Helene V. Galen v. Avenue of the Stars Associates LLC et al

Filing 29

ORDER by Judge Ronald S.W. Lew denying Plaintiff's Motion for Summary Judgment 11 in its entirety. With regard to the Defendant, the Court DENIES IN PART AND GRANTS IN PART Defendant's Motion for Summary Judgment 15 . The Court GRANTS Summary Judgment on the third cause of action for Rescission because Defendant meets the liquidated damages terms mandated under 15 U.S.C. § 1703(d)(3) by using the breach of contract language in Cal. Civ. Code § 1675. (lom)

Helene V. Galen v. Avenue of the Stars Associates LLC et al

Doc. 29

1 2 3 4 5 6 7 8 9 10 11 Helene V. Galen, as Trustee for the Louis J. Galen 12 Revocable Trust of 1983, Udt Dated May 23, 1983, 13 Plaintiff, 14 v. 15 16 Avenue of the Stars Associates, LLC, 17 18 19 Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CV 09-4738 RSWL (SHx) ORDER Re: Plaintiff's Motion for Summary Judgment [11] and Defendant's Motion for Summary Judgment [15] UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Plaintiff Helene V. Galen filed her Motion for

20 Summary Judgment [11] on July 1, 2010. Defendant Avenue 21 of the Stars Associates, LLC filed its Motion for 22 Summary Judgment [15] on July 26, 2010. Both matters 23 were originally set for hearing on August 23, 2010. 24 Having taken both matters under submission on August 25 20, 2010, and having reviewed all papers submitted 26 pertaining to these motions, the Court NOW FINDS AND 27 RULES AS FOLLOWS: 28 The Court hereby DENIES Plaintiff's Motion for
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1 Summary Judgment in its entirety. With regard to the 2 Defendant, the Court DENIES IN PART AND GRANTS IN PART 3 Defendant's Motion for Summary Judgment. 4 Summary judgment is appropriate when there is no Fed. R. Civ. 5 genuine issue of material fact and the moving party is 6 entitled to judgment as a matter of law. 7 P. 56(c). A genuine issue is one in which the evidence Anderson v. Liberty The evidence, and any Diaz v.

8 is such that a reasonable fact-finder could return a 9 verdict for the non-moving party. 10 Lobby, 477 U.S. 242, 248 (1986).

11 inferences based on underlying facts, must be viewed in 12 a light most favorable to the opposing party. 14 1985). 15 Plaintiff asserts four grounds for Summary Judgment 16 based on her Complaint: (1) regarding the Second Claim 17 for Rescission, Defendant allegedly violated the federal 18 Interstate Land Sales Full Disclosure Act (hereinafter, 19 "ILSA") by failing to provide Plaintiff with a valid 20 Property Report before she signed the Purchase and Sale 21 Agreement (hereinafter, "Agreement"); (2) regarding the 22 Third Claim for Rescission, Defendant allegedly violated 23 the ILSA by failing to include a required disclosure in 24 the Agreement; (3) regarding the Fourth Claim for 25 Rescission, Defendant allegedly violated the California 26 Subdivided Lands Act (hereinafter, "SLA") by failing to 27 provide a valid Property Report and by failing to secure 28 a signed Property Report Receipt before Plaintiff signed
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13 American Tel. & Tel., 752 F.2d 1356, 1358 n.1 (9th Cir.

1 the Agreement; and (4) regarding the Seventh Claim for 2 Declaratory Relief, Defendant's alleged violation of the 3 ILSA and the SLA entitles Plaintiff to the return of her 4 deposit, with interest. 5 6 1. Second Claim for Relief for Rescission The ILSA prohibits the The Court DENIES Summary Judgment for Plaintiff's

7 Second Claim for Rescission.

8 sale or lease of any lot unless a printed property 9 report "has been furnished to the purchaser or lessee in 10 advance of the signing of any contract or agreement for 11 sale or lease by the purchaser or lessee". 12 1703(a)(1)(B). 15 U.S.C. § Where the required property report "has

13 not been given to the purchaser or lessee in advance of 14 his or her signing such contract or agreement, such 15 contract or agreement may be revoked at the option of 16 the purchaser or lessee within two years from the date 17 of such signing . . ." 18 19 Summary Judgment. 21 party's case. 15 U.S.C. § 1703(c). Plaintiff fails to meet the burden of proof for Plaintiff, as the moving party, must

20 show an "absence of evidence" to support the non-moving Celotex v. Catrett, 477 U.S. 317, 325 22 (1986). Plaintiff argues that the binder she received on 23 March 25, 2008, could not have included the most current 24 Property Report, which is dated March 28, 2008 25 (hereinafter, "March Property Report"). These facts 26 fail to refute Defendant's assertions that its staff 27 sent a subsequent package of materials that included the 28 March Property Report before Plaintiff signed the
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1 Agreement. 2 Defendant also lacks evidence that proves it sent But Defendant, as 3 Plaintiff the March Property Report.

4 the non-moving party has gone beyond the pleadings and 5 designated specific facts showing that there is a 6 genuine issue for trial. See Celotex, 477 U.S. at 324. 7 In the instant case, the evidence demonstrates that a 8 genuine issue of fact remains such that a reasonable 9 fact-finder could return a verdict for the non-movant. 10 See Anderson, 477 U.S. at 248. 11 12 2. Third Claim for Relief for Rescission The ILSA gives the purchaser additional See 15 The Court DENIES Plaintiff's Third Claim for Relief

13 for Rescission.

14 grounds for revocation of a nonexempt contract or 15 agreement pursuant to 15 U.S.C. § 1703(d)(3). 16 U.S.C. § 1703(d)(3). Although Defendant undisputably

17 did not include the breach of contract provision under 18 15 U.S.C. § 1703(d), the section merely requires that 19 the Agreement "provide" for the terms as specified under 20 the section. 15 U.S.C. § 1703(d). In the Agreement 21 signed by Plaintiff, Defendant meets this requirement by 22 complying with Cal. Civ. Code § 1675. 23 Since both 15 U.S.C. § 1703(d) and Cal. Civ. Code § 24 1675 address the issue of how much of the buyer's 25 payment constitutes liquidated damages to the seller 26 should the buyer fail to complete the purchase of the 27 property, Defendant does not need to include both 28 statutory provisions in the Agreement.
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See 15 U.S.C. §

1 1703(d); Cal. Civ. Code § 1675.

Furthermore, as

2 California law mandates that "any contractual provision 3 which calls for disbursement or a charge against 4 Purchase Money based on Buyer's alleged failure to 5 complete the purchase of the subdivision . . . must 6 conform with Civil Code Sections 1675 . . .," Defendant 7 properly followed the more stringent requirements of 8 Cal. Civ. Code § 1675 in drafting the Agreement's 9 liquidated damages provision. 10 2791(c)(1) (emphasis added). 11 12 3. Fourth Claim for Relief for Rescission The Court also DENIES Plaintiff's Fourth Claim for Cal. Code of Regs. §

13 Rescission based on whether Defendant provided a valid 14 Property Report and secured a Property Report Receipt. 15 The SLA also requires a copy of the property report 16 be given to the prospective purchaser "prior to the 17 execution of a binding contract or agreement for the 18 sale or lease of any lot or parcel in a subdivision." 19 Cal. Bus. & Prof. Code § 11018.1. As stated above, 20 Plaintiff's evidence does not unequivocally demonstrate 21 that Defendant failed to provide her with a valid 22 Property Report prior to her signing the Agreement. 23 Thus, the Court cannot reach Summary Judgment because a 24 genuine issue of fact remains such that a reasonable 25 fact-finder could return a verdict for the non-movant. 26 See Anderson, 477 U.S. at 248. 27 Second, the California Code of Regulations require
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28 that a prospective purchaser "be given a copy of the

1 public report for which a receipt must be completed and 2 retained." Cal. Code Regs. tit. 1, § 2795.1. The use 3 of the term "prospective purchaser" in the Receipt's 4 terms does not establish that Defendant violated the 5 SLA. The Receipt clearly provides for situations such 6 as the one at hand, where a "prospective purchaser" has 7 signed a purchase and sale agreement but has yet to 8 close escrow. The Receipt's language acknowledges that 9 the Receipt's signatory may have already signed a 10 purchase and sale agreement based on a conditional 11 property report, and subsequently may be signing the 12 Receipt for a final property report. Thus, Defendant 13 did not violate the SLA by obtaining Plaintiff's 14 signature for the Receipt after Plaintiff signed the 15 Agreement. 16 While the Court finds that the use of the term 17 "prospective purchaser" in the Property Report Receipt's 18 language does not prove that the Receipt must be signed 19 before the purchaser signs a purchase and sale 20 agreement, genuine issues of material fact still exist 21 as to whether Defendant provided Plaintiff a valid 22 Property Report before she signed the Purchase and Sale 23 Agreement. 24 25 4. Seventh Claim for Declaratory Relief Accordingly, as the Court DENIES Summary Judgment

26 for Plaintiff's claims under the ILSA and the SLA, the 27 Court also DENIES Summary Judgment for Plaintiff's 28 Seventh Claim for Declaratory Relief.
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1

With regard to Defendant's Motion, Defendant

2 asserts six grounds for Summary Judgment: (1) As to 3 Plaintiff's claim for Damages and Rescission, Defendant 4 asserts that it is exempt from ILSA under the "100 Lot 5 Exemption" and, even if not exempt, that Plaintiff 6 cannot meet her burden of proving that Defendant 7 violated ILSA by failing to provide her with the most 8 current Property Report before she signed the Purchase 9 and Sale Agreement; (2) as to Plaintiff's claim for 10 Rescission under ILSA, Plaintiff cannot meet her burden 11 in proving that Defendant violated ILSA by failing to 12 include specific language in the Agreement's liquidated 13 damages clause; (3) as to Plaintiff's claim for 14 Rescission under SLA, the Act does not require that 15 Defendant provide the most current copy of the Property 16 Report and secure a signed Receipt for the Property 17 Report; (4) as to Plaintiff's claim for Unfair 18 Competition, Defendant complied with ILSA and SLA and 19 there is no statutory authority justifying such claim; 20 (5) as to Plaintiff's claim for Constructive Trust, 21 Defendant complied with ILSA and the SLA and there is no 22 grounds to grant restitution or injunctive relief; and 23 (6) as to Plaintiff's claim for declaratory relief, 24 Defendant did not violate ILSA or the SLA and there is 25 no basis by which Plaintiff can rescind the contract. 26 As an initial matter, the Court has determined that 27 the Defendant does not qualify for the "100 Lot 28 Exemption" and is therefore not exempt from the ILSA
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1 requirements. The policy behind ILSA is to protect 2 consumers and ensure that prior to purchasing certain 3 types of real estate, a buyer is apprised of the 4 information needed to make an informed decision. As 5 such, the Court finds that the applicability of the 6 exemption has to be contemporaneous with the sale of a 7 particular lot and not at some point after the signing 8 of the contract. 9 10 11 1. Plaintiff's First and Second Causes of Action for Damages and Rescission Under ISLA The Court DENIES Defendant's Motion for Summary

12 Judgment on the first and second causes of action for 13 Damages and Rescission for violations of the Interstate 14 Land Sales Full Disclosure Act. Genuine issues of 15 material fact still exist as to whether Defendant 16 violated the Interstate Land Sales Full Disclosure Act. 17 Based on the facts presented, the Court cannot determine 18 whether Plaintiff received the Property Report amended 19 on March 28, 2008 before she signed the Purchase and 20 Sale Agreement. 21 Additionally, the Court finds that a developer is 22 required to give a prospective buyer a copy of a 23 property report that is in effect prior to buyer's 24 execution of the purchase agreement. Therefore, it is 25 whether Plaintiff was in actual receipt of the March 28 26 Report as opposed to the December 17 Report that is 27 controlling on the issue of whether Defendant violated 28 ISLA.
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2. Plaintiff's Third Cause of Action for Rescission Under ISLA Regarding Liquidated Damages Clause With regard to Defendant's Motion for Summary

4 Judgment on the third cause of action for Rescission, 5 the Court GRANTS Summary Judgment because Defendant 6 meets the liquidated damages terms mandated under 15 7 U.S.C. § 1703(d)(3) by using the breach of contract 8 language in Cal. Civ. Code § 1675. 9 While Defendant undisputably did not include the 10 breach of contract provision under 15 U.S.C. § 1703(d), 11 the section merely requires that the Agreement "provide" 12 for the terms as specified under the section. 13 § 1703(d). 15 U.S.C. In the Agreement signed by Plaintiff,

14 Defendant meets this requirement by complying with Cal. 15 Civ. Code § 1675. 16 17 18 19 3. Plaintiff's Fourth Cause of Action for Rescission Under the California Subdivided Lands Act The Court DENIES Defendant's Motion for Summary

20 Judgment on the fourth cause of action for Rescission 21 under the California Subdivided Lands Act. While the 22 Court finds that the use of the term "prospective 23 purchaser" in the Property Report Receipt's language 24 does not prove that the Receipt must be signed before 25 the purchaser signs a purchase and sale agreement, 26 genuine issues of material fact still exist as to 27 whether Defendant provided Plaintiff a valid Property 28 Report before she signed the Purchase and Sale
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1 Agreement. 2 3 4 4. Plaintiff's Fifth Cause of Action for Unfair Competition The court DENIES Defendant's Motion for Summary

5 Judgment on the fifth cause of action for Unfair 6 Competition. Genuine issues of material fact still exist 7 as to whether Defendant failed to provide Plaintiff with 8 a valid Property Report before she signed the Purchase 9 and Sale Agreement, in violation of ILSA and the SLA. 10 11 12 5. Plaintiff's Sixth Cause of Action for Constructive Trust The court DENIES Defendant's Motion for Summary

13 Judgment on the sixth cause of action for Constructive 14 Trust. Genuine issues of material fact still exist as to 15 whether Defendant failed to provide Plaintiff with a 16 valid Property Report before she signed the Purchase and 17 Sale Agreement, in violation of ILSA and the SLA 18 19 20 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 28 ///
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6. Plaintiff's Seventh Cause of Action for Declaratory Relief Since the Court has DENIED Summary Judgment on six

21 out of the seven preceding claims under the ILSA and the

1 SLA, the Court also DENIES Summary Judgment on 2 Defendant's Claim for Declaratory Relief. 3 4 DATED: August 24,2010 5 IT IS SO ORDERED. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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HONORABLE RONALD S.W. LEW Senior, U.S. District Court Judge