Plantation Key Developers, Inc. v. Colonial Mortgage Co. of Indiana, Inc.

589 F.2d 164
CourtCourt of Appeals for the Fifth Circuit
DecidedFebruary 6, 1979
DocketNo. 76-3055
StatusPublished
Cited by12 cases

This text of 589 F.2d 164 (Plantation Key Developers, Inc. v. Colonial Mortgage Co. of Indiana, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Plantation Key Developers, Inc. v. Colonial Mortgage Co. of Indiana, Inc., 589 F.2d 164 (5th Cir. 1979).

Opinion

FAY, Circuit Judge:

This is an action brought by a condominium project builder, Plantation Key Developers, Inc. (“Plantation”), against its permanent lender, Colonial Mortgage Co.1 (“Colonial”), based on breach of contract and fraud.2 The trial court directed a verdict against Plantation on its fraud claim. The jury returned a verdict of $60,000 in favor of Plantation on its contract claim. The Court entered judgment thereon for $60,000 plus interest and costs. Colonial raises three points on appeal: 1) the breach of contract issue should not have been submitted to the jury; 2) Plantation failed to prove any damages; and 3) the trial court erred in awarding pre-judgment interest to Plantation. Plantation cross-appeals the directed verdict on the fraud count.

The dispute arose from a loan arrangement between Colonial and Plantation. Plantation was formed for the purpose of constructing a condominium project on Plantation Key, Florida. Through a mortgage broker Plantation contacted Colonial, a mortgage lender, for the purpose of obtaining permanent financing3 for the condominium project.

In November 1973 Colonial promised to provide permanent mortgage funds through [167]*1671975 to Plantation. The agreement4 pro-vided for performance in three parts. First, Colonial agreed to provide mortgage money through December 81, 1974 at the rate of 9% plus a loan service fee (points) of 3V2% of the loan amount. Second, Plantation had the option to extend the commitment for six months “with adjustments in interest and points made if market conditions so demand.” Finally, the agreement provided for another six month extension of the commitment with the same interest and point adjustments. Plantation paid a nonrefundable commitment fee of $60,000. In addition, Plantation agreed to pay $30,000 each time it chose to bind Colonial to a six month extension,

The dispute is based on Colonial’s adjustment of the interest rates and service fees for the first extension, January 1, 1975 to July 1, 1975. Colonial proposed to extend the commitment with the rate changed to 93/4% and 9 points. Plantation contended that these rates were inconsistent with Colonial’s promise to make rate adjustments only in response to “market conditions.” Plantation refused to pay $30,000 for an extension at the rates of 93á% interest and 9 points. Instead, it brought this action.

I. BREACH OF CONTRACT

Colonial presents an arsenal of legal theories as the grounds upon which it is excused [168]*168from performance of the first six month option, regardless of the reasonableness of its adjustment of the rates. It argues: 1) Plantation’s payment of the extension fee was a condition precedent to suit; 2) the quotation and extension fee were dependent covenants; 3) the quotation and the extension fee were concurrent conditions; 4) Plantation’s failure to tender the extension fee was a breach which excused Colonial from performance; and 5) the option lapsed due to Plantation’s failure to exercise it. The essence of Colonial’s argument is that Plantation cannot complain that the quoted rates were violative of the contract since it did not tender the $30,000 for the six month extension. Both the authorities and the reasoning relied upon by Colonial are unpersuasive.

Colonial fails to recognize its agreement for what it is, an option contract. An option contract has two elements: 1) the underlying contract which is not binding until accepted; and 2) the agreement to hold open to the optionee the opportunity to accept. Frissell v. Nichols, 94 Fla. 403, 114 So. 431, 433 (1927). Both the option and the underlying contract must be supported by consideration. Donahue v. Davis, 68 So.2d 163 (Fla.1953); Koplin v. Bennett, 155 So.2d 568 (Fla. 1st DCA 1963). In this case, the consideration for the option to bind Colonial to a six month extension was the $60,000 which Plantation had already paid.5 Plantation was obligated to pay the additional $30,000 only if it chose to exercise its option and to bind Colonial to the quoted rates for the extended period.6 Viewed in this manner, it is clear that Colonial’s contractual duty to quote a rate for the six month extension period was in no way dependent upon Plantation’s payment of the $30,000. It would be absurd to say that Plantation should pay $30,000 for Colonial’s commitment before Colonial has stated the terms, especially when Plantation had already paid Colonial $60,000 to do just that.

Thus, the trial court correctly left to the jury the decision of whether Colonial’s quoted rate of 9%% and 9 points was in compliance with Colonial’s obligation to change its rates only if market conditions so demanded. The jury found in a special verdict that the interest rate and closing fees were not in compliance with the commitment letter.

Our inquiry on review is whether there was sufficient evidence to support the jury’s decision. “[I]t is the function of the jury as the traditional finder of the facts, and not the Court, to weigh conflicting evidence and inferences, and determine the credibility of witnesses.” Boeing Co. v. Shipman, 411 F.2d 365, 375 (5th Cir. 1969) (footnote omitted). The evidence supports the jury’s decision that Colonial’s rate quotation did not comply with the contract. Plantation presented several witnesses who testified that the rates charged on projects comparable7 to Plantation’s were in the range of 98/4% interest and 3 points. In addition, money was available through the J. I. Kislak Company, one of the country’s [169]*169largest mortgage brokers, for permanent condominium loans at 9%% interest and 3 points. Finally, an expert witness testified that points had been fairly constant at about 3V2 to 4!/2% of the amount of the loan. Based upon this testimony, the jury reasonably could have found that Colonial’s rate of 9%% and 9 points was not in compliance with the contractual provision requiring quotations to be in accord with market conditions.

II. DAMAGES

Colonial also attacks the verdict of $60,-000 damages in favor of Plantation. Colonial asserts that even if it breached the contract, its performance prior to the breach was of some value to Plantation and therefore it should not be ordered to pay back the full $60,000 which it was paid. Colonial indicates two ways in which its performance benefited Plantation. First, the parties stipulated that one of the conditions upon which Plantation received its construction financing was that it had already acquired permanent financing.8 Second, Colonial performed to the extent that it made loans available in 1974.9 Even assuming that these contentions are correct, an award of $60,000 was still proper.

In its complaint, Plantation alleged two items of damages. First, Plantation claimed the $60,000 which it had paid to Colonial to issue the commitment. Second, Plantation sought recovery of $30,000 which it had paid as a broker’s or finder’s fee in order to locate a lender, Colonial. It alleged that Colonial knew that it had incurred this expense and that the loss of this amount was a foreseeable consequence of Colonial’s breach.

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Bluebook (online)
589 F.2d 164, Counsel Stack Legal Research, https://law.counselstack.com/opinion/plantation-key-developers-inc-v-colonial-mortgage-co-of-indiana-inc-ca5-1979.