HIGGINSON, Circuit Judge:
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
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").
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.
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, 15 U.S.C. § 1703(a)(2).
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." Fed.R.Civ.P. 56(a). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation omitted). "Doubts are to be resolved in favor of the nonmoving party, and any reasonable inferences are to be drawn in favor of that party." Gowesky v. Singing River Hosp. Sys., 321 F.3d 503, 507 (5th Cir. 2003).
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).
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.
15 U.S.C. § 1702(a)(2). Each of the Purchase Agreements states in relevant part:
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 15 U.S.C. § 1702(a)(2).
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 § 1702(a)(2), but the Eleventh Circuit has construed, as a matter of federal law, the two-year ILSA exemption to be limited to contracts that impose a "legal duty" on the developer to construct a building within two years. See e.g., Stein v. Paradigm Mirasol, LLC, 586 F.3d 849, 854 (11th Cir.2009) (holding that in order to qualify for the ILSA's two-year exemption, the contract must impose a legal duty on the developer to perform his promise to construct the condominium within two years). "The nature and extent of the duty a contract imposes, however, is a matter of state contract law." Id.
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 § 1702(a)(2), state that:
Supp. Info. to Part 1710: Guidelines for Exemptions Available Under the ILSA (hereafter, "HUD Gdl. Supp. to Pt. 1710").
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 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:
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
For the reasons discussed above, we AFFIRM the district court's grant of summary judgment in favor of Defendants-Appellees Loga and Stieffel.
