Puff 'N Stuff of Winter Park, Inc. v. Bell
| Decision Date | 20 December 1996 |
| Docket Number | No. 95-122,95-122 |
| Citation | 683 So.2d 1176 |
| Parties | 22 Fla. L. Weekly D52 PUFF 'N STUFF OF WINTER PARK, INC., et al., Appellants, v. James T. BELL, Daniel W. Lykens, et al., Appellees. |
| Court | Florida District Court of Appeals |
This is an appeal from a final summary judgment against the appellants--Puff 'N Stuff of Winter Park, Inc. and Glenn and Christine Dietel--in regard to their counterclaim and third-party actions below against the appellees. The case arises from a foreclosure action instituted by one of the appellees, Federal Trust Bank (FTB), against the appellants because of various defaults on loans. The loans to Puff 'N Stuff and the Dietels were made for the acquisition and renovation of a building in Winter Park.
While construction was in progress, a dispute arose between the parties as to whether or not FTB had verbally agreed to fully fund the project. The allegations in the retaliatory counter-actions by Puff 'N Stuff and the Dietels were that they had been verbally assured by Bell, an officer of FTB, that the bank's lending limit would not be a problem, and that ultimately it was, thereby causing a delay in construction and the necessity for Puff 'N Stuff and the Dietels to incur additional financing from a private source in order to complete the construction. They also claimed that FTB failed to honor its verbal commitments to provide additional financing after a "replacement loan" was obtained. All of the damages claimed by Puff 'N Stuff and the Dietels in their affirmative claims were based on the alleged failure of FTB to fully and timely provide funding pursuant to verbal agreements to do so.
We hold that the trial judge was correct in applying section 687.0304(2), Florida Statutes (1989) in accordance with its plain meaning--i.e., the debtors in this case cannot maintain their actions which are based, according to the allegations and proof, on an oral promise to extend credit. That section provides:
CREDIT AGREEMENTS TO BE IN WRITING.--A debtor may not maintain an action on a credit agreement unless the agreement is in writing, expresses consideration, sets forth the relevant terms and conditions, and is signed by the creditor and the debtor.
The appellants' contention that an oral promise to loan money 1 can be termed "fraud in the inducement," thereby evading the clear intent of the statutory prohibition, was recognized by the trial judge as mere semantics. If this court were to adopt the appellants' analysis in this case, we would effectively repeal the statute. See generally Canell v. Arcola Housing Corp., 65 So.2d 849 (Fla.1953)(statute of frauds may not be avoided by suit for fraud based upon oral representations).
AFFIRMED.
HARRIS, J., concurs specially with opinion.
I concur with Judge Cobb's opinion, which is based on section 687.0304(2), Florida Statutes--a banking "statute of frauds." I write because the issue relating to the economic loss rule deserves further discussion.
Appellants allege that the bank agreed to loan them $1,025,000 and that although the bank acknowledged that it presently lacked the lending authority to make that loan, it nevertheless assured them that the limit would be increased or another avenue would be found so that the entire loan would be fully and timely funded. Therefore, appellants' core allegation is that the bank committed to loan them $1,025,000 in a timely manner. Based on these allegations, the parties had a contract which required the bank to advance all of these funds in a timely manner even if the lending limit problem persisted.
Appellants then assert that because the lending limit problem was not immediately resolved, the written loan commitment was for only $520,000. Appellants accepted this commitment and closed on the loan and used the funds to purchase the real estate on which they intended to construct a building. When they started construction of the building, they did so without a formal loan commitment, apparently choosing to rely on the alleged oral understanding. Hence, when the first construction draw came due, they borrowed an additional $60,000 from the bank under a future advance clause in their original loan documents. Subsequently, the bank loaned appellants an additional $15,000 secured by vehicles and $32,000 secured by kitchen equipment.
At this point, a dispute arose as to additional funding. Appellants claim that in spite of the fact that the bank assured them that the lending limit would pose no problem, the bank refused additional timely loans because of that limit. The bank asserts that it made no such commitment in the first place; that the piecemeal loans merely reflect an effort to accommodate a borrower. Although an amount in excess of the alleged promised loan was eventually provided by the bank, albeit in a circuitous manner, appellants claim that they were injured because the bank did not advance all of the funds agreed to in a timely manner.
One would think that appellants would therefore sue the bank on the "master loan agreement"--that is, the original oral agreement to loan $1,025,000 in a timely manner. But the rub, of course, is section 687.0304(2), which requires that before a loan commitment can be enforced, it must be in writing. This protects both the banks against fraudulent borrowers and the borrowers against deceitful banks.
But appellants had unfortunately failed to get this more generous commitment in writing. Not to worry. To avoid this technical impediment, appellants decided that instead of attempting to sue on the oral agreement, they would allege that a portion of that agreement, the fact that the bank would obtain increased lending authority or find another way to fund the loan in a timely manner, fraudulently induced them to enter into this lending arrangement in the first place. And, because the bank never intended to fully fund its commitment (even though it eventually did), appellants urge that the bank is liable because of its intentional tort of fraudulent inducement.
Some courts are beginning to look more closely at fraud in the inducement allegations. In Dewachter v. Scott, 657 So.2d 962 (Fla. 4th DCA 1995), the court was concerned with a fraud in the inducement action brought when the contract itself was unenforceable. The court stated:
We believe that the trial court correctly granted summary final judgment for the defendant, based on these allegations because an oral contract for lifetime employment is terminable at will. [Citations omitted]. Even though Dewachter couched her complaint as fraud in the inducement rather than breach of contract, we believe her claim is still barred as it attempts to circumvent the bar to a breach of contract action based on an oral contract terminable at will. Since the parties clearly cannot be restored to the status quo that existed before the alleged contract, as might be sought in an action based on fraud in the inducement, the measure of damages Dewachter sought here would be the same as breach of contract damages. See Canell v. Arcola Housing Corp., 65 So.2d 849 (Fla.1953) (). Thus, we hold the trial court correctly granted summary final judgment in Dr. Scott's favor.
As I indicated in my dissent in Williams v. Peak Resorts International, Inc., 676 So.2d 513 (Fla. 5th DCA 1996), almost any contract claim can be framed as a fraud in the inducement action. This case proves the point. Therefore it seems more appropriate, if the economic loss rule has any real substance, to look not at the label placed on the claim by the attorney but rather at the substance of the claim. For example, assume A, Inc. and B enter into a joint venture agreement in which B puts up the property in exchange for A, Inc. agreeing to develop and market the property and then pay B out of the proceeds of sales an agreed price for the property plus a percentage of the profits. However, because B is concerned about the financial strength of A, Inc. and in order to induce B to enter the joint venture agreement, A, Inc. falsely represents that its investors have put up $100,000 to pay off general creditors. Even though A, Inc. proceeds to develop the property in accordance with its agreement, its unpaid general creditors are able to put A, Inc. into bankruptcy thus subjecting B's property to the claims of A, Inc.'s previous creditors. In this case, the false representation is separate and distinct from the development agreement and B suffered injury by relying on it.
But consider our case. It is alleged that the bank represented that although it presently lacked the necessary lending authority to make the million dollar plus loan, it would either obtain the necessary lending authority, or find another way to make the agreed loan, in a timely fashion. But this representation goes to the heart of the agreement between the parties and is inseparable from the agreement to make the loan. To permit this type representation to constitute a fraud in the inducement claim is the same as saying that anytime one breaches a contract, the other side merely needs to allege that the breaching party never intended to honor its commitment and thus is liable for fraud in the inducement. The one suing must then prove the breach of the agreement in order to prove the misrepresentation....
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