This summary also appears under Contracts
Issues: Contract dispute surrounding the purchase of a condo unit; Whether the district court correctly interpreted provisions of the Interstate Land Sales Full Disclosure Act (ILSFDA) (15 USC § 1701 et seq.) under which the plaintiffs brought an action to rescind their purchase agreement; Jones v. Muskegon Cnty.; Exercise of supplemental jurisdiction; Gamel v. City of Cincinnati; Whether plaintiffs' rescission claim under § 1703(c), was untimely; Effect of defendant-Bridgewater's failure to include notice of their right to rescind in the purchase agreement; Winter v. Hollingsworth Props., Inc. (11th Cir.); § 1703(a)(1)(B); §§ 1709(a) and (b); § 1711; Jankus v. Edge Investors, L.P. (SD FL) (Jankus I and II); § 1711(b); Taylor v. Holiday Isle, LLC (SD AL); Giving effect to every clause and word in a statute; American Civil Liberties Union v. National Sec. Agency; Whether the district court properly dismissed the plaintiffs' entire ILSFDA claim; Whether the district court should have analyzed their entitlement to equitable relief under § 1709; Gentry v. Harborage Cottages-Stuart, LLLP (11th Circuit); Whether the plaintiffs adequately proved their entitlement to equitable rescission; Damages; The "election of remedies" affirmative defense; Bagwell v. Susman; Guy James Constr. Co. v. Trinity Indus., Inc. (5th Cir.); Kuhl v. Hayes (10th Cir.); Waiver; Whether there were allegations pleaded and proof offered that Bridgewater's ILSFDA violations caused the plaintiffs' damages; Dismissal of plaintiffs' Michigan Condo Act claim and Bridgewater's cross-claim for breach of contract; 28 USC §§ 1367(a) and (c)(3); Campanella v. Commerce Exch. Bank; Supplemental jurisdiction; § 1367(c); Whether the district court properly awarded Bridgewater the plaintiffs' cash deposit
Court: U.S. Court of Appeals Sixth Circuit
Case Name: Veneklase v. Bridgewater Condos, L.C.
e-Journal Number: 50838
Judge(s): Gibbons, Clay, and White
In an issue of first impression, the court adopted the construction outlined in Holiday Isle, which gives effect to both § 1703(c)'s two-year limit and § 1711's three-year statute of limitations. The court held that a purchaser or lessee must comply with both § 1703(c)'s two-year limit for exercising the right of rescission and § 1711(b)'s three-year limit for filing suit based on the seller's refusal to honor the buyer's rescission. Thus, the court concluded, inter alia, that the district court properly ruled that the plaintiffs' claim for rescission under §1703(c) was untimely, where it was exercised more than two years after the date on which the purchase agreement was signed. However, the court also held that equitable rescission is available as a remedy under § 1709 even when the buyer did not timely rescind the purchase agreement under § 1703, and remanded the case for the district court to determine whether plaintiffs were entitled to equitable rescission under §§ 1709(a) and (b). The plaintiffs entered into an agreement with defendant-Bridgewater for the purchase of unit 79 in a condo project. They argued that the district court incorrectly interpreted provisions of the ILSFDA under which they brought an action to rescind their purchase agreement. Plaintiffs claimed that Bridgewater's failure to include notice of their right to rescind in the purchase agreement extended the period during which they could rescind under § 1703(c) until two years after the disclosure was correctly made. They contended that since the disclosure was never made, they timely rescinded the purchase agreement in 3/09. Bridgewater urged the court to endorse the district court's interpretation - that ILSFDA § 1703(c) allows a purchaser to rescind only within two years of signing a purchase agreement and a purchaser has an additional third year within which to bring suit, consistent with § 1711, if the developer or seller refuses to honor the rescission. Bridgewater argued that the statutory two-year period runs from the date the purchase agreement is signed, regardless of whether or not the agreement contained a recital of the purchaser's right to rescind within two years, as required by § 1703(c). The court found the analysis of Holiday Isle persuasive. By its plain language, "§ 1703(c) allows a buyer who is not provided with the required property report two years from the date of signing within which to rescind the agreement." The court held that nothing in § 1703(c)'s language indicates that a developer's failure to provide the required property report "obviates, tolls or extends the two-year deadline for rescission." Plaintiffs' proposed construction - that Bridgewater's failure to include notice of their right to rescind in the purchase agreement extends the period in which they could rescind under § 1703(c) until two years after the disclosure was correctly made - would not give effect to the clause of § 1703(c) establishing a two-year window from the date of signing within which the buyer must exercise the rescission right. Such a construction would contravene the principle that the courts are "required to give effect, if possible, to every clause and word of a statute." Plaintiffs also argued that the district court erred in dismissing their entire ILSFDA claim without considering their entitlement to equitable rescission under § 1709. The court concluded that the "plain language of ILSFDA §§ 1709(a) and (b) allow the district court to award any equitable relief it deems appropriate based on plaintiff's proof - not any equitable relief save rescission." Affirmed in part, reversed in part, and remanded.
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