Bertha Moseley HILLMAN; Toxey G. Collins; Joe Michael Mayo; William Thomas Cottom, Jr.; Numa L. Marquette, Jr.; Gail Marquette; James M. Warner; Constance M. Warner; Michael Ellis; Kelly Ellis; M. Ellis Family Holdings, L.L.C., Plaintiffs-Appellants, v. Emerson P. LOGA, III; Dennis Stieffel; Douglas R. Johnson, Defendants-Appellees.
No. 11-60868
United States Court of Appeals, Fifth Circuit
Sept. 28, 2012
299
V.
For the foregoing reasons, we VACATE the district court‘s order denying Opulent Life‘s motion for a preliminary injunction and REMAND for further proceedings consistent with this opinion.
Bertha Moseley Hillman (argued), Thibodaux, LA, pro se.
Floyd J. Logan, Logan & Purvis, Gulfport, MS, Nicholas Van Wiser (argued), Byrd & Wiser, Biloxi, MS, Defendants-Appellees.
Before KING, SMITH and HIGGINSON, Circuit Judges.
Plaintiffs-Appellants appeal the district court‘s grant of summary judgment in favor of Defendants-Appellees, based on the district court‘s finding that the 24-month
FACTS AND PROCEEDINGS
Plaintiffs-Appellants (“Purchasers“) each owned condominium units at the Village at Henderson Point (the “Village“) located in Pass Christian, Mississippi. Hurricane Katrina destroyed the condominium complex in August 2005. In early 2007, Purchasers retained Lacote, LLC (“Lacote“) to rebuild the complex in the same location. Lacote was made up of three members, Emerson P. Loga, III (“Loga“) and Dennis Stieffel (“Stieffel“), and Douglas Johnson (“Johnson“).2
In furtherance of the plan to develop and construct the new condominium complex, Lacote acquired the Village property from the Purchasers. The purchase was financed through Trustmark National Bank (“Trustmark“), which received a first position lien on the property and committed to provide construction financing for the project.
Prior to construction, Purchasers executed Purchase Agreements and made deposits with Lacote for the purchase of individual units once the complex was completed. The Purchase Agreements stipulated that construction of the units would be completed within two years of the execution of the Agreements.
Construction began in January 2008, but Lacote did not have adequate funding and stopped construction in June of that year, when the project was only 35% complete.3 Lacote thus obtained a second construction loan from SI Realty Enterprises, Inc. (“SI Realty“) in the amount of $1.5 million. SI Realty secured its loan with a second position lien through a deed of trust against the property.
Trustmark allegedly backed out of its commitment to finance the project and Lacote thereafter could not make its loan payments to SI Realty. SI Realty purchased Trustmark‘s first lien and foreclosed on the property in January 2009. Lacote filed for, and has been discharged from, bankruptcy.
Purchasers filed the instant lawsuit in May 2010 alleging that Loga, Stieffel, and Johnson, as individual members of Lacote, violated the anti-fraud provisions of the ILSA,
STANDARD OF REVIEW
This court reviews “a district court‘s grant of summary judgment de novo, applying the same standards as the district court.” Noble Energy Inc. v. Bituminous Cas. Co., 529 F.3d 642, 645 (5th Cir.2008). Summary judgment is thus proper when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
The district court correctly stated that interpretation of the ILSA is governed by federal law, see Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 97, 111 S.Ct. 1711, 114 L.Ed.2d 152 (1991), and that state law (in this case, the law of Mississippi) governs the interpretation of the Purchase Agreements. ACS Constr. Co. of Miss. v. CGU, 332 F.3d 885, 888 (5th Cir.2003).
DISCUSSION
The district court ruled that the Purchase Agreements are exempt from the ILSA because the language imposing a 24-month construction term requirement brings the agreements within the ILSA‘s two-year building exemption.5 The two-year building exemption is found in
(a) Sale or lease of lots generally
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 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 ....
COMPLETION DATE AND CONSTRUCTION.
a. Notwithstanding any other provision of this Agreement, construction of the Unit shall be completed on or before twenty-four (24) months or less from the date of execution of this Purchase Agreement OR a Certificate of Occupancy has been issued by the relevant building authority, whichever is sooner, provided, however, that SELLER shall not be responsible for delays caused by circumstances recognized by Mississippi
law to constitute impossibility of performance, such as war, strikes, insurrection, Acts of God, or unanticipated shortage of building materials.
This language from the Purchase Agreements, on its face, obligates the Seller (in this case, Lacote) to complete the building of the Village within 24 months, as contemplated in the exemption articulated in
Appellants, however, contend that the 24-month building requirement included in the Purchase Agreements is illusory because Appellants’ abilities to seek damage and specific performance remedies are limited and, therefore, the Purchase Agreements remain subject to the provisions of the ILSA. This court has not yet set forth the exact parameters of the two-year exemption under
Under Mississippi law, a contract obligation is illusory if the words of the agreement “‘do not purport to put any limitation on the freedom of the alleged promisor, but leave his future action subject to his own future will, just as it would have been had he said no words at all.‘” Marshall Durbin Food Corp. v. Baker, 909 So.2d 1267, 1275 (Miss.Ct.App.2005) (quoting Krebs ex rel. Krebs v. Strange, 419 So.2d 178, 182-83 (Miss.1982)). “Such an illusory promise is neither enforceable against the one making it, nor is it operative as a consideration for a return promise.” Id.
Mississippi law does not provide much guidance on whether creation of a legal obligation requires both damages and also specific performance as available remedies. Notably, the HUD Guidelines, which discuss what constitutes an “obligation” for the purpose of
[C]ontracts that directly or indirectly waive the buyer‘s right to specific performance are treated as lacking a realistic obligation to construct. HUD‘s position is not that a right to specific
performance of construction must be expressed in the contract, but that any such right that purchasers have must not be negated. For example, a contract that provides for a refund or a damage action as the buyer‘s sole remedy would not be acceptable.
Supp. Info. to Part 1710: Guidelines for Exemptions Available Under the ILSA (hereafter, “HUD Gdl. Supp. to Pt. 1710“).7 This court has stated that while the HUD Guidelines “are entitled to a degree of deference, we consider them only to the ‘extent that those interpretations have the power to persuade[.]‘” Nickell, 636 F.3d at 755 (quoting Christensen v. Harris Cnty., 529 U.S. 576, 587, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000)) (internal quotation marks omitted). The HUD Guidelines are unambiguous, and no federal court has held to the contrary, that an obligation for the purpose of
Although the district court‘s Memorandum and Opinion and Order cites five provisions of the Purchase Agreements that the district court considers relevant to the question of whether the obligation to build within two years is illusory, Appellants limit their argument to only two of these provisions. The first of these provisions is the “Default” provision, found under Section 14 of the Purchase Agreements. The language in the “Default” provision, “PURCHASER shall be entitled to the refund of his downpayment as well as any other monies he may have advanced SELLER” in the event of Seller‘s default for any reason, does not specifically limit Appellants’ available remedies under the Purchase Agreements. Instead, the language “shall be entitled to” gives Purchasers the option to seek a refund remedy.10
Mississippi law emphasizes the importance
The second provision relied upon by Appellants in arguing that the Purchase Agreements limited their ability to seek a remedy is the “Down Payment” provision, found in Section 3 of the Purchase Agreements, which states in relevant part:
a. CONVEYANCE OF UNDIVIDED INTEREST TO PURCHASER: As partial consideration for monies advanced to SELLER by PURCHASER via down payments and/or Reservation Deposits (all of which are being considered partial payments in furtherance of this Agreement), after Seller acquires subject real property upon which the Village on the Beach condominium regime will be built, Seller will convey to Purchaser his predetermined undivided interest in the common areas in the condominium development which Purchaser will hold subject to any and all loans under which the property as a whole may be collateralized. All parties acknowledge that, if for any reason, this Purchase Agreement should not be consummated by a Sale/Purchase closing within the time contemplated by this Agreement, Lacote, LLC will refund all monies (payments) deposited by Purchaser wherein Purchaser will relinquish and convey their undivided interest in subject property to Seller.
Appellants contend, “[t]his clause requires Purchasers to relinquish and convey their undivided interest in the Village property to Seller in lieu of specific performance and limit[s] Purchasers’ alleged remedies to refund of deposits.”
We agree that the “will refund” and “will relinquish” language mandates the fulfillment of such requirements by the parties in the event that the Purchase Agreement is not “consummated by a Sale/Purchase closing ....” However, the “Down Payment” provision discusses conveying to the Purchaser “his predetermined undivided interest in the common areas in the condominium development” in the sentence immediately preceding the sentence requiring that, “Purchaser will relinquish and convey their undivided interest in subject property to Seller.” Therefore, the “undivided interest in subject property” logically refers to the “undivided interest in the common areas” that are the subject of this particular “Down Payment” provision. Appellants present no reason why “undivided interest in subject property” should instead be interpreted as referring to Purchasers’ interest in their specific, bargained for condominium units. More importantly, nothing in the “Down Payment” provision specifically negates Appellants’ right to pursue damages or specific performance, and, as we previously described, Mississippi law looks to specific language negating a party‘s ability to sue for damages or specific performance. See Osborne, 549 So.2d at 1339.
Finally, Appellants argue that the Purchase Agreements are illusory because their interest in the property was subordinate to third parties and Loga and Stieffel never had the capital to return Appellants’ deposits. We do not dispute that this was a bad deal for Appellants. However, even if the likelihood of Purchasers‘s getting certain remedies was less likely under this Agreement and the particular circumstances surrounding it, the terms of the Purchase Agreements did not nullify Lacote‘s obligation to build by negating
CONCLUSION
For the reasons discussed above, we AFFIRM the district court‘s grant of summary judgment in favor of Defendants-Appellees Loga and Stieffel.
HIGGINSON, Circuit Judge
In re Amy UNKNOWN, Petitioner. United States of America, Plaintiff-Appellee, v. Doyle Randall Paroline, Defendant-Appellee, v. Amy Unknown, Movant-Appellant. United States of America, Plaintiff-Appellee, v. Michael Wright, Defendant-Appellant.
Nos. 09-41238, 09-41254 and 09-31215
United States Court of Appeals, Fifth Circuit
Oct. 1, 2012