Opinion
No. 3D18-2069
12-04-2019
295 COLLINS, LLC, Appellant, v. PSB COLLINS, LLC, Appellee.
Damian & Valori, LLP, and Melissa D. Visconti and Melanie Damian, Miami, for appellant. Kluger, Kaplan, Silverman, Katzen & Levine, PL, and Marko F. Cerenko and Alan J. Kluger ; Samson Appellate Law, and Daniel M. Samson, Miami, for appellee.
Damian & Valori, LLP, and Melissa D. Visconti and Melanie Damian, Miami, for appellant.
Kluger, Kaplan, Silverman, Katzen & Levine, PL, and Marko F. Cerenko and Alan J. Kluger ; Samson Appellate Law, and Daniel M. Samson, Miami, for appellee.
Before SALTER, LOGUE and SCALES, JJ.
SALTER, J.
295 Collins, LLC ("Seller") appeals an order granting partial summary judgment regarding the specific performance of a buyout provision in a property development joint venture with the appellee, PSB Collins, LLC ("Buyer"). We affirm.
We have jurisdiction over the order under Florida Rule of Appellate Procedure 9.130(a)(3)(c)(ii) as a non-final order determining the right to immediate possession of property. The committee notes to the rule specify that the term "property" includes personal property—here, LLC interests. The non-final order addressed other claims by the Buyer against the Seller, such as those for costs, expenses, and damages for breach of contract and breach of the implied covenant of good faith and fair dealing, but those matters are not before us.
The scenario in the circuit court lawsuit involved a common contractual mechanism for the resolution of an impasse when two equal owners in a joint venture become deadlocked. In this case, major real estate investors Dhruv Piplani and Jason Halpern each created individual New York limited liability companies (Buyer, by Piplani, and Seller, by Halpern), which in turn formed and held 50% interests in "JHPSB Collins Ventures LLC," a Delaware limited liability company (the "Venture").
The Venture owned, directly and indirectly, three other LLCs, one of which held title to a property the Venture and those related entities planned to develop as a condominium on Collins Avenue in Miami Beach, Florida (the "Project"). To facilitate the Project, the Venture obtained $26,000,000.00 in construction financing from Stonegate Bank ("Stonegate"). Jason Halpern personally guaranteed the loan and entered into an environmental indemnity agreement with Stonegate in connection with the loan.
The operations of the Venture were governed by an amended and restated limited liability company operating agreement (the "Agreement") and by Delaware law. The issue presented here is whether the trial court correctly interpreted the buyout provision in the Agreement following the parties' decision to separate.
The essence of a buyout provision such as this is that one co-owner proposes to buy the other's interest at a particular price, and the recipient of that proposal either accepts the price (and sells) or responds by agreeing to buy rather than sell at the designated price. In the present case, 295 Collins, LLC first proposed to purchase the interests of PSB Collins, LLC, for a price based on an all-cash Project purchase price of $43,092,331.00. In a timely response (30 days after the proposal), PSB Collins, LLC, elected instead to purchase the ownership interest of 295 Collins, LLC, based on the Project purchase price, rather than to sell. This explains the designations of "Seller" for 295 Collins, LLC, and "Buyer" for PSB Collins, LLC, for purposes of this opinion.
Section 8.7 of the Agreement, captioned "Buy/Sell," governed the transaction and closing in this case. The Buyer made the specified escrow deposit of five percent of the purchase price and the parties communicated via email regarding a closing date set for Friday, January 19, 2018.
It can signify a problem, though, when a court reporter shows up to transcribe the "closing proceedings" at the time and place of the scheduled closing--and that is what happened here. At the beginning of the closing proceedings, both parties and their counsel indicated that they were present and "ready, willing and able" to close the transaction. The Seller balked at executing the requisite transfer documents after the Buyer (and its attorneys) explained that: the Buyer had already wired to Chicago Title (the title insurer and closing agent for the transaction) $24,500,000.00, the proceeds of a new mortgage loan that was arranged with Emerald Creek Capital 2, LLC ("Emerald Creek"), to fund the Buyer's purchase and the payoff of the Stonegate loan (including a satisfaction of Stonegate's existing mortgage and release of Mr. Halpern's personal guaranty of that loan), and had assembled the documents required to be executed in connection with the closing.
The Seller's refusal was based on an emailed "closing checklist" that contained five items: (1) a release of Mr. Halpern regarding his Stonegate guaranty and a condominium unit owner admission agreement; (2) an indemnity agreement; (3) additional payments of $1,271,466.00 regarding an alleged member loan due the Seller, together with accrued and unpaid legal fees, accounting fees, and overhead costs incurred through the closing date; (4) a document to address a non-party alleged to have purchased an interest in the Venture; and (5) a condominium offering plan amendment. The Buyer responded to each of those requirements with its position, and relied on section 8.7(i) of the Agreement, a provision that required the "consummation of the Buy/Sell Closing," even if a dispute had arisen over the purchase price, prorations, adjustments, "or any other calculation or computation." The provision specified that the parties were to consummate the transaction "as if [the dispute] did not exist," with the dispute to continue after the closing with the intention that the parties would resolve the dispute pursuant to other terms of the Agreement and the parties would not waive their rights by closing. The parties had also agreed (presciently, as it turned out) on a mechanism to withhold escrow proceeds pending resolution of such a dispute.
After the exchange of positions by counsel for the parties, the representatives of the Seller left the closing room and did not return. The Seller's authorized signatory, Mr. Halpern, had declined to sign the assignments of interest and other closing documents.
Following the failed closing, the Buyer filed a lawsuit in the circuit court in Miami-Dade County for specific performance and money damages. After pretrial motions and discovery, the parties filed cross-motions for summary judgment. The trial court granted the Buyer's motion for summary judgment on the specific performance count, and this appeal followed. The remaining claims and issues continued to pend in the trial court.
Analysis
Our review of the contract provisions within the Agreement is de novo, as is our review of the summary judgment order. Tropical Glass & Constr. Co. v. Gitlin, 13 So. 3d 156, 158 (Fla. 3d DCA 2009). Under the controlling Delaware law, our review of the trial court's ruling on specific performance is for an abuse of discretion. As the party seeking specific performance, the Buyer was required to prove, by clear and convincing evidence, (1) the right was available under the Agreement (it was), (2) the Buyer was "ready, willing and able" to perform, and (3) the balance of the equities was in the Buyer's favor. Osborn v. Kemp, 991 A.2d 1153, 1158 (Del. 2010).
We address the Seller's five alleged justifications for refusing to close as presented in their amended initial brief here: (a) the Buyer refused to release Mr. Halpern from guarantees as required by the operating agreement; (b) the Buyer failed to place the initial escrow beyond the Buyer's control; (c) the Buyer failed to "prepay" the Stonegate loan; (d) the Buyer failed to satisfy conditions precedent in connection with the Stonegate loan by the time of closing; and (e) the Buyer failed to consummate the closing.
A. Release of Mr. Halpern
As an initial matter, Mr. Halpern's demands for a "release" of his Stonegate guaranty were not part of the "summary judgment evidence" timely presented to the trial court under Florida Rule of Civil Procedure 1.510(c) ; Mr. Halpern's declaration and the environmental indemnity referred to by him were not filed within the time specified by the Rule. See Rodriguez v. Tri-Square Constr., Inc., 635 So. 2d 125, 127 (Fla. 3d DCA 1994). But the Seller's argument also fails as a matter of law. These sophisticated parties, each represented by experienced New York and Florida counsel, entered into a detailed 40-page joint venture operating agreement, the Agreement, with a buy/sell provision that was so complete that it even addressed the prospect that a dispute would arise at the closing table (and the procedure for addressing any such dispute).
Nowhere in the four single-spaced pages of section 8.7, "Buy/Sell," and its nine subparts do we find a requirement for the Buyer to deliver to Mr. Halpern a "personal release" as he demanded before closing. The textual analysis is not complicated. In section 8.7(g), the Buyer is to deliver at closing a full and unconditional release from Stonegate of the Seller and Mr. Halpern, or to "prepay the indebtedness in full," which the Buyer demonstrated its readiness, willingness, and ability to accomplish.
The word "prepay" in that provision is addressed below in part C of this opinion, as the Seller made a separate argument regarding its meaning.
There is no other provision obligating the Buyer to provide a personal release to Mr. Halpern. Section 8.7(h) provides for an indemnity from the Buyer and the Venture to the Seller,
... from any liability, damage, cost or expense (including, without limitation, reasonable attorney's fees and costs incurred in the enforcement of the foregoing indemnity) arising out of the [Venture], the Project, or this Agreement, to the extent that any such liability, damage, cost or expense is based on actions or events occurring on or after the Buy/Sell Closing Date.
The words in a contract must be given their plain and ordinary meaning. Beans v. Chohonis, 740 So. 2d 65, 67 (Fla. 3d DCA 1999). The indemnity runs only to the Seller and does not extend to Mr. Halpern individually. It also represents a logical allocation of risk and liability: each party is liable for its own actions and omissions preceding the closing, and the Buyer and post-closing Venture indemnify the Seller for their Project-related acts and omissions thereafter, given the disengagement of the Seller from the Venture. The Buy/Sell terms do not include a requirement that Mr. Halpern be granted a release of the environmental indemnity provided in connection with the Stonegate loan.
B. Control of Buyer's Escrow Payment
The Seller's second argument complains that "[Buyer] retained full control over the escrowed funds [approximately $2,155,000.00] and could instruct the escrow agent, at any time, to return the funds to [the Buyer], in direct violation of Section 8.7(e) of the Operating Agreement." The Buyer responds that the instructions given by the Buyer matched those given by the Seller when it made the initial offer to buy out the Buyer in November, and that in any event, this was a dispute over money and, as previously discussed above, could not have been a basis for refusing to close. Section 8.7(i) expressly required such disputes to be asserted and resolved after the closing. The Buyer also demonstrated that the escrowed funds were immediately available at the closing to fund the buyout.
C. "Prepayment" of the Stonegate Loan
The Seller argues that the Buyer failed to "prepay such indebtedness [the Stonegate loan] in full" as required by section 8.7(g) of the Agreement "before" the closing. This argument suggests that the Buyer's new lender's (Emerald Creek's) wire transfer of the payoff amount to Chicago Title in conformance with Stonegate's payoff letter was insufficient because it was contingent upon Mr. Halpern completing the Seller's execution of the transfer documents. The text of section 8.7(g) imposes no such requirement to pay the new loan proceeds to Stonegate "before" the closing rather than "at the Buy/Sell closing," the phrase which concludes the obligation to "prepay" Stonegate.
The plain meaning of the word "prepay" as used in the sentence and the transaction is a loan payoff prior to the stated maturity of the loan. In the case of the 300 Collins Project and the Venture, the construction loan had not yet matured or been terminated by the lender. Because of the dispute between the principals of the Seller and Buyer, one 50% venturer was buying out the other before all of the originally-planned activities of the Venture were completed and before the maturity date of the Stonegate loan. That reading is supported by the sentence within section 8.7(g) specifying that the Buyer's payoff of the Stonegate loan must include any "prepayment penalty" or "prepayment premium." We acknowledge the Seller's argument that "prepay" means "to pay in advance," but we reject the tortured construction added in the argument, "to pay in advance of closing," versus the contextually obvious, "to pay in advance of the maturity of the loan, as part of closing." In this case, the summary judgment evidence establishes that the payoff funds were only awaiting the Seller's execution of the transfer documents. The Stonegate loan would have been prepaid at the closing, had the Seller (through its principal, Mr. Halpern) performed as specified in the Agreement.
D. Stonegate Payoff and Conditions Precedent
The Seller contends that the Buyer failed to satisfy conditions relating to the payoff of the Stonegate loan by the time of the closing. One of these alleged conditions precedent was to "prepay" the loan, and that has already been discussed. The summary judgment evidence included Stonegate's payoff letter as well as the uncontroverted evidence that the proceeds from the replacement loan with Emerald Creek had been wired to the closing agent and were ready for disbursement at the January 19 closing, on confirmation that the transfer documents were signed and delivered to the closing agent.
The substance of this argument by the Seller is that certain requirements of Emerald Creek for the release of the escrowed proceeds of its replacement loan (which were to pay off the Stonegate loan) were not fulfilled. The Seller maintains in its brief that "[i]t is undisputed that the encumbrances remained on the title even on the morning of the purported closing, and it was clear from the record evidence that a clean title policy could not be issued on that date."
The Seller failed to point, however, to any summary judgment evidence that any specific title policy exception to be addressed, or document to be received, by Chicago Title was unfulfilled at the point that the Seller and Buyer sat down for the closing. Emerald Creek's witness testified that his attorney was "good to go" for the closing. His testimony that "termination of notice of commencement liens" had not been obtained as of the date of closing does not establish that Emerald Creek would refuse to fund the replacement loan at closing. At closing, there was no discussion regarding this specific issue, and had there been, of course it would have been the Seller's obligation to assist the Buyer in obtaining such "additional instruments" (section 11.16 of the Agreement) to effectuate the closing. The Seller made no tender of the signed transfer documents to Chicago Title as escrow agent and title insurer (conditioned upon confirmation that the escrow agent had also received all necessary documents for the release of the Emerald Creek funds for the wire to Stonegate) before walking out of the closing.
Emerald Creek's representative did not testify that any title requirement would preclude funding or would not be "insured over" by the title insurer and closing agent.
From inception and until the time of closing, the Seller was the "Manager" under the Agreement and acted on behalf of the Venture regarding construction.
E. "Buyer's Failure to Consummate the Closing"
The Seller's fifth and final argument, a single paragraph reliant upon the other supposed defaults at closing, maintains that as a result of those shortcomings and "failure to close," the Buyer "was required to tender the escrowed deposit amount to [Seller] as liquidated damages but failed to do so." This argument fails by virtue of the trial court's conclusions, and ours, that (1) the Buyer tendered complete performance and was "ready, willing and able" to close, while (2) the Seller failed and refused to perform as required by the Buy/Sell provision of the Agreement. Conclusion
The record establishes that the Seller made the initial offer to buy out the interests in the Venture and Project. But the terms of the Agreement authorized the Buyer to counter with its own proposal to purchase the Seller's interests, using the price established by the Seller. The summary judgment evidence establishes that the Agreement's closing procedure and requirements were followed by the Buyer, and that the Buyer was ready, willing, and able to perform at closing, had the Seller's representatives not walked out. Recognizing and following the controlling Delaware law applicable to the Agreement and the record, the trial court committed no error.
Indeed, the Seller, as manager of the Venture, was in the better position to fix a value.
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Affirmed.