Sucsova Investments, Inc. v. Magnolia Holdings of Celebration, LLC et al

Filing 82

FINDINGS OF FACT AND CONCLUSIONS OF LAW following bench trial; directing clerk to enter judgment and close the file. Signed by Judge John Antoon II on 2/15/2012. (EK)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
SUCSOVA INVESTMENTS, INC.,
Plaintiff,
-vs-

Case No. 6:10-cv-85-Orl-28KRS

MAGNOLIA HOLDINGS OF
CELEBRATION, LLC, VENANCIO
TORRE, ANDREW LA ROSA,
Defendants.
______________________________________

ORDER
Plaintiff Sucsova Investments, Inc. (“Plaintiff”) brought this action as the holder of a
promissory note executed and delivered by Defendant Magnolia Holdings of Celebration,
LLC (“Magnolia”) and guaranteed by Defendants Venancio Torre (“Torre”) and Andrew La
Rosa (“La Rosa”) (collectively “the Individual Defendants”), which Defendants have failed to
pay. The Court held a two-day bench trial in this case on August 3, 2011 and August 22,
2011. In accordance with Federal Rule of Civil Procedure 52, the Court now issues the
following opinion as its findings of fact and conclusions of law.
The genesis of this dispute was a real estate venture undertaken by Magnolia;
Magnolia purchased land in Celebration, Florida that it intended to build on. To pay for the
land, Magnolia obtained a mortgage on the property; to pay for the building, Magnolia
needed to obtain a construction loan. However, because its only asset–the land–was
already encumbered, Magnolia needed private investors and approached Plaintiff about

investing $350,000 in exchange for a ten percent equity interest in Magnolia. Plaintiff was
unsure about investing for only an equity interest. Plaintiff and Magnolia sent numerous emails back and forth, attempting to come to an agreement. As the deadline for obtaining
investors approached, Magnolia offered to give Plaintiff a promissory note for the $350,000
and the Individual Defendants offered personal guarantees. (Promissory Note, Pl.’s Trial Ex.
1). Pursuant to the promissory note, Defendants agreed to pay Plaintiff a fixed interest rate
of ten percent per year, based on a 365-day year, and “bonus” interest of ten percent of the
loan amount at the first of three designated times: (1) within thirty days of the sale and
closing of the project, (2) if and when Magnolia elected to prepay the bonus interest, or (3)
on the third anniversary of the funding of the promissory note. The note was to be paid after
twelve months, with an option to defer payment for six additional months. Due to the timepressure of the situation and the distance between the parties,1 Defendants faxed a copy of
the signed promissory note to Plaintiff, and Plaintiff then wired the money to Magnolia.
After the money was provided, Plaintiff and Defendants continued negotiations and
discussed the possibility of entering into a Joint Venture Agreement (“JVA”), whereby the
promissory note and the guarantees would be forgiven in exchange for Plaintiff obtaining an
equity interest in the project along with certain other benefits. Ultimately, however, a JVA
was never signed. Undoubtedly due to the fast-paced atmosphere of the real estate market
at the time and the familiarity of the parties,2 the negotiations were haphazard and informal.

1

Defendants were located in Florida and Plaintiff was located in Guatemala.

2

A representative of Sucsova, Mr. Olaf Rasch, and Mr. Torre are related by
marriage–their wives are sisters.
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As a result, each party assumed that all were on the same page, but they were not.
Defendants assumed that they were operating under the JVA even though it had not been
signed, and Plaintiff continued to operate as the holder of the promissory note with the option
to convert the note to an equity interest. Had the Magnolia project been successful, this
oversight would likely not have been an issue because Plaintiff would have exercised its right
to convert the note to an equity interest and then the parties would, once again, be on the
same page. But, as were so many other real estate ventures at this time, the Magnolia
project was unsuccessful and lost money, resulting in Defendants’ inability to pay both
Plaintiff and the holder of the mortgage on the land.
Defendants assert that even though the JVA was never signed they were operating
pursuant to it and therefore the promissory note was no longer in effect. Defendants’
argument is without merit. The evidence clearly showed that Plaintiff sent Magnolia the
money in reliance on the promissory note and personal guarantees. It is also clear that while
there was much negotiation over the JVA, the parties never reached an agreement regarding
its terms. The fact that Defendants provided Plaintiff with stock certificates, without agreeing
to the JVA, does not invalidate the promissory note. Rather, it supports Plaintiff’s view of the
arrangement–that Plaintiff had a right to convert the promissory note to an equity interest–as
does the fact that until this suit was filed, Magnolia classified Plaintiff as a debt holder, rather
than an equity holder, on its tax returns and financial statements. Only after this suit was
filed did Magnolia attempt to amend its tax returns and financial statements to reflect
otherwise.

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Furthermore, contrary to Defendants’ contention, Plaintiff did not charge usurious
interest and did not possess the requisite intent to do so. Defendants’ usury argument is
based on the allegation that Plaintiff intended to collect both the interest on the loan and its
income as an equity holder. However, as discussed above, Plaintiff only had a right to the
interest provided for in the promissory note because Plaintiff never exercised its option to
convert that note into an equity share of Magnolia. Plaintiff could not have collected both the
interest payment on the loan and the payment from its equity investment because it could
only have one or the other.
Accordingly, the full amount of the promissory note–the sum of $350,000–remains
due and owing to Sucsova pursuant to the terms of the Promissory Note. Interest of ten
percent per year, calculated through the final date of trial–August 22, 2011–in the amount
of $148,630.14 is also due, along with the flat ten percent bonus interest3 of $35,000.
Accordingly, the total amount due as of the last day of trial was $533,630.14. In addition,
Defendants will be charged the federal statutory interest rate as of August 23, 2011–0.11
percent–through today, February 15, 2012. Thus, the post-trial interest total is $284.65,
making the entire total due and owing to Plaintiff $533,914.79. Post-judgment interest shall
also accrue at the current statutory rate.

3

Defendants assert that Sucsova cannot claim the bonus interest because it did not
argue that it was due such interest until it filed its Proposed Findings of Fact and Conclusions
of Law (Doc. 50). However, in Sucsova’s Complaint (Doc. 1) it asserted its rights pursuant
to the promissory note, which include a right to the bonus interest provided therein.
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In accordance with the foregoing, the Clerk is directed to enter a judgment providing
that on its claims, Plaintiff shall recover from the Defendants $533,914.79. Thereafter, the
Clerk shall close this file.
DONE and ORDERED in Chambers, Orlando, Florida this 15th day of February,
2012.

Copies furnished to:
Counsel of Record
Unrepresented Party

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