Pigott v. Sanibel Dev., LLC

• Citation: 576 F. Supp. 2d 1258
• Decision Date: 17 September 2008
• Docket Number: CIVIL ACTION 07-0083-WS-C
• Parties: JANICE PIGOTT, et al., Plaintiffs, v. SANIBEL DEVELOPMENT, LLC, Defendant
• Court: Alabama Court of Civil Appeals

576 F. Supp. 2d 1258, JANICE PIGOTT, et al., Plaintiffs, v. SANIBEL DEVELOPMENT, LLC, Defendant.

CIVIL ACTION 07-0083-WS-C

UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT

OF ALABAMA,

SOUTHERN DIVISION

September 17, 2008, Decided

September 17, 2008, Filed

For Janice Pigott, Kimberly L. Barnes, Christopher Barnes, Plaintiffs: Charles Andrew Harrell, Jr., LEAD ATTORNEYS, Gulf Shores, AL.

For Cynthia Priolet, Phillippe Priolet, Susan Hersey, Plaintiffs: A. Carson I. Nicolson, LEAD ATTORNEY, Carson Irvine Nicolson, LLC, Fairhope, AL; Shawn Tavel Alves, LEAD ATTORNEY, Stone, Granade & Crosby, P.C., Bay Minette, AL.

For Richard Taylor, Steven A. Martino, Plaintiffs: A. Carson I. Nicolson, LEAD ATTORNEY, Carson Irvine Nicolson, LLC, Fairhope, AL.

For Sanibel Development, LLC, Defendant: Samuel G. McKerall, LEAD ATTORNEY, Gulf Shores, AL.

WILLIAM H. STEELE, UNITED STATES DISTRICT JUDGE.

OPINION ORDER

This matter comes before the Court on Plaintiffs' Motion for Partial Summary Judgment (doc. 79), Defendant's Motion for Summary Judgment (doc. 81), and Plaintiffs' Motion to Strike (doc. 93). The Motions have been briefed and are ripe for disposition.

I. Nature of the Case.

This action is an amalgamation of four consolidated civil actions, spanning eight plaintiffs with substantially similar claims against defendant, Sanibel Development, LLC. 1 Those eight plaintiffs - Janice Pigott, Kimberly Barnes, Christopher Barnes, Cynthia Priolet, Phillipe Priolet, Susan Hersey, Richard Taylor, and Steven Martino - all contracted with Sanibel in spring 2005 to purchase condominium units at a high-rise beachfront development known as Sanibel, a Condominium, which lies between the Gulf of Mexico and Little Lagoon in Gulf Shores, Alabama. More specifically, Pigott and the Barneses contracted with Sanibel to purchase Units 204 and 205 of the project; Hersey contracted with Sanibel to purchase Unit 1005; the Priolets contracted with Sanibel to purchase Unit 1105; and Taylor and Martino contracted with Sanibel to purchase Unit 1106. In accordance with the terms of their purchase agreements, plaintiffs furnished Sanibel with substantial letters of credit and/or cash deposits to be held in escrow as security for plaintiffs' performance of their obligation to close on the units. 2

All eight plaintiffs now seek to rescind their purchase agreements with Sanibel and to recover the earnest money funds paid in connection with those agreements. Plaintiffs contend that their right of rescission arises under the Interstate Land Sales Full Disclosure Act, 15 U.S.C. §§ 1701 et seq. ("ILSFDA" or the "Act"), based on Sanibel's failure to provide plaintiffs with disclosures in the form of a printed property report. The critical legal question presented by the parties' cross-motions for summary judgment is whether the Sanibel project is subject to, or exempt from, the Act's disclosure requirements. If the Sanibel project is not exempt, then all eight plaintiffs are entitled to revoke their purchase agreements, and Sanibel is obligated to return their cash deposits and letters of credit to them. On the other hand, if the project is exempt, then plaintiffs have forfeited their earnest money deposits and letters of credit by refusing to close on their purchase agreements with Sanibel in a timely manner.

In addition to the ILSFDA property report cause of action interposed by all plaintiffs, six plaintiffs (Pigott, the Barneses, the Priolets, and Hersey) have asserted ILSFDA fraud claims against Sanibel, for which they seek rescission of the purchase agreements, return of earnest money/letters of credit, damages, and other relief. (See docs. 53, 54.) In particular, Pigott and the Barneses allege that Sanibel "represented to [them] that they were purchasing Unit 204 of Sanibel directly from the Defendant at a preconstruction price when in fact Unit 204 was under contract to be sold to a third party." (Doc. 53, P 26.) 3 Similarly, the Priolets and Hersey assert that they were defrauded because they "believed and it was represented to them that they were making an Offer on a pre-development unit of Sanibel Condominiums," when in fact such was not the case. (Doc. 54, PP 36, 48.)

All of plaintiffs' ILSFDA causes of action (including both the disclosure-related claims and the fraud-based claims) arise pursuant to 15 U.S.C. § 1709(a), which creates a private right of action for purchasers against developers who fail to comport with the disclosure and anti-fraud provisions of the Act.

All parties move for summary judgment on the ILSFDA disclosure issue, which hinges on the legal question of whether (based on material facts that are undisputed) the Sanibel project was or was not exempt from the Act's property report requirement. Additionally, Sanibel seeks summary judgment on the fraud causes of action, while plaintiffs Hersey and the Priolets contend that genuine issues of material fact necessitate that their fraud claims be decided at trial.

II. Background Facts. 4

A. The Sanibel Project.

The salient facts concerning the structure of the Sanibel project (the "Project") are both straightforward and undisputed. All parties agree that the Project is a recently-completed high-rise condominium development in Gulf Shores, Alabama, comprised of 108 residential units. Defendant, Sanibel Development, LLC, was the developer of the Project. All parties agree (and Sanibel, in particular, concedes) that the Project was not registered with the U.S. Department of Housing and Urban Development ("HUD") under the ILSFDA. (Doc. 81-2, P 9.) All parties agree (and Sanibel again admits) that Sanibel neither prepared the property report that the ILSFDA requires with respect to certain condominium developments, nor furnished copies of any such property report to the eight plaintiffs in this action at any time. (Id., PP 10-11.) 5

B. The Purchase Agreements.

All plaintiffs entered into substantially identical Purchase Agreements and Escrow Agreements with Sanibel for particular units of the Project in the spring of 2005, well before the Project had been built.

On February 23, 2005, Pigott and the Barneses jointly entered into a Purchase Agreement and Escrow Agreement with Sanibel to purchase Unit 204 of the Project for the total purchase price of $ 519,900. (Doc. 79, Exh. A.) 6 Several months later, on May 18, 2005, those same three plaintiffs entered into a Purchase Agreement and Escrow Agreement with Sanibel to purchase Unit 605 of the Project for the total purchase price of $ 613,000. (Doc. 79, Exh. B.) 7 These Agreements obligated Pigott and the Barneses to pay a 20% earnest money deposit in the form of an irrevocable bank letter of credit or, alternatively, a cash deposit, to be held in escrow pending the closing. (Id., P 3.) The Agreements also provided that Sanibel was undertaking to construct the Project, with completion anticipated within two years. (Id., P 5.) Closing of the sale and delivery of the unit were to occur within 30 days following completion of construction, with the purchasers expressly agreeing to close within such 30-day period. (Id.) The Agreements further provided that if purchasers failed to perform their contractual obligations, Sanibel would be entitled to terminate the Agreements, "whereupon the earnest money and all interest earned thereon (if any) shall be immediately paid to [Sanibel] as fixed and full liquidated damages." (Id., P 14(b).)

On March 17, 2005, Hersey entered into a Purchase Agreement and Escrow Agreement with Sanibel to purchase Unit 1005 of the Project for the sum of $ 529,000. (Doc. 79, Exh. D.) 8 The terms of the Hersey agreement were substantially identical in all material respects to those of the Pigott/Barnes agreements. However, Unit 1005 had a hidden history. Unbeknownst to Hersey, Sanibel had previously sold it to someone else for a much lower price. 9 In particular, the record reflects that on November 23, 2004, non-parties Tommy and Sheena Byrd had entered into a Purchase Agreement with Sanibel to purchase Unit 1005 for $ 329,000, which is $ 200,000 less than the amount that Hersey agreed to pay four months later. (Doc. 79, Exh. J.) 10 The record also includes an undated document styled "Agreement to Cancel Contract and Return of Earnest Money Deposit," wherein Sanibel released the Byrds from their agreement to purchase Unit 1005, returned their earnest money deposit to them, and promised to pay them "the approximate sum of $ 200,000" upon the closing of the Hersey sale of that same unit. (Id.) Sanibel has no disclosure statements or documentation showing that Hersey or her agent was ever apprised of the arrangement between Sanibel and the Byrds for Unit 1005. (Hirras Dep., at 69, 127.) Moreover, Hersey testified in her deposition that "[n]o one ever informed [her] it was a flip" until well after she had signed the Purchase Agreement and paid the 20% deposit. (Hersey Dep., at 42.) 11

The Priolets were in a similar position to Hersey. On April 14, 2005, the Priolets executed a Purchase Agreement and Escrow Agreement with Sanibel, containing the same basic terms as the other agreements described herein. The Priolets agreed to purchase Unit 1105 for the total purchase price of $ 530,000. (Doc. 79, Exh. D.) 12 But Sanibel had previously sold Unit 1105 to Matthew Quantz for the sum of $ 329,000 via Purchase Agreement dated November 4, 2004. (Hirras Dep., Exh. 19.) 13 The summary judgment record reflects that on April 14, 2005, the very same day that the Priolets agreed to buy Unit 1105 from Sanibel, Sanibel entered into an "Agreement to Substitute Contract and Return Earnest Money Deposit" with Quantz, such that Sanibel released Quantz from his obligation to purchase Unit 1105 and promised to pay him $ 201,000 when the Priolet sale closed. (Id.) As with the Hersey agreement, Sanibel has no written disclosures or other documentation reflecting that the Priolets were notified of the Quantz arrangement at the time they agreed...