No Rust Rebar, Inc. v. Green Tech Dev. (In re No Rust Rebar)
| Decision Date | 22 September 2021 |
| Docket Number | 21-12188-PDR,Adv. Case 21-01111-PDR |
| Parties | In re: No Rust Rebar, Inc., Debtor. v. Green Tech Development, LLC, Defendant. No Rust Rebar, Inc., Plaintiff, |
| Court | U.S. Bankruptcy Court — Southern District of Florida |
ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT
Peter D. Russin, Judge United States Bankruptcy Court.
No Rust Rebar, Inc. and Green Tech Development, LLC litigated this case for over four years in state court before it was removed to this Court. After years of litigation, only the following questions remain: whether No Rust holds an enforceable oral option contract to purchase real property owned by Green Tech and, if so, whether No Rust is entitled to specific performance. Both parties seek summary judgment, but genuine disputes as to material facts persist. Consequently, the Court denies both motions.
Background[1]
No Rust is an industrial supply business that manufactures structural reinforcement products.[2] In July 2015, it contracted to purchase real property in Pompano Beach, Florida to use as its manufacturing facility.[3] Based on an agreement with the Seller No Rust occupied the Property before closing.[4] But as the closing date drew near, No Rust lacked the funds to close.[5] On December 7, 2015, in a Written Consent of the Shareholders (the "No Rust Consent"), No Rust's shareholders acknowledged that:
No Rust's shareholders determined that it was in the best interest of No Rust to assign its right to purchase the Property to Green Tech under certain specific terms including:
The No Rust Consent is signed by No Rust's founder, majority shareholder, CEO, and President - Don Smith - who also provided affidavits in support of No Rust's motion.[8] Attached to Smith's affidavit are notes from representatives of Green Tech (the "Green Tech Notes") and a purported Resolution to Purchase Real Property by the members of Green Tech (the "Green Tech Resolution"), which would have memorialized a commitment by Green Tech to terms that are, in all relevant respects, identical to those in the No Rust Consent.[9] The Green Tech Resolution, however, was never signed.[10]
Green Tech received the deed to the Property on December 11, 2015.[11] On January 6, 2016, No Rust formally assigned its rights to Green Tech, and No Rust and Green Tech signed a post-closing agreement with the Seller.[12] The same day, Green Tech executed a $598, 900.00 note secured by a mortgage on the Property in favor of Pet Star Corporation; Pet Star was owned by the principal of Green Tech.[13] The Mortgage included a "No Transfer" clause, but specifically stated that:
[I]t is contemplated that the [P]roperty may be sold to [No Rust]. This transfer is approved, but that buying entity must give six months notice prior to pre-paying all or part of the obligation under the Note.[14]
Representatives of No Rust and Green Tech appear to have discussed the consideration provided in exchange for the Assignment, including the Option to purchase the Property in favor of No Rust. However, there is no written document signed by Green Tech agreeing to the terms. Yet, No Rust proceeded under the assumption that the Assignment included the terms described in the No Rust Consent, including the Option. No Rust asserts that in pursuit of ownership of the Property, it took actions including the payment of property taxes for 2016 and 2017, the making of over $150, 000.00 worth of valuable and permanent improvements to the Property, and maintenance of the Property for years.[15] Neither party provides specific details associated with No Rust's alleged improvements to the Property.
On November 29, 2016, less than one year after Green Tech took title to the Property, No Rust sought to exercise the Option by filing in the public records a Notice of Election to Purchase Real Property.[16] According to the Amended Complaint, Green Tech refused to acknowledge No Rust's alleged right to purchase the Property and asserted that No Rust's filing of the Notice of Election constitutes slander of title.[17]In December 2016, No Rust sued Green Tech in an effort to enforce what it believes is its right to purchase the Property.[18]
In March 2021, after litigation between the parties had been pending for over four years, No Rust filed a voluntary Chapter 11 bankruptcy petition and removed the case to this Court. The only remaining count is Count III, which seeks specific performance requiring Green Tech to consummate the sale of the Property.[19] Both parties seek summary judgment.[20]
The Court's subject matter jurisdiction in this case is based on "related to" jurisdiction under 28 U.S.C. § 1334(b); the matter was properly removed under 28 U.S.C. § 1452(a), and the parties have consented to the Court entering final orders. The Court has statutory authority to hear and determine this case under 28 U.S.C. § 157(a) and the general order of reference from the United States District Court for the Southern District of Florida.[21] Venue is proper under 28 U.S.C. § 1409.
Fed. R. Bankr. P. 7056 applies Fed.R.Civ.P. 56 to adversary proceedings. Under Rule 56, "the court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." See In re Fisher Island Investments, Inc., 778 F.3d 1172, 1195 (11th Cir. 2015); In re Villas of Windmill Point II Prop. Owners Ass'n, No. 19-01822-MAM, 20211711794, at *3 (Bankr. S.D. Fla. Apr. 29, 2021) (Mora, J.). "If a reasonable fact finder evaluating the evidence could draw more than one inference from the facts, and if that inference introduces a genuine issue of material fact, then the court should not grant the summary judgment motion." Jeffrey v. Sarasota White Sox, 64 F.3d 590, 594 (11th Cir. 1995) (cleaned up). An issue is "genuine" where the "evidence is such that a reasonable [fact finder] could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). "An issue of fact is 'material' if it is a legal element of the claim under the applicable substantive law which might affect the outcome of the case." In re Hampton, 616 B.R. 917, 920 (Bankr. S.D. Fla. 2020) (Grossman, J.) (quoting Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997)).
No Rust seeks specific performance under the alleged Option. To win a suit for specific performance, "the plaintiff must do more than merely prove his case by a preponderance of the evidence … he must prove the contract as alleged in his complaint by competent and satisfactory proof which must be clear, definite and certain." Miller v Murray, 68 So.2d 594, 596 (Fla. 1953) (emphasis added); see, e.g., Lupetto, Inc. v. South Bay Dev. Grp., LLC, 302 So.3d 1061, 1063 (Fla. 3d DCA 2020).
Under Florida's Statute of Frauds, certain types of contracts - including contracts for the sale of land, contracts for leases that exceed one year, and contracts that will not be performed within one year - are only enforceable if they are in writing and signed by the party against whom relief is sought.[22] Fla. Stat. § 725.01; see Avery v. Marine Bank & Trust Co., 216 So.2d 251, 252 (Fla. 2d DCA 1968) (). Here, the parties agree there is no written contract signed by Green Tech providing No Rust with the Option. Normally, that would end the inquiry, but No Rust argues that the facts of this case fall under the "partial performance" exception to the Statute of Frauds. To take a contract out of the Statute of Frauds under the partial performance exception, the party seeking enforcement of the oral contract must establish: (1) that an oral contract for sale was made; (2) payment of all or part of the consideration, whether it be in money or services; (3) possession by the party seeking enforcement; and (4) the making of valuable and permanent improvements upon the land with the consent of the owner, or, in the absence of improvements, the proof of such facts as would make the transaction a fraud upon the purchaser if it were not enforced. Miller, 68 So.2d at 596.
If No Rust establishes the existence of a valid and enforceable oral contract including the Option, it will then have to show...
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