Cavic v. Grand Bahama Development Co., Ltd.

• Decision Date: 28 March 1983
• Docket Number: No. 81-5649,81-5649
• Citation: 701 F.2d 879
• Parties: Louis F. CAVIC and Helen A. Cavic, his wife, Plaintiffs-Appellees, Cross-Appellants, v. The GRAND BAHAMA DEVELOPMENT COMPANY, LIMITED, Defendant-Appellant, Cross-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 879

701 F.2d 879

Louis F. CAVIC and Helen A. Cavic, his wife, Plaintiffs-Appellees, Cross-Appellants, v. The GRAND BAHAMA DEVELOPMENT COMPANY, LIMITED,

Defendant-Appellant, Cross-Appellee.

No. 81-5649.

United States Court of Appeals, Eleventh Circuit.

March 28, 1983.

Roger C. Minahan, Minahan & Peterson, Milwaukee, Wis., for defendant-appellant, cross-appellee.

J. Richard McEachern, Guilfoil, Symington, Petzall & Shoemake, St. Louis, Mo., for plaintiffs-appellees, cross-appellants.

Appeals from the United States District Court for the Southern District of Florida.

Before FAY and CLARK, Circuit Judges, and MARKEY ^*, Chief Judge.

FAY, Circuit Judge:

This is an appeal from the final judgment for $440,000.00 entered by the district court upon a jury verdict rendered in favor of the

appellees. The appellees sued the appellant for common law fraud alleging that they were induced by fraudulent misrepresentations to enter into contracts to purchase from the appellant real property located in Freeport, Grand Bahama Island. A jury found for the appellees on their common law fraud claim and awarded both compensatory and punitive damages. We affirm the award in its entirety.

FACTS

Throughout the course of this litigation the appellees have maintained that they are victims of a sophisticated, complicated, and fraudulent land-sale scheme operated by the appellant. While much of the evidence adduced at trial was conflicting and hotly contested, the following facts are basically undisputed:

The appellant is engaged in the business of developing the tourist-related industry and land subdivisions for resale in Freeport, Bahama.

In September of 1968 the appellees travelled to Freeport for a vacation. On September 23, 1968, the appellees signed two contracts for the purchase of two parcels of real property from the appellant for $26,361.00 and $48,965.00. The contracts required the appellees to make a total down payment of $15,066.00, with sixty monthly installments of $311.00 and $574.00.

The appellees executed two contracts for the purchase of two additional parcels of real estate in Freeport on November 23, 1968. These contracts were for property with respective prices of $51,715.00 and $46,105.00. The contracts required the appellees to make a total down payment of $19,564.00, with sixty monthly installments of $543.00 and $609.00.

The appellees were unable to keep up the monthly payments on the four lots; consequently, they eventually defaulted on the 1968 contracts. Concerned about their investment, one of the appellees returned to the Bahamas to meet with the appellant. As a result of this meeting, on May 17, 1972, the appellees executed four release authorizations whereby the principal payments made on the 1968 contracts, together with appreciation allowed by the appellant, were applied to the purchase of two pieces of ocean-front property in Freeport. Although no cash down payment was required for these purchases, the appellees were obligated to pay the $154,332.00 principal balance by 120 monthly installments of $1,312.89 and $479.14. The appellees received no money from this transaction, even though the transaction was considered a "trade up" and appreciation was shown in the value of the original four pieces of property purchased by the appellees.

It was later proposed that the appellees transfer their equity and appreciation in the two pieces of oceanfront property into a venture to build an oceanfront hotel in Freeport, since the greater marketability and resale value of the hotel would enhance the appellees' chances of recovering their equity. Accordingly, on March 23, 1973, the appellees executed an agreement with Gateway Investments, Ltd. ("Gateway") in which they agreed to establish a joint venture between themselves and others for the purpose of purchasing beachfront property in Freeport and constructing a 400 room hotel. The venture took the form of Clubhotels (Bahamas) Ltd. ("Clubhotels"). Gateway, as trustee for Clubhotels, contracted with the appellant on April 6, 1973 for the sale of the land upon which the hotel was to be built. The appellees agreed to contribute their equity in the two pieces of oceanfront property to Clubhotels, to be used in making partial payment of the price due under Clubhotels' contract with the appellant for the purchase of the hotel property and the development of the hotel. The appellees assigned their equity directly to the appellant. In return for their contribution to the joint venture, the appellees were to receive shares of Clubhotels' stocks in the amount of their contribution. Because the equities that were traded in by the members of the venture far exceeded the purchase price of the land upon which the hotel was to be constructed, the excess equities were traded in for another piece of oceanfront property, which the venturers were to Clubhotels continually suffered from an inability to secure financing and necessary permits and licenses, until the time that the appellant declared Clubhotels' contract with it to be in default in September, 1977. All of the paid in equity, as well as the land, was forfeited to the appellant. This included the land which Clubhotels was to receive "free and clear." These two tracts of land subsequently were resold by the appellant.

hold free and clear without any building compulsion requirement.

On December 30, 1976, the appellees filed a complaint against the appellant in the Circuit Court of Dade County, Florida, seeking compensatory and punitive damages for alleged common law fraud and unjust enrichment. The action was removed to the United States District Court for the Southern District of Florida on January 31, 1977.

The appellees attempted to serve the appellant with process on three occasions. Suit papers were finally served on Charles Schuette, the resident agent of American Division, Inc., and the Florida Secretary of State. The appellant's motions to quash service of process and dismiss for lack of in personam jurisdiction were denied on February 17, 1978.

The cause was tried before a jury on April 13-16, 1981. At the close of the appellees' case-in-chief, the trial judge denied the appellant's motion for a directed verdict. At the close of all the evidence, the trial judge granted the appellant a directed verdict on the unjust enrichment claim and only submitted the common law fraud claim to the jury for determination. The jury returned its verdict and awarded the appellees $140,000.00 in compensatory damages and $300,000.00 in punitive damages. The appellant's post-trial motions for directed verdict, judgment notwithstanding the verdict, or for new trial were denied on June 1, 1981. Timely appeal was filed by the appellant on June 23, 1981. The appellees filed a cross-appeal only as to the denial of prejudgment interest.

DISCUSSION

I. Applicable Law.

Before discussing the points of error raised on appeal by the appellant, it is necessary to pause and decide what law governs the appellees' claim for fraud.

Fed.R.Civ.P. 44.1(1) requires parties to give written notice, in the pleadings or otherwise, of their intention to assert foreign law. The Restatement (Second) of Conflicts provides:

[Where] either no information, or else insufficient information, has been obtained about the foreign law, the forum will usually decide the case in accordance with its own local law .... The forum will usually apply its own local law for the reason that in this way it can best do justice to the parties .... When both parties have failed to prove the foreign law, the forum may say that the parties have acquiesced in the application of the local law of the forum....

Restatement (Second) of Conflicts Section 136, comment h, at pp. 378-79 (1971); see 5 Moore's Federal Practice p. 44.1.03, p. 1655 (2d ed. 1977). Here, even though the alleged misrepresentations were made in Freeport, none of the parties claimed the applicability of Bahamian law or asserted that it differs from that of Florida. Rather, recognizing that the Bahama Islands and Florida share a common civil law background, each party asserts the similarity in the laws governing claims for fraud in both jurisdictions and seems to have assumed that Florida law governs. "Because the parties did not raise any conflict of laws issue in the district court and do not raise it on appeal, under applicable conflict of laws principles the law of the forum ( [Florida] would govern the substantive issues due to the absence of facts justifying the application of the law of some other jurisdiction." Montgomery Ward & Co., Inc. v. Pacific Indemnity Company, 557 F.2d 51, 58, n. 11 (3rd Cir.1977); Clarkson Co. Ltd. v. Shaheen, 660 F.2d 506, 513, n. 4 (2d Cir.1981); Commercial Insurance Company of Newark v. Pacific Peru Construction, 558 F.2d 948, 952 (9th Cir.1977); Seguros Tepeyac, S.A Compania Mexicana v. Bostrom, 347 F.2d 168, 174, n. 3 (5th Cir.1965) (in the absence of statute, foreign law or rights thereunder to be given effect must be proved like any other fact, in the absence of which the law of the forum is ordinarily applied).

II. The Sufficiency of the Evidence.

We next confront the appellant's contentions that the trial court erred in denying its motions for a directed verdict, for judgment notwithstanding the verdict, and for a new trial. In reviewing these claims, we need to address the appellant's underlying arguments that the evidence was insufficient to support the verdict and judgment.

The yardstick against which the above motions must be measured is a federal one:

On motions for directed verdict and for judgment notwithstanding the verdict the Court should consider all of the evidence--not just that evidence that supports the non-mover's case--but in the light and with all reasonable inferences most favorable to the party opposed to the motion. If the facts and inferences point so strongly and overwhelmingly in favor of one party that the Court...