Cook v. Deltona Corp., 83-5651

• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)
• Citation: 753 F.2d 1552
• Docket Number: No. 83-5651,83-5651
• Parties: Wendell COOK, Plaintiff-Appellee, Cross-Appellant, v. The DELTONA CORPORATION, Marco Island Development Corporation, Mackle Brothers Division, a corporation, Defendants-Appellants, Cross-Appellees.
• Decision Date: 27 February 1985

Page 1552

753 F.2d 1552 Wendell COOK, Plaintiff-Appellee, Cross-Appellant,
v.
The DELTONA CORPORATION, Marco Island Development
Corporation, Mackle Brothers Division, a
corporation, Defendants-Appellants,
Cross-Appellees. No. 83-5651. United States Court of Appeals,
Eleventh Circuit. Feb. 27, 1985.

Page 1554

Joseph Mancilla, Jr., Miami, Fla., for defendants-appellants, cross-appellees.

Larry Stumpf, Miami, Fla., Robert F. Childs, Jr., Birmingham, Ala., for plaintiff-appellee, cross-appellant.

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

Before GODBOLD, Chief Judge, HILL, Circuit Judge, and PECK ^*, Senior Circuit Judge.

JAMES C. HILL, Circuit Judge:

This appeal presents for review a breach of contract action together with ancillary issues of common law fraud, fraud and non-disclosure under the Interstate Land Sales Full Disclosure Act, 15 U.S.C. Sec. 1701 et seq., and entitlement to attorneys' fees, interest, and costs with respect to these claims.

The district court directed a verdict for the plaintiff on the claimed breach of contract, directed verdicts for the defendant on all fraud claims, dismissed the statutory nondisclosure claims, denied attorneys' fees and prejudgment interest, and submitted the issue of damages for the breach of contract to the jury. The jury, finding the defendant breached the contract in bad faith, awarded loss-of-bargain damages. Defendant below, Deltona Corporation ("Deltona") appeals both the directed verdict on the breach of contract claim and the jury's bad faith finding and award of loss-of-bargain damages. Plaintiff below, Cook, cross-appeals the directed verdicts on his claims of common law and statutory fraud and punitive damages, and the dismissal of his statutory nondisclosure

Page 1555

claims. Cook also contests the denial of attorneys' fees and prejudgment interest.

We approach this raft of issues seriatim, commencing with the breach of contract claim. Because the resolution of this case in large part turns upon who knew what when, the facts will be set out in detail.

I. FACTS

A. The Marco Island Development.

In 1964 Deltona began purchasing land on Marco Island, Collier County, Florida, for the purpose of commercial and residential development. The project was to be financed in part with purchase monies paid to Deltona by installment contract purchasers over a period of many years. Because of the varying length of these contracts and the varying delivery dates specified in them, Deltona planned to complete development of the lots in the order of their scheduled delivery. To facilitate and organize this overall development Deltona divided the island into six construction areas which were then given popular names based upon nearby geographical features. Initially these areas were Marco River, Roberts Bay, Barfield Bay, Big Key and Collier Bay. In 1969 Deltona acquired the area in which the plaintiff's lot was to be located, Marco Shores.

At the time of its purchase by Deltona, much of the land to be developed was underwater. It was Deltona's plan to create the land for development through a process known as dredge and fill, the moving of earth from one shallow area to another, making a landfill. In order to accomplish this master plan, Deltona sought and obtained various development approvals, including county zoning approval of its master plan and, after required public hearings, county and state of Florida bulkhead line approvals setting out permissible dredge and fill areas for the planned community. After these bulkhead approvals were obtained, it was necessary to obtain specific dredge and fill permits from three authorities, Collier County, the state of Florida, and the United States Army Corps of Engineers.

In accordance with the geographical division of the development and the first delivery/first development plan of operation, in October, 1964 Deltona sought and obtained all necessary dredge and fill permits on the Marco River area. It is significant that in 1964 the Army Corps dredge and fill permit was issued almost automatically upon approval of the dredge and fill operation by county and state authorities. Development of Marco River proceeded apace.

Deltona next sought to obtain dredge and fill permits for Roberts Bay. County approval came on February 6, 1968; state approval, on April 15, 1968. In contrast to the earlier permitting process for Marco River, however, it was not until December 8, 1969 that Deltona was able to obtain Army Corps of Engineers dredge and fill permits approving the development of Roberts Bay. This was because the 1969 permit application was subject to a much more elaborate scrutiny by the Corps, a review encompassing the status of all sales on Marco Island, Deltona's master plan for the Marco Island community, and Deltona's plans for the development of adjacent land. Additionally, as part of its approval of the Roberts Bay dredge and fill permit, the Corps advised Deltona that each permit application was reviewed independently and that the approval of the Roberts Bay permit was not a guarantee that any further permits would be granted. Consequently, although Deltona was allowed to sell lots in three development areas, Barfield Bay, Big Key, and Marco Shores, the company had notice that Corps permits for these areas were not assured.

Shortly after receiving the Roberts Bay permit and its accompanying caveat, Deltona purchased the Marco Shores tract in which the plaintiff's lot was to be located. Following its established development plan, Deltona then sought county and state dredge and fill permits for Marco Shores. These permits were obtained prior to November 1971. Thereafter, Deltona's permitting experience with respect to tracts comparable to Marco Shores caused the company to conclude that seeking a dredge and fill permit for Marco Shores would be

Page 1556

an exercise in futility. Accordingly, a Corps dredge and fill permit for Marco Shores was never requested. Deltona ceased selling Marco Shores lots in June of 1973.

B. The Cook Contract.

The scene now shifts from the west coast of Florida to Bent Waters Airforce Base in England where the plaintiff, in October, 1971, was a United States Air Force pilot. On October 30, 1971 Cook met with a Deltona salesperson, Ms. Pat Arens. On that date Cook executed a contract for the purchase of a lot in the Marco Shores development. Deltona executed the contract on November 15, 1971. The executed contract called for delivery of marketable title to the lot on or before May, 1980. In the event Deltona was unable to meet its obligations under the agreement the contract provided that Deltona would return to Cook all monies paid, including interest, toward the purchase of the property.

Over the next 11 years a series of events occurred culminating in the filing of this action on March 22, 1982. Because this case largely turns upon whether Deltona knowingly misrepresented to Cook its ultimate ability to perform by delivering title to the Marco Shores lot, we must look both to the actual state of Deltona's knowledge about its ability to develop Marco Shores, and to Deltona's representations to Cook on this subject. We examine each set of facts chronologically.

1. What Deltona knew.

In June of 1973 Deltona ceased selling lots in Marco Shores. In July of 1973 the Army Corps of Engineers advised Deltona that an Environmental Impact Study ¹ would have to be conducted before a dredge and fill permit for Marco Shores would be issued. In March of 1975 Deltona revised its property report to indicate that the Marco River and Hudson Bay development areas had been approved for dredge and fill. This report specifically noted, however, that should Deltona be unable to obtain dredge and fill permits for other areas the company would tender a refund pursuant to agreement between the parties. In April of 1976 the Army Corps of Engineers denied dredge and fill permits for Barfield Bay and Big Key. In July of 1977 Deltona revised its offering statement to indicate that some Marco Island dredge and fill permits had been denied. Sometime prior to April, 1977 Deltona set up a state approved refund option program for the satisfaction of those customers whose lots could not be delivered because of the denial of required dredge and fill permits. It is undisputed that Deltona has never applied for a dredge and fill permit for Marco Shores.

2. What Deltona told Cook.

While these developments were taking place, Deltona corresponded with Cook about various problems in the purchase of the contract lot. In April of 1973 Cook, having encountered financial difficulty, called Deltona for aid in selling his lot. He was advised at that time that no development had taken place at Marco Shores, that the lots were still underwater, and that Deltona could not help him. In response to Cook's alternative request for a refund, Deltona advised no refund was available and that, in the event Cook defaulted on payments, the monies paid in to date would be kept as liquidated damages. Cook continued making payments.

In October or November of 1975 Cook learned from a friend that Deltona was encountering serious difficulties in the development of Marco Shores. Cook called Deltona and again demanded a refund. He was advised by Deltona's representative that the company was still trying to develop the lots and to make the May, 1980 delivery. As an alternative request, Cook asked for a payment moratorium. The company agreed, and Cook has made no further payments since November, 1975. In March of 1977 Deltona sent Cook a letter formalizing the moratorium and advising him that some dredge and fill permits

Page 1557

for construction on Marco Island had been denied.

By letter dated April 13, 1977, and allegedly received by Cook in the summer of 1977, Deltona informed Cook that it was uncertain about the effect of the permitting problem on particular properties. Cook was advised...