IN THE SUPREME COURT OF FLORIDA SUPREME COURT CASE NO. SC

Transcription

1 DANIEL C. O=CONNOR and SUSETTE O=CONNOR, his wife, IN THE SUPREME COURT OF FLORIDA SUPREME COURT CASE NO. SC RD DCA CASE NO. 3D vs. Petitioners, GERALD A. CASTIGLIANO, Respondent. / ON DISCRETIONARY REVIEW FROM THE DISTRICT COURT OF APPEAL OF FLORIDA, THIRD DISTRICT PETITIONERS= BRIEF ON JURISDICTION Lydecker & Wadsworth, LLC Attorneys for Petitioner 1201 Brickell Avenue Suite 200 Miami, FL Telephone (305) Fax (305) cdz@lydeckerwadsworth.com

2 TABLE OF CONTENTS Table of contents...i Table of Authorities...ii Statement of the Case and Facts...1 Summary of Argument...4 Argument Conclusion Certification Certificate of Service...10 i

3 TABLE OF AUTHORITIES CASES Blackmon v. Hill, 427 So.2d 228 (Fla. 3 rd DCA 1983)...4, 5 Galt View Apartments v. Fazio, 490 So.2d 1105 (Fla. 4 th DCA 1986)...4,5,7 Glave v. Brandlein, 193 So.2d 780 (Fla.4th DCA 1967)...8 Gates v. Thompson, 92 So.2d 420 (Fla. 1957)...8 Kendel v. Pontious, 261 So.2d 167 (Fla.1972)...8 Key v. Alexander, 91 Fla. 975, 108 So. 883 (1926)...4,5,6,7 Steffens v. Urgo, 425 So.2d 658 (Fla. 4 th DCA Thomas v. Rollins, 298 So.2d 186 (Fla. 1 st DCA 1974)...7 Wolofsky v. Behrman, 454 So.2d 614 (Fla. 4 th DCA 1984)...4,5,8 Wolofsky v. Waldron, 526 So.2d 945 (Fla. 4 th DCA 1988)...4,5,8 FORMS FOR USE WITH RULES OF CIVIL PROCEDURE Florida Rules of Civil Procedure, Form ii

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5 STATEMENT OF THE CASE AND FACTS The question is whether a seller of real property who knows that his signature on a fraudulently procured mortgage encumbering his property is forged, but does not even contact the mortgagee to inform it of the forgery and makes no request that the mortgage be canceled, can be held to have acted in good faith and with reasonable diligence in clearing title in order to enable a closing. The facts are as referenced in the Third District=s opinion. Castigliano contracted to sell his home on Key Biscayne to the O=Connors in October of The contract had a clause obligating Castigliano to make diligent efforts to clear any title defects during the 45 days following their discovery. If title was not cleared within the 45-day period, the O=Connors could elect either to take title as it was or to receive a refund of their deposit and cancel the transaction. A title search conducted in November of 2000 revealed the first mortgage that the parties had expected and, in addition, three junior mortgages, of which the parties were unaware. All four mortgages aggregated $51,000 more than the purchase price. Castigliano investigated and discovered that the junior mortgages had been fraudulently placed on the property by his financial advisor, Hsu. Two had genuine Castigliano signatures, allegedly fraudulently procured. The third, to Equicredit, was a complete forgery, a fact Castigliano became aware of shortly after he reviewed the printout of the title search results. Castigliano then confronted Hsu, who admitted to the 1

6 fraud and promised to pay off the mortgages. Although the mortgages aggregated $51,000 more than the purchase price, preventing a closing at the time they were discovered, there would have been sufficient closing proceeds to pay off the other three mortgages and close the transaction if the forged Equicredit mortgage had been released. Castigliano, however, never contacted Equicredit to advise it that its mortgage was a forgery, and never requested that Equicredit release the mortgage so that a closing could take place. Instead, he hired counsel and pursued Hsu over a period of six months in an attempt to make himself whole by forcing Hsu to pay off the three fraudulent mortgages. Hsu agreed to do so but absconded instead. While Castigliano was pursuing Hsu, he agreed to modify the purchase agreement by permitting the O=Connors to go into possession of the property on a lease-purchase basis regardless of the 45-day deadline to make title satisfactory. All all rent after the first payment was credited toward the purchase price. The lease was terminable by either party upon thirty days= notice, but made reference to the purchase agreement and to the efforts to clear title to be undertaken by Castigliano. The O=Connors occupied the property under the lease from January 2001 through June 2001, while Castigliano allegedly attempted to clear the mortgages. After Hsu defaulted and absconded in late May of 2001, Castigliano reneged and attempted to evict the O=Connors in June. He still did not contact Equicredit to request a 2

7 satisfaction of the mortgage he knew was forged. Castigliano filed an eviction action against the O=Connors, who counterclaimed for specific performance. While Castigliano was allegedly attempting to clear title, the three junior mortgagees, including Equicredit, filed foreclosure actions. Castigliano defended on fraud grounds. During the foreclosure litigation, Castigliano and the O=Connors jointly presented Equicredit with a handwriting expert=s opinion that Castigliano=s signature on the Equicredit mortgage was forged. Equicredit satisfied the mortgage seven days later. The other two mortgagees were granted summary judgment. To prevent foreclosure, the O=Connors paid the other two mortgages. After a six-day trial, a decree of specific performance was entered, finding specifically that Castigliano had failed to act in good faith and had failed to make diligent efforts to clear title sufficiently to enable a closing by having made no attempt or request to have Equicredit satisfy its mortgage, which would have enabled a closing. In addition, the chancellor found that by not exercising the 45-day deadline to force an election to take title as is or cancel the transaction and instead permitting the O=Connors to go into possession while he attempted to clear title, Castigliano waived the 45-day deadline and could not terminate the contract until good faith and reasonable efforts were exercised. Castigliano appealed. The Third District, citing Blackmon v. Hill, 427 So.2d 228 (Fla. 3 rd DCA 1983), held that Castigliano had acted in good faith as a matter of law by pursuing Hsu in order to cause him to pay off the fraudulent mortgages, despite the 3

8 fact that he chose to ignore Equicredit. On sufficiency of the evidence, it held that the O=Connors had not proven that Castigliano had reasonable and certain means at his disposal to clear the Equicredit mortgage because they failed to show how long it would have taken Equicredit to clear the mortgage if Castigliano had timely made it aware of the forgery and requested its satisfaction. Finally, it held that Castigliano had not waived the 45-day deadline to clear title by allowing the O=Connors to go into possession for six months while he attempted to have Hsu pay off the fraudulent mortgages. It also engrafted onto Florida specific performance law an additional element to be proven by the vendee: That specific performance would not result in hardship to the vendor. SUMMARY OF ARGUMENT This case expressly and directly conflicts with Key v. Alexander, 91 Fla. 975, 108 So. 883 (1926), Wolofsky v. Behrman, 454 So.2d 614 (Fla. 4 th DCA 1984) (AWolofsky I@), Galt View Apartments v. Fazio, 490 So.2d 1105 (Fla. 4 th DCA 1986), and Wolofsky v. Waldron, 526 So.2d 945 (Fla. 4 th DCA 1988)(AWolofsky II). The conflict lies less in whether the facts permit a finding that Castigliano used reasonable diligence to clear title as a mater of law than it does in the Third District=s finding that pursuing only one means of clearing title, while ignoring a priori another means because it would not result in as much economic benefit to the vendor, can ever constitute good faith. The law of this court and the Fourth District is clear to the effect that both good faith in fact and reasonable diligence are prerequisites to the termination of a real estate sales contract due 4

9 to inability to clear title. It is also clear that ignoring one reasonable means of clearing title evidences bad faith. In terms of this case, approaching Equicredit successfully would not have enabled Castigliano to recover all his loss from the fraud (with which the O=Connors had nothing to do), but as a matter of simple mathematics it would have enabled a closing. Deliberately ignoring Equicredit and electing instead to pursue Hsu, which would have enabled a closing only if Castigliano was able to recover all his fraud losses first, is not good faith as defined in Key, Wolofsky I, Galt and Wolofsky II. Such good faith is a prerequisite to consideration of the holding in Blackmon, supra at 230, to the effect that a vendor need not exercise extraordinary efforts, or undertake efforts that would be futile, in order to clear title, as well as to the application of Blackmon=s requirement of a showing that the proposed means of clearing title was reasonable and certain. This case also conflicts with Key, Wolofsky I, Galt and Wolofsky II to the extent that it requires a vendee seeking specific performance to prove an additional element of absence of hardship to the vendor, especially in a case where the facts show that the hardship was caused by the vendor=s own acts and omissions and not by any act of the vendees. 5

10 ARGUMENT This Court should exercise jurisdiction because the Third District=s opinion lowers the bar of good faith and reasonable diligence to clear title far below that required in Key and the Fourth District cases, and the law should be harmonized in these days of a rising real estate market in which the economic benefit of evading contractual obligation is financially tempting to vendors. There should be a bright line test of good faith and reasonable diligence established by this court in cases where the vendor has a choice of two means of clearing title, and elects from the start only the one that is most likely to defeat the transaction rather than the one that will save it. Throughout the years, Florida courts have held that a choice evidencing the intent to defeat a transaction constitutes bad faith as a matter of law, and that reasonable diligence starts with pursuit of reasonably available means of clearing title, not ignoring some ab initio. Castigliano had to at least try to contact Equicredit, advise it of the forgery, and at least ask for a release. Anything else falls short of good faith as defined by the conflicting cases. Key is the seminal good faith case. The seller, Alexander, terminated the contract because he could not clear title because his wife refused to execute the deed. The evidence showed that Alexander had become unhappy with his bargain. This court held that when a seller of real property enters into a solemn contract in writing whereby he binds himself to deliver good title to the property being sold, the purchaser may assume and rely that the contract will be carried out with the utmost good faith. Bad faith may be 6

11 proven by any act inconsistent with the utmost good faith. The Fourth District in Galt further analyzed what constitutes Agood in complying with a condition. It held squarely that pursuing only one avenue of compliance and ignoring others is inconsistent with good faith. Galt, the vendor, had to obtain HUD approval before he could convey good title. It applied to HUD, but its proposal was rejected. Galt terminated the contract for failure of the condition. Fazio, however, continued to negotiate with HUD and presented Galt with several alternative methods of obtaining the requisite approval. Galt refused to make the attempt and Fazio sued for specific performance. The Fourth District, citing Steffens v. Urgo, 425 So.2d 658 (Fla. 4 th DCA 1983), held that Galt=s unwillingness to consider or pursue the other alternatives constituted bad faith. In Wolofsky II, supra at 616, which involved a clause identical to that in this case, the Fourth District further analyzed the test of good faith. It held that good faith is the vendor=s Adoing his best@ to complete a conveyance, and that the vendor must seek to effectuate completion of the contract before he may be found to be acting in good faith. This finding was consistent with the holding of Wolofsky I, supra at 946, despite its holding that good faith is primarily a question of intent and the inquiry is fact-intensive: Failure to even make the attempt to exercise a reasonable avenue that could enable a closing constitutes bad faith. Additionally, the elements of specific performance as recognized in Florida are: 7

12 1) A clear, unambiguous and binding contract, complete in all of its essential elements, which has been accepted by the seller and which acceptance has been communicated to the purchaser. Kendel v. Pontious, 261 So.2d 167 (Fla.1972). 2) That the purchaser has requested a conveyance and that the vendor refuses to convey to the purchaser. Gates v. Thompson, 92 So.2d 420 (Fla. 1957). 3) That the purchaser has either paid the balance due, tendered such balance, been ready, willing and able to pay such balance, or been excused from such performance. Glave v. Brandlein, 193 So.2d 780 (Fla.4th DCA 1967). 4) That the purchaser offers to do equity; i.e., pay the agreed purchase price. Thomas v. Rollins, 298 So.2d 186 (Fla. 1 st DCA 1974). See also Florida Rules of Civil Procedure, Form The Third District, using only out-of-state authority, has engrafted onto the law of Florida an additional element, to wit: That the vendee must prove that specific performance will not result in hardship to the vendor. Research has found no Florida case including this requirement. To the extent that previous authority has not announced this element as requisite to a Florida specific performance case, the Third District=s decision in this case conflicts with all prior authority. This deviation from well-established Florida law is ill-advised, and this court should clearly announce that it is not a requisite element of a Florida specific performance prima facie case. The potential problem with such a requirement is exemplified by the evidence 8

13 in this case. If this Court were to accept jurisdiction and direct briefing on the merits, Petitioner would be prepared to show that Castigliano was grossly negligent in handing control of his financial affairs to Hsu, to the extent of giving him blank checks on his accounts, ignoring prior instances of fraud, giving Hsu a power of attorney that allowed Hsu to encumber his property, and signing legal documents without even looking at them, Anot paying any attention, really.@ This illustrates the danger that engrafting this element onto a prima facie specific performance case without providing for analysis of the equities in the case as to who caused the hardship would pose to well-established Florida jurisprudence on specific performance. 9

14 CONCLUSION Petitioner respectfully submits that there is direct and express conflict jurisdiction and respectfully suggests that the Court accept jurisdiction or, in the alternative, defer its decision on jurisdiction, and direct briefing on the merits. CERTIFICATION I HEREBY CERTIFY that this brief was typed and set in Times New Roman 14 font with one-inch margins. CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true copy of the foregoing Notice to Invoke Discretionary Jurisdiction of Supreme Court was mailed and faxed to WOODROW AMAC@ MELVIN, ESQ., 2701 South Bayshore Drive, Coconut Grove, FL on this 21st th day of November, Lydecker & Wadsworth, LLC Attorneys for Petitioner 1201 Brickell Avenue, Suite 200 Miami, FL Telephone (305) Fax (305) cdz@lydeckerwadsworth.com By: Carlos L. de Zayas Florida Bar No