ASSET MANAGEMENT HOLDINGS, L L C v. ASSETS RECOVERY CENTER INVESTMENTS, L L C

• Court: District Court of Appeal of Florida
• Decided: February 23, 2018
• Docket: 16-3599
• Status: Published

Opinion

IN THE SECOND DISTRICT COURT OF APPEAL, LAKELAND, FLORIDA

February 23, 2018

ASSET MANAGEMENT HOLDINGS, ) LLC, a/k/a AMH USA, LLC; and ) THIERRY CASSAGNOL, ) ) Appellants, ) ) v. ) Case Nos. 2D16-341 ) 2D16-3599 ASSETS RECOVERY CENTER ) CONSOLIDATED INVESTMENTS, LLC; 19-ASSET ) MANAGEMENT HOLDINGS, LLC; MIA ) FUNDING, LLC; 17-ASSET ) MANAGEMENT HOLDING, LLC; ) 16-ASSET MANAGEMENT HOLDINGS, ) LLC; 14-TP FUNDING, LLC; 12 ASSET ) MANAGEMENT HOLDINGS, LLC; 11 ) ASSET MANAGEMENT HOLDINGS, LLC; ) 10-ASSET MANAGEMENT HOLDINGS, ) LLC; 9-COMP LOAN, LLC; ) 6-MISPROPERTIES, LLC; ) 5-HOMECOM.LOANS, LLC; ) 4-TRADERS TRUST, LLC; 21 ASSET ) MANAGEMENT HOLDINGS, LLC; ) 3-STUDENT LOAN, LLC; 2 BANKING ) ONE FUNDING, LLC; 1, M, LLC, 1 M, ) INC.; JOHN OLSEN; and DANIEL ) COOSEMANS, ) ) Appellees. ) )

BY ORDER OF THE COURT:

The plaintiff entities' October 31, 2017, motion for rehearing is denied.

The plaintiff entities' October 31, 2017, motion for clarification is granted to the extent that the prior opinion dated October 18, 2017, is withdrawn and the attached opinion is

issued in its place. No further motions for rehearing will be entertained.

I HEREBY CERTIFY THE FOREGOING IS A TRUE COPY OF THE ORIGINAL COURT ORDER.

MARY ELIZABETH KUENZEL, CLERK

-2- IN THE DISTRICT COURT OF APPEAL OF FLORIDA SECOND DISTRICT

ASSET MANAGEMENT HOLDINGS, ) LLC, a/k/a AMH USA, LLC; and ) THIERRY CASSAGNOL, ) ) Appellants, ) ) v. ) Case Nos. 2D16-341 ) 2D16-3599 ASSETS RECOVERY CENTER ) CONSOLIDATED INVESTMENTS, LLC; 19-ASSET ) MANAGEMENT HOLDINGS, LLC; MIA ) FUNDING, LLC; 17-ASSET ) MANAGEMENT HOLDING, LLC; ) 16-ASSET MANAGEMENT HOLDINGS, ) LLC; 14-TP FUNDING, LLC; 12 ASSET ) MANAGEMENT HOLDINGS, LLC; 11 ) ASSET MANAGEMENT HOLDINGS, LLC; ) 10-ASSET MANAGEMENT HOLDINGS, ) LLC; 9-COMP LOAN, LLC; ) 6-MISPROPERTIES, LLC; ) 5-HOMECOM.LOANS, LLC; ) 4-TRADERS TRUST, LLC; 21 ASSET ) MANAGEMENT HOLDINGS, LLC; ) 3-STUDENT LOAN, LLC; 2 BANKING ) ONE FUNDING, LLC; 1, M, LLC, 1 M, ) INC.; JOHN OLSEN; and DANIEL ) COOSEMANS, ) ) Appellees. ) )

Opinion filed February 23, 2018.

Appeals from the Circuit Court for Sarasota County; Stephen L. Dakan, Associate Senior Judge.

John S. Jaffer, Sarasota, and Steele T. Williams of Steele T. Williams, P.A., Sarasota, for Appellants. Mark A. Levy of Brinkley Morgan, Ft. Lauderdale, for Appellees.

ROTHSTEIN-YOUAKIM, Judge.

Defendants/Counterplaintiffs below, Asset Management Holdings, LLC,

a/k/a AMH USA, LLC, and Thierry Cassagnol (collectively, AMH), appeal an amended

final judgment awarding damages to Plaintiffs/Counterdefendants below, Assets

Recovery Center Investments, LLC, and various other entities (the plaintiff entities), on

the plaintiff entities' breach-of-contract claim and dismissing with prejudice all of the

plaintiff entities' alternative claims for damages and AMH's counterclaims. We agree

with AMH's argument that the trial court erred in denying its motion for an involuntary

dismissal because the plaintiff entities failed to prove damages.1 Accordingly, we

reverse the amended final judgment to the extent that it awarded damages to the

plaintiff entities, affirm the amended final judgment to the extent that it disposed of the

plaintiff entities' alternative claims for damages and AMH's counterclaims, and remand

for entry of an involuntary dismissal of the plaintiff entities' breach-of-contract claim.2

Background

In 2003, the parties orally agreed that AMH would locate distressed

mortgages that holders were typically willing to sell for less than face value, the plaintiff

entities would provide the capital to finance the purchase of the distressed mortgages,

and AMH would service the loans on behalf of the plaintiff entities. Specifically, they

1We reject AMH's other arguments without further comment. 2Indoing so, we do not disturb the trial court's finding that the plaintiff entities own the disputed loans. -2- agreed that any money that AMH collected when servicing these loans would be applied

as follows: first, AMH would reimburse itself for certain hard costs incurred while

servicing and collecting the loans; second, the plaintiff entities would be reimbursed for

the capital expended to acquire the loans; and third, once the plaintiff entities had been

fully reimbursed as to a particular group of loans, the parties would split the remaining

proceeds from that group evenly. With the foreclosure crisis looming, however, AMH

became indebted to the plaintiff entities, and the parties' business relationship went

awry. Consequently, in November 2008, the parties orally agreed that AMH would stop

servicing the loans and would transfer all active loan files to the plaintiff entities and that

the plaintiff entities would not seek to recover any money that AMH owed them (the

walkaway agreement). About six months after AMH transferred the files to the plaintiff

entities, however, AMH claimed that it had accidentally included in the transfer

approximately 170 loans that were not originally part of the walkaway agreement, and it

resumed servicing and collecting payments on these 170 loans (the disputed loans).

The plaintiff entities sued AMH for breach of the walkaway agreement.3

The trial court bifurcated proceedings by holding a bench trial on all of the parties'

substantive claims and counterclaims followed by a separate bench trial on damages.

At the conclusion of the first bench trial, the court rejected AMH's assertions that the

walkaway agreement was unenforceable and that it owned the disputed loans; found

that the plaintiff entities owned the disputed loans and that, pursuant to the walkaway

agreement, AMH owed the plaintiff entities any monies that it had collected on the

3The plaintiff entities also raised alternative theories of recovery and ancillary claims not relevant to the issues we address on appeal. -3- disputed loans and was liable for any damages; reserved jurisdiction to determine the

amount of damages, if any, due to the plaintiff entities; and dismissed with prejudice the

plaintiff entities' remaining claims and AMH's counterclaims.

Before the damages trial, the plaintiff entities filed a written "memorandum

regarding damage calculation" in which they requested damages in the amount of all

monies that AMH had collected on the disputed loans after the parties had entered into

the walkaway agreement. AMH responded, in pertinent part, that an award of damages

in the amount of AMH's gross collections would fail to account for the costs that AMH

had incurred in collecting and servicing the disputed loans and, as a remedy for breach

of contract, would improperly put the plaintiff entities in a better position than they would

have been if the walkaway agreement had not been breached.

At the damages hearing, the plaintiff entities relied on their memorandum

and asserted that any costs that AMH had incurred in collecting and servicing loans

covered by the walkaway agreement had been incurred through AMH's own

wrongdoing. AMH responded that under a "breach of contract damage analysis, . . . the

Plaintiff entities should not be put into a position better than they would have been, but

for the breach" and asserted that the costs that AMH had incurred should be considered

as "various setoffs to the overall gross number." AMH offered to establish an

appropriate setoff by having Cassagnol testify, in pertinent part, to AMH's costs in

servicing the disputed loans, and it noted that, in discovery, the plaintiff entities had

acknowledged that fifty dollars per loan per month was a reasonable servicing fee. The

plaintiff entities responded by reiterating that AMH should not be entitled to a setoff

based on its wrongdoing.

-4- The trial court agreed that AMH was not entitled to a setoff. The court

noted that the first trial had addressed whether the walkaway agreement was valid and

could be enforced, and it clarified its prior ruling that AMH had breached the walkaway

agreement and that the disputed loans belonged to the plaintiff entities. Nonetheless, to

preserve the issue for appeal, the court directed AMH to submit a written proffer of the

setoff.

In addition to submitting this written proffer of their servicing costs, AMH

moved for an involuntary dismissal. AMH reiterated its argument that awarding gross

collections as damages would improperly put the plaintiff entities in a better position

than they would have been had AMH not breached the walkaway agreement. AMH

asserted that because the plaintiff entities had not introduced any evidence of the costs

that they necessarily would have incurred in servicing the disputed loans, they had

failed to satisfy their burden of proving damages under a lost-profits theory. The plaintiff

entities responded that lost profits was not the correct measure of damages and that

AMH could properly be denied a setoff based on its wrongful conduct. The plaintiff

entities continued to rely solely on their original memorandum; they neither proffered nor

requested an opportunity to proffer what costs they would have incurred in servicing the

disputed loans absent the breach.

The trial court denied AMH's motion without explanation and, on the same

day, entered an amended final judgment. The amended final judgment included the

same findings and rulings as the original final judgment, including its finding that the

plaintiff entities are the owners of the disputed loans, and awarded the plaintiff entities

-5- all monies that AMH collected on the disputed loans after November 2008. AMH timely

appealed.

Analysis

Whether the trial court applied the correct measure of damages on a

breach-of-contract claim is a question of law that this court reviews de novo. Del Monte

Fresh Produce Co. v. Net Results, Inc., 77 So. 3d 667, 673 (Fla. 3d DCA 2011). If the

trial court employed the correct measure of damages, we review the damages award for

support by competent, substantial evidence. Id.

On appeal, AMH argues that the trial court erred in denying its motion for

an involuntary dismissal because the plaintiff entities did not present sufficient evidence

of damages under the correct measure. AMH contends that, to recover on their breach-

of-contract claim, the plaintiff entities had to prove lost profits, which required evidence

not only of AMH's gross collections but also of the costs the plaintiff entities necessarily

would have incurred in servicing and collecting payments on the disputed loans if AMH

had not done so in the breach. We agree.

At the damages part of the trial, the trial court stated that it had previously

found that the plaintiff entities owned the disputed loans, contrary to AMH's claim to

ownership; that the walkaway agreement was enforceable; and that AMH had breached

it. Therefore, contrary to the plaintiff entities' suggestion, the court was apparently

proceeding solely on the plaintiff entities' breach-of-contract claim; the court did not

indicate that it had made or was relying on any other findings that implicated the plaintiff

entities' other causes of action. See Rollins, Inc. v. Butland, 951 So. 2d 860, 876 (Fla.

2d DCA 2006) ("The elements of an action for breach of contract are: (1) the existence

-6- of a contract, (2) a breach of the contract, and (3) damages resulting from the breach.").

And, therefore, the plaintiff entities had to prove the third element of a breach-of-

contract claim: damages resulting from the breach. See Siever v. BWGaskets, Inc.,

669 F. Supp. 2d 1286, 1300 (M.D. Fla. 2009) ("Under Florida law, damages are an

essential element of an action for breach of contract." (citing Butland, 951 So. 2d at

876)).

The trial court's conclusion that AMH's wrongful conduct precluded a

"setoff" misapprehends the purpose of a damages award on a breach-of-contract claim,

which "is to restore an injured party to the same position that he would have been in had

the other party not breached the contract." Verandah Dev., LLC v. Gualtieri, 201 So. 3d

654, 659 (Fla. 2d DCA 2016) (quoting Lindon v. Dalton Hotel Corp., 49 So. 3d 299, 305

(Fla. 5th DCA 2010)). In so concluding, the court incorrectly focused on punishing AMH

for its breach rather than on putting the plaintiff entities in the same position that they

would have been but for the breach. See id. As a result, the court incorrectly put the

plaintiff entities in a better position than they would have been, see id. ("In restoring the

injured party to the 'same position,' he 'is not entitled to be placed, because of that

breach, in a position better than that which he would have occupied had the contract

been performed.' " (quoting Lindon, 49 So. 3d at 305)), because if AMH had not

resumed servicing and collecting the disputed loans, the plaintiff entities would have

incurred costs by doing it themselves or by outsourcing it to a third party.

The burden of proving damages rested solely with the plaintiff entities.

See Montage Grp., Ltd. v. Athle-Tech Comput. Sys., Inc., 889 So. 2d 180, 195 (Fla. 2d

DCA 2004) ("The plaintiff bears the burden of proving an entitlement to lost profits.");

-7- James Crystal Licenses, LLC v. Infinity Radio Inc., 43 So. 3d 68, 75, 80 (Fla. 4th DCA

2010) (reversing lost profits award and remanding for entry of defense judgment

because plaintiff introduced evidence of only some fees it would have incurred but failed

to deduct general overhead expenses); Indian River Colony Club, Inc. v. Schopke

Constr. & Eng'g, Inc., 619 So. 2d 6, 8 (Fla. 5th DCA 1993) (holding that plaintiff failed to

carry burden of proving costs and expenses that it had to deduct from income when

calculating lost profits); Physicians Reference Lab., Inc. v. Daniel Seckinger, M.D. &

Assocs., P.A., 501 So. 2d 107, 109 n.1 (Fla. 3d DCA 1987) (rejecting nonbreaching

party's argument that breaching party's failure to present evidence warranted affirmance

of damages award because nonbreaching party bore burden of proving lost profits).

Because they introduced no evidence of the costs they would have incurred in servicing

and collecting the disputed loans, they failed to carry that burden, and the trial court

should have granted AMH's motion for an involuntary dismissal. See Fla. R. Civ. P.

1.420(b); Allard v. Al-Nayem Int'l, Inc., 59 So. 3d 198, 201 (Fla. 2d DCA 2011)

("Involuntary dismissal is proper where there is inadequate proof at trial on the correct

measure of damages."); St. Petersburg Hous. Auth. v. J.R. Dev., 706 So. 2d 1377, 1377

(Fla. 2d DCA 1998) (reversing order granting rehearing, entered after court had

originally found that plaintiff failed to introduce sufficient damages of expenses to

support lost profits, because "[t]his procedure improperly allows appellee a 'second bite

at the apple' at proving damages, an element of proof that should have been proven at

trial"); Teca, Inc. v. WM-TAB, Inc., 726 So. 2d 828, 830 (Fla. 4th DCA 1999) (reversing

damage award, remanding for entry of defense judgment because plaintiff failed to

prove expenses in support of claim of lost profits, and rejecting approach that would

-8- have "allow[ed] a second bite at the apple when there has been no proof at trial

concerning the correct measure of damages").

Conclusion

The plaintiff entities failed to introduce evidence essential to their burden

of proving lost profits on their breach-of-contract claim. In light of this failure, the trial

court erred in denying AMH's motion for an involuntary dismissal. Accordingly, we

reverse the amended final judgment only to the extent that it awarded damages to the

plaintiff entities on their breach-of-contract claim; affirm the amended final judgment to

the extent that it disposed of the plaintiff entities' alternative claims for damages and

AMH's counterclaims; and remand for entry of an involuntary dismissal of the plaintiff

entities' breach-of-contract claim.

Affirmed in part; reversed in part; remanded with directions.

LaROSE, C.J., and SLEET,4 J., Concur.

4Judge Sleet has been substituted for Judge Wallace, who was on the original Asset Management Holdings panel. -9-