Appeals Court Calls For Rule Change In Real Estate Contract Case

Jun 21, 2016 No Comments by

The Third District Court of Appeal is calling for a rule change to allow it to review orders granting leave to add punitive damages.

The appellate court seemed powerless to reverse an order from Miami-Dade Circuit Judge Barbara Areces allowing a would-be buyer to tack on punitive damages to his complaint against a company linked to juggernaut real estate developer The Related Group Inc.

Russian businessman Michael Berezovsky sued Related Group affiliate TRG Desert Inn Venture Ltd. for breach of contract over a deal struck in 2004 for a luxury condominium. He claimed TRG misapplied his deposit and sold the condo out from under him, causing him to lose hundreds of thousands of dollars.

During the trial, Areces granted Berezovsky’s motion to pursue punitive recovery, and a judicial panel agreed — but grudgingly, because of limited certiorari jurisdiction.

The appellate court is urging Florida Bar’s Appellate Court Rules Committee to consider expanding the catalogue of appealable, nonfinal orders to include trial court orders granting motions for leave to add punitive damages.

 

“We are compelled to deny TRG’s petition,” District Judge Edwin Scales wrote on behalf of the panel with Judges Leslie Rothenberg and Frank Shepherd.

‘Ran Roughshod’

TRG sold preconstruction units at Related Group’s and Dezer Development‘s joint venture, Ocean Four, a luxe 41-story waterfront tower in Sunny Isles Beach.

Berezovsky made a $141,780 deposit for a two-bedroom condo but later appeared to assign the contract to Boris Tarlo and Margarita Golkova, husband-and-wife buyers collectively referred to as Tarlo in court documents.

Berezovsky seemed poised to make a hefty return, flipping the contract to the couple for $247,880.

But then the deal fell apart. It became a victim of the last real estate boom, when buyers flipped property, debt and contracts for quick and sizeable returns.

Court documents show the litigants argued over the transfer of the contract while TRG continued construction and completed the project. They disagreed on who requested an assignment and assumption agreement from the developer.

TRG claimed all three parties signed a document transferring Berezovsky’s interest in the contract to Tarlo. But Berezovsky’s attorney, Michael Bennett of Bennett Aiello in Miami, claimed his client canceled the assignment and got multiple confirmations from the developer. He said Berezovsky had not completed negotiations with Tarlo when his mother mistakenly signed and submitted the assignment. Bennett said Berezovsky immediately contacted TRG in writing and by phone to revoke the assignment and got confirmation from the developer that he was still the contract holder.

In 2007, TRG closed on the unit with Tarlo and credited Berezovsky’s six-figure deposit to the couple. Instead of a return of more than $106,000 on the flip, Berezovsky claimed a massive loss.

 

“What they did is they removed him as the purchaser and put Tarlo’s name in there. TRG took my client’s 20 percent and applied it to the purchase, so Tarlo had to come up with only 80 percent,” Bennett said. “This was the heyday. They were so busy, they just cared about closing. They were more concerned about getting the deposit than they were about my client’s rights. Essentially they ran roughshod over him.”

Both Sides Claim Victory

Berezovsky sued TRG and Tarlo. His fifth amended complaint charges Tarlo with breach of contract, unjust enrichment, tortious interference, negligent misrepresentation, conversion and fraud. He leveled allegations of breach of contract, negligence, conversion and fraud against TRG.

Berezovsky sought to recover his deposit plus benefit-of-the-bargain damages, claiming he lost out on a hefty price appreciation at the height of the real estate cycle. He later successfully petitioned the court for permission to seek punitive damages against both defendants.

Only TRG challenged Areces’ ruling. Among the company’s arguments was a claim that Florida’s independent tort rule precluded Berezovsky from recovering punitive damages against the developer on a breach of contract claim without also asserting a tort not linked to the alleged breach. It argued Berezovsky’s breach of contract and tort claims arose from the same conduct.

The developer’s attorney, Related Group vice president and general counsel Betsy McCoy, suggested the fight should be Berezovsky and his onetime business affiliate.

 

“He’s trying to get money from TRG that Tarlo owes him,” McCoy said. “He’s sort of on his last breath. You can tell that the Third DCA isn’t interested in having the trial court give him any more leniency, but it can’t correct the trial court at this stage.”

After oral argument, the appellate court ordered the parties to provide supplemental briefings on whether the torts alleged in Berezovsky’s complaint constituted independent torts distinct from TRG’s alleged contractual breach.

On certiorari review, the appellate court’s inquiry is limited to whether the trial court met procedural requirements.

 

“Although we might quarrel with the trial court’s determination that Florida’s independent tort rule is not a bar to Berezovsky’s punitive damage claim, our limited certiorari jurisdiction prevents us from quashing the trial court’s order on this basis,” Scales wrote.

Both sides celebrated the appellate court’s ruling as a victory.

For Berezovsky, it opened the door for a potentially larger award with punitive damages against the defendants.

 

“TRG certainly doesn’t want to make my client whole or compensate him for his losses,” Bennett said.

But the developer also embraced the appellate ruling, the panel’s apparent inclination to reverse the trial court and its call for a rule change.

 

“We feel that those observations will be beneficial to us as the trial proceeds,” McCoy said. “We hope this will be a game changer for other companies that are facing meritless litigation in the future.”

When they return before Areces, TRG intends to push for summary judgment, while Berezovsky plans to engage in financial discovery to pursue his claims.

 

Source:  DBR

 

 

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