Peninsula Federal Sav. and Loan Ass'n v. DKH Properties, Ltd.

• Decision Date: 06 April 1993
• Docket Number: No. 90-2728,90-2728
• Citation: 616 So.2d 1070
• Parties: 18 Fla. L. Week. D943 PENINSULA FEDERAL SAVINGS AND LOAN ASSOCIATION, n/k/a Intercontinental Bank, et al., Appellants, v. DKH PROPERTIES, LTD., a Florida Limited Partnership, et al., Appellees.
• Court: Florida District Court of Appeals

Page 1070

616 So.2d 1070

18 Fla. L. Week. D943

PENINSULA FEDERAL SAVINGS AND LOAN ASSOCIATION, n/k/a Intercontinental Bank, et al., Appellants, v. DKH PROPERTIES, LTD., a Florida Limited Partnership, et al Appellees.

No. 90-2728.

District Court of Appeal of Florida Third District.

April 6, 1993.

Shutts & Bowen, Paul, Landy, Beiley & Harper, P.A., and Sam Daniels, Miami, for appellants.

Richard and Richard and Dennis Alan Richard, Laurel W. Marc-Charles and Sydney A. Marks, Miami, for appellees.

On Motions for Rehearing

Before FERGUSON, JORGENSON and COPE, JJ.

COPE, Judge.

On consideration of the motions for rehearing, we withdraw the opinion dated November 24, 1992, and substitute the following opinion:

Peninsula Federal Savings and Loan Association appeals a final judgment against it for damages and denying Peninsula's counterclaim for foreclosure. We reverse.

Peninsula agreed to make a construction loan to its borrower, DKH Properties, Ltd., for the renovation of an office building in downtown Miami. The initial term of the loan was eighteen months. At the end of the eighteen month construction period, the borrower had the right to extend the loan for an additional three-year period, provided that the borrower satisfied certain conditions. This three-year extension period was referred to as the "Mini-Permanent" loan. During the Mini-Permanent period, the office building would be rented to tenants and the borrower would seek long-term financing.

The borrower attempted to invoke its right to extend the loan for the Mini-Permanent period. The lender refused to extend, contending that the borrower had not met the contractual prerequisites for an extension. The borrower sued in contract and in tort, and the lender counterclaimed for foreclosure. From a judgment in favor of the borrower, the lender appeals.

The tort counts must be reversed. The borrower had purchased the office building and real estate from a partnership, OCE. ¹ The borrower gave OCE a purchase money first mortgage on the property. The OCE mortgage provided that OCE would subordinate its mortgage to an institutional mortgage for the purpose of rehabilitating the property.

After Peninsula agreed to make the loan for renovation of the property, Peninsula and OCE entered into a subordination agreement. OCE subordinated its mortgage to Peninsula's 3.5 million dollar mortgage. However, OCE did not agree to an open-ended subordination for Peninsula's future advances clause. Instead, the subordination agreement required that OCE consent to future advances in order for the future advances to have priority over the OCE mortgage.

The borrowers contend that by entering into this subordination agreement, Peninsula was guilty of intentional interference with the borrower's contractual relationships with OCE. That is plainly incorrect.

In the present case the contract between the borrower and Peninsula provided, in part, that the borrower would cause "to be executed by all required parties such instruments and documents as Lender and its attorneys shall require to ensure that Lender shall have a valid first-position lien in the amount of the loan [3.5 million dollars]...." (Emphasis added). ² Thus the Peninsula-borrower agreement expressly authorized Peninsula to enter into such agreements as Peninsula deemed necessary to assure that it had a first mortgage lien on the subject property. As OCE was then the holder of a first mortgage on the property, plainly Peninsula was entitled to require execution of a subordination agreement by OCE in order to place Peninsula's 3.5 million dollar loan in first position. Pursuant to these contractual rights, Peninsula and OCE negotiated a subordination agreement satisfactory to Peninsula.

The tort under consideration here is described by the Restatement (Second) of Torts as follows:

Sec. 766. Intentional Interference with Performance of Contract by Third Person

One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person by inducing or otherwise causing the third person not to perform the contract, is subject to liability to the other for the pecuniary loss resulting to the other from the failure of the third person to perform the contract.

Restatement (Second) of Torts Sec. 766 (1979) (emphasis added).

Here, the borrower expressly consented to Peninsula's entry into the subordination agreement in such form and content as Peninsula found necessary to assure that it had a first lien position for the loan amount of 3.5 million dollars. As Peninsula took these steps pursuant to the contract with the borrower, this cannot be deemed "interference," nor can it be deemed "improper," and assuredly it was not tortious behavior. See id.; Florida Telephone Corp. v. Essig, 468 So.2d 543, 544 (Fla. 5th DCA 1985); see also Genet Co. v. Annheuser-Busch, Inc., 498 So.2d 683, 684 (Fla. 3d DCA 1986); United of Omaha Life Insurance Co. v. Nob Hill Assoc's, 450 So.2d 536, 539 (Fla. 3d DCA), review dismissed, 458 So.2d 273 (Fla.), review denied, 458 So.2d 274 (Fla.1984); Ethyl Corp. v. Balter, 386 So.2d 1220, 1224-25 (Fla. 3d DCA 1980), review denied, 392 So.2d 1371 (Fla.), cert. denied, 452 U.S. 955, 101 S.Ct. 3099, 69 L.Ed.2d 965 (1981); Nitzberg v. Zalesky, 370 So.2d 389, 391-92 (Fla. 3d DCA 1979), receded from in part, Ethyl Corp. v. Balter, 386 So.2d at 1225; Babson Bros. Co. v. Allison, 337 So.2d 848, 850 (Fla. 1st DCA 1976), cert. denied, 348 So.2d 944 (Fla.1977). ³

Additionally, the Peninsula-OCE subordination agreement in no way impeded the performance by OCE of OCE's contract with the borrower. The subordination agreement provided that any future advances by Peninsula over and above the 3.5 million dollar level would require the consent of OCE. The borrower contends that under the borrower-OCE agreement, OCE was obligated to grant further subordination for additional costs associated with the building. Assuming that is so, the Peninsula-OCE agreement did not prevent OCE from consenting to future advances or further subordination. In order to establish tort liability it must be shown that there was interference with OCE's ability to perform its contractual obligations under the OCE-borrower contract; here there was none. ⁴

The borrower argues that by virtue of the borrower-OCE agreement, OCE was obligated to grant a monetarily unlimited consent to Peninsula's future advances clause. That is not correct.

The OCE-borrower agreement provided:

2. The Mortgagee agrees to subordinate this mortgage and the note secured hereby to a superior lien to secure a loan from an institutional lender [Peninsula] where such loan is for the purpose of financing the rehabilitation of the property encumbered hereby by the Mortgagor [borrower]. All funds of the institutional lender shall be used for "hard costs" as they relate to the rehabilitation of the property. "Hard costs" are defined as costs for tangible items to be installed in or on the encumbered premises and labor done to the building, plus expenses incurred by the mortgagor [borrower] for reasonable fees paid to architects, engineers, appraisers and leasing agents, interest and points on such financing, real estate taxes and insurance. "Reasonable fees" shall mean the general standard in the community.

(Emphasis added).

OCE had agreed to subordinate only for hard costs associated with rehabilitation of the property. Peninsula's future advances clause contained no such limitation. Peninsula and OCE negotiated a subordination agreement which gave Peninsula what it was entitled to--subordination by OCE to Peninsula's 3.5 million dollar loan. OCE's approval was to be required in the event Peninsula ever desired to make any future advances. ⁵ This was certainly a permissible solution, ⁶ and was well within the contractual authority of Peninsula to consummate. ⁷

The borrower argues that it may have been able to find another lender to purchase the Peninsula loan and extend further credit to the borrower if the Peninsula-OCE subordination agreement had covered future advances. While that may be so, the contract between the borrower and Peninsula called for Peninsula to enter into a subordination agreement covering the 3.5 million dollar loan. It did not require Peninsula to enter into a subordination agreement covering future advances. In fact, the parties' contract allowed Peninsula the power to decide the form and content of the subordination agreement. Peninsula did not breach a contractual obligation, much less commit an intentional tort, by entering into the subordination agreement with OCE.

There was no issue for the jury. The lender's motion for directed verdict should have been granted on the intentional interference count, as well as the related conspiracy count. See Lake Gateway Motor Inn v. Matt's Sunshine Etc., 361 So.2d 769, 772 (Fla. 4th DCA 1978), cert. denied, 368 So.2d 1370 (Fla.1979); see also Wackenhut Corp. v. Maimone, 389 So.2d 656 (Fla. 4th DCA 1980), review denied, 411 So.2d 383 (Fla.1981).

We likewise find no jury issue as to the fraud count. A directed verdict should have been granted on that issue as well.

The lender contends that it was also entitled to a directed verdict on the claims for breach of contract. Based on the evidence contained in the present record, we disagree.

Under the Mortgage Note, as well as the Construction Loan Agreement, the borrower was entitled to extend the term of the note for the additional three-year "Mini-Permanent" period if certain conditions were met. One of those conditions was that "no Event of Default ... has occurred and is continuing on the date such extension period is to commence...." Under the Construction Loan Agreement, ⁸ a monetary event of default would occur should the Borrower "fail to make payment of any sums of money when due ... and such failure shall continue for four (4) consecutive days after...