Bivens Gardens Office Bldg., Inc. v. Barnett Bank of Florida, Inc.
| Decision Date | 31 July 1990 |
| Docket Number | No. 89-3172,89-3172 |
| Citation | 906 F.2d 1546 |
| Parties | , RICO Bus.Disp.Guide 7525 BIVENS GARDENS OFFICE BUILDING, INC., a Florida corporation, James A. Karns, individually and as a minority shareholder of Bivens Center, Inc., Fred Konstand, individually and as a former majority shareholder of Bivens Center, Inc., George Malik, partner of Edward Malik, partner of Joseph P. Malik, partner of Malik Investment Company, and George Malik, individually, Plaintiffs-Appellants, v. BARNETT BANK OF FLORIDA, INC., a Florida Corporation, which acquired American Bancshares, Inc., a Florida corporation, Bivens Center, Inc., a Florida corporation, Robert P. Cates, a partner of Goldin, Turner and Cates, a partnership, Goldin and Cates, a partnership, Charter Advisory Company, a Florida corporation, Michael Colodny, First City Bank of Gainesville, Inc., a Florida corporation, formerly known as Bivins Gardens Bank, Inc., a Florida corporation, Florida Companies, Inc., a Florida corporation, formerly known as Guardian Mortgage Investors, a Massachusetts business trust, Lee E. Hanna, International Hospitality Group, Ltd., a Maryland corporation, John J. Jennings, Robert Koons, James F. Lang, Robert F. Lanzillotti, St. Johns Group, Inc., a Florida corporation, which acquired Charter Investment and Development Company, a Florida company, The Great American Bank of Gainesville, Inc., a Florida corporation, formerly known as University City Bank, a Florida corporation, Larry G. Turner, a partner of Goldin and Turner, a partnership, Goldin, Turner and Cates, a partnership, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
David B. Ferebee, Tassone & Ferebee, Jacksonville, Fla., Andrew J. Michaels, Michaels & McGown, Akron, Ohio, for plaintiffs-appellants.
Lamar Winegeart, III, Jay Steel, Mahoney, Adams, Milam, Surface & Grimsley, P.A., Jacksonville, Fla., Dock Blanchard, Ocala, Fla., William E. Kuntz, Smith & Hulsey, Jacksonville, Fla., William N. Avera, Avera, Perry & Vloedman, Gainesville, Fla., Terry D. Bork, Boyd & Jenerette, P.A., Harold L. Catlin, Jacksonville, Fla., for defendants-appellees.
Appeal from the United States District Court for the Middle District of Florida.
Before KRAVITCH and CLARK, Circuit Judges, and ATKINS *, Senior District Judge.
Plaintiffs appeal the district court's dismissal of their civil RICO and pendent state law claims against the defendants on the grounds that the statute of limitations had expired. 1 The several causes of action enumerated in the complaint arise from the alleged wrongful takeover of a corporation in 1975, the mismanagement and wrongful diversion of corporate assets between 1975 and 1981, and the wrongful sale of a partnership's major asset in 1981 for less than its market value. Reasoning that all of the injuries suffered by the plaintiffs arose from the wrongful takeover of the corporation in 1975, the district court held that the statute of limitations on the civil RICO claims had expired in 1979, well before the plaintiffs filed the complaint in 1983. Finding that the complaint alleges injuries to the plaintiffs independent of the injuries suffered as a result of the wrongful takeover of the corporation, and that some of the plaintiffs' civil RICO claims for damages for these injuries are not time-barred and that others may not be time-barred, we reverse in part the district court's dismissal of all claims against all defendants.
This case involves five plaintiffs and thirteen defendants. Although the parties tend to lump their opponents together into a single, amorphous group of "plaintiffs" or "defendants," a proper resolution of this appeal requires that we recognize the relationships of the individual parties to each other and to the events that led to the filing of the complaint. Nevertheless, a complete description of each defendant's actions is not necessary for the resolution of this appeal. The following provides a basic outline of the actions of the more important participants in the defendants' alleged scheme to defraud the plaintiffs. Because the district court's order rests entirely on its holding that the claims are time-barred, we assume the facts alleged in the complaint to be true.
Sometime in 1969, plaintiff Fred Konstand ("Konstand") formulated a plan for the development of 40 acres of land in Gainesville, Florida. Konstand contemplated a mixed-use development to include condominiums, an office building, a shopping center, and a hotel. To accomplish this purpose, Konstand formed a number of different entities. He incorporated defendant Bivens Center, Inc. ("BCI"), in which he originally owned the majority of the stock, and in which plaintiff James Karns ("Karns") was the largest minority shareholder. BCI became the general partner of Bivens Gardens Hotel, Ltd. ("BGH, Ltd."), a limited partnership formed for the purpose of developing the hotel. BCI owned a one-half interest in BGH, Ltd. and the other half was owned by approximately 20 limited partners, including plaintiff George Malick and plaintiff Malick Investment Company. The limited partnership, BGH, Ltd., held title to the hotel until it was sold in 1981. Konstand also formed plaintiff Bivens Gardens Office Building, Inc. ("Office") to develop the office building. Although the office building was never built, Konstand formed other entities that successfully built condominiums on the property.
After obtaining capital contributions from the sale of shares in BCI and limited partnership interests in BGH, Ltd., Konstand arranged additional financing for these various enterprises from a number of sources. Defendant Guardian Mortgage Investors ("Guardian"), 2 a real estate investment trust, was a principal lender. Guardian agreed to lend money to several of the entities, including Office and BGH, Ltd. Konstand and BCI also jointly borrowed $200,000 from defendant University On October 18, 1974, defendant UCB sent Konstand a notice that the $200,000 loan was in default. The complaint alleges that on February 20, 1975, UCB attorney Selig Golden, defendant Robert Koons (then president of UCB), and defendant Robert Lanzillotti (then chairman of defendant Bivens Gardens Bank 4 and a limited partner in BGH, Ltd.), went to Karns's home and fraudulently obtained a proxy vote from him. That proxy was used later that evening at an improperly called shareholders meeting to oust the directors of BCI, elect new directors, and oust plaintiff Konstand from his presidency and control of BCI. Having gained effective control of BCI, the defendants gained control of the hotel, as BCI was the general partner in BGH, Ltd., the entity formed to develop the hotel. The next day, February 21, 1975, UCB began proceedings against Konstand and BCI to obtain judgment on the defaulted $200,000 loan. UCB soon obtained a state court judgment declaring that Konstand and BCI were in default on the loan and stock pledge agreements. With the court's permission, UCB offered Konstand's 58.07 shares in BCI for sale, and UCB itself purchased those shares at the public sale for $501. At this point, Konstand had lost control of BCI, as he no longer was president and held only 0.93 shares of BCI stock.
City Bank ("UCB"), 3 which loan was secured by a pledge of 58.07 shares of Konstand's stock in BCI.
On May 8, 1975, Konstand filed a lawsuit in state court against six of the defendants in the present action. The other seven defendants in this action are interrelated with those six defendants, as they are all officers, directors, employees, or successors in interest to the six state court defendants. Among other things, Konstand alleged he had not been in default on the $200,000 UCB loan and that UCB and Koons had been part of a conspiracy that had successfully placed "the control, management and cash flow of the hotel in the hands of the defendants" and had "succeeded in removing Konstand from the control" of the hotel. R5-128. Several years later, Konstand amended his complaint in the state court action to add allegations concerning false representations made to him by Koons, UCB and defendant Charter Advisory Co. (advisor to Guardian) for the purpose of removing him as a shareholder, officer, and director of BCI and the hotel. None of the other plaintiffs in the present action were parties to this state court action, and the suit was eventually dismissed for failure to prosecute.
In April, 1981, the hotel was sold as part of the bankruptcy reorganization of BGH, Ltd. The plaintiffs in this case contend that several of the defendants misrepresented to the bankruptcy court that both BCI and BGH, Ltd. had given the approval necessary to the sale of the hotel in accordance with their respective shareholder and limited partnership agreements, and that these defendants misrepresented the value of the hotel, such that the hotel was sold pursuant to bankruptcy approval for $1.5 million less than fair market value.
The plaintiffs filed this civil RICO action on July 21, 1983. The complaint contains five counts. Count I alleges that all defendants violated the RICO Act, 18 U.S.C. Secs. 1961, et seq., by conspiring to a) take over the ownership of BCI and control of the management and assets of BCI, b) mismanage and divert the assets of BCI and BGH, Ltd. to their own use, and c) wrongfully sell the hotel for less than its fair market value. Count II alleges RICO violations against UCB based on allegations of wire fraud, mail fraud and bankruptcy fraud, and Count III alleges the same violations against Guardian and Charter Advisory Co. Count IV is essentially a state law shareholder derivative action that seeks an accounting and damages against UCB for mismanagement of BCI. Count V alleges that all defendants violated state law by conspiring for the purposes of unlawfully The district court order appealed from in this case addresses only the defense of the statute of...
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