Dalzell v. Trailhead Lodge at Wildhorse

The issue this case presented for the Tenth Circuit's review centered on whether the developer of a master-planned subdivision (master developer) was liable under the Interstate Land Sales Full Disclosure Act when a different developer sells units in a condominium project in the subdivision without providing a property report or making a statement of record available, as required by 15 U.S.C. 1703(a)(1)(A)-(B). RP Steamboat Springs, LLC was formed for the purpose of developing a mixed-housing, master-planned subdivision in Steamboat Springs, Colorado, called Wildhorse Meadows. RP entered into an agreement with the City of Steamboat Springs to develop Wildhorse Meadows. As master developer and initial owner of the Trailhead parcel, RP engaged in a variety of marketing activities through its listing agent, S&P Properties, for the development as a whole and for Trailhead Lodge specifically. A group of investors formed Trailhead Lodge at Wildhorse Meadows, LLC for the purpose of developing the Trailhead Lodge condominiums. Trailhead LLC hired Resort Ventures as its management company and S&P Properties as its listing and marketing agent. S&P Properties and Trailhead LLC's unsuccessfully tried to negotiate a separate project agreement for the Trailhead Lodge. RP entered into a project agreement with S&P Properties concerning Trailhead Lodge and then assigned all of its rights, title, and interest in the Trailhead Project Agreement to Trailhead LLC. RP transferred the Trailhead parcel to Trailhead LLC by special warranty deed. Two days before Trailhead LLC officially obtained ownership of the Trailhead parcel, several Buyers entered into (substantially identical) preconstruction purchase and sale agreements with Trailhead LLC. RP was not a signatory to the Contracts, but it was mentioned as the master developer. Buyers each paid a deposit toward the purchase of their respective Trailhead Lodge units. At the time Trailhead LLC entered into the Contracts with Buyers, no one had filed a statement of record with the Department of Housing and Urban Development for Trailhead Lodge, nor were Buyers provided a property report, as required by the Interstate Land Sales Full Disclosure Act. As a result of this failure, Buyers had the right to rescind the Contracts within two years after signing, which they did. The now-insolvent Trailhead LLC did not return the deposits Buyers paid under the Contracts. Buyers filed this action Trailhead LLC, RP, and S&P Properties. Among other claims, Buyers alleged Trailhead LLC, RP, and S&P Properties all qualified as developers under the Land Sales Act and that they violated the Land Sales Act by failing to file a statement of record and failing to provide a property report when Buyers purchased the condominium units. The district court subsequently granted Buyers' motion for summary judgment against Trailhead LLC on the Land Sales Act claims. Buyers later settled all claims against S&P Properties, and S&P Properties was dismissed from the case. Buyers and RP agreed to submit those Land Sales Act claims to the district court on written briefs, supporting affidavits, and stipulated facts. In its ultimate findings of fact and conclusions of law, the district court ruled that RP was not liable under the relevant provisions of the Land Sales Act. Buyers timely appealed. The Tenth Circuit concluded that because the master developer in this case, RP Steamboat Springs, LLC (RP), neither directly nor indirectly sold the condominium units at issue, it was not liable under the Land Sales Act. The Court therefore affirmed the district court's ruling in favor of RP. View "Dalzell v. Trailhead Lodge at Wildhorse" on Justia Law