Tews v. Valdeon

Decision Date23 September 2013
Docket NumberCase Number: 12-23026-CIV-MORENO
PartiesSERGEJ TEWS, Plaintiff, v. LUIS VALDEON, Defendant.
CourtU.S. District Court — Southern District of Florida
ORDER DENYING DEFENDANT'S MOTION TO DISMISS AND MOTION TO
STRIKE PUNITIVE DAMAGES, AND GRANTING DEFENDANTS MOTION TO
STRIKE PLAINTIFF'S CLAIM FOR ATTORNEY'S FEES

THIS CAUSE came before the Court upon Defendant's Motion to Dismiss Amended Complaint (D.E. No. 10), filed on October 17, 2013.

THE COURT has considered the motion, response, reply, and the pertinent portions of the record, and being otherwise fully advised in the premises, it is

ADJUDGED that the motion is DENIED. Likewise, Defendant's Motion to Strike Plaintiff's claim for punitive damages is likewise DENIED. However, Defendant's Motion to Strike Plaintiff's claim for attorney's fees is GRANTED.

I. Background

In early 2007, the Plaintiff and Defendant in this case entered into an agreement to form Defendant Florida Discount Properties. The agreement was not reduced to writing. Under the agreement, Plaintiff Sergej Tews and Defendant Luis Valdeon formed Florida Discount Properties for the purposes of buying distressed real estate at foreclosure sales, fixing up the properties, andselling them for a profit. Under the agreement, Tews would provide the capital to purchase the properties, either individually or through one of his two corporations, Plaintiffs Precision Private Investments Corp. or Avalanche Financial Group, and Valdeon would provide the subject matter and management expertise necessary to identify target properties, restore them, and sell them at a profit. According to the Complaint, the initial investments would be returned, and Tews and Valdeon would split the profits 50-50. Similarly, Valdeon would from time to time solicit outside investors. The outside investors would advance 75% of the purchase price of the property, with Florida Discount advancing 25%. Florida Discount would split the profits with the investor 50-50%. Tews and Valdeon would then split Florida Discount's property equally between themselves. In the Amended Complaint, Plaintiff states that "[t]he parties made no agreement as to the time for return of capital from the corporation, other than that it would take place upon demand.

According to the Complaint, Plaintiff Tews, acting through the Plaintiff Corporations, provided $400,000 in capital to Florida Discount between February 22, 2007 and May 11, 2007. The Plaintiff provided $100,000 on February 22, 2007; $50,000 on March 5, 2007; $100,000 on April 10, 2007; $50,000 on April 18, 2007; and $100,000 on May 11, 2007. On July 19, 2007, Defendant returned $250,000 to Plaintiff Tews.

On September 30, 2008, Plaintiff Tews was arrested on an unrelated matter. He left the country in 2011. On or around July 29, 2011, Tews demanded the return of the remaining $150,000 capital, plus an accounting and return of profits that had allegedly been withheld.

Tews filed his original Complaint on August 20, 2012. Tews amended his Complaint on October 2, 2012. The Amended Complaint alleged five counts against Valdeon: (1) Breach of Fiduciary Duty (2) Conversion, (3) Unjust Enrichment, (4) Civil Theft, and (5) Constructive Trust.There are no claims against Florida Discount, and Tews did not make an effort to get the FDP board of directors to approve asserting the claims because, he argued, "such effort would be a futile ritual."

Valdeon filed a Motion to Dismiss on October 17, 2012. He argued that the entire complaint should be dismissed as it is barred by the statute of frauds. The Motion further argues that Counts 1-4 are barred by the statute of limitations. The Motion further argues that Counts 1,2, and 4 are barred by the Economic Loss Rule. The Motion finally argues that Plaintiff's claims for Punitive Damages and Attorney's Fees should be stricken. In his Response, Plaintiff withdrew the request for attorney's fees.

II. Analysis

"To survive a motion to dismiss, plaintiffs must do more than merely state legal conclusions," instead plaintiffs must "allege some specific factual basis for those conclusions or face dismissal of their claims." Jackson v. BellSouth Telecomm., 372 F.3d 1250, 1263 (11th Cir. 2004). When ruling on a motion to dismiss, a court must view the complaint in the light most favorable to the plaintiff and accept the plaintiff's well-pleaded facts as true. See St. Joseph's Hosp., Inc. v. Hosp. Corp. of Am., 795 F.2d 948, 953 (11th Cir. 1986). This tenet, however, does not apply to legal conclusions. See Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). Moreover, "[w]hile legal conclusions can provide the framework of a complaint, they must be supported by factual allegations." Id. at 1950. Those "[f]actual allegations must be enough to raise a right to relief above the speculative level on the assumption that all of the complaint's allegations are true." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545 (2007). In short, the complaint must not merely allege a misconduct, but must demonstrate that the pleader is entitled to relief. See Iqbal, 129 S. Ct. at 1950.

A. The Contract Falls Outside the Statute of Frauds

Defendant argues first that Plaintiff's claims are barred by the statute of frauds. Plaintiff argues that the statute of frauds is inapplicable to its claims, because they are all non-contract remedies. While Plaintiff's argument does not hold the day, this Court should deny Defendant's motion to dismiss.

The Statute of Frauds in Florida provides that:

No action shall be brought . . . upon any agreement that is not to be performed within the space of 1 year from the making thereof . . . unless the agreement or promise upon which such action shall be brought, or some note or memorandum thereof shall be in writing and signed by the party to be charged therewith or by some other person by her or him thereunto lawfully authorized.

Fla. Stat. § 725.01. The general rule in Florida is that "when . . . no definite time was fixed by the parties for the performance of their agreement, and there is nothing in its terms to show that it could not be performed within a year according to its intent and the understanding of the parties, it should not be construed as being within the statute of frauds." Yates v. Ball, 181 So. 341, 344 (Fla. 1937). However, courts recognize an exception that

[W]hen no time is agreed on for the complete performance of the contract, if from the object to be accomplished by it and the surrounding circumstances, it clearly appears that the parties intended that it should extend for a longer period than a year, it is within the statute of frauds, though it cannot be said that there is any impossibility preventing its performance within a year.

Id. "Contracts for an indefinite period generally do not fall within the statute of frauds." Browning v. Poirier, 113 So.3d 976, 978 (Fla. Dist. Ct. App. 2013).

The statute of frauds applies to claims for unjust enrichment where the unjust enrichment arose from the alleged contract. Browning v. Poirier, 113 So.3d at 980 ("a party whose contract is unenforceable due to the statute of frauds cannot recover for unjust enrichment, as the law will notimply a contract where an express contract exists regarding the same subject matter."). Where a plaintiff provides no evidence that the conversion occurs outside of the unenforceable contract, a claim for conversion is barred by the statute of frauds. Saeme v. Levine, 502 Fed.Appx. 849, 853 (11 th Cir. 2012). Claims for breach of fiduciary cannot survive a motion to dismiss for statute frauds where the claims are "merely repackaged claims for breach of an oral contract." B&C Investors, Inc., v. Vojak, 79 So.3d 42, 47 (Fla. Dist. Ct. App. 2011). Florida Courts statute of frauds does not bar an imposition of a constructive trust. Guest v. Claycomb, 932 So.2d 567,570 (Fla. Dist. Ct. App. 2006). Nevertheless, a "constructive trust is not a traditional cause of action; it is more accurately described as an equitable remedy." Collinson v. Miller, 903 So.2d 221, 228 (Fla. Dist. Ct. App. 2005). Thus, a constructive trust is "a remedy . . . that must be imposed based upon an established cause of action." Id.

This contract does not fall under the statute of frauds. The design of the alleged contract was that Tews would provide the capital and Valdeon would purchase, rehabilitate, and flip distressed real estate. Capital would be returned "on demand." Thus, this is a contract for "an indefinite period." It cannot be said that, based on the "object to be accomplished," the parties clearly intended for this to last beyond one year. Flipping a house or houses is something that can be done in a matter of months. Indeed, a majority of the payments Plaintiff made between February and May were returned to him in July. This case is clearly distinguishable from Dwight v. Tobin, 947 F.2d 455 (11th Cir. 1991). In that case, the parties' partnership's business was the "purchase and development of properties throughout the country . . . and the contract under consideration . . . involved a long-term development scheme that would take a great deal of time to accomplish.' Dwight v. Tobin, 947 F.2d 455, 459 (11th Cir. 1991). In Dwight, the 11th Circuit affirmed the District Court in holding that thecontract fell within the statute of frauds. Id.

Based on the above precedent, this is a close case. However, because of the clear directive to read contracts for an indefinite time as falling outside the statute of frauds, this case should not be dismissed. It does not appear from the facts that the parties clearly intended that the partnership would last longer than a year, and thus dismissing under the statute of frauds would not be appropriate.

B. The Statute of Limitations does not Bar Plaintiff's Claims

Defendant has argued that Plaintiff's case is barred by the relevant Statutes of Limitations. Defendant's arguments are misplaced.

Regarding each of Counts 1-4, De...

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