Tinwood N.V. v. Sun Banks, Inc., 89-2281

• Decision Date: 08 November 1990
• Docket Number: No. 89-2281,89-2281
• Citation: 570 So.2d 955
• Parties: RICO Bus.Disp.Guide 7627, 15 Fla. L. Weekly D2725 TINWOOD N.V., Appellant, v. SUN BANKS, INC., etc., et al., Appellees.
• Court: Florida District Court of Appeals

Page 955

570 So.2d 955

RICO Bus.Disp.Guide 7627, 15 Fla. L. Weekly D2725

TINWOOD N.V., Appellant, v. SUN BANKS, INC., etc., et al., Appellees.

No. 89-2281.

District Court of Appeal of Florida,

Fifth District.

Nov. 8, 1990.

Rehearing Denied Dec. 13, 1990.

J. Alfredo de Armas of Munilla & Associates, P.A., Arnaldo Velez of Taylor, Brion, Buker & Green, Miami, and James C. Adkins, Tallahassee, for appellant.

Thomas B. DeWolf, Marc P. Ossinsky, and John L. O'Donnell, Jr., of DeWolf, Ward, O'Donnell & Hoofman, P.A., Orlando, for appellees Figueredo, Euro-American Inv. Corp., Inc. and Euro-American Properties, S.A.

No appearance for appellee, Sun Banks, Inc.

HARRIS, Judge.

Robert Figueredo located certain property in Orange County that he believed would be a good investment opportunity for foreign investors. He incorporated Tinwood, N.V. under the laws of the Netherlands Antilles with himself as president and general manager. He then prepared an offering brochure and distributed it to proposed foreign investors. In the brochure he offered stock in Tinwood to raise $3,600,000 (half in cash; half in notes) to acquire 54.3 acres of property ($66,285 per acre). In the brochure, he indicated that for his services he would receive 25 percent of the profits from the resale of the property. Investors testified that Figueredo represented that this would be his only compensation from the project.

The offering was successful. Investors deposited $1,800,000 cash into one of Figueredo's corporations, Euro-American Properties, (EAP) S.A.--Escrow Account (Tinwood, N.V.), ¹ for their stock. They also delivered notes in that amount to complete the purchase price of the real estate and to purchase their stock. The property was purchased and Figueredo and another of his corporations, Euro-American Investment Corp. (EAIC), became managing agents for Tinwood. Figueredo and EAIC were removed as managing agents in 1985 and, after a review of the corporate files and audits and other information, Tinwood brought this action against Figueredo and his corporations (defendants) alleging (1) violation of securities law (Chapter 517, Florida Statutes); (2) civil theft; (3) conspiracy; (4) common law fraud; (5) misrepresentation and (6) RICO violations (Chapter 895, Florida Statutes).

After a six week jury trial, the trial judge entered a directed verdict in favor of defendants on all counts. We affirm in part and reverse in part.

FACTS

In early April, 1982, Figueredo, as president of EAIC, located a 54.3 acre parcel of property owned by Waters and Seward. A letter dated April 15, 1982 reflects preliminary negotiations between the parties and references a purchase price of $43,500 per acre, with Figueredo being responsible for all sales commissions which the sellers understood to be $8,000 per acre. On July 15, 1982, the parties signed a letter which referenced a purchase price of $43,000 per acre plus commissions. This letter, which the sellers sent to Figueredo stated, "We understand you are prepared to execute a standard contract for sale and purchase." The parties did execute a contract dated June 30, 1982, but it referenced a purchase price of $66,285.00 per acre. The total purchase price reflected by the contract (including a "wrap-around mortgage" of $1,799,275) was $3,599,275. Commission was to be paid by the sellers per separate agreement. The contract was executed by Figueredo acting as Trustee for Tinwood, N.V., a "Netherlands Antilles Corporation in formation" and a closing date of October 12, 1982 was agreed upon.

Following the closing Figueredo and EAIC served as Tinwood's managing agents until they were removed in August, 1985. During their period of service, they received on behalf of Tinwood a total of $1,800,000 cash from investors. After their removal, the new managing directors of Tinwood became involved in settlement negotiations with several entities holding mortgages on the property and received a number of documents which gave rise to the instant lawsuit. One document, labeled "Management Agreement," was dated October 10, 1982, two days before the first closing. ² According to the agreement, Waters and Figueredo (as EAIC) divided the difference between the "sale price" for the land ($43,350 per acre) and the cost of the land to Tinwood ($66,285 per acre), one third to Waters and two thirds to EAIC. The "Management Agreement" was not contained in the documents or records of Tinwood obtained from Figueredo. Figueredo admitted he did not disclose the "Management Agreement" to shareholders of Tinwood because he did not consider it a document of the corporation.

Roger Handley of the state comptroller's office investigated Waters and Seward's activities and testified Figueredo told him the land was purchased for approximately $43,000 per acre. Seward testified the price was approximately $44,285.

The September 30, 1983 financial statement of Tinwood reflected that corporate funds used for purchase of the land, including interest and taxes, totalled $3,610,826. The statement also disclosed that a brokerage commission of $243,000 was paid, at the first closing, to EAP, an affiliate of Figueredo. Figueredo also received a $33,600.52 syndicate fee at the first closing.

There was also evidence of two sets of closing statements for the September, 1983 closing. One set, prepared by the closing agent, attorney Woods, discloses the existence of two unsecured promissory notes given by Figueredo on behalf of Tinwood as well as various sums Figueredo was to receive, including a joint venture contribution of $300,000. The second set does not disclose these details. Tinwood received the second set.

DISCUSSION

When considering the propriety of a motion for directed verdict, the trial court must consider the evidence in a light most favorable to the non-moving party and if there is any evidence to support a possible verdict for such party, a directed verdict is improper. Pritchett v. Jacksonville Auction, Inc., 449 So.2d 364 (Fla. 1st DCA 1984); Howarth v. Moreau, 430 So.2d 576 (Fla. 5th DCA 1983). Stated otherwise, a directed verdict is proper where the evidence and reasonable inferences therefrom fail to prove a prima facie case in support of the cause(s) of action pleaded. Golden v. Morris, 55 So.2d 714 (Fla.1951); Hartnett VIOLATION OF CHAPTER 517 (Securities Violation)

v. Fowler, 94 So.2d 724 (Fla.1957). See generally, Holmes v. Don Mealey Chevrolet, Inc., 468 So.2d 552 (Fla. 5th DCA 1985); Williams v. Meyer, 474 So.2d 1214 (Fla. 5th DCA 1985); Jennings v. Ray, 484 So.2d 1267 (Fla. 5th DCA 1986). Thus the broad question on this appeal is whether, viewing the evidence in a light most favorable to Tinwood, the corporation adduced evidence or reasonable inferences therefrom to establish a prima facie case on one or more of its causes of action.

This is the type of action which is personal to the investors and could not be maintained on their behalf by the corporation. The corporation after all did not buy the alleged securities, rather persons who were not parties to this lawsuit did. See E.F. Hutton & Co., Inc. v. Rousseff, 537 So.2d 978 (Fla.1989) (§ 517.211 requires buyer/seller privity). Indeed, in the absence of a joinder of the private investors, the court could not require repayment to such private investors. Wee Mac Corp. v. State, 301 So.2d 101 (Fla. 3d DCA 1974). The directed verdict on this claim is affirmed.

BREACH OF FIDUCIARY DUTY (Agents Failure to Disclose Secret Profit)

Under Florida corporate law, ³ a director has the duty to perform his duties "in good faith, in a manner he reasonably believes to be in the best interests of the corporation, and with such care as an ordinarily prudent person in a like position would use under similar circumstances." § 607.111(4), Fla.Stat. (1985); Old Port Cove Property Owners v. Ecclestone, 500 So.2d 331 (Fla. 4th DCA 1986), rev. denied, 509 So.2d 1118 (1987). A director or officer of a corporation, acting as its agent in the purchase of property, occupies a position of trust and confidence with respect to the corporation and owes the corporation a fiduciary duty to exercise the utmost good faith and to make full disclosure of all facts within his knowledge pertaining to the transaction. Pryor v. Oak Ridge Development Corp., 97 Fla. 1085, 119 So. 326 (1928); United Homes, Inc. v. Moss, 154 So.2d 351 (Fla. 2d DCA 1963). In the absence of a showing that he acted with the consent of the shareholders, an officer or director is precluded from making any secret profit or deriving any personal advantage at the expense of the corporation. Pryor v. Oak Ridge Development Corp., supra; United Homes, Inc. v. Moss, supra; Avila South Condominium Association v. Kappa Corp., 347 So.2d 599 (Fla.1977); Old Port Cove Property Owners v. Ecclestone, supra. Where the officer or director makes a secret profit, he will be required to disgorge it. Fort Myers Development Corp. v. J.W. McWilliams Co., 97 Fla. 788, 122 So. 264 (1929), on remand, 105 Fla. 13, 140 So. 902 (1932); United Homes, Inc. v. Moss, supra; see also Quinn v. Phipps, 93 Fla. 805, 113 So. 419 (1927); Restatement of Restitution, § 138 (a fiduciary who has acquired a benefit by a breach of his duty as fiduciary is under a duty of restitution to the beneficiary); Restatement of Agency 2d § 403 (if an agent receives anything as a result of his violation of a duty of loyalty to the principal, he is subject to a liability to deliver it, its value, or its proceeds, to the principal).

Tinwood presented a prima facie case showing Figueredo and EAIC arranged for a secret profit at the expense of and without the knowledge of the corporation. Defendants argue that the evidence showed the property which Tinwood purchased in 1982 and 1983 for $3.6 million had a fair market value at the time of trial in excess of $8 million. Even so, this evidence does not preclude recovery. See Donahue v. Davis, 68 So.2d 163 (Fla.1953) (fact that...