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Nu-Chan, LLC v. 20 Pine Street LLC

September 30, 2010

NU-CHAN, LLC, PLAINTIFF,
v.
20 PINE STREET LLC, DEFENDANT.



The opinion of the court was delivered by: Honorable Paul A. Crotty, United States District Judge

ORDER

Plaintiffs Nu-Chan, LLC ("Nu-Chan") and Pei-Ching Chiu ("Chiu") (together, "Plaintiffs") bring actions against Defendant 20 Pine Street LLC ("20 Pine" or "Defendant") to rescind their respective condominium purchase agreements and have their deposits returned. Plaintiffs move for summary judgment, contending that they have a right to such relief because Defendant failed to comply with the requirements of the Interstate Land Sales Full Disclosure Act, 15 U.S.C. § 1701 et. seq. ("ILSFDA" or the "Act"). Defendant also moves for summary judgment, contending that (1) ILSFDA does not apply to condominiums; (2) even if ILSFDA does apply to condominiums, the condominiums at issue are exempt under the "improved lot exemption"; and (3) even if the condominiums are not exempt from ILSFDA, Plaintiffs claims are time-barred. For the following reasons, Plaintiff's motion for summary judgment is DENIED, and Defendant's motion for summary judgment is GRANTED IN PART and DENIED IN PART.

BACKGROUND

The 20 Pine Street Condominium, located in lower Manhattan, consists of over 400 residential units, which Defendant marketed as part of an offering plan while the building was being converted from an office building to a residential property. (Def. 56.1 Stmt. ¶¶ 1, 4; Pl. 56.1 Resp. ¶¶ 1, 4.) On January 20, 2006, Michael Nucatola and 20 Pine entered into an agreement under which Nucatola would purchase Unit No. 411 for $670,000. (Fleishman Aff., Ex. E.) Nucatola later assigned his rights under the purchase agreement to Nu-Chan, an LLC in which he and a business partner, Jeffrey Chan, were the sole members. (Def. 56.1 Stmt. ¶¶ 41-- 46; Pl. 56.1 Resp. ¶¶ 41--46.) On June 19, 2006, Chiu entered into a purchase agreement with 20 Pine to purchase Unit 605 for $925,000. (Fleishman Aff., Ex. E.) In total, Chiu paid 20 Pine $138,750 in deposits on Unit 605, while Nucatola paid $100,500 in deposits on his unit. (Fleishman Aff. Ex. D, E.)*fn1

In early 2009, both Nu-Chan and Chiu sent setters to Defendant, demanding rescission of their respective purchase agreements, claiming that they had such a right under § 1703(c) of ILSFDA because Defendant had not provided each plaintiff with a property report pursuant to the statute. (Fleishman Aff, Ex. I, J.) Defendant rejected these demands and Plaintiffs subsequently brought the instant lawsuits.

LEGAL STANDARDS

A. Summary Judgment Standard

Summary judgment is appropriate where the record demonstrates that "there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). A fact is material if it "might affect the outcome of the suit under governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The moving party bears the initial burden of producing evidence on each material element of its claim or defense demonstrating that it is entitled to relief. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The evidence on each material element must be sufficient to entitle the movant to relief as a matter of law. Vt. Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 244 (2d Cir. 2004). Once the moving party has made an initial showing that no genuine issue of material fact remains, the nonmoving party may not refute this showing solely by means of "[c]onclusory allegations, conjecture, and speculation," Niagara Mohawk Power Corp. v. Jones Chem., Inc., 315 F.3d 171, 175 (2d Cir. 2003) (internal citations and quotations omitted), but must instead present specific evidence in support of its contention that there is a genuine dispute as to material facts. Fed. R. Civ. P. 56(e). The Court resolves all ambiguities and draws all factual inferences in favor of the non-movant, but "only if there is a 'genuine' dispute as to those facts." Scott v. Harris, 550 U.S. 372, 380 (2007) (citing Fed. R. Civ. P. 56(c)).

The same standard of review applies when the court is faced with cross-motions for summary judgment. Morales v. Quintel Entm't, Inc., 249 F.3d 115, 121 (2d Cir. 2001). Each party's motion must be reviewed on its own merits, and the Court must draw all reasonable inferences against the party whose motion is under consideration. Id.

B. ILSFDA

Congress passed ILSFDA in order "to protect purchasers from unscrupulous sales of undeveloped home sites, frequently involving out-of-state sales of land purportedly suitable for development, but actually under water or useful only for grazing." Beauford v. Helmsley, 740 F. Supp. 201, 209 (S.D.N.Y. 1990) (quoting Winter v. Hollingsworth Properties, 777 F.2d 1444, 1447 (11th Cir. 1985)). While the target appears to have been sales of new land, "Congress made the statute applicable to all lots." An v. Leviev Fulton Club, LLC, No. 09 cv 1937, 2010 WL 3291402, *1 (S.D.N.Y. August 10, 2010).

Under § 1703(c) of ILSFDA, sellers of over 100 lots of otherwise non-exempt real property must provide purchasers with a property report prior to the signing of any purchase agreement. 15 U.S.C. § 1702-1703; see Winter, 777 F.2d at 1447-48. If the seller does not comply with this requirement, and the transaction is not exempt from coverage by the Act under § 1702, the buyer has an automatic right, within two years of signing the agreement, to rescind the purchase agreement and a return of the deposit. 15 U.S.C. § 1703(c). ILSFDA requires the seller to provide, in the purchase agreement, written notice of the aforementioned automatic rescission right. Id. In addition, a plaintiff may bring an action under ILSFDA for damages or equitable relief to enforce rights under § 1703. 15 U.S.C. § 1709(a)-(b).

ILSFDA has multiple time limitation elements. First, as stated above, a buyer must demand rescission under § 1703(c) within two years of the date the parties signed the agreement. In addition, however, there is a general three year statute of limitations that applies to all claims made under the statute. 15 U.S.C. § 1711.

There are several kinds of transactions that are exempt from the ILSFDA requirements. 15 U.S.C. § 1702(a)-(b). At issue here is the "improved lot" exemption, which states that "the sale or lease of any improved land on which there is a residential, commercial, condominium, or industrial building, or 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" is exempt from the Act's requirements. 15 U.S.C. § 1702(a)(2).

ANALYSIS

A. ILSFDA Applies to the Condominium ...


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