MARC
P. OSSINSKY ATTORNEY AT LAW REPORTED CASES
Case 5
570 So.2d 955
RICO Bus.Disp.Guide 7627, 15 Fla. L. Weekly D2725
(Cite as: 570 So.2d 955)
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. |
|
*957 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.
[1] 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.),
[FN1] 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).
FN1. Defendants
urge that since the cash was "investor money" deposited
into Euro-American Properties escrow account, even
if a wrong occurred it was against the investors and
not Tinwood. We disagree. The cash was delivered in
order to acquire the property and in exchange for stock
in Tinwood. If, because of the
actions of defendants, the value received for the stock by Tinwood was reduced,
then Tinwood also was wronged.
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.
*958 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. [FN2] 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.
FN2. The property
was actually purchased in two closings, one occurring
on October 12, 1982 and the other occurring on September
15, 1983.
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 *959 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.
VIOLATION OF CHAPTER
517 (Securities Violation)
[2] 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) (s 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)
[3][4][5] Under
Florida corporate law, [FN3] 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." s 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, s 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 s 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) FN3.
Defendants urge that the law of the Netherlands Antilles
controls. We reject this contention. Here Figueredo
had his office in Florida, the corporate purpose (investing
in Florida property) was to be carried out in Florida,
and a corporate bank account was maintained here. Florida
had the most "significant relationship" to the transaction.
See State Farm Mutual Automobile Insurance Company
v. Olsen, 406 So.2d 1109 (Fla.1981); see generally
Restatement (Second), Conflict of Laws, s 309.
[6][7] 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 profit had been realized despite *960 fraud practiced
by one joint adventurer upon his co-adventurers was
immaterial to their right to an accounting from him).
The directed verdict
on this claim is reversed.
Back
to Top
FRAUD AND MISREPRESENTATION
[8] Recovery under
these theories is only possible if a prima facie case
of fraud against the corporation (as opposed to the
investors) was presented. This requires evidence of
misrepresentation to the corporation and resultant
damages sustained by the corporation. See Amazon v.
Davidson, 390 So.2d 383 (Fla. 5th DCA 1980). Tinwood
argues numerous separate misrepresentations and concealments
of material fact were made by defendants to the corporation
resulting in damages to the corporation. We agree only
as to the following misrepresentation of purchase price
as $3,600,000, or$66,285 per acre. The cost of the
real property as represented in the offering memorandum
was $3,600,000. As noted above, there is evidence that
the actual purchase price of the land was approximately
$43,500 per acre for a total of much less than the
stated amount and that this information was not contained
in the corporate records. A jury could conclude that
the true purchase price was concealed from the corporation
by its managing directors and that the corporation
was damaged by paying $22,785.00 per acre more than
the purchase price. The directed verdict on this claim
is reversed.
CIVIL THEFT
Tinwood paid $3,600,000
for the land. There is evidence that Figueredo obtained
the property for a sum less that $3,600,000 but did
not account to the corporation for the difference.
[9][10] Civil
theft is recognized under section 812.035, Florida
Statutes (1985). Defendants, citing Rosen v. Marlin,
486 So.2d 623 (Fla. 3d DCA 1986), rev. denied, 494
So.2d 1151 (1986) and Futch v. Head, 511 So.2d 314
(Fla. 1st DCA 1987), rev. denied, 518 So.2d 1275 (1987),
point out that a dispute over the amount of money that
a person owes may justify a breach of contract action
but does not become a theft which is actionable under
section 812.035. However, the mere existence of a contractual
relationship between parties does not preclude an action
for civil theft. Nova Flight Center, Inc. v. Viega,
554 So.2d 626 (Fla. 5th DCA 1989). An embezzlement
whereby the defendant lawfully obtains possession of
the plaintiff's funds and thereafter converts said
funds to his own use will justify an action for civil
theft. Masvidal v. Ochoa, 505 So.2d 555 (Fla. 3d DCA
1987); Puchner v. Drexel Burnham Lambert, Inc., 498
So.2d 550 (Fla. 3d DCA 1986). Furthermore, as stated
in State v. Oates, 330 So.2d 554, 556 (Fla. 4th DCA
1976):
One obtaining
personal property by trick, device, or fraud, intending
to appropriate it, is guilty of larceny on subsequent
appropriation. A person is guilty of larceny who gets
possession of money of another by means of fraud or
trickery with the preconceived purpose to appropriate
the money to his own use, on the theory that the fraud
vitiates the consent of the owner who is held to retain
constructive possession up to the time of conversion
by the taker. Casso v. State, 182 So.2d 252 (Fla.App.2d
1966).
[11] In this case,
evidence was presented that the property was bought
at much less than $66,285 per acre, and that corporate
funds were secretly disbursed to defendants. Further,
that defendant Figueredo attempted, through the use
of a second set of closing documents, to conceal the
actual details of the closing from the corporation.
The question of whether Figueredo was guilty of civil
theft of funds belonging to Tinwood should have been
submitted to the jury. The directed verdict on this
count is reversed.
RICO ACT
[12] In order
to establish a RICO violation, Tinwood was required
to show "a pattern of racketeering activity." ss 895.02(4),
895.03, Fla.Stat. (1985). In a case somewhat analogous
to this one, State v. Lucas, 570 So.2d 952 (Fla. 3d
DCA 1990), *961 the Third District noted that the United
States Supreme Court, in H.J., Inc. v. Northwestern
Bell Telephone Co., 492 U.S. 229, 109 S.Ct. 2893, 106
L.Ed.2d 195 (1989) held that to prove a "pattern of
racketeering activity" under the federal RICO act (from
which the Florida RICO Act was derived), a plaintiff
must show that the racketeering predicates are related,
and that they amount to or pose a threat of continued
criminal activity. Id. 109 S.Ct. at 2900. The Supreme
Court continued:
Continuity is
both a closed--and open-ended concept, referring either
to a closed period of repeated conduct, or to past
conduct that by its nature projects into the future
with a threat of repetition. [Citation omitted] ...
A party alleging a RICO violation may demonstrate continuity
over a closed period by proving a series of related
predicates extending over a substantial period of time.
Predicate acts extending over a few weeks or months
and threatening no future criminal conduct do not satisfy
this requirement ... Often a RICO action will be brought
before continuity can be established in this way. In
such cases, liability depends on whether the threat
of continuity is demonstrated. Whether the predicates
proved establish a threat of continued racketeering
activity depends on the specific facts of each case
... A RICO pattern may surely be established if the
related predicates themselves involve a distinct threat
of long-term racketeering activity, either implicit
or explicit ... In other cases, the threat of continuity
may be established by showing that the predicate acts
or offenses are part of an ongoing entity's regular
way of doing business ... [,] a long-term association
that exists for criminal purposes ... [,] or a regular
way of conducting ... [an] ongoing legitimate business.Id.
109 S.Ct. at 2902.
The Third District
then held that the information before it was properly
dismissed because it failed to allege continuity in
the racketeering conduct alleged. The court explained:
[A]ll the predicate
racketeering acts alleged in the information span only
a brief period of six months and threaten no future
long-term racketeering conduct. Indeed, the six-month
fraudulent scheme alleged was aimed solely at a discrete
set of victims, namely, former Wellington Precious
Metals' clients derived from Wellington client lists,
and was not directed at the public at large; obviously,
such a scheme poses no threat of long-term existence
as it necessarily must terminate when the Wellington
client lists are exhausted. Stated differently, the
alleged fraudulent scheme had but a limited set of
victims covering only a short-term operation with no
reasonable possibility of continuous existence. This
being so, this short-run fraudulent scheme utterly
fails to satisfy the continuity prong of the "pattern
of racketeering activity" element to the charged RICO
offenses.
State v. Lucas,
570 So.2d at 955.
The instant case
is nearly identical. Defendants' conduct had a limited
purpose, was directed to a limited set of investors
and covered only a short- term operation with no reasonable
possibility of continuous existence.
Tinwood relies
on Banderas v. Banco Central del Ecuador, 461 So.2d
265 (Fla. 3d DCA 1985) for the proposition that a pattern
of racketeering activity was established here; however,
in that case, the defendants had set up four fictitious
hospitals in order to perpetrate the fraud which was
conducted over a ten month period and the court noted, "This
was not a technical securities or business fraud. This
was a well organized, ongoing, systematic, criminal
scheme devised by [plaintiff]." Banderas at 270. The
instant case is factually much closer to H.J., Inc.
than Banderas. Tinwood failed to establish a prima
facie case against defendants under the RICO Act, and
the directed verdict on this count is affirmed.
CONCLUSION
The trial court
erred in directing a verdict for defendants on Counts
II, III, V, VI *962 and XXXIX of Tinwood's amended
cross claim. The final judgment is reversed and the
cause remanded for a new trial on those counts.
AFFIRMED in part,
REVERSED in part, and REMANDED.
COBB and GOSHORN,
JJ., concur.
Select A Case
Back to Top
|
