established that limitations on an obligation to complete construction may include circumstances that would support a defense of impossibility under Florida contract law. Kamel, ___ Fed.Appx. at ___, 2008 WL 4601715, at *3. However, this conclusion is premised on the principle stated in the Department of Housing and Urban Development's ("HUD") Guidelines that limitations on a seller's obligation to complete construction "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." Guidelines, 61 Fed. Reg. 13596, Part IV(b), ¶ 7. Thus, the guiding principle is that a limitation on the seller's obligation to complete construction must be cognizable as a defense recognized under state contract law. The examples given, including impossibility, frustration and events beyond the seller's reasonable control, are merely illustrative and are therefore non-exhaustive. Guidelines, 61 Fed. Reg. 13596, Part I, ¶ 2 ("Not every conceivable factor of the exemption process is covered in these Guidelines. ... Examples are given, but the examples do not in any way exhaust the myriad possibilities ... nor do they set absolute standards."). Therefore, limitations in a purchase agreement concerning the seller's obligation to complete construction are not illusory where they are limited to defenses recognized under state contract law. See Kamel, ___ Fed.Appx. at ___, 2008 WL 4601715, at *3 (holding that a seller's obligation was not illusory because the limitations were grounded in the doctrine of impossibility, which is a well-established defense under Florida contract law).

The Harborage Condominiums are comprised of 126 individual condominium units. Res. to Pl.'s Request for Admissions, # 5 (dkt. # 101-2)...