Rai v. WB Imico Lexington Fee, LLC
| Decision Date | 19 March 2012 |
| Docket Number | No. 09 Civ. 9586 (PGG).,No. 09 Civ. 9609 (PGG).,No. 09 Civ. 9610 (PGG).,No. 09 Civ. 9611 (PGG).,No. 09 Civ. 9612 (PGG).,09 Civ. 9586 (PGG).,09 Civ. 9609 (PGG).,09 Civ. 9610 (PGG).,09 Civ. 9611 (PGG).,09 Civ. 9612 (PGG). |
| Citation | 851 F.Supp.2d 615 |
| Parties | Aviral RAI and Sangeeta Rai, Plaintiffs, v. WB IMICO LEXINGTON FEE, LLC, Defendant. Haskell Limited Inc., Plaintiff, v. WB Imico Lexington Fee, LLC, Defendant. Jessica Benhamou, Plaintiff, v. WB Imico Lexington Fee, LLC, Defendant. Garrett Bauer, Plaintiff, v. WB Imico Lexington Fee, LLC, Defendant. Marilyn Ezzes, Plaintiff, v. WB Imico Lexington Fee, LLC, Defendant. |
| Court | U.S. District Court — Southern District of New York |
OPINION TEXT STARTS HERE
Lawrence C. Weiner, Alan Wasserman, Wilentz, Goldman & Spitzer, P.A., Woodbridge, NJ, Donald Robert Dunn, Jr., Pryor Cashman LLP, James Andrew Moss, Balber, Pickard, Battistoni, Maldonado, & Van Der Tuin, New York, NY, for Plaintiffs.
Richard Henry Dolan, Thomas Aquinas Kissane, Schlam Stone & Dolan LLP, New York, NY, for Defendant.
Plaintiffs are purchasers of condominium units in “The Lucida,” a condominium development in Manhattan, and have sued to rescind their purchase agreements and recover their deposits based on alleged violations of the Interstate Land Sales Full Disclosure Act, 15 U.S.C. §§ 1701–1720 (2009) (“ILSA” or the “Act”). (Rai Am. Cmplt. ¶ 1; Haskell Cmplt. ¶¶ 2–4; Benhamou Cmplt. ¶¶ 2–4; Bauer Cmplt. ¶¶ 2–4; Ezzes Cmplt. ¶¶ 2–4) Defendant WB Imico Lexington Fee, LLC (“WB Imico”) has counterclaimed for breach of contract, asserting that Plaintiffs breached their purchase agreements by refusing to pay the purchase price or close title on the units. WB Imico seeks a declaration that it may retain Plaintiffs' deposits. (Rai Am. Ans., Counterclaim ¶¶ 1–5; Haskell Am. Ans., Counterclaim ¶¶ 1–5; Benhamou Am. Ans., Counterclaim ¶¶ 1–5; Bauer Am. Ans., Counterclaim ¶¶ 1–5; Ezzes Am. Ans., Counterclaim ¶¶ 1–5) Plaintiffs and Defendant also seek an award of attorneys' fees and costs.
All parties have cross-moved for summary judgment. (Rai Dkt. Nos. 38, 46; Haskell Dkt. Nos. 44, 56; Benhamou Dkt. Nos. 43, 55; Bauer Dkt. Nos. 42, 54; Ezzes Dkt. Nos. 45, 57) The parties' motions turn on the question of whether WB Imico's failure to include tax lot numbers in the purchase agreements executed by Plaintiffs constitutes a violation of ILSA that permits Plaintiffs to rescind the agreements and recover their deposits.
For the reasons stated below, this Court concludes that ILSA applies to condominium units, that the Act's “100–lot exemption” is not applicable, and that WB Imico's failure to include tax lot numbers in the purchase agreements constitutes a violation of ILSA that permits Plaintiffs to rescind the purchase agreements and recover their deposits. Accordingly, Plaintiffs' motions for summary judgment will be granted and Defendant's motions for summary judgment will be denied.
WB Imico is the sponsor and developer of The Lucida, a new condominium development located at 151 East 85th Street, New York, New York. ) 1 On March 21, 2007, WB Imico filed an offering plan (the “Offering Plan”) with the New York State Department of Law representing that the The Lucida would consist of 110 residential units, one retail unit, and one rental unit consisting of 24 apartments. ( Id. ¶ 4; Moss Decl., Ex. 21)
By April 20, 2007–approximately one month after the Offering Plan was filed with the New York State Department of Law-buyers had executed purchase agreements for 17 units (Moss Decl., Ex. 22), representing 15% of the residential units in The Lucida. It is undisputed that WB Imico could have obtained tax lot numbers for the residential units at The Lucida at that time, but chose not to do so. ( See13 N.Y.C.R.R. § 20.3(q)(3); New York City Department of Finance, Condominium Apportionment and Approval Process, NYC.GOV, http:// www. nyc. gov/ html/ dof/ html/ pdf/ property/ pro_ 506. pdf (last visited March 17, 2012); Evanusa Deck ¶¶ 6–7; Evanusa Supp. Decl. ¶¶ 9–11, 13) Obtaining tax lot numbers at that time would have required WB Imico to declare the condominium offering plan “effective.” WB Imico chose not to declare the condominium offering plan “effective” until November 26, 2007, by which time purchase agreements had been executed for 78 units at The Lucida—71% of the residential units offered for sale.2 (Moss Deck, Ex. 22) Defendant did not go on to request assignment of tax lot numbers until April 7, 2009 ( id., Ex. 24) and tax lot numbers were not assigned to The Lucida's residential units until June 2, 2009. ( Id.; Evanusa Decl. ¶ 10; Evanusa Supp. Decl. ¶ 9)
Between June 25, 2007 and February 27, 2008, each Plaintiff executed substantially similar purchase agreements for condominium units in The Lucida, and each paid WB Imico deposits pursuant to those agreements.3 In connection with the sale of units, WB Imico prepared a property report (“Property Report”) for each Plaintiff's respective unit and delivered the report to each Plaintiff.4 (Pltfs. R. 56.1 Stmt. ¶ 6; Gazzola Decl. ¶ 5; Benhamou Decl. ¶ 5; Bauer Decl. ¶ 5; Ezzes Decl. ¶ 5) The purchase agreements executed by Plaintiffs did not provide tax lot information for the individual units. As noted above, tax lot numbers for the individual units in The Lucida were not assigned until on or about June 2, 2009, when the First Amended Condominium Declaration was recorded. (Moss Decl., Ex. 24; Evanusa Decl. ¶ 10; Evanusa Supp. Decl. ¶ 9)
The Property Report issued to each Plaintiff advised that the purchase agreement was not yet recordable, and that tax lot information for the individual unit was not yet available. The disclosure section of the Property Report contains the following language under the heading “Method and Purpose of Recording”:
Under New York law, the recording of the Agreement could protect you from other contract vendees and certain future creditors of the Developer. However, under the terms of the Agreement, neither the Agreement nor any short-form summary thereof can be recorded in the Office of the New York City Register, County of New York and any recording of the Agreement by you in violation of the provisions of the Agreement is a breach of the Agreement.
Subsequent to the closing, however, you can record the Tower Unit Deed conveying title to you, and this will protect you against claims of our subsequent creditors and buyers.
(Haas Decl., Ex. C, at 9) (emphasis in original).
The Property Report further provides:
NEITHER THE FLOOR PLANS NOR THE DECLARATION HAVE BEEN SUBMITTED TO THE RPAB [Real Property Assessment Bureau of the City of New York]. UNTIL THE FLOOR PLANS ARE FILED AND THE DECLARATION IS RECORDED, THE DESCRIPTION OF THE UNITS IS NOT LEGALLY ADEQUATE FOR THE CONVEYANCE OF THE TOWER UNITS. THEREAFTER, EACH TOWER UNIT WILL BE LEGALLY DESCRIBED BY REFERENCE TO ITS UNIT AND TAX LOT NUMBER AS SET FORTH IN THE RECORDED DECLARATION AND FILED FLOOR PLANS.
( Id., Ex. C, at 13) (emphasis in original)
At the time each Plaintiff signed his, her, or its purchase agreement, the Offering Plan for The Lucida and each Plaintiff's Property Report represented that The Lucida would contain 110 condominium units. Between April 12, 2007 and February 19, 2008, however, non-party purchasers of units in The Lucida reached agreements with WB Imico to combine units, thereby reducing the number of units to be sold in The Lucida to 98. ) On August 6, 2007, the Department of Buildings approved revised floor plans that combined 23 units into 11 units ( Id. ¶ 4(xvi)), and on October 27, 2008, the Fourteenth Amendment to the Offering Plan (the “Fourteenth Amendment”) was filed with—and approved by—the New York State Department of Law amending the Offering Plan. ( Id. ¶ 4(xvii); Moss Decl., Ex. 23) The Fourteenth Amendment represented that The Lucida would contain 98 condominium units, reflecting the various combinations of units referenced above. (Moss Deck, Ex. 23) The Sixteenth Amendment dated June 29, 2009, likewise represented that The Lucida would contain 98 condominium units. (Haas Deck, Ex. B)
Between June 23, 2009 and November 9, 2009—within two years of executing their respective purchase agreements—each Plaintiff sent a notice to WB Imico purporting to revoke their purchase agreement,pursuant to Section 1703(d) of ILSA, due to WB Imico's alleged failure to comply with ILSA's disclosure requirements. ) Plaintiffs likewise demanded the immediate return of their respective deposits. ) WB Imico has not returned to Plaintiffs any portion of the deposits. )
On or about December 28, 2009, each Plaintiff received a notice from WB Imico setting a closing date of February 1, 2010.5 (Def. R. 56.1 Stmt. ¶ 1; Haas Decl. ¶ 7) WB Imico asserts that none of the Plaintiffs closed on the designated closing date, and that the time for Plaintiffs to exercise their rights to close under their respective purchase agreements has expired. 6 (Def. R. 56.1 Stmt. ¶¶ 2–3; Haas Decl. ¶ 7)
In their joint motion for summary judgment, Plaintiffs argue, inter alia, that ILSA applies to a condominium development such as the The Lucida, that no exemption to ILSA is applicable, and that the purchase agreements violate Section 1703(d)(1) of the Act because they do not include...
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