Opinion ID: 381032
Heading Depth: 2
Heading Rank: 2

Heading: The ILSFDA

Text: Equitable Tolling 16 The statute of limitations governing plaintiffs' second theory of recovery poses a different problem. The sufficiency of the allegations of fraudulent concealment and due diligence becomes irrelevant if, as the district court decided, the statute of limitations under the ILSFDA does not admit to any equitable exceptions. 17 Because the Supreme Court has declared that equitable tolling principles are read into every federal statute of limitation, Holmberg v. Armbrecht, 327 U.S. 392, 397, 66 S.Ct. 582, 585, 90 L.Ed. 743 (1946); see also Esplin v. Hirschi, 402 F.2d 94, 103 (10th Cir.), cert. denied, 394 U.S. 928, 89 S.Ct. 1194, 22 L.Ed.2d 459 (1969), we are reluctant to interpret a federal statute as imposing an absolute bar. This broad rule, however, must be read in light of congressional prerogative. When applying equitable doctrines, the Supreme Court has specifically noted the absence of any indication of contrary congressional intent. See, e.g., Glus v. Brooklyn Eastern District Terminal, 359 U.S. 231, 234, 79 S.Ct. 760, 762, 3 L.Ed.2d 770 (1959); Holmberg v. Armbrecht, 327 U.S. at 395, 66 S.Ct. at 584. See also United States v. Reliance Insurance Co., 436 F.2d 1366, 1370 (10th Cir. 1971). 18 We find the language of the ILSFDA indicative of such a contrary congressional intent. The statute of limitations under the Act appears to preclude the operation of the equitable tolling doctrine. When this suit was brought, the statute read: 19 No action shall be maintained to enforce any liability created under section 1709(a) or (b)(2) of this title unless brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence, or, if the action is to enforce a liability created under section 1709(b)(1) of this title, unless brought within two years after the violation upon which it is based. In no event shall any such action be brought by a purchaser more than three years after the sale or lease to such purchaser. 20 15 U.S.C. § 1711 (emphasis added). The last sentence of this section uses strong and unambiguous terms which, if not meant to create an absolute bar to untimely suits under the ILSFDA, are extraneous and meaningless. Statutory interpretation, then, directs us to the conclusion that (w)here the statute expressly provides for a tolling period for fraudulent concealment, and then includes a secondary date which 'in no event' can be surmounted, there is good basis for the belief that the latter date was intended as an absolute barrier to the filing of suits. Timmreck v. Munn, 433 F.Supp. 396, 408 (N.D.Ill. 1977). 21 With few exceptions, courts addressing the problem have found that the three-year limitation in the ILSFDA cannot be tolled by equitable principles. 7 See Timmreck v. Munn, 433 F.Supp. at 408-09; Husted v. Amrep Corp., 429 F.Supp. 298, 306 (S.D.N.Y. 1977); Hester v. Hidden Valley Lakes, Inc., 404 F.Supp. 580, 582 (N.D.Miss. 1975); Maher v. J. R. Williston & Beane, Inc., 280 F.Supp. 133, 137 (S.D.N.Y. 1967). Contra, Fuls v. Shastina Properties, Inc., 448 F.Supp. 983, 987-88 (N.D.Cal. 1978); Happy Investment Group v. Lakeworld Properties, Inc., 396 F.Supp. 175, 188 (N.D.Cal. 1975). This interpretation is consistent with the interpretation generally given the similar terms of the statute of limitations under § 13 of the Securities Act of 1933, the statute upon which the ILSFDA was based. See, e.g., Timmreck v. Munn, 433 F.Supp. at 408; United States v. Del Rio Springs, Inc., 392 F.Supp. 226, 228 (D.Ariz. 1975). The three-year limitation in the 1933 Act, 15 U.S.C. § 77m, has been held to be an absolute bar, notwithstanding allegations of fraudulent concealment. See Brick v. Dominion Mortgage & Realty Trust, 442 F.Supp. 283, 291 (W.D.N.Y. 1977); Fischer v. International Telephone & Telegraph Corp., 391 F.Supp. 744, 748 (E.D.N.Y. 1975); Shonts v. Hirliman, 28 F.Supp. 478, 486 (S.D.Cal. 1939); Cowsar v. Regional Recreations, Inc., 65 F.R.D. 394, 399, (M.D.La. 1974). Finally, finding the ILSFDA to contain an absolute bar is consistent with later congressional action. In 1979 the ILSFDA was amended to extend the unduly short maximum limitation to three years after the discovery of the violation or after discovery should have been made. H.R.Rep. No. 154, 96th Cong., 1st Sess. 38, reprinted in (1979) U.S.Code Cong. & Admin.News, 2317, 2354. Time of Sale 22 Plaintiffs next argue that even if their right to sue under the ILSFDA is irretrievably lost three years after the sale of the property, this suit is not barred because a sale is not complete until all installments on the real estate contract are paid. 23 The regulations issued under the ILSFDA define sale as any obligation or arrangement for consideration to purchase. 24 C.F.R. § 1710.1(n). This definition emphasizes the legal obligation to purchase rather than the payment or receipt of title 8 by the purchaser, and interpreting courts have uniformly found the sale to be at the time of signing the initial contract. See Fogel v. Sellamerica, Ltd., 445 F.Supp. 1269, 1275 (S.D.N.Y. 1978); Husted v. Amrep Corp., 429 F.Supp. 298, 305-06 (S.D.N.Y. 1977); Bongratz v. WL Belvidere, Inc., 416 F.Supp. 27, 29 (N.D.Ill. 1976); Davis v. Rio Rancho Estates, Inc., 401 F.Supp. 1045, 1048 (S.D.N.Y. 1975). It is entirely consistent with stated congressional objectives to define sale in a real estate market as contract formation rather than contract discharge. Real estate payments are commonly not completed for decades. 9 We are sensitive to the need for curbing unscrupulous real estate developers' incentive for fraudulently inducing purchasers to continue making payments on worthless contracts. However, we are limited by a statute which represents a cautious intrusion into a new field of federal regulation 10 and we are not at liberty to extend liability as plaintiffs suggest. We therefore affirm the district court's finding that plaintiffs' claims under the ILSFDA are barred. 24 We affirm the district court's dismissal of the claim under the ILSFDA and reverse as to the claims based on federal securities laws for further proceedings.