Cafaro v. Zois, 16-15522
| Decision Date | 23 May 2017 |
| Docket Number | No. 16-15522,16-15522 |
| Parties | JOHN J. CAFARO, Plaintiff-Appellant, v. ELIA ZOIS, MARIANA ZOIS, KEITH HYATT, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
[DO NOT PUBLISH]
Non-Argument Calendar
D.C. Docket No. 9:15-cv-80150-BB
Appeal from the United States District Court for the Southern District of Florida
Before WILSON, MARTIN, and ANDERSON, Circuit Judges.
John J. Cafaro sued over his contract to rent and ultimately purchase a multi-million dollar property in Palm Beach, Florida. Cafaro sued Elia Zois, the property owner; Mariana Zois, his wife; and Keith Hyatt, the receiver for the property during foreclosure proceedings in state court. On appeal is the district court's summary judgment on four claims: Cafaro's claims of breach of contract (Count I) and common law fraud (Count III) against Elia Zois, Cafaro's claim of fraudulent transfer under the Florida Uniform Fraudulent Transfer Act (Count VI) against the Zoises, and Hyatt's counterclaim of breach of contract against Cafaro.1 After extensive review of the parties' briefs, the district court's opinion, and the record, we reverse summary judgment on Cafaro's claim of common law fraud and affirm summary judgment on the remaining claims.
On February 14, 2013, Cafaro contracted with Elia Zois to rent and ultimately purchase property in Palm Beach for $10,370,000. The contract required Cafaro to make periodic payments ranging from $330,000 to $600,000 (totaling $1.6 million) until July 1, 2014, and monthly payments of $35,000(totaling $770,000) until December 1, 2014.2 On the December 31, 2014 closing date, Cafaro had to pay $8 million. Also, the contract required Zois to lease Cafaro the property until the December 31, 2014 closing date and to deliver title five days before the closing date. If within the five days Cafaro found a defect that rendered the title unmarketable, he had to either accept the title as is or notify Zois. If Cafaro notified, Zois had thirty days in which to "take reasonable diligent efforts to remove [the] defect[]." If Zois failed to remove the defect, Cafaro could accept the title as is or terminate the contract and receive refund of his payments.
Under the contract, a defaulting party lost the "Deposit," which included the monthly and periodic payments. The contract stated:
Cafaro missed a monthly payment in July 2013 but otherwise timely made his monthly payments from March 2013 to July 2014. Cafaro ceased paying after July 2014. On October 23, 2014, Zois sent Cafaro a notice of default for failure to make monthly payments from August to October 2014.
All of Cafaro's periodic payments were timely except the last, which was due on July 1, 2014, but which Cafaro paid two days late.
In total, Cafaro paid approximately $2.2 million.
On March 18, 2013, just over a month after the parties entered into the contract, Bank of America accelerated Zois's mortgage loan (totaling approximately $8 million) for transferring a leasehold interest in the property, which secured the loan. Zois defaulted on the mortgage loan, and on April 16, 2013, Bank of America sold the mortgage to SummitBridge Investments IV LLC. On September 1, 2013, Zois agreed to pay SummitBridge $35,000 per month from October 1, 2013, to January 30, 2015, and any remaining amount due on January 30, 2015. Zois did not make his monthly payments to SummitBridge from April to June 2014 despite collecting the same amount, $35,000, every month from Cafaro.
After Zois's default and during a two-week span beginning June 11, 2014, SummitBridge sent three letters to Cafaro informing him that Zois assigned Cafaro's "rents" to SummitBridge and demanding the rents. SummitBridge and Zois disagreed on whether the $334,000 periodic payment constituted rent. On July 1, 2014, Cafaro paid SummitBridge a $35,000 monthly payment but not the $334,000 periodic payment due that day. Cafaro explained in an email to Zois that Cafaro put the $334,000 "into an escrow account until you and [SummitBridge] can come to [an] agreement on where the payment should be sent."
On July 2, 2014, Zois sent Cafaro a notice of default stating that putting the $334,000 into an escrow account failed to constitute a timely periodic payment and demanded that Cafaro send the money to Zois.3 On July 3, 2014, Cafaro sent the $334,000 periodic payment to Zois, and on July 7, 2014, Zois sent Cafaro a letter rescinding the notice of default. After July, Cafaro ceased making further payments to either Zois or SummitBridge. On July 25, 2014, SummitBridge initiated a foreclosure action against the property in state court and on September 8, 2014, recorded a notice of lis pendens. On December 12, 2014, the state court appointed Hyatt as the receiver for the property.
Zois failed to pay federal income taxes from 2009 to 2012. Finally, on February 4, 2014, the Internal Revenue Service (IRS) recorded a federal tax lien against the property for approximately $3.6 million. The IRS sent Cafaro a letter on June 3, 2014, and again on August 13, 2014, notifying him of the lien and instructing him to make the payments due under his contract with Zois to the IRS. Cafaro did not pay any amount due under the contract to the IRS.
On October 3, 2014, the Zoises granted a second mortgage, this time to Apple Chase Investors, LLC, to secure an existing loan for $2 million. Although it is unclear how the Zoises granted a second mortgage while SummitBridge's foreclosure action was pending, Zois states that he "had a relationship with Apple Chase and one of its principals for many years."
After receiving Zois's October 23, 2014 notice of default, Cafaro sent Zois a November 3, 2014 letter requesting adequate assurances, including but not limited to assurances that SummitBridge and the IRS will release any lien on the property upon closing, that SummitBridge's foreclosure action will have been dismissed by closing, and that Zois will prove that no other lien or encumbrance exists on the property. Cafaro argues that no one responded to the request for adequateassurances, and Zois argues that his father told Cafaro that the liens on the property "would not be a problem."
We review summary judgment de novo, viewing the evidence in the light most favorable to the party opposing the judgment. Wilson v. B/E Aerospace, Inc., 376 F.3d 1079, 1085 (11th Cir. 2004). Summary judgment is appropriate if there is no genuine issue of material fact. Fed. R. Civ. P. 56(a).
Claiming that Zois breached the contract, Cafaro argues that Zois failed to respond to his request for adequate assurances. Section 672.609, Florida Statutes, states, "When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance." And the party demanding adequate assurance "may if commercially reasonable suspend any performance" "until he or she receives such assurance." Fla. Stat. § 672.609; see Hosp. Mortg. Grp. v. First Prudential Dev.Corp., 411 So. 2d 181, 182 (Fla. 1982) (). However, "a party already in breach is not entitled to invoke [the section] by demanding assurances." See Advanced Bodycare Sols., LLC v. Thione Int'l, Inc., 615 F.3d 1352, 1361 (11th Cir. 2010) (internal quotation marks omitted) (discussing a similar Georgia law).
Cafaro did not request adequate assurances until November 3, 2014, only after missing four monthly payments totaling $140,000 and only after receiving a notice of default from Zois. As the breaching party, Cafaro could not request adequate assurances and use Zois's failure to respond to the request to excuse his breach. Also, Cafaro argues for the first time on appeal that his e-mail to Zois on June 25, 2014—before Cafaro ceased monthly payments—constitutes a request for adequate assurances.5 Even if this argument is properly before this court, the e-mail asks only for clarification on whether Cafaro should send a $334,000 periodic payment to Zois or SummitBridge. This email neither requests assurance that Zois can deliver title nor discusses Cafaro's failure to pay his $35,000 monthly payments, which caused his default.
As receiver for the property, Hyatt counterclaims that Cafaro, not Zois, breached the contract. Even viewed in the light most favorable to Cafaro, the record reveals that Cafaro failed to pay his rent—the $35,000 monthly payment—in July 2013 and in every month after July 2014. Even if Cafaro had doubts about Zois's ability to deliver title, under the contract Zois was not required to deliver title until five days before the December 31, 2014 closing date. And as stated above, Cafaro did not request adequate assurances until after missing four monthly payments and receiving a notice of default from Zois. The contract specifically includes Cafaro's failure to pay as grounds for his default. And because Cafaro defaulted, Zois under the contract "elect[ed] to recover and retain the Deposit for the account of [Zois] as agreed upon liquidated damages, consideration for execution of this Contract, and in full...
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