American Safety Insurance Service v. Griggs
| Decision Date | 18 May 2007 |
| Docket Number | No. 5D05-2883.,5D05-2883. |
| Citation | 959 So.2d 322 |
| Parties | AMERICAN SAFETY INSURANCE SERVICE, INC., et al., Appellant, v. Donald GRIGGS, John Amodia, Lou Amodia, et al., Appellee. |
| Court | Florida District Court of Appeals |
John A. Christy and Debra A. Wilson, of Schreeder, Wheeler & Flint, LLP, Atlanta, GA, and J. Lester Kaney of Cobb & Cole, P.A., Daytona Beach, for Appellant.
David A. Vukelja of David A. Vukelja, P.A., Ormond Beach, for Appellee.
American Safety Insurance Services, Inc. ("ASIS"), American Safety Insurance Group, Ltd. ("ASIG"), American Safety Reinsurance, Ltd. ("ASRE"), and Ponce Lighthouse Properties, Inc. ("Lighthouse") (collectively, "American Safety") appeal the trial court's order that ruled American Safety had been unjustly enriched by the plaintiffs. The plaintiffs are seven Connecticut residents — [Donald Griggs, John Amodia, Lou Amodia, Michael D'Addabbo ("D'Addabbo"), Terry B. Fletcher, Louis T. Burnett, and Edward R. Mauro] — (collectively, "Connecticut Seven") who invested money in a project to develop property in Ponce Inlet. American Safety raises several points on appeal, but two are dispositive. Because the Connecticut Seven's claim for unjust enrichment failed as a matter of law and the damages award was unsupported by substantial, competent evidence, we reverse.
In the late 1980s, each of the Connecticut Seven invested $300,000 into a company owned and run by H. Mac McMurry. McMurry was a banker for decades, served as a bank president, and was intimately familiar with commercial development loans. In 1986, the Connecticut Seven provided $300,000 letters of credit as collateral to a limited partnership formed to acquire and develop approximately 115 acres of land in Ponce Inlet. McMurry, another individual, and Ponce Marina, Inc. ("PMI") were general partners.1 The letters were supposed to serve as collateral, not funding.
McMurry testified that the first mortgage from Carrie Bank was for approximately $4.5 million. The sale closed in early 1985, and McMurry estimated that zoning and permitting would require $250,000 and one year. His projection was off by about nine years and $1.8 million. Because McMurry could not get the loan extended, he convinced the Connecticut Seven to allow him to draw upon the $300,000 letters of credit to fund the project. Their funds were exhausted by 1989, though no construction occurred. PMI delivered to each plaintiff a $300,000 promissory note in September 1990, secured by half of PMI's outstanding shares.
The record shows McMurry and the Connecticut Seven expected the first mortgage to be paid before the promissory notes. A November 1994 letter from McMurry to J. Dana Fogle, the Connecticut Seven's counsel, stated the promissory notes would be paid "following the payment of the first mortgage." The Connecticut Seven released their February 1994 lis pendens on the property, but recorded the November 1994 agreement. In January 1995, the Connecticut Seven signed a subordination agreement, agreeing the Connecticut Agreement was subordinate to the first mortgage.
PMI was financially troubled. It faced foreclosure from 1989 through 1999, when American Safety foreclosed. In this time, McMurry sent various last-minute requests for more money to the Connecticut Seven. For example, in November 1993, McMurry requested funds due within one week to extend PMI's permits. In March 1997, McMurry contacted the Connecticut Seven because he needed within four days approximately $500,000 for improvements and the 1994 tax bill.
The Connecticut Seven did not contribute additional funds in 1997, and Citibank, which had acquired the mortgage, filed an action for foreclosure in May 1997. The principal owed was approximately $8.85 million. In November 1997, MD Marina Ltd. ("MD Marina") acquired the debt and documents from Citibank, was substituted as a plaintiff, and proceeded with the foreclosure. After more than ten years of McMurry's stewardship, no construction had occurred on the property.
American Safety and Lloyd Fox, the president of the three American Safety defendants, were not yet involved. In November 1997, Steve Sirang of the Cobb Capital Corporation wrote to his friend, Fox, about the project and recommended that American Safety provide financing. We highlight two critical documents preceding the May 1998 agreements between American Safety, PMI, and the Connecticut Seven.2
First, Synergy (ASIS) provided a loan commitment letter to PMI on 16 April 1998, which provided that, as an express condition precedent to the loan commitment, Synergy must "purchase all existing promissory notes made by [PMI], which are secured by the Property. . . ." As collateral for the loan, PMI was required to provide a deed and security agreement creating a first priority lien and security interest on the property and improvements.
Second, we note with interest Fogle's letter to McMurry dated 21 May 1998 — one week before the Connecticut Seven and PMI executed their profit participation agreement. Fogle's summary of the terms show that he knew all of them, contrary to McMurry's "ambush" testimony at trial:
1. As consideration . . ., the Connecticut 7 will execute a full assignment to Peggy McMurry of each of their 71 shares of stock, and of the promissory note secured by the pledge of said stock.
2. . . . [PMI] . . . would acknowledge that [PMI] owes the Connecticut 7 the total sum of . . . [$3,584,000], as to this transaction only. . . .
Mac, . . . the final agreement would need to be signed by all of the affected parties. . . . I've taken the liberty of faxing it to you and [the Connecticut Seven] simultaneously. . . .
We are all rooting for you, and realize that we sink or swim, together.
(Emphasis added).
The 29 May 1998 agreement between the Connecticut Seven and PMI.
The Connecticut Seven and PMI entered into a profit sharing agreement on 29 May 1998. The Connecticut Seven claims on appeal that it contained provisions that conferred benefits directly to American Safety. This agreement provided:
WHEREAS, [PMI] borrowed money secured by the Project pursuant to certain loan documents . . .; and
WHEREAS, a successor in interest to the original lender . . . sued to foreclose on the Project . . .[;]
WHEREAS, [PMI] desires that [ASRE] ("Lender") acquire the First Mortgage Loan and . . . Documents, and to provide further development and pre-construction financing to [PMI], and to settle the Litigation.
WHEREAS, Lender is willing to acquire the First Mortgage Loan and ... Documents, and to make the further advances to [PMI], and to cause the Litigation to be resolved only if Parties agree to enter into this Agreement.
WHEREAS, [PMI] has previously entered into agreements for repayment of investments by CONNECTICUT-7 ..., which agreements are evidenced by certain Promissory Notes secured by 500 shares of stock owner.
WHEREAS, the parties hereto recognize that [PMI] has entered into a Loan Agreement with Lender necessitating a novation of all prior agreements between the parties, and the release of 500 shares of stock of [PMI] so that such shares may become available to be pledged to Lender.
WHEREAS, the CONNECTICUT-7 have agreed to a term of payment payable on distribution of profits to [PMI] and calculated based on unit sales.
WHEREAS, [PMI] has entered into a certain Profit Participation Agreement with Lender, pursuant to which [PMI] is permitted to receive profit distributions from Project in an amount equal to one hundred percent (100%) of the profits up to the first $6,477,250.00 and thirty three and one third percent (33%) of the profits distributions for every dollar of profit thereafter.
NOW THEREFORE, ... the parties hereto agree as follows:
1. PARTICIPATION.
1.1 ... CONNECTICUT-7 will execute a full assignment to PEGGY A MCMURRAY [sic] of each of their five hundred (500) shares of [PMI] stock ... and of the Promissory Notes ..., and ... remove any liens from the record against the Project ....
1.2 [PMI] acknowledges that the amount due by [PMI] to CONNECTICUT-7 under the Promissory Notes is $3,584,000.00 including principal and accrued interest to date (and not further interest thereunder) (the "Debt")[.]
1.3 [PMI] shall repay the Debt to the CONNECTICUT-7. . . .
1.4 ... CONNECTICUT-7 shall be entitled to receive from [PMI] in satisfaction of the Debt ... $4,200.00 for each ... condominium unit and each boat slip when sold and closed ... payable as follows:
a) CONNECTICUT-7 shall receive ... ($1,400.00) at the time of the sale and closing of each residential unit and each boat slip.
b) At the completion of each Project phase ... and after the full payment of principal and interest for all lenders holding any mortgage interest in the Project from the profit distributions to [PMI] as described above, [PMI] shall pay to CONNECTICUT-7 . . . $2,800.00 for each . . . condominium unit and boat slip previously sold. . . .
1.5 CONNECTICUT-7 expressly acknowledges and agrees that any and all payments due under this Agreement shall not be secured by the Project in any manner whatsoever and that this Agreement shall not be recorded in the Public Records of Volusia County, Florida.
(Emphasis added).
The plaintiffs delivered the promissory notes and stock to PMI, released the November 1994 agreement concerning the notes, and did not record the profit participation agreement.
The 29 May 1998 loan agreement between PMI and American Safety.
On 29 May 1998, ASRE purchased the loan documents and indebtedness held by MD Marina and agreed to advance additional sums to PMI. Among the loan agreement's terms, PMI covenanted to "[c]onvert at least 70 of the 117 potential . . . purchasers on the reservation list to hard contracts . . . [by 1 November 1998]."3
The 29 May 1998 stipulation for settlement.
In connection with the loan agreement, on 29 May 1998...
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