The Georgia Court of Appeals has revived a suit brought by residents of an upscale Atlantic Station condominium claiming that the developer marketed their units' "spectacular city views" while knowing those vistas would soon be obscured by another high-rise the developer had planned.
A Fulton County Superior Court judge dismissed the suit last year. But the Court of Appeals said the judge should not have relied on language in the sales contracts in which the buyers disclaimed any verbal or other guarantees about the condos that could have been made by sales agents.
"We're very encouraged," said
Weinstock & Scavo associate James R. Fletcher II, who worked on the appeal. "In this case, the Court of Appeals opinion reaffirms the principle that these defendants are not entitled to conceal their plans to block the view from the building with another building, and then try to hide behind the details of a contract."
"This is not a case about buyer's remorse," added Fletcher. "It's about seller's deceit."
Queries to the defense team, Troutman Sanders partners William M. Withrow Jr. and Thomas E. Reilly and associate Brian P. Watt, were forwarded to Novare, which provided an e-mailed statement.
"The Court of Appeals' ruling is based purely on the allegations of plaintiffs' complaint and not on any evidence, and is not a decision on the merits of Plaintiffs' surviving claims," the e-mail said. "Novare fully expects to prevail on the merits of this case, The very thing about which the plaintiffs complain in this case was expressly addressed with disclosures in Plaintiffs' purchase agreements and condominium documents that the views from their condominiums could change due to future development. As a result, the company intends to seek further judicial review of the decision and intends to continue to vigorously defend itself."
The suit was filed Dec. 31, 2008, by eight plaintiffs who purchased units on the southern side of the 26-story Twelve Atlantic Station Hotel and Residences "in or about early 2006," and named as defendants developer Novare Group and its affiliates, two corporate officers and Atlantic Station LLC. The suit accused the developers and their agents of emphasizing the downtown panorama from the units on that side of the building and promising that no other building would obscure that view.
The buyers said they were assured that any new construction "would be a low to mid rise office building" that "would not be built for at least five years."
The suit said Novare and Atlantic Station had in fact already signed a letter of intent in 2005 agreeing to develop another high-rise, the 47-story Atlantic, across 17th Street and just south of the Twelve.
When the suit was filed, the plaintiffs' attorney Michael Weinstock—whose son is one of the plaintiffs—told the Daily Report that southern-side units were more expensive.
The complaint included allegations of fraud and negligence, later adding violations of Georgia's Fair Business Practices Act. It asked the court to rescind the sales contracts and award damages and attorneys' fees.
The defense countered that the contracts clearly stated that that no oral or written statements by anyone outside of the written language of the contract itself was binding upon the parties, and that—since there was no guarantee of any particular view in those agreements—the unhappy buyers had no claim.
Further, they noted, there was even language included in the contracts that the views from the units "may change over time due to, among circumstances, additional development … ."
On Oct. 8, 2009, Fulton County Superior Court Judge Alford J. Dempsey Jr. granted a defense motion for judgment on the pleadings, ruling that the multiple disclaimers in the contract relating to guarantees from sales brokers and the possibility of changing views or lighting had put the buyers on notice that their views might change.
The judge concluded that the buyers had waited too long to seek rescission of the contracts; there had been public disclosure of the planned construction of the 47-story Atlantic condominium tower between March and May of 2006, said his order.
"Despite such notice, plaintiffs waited until Dec. 31, 2008, over two-and-a-half years later, to take any action to tender rescission of their purchase agreements," said his order. "Accordingly, this court holds as a matter of law that plaintiffs failed to timely demand or tender rescission of purchase agreements and have affirmed [them.]"
But the appeals court ruled that Dempsey had erred in dismissing the case. While it upheld portions of his order, including dismissal of negligence counts against two Novare officers, it reversed his dismissal of claims of fraud in the inducement by actual concealment, negligent misrepresentation, negligent supervision and violations of the Georgia Fair Business
Practices Act.
The opinion, written by Chief Judge M. Yvette Miller with the concurrence of presiding Judges Herbert E. Phipps and Edward H. Johnson, noted that for the purpose of the appeal of a motion on the pleadings, the facts laid out by the appellants, in this case the purchasers, are presumed to be true.
Given that presumption, the purchasers had "sufficiently set forth a claim of active fraud via active concealment" by asserting that the developers intentionally concealed their plans to build a high-rise taller than the Twelve directly across from it.
The appeals court also ruled that, contrary to the lower court's order, the purchasers had not affirmed their contracts, including the important disclaimer language. Although the original complaint did not contain a separate claim seeking to rescind the contracts, Miller wrote, the plaintiffs had sought that relief, and the fact that they did not sue for breach of contract indicated that they did not consider themselves to have accepted all of the contract terms.
As to the allegations of violations of the Fair Business act, Miller wrote that the lower court should not have ruled that the act's two-year statute of limitations barred any claims. While the original complaint mentioned a March 2006 news story reporting on the possibility of a building in that area, it was not until September 2008 "when it became apparent that construction of The Atlantic blocked their views and that value of their properties would be substantially diminished," wrote Miller.
Since the statute of limitations did not apply, the plaintiffs' claims that they had relied on false information when they purchased their units could also be heard under the Fair Business act, she wrote, because "justifiable reliance [is] an essential element of the FBPA … ."
Fletcher and fellow Weinstock associate W. Hennen Ehrenclou said the order gave them renewed hope that their clients would have their day in court.
"The Georgia Legislature has recognized in the Fair Business Practices Act that businesses can't use small-print disclosures to circumvent the act," said Ehrenclou. "These [clauses] were inserted by the sellers knowing they were going to need them later."
The Appeals Court case is Sarif v. Novare Group, No. A10A0972.
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