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IN THE CIRCUIT COURT OF THE TWELFTH JUDICIAL CIRCUIT
IN AND FOR SARASOTA COUNTY, FLORIDA
RICHARD C. SENKER, Trustee of the Richard CASE NO. 2007-CA-008509-NC /
C. Senker and Patricia A. Senker Land Trust,
--a Florida Land Trust, ae ee a
A |
Plaintiff, 0) I } IN FFIcIA NL "f
INSTRUMENT # 2008L20509 6 Pos
vs. 2008 SEP 05 10:17 AM
KAREN E. RUSHING
SNAVELY SIESTA ASSOCIATES, LLC, CLERK OF THE CIRCUIT COURT
an Ohio Limited Liability Company, SARASOTA COUNTY» FLORIDA
SIVES Receipt#10985748
Defendant.
PARTIAL SUMMARY JUDGMENT
ON COUNT IV OF SECOND AMENDED COMPLAINT
THIS MATTER came before the Court on August 27, 2008 on Plaintiffs, Richard C.
Senker, Trustee of the Richard C. Senker and Patricia A. Senker Land Trust, a Florida Land
Trust, (“Senker’) Motion for Partial Summary Judgment on Count IV of his Second Amended |
Complaint against Defendant Snavely Siesta Associates, LLC, an Ohio Limited Liability
Company (“Snavely”). The Court having considered arguments, materials pertinent to the
issues, and the law (cases cited by the Court are for general propositions of law if not
factually similar), and being otherwise duly and sufficiently advised in the premises, finds
as follows:
On July 18, 2005, Senker executed a contract with Snavely for the purchase and sale
of a preconstruction unit at Summer Cove on Siesta, a condominium. Summer Cove consists
(uc CTH
=of 45 units. The contract is covered by the Interstate Land Sales Full Disclosure Act (“ILSA’).
The contract was drafted solely by, or on behalf of, Snavely.
senker paid $283,050.00 as deposits, and $24,408.73 for upgrades to the unit, fora
total of $307,458.73, $141,525.00 of which remains in escrow with Kirk Pinkerton.
On June 22, 2007, Snavely sent Senker written notice of a closing date of July 16,
2007. On June 27, 2007, Senker provided written notice to rescind the contract and
demanding a return of the deposits.
Snavely intended to exempt itself from the provisions of ILSA pursuant to 15 U.S.C.
§1702(a)(2), by including in the contract a provision requiring Snavely to complete
construction of the unit within two years of execution.
ILSA is an anti-fraud consumer protection statute. As a general rule, it requires a
developer to make certain disclosures, called a property report, to prospective buyers about
the development. The report must be approved by HUD and provided to each prospective
buyer prior to the execution of a purchase agreement. A report was not provided.
ILSA provides for certain exemptions for developers to avoid the preparation and
approval of the report. There is an exemption under §1702(a)(2) (“the two year completion
exemption’) for transactions that involve “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.” In order to
qualify for the two year completion exemption, a developer must include in its agreement a
clause that unconditionally obligates the developer, in a non-illusory and unrestricted manner,
to complete construction of the residential unit within two years from the date the purchaser
signs the sales agreement. The agreement cannot provide a developer discretion as to non-performance. ILSA is to be construed liberally in favor of the public. Samara Development
Corp. v. Marlow, 556 So. 2d 1097 (Fla. 1990).
The Samara “unconditionally obligate” requirement is not viewed by federal courts ina
fashion so restrictive as to disallow all events that could occur to make timely performance
impossible. “...a contract ‘obligates’ completion of a condominium within two years when that
commitment to do so is real and not illusory.” Stein v. Paradigm Mirasol, LLC, 551 F. Supp.2d
1323 (M.D. Fla. 2008).
This Court is asked to examine two provisions of the contract.
The Two-Year Exemption
Paragraph 4(a) states:
4. Closing.
(a)... The unit...shall be completed not later than two (2) years from the
date Purchaser signs this Contract. However, the date for completion may
be extended by reason of delays incurred by circumstances beyond Seller's
control, such as acts of God, or other grounds cognizable in Florida
contract law such as impossibility or frustration of performance, including
without limitation, delays occasioned by rain, wind and lightning storms. It is
the intention of the parties that this sale qualify for the exemption provided
by 15 U.S.C. Section 1702(a)(2) and that nothing contained in this
Agreement shall be construed or so operate as to any obligations of Seller
or rights of Buyer in a manner which would render said exemption
inapplicable. Subject to the provisions of this paragraph, time of the
essence of this Agreement.
Harvey v. Lake Buena Vista Resort, LLC, 2008 WL 1843909 (M.D.Fla. April 22, 2008),
dealt with similar language and states:
Courts look to state contract law to determine whether a contract can be
construed as obligating the seller to complete construction within a period
of two years.
A provision in an ILSFDA-governed agreement which extends the
completion period for delays not qualifying under Florida's impossibility ofperformance principles renders the obligation to complete the condominium
within two years illusory.
A developer cannot have it both ways. Either it must list the small number
of acceptable defenses to timely completion that are narrowly-tailored
contract defenses recognized by Florida law and that fit within the
exemption, or if it enumerates a broad, all-encompassing list of defenses it
is not entitled to the exemption. A savings clause in general is designed to
protect the parties to a contract from changes in the law or the parties’
circumstances that occur after the contract has been entered into... The
savings clause in this case is no more than the Resort developer's attempt
to provide itself with an “escape hatch” in order to take advantage of the
ILSFDA exemption down the road, despite its failure to draft a Purchase
Agreement that actually complied with the ILSFDA in the first instance.
This Court adopts the analysis of Stein and Harvey. The Second District of Florida is in
the Federal Middle District. Deference will be given to the Middle District. The conditions
included in Snavely’s contract are broad enough to seriously undermine the obligation to
complete the condominium within two years. The conditions are not limited to delays which
constitute “impossibility of performance,” but also include delays which constitute “frustration
of performance.” The two year completion obligation is illusory.
Snavely also argues that, notwithstanding the breadth of conditions contained in the
two year exemption, a savings clause which indicates “... nothing contained in this Agreement
shall be construed or so operate as to any obligations of Seller or rights of Buyer in a manner
which would render said exemption inapplicable,” requires the court to uphold the Contract’s
two year exemption.
The Court disagrees, and adopts the reasoning in Jersey Palm-Gross, Inc. v. Paper,
658 So.2d 531 (Fla. 1995) as cited by Harvey. Harvey states:
...were the Court to accept the savings clause it would ‘undermine public
policy’ and defeat Congress's purpose in creating this consumer-protection
legislation and requirement that the exemptions be read narrowly. Giving
effect to the Resort's purported savings clause in this case would
4encourage other developers to include the broadest list of potential
all-encompassing excuses to extend completion dates beyond two years,
and simply tack on a savings clause to avoid losing the exemption in the
event it is challenged. Once some or most of the developer's broadly
enumerated defenses are found to be unacceptable by a court (necessarily
called on to interpret the language of the contract), the developer is still
rewarded by retaining the exemption and not having to comply with (or not
penalized for failing to comply with) the ILSFDA's requirements.
The Pre-Sale Contingency
Paragraph 15 of the instant contract states:
15. Conditions to Closing.
(a) Pre-Sale Requirement. If Seller has been unable to obtain purchase
contracts for at least sixty percent (60%) of the Units in the Condominium in
which the Unit is located within one hundred eighty (180) days . . . Seller»
may unilaterally terminate this Agreement by delivery of written notice to
Purchaser and upon delivery of such notice and refunding to Purchaser, all
Deposits actually submitted by Purchaser in accordance with the terms of
this Agreement, including any and all interest accrued thereon, Seller shall
have fulfilled all of Seller's obligations to Purchaser under this Agreement
and this Agreement shall automatically be terminated and be of no further
force and effect. (emphasis added).
This Court again adopts the reasoning of Harvey, which also states:
A unilateral right to cancel the contract based‘on a lack of sufficient sales
after the Purchase Agreement is signed is an illusory promise and is not an
‘unconditional obligation’ to perform the contract as required under the
ILSA. : .
Therefore, it is hereby
ORDERED AND ADJUDGED as follows:
1. Partial Summary Judgment on Count IV of the Second Amended Complaint is
entered in favor of Plaintiff.
2. Plaintiff, Richard C. Senker, Trustee of the Richard C. Senker and Patricia A.
Senker Land Trust, a Florida Land Trust, is hereby awarded judgment against Defendant,
5Snavely Siesta Associates, LLC, an Ohio Limited Liability Company, in the amount of all
money paid by him under the Contract, which is the first and second earnest money deposits
totaling the $283,050.00 and $24,408.73 for upgrades to the Unit, for a total of $307,458.73,
for which let execution issue.
3. Plaintiff is also entitled to recover interest, costs and reasonable attorney's fees.
The Court reserves jurisdiction to enter judgment in favor of Plaintiff against Defendant for
these items, and to enter further orders to provide Plaintiff full relief as the prevailing party in
this action.
4. Escrow Agent, Kirk Pinkerton, P.A., is ordered to disburse all funds remaining in
escrow under the Contract to Senker within 10 days of this Order, and to report to the Court
the amount of said disbursement.
DONE AND ORDERED in Chambers in Sarasota County, Florida, this 4" day of
September, 2008.
BOB McDONALD, CIRCUIT JUDGE
J se furnished to:
¢
v
a \ of
O
Sheryl A. Edwards, Esquire
1901 Morrill Street
Sarasota, Florida 34236
Scott Petersen, Esquire
50 Central Avenue, Suite 700
Sarasota, Florida 34236
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IN THE CIRCUIT COURT OF THE TWELFTH JUDICIAL CIRCUIT IN AND FOR SARASOTA COUNTY, FLORIDA RICHARD C. SENKER, Trustee of the Richard CASE NO. 2007-CA-008509-NC / C. Senker and Patricia A. Senker Land Trust, --a Florida Land Trust, ae ee a A | Plaintiff, 0) I } IN FFIcIA NL "f INSTRUMENT # 2008L20509 6 Pos vs. 2008 SEP 05 10:17 AM KAREN E. RUSHING SNAVELY SIESTA ASSOCIATES, LLC, CLERK OF THE CIRCUIT COURT an Ohio Limited Liability Company, SARASOTA COUNTY» FLORIDA SIVES Receipt#10985748 Defendant. PARTIAL SUMMARY JUDGMENT ON COUNT IV OF SECOND AMENDED COMPLAINT THIS MATTER came before the Court on August 27, 2008 on Plaintiffs, Richard C. Senker, Trustee of the Richard C. Senker and Patricia A. Senker Land Trust, a Florida Land Trust, (“Senker’) Motion for Partial Summary Judgment on Count IV of his Second Amended | Complaint against Defendant Snavely Siesta Associates, LLC, an Ohio Limited Liability Company (“Snavely”). The Court having considered arguments, materials pertinent to the issues, and the law (cases cited by the Court are for general propositions of law if not factually similar), and being otherwise duly and sufficiently advised in the premises, finds as follows: On July 18, 2005, Senker executed a contract with Snavely for the purchase and sale of a preconstruction unit at Summer Cove on Siesta, a condominium. Summer Cove consists (uc CTH =of 45 units. The contract is covered by the Interstate Land Sales Full Disclosure Act (“ILSA’). The contract was drafted solely by, or on behalf of, Snavely. senker paid $283,050.00 as deposits, and $24,408.73 for upgrades to the unit, fora total of $307,458.73, $141,525.00 of which remains in escrow with Kirk Pinkerton. On June 22, 2007, Snavely sent Senker written notice of a closing date of July 16, 2007. On June 27, 2007, Senker provided written notice to rescind the contract and demanding a return of the deposits. Snavely intended to exempt itself from the provisions of ILSA pursuant to 15 U.S.C. §1702(a)(2), by including in the contract a provision requiring Snavely to complete construction of the unit within two years of execution. ILSA is an anti-fraud consumer protection statute. As a general rule, it requires a developer to make certain disclosures, called a property report, to prospective buyers about the development. The report must be approved by HUD and provided to each prospective buyer prior to the execution of a purchase agreement. A report was not provided. ILSA provides for certain exemptions for developers to avoid the preparation and approval of the report. There is an exemption under §1702(a)(2) (“the two year completion exemption’) for transactions that involve “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.” In order to qualify for the two year completion exemption, a developer must include in its agreement a clause that unconditionally obligates the developer, in a non-illusory and unrestricted manner, to complete construction of the residential unit within two years from the date the purchaser signs the sales agreement. The agreement cannot provide a developer discretion as to non-performance. ILSA is to be construed liberally in favor of the public. Samara Development Corp. v. Marlow, 556 So. 2d 1097 (Fla. 1990). The Samara “unconditionally obligate” requirement is not viewed by federal courts ina fashion so restrictive as to disallow all events that could occur to make timely performance impossible. “...a contract ‘obligates’ completion of a condominium within two years when that commitment to do so is real and not illusory.” Stein v. Paradigm Mirasol, LLC, 551 F. Supp.2d 1323 (M.D. Fla. 2008). This Court is asked to examine two provisions of the contract. The Two-Year Exemption Paragraph 4(a) states: 4. Closing. (a)... The unit...shall be completed not later than two (2) years from the date Purchaser signs this Contract. However, the date for completion may be extended by reason of delays incurred by circumstances beyond Seller's control, such as acts of God, or other grounds cognizable in Florida contract law such as impossibility or frustration of performance, including without limitation, delays occasioned by rain, wind and lightning storms. It is the intention of the parties that this sale qualify for the exemption provided by 15 U.S.C. Section 1702(a)(2) and that nothing contained in this Agreement shall be construed or so operate as to any obligations of Seller or rights of Buyer in a manner which would render said exemption inapplicable. Subject to the provisions of this paragraph, time of the essence of this Agreement. Harvey v. Lake Buena Vista Resort, LLC, 2008 WL 1843909 (M.D.Fla. April 22, 2008), dealt with similar language and states: Courts look to state contract law to determine whether a contract can be construed as obligating the seller to complete construction within a period of two years. A provision in an ILSFDA-governed agreement which extends the completion period for delays not qualifying under Florida's impossibility ofperformance principles renders the obligation to complete the condominium within two years illusory. A developer cannot have it both ways. Either it must list the small number of acceptable defenses to timely completion that are narrowly-tailored contract defenses recognized by Florida law and that fit within the exemption, or if it enumerates a broad, all-encompassing list of defenses it is not entitled to the exemption. A savings clause in general is designed to protect the parties to a contract from changes in the law or the parties’ circumstances that occur after the contract has been entered into... The savings clause in this case is no more than the Resort developer's attempt to provide itself with an “escape hatch” in order to take advantage of the ILSFDA exemption down the road, despite its failure to draft a Purchase Agreement that actually complied with the ILSFDA in the first instance. This Court adopts the analysis of Stein and Harvey. The Second District of Florida is in the Federal Middle District. Deference will be given to the Middle District. The conditions included in Snavely’s contract are broad enough to seriously undermine the obligation to complete the condominium within two years. The conditions are not limited to delays which constitute “impossibility of performance,” but also include delays which constitute “frustration of performance.” The two year completion obligation is illusory. Snavely also argues that, notwithstanding the breadth of conditions contained in the two year exemption, a savings clause which indicates “... nothing contained in this Agreement shall be construed or so operate as to any obligations of Seller or rights of Buyer in a manner which would render said exemption inapplicable,” requires the court to uphold the Contract’s two year exemption. The Court disagrees, and adopts the reasoning in Jersey Palm-Gross, Inc. v. Paper, 658 So.2d 531 (Fla. 1995) as cited by Harvey. Harvey states: ...were the Court to accept the savings clause it would ‘undermine public policy’ and defeat Congress's purpose in creating this consumer-protection legislation and requirement that the exemptions be read narrowly. Giving effect to the Resort's purported savings clause in this case would 4encourage other developers to include the broadest list of potential all-encompassing excuses to extend completion dates beyond two years, and simply tack on a savings clause to avoid losing the exemption in the event it is challenged. Once some or most of the developer's broadly enumerated defenses are found to be unacceptable by a court (necessarily called on to interpret the language of the contract), the developer is still rewarded by retaining the exemption and not having to comply with (or not penalized for failing to comply with) the ILSFDA's requirements. The Pre-Sale Contingency Paragraph 15 of the instant contract states: 15. Conditions to Closing. (a) Pre-Sale Requirement. If Seller has been unable to obtain purchase contracts for at least sixty percent (60%) of the Units in the Condominium in which the Unit is located within one hundred eighty (180) days . . . Seller» may unilaterally terminate this Agreement by delivery of written notice to Purchaser and upon delivery of such notice and refunding to Purchaser, all Deposits actually submitted by Purchaser in accordance with the terms of this Agreement, including any and all interest accrued thereon, Seller shall have fulfilled all of Seller's obligations to Purchaser under this Agreement and this Agreement shall automatically be terminated and be of no further force and effect. (emphasis added). This Court again adopts the reasoning of Harvey, which also states: A unilateral right to cancel the contract based‘on a lack of sufficient sales after the Purchase Agreement is signed is an illusory promise and is not an ‘unconditional obligation’ to perform the contract as required under the ILSA. : . Therefore, it is hereby ORDERED AND ADJUDGED as follows: 1. Partial Summary Judgment on Count IV of the Second Amended Complaint is entered in favor of Plaintiff. 2. Plaintiff, Richard C. Senker, Trustee of the Richard C. Senker and Patricia A. Senker Land Trust, a Florida Land Trust, is hereby awarded judgment against Defendant, 5Snavely Siesta Associates, LLC, an Ohio Limited Liability Company, in the amount of all money paid by him under the Contract, which is the first and second earnest money deposits totaling the $283,050.00 and $24,408.73 for upgrades to the Unit, for a total of $307,458.73, for which let execution issue. 3. Plaintiff is also entitled to recover interest, costs and reasonable attorney's fees. The Court reserves jurisdiction to enter judgment in favor of Plaintiff against Defendant for these items, and to enter further orders to provide Plaintiff full relief as the prevailing party in this action. 4. Escrow Agent, Kirk Pinkerton, P.A., is ordered to disburse all funds remaining in escrow under the Contract to Senker within 10 days of this Order, and to report to the Court the amount of said disbursement. DONE AND ORDERED in Chambers in Sarasota County, Florida, this 4" day of September, 2008. BOB McDONALD, CIRCUIT JUDGE J se furnished to: ¢ v a \ of O Sheryl A. Edwards, Esquire 1901 Morrill Street Sarasota, Florida 34236 Scott Petersen, Esquire 50 Central Avenue, Suite 700 Sarasota, Florida 34236