SALTER, J.
Coral Reef Drive Land Development, LLC, appeals a summary judgment and final judgment of foreclosure entered in favor of Duke Realty Limited Partnership.
Our review of the interpretation and application of the contract provisions is de novo, and we consider the record by resolving "all doubts and inferences in favor of the non-moving party." Sheikh v. Coregis Ins. Co., 943 So.2d 242, 244 (Fla. 3d DCA 2006).
The detailed documents entered into by the parties have more bells and whistles than the once-conventional commercial promissory note and mortgage. The terms of the documents afforded Coral Reef a first mortgage loan of $10,000,000 for the purchase and initial development of some 12 acres of prime commercial property in southwest Miami-Dade County. The property adjoined Jackson South Community Hospital and was to be developed and leased as medical offices. Duke Realty, an Indiana-based commercial real estate development partnership, bargained for an option that essentially would allow it to acquire the property by paying Coral Reef a premium of $1,500,000 above the amounts necessary to repay the Duke Realty loan and to reimburse Coral Reef for the interest costs and rezoning expenses. In the event Duke Realty exercised the option, Coral Reef would then have the right to require the property to be contributed
This was meticulously documented in lengthy single-spaced documents: an 11-page promissory note; a 47-page recorded first mortgage, security agreement, and assignment of leases and rents; a 24-page loan agreement; and a 36-page form of limited liability company operating agreement (to be entered into if the applicable options were exercised in accordance with section 9.17 of the loan agreement). The loan agreement referred to these instruments collectively as the "Loan Documents." The agreements were reviewed by attorneys for the parties.
The Loan Documents contained common "boilerplate" terms—a merger and integration provision, a waiver of the right to trial by jury, and a stipulation that no oral modification or waiver would be binding unless and until reduced to a written agreement signed by the parties. Importantly, the mortgage also included this provision:
Regarding Duke Realty's exercise of its option to acquire the mortgaged property, the loan agreement addressed the timing and method of exercise in a lengthy option provision that included this language:
The loan agreement also specified that any notice required or permitted under its terms "shall" be given in accordance with the notice provisions in the mortgage. Section 9.5 of the mortgage, "Notices," required that all notices required or permitted to be given "shall be in writing" and also specified how such notices were to be mailed or delivered.
During 2006 and early 2007, representatives of Duke Realty participated actively with Coral Reef and its principals in studying the medical office needs and status of the Hospital, in monitoring the rezoning process, and in evaluating prospective architects and contractors. Coral Reef asserts that these representatives were identifying themselves and doing business as "development partners" of Coral Reef, not as the representatives of a lender. In early 2007, Duke Realty continued to comment on designs, tenant office layouts, and construction cost estimates in anticipation that the rezoning would be approved.
In April 2007, one of the principals of Coral Reef sent an email to a principal of Duke Realty stating that Coral Reef could not pay back interest due under the terms of the mortgage "due to unforeseen circumstances," and proposing a meeting to discuss restructuring the mortgage. A representative of Duke Realty then emailed a principal of Duke Realty to advise that "the partners" in the "deal south of Miami" "have evidently run into cash flow difficulties, and are not making debt payments." The final zoning approvals were thought to be forthcoming in about a month.
It is undisputed that in October 2007, Duke Realty sent (and Coral Reef and the guarantors received) a written default notice regarding the loan. That notice was squarely inconsistent with any belief that the purchase option would be exercised by Duke Realty in two months. Coral Reef alleges, however, that representatives of Duke Realty "represented to Coral Reef that [the default notice] was a mere formality required by its loan committee and that, as agreed, Duke would purchase the property by December 14." Taking this allegation as well as true, this was a second alleged verbal promise to forbear from collection of the defaulted interest. Coral Reef also alleges that Duke Realty misled Coral Reef into setting up meetings with medical office and Hospital representatives as if the joint venture would be moving ahead.
On December 10, 2007, four representatives of Duke Realty prepared an internal "deal summary memorandum" that evaluated Duke Realty's alternatives (one of which was foreclosure) regarding the defaulted loan. Four days later, Duke Realty filed its foreclosure action.
Coral Reef and the two guarantors responded with affirmative defenses and counterclaims alleging waiver, fraud, unclean hands, breach of joint venture contract, breach of fiduciary duty, promissory estoppel, unjust enrichment, and tortious interference. After pretrial discovery, Duke Realty moved for final summary judgment, which was granted. This appeal followed.
A promise that any agreement waiving or modifying loan terms is to be in writing ordinarily is no less entitled to be enforced than a promise to make a payment by a certain date. In Florida,
In this case, Coral Reef provided no such consideration for the alleged modification of the loan documents. Continued effort to rezone the property, or to find tenants, was part of Coral Reef's original obligation, not an additional consideration. The alleged "agreement" not to refinance or sell does not represent additional consideration, as (a) there is no evidence whatsoever that Coral Reef ever attempted to refinance or sell the property, much less that it could have done so,
Turning next to Coral Reef's affirmative defenses and counterclaims based on estoppel and fraud, the critical legal shortcoming is the element of justifiable reliance. In this case, Coral Reef and the guarantors could not, as a matter of law, justifiably rely on an alleged verbal "commitment" to exercise the purchase option in the future because they had expressly agreed not to do so. Written exercise provisions avoid misunderstandings and swearing contests. In the case of business organizations, such notices identify the position and name of the individual purporting to exercise the option on behalf of the optionee. A signed written notice from such an entity provides greater assurance that the signator has assured herself or himself that the action has been duly authorized within the entity's governance system.
Promissory estoppel, the next legal basis relied upon by the appellants, is an equitable doctrine for the enforcement of agreements, not a device to nullify an expressly-agreed, written contractual term. Advanced Mktg. Sys. Corp. v. ZK Yacht Sales, 830 So.2d 924, 928 (Fla. 4th DCA 2002); Univ. of Miami v. Intuitive Surgical, Inc., 166 Fed.Appx. 450, 454 (11th Cir.2006) ("Promissory estoppel is not available as a remedy when parties have a written contract addressing the relevant issue"). In this case, the alleged telephonic notice of exercise of Duke Realty's option is directly contrary to the written provisions of the contracts.
But the trial court's correct application of the plain language of the parties' agreements is not the only basis for finding the counterclaims legally insufficient.
Nor could the telephone call or Duke Realty's conduct overcome the express written agreement (section 9.18 of the mortgage) between the parties that their relationship was not a joint venture. Having an enforceable legal right to become a joint venturer (upon the delivery of a specified written notice) is not the same as being one through implication. And becoming a joint venturer through implication was expressly disavowed in writing by the parties from the inception of their agreements.
Finally, we address the counterclaim for tortious interference. As a lender that advanced $10,000,000 and invested significant managerial time in the investment, Duke Realty had every right to attend zoning hearings, review plans, consider cost estimates, and meet prospective lessees. Taking all such allegations as true, they do not establish a legally sufficient cause of action for tortious interference. See Ferris v. S. Fla. Stadium Corp., 926 So.2d 399, 401 (Fla. 3d DCA 2006).
The world of commercial real estate is not a warm and fuzzy place. That is why parties to substantial transactions consult counsel and prepare highly-detailed written agreements to address every contingency the parties and their counsel can imagine. "Get it in writing" is the watchword, for better or worse. In this case, the borrowers admitted default in writing and hoped for mercy. Having signed over 100 pages of single-spaced legal documents reviewed by their attorneys, Coral Reef's principals could not ignore the requirements of those documents and section 687.0304. Any assumption that a telephone call could commit Duke Realty to close a $12,000,000 purchase (following Coral Reef's conceded payment default) fails, as the trial court correctly determined based on the record here, as a matter of law.
Affirmed.
SCHWARTZ, Senior Judge, concurs.
Disputed issues of material fact remain on the issue of promissory estoppel. The majority opinion is in error in saying that the lender statute of frauds bars the borrowers' promissory estoppel claim. The issue in this case involves part two of a three part agreement and not, as the majority opinion states, part one of that agreement.
The borrower in this case was a local land development company, Coral Reef Drive Land Development, LLC, which obtained a $10 million loan from a national company, Duke Realty Limited Partnership. The purpose of the loan was to buy real estate adjacent to the new Jackson South Memorial Hospital. The idea was to build medical offices on the property.
The parties' agreement had three major components. They were:
There were two important features of the option:
Coral Reef purchased the real estate and began the rezoning process. This proved to be time-consuming and expensive. Coral Reef made one interest payment of $300,000. Coral Reef encountered financial difficulties and thereafter made no further interest payments.
Although Coral Reef was in default on the payment of interest, Duke did not declare a default. Instead, Duke stayed in close touch with Coral Reef, consulting with Coral Reef about the progress of the
In April 2007, Coral Reef opened discussions with Duke about restructuring the mortgage or coming to some other agreement about the past-due interest. In May 2007, Coral Reef was successful in obtaining rezoning of Phase I of the project. As stated previously, the property became more valuable when this rezoning was accomplished.
We now come to the heart of the matter. On May 17, 2007, Coral Reef spoke to Duke's representative and told him that unless Duke firmly committed to exercise its option to buy the property by December 14, 2007 (the loan maturity date), Coral Reef was going to refinance the loan with another lender or sell the property and pay off the loan.
According to Coral Reef's testimony, the Duke representative unequivocally committed that Duke would exercise the option to buy the property by the December 14 deadline in return for Coral Reef's agreement not to refinance or sell the property.
Duke acknowledges all of this, except for one key difference. According to the Duke representative (as stated in an internal email to his boss), the Duke representative said, "I told him
Because the trial court granted a summary judgment in this case, we must read the factual record in the light most favorable to Coral Reef, as the non-moving party. See Markowitz v. Helen Homes of Kendall Corp., Inc., 826 So.2d 256, 258-59 (Fla.2002). It follows, for purposes of this appeal, that we accept Coral Reef's testimony: Duke's representative gave an unequivocal assurance to Coral Reef that Duke would exercise its option and purchase the property by December 14, 2007, in exchange for which Coral Reef refrained from selling the property or refinancing the loan.
Both sides agree that in the next several months Coral Reef and Duke were in constant communication regarding the details of the development project. Duke made a number of suggestions regarding how the project should proceed.
On October 17, 2007, Duke sent Coral Reef a default notice, stating that it was accelerating the loan. Coral Reef states that the Duke representative said this default notice was a mere formality required by its loan committee and that, as agreed, Duke would exercise the option by December 14, 2007.
According to documents produced in discovery, executives within Duke directed a Duke analyst to prepare a financial analysis entitled "Foreclosure vs. Option." The purpose was to determine whether it would be more profitable for Duke to foreclose on the property rather than exercising the option to buy. The study concluded that it would be more profitable to foreclose.
On December 14, 2007, Duke filed a foreclosure suit. Once the title to the property was clouded by the foreclosure suit, Jackson South Hospital declined to enter into a written space commitment for the buildings that were to be constructed. Given the uncertainty created by the foreclosure
In the foreclosure suit, Coral Reef filed counterclaims. The counterclaim relevant here is Coral Reef's claim for promissory estoppel. The trial court entered summary judgment in favor of Duke on the foreclosure claim and the counterclaims. Coral Reef has appealed.
Florida recognizes the cause of action for promissory estoppel. The Florida Supreme Court has explained:
W.R. Grace & Co. v. Geodata Servs., Inc., 547 So.2d 919, 924 (Fla.1989).
The facts of this case make out a viable claim for promissory estoppel. In May 2007, Coral Reef had seven months remaining before the $10 million loan came due. There was ample equity in the property, the value of which had increased after the rezoning was accomplished. Based on its close working relationship with Duke, Coral Reef also believed that Duke was interested in exercising the option to buy the real estate.
On May 17, 2007, Coral Reef spoke with Duke's representative and advised him that unless Duke firmly committed to exercise its option by the December 14, 2007 loan maturity date, Coral Reef was going to refinance the loan or sell the property and, under either alternative, pay Duke in full. The parties appear to agree that under such a scenario, Duke would lose its option to buy the property.
According to Coral Reef, Duke's representative unequivocally committed that Duke would exercise its option by the December 14 deadline and in reliance on that promise, Coral Reef did not seek an alternative lender or sell the property. Duke foreclosed instead of exercising the option, and Coral Reef lost the property.
These facts state a claim for promissory estoppel. Promissory estoppel exists where a promisor—Duke in this case— makes "a promise which the promisor should reasonably
For promissory estoppel to exist, Duke's promise must also induce the action or for forbearance. Id. It did. Coral Reef continued its work on the project and neither sold nor refinanced. Finally, promissory estoppel applies "if injustice can be avoided only by enforcement of the promise." Id. Under the facts of this case, that element is also satisfied. The summary judgment should be reversed and the cause
Duke argues that promissory estoppel cannot be invoked when the parties have a written contract. That is not so. Estoppel prevents a person from contradicting "a representation of fact made by him after another has relied on the representation." Restatement (Second) of Contracts § 90 comment a. Several of the Restatement examples involve promises made in connection with a written contract. See, e.g., id. comment b illus. 2 (borrower's detrimental reliance where lender promised not to foreclose for a specified time), comment c illus. 5 (new lender reasonably relied on original lender's promise to release part of the land from the mortgage upon payment of a stated sum).
Duke's more substantial argument is that promissory estoppel cannot be employed where a promise is barred by the bank statute of frauds, which is section 687.0304, Florida Statutes (2005). As already stated, the doctrine of promissory estoppel is unavailable if the promise is barred by the statute of frauds. W.R. Grace & Co., 547 So.2d at 920, 925.
The bank statute of frauds requires credit agreements to be in writing. A credit agreement includes "an agreement to lend or forbear repayment of money, goods, or things in action, to otherwise extent credit, or to make any other financial accommodation." § 687.0304(1)(a), Fla. Stat. A creditor is a person who extends credit under a credit agreement with a debtor, while a debtor is a person who obtains such credit.
The bank statute of frauds is not applicable here. As already explained, this transaction had three parts: (1) the loan; (2) the option for Duke to buy the real estate; and (3) the option for Coral Reef to require the formation of a joint venture. The issue here is transaction (2)—the option to buy the real estate—not transaction (1)—the loan.
This is not a case in which there was an outstanding loan and the borrower asked the lender to forbear the collection of interest. Under such facts, the bank statute of frauds would apply and the agreement would have to be in writing.
Here, however, the issue is the option for Duke to buy the real estate. Coral Reef's specific request was for a firm commitment from Duke that it would exercise the option by December 14, 2007, failing which Coral Reef would sell the property or refinance the loan. When Coral Reef gave that assurance, it was Coral Reef who engaged in forbearance—forbearance from selling the property or refinancing the loan.
Duke argues, however, that this transaction falls within the bank statute of frauds because this amounted to Duke's agreement to allow Coral Reef to forbear from repayment of interest, or amounts to "any other financial accommodation" for purposes of the statute.
Duke's argument is incorrect under the circumstances of this case. The option for Duke to buy the real estate already existed and was not created as an "accommodation" for Coral Reef. All Coral Reef wanted was a firm commitment regarding exercise of the option.
Regarding the repayment of interest, the option agreement establishes that the purchase price for Duke to acquire the property was $11.5 million plus reimbursement of costs actually expended by Coral Reef to rezone the property. Of particular interest here, Duke was also required to reimburse Coral Reef for "all interest that has accrued on the Loan
In other words, the option itself contemplated the possibility that Coral Reef might not have paid the interest due on the loan. Regardless of whether the interest was paid or unpaid, if the option was exercised, the accrued but unpaid interest was to be an adjustment to the purchase price. As Coral Reef has correctly argued, under the terms of the option agreement, overdue interest is accounted for at the closing by making the appropriate financial adjustment. Under the circumstances present here, the bank statute of frauds does not apply.
The majority opinion says that there was no consideration for Duke's unequivocal commitment to Coral Reef that it would exercise the option. That is incorrect. Forbearance counts as consideration for such a promise. This court has said:
Boymer v. Birmelin, 227 So.2d 358, 362 (Fla. 3d DCA 1969).
The majority opinion says that "there is no evidence whatsoever that Coral Reef ever attempted to refinance or sell the property, much less that it could have done so ...." majority op. at 902. Respectfully, that assertion does not read the record in the required light. Coral Reef's entire point here is that it told Duke that Coral Reef would sell or refinance unless Duke gave a firm commitment that it would exercise the option. Duke gave that assurance. Coral Reef refrained from refinancing or selling the property.
Duke did not make an argument in its motion for summary judgment that it would have been impossible for Coral Reef to refinance or sell the property. This court cannot consider an alternative ground for affirmance unless there has been a fair opportunity for that issue to be developed in the record. Robertson v. State, 829 So.2d 901 (Fla.2002); Dade County Sch. Bd. v. Radio Station WQBA, 731 So.2d 638 (Fla.1999).
To the extent that the present record addresses this issue, the record indicates that in 2007, a sale or refinancing was feasible. The loan amount here was $10 million on land that at the outset was worth $16.9 million, and after rezoning was worth more. Duke continued to verify the land value as the transaction unfolded. According to an email sent by Duke's representative, "This site is zoned, in one of the fastest growing parts of the country, adjacent to a ... hospital that is doubling in size and is out of land." For that reason Duke's representative said, as previously quoted, "I can't imagine not buying this dirt."
The majority opinion states that "any notion that Duke Realty had `firmly committed' to exercise the purchase option in December could hardly have been relied upon after the undisputed receipt of a written default notice two months before the date the option was to expire." Majority op. at 902. Again, this assertion reads the record in the wrong light. According to Coral Reef's testimony, they were assured by the Duke representative that this
In conclusion, we should reverse the summary judgment on the issue of promissory estoppel and remand the cause for further proceedings.
Martinsville Nylon Employees Council Corp. v. NLRB, 969 F.2d 1263, 1267 (D.C.Cir.1992).
