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Markowitz v. Northeast Land Co.

argued: January 22, 1990.

TOBYE R. MARKOWITZ, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
v.
NORTHEAST LAND COMPANY, TOBYE R. MARKOWITZ, APPELLANT



On Appeal from the United States District Court for the Middle District of Pennsylvania; D.C. Civil Action No. 88-1873.

Sloviter, Hutchinson and Cowen, Circuit Judges.

Author: Hutchinson

Opinion OF THE COURT

HUTCHINSON, Circuit Judge.

I.

Tobye R. Markowitz (Markowitz) appeals an order of the United States District Court for the Middle District of Pennsylvania granting defendant Northeast Land Company's (Northeast's) motion to dismiss her amended complaint. In the amended complaint, Markowitz claimed that Northeast's contracts for the sale of lots on which it promised to build condominiums for the buyers violated the Interstate Land Sales Full Disclosure Act (Act), 15 U.S.C.A. §§ 1701-1720 (West 1982 & Supp. 1990). The district court held that the sales contract between Markowitz and Northeast required Northeast to complete construction of her condominium unit within two years of the sale date. Sales in which the developer contracts to meet its obligations within two years are exempt from the Act's coverage under 15 U.S.C.A. § 1702(a)(2) (West 1982). As a result, the district court refused to exercise pendent jurisdiction over the remainder of Markowitz's complaint, which asserted only state law claims, dismissed as moot her motion seeking class certification and dismissed her complaint in its entirety.

We do not agree that the contract between Markowitz and Northeast obligated Northeast to complete construction of the condominium within two years of the sale. We will therefore reverse the district court's order holding that she failed to state a claim under the Act, vacate its order dismissing her pendent state law claims, as well as its order dismissing as moot her motion seeking class certification, and remand this matter for further proceedings.

II.

This suit arose out of Markowitz's purchase of residence number 187 of the Midlake on Big Boulder Lake Condominium in Carbon County, Pennsylvania, from Northeast. According to Markowitz's amended complaint, both she and Northeast are Pennsylvania citizens.

Markowitz's suit concerns events that occurred after Northeast completed construction of her unit. In her amended complaint,*fn1 Markowitz claims that the heating and cooling system in her condominium unit failed to operate properly; in the summer the temperature was too warm, and in the winter it was too cold. One winter, according to the amended complaint, the heating system shut off, the water pipes froze and the bursting pipes caused water damage to the property. Markowitz claims she was further damaged because the system needed constant repairs and because of loss of use of the premises and loss of rental income.

In her amended complaint, Markowitz claimed she had a federal remedy in the district court for the problem with her heating and cooling system because Northeast had violated the Act. She also asserted several separate state law causes of action and sought certification of her suit as a class action. In her claim under the Act, Markowitz stated that Northeast planned to construct more than twenty-five units. Additionally, Markowitz asserted that, at the time of the sale, unit 187 was yet to be completed. Both of these allegations are required to state a claim under the Act. See 15 U.S.C.A. § 1702(a)(1) (West 1982) (Act does not apply to sale of a lot in a subdivision containing fewer than twenty-five lots); 15 U.S.C.A. § 1702(a)(2) (West 1982) (Act does not apply to the sale of any improved land on which there is a condominium building at the time of sale).

There is a third prerequisite to a claim under the Act, and it is the presence or absence of this third prerequisite that will determine the outcome of this appeal. Among other things, § 1702(a)(2) exempts from the Act's coverage "the sale or lease of land under a contract obligating the seller or lessor to erect [a residential, commercial, condominium, or industrial] building thereon within a period of two years. . . ." 15 U.S.C.A. § 1702(a)(2).

In the text of her amended complaint, Markowitz said nothing about the time Northeast had to complete its contract, but she did attach and incorporate the agreement of sale between her and Northeast. Seizing on language in the agreement, Northeast moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss Markowitz's amended complaint for failure to state a claim under the Act.

The district court held that under the language of the agreement "Northeast Land Company was obligated to complete construction of the plaintiff's condominium unit within two [2] years." As a result, it dismissed Markowitz's claim that Northeast had ...


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