CASE NO. SC CORAL REEF DRIVE LAND DEVELOPMENT, LLC, etc. et al., DUKE REALTY LIMITED PARTNERSHIP, a foreign limited partnership,

Transcription

1 IN THE SUPREME COURT OF FLORIDA CASE NO. SC CORAL REEF DRIVE LAND DEVELOPMENT, LLC, etc. et al., vs. Petitioners, DUKE REALTY LIMITED PARTNERSHIP, a foreign limited partnership, Respondent. On a petition for discretionary conflict review of a decision of the Third District Court of Appeal JURISDICTIONAL ANSWER BRIEF GARY E. LEHMAN BROAD AND CASSEL One Biscayne Tower, 21st FL Two South Biscayne Blvd. Miami, Florida BEVERLY A. POHL, ESQ. BROAD AND CASSEL One Financial Plaza 100 S.E. Third Avenue, Suite 2700 Fort Lauderdale, Florida Counsel for Respondent

2 TABLE OF CONTENTS Page TABLE OF AUTHORITIES... ii STATEMENT OF THE CASE AND FACTS... 1 SUMMARY OF ARGUMENT... 4 ARGUMENT... 5 I. NO CONFLICT EXISTS ON THE QUESTION OF WHETHER DOING NOTHING CONSTITUTES SUFFICIENT NEW CONSIDERATION TO SUPPORT THE ENFORCEABILITY OF AN ORAL MODIFICATION...5 II. III. NO CONFLICT EXISTS ON THE AVAILABILITY OF A FULL PERFORMANCE EXCEPTION TO THE BANK STATUTE OF FRAUDS 8 NO CONFLICT EXISTS ON THE QUESTION OF WHETHER A PARTY TO A CONTRACT DISCLAIMING A JOINT VENTURE MAY, IN A DISPUTE WITH THE OTHER CONTRACTING PARTY, CLAIM TO BE A JOINT VENTURER 9 CONCLUSION CERTIFICATE OF SERVICE CERTIFICATE OF COMPLIANCE i

3 TABLE OF AUTHORITIES CASES Page Hardee v. State, 534 So. 2d 706 (Fla. 1988)... 1 J Square Enterp. v. Regner, 734 So. 2d 565 (Fla. 5th DCA 1999)... 8 Model Improvement Co. v. Sands, 9 So. 2d 179 (Fla. 1942)... 6 Mangus v. Present, 135 So. 2d 417 (Fla. 1961)... 6 Maryland Casualty Co. v. Krasnek, 174 So. 2d 541 (Fla. 1965)... 7 Reaves v. State, 485 So. 2d 829 (Fla. 1986)... 1 Scott v. Sun Bank of Volusia County, 408 So. 2d 591 (Fla. 5th DCA 1981)... 7 CONSTITUTIONAL PROVISIONS, STATUTES, AND RULES Art. V, 3(b)(3), Fla. Const.... 3, 4, 6, , Fla. Stat.... 4, 7-8 R , Fla.R.App.P ii

4 STATEMENT OF THE CASE AND FACTS In this case seeking conflict review of a decision affirming a summary judgment of foreclosure on a commercial loan, Petitioners Statement of the Case and Facts repeatedly violates this Court s four corners rule, by setting forth extensive facts taken from the dissenting opinion below, and from the record. That is improper in a jurisdictional brief. See Hardee v. State, 534 So. 2d 706, 708 n. 1 (Fla. 1988) ( for purposes of determining conflict jurisdiction, this Court is limited to the facts which appear on the face of the opinion. ); see also Reaves v. State, 485 So. 2d 829, 830 (Fla. 1986) ( Neither a dissenting opinion nor the record itself can be used to establish [conflict] jurisdiction ); id. at n. 3 ( The only facts relevant to our decision to accept or reject such petitions are those facts contained within the four corners of the decisions allegedly in conflict. ). Given that standard, the Court should reject Petitioners improper Statement of the Case and Facts, and limit consideration of the alleged conflict to those facts found in the majority opinion below. (See Pet. App. pp. 2-7). We restate those pertinent facts here. The Loan Documents governing the parties multi-million dollar plans to develop medical office space in Miami-Dade County were sophisticated written agreements comprising 118 single-spaced pages (a promissory note, mortgage, security agreement, loan agreement, and proposed joint venture operating 1

5 agreement, which was to be operative only if certain options were exercised in writing). (Pet. App. 2-3). Those detailed and meticulously documented Loan Documents, memorializing a $10,000,000 mortgage loan from Duke Realty to Petitioner Coral Reef, contained more bells and whistles than once-conventional commercial loan documents. (Id. at 2). Importantly, the Loan Documents required all modifications or waivers to be in writing, and unambiguously provided in Paragraph 9.18 (No Joint Venture) that [n]otwithstanding anything in any of the Loan Documents or in any other agreement or commitment to the contrary, the parties did not intend or agree to be joint venturers, unless the Lender (Duke Realty) exercised in writing an option to purchase the property and enter into the proposed joint venture with Coral Reef, according to the detailed terms of the Loan Documents. (App. at 3-4). With that agreement in place, Duke Realty participated actively with Coral Reef in studying the need for medical office space on the property, in monitoring the necessary rezoning process, and in evaluating prospective architects and contractors. Duke Realty also commented on the proposed designs, office layouts, and construction cost estimates. (Pet. App. pp. 4-5). During the no joint venture period of the Loan Documents, Coral Reef gave notice in April 2007 that it could not make its payments on interest due, due to unforeseen circumstances. Coral Reef contends that a principal of Duke 2

6 Realty then unequivocally committed to Duke exercising its option at the conclusion of the loan period, and in reliance on that alleged oral statement Coral Reef made no effort to refinance the loan or sell the property, or to meet its payment obligations. Six months later, in October 2007, Duke Realty sent a notice of default on the loan, which was squarely inconsistent with any belief by Coral Reef that Duke would exercise its purchase option in two months. Coral Reef contends that it was assured that the default notice was a mere formality, and that Duke in fact intended to exercise its purchase option by December 14. (Pet. App. 5-6). But Duke did not exercise its written option to purchase the property. Instead, it sought and obtained a judgment of foreclosure, based on the admitted nonpayment and the remedies set forth in the Loan Documents. Assuming that Duke Realty made the oral statements as alleged, lulling Coral Reef into continued inaction, the question on appeal was whether an oral modification barred summary judgment on Duke s claim for foreclosure on the delinquent loan. The District Court found the alleged oral agreement to be unenforceable. In this Court, Petitioners assert express and direct conflict with prior precedents of this Court and other district courts, claiming that jurisdiction lies under Article V, 3(b)(3), Florida Constitution. We show below why no such conflict exists, and why this Court has no jurisdiction and must deny review. 3

7 SUMMARY OF ARGUMENT Petitioners have failed to demonstrate the requisite express and direct conflict for this Court s jurisdiction, on any of the three questions of law discussed in the Petitioners Jurisdictional Brief. See Art. V, 3(b)(3), Fla. Const. This case arose in the context of a major commercial loan foreclosure, where the parties detailed and uniquely extensive Loan Documents governed their relationship. Those Loan Documents disclaimed a joint venture, and required modifications to be in writing. Petitioners wish to enforce an alleged oral modification of the Loan Documents, contrary to the documents themselves, and contrary to the Bank Statute of Frauds, , Fla. Stat.. None of the supposed conflict cases arose in a similar factual context, where a borrower claims that its nonpayment of existing repayment obligations constituted new and legally valid consideration for an oral loan modification; where that same nonpayment is claimed to be full performance of an oral agreement excusing the writing requirements of section ; or where a borrower claims to be a joint venturer with the lender, in a dispute between the contracting parties, despite unambiguous language in their detailed and specific loan documents providing that a joint venture does not exist unless certain options were exercised (and they were were not). In sum, Petitioners rely on out-of-context general legal principles that do not control this foreclosure case, which is governed by detailed Loan Documents. 4

8 They have failed to demonstrate express and direct conflict with any case on the same question of law. This Court has no jurisdiction to review the decision below. ARGUMENT I. NO CONFLICT EXISTS ON THE QUESTION OF WHETHER DOING NOTHING CONSTITUTES SUFFICIENT NEW CONSIDERATION TO SUPPORT THE ENFORCEABILITY OF AN ORAL MODIFICATION Despite the context of this case, involving extraordinarily detailed Loan Documents governing a $10,000,000 commercial loan, Petitioners theory to avoid foreclosure is that it reasonably relied on Duke Realty s oral representations that it would exercise its option to purchase the property and that the notice of default was a mere formality, thus leading Coral Reef to do nothing to meet its preexisting loan obligations, such as refinancing or selling the subject property. In a novel and unpersuasive argument never before seen in a foreclosure case, Coral Reef contends that its admitted inaction constituted new and sufficient consideration to support an oral loan modification that, in effect, trumped the parties 118-page Loan Documents. None of the cases cited by Petitioners, in their assertion of express and direct conflict, supports the notion that merely ignoring preexisting payment obligations on a $10,000,000 commercial loan, based on an oral agreement, 5

9 constitutes adequate consideration for an enforceable oral modification of the written documents. Petitioners have failed to demonstrate the required express and direct conflict on this question of law. Art. V, 3(b)(3), Fla. Const. In Model Improvement Co. v. Sands, 9 So. 2d 179 (Fla. 1942) (see Petitioner s Brief, p. 6) this Court found that when an old ignorant colored woman and her six minor children moved out of their home in an agreement with the prior mortgagee designed to avoid foreclosure, so that a rent collector could maintain the property and provide her with a modicum of support, that [t]he giving of possession by mortgagor was not required of her and therefore constituted a legal consideration, barring a foreclosure claim by the successor to the mortgagee. Id. at 747. Plainly, there was a benefit to the mortgagee and a detriment to the mortgagor, satisfying the familiar requirements for legal consideration. The concept of consideration was revisited in Mangus v. Present, 135 So. 2d 417 (Fla. 1961) (cited in Petitioners Brief, p. 6), which again recognized that when a promisee does something that he is not legally bound to do, the requirement for consideration has been met. But that circumstance does not describe this case, where Coral Reef argues that its not obtaining refinancing and not selling the property constituted valid legal consideration for an oral modification of the Loan Documents. Even if that were so (and we do not agree 6

10 that it is), it would not present express and direct conflict with the cited cases, where the promisees took action that was not required of them. Petitioners reliance on Maryland Casualty Co. v. Krasnek, 174 So. 2d 541 (Fla. 1965) (cited in Petitioners Brief, pp. 6-7), is misplaced, because there the ultimate question decided was not whether a party to a settlement agreement had given sufficient consideration to support the agreement, but whether the facts supported the trial court s decision that the agreement should be rescinded due to a unilateral mistake. Krasnek was not a foreclosure case, and cannot fairly be said to conflict with this case, involving the specific question of whether a borrower s continued nonpayment of loan obligations is sufficient consideration to support an oral promise to forbear on a foreclosure. As shown by the Legislature s treatment of this very issue, in the Bank Statute of Frauds, , Florida Statutes (discussed below), the considerations governing credit agreements are substantial, and comparing this case to to Krasnek is like comparing apples to kumquats. Finally, Petitioners argue that the decision below directly conflicts with Scott v. Sun Bank of Volusia County, 408 So. 2d 591 (Fla. 5th DCA 1981) (Petitioners Brief, p. 7), but that case, too, was not a foreclosure case. The distinction is significant, because Scott simply did not decide whether a borrower can be excused from nonpayment on substantial loan agreement, by doing nothing in supposed reliance on an oral modification. In sum, none of the authorities cited 7

11 by Petitioners demonstrate express and direct conflict on the consideration issue, and this Court has no jurisdiction. II. NO CONFLICT EXISTS ON THE AVAILABILITY OF A FULL PERFORMANCE EXCEPTION TO THE BANK STATUTE OF FRAUDS Constrained by the writing requirements of the Bank Statute of Frauds, , which plainly bars a claim for an oral modification of a credit agreement, Coral Reef argues that it fully performed its alleged oral agreement with Duke Realty (by doing nothing) and that full performance warrants an exception to the statutory requirements. No express and direct conflict exists on this point, because the majority in the District Court simply did not discuss a full performance exception to the Bank Statute of Frauds (see Pet. App., p. 10), and (not surprisingly) none of Petitioners full performance cases equate nonpayment of existing loan obligations as full performance of an oral modification. For example, in J Square Enterprises v. Regner, 734 So. 2d 565 (Fla. 5th DCA 1999) (cited in Petitioners Brief, p. 8), J Square paid an additional $62,000 in an agreement with the bank to avoid foreclosure. But a third party that purchased the foreclosure judgment, without knowledge of the agreement, purchased the property at a foreclosure sale. Id. at The Fifth District found that J Square s full performance on its oral contract with the bank (payment 8

12 of the additional $62,000) excused the writing requirement of the Bank Statute of Frauds. Id. at 566. Here, Coral Reef s conduct (continued nonpayment) is not comparable to J-Square s $62,000 payment that was deemed full performance of an oral contract, and the absence of any discussion of a full performance exception to the statute makes Petitioners express and direct conflict argument unpersuasive. III. NO CONFLICT EXISTS ON THE QUESTION OF WHETHER A PARTY TO A CONTRACT DISCLAIMING A JOINT VENTURE MAY, IN A DISPUTE WITH THE OTHER CONTRACTING PARTY, CLAIM TO BE A JOINT VENTURER The Petitioners final argument is that the majority opinion below finding a debtor-creditor relationship between the parties, but no joint venture expressly and directly conflicts with decisions holding that the legal relationships between parties are defined by their course of conduct, not by contract. (See Petitioners Brief, pp. 8-9). In a dispute between the contracting parties, Coral Reef claims it was a joint venturer with Duke Realty, notwithstanding section 9.18 of the mortgage (see Pet. App., p. 4) (quoting No Joint Venture provision), and notwithstanding the specific and detailed requirements set forth in the Loan Documents for the writing required to create a joint venture. 9

13 Petitioners cited authorities stand for the proposition that where the legal relationship between parties affects third parties, that legal relationship is defined by the parties conduct and the circumstances of their relationship. But here, the only dispute is between the contracting parties, borrower and lender, each of whom explicitly disavowed any intent to be joint venturers, absent specific written requirements that never materialized. None of Petitioners authorities present that same question of law, therefore no express and direct conflict sufficient to create jurisdiction in this Court has been demonstrated. See Art. V, 3(b)(3), Fla. Stat. CONCLUSION The decision below properly applied sound legal principles to an all-too familiar scenario, where a defaulting borrower claims that an oral conversation negates the parties extensive written loan documents. On these facts, no express and direct conflict is presented, and thus no jurisdiction exists in this Court to review the decision below. Moreover, the result is fair, because the $10,000,000 default was admitted and the Bank Statute of Frauds and the parties extensive loan documents precluded the borrowers defenses and counterclaims based solely on an alleged oral communication. Thus, the petition for discretionary review should be denied. 10

14 Respectfully submitted, BEVERLY A. POHL, ESQ. Florida Bar No BROAD AND CASSEL 100 S.E. Third Avenue, Suite 2700 Fort Lauderdale, Florida Ph: Fax: and GARY E. LEHMAN BROAD AND CASSEL One Biscayne Tower, 21st FL Two South Biscayne Blvd. Miami, FL Ph: Fax: Counsel for Respondent Duke Realty Limited Partnership 11

15 CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing Jurisdictional Answer Brief has been furnished to counsel listed below by U.S. Mail this 12th day of January, 2011: Teresa Ragatz Eric D. Isicoff Isicoff, Ragatz & Koenigsberg 1200 Brickell Ave., Ste Miami, FL Ph: (305) Fax: (305) isicoff@irlaw.com ragatz@irlaw.com Counsel for Petitioners BEVERLY A. POHL CERTIFICATE OF COMPLIANCE I HEREBY CERTIFY that this brief complies with Rule 9.210, Fla.R.App.P., and is prepared in Times New Roman 14 point font. BEVERLY A. POHL /0001 BAP 12