# Opposition Brief — N & C Properties v. Pritchard

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1988
- **Citation:** 488 U.S. 856

## Text

@
No. 88-231

JGREPH F. SPANIOL, JR,
CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1988

N & C Properties; NepDA, INc. OF DESTIN;
AND CHANCELLOR LAND Co., INC.,

Petitioners,
VS.

CHARLES D. PRITCHARD, ef ai.,
Respondents.

On Writ of Certiorari to the
Supreme Court of The United States

BRIEF IN OPPOSITION
TO WRIT OF CERTIORARI

JOHN R. BENN

425 North Court Street
Florence, Alabama 35630
(205) 764-4011

Attorney for Respondents

St. Louis Law Printing Co.,Inc., 13305 Manchester Road 63131 314-231-4477

es

ey

QUESTIONS PRESENTED FOR REVIEW

1. Whether the Interstate Land Sales Full Disclosure Act (IL-
SA) applies to condominium sales.

2. Whether the Alabama state courts correctly denied the ap-
plication of the 100 lot exemption (15 U.S.C. 1702(b)(1)) under
the facts of this case.

ill

TABLE OF CONTENTS
Page
rs Colas res ge euadesdceancdececes i
sks s cekesewdbsekseeedecsas cc's V
Statutory and Regulatory Provisions Involved ........ l
I ok vod ccc scevvccesesceneseess 2
Summary of the Argument ................c0c0cc00. 4
Argument
I. The Interstate Land Sales full Disclosure Act
(ILSA) applies to condominium sales ....... 5
ee IE sobs cc cccedccdsenece 5
B. Statutory Construction ................ Y
C. Federal and State Caselaw.............. 12
II. The Alabama state courts correctly denied the
application of the 100 lot exemption under the
i so obese un eeen bach o0ess 0 13

ES a a a hee 18

iv

Appendix
Statutory Provisions
RS BK. THD 0 ccs ccdnavccecdencetanes
Agency Regulations
yi ie. Fy, Rf, 7) ere err rrr
DA CPR 1700.5 CIGST) «wo vase ccaccccccenees
Regulatory Announcements

38 Fed. Reg. 23,866 (1973) .............45-

39 Fed. Reg. 7824 (1974) ............0-20e

A-l

A-l
A-l

A-2
A-3

TABLE OF AUTHORITIES

Page
Amer. Paper Inst. v. Amer. Power Serv. Corp., 461
OR rer re ree Teer re eee 10
Appalachian Inc. v. Olson, 468 So.2d 266, (Fla. App.
ps SL rr ryt Fe re eer re eer 11,13
Berzon v. Oriole Homes Corp., 497 So.2d 670 (Fla.
SG SE ood 4 cee keane eka eee seca 12
Dunaway v. Lewis, 554 P.2d 110 (Okla. Ct. App.
UE chnav5 esc enads PERER as eRe bee caek es 15,16
Eaton v. Dorchester Development, Inc., 692 F.2d 727
CC I A ie ccckceavisscdbubnadaaeweur 12,14,15
EEOC v. Commercial Office Products Co., ____ U.S.
init es EE S's Ra as is Hea 10
EPA v. National Crushed Stone Ass’n., 449 U.S. 64
COREE 8 4s. c.6. cake gah eau wat eked eosateders 10
Finst Dev. Inc. v. Bahaor, 449 So.2d 292 (Fla. App. 3
hs DE a ihn dis 000i ed itenbnancdiecet ae 13
Flint Ridge Dev. Co. v. Scenic Rivers Assn’n of Okla.,
as: CHEE bis doh dheecksceteeeeeneee 5
Grove Towers Inc. v. Lopez, 467 So.2d 358 (Fla. App. 3
WR, TERN v nankcnscnceeddscanadeeeuaeeeuess 13,15
Inversions Romar S.A. v. Jockey Club Phase III Ltd.,
No. 82-0695 CIV JE (S.D. Fla. September 18,
WN nb chs CA e0sae 06s bawends eee 12
K Mart v. Cartier, Inc., U.S. ___, 108 S.Ct.
ne EN ca 5 aw be eds babes kaaeta eens 10
Lorilland Inc. v. Pons, 434 U.S. 575 (1978) ........... 11

vi

Marco Bay Associates v. Vandewalle, 472 So.2d 472

(Pia. Age. 2a. IDES) occcccsccccssvcnccccces 13
N & C Properties v. Pritchard, 525 So.2d 1346 (Ala.

REE oud bo cubededcsaskdeend40sbkeedansuures 3
Mosher v. Southridge Associates, Inc., 552 F.Supp.

SIG CRe A OO Ee aie tdnyscsdeccsasdasatuces 12
Nargiz v. Henlopen Developers, 380 A.2d 1361 (Del.

BOTT vncadddacccscecssdebenosesceveedbiinases §,11,13
Power Reactor Dev. Co. v. International Union of

electricians, 267 U.S. 396 (1961) ................ 10
Schatz v. Jocky Club Phase III Ltd., 604 F.Supp. 537

CRAM: Fels Ge 6 bab beeo0daweeseseesdniednaaes 11,12
Star Island Associates v. Lichter, 473 So.2d 791 (Fla.

Page, Bs TSE soc cccnccscavectescssasveces 12
Udall v. Tallman, 380 U.S. 1 (1965). ..........2e200e. Z)

Winter v. Hollingsworth Properties, Inc., 777 F.2d 1444
1.3 Se reprrrrrrer ry Try rr. 10,11,12

Federal Regulations:
pote, fo, errr rrrrrr rrr y rrr l
rote. Foy, fi SPP errrrrrrrrrrrr rT err rrr ry
rie, § a) fT. errr rrr rere

Co NCD

Oe ID 0.06 600d0 disco daceseutenens
Federal Statutes:

15 U.S.C. §1702(a)(2) as amended by P.L. 95-557,
Sy GE b wk dob bd ceeaes ue bncaeeteesetetises 8

scene eneeneeienensuniiiie

Vii

Other:
re ED 664 b3:460000cdsbecneonesnus 2,8,10
I Ss ictcatoscenassacbacnanns 2
Gs EIU bb bbc cccccadcacdecccdaces 2
ISA Am.Jur. 2d, Condominiums 20 ................. 7
Rohan and Reskin, Condominium Law and Practice
(Matthew Bender 1976) 18A.02................. 7
“Condominium Regulation: Beyond Regulation,’’ 123
pT CE cei insdc cubes batepaupesacs 7
Conf. Rep. No. 1785, 90th Cong., 2d Sess. (1968)... ... 5

Housing and Community Development Amendments
of 1978, Report of the Committee on Banking,
Housing and Urban Affairs, United States (Report
Pe Dheis addds eee se keshsscaeese ime 8

OILSR Exemption Advisory Opinion, No. 1701.1(k)
SE 6 6c pebessapndahanededeess 6

Public Law 95-557, Summary of the Act, Joint Comm-
EE oo pencwascekeasndnseaeawe 8

No. 88-231
IN THE

Supreme Court of the United States

OcTOBER TERM, 1988

N & C Properties; Nepa, Inc. Or Destin;
AND CHANCELLOR LAND Co., INC.,

Petitioners,
Vs.

CHARLES D. PRITCHARD, ef ai.,
Respondents.

On Writ of Certiorari to the
Supreme Court of The United States

BRIEF IN OPPOSITION
TO WRIT OF CERTIORARI

STATUTES AND REGULATIONS INVOLVED

In addition to the provision cited in the Petition for Writ of
Certiorari and Appendix thereto, the following authority is ger-
mane to the resolution of this case:

24 C.F.R. § 1710.1 Definitions

**Lot’’ means any portion, piece, division, unit, or undivided
interest in land located in any state or foreign country if the in-
terest includes the right to the exclusive use of a specific portion
of the land.

pe

24 C.F.R. § 1710.5 Statutory Exemptions From Provisions of
This Chapter

The requirements of the Act do not apply to —

(a) The sale or lease of lots in a subdivision containing
fewer than 25 lots;

(b) The sale or lease of any improved land on which
there is a residential, commercial, condominium, or in-
dustrial building, or the sale or lease of land under a con-
tract obligating the seller or lessor to erect such a building
thereon within a period of two years. In the case of con-
dominium or multiunit construction, a presale clause con-
ditioning the sale of a unit on certain percentage of sales of
other units is permissible if it is legally binding on the par-
ties and it is for a period not to exceed 180 days. However,
the 180-day provision cannot extend the two-year period
for performance. The permissible 180 days is calculated
from the date the first purchaser signs a sales contract in
the project or, if a phased project, from the date the first
purchaser signs the first sales contract in each phase.

Respondents have also set out in the Appendix to this Brief the
pertinent regulatory announcements covering the issues in this
appeal. They are 38 Fed. Reg. 23,866 (1973); 39 Fed. Reg. 7824
(1974); and 44 Fed. Reg. 24,010 (1979).

STATEMENT OF THE CASE

In the interest of brevity, Respondents will not submit a
separate statement of the case. Respondents do wish to clarify
one particular point. In raising the Second Question, Peti-
tioners focus on the application of the ‘‘common promotional
plan’’ aspect of Section 1701(4). The Alabama Supreme Court
in reviewing the trial court decision was essentially reviewing a
factual determination made by a lower court. The Alabama
Supreme Court noted numerous factual aspects of the appellate
record which supported the lower court decision. Among them
were:

<<
Py eee aa *
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~

(1) That Neda, Inc., was formed to promote and sell
units in both Phase I and Phase II; (2) The project was
advertised, represented, and marketed as a two-phase pro-
ject consisting of two individual towers adjoining each
other, Phase I containing 55 units and Phase II containing
46 units; and (3) The project was advertised and intended
by the owners to be a two-phase project containing over
100 units. The investors offered the sworn testimony of
Authur Hill, president of Gulf South Corridor Properties,
and Winston Biggs, president of Chancellor Land Com-
pany, Inc., in support of their claim during the hearing on
March 20, 1986. The testimony of both men was that the
development was advertised, represented, and marketed as
a two-phase project containing two towers. The towers
were to be adjacent to one another, sharing a common lob-
by and beach front. Mr. Biggs testified that the Johnsons
were promised the opportunity to trade their Phase I unit
for a nicer unit in Phase II when it was completed.

A prospectus covering the development was, however,
prepared by the developers, and it was admitted into
evidence at the March 20 hearing. It was denominated
‘*East Pass Towers Condominium Declaration,’’ with the
cover depicting twin towers on the Destin coast. Phase I of
the development was to be completed by June 1, 1992. The
maximum number of units in the development was to be
101 ‘‘if, in the sole discretion of the developer, Phase II is
built.’”” The prospectus also said, ‘‘The developer has
reserved the right to construct additional apartment
buildings . . . as part of this condominium at any time
prior to June 1, 2002... . The Additional units to be con-
structed will be 46 in number and would be contained in an
additional apartment building.’’ Advertising brouchures
admitted into evidence at the hearing also depicted twin
towers jointed by a common lobby.

N & C Properties v. Pritchard, 525 So.2d 1346, 1349 (Ala.
1988).

a

SUMMARY OF ARGUMENT

1. This case involves the interpretation of the term ‘“‘lots’’ as
defined within the Interstate Land Sales Full Disclosure Act (IL-
SA). From the inception of this legislation in 1968, the
legislative history clearly evidenced an intent that ILSA apply to
the sales of condominium units. The legislative history was con-
sistent with both the statutory interpretation given to this term
by the agency charged with the statute’s enforcement as well as
Congressional acceptance of the coverage of condominiums
when the statute was amended several years later implementing
an exception to the regulatory scheme. The decision of the
Alabama Supreme Court to apply the statute to the sale of con-
dominium units was also consistent with a chorus of federal and
state decisions confirming this result. Against this background
the Petition lacks the substantial federal question necessary to
justify review by this Court.

The fact that the Alabama Supreme Court reviewed a lower
court application of the ‘‘common promotional plan’’ does not
yield the conclusion that the decision was ‘‘inconsistent’’ with
the other authorities. The Alabama Supreme Court was not er-
roneous in its conclusion that this was a factual issue. The Ap-
pellate Record amply documented the factual conclusion that
the condominium project was part of a ‘“‘common promotional
plan’’. Unlike petitioners’ portrayal, there is a complete
absence of any conflict involving a substantial federal question.

This Court should deny the requested writ.

——

ARGUMENT

I. The Interstate Land Sales Full Disclosure Act
(ILSA) applies to condominium sales.

It is now well-settled that the Interstate Land Sales Full
Disclosure Act applies to the sale of condominium units. This
conclusion is aptly drawn from the legislative history of the Act,
the statutory construction applied by agency charged with ad-
ministering its provisions, as well as Congressional acceptance
of this result, and both federal and state caselaw. With the ex-
ception of a single federal district court decision, which was
reversed on appeal, all courts have applied the Act to the sale of
condominium units.

A. Legislative Hisiory

The Interstate Land Sales Full Disclosure Act (ILSA) was
originally enacted as part of the Housing and Urban Develop-
ment Act of 1968. The disclosure aspects of this legislation was
designed to prevent false and deceptive practices in the in-
terstate sale of tracts of land by requiring developers to disclose
information needed by potential buyers to evaluate their pur-
chases. Flint Ridge Dev. Co. v. Scenic Rivers Ass’n of Okla.,
426 U.S. 776, 778 (1976). The legislation was principally
directed at protecting purchases from abuse by real estate
developers involved in interstate commerce who used the mails
in the promotions and sales of their projects. Nargiz v.
Henlopen Developers, 380 A.2d 1361, 1362 (Del. 1977). The
legislative history of the Act indicates that Congress was con-
_ cerned with the sale of a multiple, undeveloped lots pursuant to
a common promotional plan. Conf.Rep. No. 1785, 90th Cong.,
2nd Sess. (1968), reprinted in 1968 U.S. Code Cong. and Ad.
News 3053, 3066. In essence, ILSA is an antifraud statute that
utilizes the requirement of disclosure as its primary tool.

The key term in the statutory scheme is ‘‘lot’’. The ILSA is
triggered when there is a proposed sale of a non-exempt “‘lot’’.

deuthaes

This term is not defined in the legislation. The Secretary of
Housing and Urban Development (HUD) has by regulation
defined ‘‘lot’’ as ‘‘any portion, piece, division, unit, or undivid-
ed interest in land located in any state or foreign country if the
interest includes the right to the exclusive use of a specific por-
tion of the land.’’ 24 CFR §1710.1 (1987).

Almost from the outset of passage of the ILSA there were
questions raised as to whether the Act applied to condominium
developments.' In 1972, the Office of Interstate Land Saies
Registration issued an Asvisory Opinion which noted:

We agree that the key term is ‘“‘lots’’ in determining
whether the sale of a condominium unit can be equated
with the sale of a lot in the subdivision within the meaning
of the Act. We do not, however, agree that the concepts
and characteristics of a lot and a condominium unit are
mutually exclusive and that, therefore, a ‘“‘unit’’ in a con-
dominium cannot be considered a ‘‘lot’’.

OILSR Exemption Advisory Opinion, No. 1701.1(k) at p. 5
(August 20, 1972). Shortly after issuing the Advisory Opinion,
the Secretary of Housing and Urban Development responded to
builders’ concerns about the application of ILSA to con-
dominiums.

The application of the Act to condominiums has been con-
‘sistent OILSR policy since the issue was first raised in
1969. The bases for this position are that condominiums
carry the indicia of and in fact are real estate, whether or
not the units therein have been constructed. A con-
dominium is accordingly viewed by OILSR as equivalent
to a subdivision, each unit being a lot. Adverse comment,
particularly from buitders, asserts that condominiums are

'The office of Interstate Land Sales Registration (OILSR) is the
organization designated by the Secretary of Housing and Urban
Development to administer the Act. See 15 U.S.C. §1715 (a)(1982).

Po,

equivalent to houses and the sale of houses was not intend-
ed to be covered by the act. However, the right to con-
dominium space is a form of ownership, not a structural
description. This condominium concept is employed as an
ownership form for completely horizontal developments
and even for campgrounds. Congress recognized the need
to exempt professional builders from the Act and provided
an appropriate exemption. (15 U.S.C. 1702[(a)(2)]). Fora
condominium unit sale to be exempted from the Act, it
must accordingly qualify for exemption; i.e., either it must
be completed before it is sold, or it must be sold under a
contract obligating the seller to erect the unit within two
years from the date the purchaser signs the contract of
sale.

38 Fed. Reg. 23,866 (1973). Less than one year later the ffice
of Interstate Land Sales Registration issued an announc*;nent
emphasizing the application of ILSA to sales of condominium
units:

The Office of Interstate Land Sales Registration (OILSR)
offers guidelines in re-emphasizing attention to the ap-
plicability of the federal land sales registration laws to the
offer and sale of condominiums and other structures. The
Preamble to OILSR regulations published on September 4,
1973 (38 FR 23866 et seq.) points out that condominiums
are covered by the Act in that a condominium is equivalent
to a subdivision, each unit being a lot.

39. Fed. Reg. 7824. The OILSR pronouncements, applying IL-
SA to condominium sales, has become the accepted view. See
1SA AmJur 2d, Condominiums 20; Rohan and Reskin, Con-
dominium Law and Practice (Matthew Bender 1976) 18A.02;
*“‘Condominium Regulation: Beyond Regulation,’’ 123 U. of
Pa.L.Rev. 639, 660.

In 1978, Congress considered amendments to ILSA which are
historically important in constructing the statute. At that time,

i

ee

the Act only exempted sales of improved land on which there

was a residential, commercial, or industrial building or where

the seller was obligated to complete such a structure within two

years. Congress amended this provision to explicitly exempt
condominium sales under the same situations, thus inserting the
word ‘‘condominium’’ in the only place in the Act.? 15 U.S.C.
§1702(a)(2) as amended by P.L. 95-557, 907(a)(1). The accom-
panying Senate Committee Report observed:

~=——,

Section 715(b)(1) of the bill would amend Section
1403(a)(2) [now §1702(a)(2)] of the act to provide an ex-
emption for the sale or lease of any improved land on
which there is a condominium or on which a condominium
is to be built within two years. Section 1403(a)(2) presently
provides an exemption for land on which there is or will be
built within 2 years, a residential, commercial, or industrial
building. Present HUD regulations do not provide an ex-
emption for condominiums.

Housing and Community Development Amendments of 1978,
Report of the Committee on Banking, Housing and Urban Af-
fairs, United States Senate (Report No. 95-871, at page 97.) The
Conference Committee also noted:

The Interstate Land Sales Full Disclosure Act is amend-
ed to broaden the exemptions to include sale or lease of
land on which there is a condominium building on or
which a condominium building is to be built within two
years.

Public Law 95-557, Summary of the Act, Joint Explanatory
Statement of Managers of the Committee of Conference at page
80. The formal regulations implementing this amendment suc-
cinctly state:

? The term ‘‘condominium’’ refers to a form of real estate owner-
ship, rather than to any particular type of structure. See 38 Fed. Reg.
23,866 (1973)

UU

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. In the case of con-
dominium or multi-unit construction, a presale clause con-
ditioning the sale of a unit on a certain percentage of sales
of other units is permissible if it is legally binding on the
parties and it is for a period not to exceed 180 days.
However, the 180-day provision cannot extend the two-
year period for performance. The permissible 180 days is
calculated from the date the first purchaser signs a sales
contract in the project or, if a phased project, from the
date the first purchaser signs the first sales contract in each
phase.

24 CFR §1710.5(b) (1987).

Consistently, since the adoption of ILSA in 1969, both Con-
gress and the administrative agency charged with enforcing the
law have acknowledged that condominium sales fall within the
Statutory scheme of the statute.

B. Statetory Construction.

The task before the court in considering the Petition is made
relatively easy in this instance. Not only does the legislative
history of ILSA provide an adequate foundation for concluding
that the statutory term ‘“‘lots’’ includes interests in con-
dominium units, simple rules of statutory construction also dic-
tate this conclusion.

When confronted with a problem of statutory interpretation,
the Court has indicated a ‘‘great deference to the interpretation
given the statute by the officers or agency charged with its ad-
ministration.’’ Udall v. Tallman, 380 U.S. 1, 16 (1965). This
precept of statutory construction is especially applicable when
the administrative interpretation ‘‘includes a contemporaneous

ee

construction of a statute by the men charged with the respon-
sibility of setting its machinery in motion; of making the part
work efficiently and smoothly while they are yet untried and
new.’’ Power Reactor Dev. Co. v. International Union of Elec-
tricians, 267 U.S. 396, 408 (1961). If the statutory provision is
silent or ambiguous with respect to a specific issue addressed by
a valid regulation, the reviewing coutt must give deference to
the agency’s interpretation unless it conflicts with the statute’s
plain meaning. K Mart Corp. v. Cartier, Inc., __ U.S. ___.,
108 S.Ct. 1811 (1988); EEOC v. Commercial Office Products,
Co., ___U.S. ___., 108 S.Ct. 1666 (1988). Stated otherwise,
the construction placed upon the term “‘lots’’ by OILSR does
not have to be the only reasonable one, or the one that would
have been made in a judicial proceeding. The Court only needs
to conclude that the administrative agency has made ‘“‘a
reasonable interpretation of the relevant provisions.’’ Amer.
Paper Inst. v. Amer. Power Serv. Corp., 461 U.S. 402, 423
(1983) (empahsis in original). See also EPA vy. National
Crushea Stone Ass’n., 449 U.S. 04, 04 (1980).

The legislative history of ILSA clearly indicates that OILSR,
the federal body charged with administering the Act, has coni-
sistently maintained that condominium sales fall within the
Statutory provisions.’ See 38 F d. Red. 23, 866 (1973); 39 Fed.
Reg. 7824 (1974). Nothing cor.:ained within the Petition urges
that this was not a reasonable interpretation. The Eleventh Cir-
cuit in Winter v. Hollingsworth Properties, Inc., 777 F.2d 1444
(11th Cir. 1985) confirmed this aspect of ILSA by noting:

It is reasonable to conclude as HUD did, that the term
“‘lot’’ was used to refer generally to interests in realty. The
legislative history supports this construction, employing
the terms “‘lot,”’ “‘land,’’ and ‘’real estate’’ in discussing
the Act. This construction is also reasonable in terms of
the purpose of the statute. A fraudulent out-of-state sale

“~

* The existence of a consistently held agency view interpreting a
Statute is an important consideration. See /mmigration & Naturaliza-
tion Service v. Cardoza-Fonseca, _____ U.S.
(1987).

, 107 S.Ct. 1207

of land is not rendered any less fraudulent if the con-
dominium form of ownership is utilized.

Id. at 1448. See also Schatz v. Jockey Club Phase III, Ltd., 604
F.Supp. 537, 540-41 (S.D. Fla. 1985); Nargiz v. Henlopen
Developers, 380 A.2d 1361, 1364 (Del. 1977); Appalachain, Inc.
v. Olson, 468 So.2d 266, 268 (Fla. App. 2 Dist. 1985). The Peti-
tion is noteworthy in its silence as to the statutory construction
placed on the ILSA by the OILSR.

The conclusion that the sale of condominium units falls
within the parameters of ILSA is also confirmed by analyzing
the impact of the 1978 amendments. The 1978 amendments
sought to specifically exclude condominiums that would be con-
structed within two years. Congress obviously would not
specifiacally exempt this class of condominium projects if the
Act did not in the first instance apply to condominiums as
“‘lots’’. This conclusion is bolstered by the realization that
Congress is presumed to be aware of an administrative inter-
pretation of a statute when it legislates modifications.
Lorilland, Inc. v. Pons, 434 U.S. 575, 580 (1978). The amend-
ment enacted by Congress apparently constituted an implied
recognition of the ILSA coverage to condominium sales. The
Eleventh Circuit reached this conclusion by recognizing:

The obvious conclusion to be drawn from this history is
. that Congress was aware of HUD’s interpretation that the
| Act covered condominium sales and acted to exempt such
sales where the building is existing or must, by contract, be
completed within two years. If the ILSA did no include
the sale of condominiums within its scope, it would be
senseless to provide for exclusion of such sales under
prescribed conditions. We therefore conclude that Con-
gress was aware of, and approved of, HUD’s construction
of the Act and hold that the ILSA is applicable to the sale
of condominiums.

Winter, 777 F.2d 1444, 1449 (1985). The Petition while
recognizing the historical sequence of Congressional action of-
fers no explanation for a contrary interpretation. Following the

iii

oe te a -

argument of Petitioners, the 1978 amendment would liave been
superfluous. The Court should avoid am interpretation that
leads ‘0 this result.

C. Federal and State Caselaw

The Petitions’s weakest argument involves its attempt to
justify a substantial federal question under Section 1257 in view
of the existing federal and state caselaw. The Petition claims
that ‘‘a majority of the courts’’ have found ILSA to apply to
condominium is a misnomer. With the exception of one federal
district court case, which was reversed on appeal, every federal
and state decision has upheld the application of ILSA to con-
dominium sales.

The Eleventh Circuit is the only federal appellate court to
discuss this issue. In Eaton v. Dorchester Development, Inc.,
692 F.2d 727 (11th Cir. 1982) the panel in reviewing a dismissal
order assumed, without discussion, that ILSA applied to con-
dominium sales. Later, in Winter v. Hollingsworth Properties,
Inc., 777 F.2d 1444 (11th Cir. 1985) - the principal federal
authority relied upon by both the trial and appellate courts in
Alabama - a different panel specifically held LISA applicable to
the sale of condominiums. Thus, the Eleventh Circuit reversed
the only reported decision to hold that ILSA did not apply to
condominium sales. The decisions of all federal district courts
also confirm the application of ILSA to condominium dales. (1)
Schatz v. Jockey Club Phase Ill, Lid., 604 F.Supp. 537 (S.D.
Fla. 1985); Inversions Romar, S.A. v. Jockey Club Phase 111,
Lid., No. 82-0695 CIV-JE (S.D. Fla. September 18, 1984);
Mosher v. Southridge Associates, Inc., 552 F.Supp. 1226
(W.D.Pa. 1982)(applying two year exemption).

Petitioners also can find little solace in state caselaw. Every
reported decision has upheld the application of ILSA to the sale
of condominium units. Berzon v. Oriole Homes Corp., 497
So.2d 670 (Fla.App. 4 Dist. 1986); Star Island Associates v.
Lichter, 473 So.2nd 791 (Fla.App. 2nd Dist. 1985); Marco Bay

BERNER TRA

|

Associates v. Vandewalle, 472 So.2d 472 (Fla. App. 2 Dist.
1985); Appalachian, Inc. v. Olson, 468 So.2d 266 (Fla.App. 2
Dist. 1985); Grove Towers, Inc. v. Lopez, 467 So.2d 358
(Fla.App. 3 Dist.), rev. denied, 480 So.2d 1294 (Fla. 1985); Finst
Dev., Inc. v. Bahaor, 449 So.2d 292 \Fla.App. 3 Dist. 1984);
Nargiz v. Henlopen Developers, 380 A.2d 1361 (Del. 1977).

The decision of the Alabama Supreme Court being challeng-
ed by this Petition is in accord with not only the federal caselaw
for the Circuit but also every other appellate decision to discuss
this question.

The Petition’s contention that jurisdiction in this case is
necessary is a most untennable one. There is a complete absence
of any substantial federal question. The decision of the
Alabama Supreme Court is consistent with the legislative
history of the Act as well as supportable by tenets of statutory
construction. Further, the Petition is unable to cite a single
federal or state decision which is contrary authority to the legal
conclusion reached by the Alabama Supreme Court. The pre-
sent Petition does not raise a substantial federal question.

Il. The Alabama state courts correctly denied the applica-
tion of the 100 lot exemption under the facts of this case.

The basic argument advanced on behalf of Petitioners, while
presented under the guise of a ‘‘conflict of decisions,’’ is in
) reality only a dispute over how the factual situations in three
separate cases were resolved. An examination of the decision of
the Alabama Supreme Court demonstrates that there is the
absence of any real conflict that would be subject to review by
this Court. The “‘sheeps clothing”’ blanketing this issue is readi-
ly discernable when the cases cited are examined.

te te ee

The basic foundation of Petitioners’ assertion includes the
application of the ‘*common promotional plan’”’ as set forth in
Section 1701(4).

a” oe

{A] plan, undertaken by a single developer or a group of
developers acting in concert, to offer lots for sale or lease;
where such land is offered for sale by such a developer or
group of developers acting in concert, and such land is
contiguous or is known, designated, or advertised as a
common unit or by a common name, such land shall be
presumed, without regard to the number of lots covered by
each individual offering, as being offered for sale or lease
as part of a common promotion plan.’’

15 U.S.C. 1701(4) (emphasis added). The Alabama Supreme
Court was not the first appellate case to review the application
of this provision. In addition to the decision of the Alabama
Supreme Court, the “‘common promotion plan’’ has been ap-
plied in three reported decisions.

The Eleventh Circuit briefly addressed the ‘‘common promo-
tion plan’’ in Eaton v. Dorchester Development, Inc., 692 F.2d
727 (11th Cir. 1982). Judge Vance in authoring the Panel’s deci-
sion acknowledged the application of Section 1701(4) to the
facts of the complaint when he noted:

[Plaintiffs] contended that Defendants had acted in con-
cert with another developer, Power Corporation, to
develop the Dorchester as part of a project which included
a second condominium, the Grosvenor.

Plaintiffs submitted a promotional brochure in which
Power Corporaticn referred to itself as the
**owner/developer/builder’’ of both the Dorchester and
the Grosvenor and stated that the Grosvenor was continu-
ing the “‘standard of excellence’’ that Power Corporation
had begun several years ago with the Dorchester. They
also submitted a magazine advertisement in which a
realtor, Power Realty, Inc., promoted ‘‘Power Corpora-
tion Luxury Condominiums’’, including the Dorchester
and the Grosvenor. Finally, plaintiffs submitted copies of
Status sheets from the Florida Department of State show-

ae aaa STS

—

ing that Power Corporation and the Dorchester had the
same president and director and the same registered office.

Id. at 729. The Panel confirmed that based upon the allegations
of the complaint, a cause of action was stated under the ‘‘com-
mon promotion plan’’ and that defendants were not exempted
solely because part of the project only involved eighty-six units.
The Alabama Supreme Court cited Eaton in authoring its affir-
mance. 525 So.2d 1346, 1349-50.

A similar conclusion based upon the facts of the case was
reached in Grove Towers, Inc. v. Lopez, 467 So.2d 358 (Fla.
App. 3 Dist. 1985). In this case, the court confirmed the ap-
plication of the ‘‘common promotional plan’’ to a proposed
project totalling 108 units in the condominium documents while
only 98 units were ‘‘intended.’’ /d. at 361. Again, Grove
Towers indicated that individual facts of that case were being
reviewed. Nothing contained in the decision of the Alabama
Supreme Court decision could even be remotely characterized as
‘‘inconsistent’’ with this opinion. Petition at p. 23.

The guise of Petitioners’ assertion is further revealed in an ex-
amination of Dunaway v. Lewis, 554 P.2d 110 (Okla. Ct.App.
1976) - the other case which Petitioners allege is ‘‘inconsistent”’
with the decision of the Alabama Supreme Court. In Dunaway,
the Court of Appeals of Oklahoma reviewed a jury verdict in
favor of the defendant. At trial, plaintiff had claimed the ex-
eistence of a ‘’common promotional plan.’’ The jury found in
favor of the defendant on this issue. The appellate court aptly
noted:

on inl eee i

In the case at bar the defendant produced evidence that
Lakeside North Second was not a part of the same promo-
tional plan as Lakeside North. Although his evidence that
the developments were not contiguous and were created at
different times are not necessarily persuasive, the disparate
forms of advertising used by the defendant create a valid
question of fact whether Lakeside North Second was or

was not a part of a common promotional plan with
Lakeside North. The fact was properly reserved for the

jury.

Id. at 112. Dunaway, was another authority relied upon by the
Alabama Supreme Court in rendering its opinion. 525 S.2d at
1349-50.

Quite apart from being ‘‘inconsistent’’ with these authorities,
the Alabama Supreme Court in reviewing a trial court factual
determination, affirmed the lower disposition noting that the
relevant statutory provisions were correctly applied. The Court
cited at length the factual record that support the determination
of a ‘‘commonal promotional plan.’’ As noted by Justice
Almon:

The investors’ argument below and on appeal is that the
developers offered to sell units in Phase I and Phase II as a
common plan to development. In support of their argu-
ment, the point to the following factors: (1) That Neda,
Inc., was formed to promote and sell units in both Phase |
and Phase II; (2) The project was advertised, represented,
and marketed as a two-phase project consisting of two in-
dividual towers adjoining each other, Phase I containing
55 units and Phase II containing 46 units; and (3) The pro-
ject was advertised and intended by the owners to be a two-
phase project containing over 100 units. The investors of-
fered the sworn testimony of Arthur Hill, president of
Gulf South Corridor Properties, and Winston Biggs, presi-
dent of Chancellor Land Company, Inc., in support of
their claim during the hearing on March 20, 1986. The
testimony of both men was that the development was
advertised, represented, and marketed as 2 two-phase pro-
ject containing two towers. The towers were to be adjacent
to one another sharing a common lobby and beach front.
Mr. Biggs testified that the Johnsons were promised the
Opportunity to trade their Phase I unit for a nicer unit in

so

Phase II when it was completed. He also testified, and it
was undisputed by the appellants, that none of the pur-
chasers in this suit was presented with a prospectus prior to
the execution of their preconstruction purchase
agreements.

A prospectus covering the development was, however,
prepared by the developers, and it was admitted into
evidence at the March 20 hearing. It was denominated
‘‘Rast Pass Towers Condominium Declaration,’’ with the
cover depicting twin towers on the Destin coast. Phase I of
the development was to be completed by June 1, 1992. The
maximum number of units in the development was to be
101 ‘‘if, in the sole discretion of the developer, Phase II is
built.”’ The prospectus also said, ‘‘The developer has
reserved the right to construct additional apartment
buildings... as part of this condominium at any time prior
to June 1, 2002.... The additional units to be constructed
will be 46 in number and would be contained in an addi-
tional apartment building.’’ Advertising brochures admit-
ted into evidence at the hearing also depicted twin towers
joined by a common lobby.

Id. at 1348-49.

Without question, the Alabama Supreme Court correctly ap-
plied prevailing standards of review under Alabama law to what
was in all respects a factual determination. There is dubious
merit to Petitioners’ assertion that the Alabama Supreme Court
decision was ‘‘inconsistent’’ with Dunaway or Grove Towers.
Any alleged conflict giving rise to claim for jurisdiction before
this Court is at best illusory. There is no real cenflict on the ap-
plication of law or fact between the underlying facts of this case
and how the trial court resolved them or between the authority
of the Alabama Supreme Court and any other decision cited by
Petitioners. The Court should deny the writ of certiorari.

~~ oe

CONCLUSION
In light of the foregoing, it is clear that:

1. The legislative history of Interstate Land Sales Full
Disclosure Act applies to the sale of condominium units.

2. Precepts of statutory construction confirm that the In-
terstate Land Sales Full Disclosure Act applies to the sale
of condominium units.

3. Except for one case which was reversed on appeal, all
report °d decisions, both federal and state, have held that
the Interstate Land Sales Full Disclosure Act applies to the
sale of condominium units.

4. There is an absence of any substantial federal question as
to whether the Interstate Land Sales Full Disclosure Act
applies to the sale of condominium units.

5. There is nothing in a review of the caselaw, applying the
common promotional plan to indicate that the decision of
the Alabama Supreme Court conflicts with other
authorities.

WHEREFORE, Respondents urge this Court to deny the re-
quested Writ of Certiorari.

DONE AND DATED this 19th day of August, 1988.

John R. Benn

425 North Court Street
Florence, Alabama 35630

Attorney for Respondents

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APPENDIX
STATUTORY PROVISIONS
15 U.S.C. 1702(a)

(a) Unless the method of disposition is adopted for the purpose
of evasion of this chapter, the provisions of this chapter shall
not apply —

(1) the sale or lease of lots in a subdivision containing less
than twenty-five lots;

(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 lesser to erect such a building
thereon within a period of two years.

AGENCY REGULATIONS
24 C.F.R. §1710.1 Definitions

**Lot’’ means any portion, piece, division, unit, or undivided in-
terest in land located in any state or foreign country if the in-
terest includes the right to the exclusive use of a specific portion
of the land.

24 C.F.R. §1710.5 Statutory Exemptions From Provisions of
This Chapter

The requirements of the Act do not apply to—

(a) The sale or lease of lots in a subdivision containing fewer
than 25 lots;

(b) 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. In the case of condominium or multiunit construction, a

— ss

presale clause conditioning the sale of a unit on a certain percen-
tage of sales of other units is permissible if it is legally binding
on the parties and it is for a period not to exceed 180 days.
However, the 180-day provision cannot extend the two-year
period for performance. The permissible 180 days is calculated
from the date the first purchaser signs a sales contract in the
project or, if a phased project, from the date the first purchaser
signs the first sales contract in each phase.

REGULATORY ANNOUNCEMENTS

Land Registration, Formal Procedures and Advertising Sales
Practices, and Posting of Notices of Suspension, 38 Fed. Reg.
23,866 (1973)

Considerable comment was received with respect to the propos-
ed definition of lot. Essentially, comments complained that
OILSR is seeking to regulate everything from securities to coun-
try club memberships. Since in this range of coverage con-
dominiums were mentioned most frequently, OILSR policy on
condominium coverage is set forth herein.

The application of the Act to condominiums has been consistent
OILSR policy since the issue was first raised in 1969. The bases
for this position are that condominiums carry the indicia of and
in fact are real estate, whether or not the units therein have been
constructed. A condominium is accordingly viewed by OILSR
as equivalent to a subdivision, each unit being a lot. Adverse
comment, particularly from builders, asserts that con-
dominiums are equivalent to houses and the sale of houses was
not intended to be covered by the Act. However, the right to
condominium space is a form of ownership, not a structural
description. This condominium concept is employed as an
ownership form for completely horizontal developments and
even for campgrounds. Congress recognized the need to exempt
professional builders from the Act and provided an appropriate
exemption (15 U.S.C. §1702(3)). For a condominium unit sale

—_—* po

to be exempted from the Act, it must accordingly qualify for ex-
emption; i.e., either it must be completed before it is sold, or it
must be sold under a contract obligating the seller to erect the
unit within two years from the date the purchaser signs the con-
tract of sale. For the purposes of the exemption cited,
‘‘buildings comprises the dwelling unit and all utilities or
systems necessary to support normal occupancy. Additionally,
if a condominium dwelling unit is merely incidental to the com-
mon facilities (as in the case of recreational developments) all
common facilities must be completed within the two-year period
to qualify for the exemption since frequently vacation sites are
sold without assurances that such facilities will be completed.
With respect to condominiums intended as primary residences
in metropolitan areas, registration typically is unnecessary since
most professional builders would qualify for the exemption in-
asmuch as they are able to deliver a completed unit to a pur-
chaser within two years after the contract of sale has been sign-
ed.

Further, the legislative history of the Act has been cited as not
authorizing coverage of condominiums. However, there is
negligible legislative history on the present Act and that
legislative history with respect to predecessor bills is unclear on
this subject. It is OILSR’s position that the amended definition
of lot merely codifies OILSR’s longstanding position on con-
dominiums and is a valid exercise of the Secretary’s regulatory
authority under the Act to implement the provisions thereof.

Condominium and Other Construction Contracts, 39 Fed. Reg.
7824 (1974)

The Office of Interstate Land Sales Registration (OILSR) offers
guidelines in re-emphasising attention to the applicability of the
federal land sales registration laws to the offer and sale of con-
dominiums and other structures. The Preamble to OILSR
regulations published on September 4, 1973 (38 FR 23866 et
seq.) points out that condominiums are covered by the Act in

—

that a condominium is equivalent to a subdivision, each unit be-
ing a lot.

George K. Bernstein, Administrator of the Office, reports that
many condominium developers and trade associations have in-
quired concerning coverage of condominium developments in
light of section 1403(a)(3) of the Interstate Land Sales Full
Disclosure Act. (Act). That section exempts from registration
sales of existing buildings and sales of land under contracts
obligating seilers to erect buildings on the land within two years.

Guidelines for Exemptions Available Under the Interstate Land
Sales Full Disclosure Act, 44 Fed. Reg. 24012 (1979)

(c) Improved Lots. — (Section 1403(a)(3) (15 U.S.C. 1702(a)(3)
and 24 CFR 1710.10(c)).

This Section exempts: (1) the sale or lease of any improved land
on which there is a residential, commercial, condominium, or
industrial building or (2) the sale or lease of land under a con-
tract obligating the seller to erect such a building on the lot
within a period of two years.

For a building or unit to be considered complete, it must be
physically habitable and usable for the purpose for which it was
purchased. A residential structure, for example, must be ready
for occupancy and have all necessary and customary utilities ex-
tended to it before it can be considered complete.

If you (the developer or seller) are relying on this exemption and
the residential, commercial, condominium or industrial building
is not complete, the contract must specifically obligate you, the
seller, to complete such a building within two years, otherwise
the sale is not exempt. The two year period begins on the date
the purchaser signs the contract. The use of a contract that
obligates the buyer to build within two years would not exempt

the sale.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385019_2162%3A2. Public record. Not legal advice.