You are on page 1of 19

Florida Business Law Case Summaries

Prepared and Presented by: The Association for Law and Business
University of Florida Levin College of Law
Presenter: Miriam Cortes

Bellon v. Acosta, 34 Fla. L. Weekly D1047a (Fla. 3d DCA 2009)

Concepts: Contracts, Finance Contingency Clause, Sale of Residential Real Estate,


Deposit

Appellants, Erik and Amy Bellon (“Sellers”), appeal a judgment awarding Defendants-
Appellees, Julio and Christine Acosta (“Buyers”), entitlement to the possession of a
deposit for the purchase of residential real estate. Buyers entered into a contract to
purchase Sellers’ home and paid a deposit. The contract contained a financing
contingency clause, which provided Buyers with a commitment period of twenty business
days in which to provide written notification to the Sellers stating whether or not Buyers
had obtained a loan commitment. Having interpreted the contract terms differently,
Buyers did not provide any written notification to the sellers regarding the status of their
loan application until after the twenty business days had passed. Unable to secure a loan
commitment, Buyers provided Sellers written notification of termination of the contract,
and demanded return of their deposit. Sellers refused relying upon the contract provision
authorizing Sellers to retain the deposit if Buyers failed to provide written notification to
Sellers of their inability to obtain a loan commitment.

On appeal, Sellers argued the trial court erred in granting judgment in favor of Buyers
because the contract provision specifically provides for deposit forfeiture where Buyers
are unable to meet the contract terms. Sellers argued that the provision applies where
Buyers did not provide the required notification on or before the last day of the
commitment period, Buyers failed to obtain financing, and the transaction failed as a
result. The Third District reversed, agreeing with Sellers that the contract language did
require Buyers to provide written notification to Sellers on or before the twentieth
business day, and should Buyers fail to provide such notification, the deposit is forfeited
in favor of Sellers. The Third District noted that any financing contingency clause should
contain a procedure for notifying Seller that the contingency is met, and that the
contingency actually has been met or that the contingency has been waived.

1
Foxfire Properties, LLC v. Foxfire Owners Assoc., Inc., 34 Fla. L. Weekly D936a (Fla.
2d DCA 2009)

Concepts: Arbitration, Restrictive Covenants, Real Property, Homeowners Association,


Contract

Defendants-Appellants, Firefox Properties, LLC (“Firefox Properties”) and Sugar Loaf


Environmental Holdings, LLC (“Sugar Loaf”), appeal an order denying their motion to
compel arbitration. Subsequent to obtaining a grant to rezone a vacant parcel adjoining
the golf course, Firefox Golf Course and Firefox Owners Association, Inc. (“the Owners
Association”) entered into and recorded a Covenant and Restriction, which restricted
Firefox Golf Course to using the property for golf course and country club uses only. The
vacant parcel was rezoned and developed into a residential subdivision, and the golf
course continued to operate as a golf course and country club. Foxfire Golf Course
subsequently sold one-half of the golf course property to Foxfire Properties, and leased
the remaining one-half of the golf course property to Sugar Loaf. On the same date as the
purchase, Foxfire Properties and Sugar Loaf closed the golf course. Foxfire Golf Course
then assigned the obligations of the Covenant and Restriction to Firefox Properties,
which Firefox Properties accepted.

Firefox Properties and Sugar Loaf filed suit against the Owners Association to cancel and
terminate the Covenant and Restriction on the basis that “[n]ew governmental laws,
statutes, ordinances, rules or regulations” either “effectively prohibit[ed] the use of the
[property as a] golf course . . . or ma[de] such use no longer economically feasible.”
Firefox Properties and Sugar Loaf subsequently filed a motion to compel arbitration. The
trial court denied the motion to compel arbitration on the basis that a section of the
Covenant and Restriction required Foxfire Properties and Sugar Loaf to continue
operating the golf course in order to effectuate arbitration.

On appeal, Foxfire Properties and Sugar Loaf argued the trial court erred in denying their
motion to compel arbitration because the Covenant and Restriction did not place an
affirmative obligation on them to continue operating and using the property as a golf
course. In addition, Foxfire Properties and Sugar Loaf argued it was error for the trial
court to impose a continuing obligation as a condition precedent to arbitration. The
Owners Association argued the arbitration clause was created to apply only in
circumstances where the golf course is open and the continued use and operation of the
golf course is no longer economically feasible. The Second District reversed, agreeing
with Firefox Properties and Sugar Loaf that the Covenant and Restriction did not indicate
the arbitration provisions were ineffectual if the golf course was closed without a finding
of economic infeasibility. The court agreed the Covenant and Restriction worked as a
restriction on the use of the property but it did not create an affirmative duty to operate a
golf course.

2
Foreclosure Freesearch, Inc. v. Sullivan, 34 Fla. L. Weekly D860a (Fla. 4th DCA
2009)

Concepts: Corporations, Reverse Stock Split, Appraisal, Injunction

The Plaintiff, Freesearch Inc., is a website providing information about foreclosures


around the country. The Defendants are Sullivan and Mutillo who were each 20%
shareholders in Freesearch until Plaintiff terminated their shareholder status in December
2004. Plaintiff sued Defendants for declaratory relief stating that they were not
shareholders because they fraudulently induced Freesearch into treating them as
shareholders by not paying for their shares. Defendants counterclaimed against Plaintiff
and filed a third party claim against Freesearch’s founder for breach of fiduciary duty,
unpaid dividends and quarterly financial information, judicial dissolution of Freesearch,
disclosure of Freesearch's corporate records, and equitable estoppel against Freesearch
for denying Defendants’ position as shareholders.

On April 8, 2008, the founder adopted a reverse stock split which eliminated all of the
minority stockholder shares so that he could end the litigation in the “fairest way
possible,” which triggered Defendants’ statutory appraisal rights entitling them to obtain
payment of the fair market value of the stock. Plaintiff mailed Defendants a written
appraisal notice and form warning that they would waive their rights to appraisal if they
did not return the enclosed form by the end of the statutory period. In the notice, Plaintiff
also informed Defendants that it was not waving its right to assert that Defendants were
not stockholders and that they were not entitled to appraisal rights. After the trial court
convinced the parties to settle on some issues, the parties stipulated to some facts and the
trial court dismissed some of their claims. The Defendants then filed a motion for
temporary injunction to enjoin the appraisal process which the trial court granted because
they found that the appraisal notice was void since Plaintiff was asserting that Defendants
were not stockholders. Plaintiffs appealed from this order.

The Fourth District reversed the trial court’s order granting the motion for temporary
injunction enjoining the appraisal process because the Fourth District found that the
appraisal notice was not void even though Plaintiff was claiming that Defendants were
not shareholders and therefore the appraisal process provided Defendants an adequate
remedy at law. The Fourth District also found that Defendants were shareholders because
they had copies of stock certificates issued by Plaintiff, and they were listed as
shareholders on the record when the Plaintiff sent them their notice of appraisal rights as
required by Florida statutes. Both parties also stipulated that Defendants were
shareholders as of December 31, 2000 which the trial court incorporated into its dismissal
of one of the party’s claims. The court found that Defendants could not, after stipulating
to this, then say that their status as shareholders was in question.

The Fourth District also found that based on the applicable Florida Statutes the
Defendants were entitled to discovery during the appraisal process so that they could
receive relevant information regarding Freesearch. The Fourth District also found that

3
Defendants would be entitled to a judicial determination of the stock’s value and would
not have to accept the Plaintiff’s offer regarding the stock’s value.

Defendants argue on appeal that the trial court was correct in ordering an injunction of
the appraisal process because it would produce an unfair result. The Fourth District
disagreed, saying that Defendants’ remaining claims may entitle them to relief beyond the
appraisal process.

4
Lorillard Tobacco Co. v. French, 34 Fla. L. Weekly D915a (Fla. 3d DCA 2009)

Concepts: Attorney’s Fees, Offer of Judgment, Prejudgment Interest

Defendant Lorillard Tobacco Company appeals an award of more than five years of
statutory prejudgment interest to Plaintiff’s attorneys. The only issue before the Third
District was the accrual date for prejudgment interest. Plaintiff, a flight attendant, sued
the tobacco companies for exposure to second-hand smoke. She made an offer of
judgment to settle for $2,676 which Defendants turned down. After the trial court
granted a motion for remittitur and amended Plaintiff’s original jury award, the Supreme
Court of Florida denied Defendant’s appeal, and Defendants paid the amended final
judgment of $500,000 to Plaintiff. Plaintiff moved for an award of attorney's fees and
costs incurred after the offer of judgment was made, together with prejudgment interest
on that amount commencing from the date of entry of the amended final judgment.
Defendant argued that prejudgment interest did not begin accruing until April 2007 when
the trial court entered an order disallowing Defendant's objections to the validity of the
offer of judgment and Plaintiff's good faith in making the offer, which Defendant did not
appeal. In March 2008, the trial court ruled that prejudgment interest began accruing five
years earlier, when the amended final judgment was entered.

On appeal, Defendant argued that prejudgment interest does not begin to accrue until “the
entry of judgment making the determination of the entitlement to such fees,” relying on
Hilb, Rogal & Hamilton Co. of Fort Myers v. TB & Associates, Inc., 742 So. 2d 256, 257
(Fla. 2d DCA 1997). The Third District distinguished that case from the instant case and
affirmed relying on the language in the rule and statute on settlement offers. The Third
District said that the rule and statute make clear that a plaintiff is entitled to an award of
attorney’s fees and costs from the date the written offer has been made in accordance with
Florida law and Rule 1.442 and when a plaintiff who is an offeror under section 768.79
receives a judgment that is at least 25 percent greater than the offer. The trial court has
discretion to disallow the award if the proposal was not made in good faith. But the
Third District interpreted the use of “disallow” as meaning that the accruing of interest
begins when the qualifying conditions have occurred, which in this case was in 2002.

5
Meruelo v. The Mark Andrew of the Palm Beaches, Ltd, 34 Fla. L. Weekly D907a (Fla.
4th DCA 2009)

Concepts: Contract, Real Property Sale, Implied Covenant of Good Faith and Fair
Dealing.

Appellants, Homero Meruelo and the Merco Group of the Palm Beaches (“the Buyers”)
appeal the trial court’s denial of their Motion for Directed Verdict as to Count II of their
complaint, which alleged that “the Buyers had breached the implied duty of good faith
and fair dealing by failing to seek approval of a site plan in excess of 600,000 square feet
of air-conditioned saleable space.”

The pertinent language of the addendum to the contract is: “The current site plan for the
Property provides for the construction of approximately 784,000 gross square feet of
space. In the event Buyer is able to obtain approval to construct a total of 600,000 square
feet or more of air conditioned saleable square feet of space, Buyer will pay to Seller an
additional Five Million Dollars ($5,000,000.00).”

The Fourth District found that the addendum did not impose a duty on the buyers to seek
approval for building a different sized building; rather it was a bonus clause if the buyer
chose to seek, and gained approval to build a building larger than 600,000 square feet.
The Fourth District concluded that the trial court committed plain error and that manifest
miscarriage of justice would result if they held the buyer to have breached a duty that did
not exist by the plain language of the contract.

6
M.I. Industries USA Inc. v. Attorneys' Title Insurance Fund, Inc., 34 US Fla. Weekly
D85b (4th DCA 2009)

Concepts: Injuction, Freezing Accounts

M.I. Industries is appealing the trial court’s ruling that dissolved an injunction against
Title Insurance Fund (“the Fund”). The Fund had a member-agent who allegedly
participated in illegal flipping of property with M.I., who then funneled the profits
through his attorney’s trust account and some bank accounts that belonged to M.I. The
Fund’s title insurance and closing documents were used to close these deals so they
believed they should retain the profits to insure non-party purchasers. The trial court
granted the injunction requested by the Fund and denied the motion by M.I. to dissolve
the injunction. This appeal followed.

Freezes on bank accounts are generally not supported by the courts through injunctive
relief. However, an exception exists when the injunctive relief is needed to protect that
which is essential to the litigation. The Fourth District found that because the funds from
the interaction of the Fund and M.I. were co-mingled, and because money damages could
be granted to the Fund, the motion to dissolve the injunction should be granted. Even
though the Fund argues that M.I. may dissipate the assets and they will not be able to
collect, this is not reason to retain the injunction order. The trial court’s denial of M.I.’s
motion to dissolve is reversed.

7
Integrated Sec. Services v. Skidata, Inc., 609 F.Supp.2d 1323 (Fla. S.D. 2009)

Concepts: Alternative Dispute Resolution, Arbitration, Tortious Interference,


Unconscionable

Plaintiff, a distributor of parking and revenue collection equipment (“Distributor”),


brought a claim of tortious interference of a contractual relation claim and a defamation
claim against the manufacturer of the equipment (“Manufacturer”). The Manufacturer
terminated the distribution agreement it had with the Distributor (“Agreement”), which
then prevented the Distributor from fulfilling its obligations under an agreement with the
Port of Miami. Furthermore, it was alleged that the Manufacturer thereafter started
negotiations with the Port of Miami. The Manufacturer filed a motion to compel
arbitration, or in the alternative, a motion to dismiss. Consequently, the Distributor
argued that the arbitration clause of the Agreement was not valid since it would be
unconscionable to do so. The Manufacturer also argued that even if the arbitration clause
was still valid, the claims raised were not in relation to the Agreement and therefore not
subject to arbitration. A district court usually reviews three factors when reviewing a
motion to compel arbitration: (1) whether a valid agreement exists; (2) whether an
arbitrable issue exists and (3) whether the right to arbitrate was waived.

The Southern District court reasoned that a challenge to a validity of an agreement in its
entirety is in itself an arbitrable issue. Additionally, as the Eleventh Circuit previously
held, the test to determine if a claim is covered by the arbitration clause is weather it was
foreseeable. However, the Southern District court noted that in the event an arbitration
clause is susceptible to broad language, like in this case, then it could be inferred that the
tortious claim by the Distributor arose out the Agreement and therefore was foreseeable
and subject to arbitration. Furthermore, the defamation claim stated that Manufacturer’s
alleged communication with the Port of Miami included information regarding the
Distributor’s ability to comply with the terms of the Agreement, therefore also subject to
arbitration. As a result, the Southern District granted the motion to compel arbitration
and directed the parties to proceed to arbitration in New Jersey.

8
Labry v. Whitney Nat’l Bank, 34 Fla. L. Weekly D885a (Fla. 1st DCA 2009)
st

Concepts: Guaranty, Personal Jurisdiction, Minimum Contacts

Ed Labry and two other appellants (“Guarantors”) appealed a denial of a motion to


dismiss. Guarantors signed personal guaranties on a loan by Whitney National Bank
(“Lender”) to AB9G, LLC, a Florida corporation. After a default on the loan, Lender
demanded payment from Guarantors under the guaranties. Guarantors argued that
Florida courts did not have personal jurisdiction over them since they were residents of
Tennessee, where the guaranties were also executed. At issue, was whether the facts of
the transaction asserted personal jurisdiction over the Guarantors, and whether the
elements for “minimum contact” were met in order to satisfy due process.

On the original complaint, the Lender alleged that under Fla. Stat. § 48.193(a),
jurisdiction was appropriate because Guarantors “engaged in business in Walton County,
Florida.” On appeal however, the Lender also claimed that jurisdiction could also be
asserted under Fla. Stat. § 48.193(g) because an alleged breach of contract in Florida by
the Guarantors. The court found that although personal jurisdiction could be asserted
under the statute, there was an issue with satisfying due process under the minimum
contact test. Particularly, since the Guarantors were not Florida residents, did not have
businesses in Florida, and did not own any personal property in Florida. Furthermore,
nothing in the guaranties delineated any obligation in Florida other than default payments
were to be made in Florida. The court further reasoned that Defendants’ conduct in the
forum state must be reasonable in order to anticipate a possible suit there. As a result, the
First District held that although the Guarantors had a contractual duty in Florida, the
record failed to satisfy the constitutionality of the minimum contacts test and personal
jurisdiction could not be asserted. Therefore, the motion to dismiss was reversed.

9
Santidrian v. Landmark Custom Ranches, Inc., 2009 WL 210668 (S.D. Fla. 2009)

Concepts: ILSA, Developer

Santidrian brought an action against Landmark under the Interstate Land Sales Act
(ILSA) in the United States District Court for the southern district of Florida. Santirian
attempted to amend the initial complaint to add the President of Landmark as an
individual defendant. The president of Landmark met with Santidrian on several
occasions during the buying process and on the day of the closing. The Court held that
the president’s meeting with the buyer was sufficient to allege that the president was a
developer as defined under the ILSA. This holding allowed Santidrian to name the
president personally in an amended complaint.

Salazar v. Santa Barbara Townhomes of Homestead, Inc., 2009 U.S. App. LEXIS 2181
(11 Cir. Feb. 2009)

Concepts: ILSA, Remedies, Illusory Contract

This case is an appeal from the United States District Court, Southern District of Florida
arising from the granting of a motion to dismiss. Salazar had contracted with Santa
Barbara to construct and purchase a home. Appellants sought to have the contract
declared not in compliance with the Interstate Land Sale Full Disclosure Act (ILSA),
illusory, and thus void. The court held that the sales contract expressly exempted the
transaction from the ILSA by providing that the delivery of the home would be within
two years, the terms of the contract expressly denied the applicability of the ILSA and
that appellant’s had other remedies available to them in law and equity. In dicta, the court
distinguished Samara Development Corp., v. Marlow, 556 So. 2d 1097, (Fla. 1990)
where the Florida Supreme Court held that “without the availability of at least both
specific performance and damages the obligation to complete the construction within two
years is illusory.” The Eleventh Circuit found that the terms of the contract which set out
remedies available to purchaser at law and equity met the holding in Samara.

10
Mailloux v. Briella Townhomes, 34 Fla. L. Weekly D269c (Fla. 4th DCA 2009)

Concepts: Contracts, Disclosure Requirements

The Mailloux’ entered into a contract to purchase a condominium from Briella. The
Mailloux’ later tried to revoke and nullify the contract, complaining that Briella failed to
comply with the Interstate Land Sales Full Disclosure Act's ("ILSA") registration and
reporting requirements. Specifically. that a developer doesn't need to furnish a property
report to the purchaser under a contract obligating the seller to erect the building within
two years. The Mailloux’ contend that Briella failed to obligate itself to complete
construction within two years because the contract permitted delays associated with acts
of God, impossibility of performance, and frustration of purpose. The trial court granted
summary judgment to Briella finding that the contract and sale did not fall under ILSA's
reporting requirement. The Mailloux’ now appeal the granting of that summary
judgment.

The Fourth District affirmed the trial court's ruling and held that the contract's delay and
non-performance clauses did not alter Briella's obligation to complete the project within
two years, and Florida's ad valorem tax disclosure statute doesn't provide or imply a
private cause of action for non-compliance. The court reasoned that contract provisions
that allow for delays or non-performance beyond the two-year period do not make the
contract's obligation to finish the project within two years illusory if such provisions are
legally recognized as defenses to contract actions in the jurisdiction where the building is
being erected. The court also reasoned that the legislature did not include a private cause
of action under Section 689.261, Florida Statutes (2006), the statute under which the
Mailloux’ tried to revoke their contract. The court refused to imply or create a private
cause of action where the legislature had not.

11
O’Hanolan v. Herndon, 34 Fla. L. Weekly D379b (Fla. 2d DCA 2009)

Concepts: Mortgage foreclosure, Relief from Judgment

Thomas O'Hanlon, trustee of the Habitat Trust, filed an appeal of an order granting
Robert G. Herndon's motion for relief from a judgment of foreclosure. The order also
granted Herndon's motions to rescind a foreclosure sale, vacate certificate of sale, and
vacate certificate of title. The appellate court reversed to the extent that it grants relief
which was not requested in Herndon's motion.

O'Hanlon, as trustee of the Habitat Trust, sought foreclosure on property due to Herndon's
default on a note and mortgage. The circuit court ruled in favor of O’Hanlon and entered
a judgment of foreclosure. O’Hanlon successfully bid on the property at the foreclosure
sale and was issued certificate of sale and certificate of title.

Herndon sought relief from the final judgment of foreclosure, alleging that his wife was
improperly allowed to act as his attorney throughout the proceedings. Herndon had been
ill and gave his wife power of attorney but she mistakenly believed that she could act as
Herndon's attorney in the suit. Herndon alleged that the mortgage and note were void
because Habitat Trust never filed a Declaration of Trust with the Secretary of State
pursuant to section 609.02, Florida Statutes (2006), and therefore, it could not conduct
business as a trust.

The circuit court ruled on this defense, concluding that O'Hanlon could not lawfully bring
a foreclosure action founded on the note and mortgage filed in the case. The appellate
court found that the circuit court’s ruling was improper because this issue was not a basis
of the motion for relief from the final judgment of foreclosure; it was only alleged to be a
possible defense to O'Hanlon's complaint and motion for summary final judgment.

The Second District affirmed the order granting relief from the judgment of foreclosure
and reopened that proceeding. The Second District, however, reversed the portion of the
circuit court’s order ruling that O’Hanlon is precluded from bringing a foreclosure action
founded on the note and mortgage in this case.

12
Miller v. Preefer, 34 Fla. L. Weekly D383a (Fla. 4th DCA 2009)

Concepts: Contracts, Settlement Agreements, Non-Compete Covenants, Restraints of


Trade

In 1992, Miller sued Preefer for trademark and service mark infringement for Preefer’s
use of the term “Ale House.” The parties settled in 1994, dismissing all claims and also
making a number of other promises to each other, including a covenant not to compete.
In 2002, Preefer sued Miller for alleged violations of the 1994 agreement. The parties
settled the suit in 2006. Shortly after the settlement, Miller sued Preefer, seeking
judgment that the 1994 agreement was void and unenforceable as an illegal restraint of
trade in violation of section 542.33, Florida Statutes (1993). Preefer responded that,
having received the benefit of the agreement for nearly thirteen years, Miller should not
now be able to have a portion of the agreement, which was not advantageous to him,
declared unenforceable. The trial court ruled in favor of defendant Preefer.

The Fourth District found that the 1994 covenant not to compete acts to restrain trade.
However, the trial court had incorporated the settlement agreement into its judgment
resolving the 1992 suit. Therefore, the settlement agreement, although it contained an
illegal covenant in restraint of trade, became sheltered within the judgment. To void the
covenant not to compete, Miller was required to void the judgment itself. However, the
court held that because the trial court had jurisdiction over the subject matter of the 1992
litigation and personal jurisdiction over the parties, the inclusion of an illegal or void
provision in the settlement agreement did not render the judgment void. The judgment
was merely voidable. Hence, it was subject to a timely appeal or a timely motion to set
aside the verdict, not an attack at any time. Since Miller did not attempt to appeal or set
aside the verdict, but rather operated under the agreement for thirteen years, the court
ruled that he cannot now challenge the judgment. The Fourth District affirmed the
judgment of the trial court.

13
Moynet v. Courtois, 34 Fla. L. Weekly D401a (Fla. 3d DCA 2009)

Concepts: Contracts, Unjust Enrichment, Civil Theft, Civil Procedure

In May 2000, Marie-Laure Moynet entered into a pre-construcion purchase and sale
agreement with a condominium development to purchase a unit, depositing $54,230.
Moynet assigned her right to purchase the unit for the same specified price to Anne and
Rene Courtois. Courtois paid Moynet $87,000 for the assignment. In March 2003, the
condominium company filed for bankruptcy protection and accordingly repaid Moynet’s
deposit. In January 2005, the United States Bankruptcy Court for the Southern District of
Florida entered an order terminating the contract between Moynet and Courtois. In
February 2005, Courtois made a written demand for the remaining $32,770. In August
2005, after Moynet did not pay, Courtois filed a two-count complaint - one for civil theft
and another for unjust enrichment. In December 2006, after Moynet had not responded,
the trial court entered a default against Moynet, and entered a final judgment of
$107,075.75. The trial court then denied Moynet’s motion to vacate the default
judgment, in which she argued that the complaint failed to state a cause of action.
Moynet appealed the trial court’s order denying her motion to vacate the final judgment
in the case.

The Third District reversed the trial court’s denial and remanded with instructions to
vacate and set aside the final judgment because the complaint failed to state a cause of
action for either unjust enrichment or civil theft. With regard to the count for unjust
enrichment, where there is an express contract between the parties, claims arising out of
that contractual relationship will not support a claim for unjust enrichment. Courtois
received all of Moynet’s right, title, and interest in the contract of purchase of a unit,
which is what had been negotiated. Therefore, unjust enrichment cannot be alleged.
With regard to the count for civil theft, there is no allegation of fraud, theft or any other
criminal or felonious intent on Moynet’s part. Thus, without an allegation of criminal
intent or other facts from which criminal intent may be implied, no damages may be
awarded for civil theft.

14
Ala v. Chesser, 34 Fla. L. Weekly D372d (Fla. 1st DCA 2009)

Concepts: Contracts, Statute of frauds, Real property sale, Foreclosure, Oral agreement,
Unjust enrichment, Res Judicata

Mr. Ala appealed an order dismissing a two-count complaint he filed against Mr. Chesser.
Mr. Ala alleged in his complaint that Mr. Chesser obtained a final judgment in foreclosure
ordering the sale of property and application of the proceeds against Mr. Ala’s debt.
However, before the foreclosure sale, according to the complaint, the parties orally
agreed that Mr. Chesser would cancel the foreclosure sale in exchange for a quitclaim
deed to the property and payment to Mr. Ala of $61,998.47. Pursuant to the parties’ oral
agreement, the complaint alleged that Mr. Ala executed and delivered to Mr. Chesser a
quitclaim deed, after which Mr. Chesser told third parties not to participate at the sale
because he already had a deed from Mr. Ala. In addition, it was alleged that, although
Mr. Chesser accepted the quitclaim deed, he paid Mr. Ala nothing for the property and did
not cancel the foreclosure sale. As a result, Mr. Chesser was the sole bidder at the
foreclosure sale and obtained the property with a bid of $100. In this appeal, Mr. Ala first
claimed that Mr. Chesser was unjustly enriched by receiving the deed without paying the
value of the property. The court first addressed the issue of whether the statute of frauds,
stated in section 725.01, Florida Statutes (2008), applied to prevent an action based on
this oral contract for the sale of lands. However, the court held that this statute was not a
bar to the claim of unjust enrichment because it alleges that Mr. Ala fully performed on
the contract. The First District Court of Appeal concluded that the doctrines of part and
full performance apply where a party to an oral agreement for the conveyance of land
seeks relief in equity, even where an action for damages at law arising out of the same
agreement would be barred by the statute of frauds.

In Mr. Ala’s second count, he sought equitable relief in the form of rescission and
cancellation of the both the quitclaim deed and the titled issued to Mr. Chesser. The court
held that the statute of frauds does not bar this count either. However, it still upheld the
dismissal of this count because Mr. Ala knew Mr. Chesser had breached their oral
agreement at the time of sale. Therefore, Mr. Ala could have raised objections to the
foreclosure sale before the clerk issued a certificate of title. By the time the original
complaint was filed in the present case, Florida Rule of Civil Procedure 1.540 precluded
any attempt to set aside the judgment or sale in the earlier foreclosure proceedings where
more than one year having elapsed since the proceedings concluded. See Fla. R. Civ. P.
1.540(b) (2007). Thus, the foreclosure judgment was barred by res judicata. Moreover,
since res judicata principles preclude Mr. Ala’s claim for rescission and cancellation of
the certificate of title issued, the claim for rescission and cancellation of the quitclaim
deed is moot because it would not affect the title. Thus, the First District ruled that the
trial court did not err in dismissing this count.

15
Disimone v. LDG South II, LLC, 2009 U.S. Dist. LEXIS 5860 (M.D. Fla. Jan. 28,
2009)

Concepts: ILSA

Michael and Jennifer Disimone (Disimone) and LDG South II, LLC, a Florida limited
liability company (LDG) entered into an agreement for the purchase and sale of a
condominium (the Agreement). Disimone provided LDG with a total of $97,500.00 in
deposits pursuant to the terms of the Agreement. At no point did LDG furnish Disimone
with a property report pursuant to §1707 of the Interstate Land Sales Full Disclosure Act
(ILSFDA). Disimone filed a two-count complaint against LDG. Count one alleged that
the Agreement is subject to rescission under the ILSFDA; and count two alleged the
Agreement is subject to rescission under Fla. Stat. §718.503.

The United States District Court for the Middle District of Florida denied LDG’s motion
to dismiss. LDG asserted that Disimone was not entitled to a Property Report pursuant to
§1707 of the ILSFDA because the Agreement was exempt from such a requirement under
§1702(a)(2). Under 15 U.S.C. §1702(a)(2), the sale of a condominium is exempt from
ILSFDA disclosure requirements if the sale is “under a contract obligating the seller…to
erect [a condominium] thereon within a period of two years.” LDG argued that such an
obligation could be found in Paragraph 3(a) of the Agreement which stated: “SELLER
presently intends to complete construction of all units and all improvements of the
Condominium not later than October 31, 2012. However, for purposes of complying with
land sales regulations, SELLER hereby advises that the Unit…shall be completed not
later than two (2) years from the date PURCHASER signs this Agreement (provided,
however, that such 2-year date for completion…”

The court adopted the federal interpretation of the §1702(a)(2) exemption as was stated
by the court in Stein v. Paradigm Mirsol, LLC,. That court stated that “[t]o ‘obligate’ the
timely completion does not require that the contract be unconditional, so long as the
condition(s) does not render the obligation illusory.” Under this approach, courts must
examine the conditions to determine whether the apparent obligation to construct within
two years is real or is rendered illusory by the condition(s). The fourth sentence of
Paragraph 3(a) of the Agreement stated in relevant part that the agreement to substantially
complete construction within two years “may be extended by reason of delays incurred
by circumstances beyond SELLER’s control, such as acts of God, or any other grounds
cognizable in Florida contract law as impossibility or frustration of performance,
including without limitation, delays occasioned by rain, wind and lightning storms.”

The court found that language such as “any other grounds” and “including without
limitation” expanded rather than limited the available bases for possible delay of
completion. The court accordingly ruled that the two year completion obligation was
illusory, and therefore that the Agreement was not exempt from the reporting and
disclosure requirements pursuant to the exemption articulated in 15 U.S.C. §1702(a)(2).
Finally, the court ruled that the Agreement’s severability clause, if followed in accordance
with the wishes of LDG, would eliminate the portion of the agreement that obligated

16
LDG to complete construction within two years. Clearly the Agreement would not satisfy
the §1702(a)(2) exemption if that portion of the Agreement were to be struck.

Hebden v Roy A. Kunnemann Construction Inc., 34 Fla. L. Weekly D385a (Fla. 4th
DCA 2009)

Concepts: Contracts, Construction, Construction lien foreclosure, Setoff, Damages


relating to construction defects

The Hebdens, plaintiffs, entered into a contract with Roy. A. Kunnemann Construction
Inc, defendant, for the construction of a single-family home. A dispute arose as to the
quality of the construction which led to plaintiff’s withholding the final payment for the
work. The court ruled that the Hebdens did not give the defendant an opportunity to fix
his work and that they were thus, not justified in withholding payment. The court gave
the Hebdens a set-off in the amount of $5,035 but entered judgment against them for
$39,459 plus prejudgment interest.

The Fourth District addressed how Chapter 558 of the Florida Statutes, which concerns
defective construction, applied in this case. It was found that the Hedbens acted in
compliance with Chapter 558 when they gave the defendant written notice of their
dissatisfaction with the construction so that alternative dispute resolution may lead to a
curing of the problem. By refusing to allow the defendant to cure the problems, however,
the Hebdens did not act in compliance with Chapter 558. This non-compliance was found
not to forfeit the rights of the Hebdens to seek offset damages. The decision of the trial
court was upheld and the set-off reduction in damages sustained.

17
Hap v. Toll Jupiter Limited Partnership, 2009 U.S. Dist. LEXIS 5866 (S.D. Fla. 2009)

Concepts: ILSA, Disclosures

Jeffrey and Karen Hap (Hap) entered into a contract with Toll Jupiter Limited Partnership
(Toll). Within the contract, termed “the Agreement,” Hap agreed to purchase a parcel of
land and a residence that Toll promised to build. All totaled, Hap made an $180,385.00
deposit for the land and the future home. Hap sought declaratory relief regarding the
application of the Interstate Land Sales and Full Disclosure Act (ILSA) and regarding the
formation of the contract, repudiation of the agreement, and alleged violations of: ILSA,
sections 720.401, 498.022, 498.023 and 498.028 of the Florida Land Sales Practices Act
(LSPA), and the Florida Deceptive and Unfair Trade Practices Act (FDUTPA). Toll filed
a motion to dismiss Hap’s second amended complaint.

The United States District Court for the Southern District of Florida dismissed each of the
nine counts alleged against Toll by Hap and hence granted Toll’s motion to dismiss. First,
the court stated the rule that under Florida law, when a statute that provided for a purely
statutory right is repealed without reenactment the statute is treated as if it never existed.
Bureau of Crimes Compensation, Dept. of Labor and Employment Sec. v. Williams, 405
So.2d 747, 748 (Fla. 2nd D.C.A. 1981). Therefore, since the Florida legislature repealed
the LSPA, the court concluded that counts based on LSPA sections 498.022, 498.023, and
498.028 were dismissed with prejudice.

Second, the court analyzed the issue of whether the Agreement qualified under the ILSA
§1702(a)(2) exemption which stated that a seller is exempt from ILSA if the seller agrees
to “the sale…of land under a contract obligating the seller…to erect [a residential]
building thereon within a period of two years[,]” so long as the seller does not make such
an agreement to evade the statute. 15 U.S.C. §1702(a)(2). The court determined that the
ultimate determination of whether the Agreement obligated the seller to construct the
residence within two years was a question of state contract law. Accordingly, the court
adopted the Florida Supreme Court’s clarification of the §1702(a)(2) exemption. That
clarification stated in Samara Development Corp. v. Marlow, 556 So.2d 1097, 1100 (Fla.
1990), was that “the obligation [to construct in two years] must be unrestricted and the
contract must not limit the purchaser’s right to seek specific performance or damages.”
Paragraph ten of the Agreement stated: “notwithstanding anything to the contrary in this
Agreement, in the event that Seller fails to complete construction of the Premises within
two (2) years of the date of Buyer’s execution of this Agreement (the “Outside Settlement
Date”), then Buyer shall have all remedies available to Buyer at law and in equity without
limitation.” Hap agreed that standing alone, this provision would exempt Toll from the
ILSA. However, Hap argued that the Agreement contained other provisions that
conflicted with and rendered this exemption illusory. Hap though failed to convince the
court that other paragraphs in the Agreement were in conflict with paragraph ten of the
Agreement and also failed to convince the court that other portions of the Agreement
were set forth to trick consumers. An example of such alleged trickery was the alleged
use of smaller font for one of the other paragraphs. The court in this instance denied the

18
existence of any trickery and went so far as to state that the font size for every paragraph
was the same.

Third, the court addressed the issue of whether the disclosure summary that Toll
presented to Hap was substantially similar to the form provided by statute. The statute
required that the summary provided to the buyer be substantially similar to the form
provided by statute. Hap argued that the disclosure summary that Toll provided to them
was significantly different than the form provided by statute. Toll argued that Hap’s
examples of differences between the summary presented to them and the form provided
by statute were merely “hyper technical and subtle variations” which did not constitute
failure to comply with the statute. The court agreed with Toll and stated that each
example provided to the court by Hap represented substantial compliance with the
statute.

Fourth, the court acknowledged that Hap did not allege that Toll per se violated the
FDUTPA. Rather, the court noted that Hap alleged a per se violation of the Federal Trade
Commission Act because Toll allegedly failed to disclose that they contracted with
another business to provide a title insurance policy for which Toll was paid. Hap also
alleged that Toll told them that the title insurance would be provided “at cost” to induce
Hap to use the affiliated title insurance company. The court concluded that the Agreement
clearly stated otherwise and that nothing in the disclosure or the Agreement indicated that
the insurance would be provided “at cost.”

Fifth, Hap argued that since no officer or director signed the endorsement, this could be
seen as a rejection of the offer or as a counteroffer. The court blatantly rejected this
argument as well considering that a project manager initialed an endorsement to the
agreement of sale. Also the court noted that the president of Toll Brothers signed the
agreement on July 13, 2006.

Finally, the court addressed the issue of whether Toll repudiated the contract by assuming
that Hap breached the contract and whether Toll repudiated the contract by Toll imposing
additional requirements on Hap to respond to Toll’s belief that Hap had repudiated. The
court concluded that because Hap failed to respond to a letter from Toll stating that Toll
understood a letter sent by Hap to Toll to be an anticipatory repudiation, Toll’s letter did
not constitute repudiation of the contract.

19