Vareka Investments, N.V. v. American Inv. Properties, Inc.
| Decision Date | 09 February 1984 |
| Docket Number | No. 82-5722,82-5722 |
| Citation | 724 F.2d 907 |
| Parties | VAREKA INVESTMENTS, N.V., a Netherlands Antilles Corp., Plaintiff-Appellee, v. AMERICAN INVESTMENT PROPERTIES, INC., a Florida Corp., Defendant-Appellant. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Lawrence H. Rogovin, North Miami Beach, Fla., for defendant-appellant.
Steel, Hector & Davis, Vance E. Salter, Miami, Fla., for plaintiff-appellee.
Appeal from the United States District Court for the Southern District of Florida.
Before RONEY, HATCHETT and ANDERSON, Circuit Judges.
In this diversity case, we review the district court's award of damages to a lessor resulting from a commercial lease transaction and the termination of the lease. We affirm.
Vareka Investments, N.V. (Vareka) was incorporated under the laws of the Netherlands Antilles on October 20, 1978, to serve as a passive investment vehicle. With the exception of a shareholder who is a citizen of Italy residing in Montreal, Canada, all of the shareholders of Vareka are citizens and residents of the Republic of Ecuador. Leonard E. Treister and Jerome J. Cohen were shareholders, officers, and directors of American Investment Properties, Inc. (AIP). In January, 1978, AIP purchased The Quarters Office Park. During 1978, a company half owned by Treister and Cohen, Greater American Management Corporation (GAMC), operated The Quarters Office Park (The Quarters). In January, 1979, Vareka purchased The Quarters from AIP. Simultaneously, AIP leased The Quarters back from Vareka under a fifteen-year net lease under which AIP was obligated to pay Vareka a minimum "net" return of Vareka's cash investment. AIP was also obligated to pay all expenses and assume all duties to the subtenants and to operate The Quarters. Vareka had no liability whatsoever for the operation, maintenance, or expenses of The Quarters. Treister and Cohen, individually, guaranteed AIP's performance under the lease for the first five years, with an aggregate liability of $100,000.
On January 15, 1979, Vareka filed an "Application by Foreign Corporation for Authorization to Transact Business in Florida" with the Florida Department of State. The State of Florida granted the application, and Vareka became qualified to transact business in Florida. The qualification In August, 1979, AIP notified Vareka that AIP intended to terminate the lease. The present actions were commenced in September, 1979, when Vareka filed suit. In October, 1979, the district court authorized Vareka to re-enter the premises for the purposes of operation and management, pursuant to the lease agreement. Vareka hired Coldwell Banker Property Management Company (Coldwell Banker) to operate the property from October, 1979, through the date of the trial.
listed as the "address of principal office" of Vareka, 1400 Southeast First National Bank Building, Miami, Florida. A Resident Agent Certificate was also filed with the Secretary of State of Florida. On the certificate, Vareka designated an attorney at a Miami, Florida, law firm as its resident agent. The law firm had represented Vareka in the negotiations and consummation of the transaction, and continues to represent Vareka in Florida.
On September 4, 1979, soon after AIP advised Vareka of its intent to terminate, Vareka sued AIP under the lease. On September 14, 1979, Vareka sued Treister and Cohen based on the Guaranty. The trial court consolidated the cases.
Vareka moved for partial summary judgment on liability. The district court withheld ruling on Vareka's motion for summary judgment pending a determination of whether the court lacked subject matter jurisdiction. After holding an evidentiary hearing and considering memoranda of law on the issue of jurisdiction, the district court concluded that subject matter jurisdiction existed. Thereafter, the district court granted Vareka's motion for summary judgment as to the liability of AIP, Treister, and Cohen. The district court conducted a bench trial and found that Vareka suffered $548,000 in damages due to AIP's breach of the lease, and that Vareka was entitled to collect $100,000 of that amount from Treister and Cohen under the Guaranty. AIP, Treister, and Cohen (appellants) then filed a "Motion to Alter or Amend Judgment" and a "Notice of Appeal." The district court denied the motion to alter or amend judgment. The appellants did not file a new notice of appeal.
On appeal, we must decide whether the district court correctly concluded that it had subject matter jurisdiction; whether the district court correctly granted summary judgment; whether Vareka's cause of action for damages was premature; whether Vareka properly mitigated those damages; whether there was sufficient evidence to support the district court's award of damages; and whether Federal Rule of Appellate Procedure 4(a)(4) requires dismissal of this appeal.
Appellant, AIP, contends that the district court's finding that Vareka's principal place of business was in Quito, Ecuador, is clearly erroneous. After conducting an evidentiary hearing, the district court concluded that it had subject matter jurisdiction based on diversity. Under 28 U.S.C.A. Sec. 1332(c), a foreign corporation is deemed to be a citizen of the state in which it has its principal place of business. 1 Jerguson v. Blue Dot Investment, Inc., 659 F.2d 31, 35 (5th Cir.1981), cert. denied, 456 U.S. 946, 102 S.Ct. 2013, 72 L.Ed.2d 469 (1982). 2 One looks to the "total activity" of the corporation in order to determine its principal place of business. Village Fair Shopping Center v. Sam Broadhead Trust, 588 F.2d 431, 434 (5th Cir.1979). This analysis incorporates both the "place of activities" test (focus on production or sales activities), and the "nerve center" test (emphasis on the locus of the managerial and policymaking functions of the corporation). Toms v. Country Quality Meats, Inc., 610 F.2d 313, 315 (5th Cir.1980).
The question of a corporation's principal place of business is a question of fact. Village Fair at 433. Thus, we review the district court's determination that Vareka's principal place of business was Ecuador to determine whether it is clearly erroneous.
The district court found that all of Vareka's shareholders were citizens and residents of the Republic of Ecuador, with the exception of DiGiorgis, a citizen of Italy, residing in Montreal, Canada. Prior to institution of the present case, all corporate meetings were conducted, and all corporate decisions were made in Ecuador. The appellants were at all times relevant to this case residents and citizens of the state of Florida. The managing director of Vareka was a citizen and resident of Ecuador; the major investor in Vareka is an Ecuadorian corporation. Vareka was formed as a passive investment vehicle in order to invest funds in United States real estate. Jose Perez, the managing director of Vareka, received materials offering The Quarters for sale at his offices in Quito, Ecuador. In connection with the purchase of The Quarters, Vareka obtained loans from several Ecuadorian citizens. These loans were evidenced by promissory notes made, executed, and delivered in Quito, Ecuador. Under the long-term lease, AIP was obligated to pay all the expenses, assume all the duties to the subtenants, and operate The Quarters Office Park. Thus, Vareka was not involved in the day-to-day operation of this commercial property. At no time did any officer, director, employee, shareholder, or other representative of Vareka meet or communicate with any of the tenants at The Quarters. Likewise, no officer, director, employee, shareholder, or representative ever paid any utility bills, taxes, or service payments applicable to The Quarters, or take any other action which might be construed as operating or managing the property. Vareka had no corporate office in Miami, Florida. Although Vareka did not maintain a distinct corporate office in Quito, Ecuador, it maintained its books and records and held corporate meetings in Quito. Vareka's books and records were maintained with the part-time assistance of Perez's legal secretary and the accountant of another shareholder, in Quito. Otherwise, Vareka had no employees in Florida or elsewhere. Vareka directed AIP to make all lease payments to a Miami bank account. The sole signatories on the bank account were investors of Vareka. In August, 1979, when AIP notified Vareka that it intended to terminate the lease, AIP sent the notification to Vareka in Quito, Ecuador, via telex. The investors and shareholders of Vareka then met in Quito and responded to the advice of termination.
AIP argues that the final negotiations and closing occurred in Miami, Florida. Vareka qualified to do business in Florida and appointed a resident agent in Miami, Florida. All payments were to be sent to a Miami address. Correspondence from Vareka to AIP emanated from the office of the Miami lawyer. Finally, Vareka maintained a bank account in Florida for the purpose of receiving and disbursing all payments relating to The Quarters.
Based on the many factors cited by the district court, we conclude that the district court's holding that Vareka's principal place of business is in Ecuador, is not clearly erroneous. Since all appellants were citizens and residents of the state of Florida, the district court correctly concluded that it had subject matter jurisdiction.
AIP argues that because Vareka resumed possession of The Quarters on AIP's account, on an election of remedies theory, the cause of action for damages does not accrue until the end of the term of the lease.
The relevant portion of the Lease provides that the landlord may, without further notice to the tenant, in the event of default, exercise any one or more of the remedies set forth in the Lease. Section 9.02(b) provides:
Landlord...
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