Plantation Key Developers, Inc. v. Colonial Mortg. Co. of Indiana, Inc.

• Decision Date: 06 February 1979
• Docket Number: No. 76-3055,76-3055
• Citation: 589 F.2d 164
• Parties: PLANTATION KEY DEVELOPERS, INC., a Florida Corporation, Plaintiff-Appellee Cross Appellant, v. COLONIAL MORTGAGE COMPANY OF INDIANA, INC., an Indiana Corporation, and Southern Colonial Mortgage Company, an Indiana Corporation, Defendants-Appellants Cross Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 164

589 F.2d 164

PLANTATION KEY DEVELOPERS, INC., a Florida Corporation Plaintiff-Appellee Cross Appellant, v. COLONIAL MORTGAGE COMPANY OF INDIANA, INC., an Indiana Corporation, and Southern Colonial Mortgage Company, an Indiana Corporation Defendants-Appellants Cross Appellees.

No. 76-3055.

United States Court of Appeals, Fifth Circuit.

Feb. 6, 1979.

Guy B. Bailey, Jr., Miami, Fla., for defendants-appellants cross appellees.

Ronald A. Shapo, Jerome H. Shevin, David A. Freedman, Miami, Fla., for plaintiff-appellee cross appellant.

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

Before GOLDBERG, Circuit Judge, SKELTON ^*, Senior Judge, and FAY, Circuit Judge.

FAY, Circuit Judge:

This is an action brought by a condominium project builder, Plantation Key Developers, Inc. ("Plantation"), against its permanent lender, Colonial Mortgage Co. ¹ ("Colonial"), based on breach of contract and fraud. ² The trial court directed a verdict against Plantation on its fraud claim. The jury returned a verdict of $60,000 in favor of Plantation on its contract claim. The Court entered judgment thereon for $60,000 plus interest and costs. Colonial raises three points on appeal: 1) the breach of contract issue should not have been submitted to the jury; 2) Plantation failed to prove any damages; and 3) the trial court erred in awarding pre-judgment interest to Plantation. Plantation cross-appeals the directed verdict on the fraud count.

The dispute arose from a loan arrangement between Colonial and Plantation. Plantation was formed for the purpose of constructing a condominium project on Plantation Key, Florida. Through a mortgage broker Plantation contacted Colonial, a mortgage lender, for the purpose of obtaining permanent financing ³ for the condominium project.

In November 1973 Colonial promised to provide permanent mortgage funds through 1975 to Plantation. The agreement ⁴ provided for performance in three parts. First, Colonial agreed to provide mortgage money through December 31, 1974 at the rate of 9% Plus a loan service fee (points) of 31/2% Of the loan amount. Second, Plantation had the option to extend the commitment for six months "with adjustments in interest and points made if market conditions so demand." Finally, the agreement provided for another six month extension of the commitment with the same interest and point adjustments. Plantation paid a nonrefundable commitment fee of $60,000. In addition, Plantation agreed to pay $30,000 each time it chose to bind Colonial to a six month extension.

The dispute is based on Colonial's adjustment of the interest rates and service fees for the first extension, January 1, 1975 to July 1, 1975. Colonial proposed to extend the commitment with the rate changed to 93/4% And 9 points. Plantation contended that these rates were inconsistent with Colonial's promise to make rate adjustments only in response to "market conditions." Plantation refused to pay $30,000 for an extension at the rates of 93/4% Interest and 9 points. Instead, it brought this action.

I. BREACH OF CONTRACT

Colonial presents an arsenal of legal theories as the grounds upon which it is excused from performance of the first six month option, regardless of the reasonableness of its adjustment of the rates. It argues: 1) Plantation's payment of the extension fee was a condition precedent to suit; 2) the quotation and extension fee were dependent covenants; 3) the quotation and the extension fee were concurrent conditions; 4) Plantation's failure to tender the extension fee was a breach which excused Colonial from performance; and 5) the option lapsed due to Plantation's failure to exercise it. The essence of Colonial's argument is that Plantation cannot complain that the quoted rates were violative of the contract since it did not tender the $30,000 for the six month extension. Both the authorities and the reasoning relied upon by Colonial are unpersuasive.

Colonial fails to recognize its agreement for what it is, an option contract. An option contract has two elements: 1) the underlying contract which is not binding until accepted; and 2) the agreement to hold open to the optionee the opportunity to accept. Frissell v. Nichols, 94 Fla. 403, 114 So. 431, 433 (1927). Both the option and the underlying contract must be supported by consideration. Donahue v. Davis, 68 So.2d 163 (Fla.1953); Koplin v. Bennett, 155 So.2d 568 (Fla. 1st DCA 1963). In this case, the consideration for the option to bind Colonial to a six month extension was the $60,000 which Plantation had already paid. ⁵ Plantation was obligated to pay the additional $30,000 only if it chose To exercise its option and To bind Colonial to the quoted rates for the extended period. ⁶ Viewed in this manner, it is clear that Colonial's contractual duty to quote a rate for the six month extension period was in no way dependent upon Plantation's payment of the $30,000. It would be absurd to say that Plantation should pay $30,000 for Colonial's commitment before Colonial has stated the terms, especially when Plantation had already paid Colonial $60,000 to do just that.

Thus, the trial court correctly left to the jury the decision of whether Colonial's quoted rate of 93/4% And 9 points was in compliance with Colonial's obligation to change its rates only if market conditions so demanded. The jury found in a special verdict that the interest rate and closing fees were not in compliance with the commitment letter.

Our inquiry on review is whether there was sufficient evidence to support the jury's decision. "(I)t is the function of the jury as the traditional finder of the facts, and not the Court, to weigh conflicting evidence and inferences, and determine the credibility of witnesses." Boeing Co. v. Shipman, 411 F.2d 365, 375 (5th Cir. 1969) (footnote omitted). The evidence supports the jury's decision that Colonial's rate quotation did not comply with the contract. Plantation presented several witnesses who testified that the rates charged on projects comparable ⁷ to Plantation's were in the range of 93/4% Interest and 3 points. In addition, money was available through the J. I. Kislak Company, one of the country's largest mortgage brokers, for permanent condominium loans at 93/4% Interest and 3 points. Finally, an expert witness testified that points had been fairly constant at about 31/2 to 41/2% Of the amount of the loan. Based upon this testimony, the jury reasonably could have found that Colonial's rate of 93/4% And 9 points was not in compliance with the contractual provision requiring quotations to be in accord with market conditions.

II. DAMAGES

Colonial also attacks the verdict of $60,000 damages in favor of Plantation. Colonial asserts that even if it breached the contract, its performance prior to the breach was of some value to Plantation and therefore it should not be ordered to pay back the full $60,000 which it was paid. Colonial indicates two ways in which its performance benefited Plantation. First, the parties stipulated that one of the conditions upon which Plantation received its construction financing was that it had already acquired permanent financing. ⁸ Second, Colonial performed to the extent that it made loans available in 1974. ⁹ Even assuming that these contentions are correct, an award of $60,000 was still proper.

In its complaint, Plantation alleged two items of damages. First, Plantation claimed the $60,000 which it had paid to Colonial to issue the commitment. Second, Plantation sought recovery of $30,000 which it had paid as a broker's or finder's fee in order to locate a lender, Colonial. It alleged that Colonial knew that it had incurred this expense and that the loss of this amount was a foreseeable consequence of Colonial's breach. If both of these payments are properly compensable damages, an award of $60,000 is within the prerogative of the jury.

Florida follows the rule of just compensation for breach of contract:

In actions for breach of contract, the aim is not the mere restoration to a former position as in tort, but is the awarding of a sum which is equivalent to the performance of the bargain; the attempt is to place the plaintiff in the position he would be in if the contract had been fulfilled.

Ashland Oil, Inc. v. Pickard, 269 So.2d 714, 723 (Fla. 3d DCA 1972), Cert. denied, 285 So.2d 18 (Fla.1973). Thus, in Florida "(g)enerally, the correct measure of damages in a breach of contract action, is the loss of profits which would have resulted from the performance of the contract and which may be ascertained with a reasonable degree of certainty." Ed Skoda Ford, Inc. v. P & P Paint & Body Shop, Inc., 302 So.2d 461, 461-62 (Fla. 3d DCA 1974), Cert. denied, 315 So.2d 179 (Fla.1975). Lost profits, however, is not the exclusive measure of damages for breach of contract. Indeed, the nonbreaching party has the choice of recovering either loss of profits or damages which will put him in the same position as he was prior to making the contract. Woroner Productions, Inc. v. Tourist Development Authority, 256 So.2d 38 (Fla. 3d DCA 1971), Cert. denied, 261 So.2d 843 (Fla.1972); Sundie v. Lindsay, 166 So.2d 152 (Fla. 3d DCA 1964), Rehearing denied, 174 So.2d 629 (Fla.App.1965). In the latter case, a plaintiff may recover damages which were "reasonably foreseeable or contemplated by the parties as a result of the breach . . . ." Olin's, Inc. v. Avis Rental Car System of Florida, Inc., 172 So.2d 250, 252 (Fla. 3d DCA 1965), Cert. denied, Fla., 177 So.2d 482; Popwell v. Abel, 226 So.2d 418, 422 (Fla. 4th DCA 1969); Hadley v. Baxendale, 9 Exch. 341 (1854). Thus even though the plaintiff's expectation is not fulfilled by performance of the contract, he is not placed in a worse position than when he entered it.

The Popwell case is similar to the instant case. The defendant-buyer in Popwell breached a contract for the sale of a farm. In defense to an action by the...