BILLY JOE L. MCFARLAND, ESQUIRE Florida Bar No: Del Prado, Suite A Cape Coral, Florida (239) Attorney for Petitioner

Transcription

1 IN THE SUPREME COURT OF FLORIDA TALLAHASSEE, FLORIDA SUPREME COURT CASED NO. SC11-7 SECOND DISTRICT COURT OF APPEAL CASE NO. 2D LEE COUNTY CIRCUIT COURT CASE NO. 07-CA ADVANTAGE BUILDERS OF AMERICA, INC., Petitioners, v. CTX MORTGAGE COMPANY, LLC, A Delaware Limited Liability Company, Respondent, JURISDICTIONAL BRIEF OF PETITIONER BILLY JOE L. MCFARLAND, ESQUIRE Florida Bar No: Del Prado, Suite A Cape Coral, Florida (239) Attorney for Petitioner i

2 TABLE OF CONTENTS TABLE OF AUTHORITIES...ii INTRODUCTION...1 STATEMENT OF THE CASE AND FACTS...1 SUMMARY OF THE ARGUMENT...3 ARGUMENT...4 I. THE SECOND DISTRICT INCORRECTLY APPLIED THE DE NOVO STANDARD OF REVIEW TO REVERSE THE FACTUAL DETERMINATIONS OF THE TRIAL COURT... 4 II. THE SECOND DISTRICT S REVERSAL OF THE TRIAL COURT S GRANTING OF AN EQUITABLE LIEN ON UNDISBURSED CONSTRUCTION FUNDS CONFLICTS WITH OPINIONS OF THE FOURTH DISTRICT AND THE FIRST DISTRICT COURTS OF APPEAL... 7 III. THE SECOND DISTRICT OPINION CONFLICTS WITH THIS COURT S RULING IN GABLES RACING ASSOC., INC. V. PERSKY BECAUSE THE SECOND DISTRICT DID NOT APPLY THE ABUSE OF DISCRETION STANDARD IN REVIEWING THE TRIAL COURT S EXERCISE OF ITS EQUITABLE JURISDICTION AND DID NOT FOLLOW THE EQUITABLE MAXIMS IDENTIFIED IN GABLES RACING... 9 CONCLUSION...10 CERTIFICATE OF SERVICE...11 CERTIFICATE OF FONT USED...12 i

3 TABLE OF AUTHORITIES CASES Ace Electric Supply Company v. Terra Nova Electric, Inc., 288 So.2d 544 (Fla. 1 st DCA 1873)... 6 Alton Towers, Inc. v. Coplan Pipe & Supply Co., Inc., 262 So.2d 671 (Fla. 1972) Blosam Contractors, Inc. v. Republic Mortgage Investors, 353 So.2d 1225 (Fla. 2 nd DCA 1977)... 8 Board of Trustees of the Internal Improvement Trust Fund v. Lost Tree Village Corporation, 805 So.2d 22 (Fla. 4 th DCA 2001)... 6 Canakaris v. Canakaris, 382 So.2d 1197 (Fla. 1980)... 9 First Florida Bank v. Advantage Builders of America, Inc., 21 So.3d 921 (Fla. 2 nd DCA 2009)... 8 Florida Dept. of Environmental Protection v. ContractPoint Florida Parks, LLC, 986 So.2d 1260 (Fla. 2008)... 7 Gables Racing Assoc., Inc. v. Persky, 6 So.2d 257, 263 (Fla. 1940)... 9, 10 Giffen Industries of Jacksonville, Inc. v. Southeastern Associates, Inc., 357 So.2d 217 (Fla. 1 st DCA 1978)... 8 Helman v. Seaboard Coast Line Railroad Company, 349 So.2d 1187 (Fla. 1977)... 4 Holmes v. Kilgore, 103 So. 825 (Fla. 1925)... 7 Hunt v. First National Bank of Tampa, 381 So.2d 1194, 1197 (Fla. 2 nd DCA 1980)... 6 J.G. Plumbing Service, Inc. v. Coastal Mortgage Co., 329 So.2d 393 (Fla. 2 nd DCA 1976)... 8 Leon County v. Stephen S. Dobson, III, P.A., 957 So.2d 12, 15 (Fla. 1 st DCA 2007)... 7 Marshall v. Johnson, 392 So.2d 249 (Fla. 1980)... 5 Morgen-Oswood & Associates, Inc. of Florida v. Continental Mortgage Investors, 323 So.2d 684 (Fla. 4 th DCA 1975)... 8 ii

4 Pan-Am Tobacco Corporation v. Department of Corrections, 471 So.2d 4 (Fla. 1985)... 7 Shaw v. Shaw, 334 So.2d 13 (Fla. 1976)... 5 Other Authorities Bruner and O Connor on Construction Law... 9 iii

5 INTRODUCTION The Petitioner, Advantage Builders of America, Inc., was the Appellee in the District Court of Appeal, Second District. The Respondent, CTX Mortgage Company, LLC was the Appellant. Kremlin Yee, the Borrower, declared bankruptcy and was not a party to the appeal. The parties shall be referred to herein as ADVANTAGE, CTX, and Borrower respectively. References to the Appendix shall be indicated by the abbreviation App. STATEMENT OF THE CASE AND FACTS In February 2006, ADVANTAGE, CTX, and the Borrower, entered into a series of agreements (building contract, Residential Construction Loan Agreement (hereinafter the RCLA ), mortgage documents, etc.) that provided for the purchase and construction of a residendial home for the Borrower. ADVANTGAGE fully performed their requirements under the contracts and applied for the final draw/retainage under the RCLA. However, because the Borrower defaulted on the mortgage and the RCLA, CTX did not disburse the retainage to ADVANTAGE. Subsequently, CTX foreclosed on the property and received the completed residence while retaining funds that were to go towards the construction of that residence. After obtaining title to the completed residence, CTX disposed of the property at a substantial loss. However, it is important to note that the contracts were entered into in February 2006; ADVANTAGE completed construction and obtained a Certicate of Occupancy on May 23, 1

6 2007; CTX obtained a Certificate of Title on September 23, 2008; and CTX sold the completed property on or about November 5, CTX s sale of the property occurred a full year and a half after ADVANTAGE completed construction. In granting ADVANTAGE an equitable lien on the undisbursed construction funds, the trial court determined that 1) it would be inequitable for CTX [] to obtain the completed [] residence and also retain the funds that were to go towards the creation of the [] residence; and 2) the equities are with Advantage Builders of America, Inc. and [the trial court] hereby determines that Advantage Builders of America, Inc. is entitled to an equitable lien on undisbursed construction funds.... Further, the trial court found 1) that the RCLA was silent as to what happened in the event the Borrower defaulted, ADVANTAGE completed construction, and CTX obtained title to the completed residence as a result of the foreclosure process; 2) that the RCLA failed due to a lack of mutuality of remedy; and 3) that the RCLA contained several ambiguous terms and conditions. CTX sought review of the trial court s decision contending that, contrary to the trial courts ruling, the RCLA provided that CTX had no duty to disburse the retainage/final draw in the event of Borrower s default that resulted in foreclosure, and, contrary to ADVANTAGE s position and the trial courts ruling, that CTX was not unjustly enriched because CTX ultimately lost $250,000 on the transaction. 2

7 In the reversing the trial court, the Second District opinion determined that the facts were essentially undisputed and applied a de novo standard of review. SUMMARY OF THE ARGUMENT ADVANTAGE submits that the Second District Court of Appeals opinion conflicts with the decisions of the Florida Supreme Court and other district court of appeal decisions. First, the appellant opinion wrongly applies the de novo standard of review to the factual determinations of the trial court. Specifically, whether it was unjust for CTX to retain funds dedicated to the construction of the Borrower s residence and obtain the residence through foreclosure. The Second District should have reviewed the factual determinations of the trial court to determine if there was competent evidence to support the determinations. Instead, the Second District essentially retried the matter and determined that the equities were not with ADVANTAGE and that it was not unjust for CTX to keep funds set aside for the construction of the residence and to also obtain the benefit of its security through foreclosure. In so doing the Second District incorrectly substituted its judgment for that of the trial court also finding that the trial court s determinations regarding the RCLA were unpersuasive. Second, the Second District Court of Appeals decision conflicts with decisions of the Fourth District and First District courts of appeal. In Morgen-Oswood and Giffen 3

8 Industries the respective districts determined that where the contractor completes construction, the construction loan goes into default, the contractor is entitled to an equitable lien on undisbursed construction funds that were set aside for the construction of the project. It is important to note that the First District relies on J.G. Plumbing, a Second District Court of Appeals decision in making its determination. Third, the standard of review of a trial court s exercise of its equitable jurisdiction is abuse of discretion. The trial court determined that the facts of the matter warranted the imposition of an equitable lien on undisbursed construction funds in favor of ADVANTAGE. However, the Second District did not apply this standard of review as required by this court. ARGUMENT I. THE SECOND DISTRICT INCORRECTLY APPLIED THE DE NOVO STANDARD OF REVIEW TO REVERSE THE FACTUAL DETERMINATIONS OF THE TRIAL COURT. Conflict justifying the invocation of this Court s jurisdiction exists where the district court of appeals applies a standard of review that conflicts with a standard of review previously announced by this court. Helman v. Seaboard Coast Line Railroad Company, 349 So.2d 1187 (Fla. 1977). Further, it is not the function of the appellate court to reevaluate the evidence and substitute its judgment for that of the trier of fact. Id. Findings of fact are reviewed to determine if there is any competent evidence to support said finding. Id. In 4

9 addition, the trial court s findings of fact must be sustained regardless of the district court s opinion as to the finding s appropriateness. Id. See also Marshall v. Johnson, 392 So.2d 249 (Fla. 1980) (quoting Shaw v. Shaw, 334 So.2d 13 (Fla. 1976) stating that it is not the prerogative of an appellate court, upon a de novo consideration of the record, to substitute its judgment for that of the trial court ). In its opinion, the Second District Court of Appeal states that the trial court ruled that it would be inequitable for CTX to obtain title to the completed residence through the foreclosure process and also retain the final draw that had been designated to pay for the construction. However, the Second District, after conducting its own evaluation of the facts, reversed the trial court s finding by determining that, under the facts presented the retention of the final draw by CTX does not result in a windfall to the Lender that is unjust. See App. Additionally, the trial court determined that the RCLA was silent as to what happened to the retainage fund in the event the Borrower defaulted and CTX received the completed security as a result of the foreclosure process; that the RCLA contained ambiguous terms and conditions; and that the RCLA fails because of a lack of mutuality of remedy and the absence or inadequacy of a legal remedy is grounds for the trial courts exercise of equitable jurisdiction. The trial court determined that, under these facts, ADVANTAGE was entitled to an equitable lien on the 5

10 undisbursed construction funds. However, the Second District found these determinations of the trial court unpersuasive. This is in conflict with the requirements of Helman, etc. See App. Instead of dismissing the trial court s determinations as unpersuasive the Second District should have reviewed the determination of whether a latent ambiguity exists de novo. Board of Trustees of the Internal Improvement Trust Fund v. Lost Tree Village Corporation, 805 So.2d 22, 27 (Fla. 4 th DCA 2001). Further, intermediate ambiguities shall be treated as a latent ambiguity. Ace Electric Supply Company v. Terra Nova Electric, Inc., 288 So.2d 544 (Fla. 1 st DCA 1873). Then, if it is determined that a latent ambiguity exists, Ace Electric Supply states that an abuse of discretion standard should be used when reviewing the trial court s resolution of the latent ambiguity. Id. Further, in determining what the parties intended under the circumstances, the trial court should make a reasonable interpretation over one which is unreasonable. Id. Further, if the trial court has before it an interpretation that is fair and equitable and one that is unfair and unequitable, the former must be selected. Id. See also Hunt v. First National Bank of Tampa, 381 So.2d 1194, 1197 (Fla. 2 nd DCA 1980). Further, all contracts must be given a reasonable interpretation and, if faced with two constructions, the preferred construction is one that makes it fair, customary, and such as a prudent man 6

11 would naturally execute.... Ace Electric Supply, 288 So.2d at 548 (quoting Holmes v. Kilgore, 103 So. 825 (Fla. 1925)). Lastly, if one construction would make it unreasonable, while another would do justice to both parties, the latter will be adopted. Id. Further, the Second District s determinations regarding the trial court s ruling conflicts with the decisions of this court and other district courts of appeal. A contract that grants one party the right to sue, but also affords the other party the right to declare that it has no legal obligation to pay, is void for lack of mutuality of remedy. Florida Dept. of Environmental Protection v. ContractPoint Florida Parks, LLC, 986 So.2d 1260 (Fla. 2008). Further, [i]t is basic hornbook law that a contract which is not mutually enforceable is an illusory contract. Pan-Am Tobacco Corporation v. Department of Corrections, 471 So.2d 4 (Fla. 1985). In addition, where one party retains to itself the option of fulfilling or declining to fulfill its obligations under the contract, there is no valid contract and neither side may be bound. Leon County v. Stephen S. Dobson, III, P.A., 957 So.2d 12, 15 (Fla. 1 st DCA 2007). As such the Second District Court of Appeals applied the wrong standard of review to the factual determinations of the trial court thereby substituting the Second District s judgment for the trial court. II. THE SECOND DISTRICT S REVERSAL OF THE TRIAL COURT S GRANTING OF AN EQUITABLE LIEN ON UNDISBURSED CONSTRUCTION FUNDS 7

12 CONFLICTS WITH OPINIONS OF THE FOURTH DISTRICT AND THE FIRST DISTRICT COURTS OF APPEAL. The Fourth District stated in Morgen-Oswood that when a contractor completes construction and the borrower defaults resulting in a foreclosure on the completed property the contactor was entitled to an equitable lien against the undisbursed balance of the construction loan funds. Morgen- Oswood & Associates, Inc. of Florida v. Continental Mortgage Investors, 323 So.2d 684 (Fla. 4 th DCA 1975). Accord Giffen Industries of Jacksonville, Inc. v. Southeastern Associates, Inc., 357 So.2d 217 (Fla. 1 st DCA 1978) (quoting with approval the well reasoned opinion of Judge Stephen H. Grimes in J.G. Plumbing Service, Inc. v. Coastal Mortgage Co., 329 So.2d 393 (Fla. 2 nd DCA 1976)). See also Blosam Contractors, Inc. v. Republic Mortgage Investors, 353 So.2d 1225 (Fla. 2 nd DCA 1977) (Holding that it is neither right nor just for the lender to obtain the benefit of its security while retaining funds that were to go to the creation of the security despite a contractual arrangement stating that the final draw was to come from another source.) Further, these decisions were recently confirmed in First Florida Bank v. Advantage Builders of America, Inc., 21 So.3d 921 (Fla. 2 nd DCA 2009). Further, the decisions cited above do not require a contractor to prove that the value of the property being foreclosed upon is worth what the construction lender loaned on the property in order for the contractor to obtain an equitable 8

13 lien on the undisbursed construction funds. See also Bruner and O Connor on Construction Law, s 8:149, Mechanics Liens - - Equitable Liens (2008). If the district court is going to add this requirement to the determination, the relevant date to determine the value of the property is the date of completion of the construction not a year and a half after ADVANTAGE completed construction. This analysis was not completed by the trial court or reflected in the trial court s ruling but was incorrectly done by the Second District. III. THE SECOND DISTRICT OPINION CONFLICTS WITH THIS COURT S RULING IN GABLES RACING ASSOC., INC. V. PERSKY BECAUSE THE SECOND DISTRICT DID NOT APPLY THE ABUSE OF DISCRETION STANDARD IN REVIEWING THE TRIAL COURT S EXERCISE OF ITS EQUITABLE JURISDICTION AND DID NOT FOLLOW THE EQUITABLE MAXIMS IDENTIFIED IN GABLES RACING. The instant matter is an appeal of the trial court s granting to ADVANTAGE an equitable lien on undisbursed construction funds. In granting the equitable lien to ADVANTAGE, the trial court exercised its equitable jurisdiction. Gables Racing Assoc., Inc. v. Persky, 6 So.2d 257, 263 (Fla. 1940). The trial court s exercise of its equitable jurisdiction is reviewed under the abuse of discretion standard. Id. at 262. See also Canakaris v. Canakaris, 382 So.2d 1197 (Fla. 1980) (holding that if reasonable men could differ as to the propriety of the action taken by the trial court, then it cannot be said that the trial court abused its discretion ). Id. 9

14 However, the Second District did not apply the abuse of discretion standard of review to the trial court s determination. In so doing, the Second District s decision conflicts with, inter alia, Gables Racing and Canakaris. Further, the Second District opinion conflicts with equitable maxims identified by this court. For example, it is an equitable maxim in Florida that where one of two innocent persons must suffer as a result of the default of another, the loss shall fall on him whose act made the loss possible. See Alton Towers, Inc. v. Coplan Pipe & Supply Co., Inc., 262 So.2d 671 (Fla. 1972). Accord Gables Racing, 6 So.2d at 264 (stating that where a prejudicial situation [between two parties] results from a wrongful act of a third person, the decision must be against the party whose conduct made possible the wrongful act.... This transaction was made possible by CTX s loan which CTX evaluated and in its sole discretion determined to make. Without the loan, there would have been no construction. CONCLUSION Because the opinion of the Second District conflicts with the decisions of this court and other district courts of appeal, ADVANTAGE requests this court assume jurisdiction over the instant case in order to resolve the conflict. Billy Joe Leon McFarland Counsel for ADVANTAGE 10

15 CERTIFICATE OF SERVICE I, Billy Joe Leon McFarland, certify that a true and correct copy of the foregoing has been furnished to Terrance L. Lavy, Esquire, Attorney for Appellant, 2369 West First Street, Fort Myers, Florida 33901, by U.S. Mail delivery, on this day of January, By: Billy Joe Leon McFarland Attorney for ADVANTAGE P.O. Box Cape Coral, FL (239) Fla. Bar No

16 CERTIFICATE OF FONT USED I HEREBY CERTIFY that this brief was computer generated using Courier New 12-point font. Attorney 12