PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
MELVIN JOSEPH LONG; MARY ANN
LONG,
Plaintiffs-Appellants,
and
KEAE CROWLEY; ANNA MARIE
BARTLEY; WON GIL CHOI; HYUNG
JAE KIL; HONG Y. KIM; YONG KYO
SHIN; JUNE K. KIL; SARAH
KLAWITTER MARKS; HANNA G.
WANG; SONCHA LEE; EDWARD
No. 08-2371
CROWLEY; JAMES F. DRONSFIELD,
Plaintiffs,
v.
MERRIFIELD TOWN CENTER LIMITED
PARTNERSHIP, a Virginia limited
partnership,
Defendant-Appellee.
2 LONG v. MERRIFIELD
ANNA MARIE BARTLEY; WON GIL
CHOI; HONG Y. KIM; YONG KYO
SHIN; SARAH KLAWITTER MARKS;
HANNA G. WANG; SONCHA LEE;
KEAE CROWLEY; EDWARD CROWLEY;
JAMES F. DRONSFIELD,
Plaintiffs-Appellants,
and
HYUNG JAE KIL; JUNE K. KIL;
MELVIN JOSEPH LONG; MARY ANN
No. 09-1020
LONG,
Plaintiffs,
v.
MERRIFIELD TOWN CENTER
LIMITED PARTNERSHIP, a Virginia
limited partnership,
Defendant-Appellee.
Appeals from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Gerald Bruce Lee, District Judge.
(1:08-cv-00145-GBL-JFA)
Argued: May 14, 2010
Decided: July 13, 2010
Before WILKINSON, NIEMEYER, and SHEDD,
Circuit Judges.
LONG v. MERRIFIELD 3
Reversed and remanded by published opinion. Judge
Niemeyer wrote the opinion, in which Judge Wilkinson and
Judge Shedd joined.
COUNSEL
John Connell Altmiller, Jr., PESNER KAWAMOTO CON-
WAY, PLC, McLean, Virginia, for Appellants. Edward W.
Cameron, CAMERON MCEVOY, PLLC, Fairfax, Virginia,
for Appellee.
OPINION
NIEMEYER, Circuit Judge:
Melvin and Mary Long, along with several other individu-
als, who signed contracts to purchase eight condominiums in
the 279-unit condominium complex known as Vantage at
Merrifield Town Center in Falls Church, Virginia, com-
menced these actions against the developer, alleging viola-
tions of the Interstate Land Sales Full Disclosure Act
("ILSFDA") (pronounced, perhaps, "ills-fi-da"), 15 U.S.C.
§ 1701 et seq., and seeking to rescind their contracts and
obtain refunds of their deposits.
The developer, Merrifield Town Center Limited Partner-
ship ("Merrifield"), filed a motion to dismiss on the ground
that the sales contracts for units in the Vantage condominium
complex were exempt from ILSFDA’s requirements under
two exemptions that, when combined, covered all 279 units.
Merrifield contended that the sales contracts for 182 of the
lots or units, which promised delivery of condominiums
within two years, were allegedly exempted under ILSFDA’s
"Improved Lot Exemption," which exempts from ILSFDA
sales contracts that obligate the seller to construct the prom-
4 LONG v. MERRIFIELD
ised condominiums within "a period of two years." See id.
§ 1702(a)(2). And the sales contracts for the remaining 97
units, which promised delivery of condominiums within three
years, were allegedly exempted under ILSFDA’s "100 Lot
Exemption," which exempts from ILSFDA transactions
involving developments containing fewer than 100 lots that
are not otherwise exempt under the Act. See 15 U.S.C.
§ 1702(b)(1). The plaintiffs responded, arguing that in order
for the 100 Lot Exemption to apply, the remaining 182 units
had to be exempt under the Improved Lot Exemption and that,
in this case, the contracts for the sale of those units did not
satisfy the requirements of § 1702(a)(2) because they did not
obligate Merrifield to deliver the condominiums within two
years from the date that each purchaser signed the purchase
contract.
The district court granted Merrifield’s motion to dismiss
based on the 100 Lot Exemption. But it did so without dis-
cussing whether the other sales contracts in the development
were indeed exempt under the Improved Lot Exemption. The
plaintiffs’ appeal challenges Merrifield’s qualification for
both exemptions, as the first is dependent on the second.
We hold that to qualify for the Improved Lot Exemption
under § 1702(a)(2), which provides that a sales contract must
"obligate the seller . . . to erect a [residential, commercial,
condominium, or industrial] building thereon within a period
of two years," the sales contract must obligate the seller to
build and deliver the required structure within two years of
the date that the purchaser signs the contract and incurs obli-
gations, rather than within two years of the date that the seller
signs the contract. Because the sales contracts for the 182
condominiums did not obligate Merrifield to construct the
condominiums within two years of the date that the purchas-
ers signed the contracts and incurred obligations, those con-
tracts were not exempt from regulation under ILSFDA. And
because those 182 sales contracts were not exempt, the 100
Lot Exemption could not be relied on to exempt the remaining
LONG v. MERRIFIELD 5
condominiums because there were more than 100 lots or units
in the development that were not exempt. Accordingly, we
reverse the district court’s order of September 30, 2008,
granting Merrifield’s motion to dismiss and remand for fur-
ther proceedings.
I
In selling the lots and unbuilt condominium units at the
Vantage condominium complex, Merrifield offered two types
of sales contracts. One type, which covered 97 units, prom-
ised construction and delivery of the condominium unit within
36 months of Merrifield’s "ratification" of the sales contract,
and the other type, which covered 182 condominium units,
promised construction and delivery of the condominium unit
within 24 months of Merrifield’s "ratification" of the sales
contract. All of the plaintiffs in this case signed 36-month
contracts during June and July of 2005, and Merrifield ratified
those contracts by signing them from one to three months
later.
Other than the promised delivery date, all of the sales con-
tracts at the Vantage condominium complex were substan-
tially similar. Each contract provided that it "[was] made on
[the date of purchaser’s signing] by and between [purchaser]
and [Merrifield]." Each contract required that the purchaser
provide a deposit at the time the purchaser signed the contract
equal to 5% of the purchase price if the purchaser intended to
occupy the unit, or 10% if the purchaser was an investor who
intended to sell or lease the unit, and a second, larger deposit
within 180 days of the purchaser’s signing. Each contract also
obligated the purchaser to make a written loan application
within seven days "of the date Purchaser signs" the contract
and to obtain approval of the financing within two weeks
"from the date Purchaser signs" the contract. If the purchaser
intended to buy the condominium without obtaining a loan,
the purchaser was obligated to produce documentation within
five days "of the date Purchaser signs," showing its ability to
6 LONG v. MERRIFIELD
pay. Finally, each contract provided that if the purchaser
"breaches or defaults under this Agreement, the Agreement
Deposit and the Options Deposit will be retained by [Merri-
field] as liquidated damages and not as a penalty, in which
event Purchaser and [Merrifield] shall be relieved from fur-
ther liability hereunder." The default clause also authorized
Merrifield, "[i]n the alternative," to retain the initial deposit
and the options deposit and to pursue such other legal or equi-
table remedies as it may have.
Each contract anticipated that Merrifield would, at some
later date, "ratif[y]" the sales contract signed by the purchaser
and provided that the contract was not binding on Merrifield
until such ratification. In the case of the eight contracts at
issue in this case, Merrifield ratified the contracts from one to
three months after the purchaser signed them.
Due to a series of disagreements, none of the contracts in
this case went to settlement. Rather, the purchasers com-
menced these actions under ILSFDA and state law, seeking
rescission and return of their deposits by way of rescission or
damages. Merrifield filed a motion to dismiss the complaints
under Federal Rule of Civil Procedure 12(b)(6), claiming that
the 182 24-month contracts were exempt from ILSFDA’s
requirements under the Improved Lot Exemption, 15 U.S.C.
§ 1702(a)(2), as they obligated Merrifield to construct the
condominiums within two years of Merrifield’s ratification of
the contracts. Because 182 units were exempt, the remaining
97 36-month contracts, which included plaintiffs’ contracts,
were exempt under the 100 Lot Exemption, 15 U.S.C.
§ 1702(b)(1). Merrifield also addressed the plaintiffs’ state-
law claims in its motion to dismiss.
The district court granted Merrifield’s motion, reasoning
that because it was undisputed that Merrifield was selling
only 97 units under the 36-month contracts, the 100 Lot
Exemption applied to them, warranting dismissal of the ILS-
FDA claims. The district court did not, however, address the
LONG v. MERRIFIELD 7
question of whether the Improved Lot Exemption applied to
the 182 24-month contracts, nor did it discuss the fact that the
condominium complex, when combining the 24-month con-
tracts and the 36-month contracts, contained more than 100
units. The district court also dismissed the state-law claims, a
ruling that the plaintiffs do not appeal.
The plaintiffs filed a timely motion to alter or amend the
district court’s judgment, arguing that the district court had
erred by applying the 100 Lot Exemption without considering
the antecedent question of whether the 24-month contracts
were exempt under the Improved Lot Exemption. They
argued that case law, as well as regulations of the Department
of Housing and Urban Development ("HUD"), provided that
the Improved Lot Exemption requires that a seller be obli-
gated to build the structure within 24 months of when the pur-
chaser signs the sales contract and incurs obligations. The
plaintiffs argued that the 24-month contracts in this case
failed to meet that requirement because they did not require
Merrifield to build and deliver completed condominiums until
two years after it ratified the contracts. Because the 182 24-
month contracts were not exempt, the plaintiffs argued, the
plaintiffs’ 36-month contracts also were not exempt, as the
total number of non-exempt units in the development
exceeded 100.
The district court denied the plaintiffs’ motion to alter or
amend the judgment, and this appeal followed.
II
Because Vantage at Merrifield Town Center was a condo-
minium complex that contained a total number of 279 lots or
units, only if the 182 units sold with 24-month contracts were
exempt under the Improved Lot Exemption of 15 U.S.C.
§ 1702(a)(2) could the 97 units sold with 36-month contracts
be exempt under the 100 Lot Exemption, because only then
would the development contain fewer than 100 otherwise
8 LONG v. MERRIFIELD
non-exempt units. See 15 U.S.C. § 1702(b)(1) (exempting
"the sale or lease of lots in a subdivision containing fewer
than one hundred lots which are not exempt under
[§ 1702(a)]") (emphasis added)). If, on the other hand, the 24-
month contracts were not exempt under the Improved Lot
Exemption, the 36-month contracts would not be exempt
under the 100 Lot Exemption, as the development would then
contain more than 100 otherwise non-exempt units.
The district court skipped a step in its analysis in determin-
ing that the 100 Lot Exemption applied to the 36-month con-
tracts by failing to consider the antecedent question of
whether the Improved Lot Exemption applied to the 24-month
contracts. It failed to recognize that to determine whether the
plaintiffs’ contracts with Merrifield were exempt under the
100 Lot Exemption, it necessarily had to address whether the
24-month contracts were exempt under the Improved Lot
Exemption.
Thus, the issue now presented is whether the 24-month
contracts are exempt as "obligat[ing] the seller or lessor to
erect . . . a building [on the lot] within a period of two years."
15 U.S.C. § 1702(a)(2) (emphasis added). And to resolve that
issue, we must determine when the Improved Lot Exemp-
tion’s two-year period begins to run. The plaintiffs argue that
the two-year period during which the developer must erect
and deliver a building begins to run from the time that the
purchasers sign the sales contracts and incur obligations. Mer-
rifield argues that the time period begins to run only when
both parties have signed the contracts.
Because § 1702(a)(2) is ambiguous in this regard, we must
ascertain the interpretation of the statute that best implements
Congress’ intent and gives effect to the statute’s purpose. See
Adler v. Comm’r, 86 F.3d 378, 380-81 (4th Cir. 1996); see
also Food Town Stores, Inc. v. EEOC, 708 F.2d 920, 924 (4th
Cir. 1983) ("A statute must be interpreted to give it the single,
most harmonious, comprehensive meaning possible in light of
LONG v. MERRIFIELD 9
the legislative policy and purpose"); Berry v. Atl. Greyhound
Lines, Inc., 114 F.2d 255, 257-58 (4th Cir. 1940) ("A statute
should . . . be interpreted both as a whole and also in the light
of its general scope, tenor and purpose").
ILSFDA is a remedial statute enacted to prevent interstate
land fraud and to protect unsuspecting and ill-informed inves-
tors from buying undesirable land. See Kemp v. Peterson, 940
F.2d 110, 112 (4th Cir. 1991) ("The Act is designed to pre-
vent fraud and deception in the sale of undeveloped land");
Ahn v. Merrifield Center Ltd. P’ship, 584 F. Supp. 2d 848,
853 (E.D. Va. 2008). To this end, the statute requires that
specified disclosures be made prior to a purchaser’s execution
of a sales contract. See Ahn, 584 F. Supp. 2d at 853. See gen-
erally Conf. Rep. 90-1785 (1968), as reprinted in 1968
U.S.C.C.A.N. 3053, 3066 (describing purposes of disclosure
requirements as preventing material misrepresentations by
sellers). These disclosure requirements are designed to protect
purchasers by ensuring that "‘prior to purchasing certain types
of real estate, a buyer [is] apprised of the information needed
to insure an informed decision.’" Markowitz v. Ne. Land Co.,
906 F.2d 100, 103 (3d Cir. 1990) (quoting Cost Control Mktg.
& Mgmt., Inc. v. Pierce, 848 F.2d 47, 48 (3d Cir. 1988)).
Congress did not, however, intend that ILSFDA regulate all
sales of real property, and, accordingly, it provided a list of
specific exemptions. See 15 U.S.C. § 1702(a)-(b). Because
ILSFDA is a remedial statute, however, we construe its
exemptions narrowly. See Olsen v. Lake Country, Inc., 955
F.2d 203, 206 (4th Cir. 1991).
The Improved Lot Exemption of § 1702(a)(2) recognizes a
limit to the statute’s protections in circumstances where a pur-
chaser receives assurances that the lot he is purchasing either
already contains a building or structure or will contain one
within 24 months of the purchase date. The guarantee of con-
struction within a reasonably short time obviates some of the
concern that the purchaser may have about being hoodwinked
10 LONG v. MERRIFIELD
into buying an uninhabitable lot or a lot that will not have the
value anticipated by the contract. Construing the Improved
Lot Exemption narrowly will thus best serve ILSFDA’s pur-
poses. Thus, a sales contract, which requires a purchaser
immediately to undertake obligations and pay money to the
seller but permits the seller at its discretion to postpone con-
struction and delivery of the building or structure, would
undermine the purposes of ILSFDA.
In this case, if we were to construe § 1702(a)(2) as Merri-
field would have us do—that is, to find that the exemption
applies even if Merrifield’s obligation to build and deliver
condominiums extends to an indefinite date defined by two
years after it elects to ratify the contract—we would be
expanding the exemption to such an extent that the statutory
purposes could be frustrated or entirely defeated. The contract
purchasers would be incurring obligations and expenses on
the date they sign the contract, but the seller’s obligation to
build would extend to an indefinite period determined by
when the seller decides to ratify it. Such a scenario would nar-
row significantly the scope of transactions protected by ILS-
FDA, frustrating Congress’ purpose. See Ahn, 584 F. Supp. 2d
at 855 ("To confer on sellers the power to extend the two-year
period by delaying ‘ratification’—perhaps indefinitely—
would allow sellers to engage in an end-run around ILSFDA’s
protections, a result plainly contrary to Congress’s carefully
crafted scheme to protect property purchasers"). Accordingly,
the narrower construction of § 1702(a)(2), as advanced by the
contract purchasers in this case—that the two-year statutory
obligation begins when the purchaser signs the sales contract
—better serves the statute’s purposes.
This interpretation—that the time within which sellers are
obligated to build runs from the purchaser’s signing and
incurring obligations—also results in a systematic and coher-
ent scheme that fits the precontract protections given by ILS-
FDA for non-exempt sales. For instance, in non-exempt sales,
a printed property report must be provided to "the purchaser
LONG v. MERRIFIELD 11
or lessee in advance of the signing of any contract or agree-
ment by such purchaser." 15 U.S.C. § 1703(a)(1)(B) (empha-
sis added). In the event that such disclosures are not made, the
purchaser may revoke the contract within two years of the
date of the purchaser’s signing. See id. § 1703(c). This struc-
ture of coverage thus meshes well with the exemption so long
as the exemption is construed narrowly—i.e., such that the
date of the purchaser’s signing and incurring obligations, not
the date when the seller chooses to sign, begins the time
period in which the contract must oblige the seller to build
and deliver a condominium.
Regulations promulgated by HUD also support the inter-
pretation that the date of the purchaser’s signing commences
the period within which the seller must build the promised
structure. They provide, for example, that a seller may include
a "presale clause conditioning the sale of a unit on a certain
percentage of sales of other units . . . if it is legally binding
on the parties and 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 calcu-
lated from the date the first purchaser signs a sales contract
. . . ." 24 C.F.R. § 1710.5 (emphasis added). This provision
recognizes that presale conditions are permissible, but
explains that such conditions become enforceable when the
purchaser signs, even if the seller has not signed, and that they
cannot be used to extend the date for the seller’s performance
beyond two years after the purchaser signs. And, as with
other parts of the statute, this regulation begins the applicable
time period on the date that the purchaser signs. The opera-
tion of this regulation is consistent with a more general under-
standing that the relevant starting point for ILSFDA’s
regulation and exemption of contracts is the date of the pur-
chaser’s signing. This regulation also highlights the impor-
tance of the seller’s obligation to construct within two years
of the purchaser’s signing.
In addition, HUD has issued interpretive guidelines that are
specifically applicable to the Improved Lot Exemption of
12 LONG v. MERRIFIELD
§ 1702(a)(2). Its guidelines state, "The two-year period nor-
mally begins on the date the purchaser signs the sales con-
tract." Guidelines for Exemptions Available Under the
Interstate Land Sales Full Disclosure Act, 61 Fed. Reg.
13,601, 13,603 (March 27, 1996) (emphasis added). While
these guidelines are not binding, they are entitled to "some
deference" in interpreting the relevant statute. See Reno v.
Koray, 515 U.S. 50, 61 (1995); see also Christensen v. Harris
County, 529 U.S. 576, 587 (2000); Skidmore v. Swift & Co.,
323 U.S. 134, 140 (1944). Merrifield suggests that the use of
the word "normally" in the guidelines implies that the date of
the purchaser’s signing is not a mandatory start date for the
two-year term but simply a commonly understood one. But
this fails to recognize that the guidelines also state, "The con-
tract must not allow nonperformance by the seller at the sell-
er’s discretion. . . . [A]s a general rule delay or
nonperformance must be based on grounds cognizable in con-
tract law such as impossibility or frustration and on events
which are beyond the seller’s reasonable control." 61 Fed.
Reg. at 13,603 (emphasis added). Despite the guidelines’ pro-
hibition, the 24-month sales contracts for condominiums at
the Vantage condominium complex afforded Merrifield unfet-
tered discretion to delay its obligation to build. Thus, while
the contracts required purchasers to give deposits at the time
they signed and promptly thereafter to undertake to secure
financing, they did not begin Merrifield’s period of perfor-
mance until Merrifield chose to ratify the contracts, a date that
fell within its sole discretion.
Finally, and most immediately important, Merrifield sought
an advisory opinion from HUD, under 24 C.F.R. § 1710.17,
as to whether the Improved Lot Exemption and the 100 Lot
Exemption would apply to exempt both the 24-month and 36-
month contracts in this case. HUD responded by letter dated
November 3, 2005, and advised Merrifield that the Improved
Lot Exemption would apply to the 24-month contracts and, as
a result, the 100 Lot Exemption would apply to the 36-month
contracts. But the letter was explicitly predicated on HUD’s
LONG v. MERRIFIELD 13
understanding that construction of the condominiums would
take place "within two years from the date the purchaser
signs the Condominium Purchase Contract," not within two
years of ratification, as the contracts actually provided.
(Emphasis added). Therefore, rather than indicating that the
Improved Lot Exemption should apply to Merrifield’s 24-
month contracts, the HUD opinion actually indicates that it
should not apply.
Notwithstanding the statute, regulations, and guidelines,
Merrifield advances several contract-based arguments as to
why the Improved Lot Exemption’s two-year period begins to
run only upon the date that both parties have signed the con-
tract. First, it argues that the Virginia statute of frauds, which
provides that no contract for the sale of real property exists
until the contract is written and signed by the parties, requires
a conclusion that no contract existed until both parties signed.
It reasons, therefore, that § 1702(a)(2)’s two-year period for
constructing condominiums must begin when it ratifies the
contracts. The statute of frauds, however, requires a writing
and signature only "by the party to be charged." Va. Code.
Ann. § 11-2. Thus, in this case, the sales contracts became
binding against the purchasers upon the purchasers’ signing.
In the same vein, Merrifield also argues that when the pur-
chasers signed the sales contracts, they were merely offering
to enter into a contract—an offer that could be accepted or
rejected by Merrifield. It asserts that the provisions for depos-
its and financing were simply components of the offer. But
this argument fails to recognize the import of the deposit and
financing terms. The contracts provided that upon signing,
each purchaser had to pay Merrifield an initial deposit and,
within a short period, a second deposit, regardless of when
Merrifield ratified the contract. The purchasers were also
required, within a few days of signing, to obtain financing,
again regardless of when Merrifield ratified the contract.
Finally, the contract contained default provisions under which
the purchasers could lose some deposits as liquidated dam-
14 LONG v. MERRIFIELD
ages, again before Merrifield ratified the contract. Moreover,
at a more general level, the contract’s use of the term "ratifi-
cation" by Merrifield implied Merrifield’s validation of an
agreement that had already been reached.
Finally, in support of its position, Merrifield relies on the
Sixth Circuit’s decision in Becherer v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 43 F.3d 1054, 1066-67 (6th Cir. 1995),
which it describes as holding that the two-year period must be
measured from the time the contract was executed by both
parties. Instead, however, the Sixth Circuit held that
§ 1702(a)(2)’s two-year period began running on the date an
interim escrow account was closed, "as it was only then that
the parties became legally bound" under the contract. The
Becherer court thus did not face a factual circumstance like
the one in this case, where the obligations of the purchasers
were created before the seller’s period for performance com-
menced. See id. at 1066. Indeed, consistent with the conclu-
sion that we reach in this case, the Sixth Circuit recognized,
in dictum, that the HUD regulations provide that "‘the con-
tract must not allow nonperformance by the seller at the sell-
er’s discretion.’" Id. at 1067 (quoting 24 C.F.R. Pt. 1710,
App. A. subpt. IV(b)).
III
In sum, we conclude that the Improved Lot Exemption of
15 U.S.C. § 1702(a)(2) requires that a sales contract, to be
exempt, must oblige the seller to build and deliver the prom-
ised building within two years after the purchaser signs the
contract and incurs obligations. Because the 24-month sales
contracts in this case did not require Merrifield to construct
and deliver the subject condominiums within two years of
when the purchasers signed the contracts and incurred obliga-
tions, but rather obligated it to complete the construction
within two years of when it, in its discretion, chose to ratify
the contracts, the contracts were not exempt under
§ 1702(a)(2). With this conclusion, the 100 Lot Exemption
LONG v. MERRIFIELD 15
also could not have applied to the plaintiffs’ contracts because
there were more than 100 non-exempt units. See 15 U.S.C.
§ 1702(b)(1).
Accordingly, we reverse the district court’s order dismiss-
ing the plaintiffs’ ILSFDA claims and remand for further pro-
ceedings.
REVERSED AND REMANDED