Three Keys, Ltd. v. Kennedy Funding, Inc.

28 So. 3d 894, 2009 Fla. App. LEXIS 17293, 2009 WL 3877900
CourtDistrict Court of Appeal of Florida
DecidedNovember 20, 2009
Docket5D08-802, 5D08-3884
StatusPublished
Cited by5 cases

This text of 28 So. 3d 894 (Three Keys, Ltd. v. Kennedy Funding, Inc.) is published on Counsel Stack Legal Research, covering District Court of Appeal of Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Three Keys, Ltd. v. Kennedy Funding, Inc., 28 So. 3d 894, 2009 Fla. App. LEXIS 17293, 2009 WL 3877900 (Fla. Ct. App. 2009).

Opinion

COHEN, J.

We review the consolidated appeals of the trial court’s directed verdict and final judgment in case no. 5D08-802, together with the trial court’s posttrial order denying a motion for attorney’s fees in case no. 5D08-3884. Three Keys, Ltd., and the Corinne R. Muller Trust (collectively the “Participant”), appeal the entry of a directed verdict and final judgment in favor of Kennedy Funding, Inc., Kennedy Funding, *897 LLC, and Anglo-American Financial, LLP (collectively the “Lead”), following a $5,345,000 jury verdict in favor of the Participant on its claims of breach of contract and breach of the covenant of good faith and fair dealing. The Lead cross-appeals the denial of its counterclaim seeking supplemental and equitable relief, as well as its request for additional interest before an amended certifícate of title issued. The Lead also appeals the trial court’s order denying its motion to determine entitlement to attorney’s fees and costs under the offer of judgment statute. We affirm in all respects.

Background

The Feinstein Family Partnership (“Feinstein”) owned a mixed-use development of regional impact in Ft. Myers, Florida (the “Colonial DRI”), which it developed with roads, street lights, and utility system infrastructure. The Colonial DRI included twenty-two saleable parcels of real estate, one out-parcel, and $5.4 million in impact fee credits (the “Property” or “Collateral”). In the wake of a foreclosure judgment in favor of the City, which funded the infrastructure development, Feinstein filed for bankruptcy protection under Chapter 11. To proceed with the project, Feinstein, using a loan from the Muller Trust, sought to free the project from the bankruptcy trustee by negotiating a settlement of the City’s judgment and then seeking a loan to pay off the City and the Muller Trust. Ultimately, the Lead and the Participant joined to loan Feinstein $16,128,210, secured by a note, mortgage, and security agreement on the Property. The mortgage granted the Lead and Participant, as lenders, a super-priority security interest above all of Fein-stein’s creditors, except for the Lee. County Tax Collector. To fund the loan, the Lead advanced $11 million, and the Participant advanced $5,128,210; their respective interests in the loan were 68.2% and 31.8%.

Inter-Creditor Agreement

In addition to executing the loan documents with Feinstein, the Lead and the Participant entered into an Inter-Creditor Agreement (“Agreement”) that defined their relationship as co-lenders. According to the Agreement, the Lead held the loan documents and was charged with prosecuting any necessary foreclosure action. If Feinstein defaulted, the Agreement required any monies recovered to first be applied to satisfy the Lead Debt, 1 and any remainder divided pro rata between the Lead and the Participant. The Agreement also required the parties to share all reasonable costs, fees, and expenses necessary to foreclose, preserve, or liquidate the Property according to their pro rata interests in the loan.

Feinstein subsequently defaulted on the loan, and the Lead filed a foreclosure action. Feinstein’s earlier Chapter 11 bankruptcy was converted to Chapter 7. In addition to the foreclosure suit, the Property was also the subject of environmental litigation involving allegations that Fein-stein violated the Federal Clean Water Act. The Lead incurred considerable attorneys’ fees, consultants’ fees for environmental mitigation plans, and costs in defending and settling this litigation. Attorneys with Greenberg, Traurig, representing the Lead in the bankruptcy and foreclosure proceedings, agreed to indefi-' *898 nitely defer payment of $200,000 in attorneys’ fees until the Lead recovered all monies due it under the loan. Additionally, Greenberg, Traurig capped all attorneys’ fees incurred after November 1, 1999, in the Feinstein matters at $100,000. The Lead did not inform the Participant about either of these agreements. Ultimately, the Lead paid the bankruptcy trustee $600,000 and the subordinate lenders a total of $217,500 to settle the foreclosure action and reach a stipulation for entry of a final judgment of foreclosure. This concluded the foreclosure action. The Lead also agreed to pay $1,198,400 for offsite environmental mitigation and $31,000 to grant a conservation easement on a small portion of the Property, for a total of $1,229,400 to settle the environmental litigation.

On November 21, 2000, the circuit court entered a final judgment of foreclosure in favor of the Lead and determined $22,291,635.66 was owed, representing $16,128,210 in principal and accrued interest of $6,163,425.66. The final foreclosure judgment provided that the Property would be sold subject to the lien for unpaid real estate taxes, NationsBank’s first lien on the impact fee credits, and the claims arising out of the environmental litigation. The final judgment also reserved jurisdiction to award the Lead “additional sums for costs, attorney’s fees, real estate taxes, and other charges and expenses incurred in preserving its collateral or enforcing its rights under the mortgage documents.” Pursuant to their respective loan interests, the Lead’s share of the judgment was $15,202,895 or 68.2%, and the Participant’s share was $7,088,740 or 31.8%.

At the foreclosure sale, Kennedy Funding, LLC, formed by the Lead to take title, purchased the Property with a credit bid. On January 4, 2001, the clerk issued a certificate of title vesting title to the Property in Kennedy Funding, LLC. As of that date, the Lead’s share of the foreclosure judgment plus postjudgment interest was $15,386,000, the final amount of Lead Debt which the Participant contended it was subordinated under the Agreement.

When Kennedy Funding, LLC purchased the Property, there was approximately $2.5 to $3 million in unpaid real estate taxes, along with a host of other problems. The development approvals were about to expire and required renewal in order to develop the Property in accordance with the Colonial DRI. Further action was taken to obtain the City’s approval to amend some of the proposed uses to residential. There were also title problems and fines assessed by the City. The Lead paid attorneys’ fees, engineering fees, and other fees and costs to solve the problems, maintain, and market the Property.

Issues regarding expense reimbursement arose early when the Lead demanded in November 1999 that the Participant reimburse the Lead for its share, or $193,369.87, of expenses totaling $608,157.87 allegedly due under the Agreement. The total expenses included the legal fees deferred by Greenberg, Traurig, as well as other amounts the Participant deemed unrelated. The Lead threatened to hold the Participant in default if it did not pay the expenses. Upon receiving this demand, Basciano, Three Keys’ principal, requested, but did not receive, supporting documentation for the expenses claimed.

Disagreements also centered on the parties’ duty to consult regarding the liquidation of the Property. Based upon the description of the co-lenders’ rights and duties in section 6 of the Agreement, the Participant asserted that the Lead owed a duty to consult. The Agreement provides that the “Lead and Participant shall consult,” but in the case of disagreement, *899

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Bluebook (online)
28 So. 3d 894, 2009 Fla. App. LEXIS 17293, 2009 WL 3877900, Counsel Stack Legal Research, https://law.counselstack.com/opinion/three-keys-ltd-v-kennedy-funding-inc-fladistctapp-2009.