Oregrund Ltd. Partnership v. Sheive

• Decision Date: 07 May 2004
• Docket Number: No. 5D03-2408.,5D03-2408.
• Citation: 873 So.2d 451
• Parties: OREGRUND LIMITED PARTNERSHIP, et al., Appellants, v. Kathy D. SHEIVE, etc., et al., Appellees.
• Court: Florida District Court of Appeals

873 So.2d 451

OREGRUND LIMITED PARTNERSHIP, et al., Appellants, v. Kathy D. SHEIVE, etc., et al., Appellees.

No. 5D03-2408.

District Court of Appeal of Florida, Fifth District.

May 7, 2004.

Rehearing Denied May 28, 2004.

Robert W. Anthony of Fassett, Anthony & Taylor, P.A., Orlando, for Appellants.

John H. Dannecker and Richard A. Burt of Shutts & Bowen, LLP, Orlando, for Appellees.

SHARP, W., J.

Oregrund Limited Partnership (Oregrund) and Euramerican Investment Consultants Corp.¹ (collectively referred to herein as appellants), appeal from three orders of the trial court which collectively dismissed all of the counts set forth in their third amended complaint, with prejudice. On July 13, 2001, appellants filed suit against appellees, investors in the two transactions set forth in the complaint,² on multiple grounds, all of which, save one, are based on violation of the state's usury statutes. In dismissing the complaint, the trial court determined that, regarding the two transactions set forth in the complaint, any return to appellees was speculative. Inferentially, this is a finding that appellees were primarily investors, not lenders, removing the transactions from application of the usury statutes. We find that appellants' complaint sufficiently stated a cause of action, based on violation of the usury statutes, and reverse.

The facts set forth in the complaint are taken as true at this procedural juncture and are as follows: Appellants wanted to borrow approximately $600,000.00 to be used in a business venture, known as "Port-O-Call." Appellants also owned an 8.4 acre vacant commercial tract of land in Osceola County, located between U.S. 192 and Lake Cecile, which they wanted to develop in the future. There were plans to locate the Osceola County Convention Center immediately across from the 8.4-acre tract. It had been appraised in 1998 for $5.76 million, and was encumbered by a $1.7 million mortgage. In September of 2000, after the transactions in this case, the tract was appraised at $5.215 million, encumbered by a $1.85 million mortgage.

On January 6, 2000, the first group of investors executed an agreement which created a land trust known as the Lake Cecile Land Trust, in which they invested various sums of money in return for proportional interests. The next day, three documents were executed by the parties' representatives: Kathy Sheive, as attorney and trustee for the land trust, and John Nadd, the general partner of Oregrund and president of Euramerican. The first document was an Agreement for Sale and Purchase of the 8.4-acre tract, by which appellants sold the land trust a one-half interest in the tract for $600,000.00. Second, appellants executed a warranty deed transferring the one-half interest in the tract to the land trust. And third, the parties executed an Option to Repurchase, which gave appellants the right to repurchase the one-half interest in the tract that they had, that day, conveyed to the land trust. Appellants were the sole option beneficiaries under the Option. Appellants received $600,000.00.

The terms of the Option were that if appellants exercised their right to repurchase the tract in the first year following the sale, the repurchase price was to be $1.2 million (twice the amount of $600,000.00 proceeds received by appellants). If the Option was exercised in the second year following the sale, the price was to be $1.8 million (three times the amount of the $600,000.00 proceeds received by appellants). If the Property was not repurchased in two years, the land trust had the right to sell its one-half interest in the tract.

If the land trust sold its one-half interest after two years, the minimum sales price had to be $1.7 million (the amount of the mortgage at that time). The land trust was entitled to keep all of any sale proceeds up to $3.5 million. Any proceeds which exceeded $3.5 million were to be split equally between appellants and appellees. Appellants had the sole responsibility to pay the mortgage, taxes and other expenses on the tract while the land trust owned a one-half interest in the tract.

Before the first year passed, apparently appellants incurred financial problems. Eight months after the initial transaction, on August 31, 2000, in consideration for a full interest in the tract and "the securing of refinancing," appellees amended the land trust with respect to the Option. Pursuant to the Amendment, the land trust received Appellants' remaining one-half interest in the tract. Appellants were given the right to repurchase the entire tract at any time in the future. The only event which triggered the termination of the option to repurchase was appellants' sale of its Port-O-Call venture, but such sale was at appellants' discretion. Under the Amendment, if appellants elected to repurchase the tract prior to January 1, 2001 (i.e., within four months of the Amendment), the purchase price was $1.2 million. After that date, appellants' repurchase price went up an additional $600,000, bringing the total to $1.8 million.

The mortgage payments, taxes, and other expenses on the tract continued to remain appellants' sole obligation, and their failure to pay these expenses constituted a default, which terminated their rights as option beneficiary. Further, commencing November 1, 2000, appellants were required to pay the trustee of the land trust the sum of $5,250 per month, which was to be held in escrow and used at the trustee's discretion in the event of a default.

On September 1, 2000, First Commercial Bank of Florida, loaned appellants an additional $150,000 to be added to the original principal mortgage balance of $1.7 million, thereby increasing the mortgage balance on the tract to $1.85 million. That same month, an appraisal was performed and the tract was valued at $5.215 million.

Appellants were unable to raise the necessary funds to exercise the option and continued to be unable to do so through June 25, 2001. They also defaulted by failing to pay the mortgage and taxes on the tract. Appellees sent a notice of default and terminated appellants rights as option beneficiaries. Appellants filed this lawsuit, claiming the transactions are usurious,³ for related relief therein, and to alternatively declare the deed a mortgage or cancel it.

Appellate Review

We begin our analysis by noting that the sufficiency of a complaint is a matter of law which requires a de novo review. Sobi v. Fairfield Resorts, Inc., 846 So.2d 1204 (Fla. 5th DCA 2003). An appellate court is not free to rely on assumptions as to what may or may not be proved. Sweeney v. Integon General Ins. Corp., 806 So.2d 605 (Fla. 4th DCA 2002). All well pleaded allegations must be accepted as true. Fox v. Professional Wrecker Operators of Florida, Inc., 801 So.2d 175, 178 (Fla. 5th DCA 2001).

Review of Usury Law in Florida

The burden of proving usury is on the party who alleges it. See Phillips v. Lindsay, 102 Fla. 935, 136 So. 666 (1931); Tucker v. Fouts, 73 Fla. 1215, 76 So. 130 (1917); Swanson v. Gulf West Intern. Corp., 429 So.2d 817 (Fla. 2d DCA 1983). Although the determination of usury is one for the fact finder, Wells v. Freedman, 342 So.2d 983 (Fla. 3d DCA 1977); where there is no conflict in the material facts, it is one of law for the court. Rebman v. Flagship First National Bank of Highlands County, 472 So.2d 1360 (Fla. 2d DCA 1985).

The Legislature enacted usury laws to remedy an existing evil, and it⁴ has wide discretion in dealing with usury. Cesary v. Second National Bank of North Miami, 369 So.2d 917 (Fla.1979). Legislative classifications are not to be disturbed by the courts unless plainly unconstitutional. Cesary. The usury statutes are to be read together, and are particularly subject to construction in pari materia. Wilensky v. Fields, 267 So.2d 1 (Fla.1972)

; First Mortgage Corp. of Vero Beach v. Stellmon, 170 So.2d 302 (Fla. 2d DCA 1964). Each statute is to be construed so that it is meaningful in all parts. Wilensky; First Mortgage.

Florida's usury laws are set out in Chapter 687. Section 687.02(1) defines usurious contracts as

[a]ll contracts for the payment of interest upon any loan, advance of money, line of credit, or forbearance to enforce the collection of any debt, or upon any obligation whatever, at a higher rate of interest than the equivalent of 18 percent per annum simple interest are hereby declared usurious. However, if such loan, advance of money, line of credit, forbearance to enforce the collection of a debt, or obligation exceeds $500,000 in amount or value, then no contract to pay interest thereon is usurious unless the rate of interest exceeds the rate prescribed in s. 687.071. (Emphasis added)

Similarly, section 687.03(1), which defines unlawful rates of interests, provides:

Except as provided herein, it shall be usury and unlawful ... whereby the debtor is required or obligated to pay a sum of money greater than the actual principal sum received, together with interest at the rate of the equivalent of 18 percent per annum simple interest. However, if any loan, advance of money, line of credit, forbearance to enforce the collection of a debt, or obligation exceeds $500,000 in amount or value, it shall not be usury or unlawful to reserve, charge, or take interest thereon unless the rate of interest exceeds the rate prescribed in s. 687.071.... (Emphasis added)

The Legislature deems the charging of higher rates of interest as criminal, and has imposed severe penalties on persons engaged in criminal usurious practices. Section 687.071, entitled "Criminal usury, loan sharking; shylocking," provides:

(2) Unless otherwise specifically allowed by law, any person making an extension of credit to any person, who shall willfully and knowingly charge, take, or receive interest thereon at a rate exceeding 25 percent per annum but not in excess of 45 percent per annum, or the equivalent rate for a longer or shorter period of time, whether

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