Cabana on Collins, L.L.C. v. Regions Bank
Filing
103
ORDER denying 68 Motion for Partial Summary Judgment; granting in part and denying part 71 Response, which the Court construes as a Cross-Motion for Summary Judgment. Signed by Judge Cecilia M. Altonaga on 3/5/2012. (ps1)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 11-21204-CIV-ALTONAGA/Simonton
CABANA ON COLLINS, LLC,
Plaintiff,
vs.
REGIONS BANK,
Defendant.
_____________________________/
ORDER
THIS CAUSE came before the Court on Plaintiff, Cabana on Collins, LLC’s
(“Plaintiff[’s]”) Motion for Partial Summary Judgment (“Motion”) [ECF No. 68], filed on
January 9, 2012.
On January 31, 2012, Defendant, Regions Bank (“Regions”), filed a
Memorandum in Opposition . . . (“Response”) [ECF No. 71]. On February 14, 2012, Plaintiff
filed its Reply . . . (“Reply”) [ECF No. 88]. The Court heard oral arguments on the Motion on
February 22, 2012 and has carefully considered the parties’ written submissions, the record, and
applicable law.
I.
BACKGROUND
This case involves a dispute over interest that accrued on monies deposited by Plaintiff in
Regions Bank. Plaintiff was the developer of a hotel conversion condominium project — the
Cabana Condominium — located in Miami Beach, Florida. (See Pl.’s Statement of Undisputed
Material Facts1 (“PSMF”) ¶ 1).
On September 30, 2004, Plaintiff and Regions entered into a Loan Agreement pursuant to
which Regions was to supply funding for construction of the Cabana Condominium. (See Loan
1
Plaintiff’s Statement of Material Facts is contained within the Motion. (See Mot. 4–12).
Case No. 11-21204-CIV-ALTONAGA/Simonton
Agreement, Ex. 1 [ECF No. 92-1]; PSMF ¶ 2). Around the same time period, Plaintiff was in the
process of pre-selling individual condominium units to buyers using a form Purchase and Sale
Agreement (“Purchase Agreement”). (See Ex. 2 [ECF No. 92-2]).
Pursuant to Florida Statute section 718.202, Plaintiff was obligated to open an escrow
account through an escrow agent who would deposit (or cause to be deposited) into the escrow
account the purchase deposits posted by potential buyers of units at the Cabana Condominium.
(See PSMF ¶ 3); FLA. STAT. § 718.202. The Purchase Agreement designates the escrow agent as
Phillips, Eisinger & Brown, P.A. (“Phillips, Eisinger” or “Escrow Agent”). (See Purchase
Agreement ¶ 3). In addition, the Purchase Agreement provides that Plaintiff is entitled to “any
interest actually earned” on the escrowed deposits unless Plaintiff defaults on the Purchase
Agreement. (See id.).
Consistent with the Purchase Agreement, the Loan Agreement specifies that Phillips
Eisinger will act as escrow agent for unit purchase deposits (hereinafter, “Escrow Funds”). (See
Loan Agreement § 1.1; Escrow Agent Acknowledgment and Agreement (“Escrow Agreement”),
Ex. 3 [ECF No. 92-3]; PSMF ¶ 6).
The Loan Agreement obligates Plaintiff to open the
statutorily-required escrow account (hereinafter “Escrow Account”) at Regions Bank. (See Loan
Agreement § 6.2; PSMF ¶ 7). Plaintiff, through the Escrow Agent, opened and maintained the
statutorily required Escrow Account. (See PSMF ¶ 8).
The Escrow Account was initially opened as an interest bearing money market savings
account. (See id. ¶ 9). The Escrow Account was governed by the Regions Bank Customer
Agreement (“Customer Agreement”). (See Ex. 5 [ECF No. 92-5]; Transcript of Oral Argument
on Pl.’s Motion (“Transcript”) 4:13–17).
2
Case No. 11-21204-CIV-ALTONAGA/Simonton
The Customer Agreement contains the following provision limiting the number of
withdrawals Plaintiff may make every month:
Account Limitations . . . You may make an unlimited number of withdrawals in
person or withdrawals/transfers at an ATM from a money market deposit account
or a savings account; however, under federal regulation you are not permitted to
make more than six preauthorized transfers (including telephonic transfers and
automatic transfers) each statement period. No more than three of the transfers
may be made by draft, check, debit card, or similar order to a third party (to the
extent permitted by the account). We will determine the number of third party
transfers for your statement period based on the date posted. If these limitations
are exceeded on a regular basis, we may close the account and open another
account in your name that permits unlimited check writing privileges.
(Customer Agreement § I.7).
The Customer Agreement also contains the following provision limiting the amount of
time Plaintiff has to review its monthly account statements and file objections:
Review of Statements. Your statement will be mailed monthly, quarterly or
annually, depending on the type of account and the services you have with us.
You agree to promptly examine the statement mailed or delivered to you, or held
by us at your request, and to notify us of any debits or charges reflected therein
that you believe should not have been paid, in whole or in part, and any deposits
not credited, in whole or in part. The statement shall be conclusively deemed to be
correct unless we are notified by you in writing within thirty days after the closing
date of the statement.
(Id. § I.9)
These two provisions are at the heart of a dispute that arose when, in October 2005,
Regions transferred the Escrow Funds from an interest-bearing account to a non-interest bearing
account.
(See PSMF ¶¶ 30, 40). According to Regions, it did this because Plaintiff had
repeatedly violated the monthly withdrawal limitations on the Escrow Account in the earlier
months of 2005. (See Regions’ Statement of Additional Material Facts in Opposition . . .
(“DSAF”) ¶ 58 [ECF No. 72]). Plaintiff disputes this assertion and contends it never violated the
monthly withdrawal limitations placed on the Escrow Account.
3
Despite the parties’
Case No. 11-21204-CIV-ALTONAGA/Simonton
disagreement about the facts, Plaintiff in its Motion and Defendant through its Response both
seek summary judgment.
In identifying whether there are any facts in dispute, the Court begins with the only
specific timeline and description of events provided by either of the parties, which is contained in
Regions’ Statement of Additional Material Facts in Opposition. Regions’ Statement asserts the
following.
In February 2005, Plaintiff made five withdrawals from the Escrow Account, all of
which were by check. (See DSAF ¶ 58). In March 2005, Plaintiff made eight withdrawals from
the Escrow Account, five of which were by check. (See id.). Then, on April 15, 2005, based on
the voluminous withdrawals, Regions sent a letter advising the Escrow Agent as follows:
Federal banking regulations define your Commercial Money Market Savings
account, number 6447137095, as a limited transaction account. This means that
you may make no more than six withdrawals from your account during each
month, unless the withdrawals are made by you in person or at an ATM. No more
than three of the six limited withdrawals may be made by check or draft. If you
exceed the withdrawal limit on more than an occasional basis, the bank is required
by law to transfer your funds to a different account type.
Our records show that last month you exceeded the withdrawal limit for the
second consecutive month. If this is a rare occurrence for you, this is not a cause
for concern. However, if you consistently need to make more than six
withdrawals, or write more than three checks, from your account, Commercial
Money Market Savings may not be the right account for you. If this is the case,
we recommend that you talk with a customer service representative at your local
bank about other account options.
(Warning Letter, Ex. 9 [ECF No. 73-15]; see DSAF ¶ 59).
Notwithstanding the letter, in May 2005, Plaintiff made at least seven withdrawals from
the Escrow Account and issued six checks. (See DSAF ¶ 60). In June 2005, Plaintiff made at
least eleven withdrawals from the Escrow Account and issued eight checks. (See id.). Because
4
Case No. 11-21204-CIV-ALTONAGA/Simonton
of the recurring frequent withdrawals, Regions placed the following warning on the monthly
statement sent to Plaintiff in June:
Banking regulations limit withdrawals on this account to six per month; no more
than three may be checks. Accounts that continue to have more than six
withdrawals per month will be transferred to another account type.
(Escrow Account Monthly Statements 46, Ex. N [ECF No. 73-14); see DSAF ¶ 61).
Then, in July 2005, Plaintiff made at least six withdrawals from the Escrow Account, five
of which were by check. (See DSAF ¶ 62). In August 2005, Plaintiff made at least seven
withdrawals from the Escrow Account, six of which were by check. (See id. ¶ 63). Based upon
what Regions considered to be repeated violations of the Customer Agreement’s withdrawal
limitations, in October 2005, Regions transferred the Escrow Funds from an interest bearing
money market account to a non-interest bearing commercial checking account, and ceased
paying interest to Plaintiff. (See id. ¶ 64).
The extent to which Plaintiff disputes the foregoing timeline and description of events
and communications is ambiguous. In its Response to Defendant’s Statement of Additional
Material Facts, Plaintiff issues a blanket denial to each of the foregoing assertions. (See Pl.’s
Resp. to DSAF . . . ¶¶ 58–67 [ECF No. 89]). And yet, Plaintiff’s other filings reveal that it does
not actually dispute everything described above. (Compare, e.g., Pl.’s Resp. to DSAF ¶ 59
(disputing that the Warning Letter was sent) with PSMF ¶ 23 (acknowledging that the Warning
Letter was sent)).
For example, Plaintiff’s Motion acknowledges that Plaintiff made at least some
withdrawals and wrote some checks from the period of February 2005 to April 2007, but it
avoids discussing specific numbers.2 (See PSMF ¶¶ 13, 22). Plaintiff further asserts that all
2
Plaintiff filed copies of the monthly statements from the Escrow Account, which were accompanied by
copies of the checks Plaintiff wrote during each monthly period. (See Escrow Account Monthly
5
Case No. 11-21204-CIV-ALTONAGA/Simonton
transactions involving the Escrow Account were made with the knowledge, consent, and
approval of Regions (see id. ¶ 22), an assertion which Regions otherwise contests (see Def.’s
Statement of Material Facts in Opposition . . . (“DSFO”) ¶ 22 [ECF No. 72]). Plaintiff also
acknowledges that it received the April 2005 Warning Letter (see PSMF ¶ 23), although it
maintains that soon thereafter the Escrow Agent contacted Regions’ representatives in the local
branch office in charge of the Escrow Account and objected to Regions’ claim that Plaintiff had
exceeded the withdrawal limitations placed on the account (see id. ¶ 24). 3
Plaintiff further acknowledges receiving the October 2005 Statement, which noted the
conversion of the Escrow Funds to a non-interest bearing account (see id. ¶ 31), although it
maintains that soon thereafter the Escrow Agent contacted Regions regarding the conversion of
the account and demanded it be restored to an interest bearing account (see id. ¶ 36).4 Plaintiff
also asserts that, upon receiving each subsequent bank statement between October 2005 and July
2007, the Escrow Agent notified Regions Bank by telephone and in writing demanding that the
account be restored to an interest bearing account.5 (See id. ¶ 39).
Based on what Regions believed to be violations of the Customer Agreement’s
withdrawal limitations, Regions did not pay Plaintiff interest on the Escrow Funds from October
2005 until April 2007. (See id. ¶ 40). In April 2007, Regions decided to re-convert the Escrow
Statements Filed By Plaintiff (“Monthly Statements Filed By Plaintiff ”), Ex. 8 [ECF No. 92-8]). The
same exhibit was filed earlier by Regions as part of its Response, and tends to support Regions’ timeline
of events. (See Escrow Account Monthly Statements Filed By Regions (“Monthly Statements Filed By
Regions”), Ex. N [ECF No. 73-14).
3
Regions does not dispute that the alleged contact was made, but it asserts that the objection was not filed
in writing, as required by the Customer Agreement. (See DSFO ¶ 24).
4
Regions does not dispute that the alleged contact was made, but it asserts that the objection was not filed
in writing, as required by the Customer Agreement. (See id. ¶ 36).
5
Regions states it lacks evidence to either admit or dispute that these communications were made, but it
asserts that the objection was not filed in writing, as required by the Customer Agreement. (See id. ¶ 39).
6
Case No. 11-21204-CIV-ALTONAGA/Simonton
Account to interest bearing status and credited Plaintiff with interest for the months of January,
February and March of 2007. (See id.; DSAF ¶ 69). Regions claims this was done solely as a
business courtesy, and for that reason, it refused to pay Plaintiff for interest for the months
between October 2005 and December 2006. (See DSAF ¶ 69). Plaintiff argues, however, that
Regions’ payment of interest for the months of January, February, and March was simply part of
its contractual obligation. (See Pl.’s Resp. DSAF ¶ 69).
Regions continued paying interest on the Escrow Funds until July 2010. (See PSMF ¶
41). In July, Regions ceased paying interest by once again converting the Escrow Account to a
non-interest-bearing account. (See id. ¶ 41). Plaintiff contends the Escrow Agent immediately
notified Regions and demanded that the account be restored to an interest-bearing account, but to
date, Regions Bank has refused all requests. (See id. ¶ 42). Regions disputes this, arguing that
the reason the account has not earned interest from July 2010 to the present is because the
Escrow Agent asked Regions to place the Escrow Funds in an account with no service charges.
(See DSFO ¶ 41). Regions explains that the account with the lowest service charges is noninterest bearing. (See id.)
Plaintiff filed suit against Regions on March 18, 2011. (See Compl. [ECF No. 1-1]). In
the Complaint, Plaintiff states that from 2007 to the present, Regions “retained and converted for
its own use and benefit, interest payments on funds deposited by Plaintiff, and the benefits of
such interest.” (Id. ¶ 8). On June 20, 2011, Plaintiff filed an Amended Complaint alleging five
claims: Count I for breach of contract, Count II for breach of fiduciary duty, Count III for unjust
enrichment, Count IV for conversion, and Count V for civil theft. (See Am. Compl. [ECF No.
34]). On September 16, 2011, Regions sought summary judgment on all counts. (See Regions’
Motion for Summary Judgment [ECF No. 37]). On November 7, 2011, the Court granted
7
Case No. 11-21204-CIV-ALTONAGA/Simonton
Regions’ motion for summary judgment as to Counts III–V, but denied it as to Counts I and II.
(See Nov. 7 Order [ECF No. 53]).
On January 9, 2012, Plaintiff filed the present Motion seeking summary judgment on
Counts I and II for breach of contract and for breach of fiduciary duty, respectively. In its
Response, Regions requests that the Court enter summary judgment in its favor as to Counts I
and II pursuant to Federal Rule of Civil Procedure 56(f)(1). On February 16, 2012, the Court
issued an Order [ECF No. 91], advising the parties it was taking Regions’ Rule 56(f)(1) request
under consideration, thereby providing Plaintiff with the requisite notice and time to respond.
(See Feb. 16 Order [ECF No. 91]).
II.
LEGAL STANDARD
Summary judgment shall be rendered if the pleadings, the discovery and disclosure
materials on file, and any affidavits show that there is no genuine issue as to any material fact
and that the movant is entitled to judgment as a matter of law. See FED. R. CIV. P. 56(c). “[T]he
court must view all evidence and make all reasonable inferences in favor of the party opposing
summary judgment.” Chapman v. AI Transport, 229 F.3d 1012, 1023 (11th Cir. 2000) (en banc)
(quoting Haves v. City of Miami, 52 F.3d 918, 921 (11th Cir. 1995)). “An issue of fact is
material if it is a legal element of the claim under the applicable substantive law which might
affect the outcome of the case.” Burgos v. Chertoff, 274 F. App’x 839, 841 (11th Cir. 2008)
(quoting Allen v. Tyson Foods Inc., 121 F.3d 642, 646 (11th Cir. 1997) (internal quotation marks
omitted). “A factual dispute is genuine ‘if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.’” Channa Imps., Inc. v. Hybur, Ltd., No. 07-21516CIV, 2008 WL 2914977, at *2 (S.D. Fla. Jul. 25, 2008) (quoting Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986)). Under Federal Rule of Civil Procedure 56(f)(1), the Court may grant
8
Case No. 11-21204-CIV-ALTONAGA/Simonton
summary judgment for the non-moving party “[a]fter giving notice and a reasonable time to
respond.”
III.
ANALYSIS
Plaintiff’s Motion requests summary judgment on the two remaining claims.
First,
Plaintiff asserts it is entitled to summary judgment on its breach of contract claim, arguing that
Regions was contractually obligated to pay Plaintiff interest on the Escrow Funds, and that
Regions breached its contractual obligation when it transferred the Escrow Funds from an
interest bearing account to a non-interest bearing account. Second, Plaintiff seeks summary
judgment on the breach of fiduciary duty claim, arguing that no material issues of fact preclude a
finding that Regions owed Plaintiff a fiduciary duty, which Regions violated when it transferred
the Escrow Funds to a non-interest bearing account.
A.
BREACH OF CONTRACT
The resolution of Plaintiff’s contract claim, as set forth in its Motion and previous filings,
initially turned upon the resolution of a critical disputed issue of fact: whether the Customer
Agreement governed the Escrow Account. Plaintiff’s original theory of the case was that the
Customer Agreement — and the account withdrawal limitations contained therein — did not
apply, and that therefore the only agreements relevant to Plaintiff’s breach of contract claim were
the Escrow Agreement between the two parties, and the Purchase Agreement between Plaintiff
and the unit buyers. (See Mot. 13–14).
At oral argument, however, Plaintiff jettisoned this theory in its entirety when it conceded
that the Customer Agreement governs the Escrow Account. (See Transcript 4:13–17). In a
change of position, Plaintiff now argues that while the Customer Agreement governs the Escrow
Account, Plaintiff never breached the Customer Agreement’s withdrawal limitations. (See id.
9
Case No. 11-21204-CIV-ALTONAGA/Simonton
4:24–8:6). Therefore, Regions had an ongoing obligation to pay interest on the Escrow Funds,
which it breached when it transferred those funds to a non-interest bearing account. (See id.
8:21–9:7). Plaintiff further argues that the Escrow Agent timely objected to the transfer of the
Escrow Funds to a non-interest bearing account, as required by the Customer Agreement.6 (See
id. 9:11–18; Mot. 16–17). Plaintiff also argues that there are no disputed issues of material fact
underlying any of its assertions, and the Court therefore should conclude as a matter of law that:
(1) Plaintiff did not breach the Customer Agreement’s withdrawal limitations; (2) Regions
breached the Customer Agreement when it transferred the Escrow Funds to a non-interest
bearing account; and (3) Plaintiff properly objected to the improper transfer of funds.
Regions disagrees, asserting the undisputed facts reveal that it was Plaintiff, and not
Regions, that breached the Customer Agreement. (See Resp. 6). In support of its position,
Regions points to copies of Plaintiff’s monthly bank statements and copies of checks it wrote
during those months that demonstrate Plaintiff violated the withdrawal limitations on the Escrow
Account. (See id. (citing Monthly Statements filed by Regions)). Regions then states that given
Plaintiff’s breach, Regions’ decision to transfer the Escrow Funds to a non-interest bearing
account was its express contractual right to do. (See Resp. 6). Regions further adds that Plaintiff
cannot complain since Plaintiff failed to satisfy the express condition precedent set forth by the
Customer Agreement, which required Plaintiff to timely notify Regions of any objections it may
have in writing. (See id. 7). Regions asserts no disputed material facts remain, as the law clearly
supports its decision to stop paying interest on the Escrow Funds. The Court agrees with
Regions.
6
The relevant language of the Customer Agreement provides that “[t]he statement shall be conclusively
be deemed to be correct unless we are notified by you in writing within (30) days after the closing date of
the statement.” (Customer Agreement § I.9)
10
Case No. 11-21204-CIV-ALTONAGA/Simonton
The relevant provision of the Customer Agreement, which governs Plaintiff’s breach of
contract claim, reads as follows:
No more than three of the transfers may be made by draft, check, debit card, or
similar order to a third party (to the extent permitted by the account) . . . If these
limitations are exceeded on a regular basis, we may close the account and open
another account in your name that permits unlimited check writing privileges.
(Customer Agreement § I.9). The plain language of the contract restricts Plaintiff to three thirdparty checks per month. (See id.). It further advises that, in the event these limitations are
regularly violated, Regions’ contractual right is to transfer those funds to a different type of
account through which Plaintiff may write an unlimited number of checks. (See id.).
The undisputed facts reveal that Plaintiff violated the withdrawal limitations placed on
the account by the Customer Agreement. The copies of Plaintiff’s monthly Escrow Account
statements and the checks it wrote during those months, which were filed by Regions as part of
its Response and by Plaintiff as part of its Exhibits for Summary Judgment [ECF No. 92],
establish that in 2005 Plaintiff wrote more than three third-party checks per month on a regular
basis. (See Monthly Statements Filed By Regions; Monthly Statements Filed By Plaintiff).
Specifically, they reveal that Plaintiff wrote four third-party checks during the months of
February (see Monthly Statements Filed By Plaintiff 3, 6, 8, 10); May (see id. 34, 36, 38, 42);
June (see id. 47, 49, 55, 61); and July (see id. 66, 70, 72, 74). In so doing, Plaintiff violated the
withdrawal limitations of the Customer Agreement, and its refusal to acknowledge these
transactions does not create a triable issue. See, e.g., Matsushita Elec. Indus. Co., Ltd. v. Zenith
Radio Corp., 475 U.S. 574, 586 (1986) (noting that a party must “do more than simply show that
there is some metaphysical doubt as to the material facts”); Cordoba v. Dillard’s, Inc., 419 F.3d
1169, 1181 (11th Cir. 2005) (“[U]nsupported speculation . . . does not meet a party’s burden of
producing some defense to a summary judgment motion. Speculation does not create a genuine
11
Case No. 11-21204-CIV-ALTONAGA/Simonton
issue of fact; instead, it creates a false issue, the demolition of which is a primary goal of
summary judgment.” (quoting Hedberg v. Ind. Bell Tel. Co., 47 F.3d 928, 931-32 (7th Cir.
1995)); see also Advisory Committee Note to 1963 Amendment of FED. R. CIV. P. 56(e) (noting
that the purpose of summary judgment is to “pierce the pleadings and to assess the proof in order
to see whether there is a genuine need for trial”). Once Regions provided sufficient facts to
support the grant of summary judgment in its favor with the records of excessive monthly
withdrawals, the burden shifted to Plaintiff to come forward with specific facts to defeat the
requested summary judgment against it. See Matsushita Elec. Indus. Co., Ltd., 475 U.S. at 587.
This, Plaintiff failed to do.
The undisputed facts similarly reveal that Regions’ decision to transfer the Escrow Funds
to a non-interest-bearing commercial checking account in October 2005 was its contractual right.
The Customer Agreement provides that if Plaintiff violates the Customer Agreement’s
withdrawal limitations, then Regions has the right to transfer the Escrow Funds to an account
“that permits unlimited check writing privileges.” (Customer Agreement § I.7). This is exactly
what Regions did, based upon its interpretation of the applicable federal regulations, Regulation
D, 12 C.F.R. section 204 et seq., which place limits on the number of permissible monthly
withdrawals that can be made from interest-bearing money market accounts.7 (See Resp. 6).
Although Regions’ interpretation of the applicable regulations appears to be correct, the Court
need not decide the issue as a matter or law. The broad language in the contract does not limit
7
Specifically, the FEDERAL RESERVE CONSUMER COMPLIANCE HANDBOOK, Regulations Q & and D:
Interest on Demand Deposits/Reserve Requirements, classifies interest bearing money market savings
accounts as “Savings Deposit Account[s],” limits those accounts to three third-party checks per month,
and states that upon violation of those limitations, the bank “may be required to reclassify the account as a
demand account.” 3–4 (January 2006). The HANDBOOK further explains that demand accounts “[m]ay
not be interest bearing,” and that “[d]emand deposits include deposits that for some reason have been
reclassified as demand deposits — for example . . . savings deposits for which the transfer or withdrawal
limitations have been exceeded.” Id. at 2.
12
Case No. 11-21204-CIV-ALTONAGA/Simonton
Regions to the strict requirements of the federal regulations in question, but rather, provides
Regions with the authority to transfer the funds to an account “with unlimited check writing
privileges” — what was, at Regions Bank, a non-interest bearing commercial checking account.
(Customer Agreement § I.7). The Court will not read a requirement into this provision that will
serve to alter the contract’s express terms. See, e.g., Churchill Dev., Inc. v. Prime Outdoor
Group, LLC, 816 So. 2d 764, 766 (Fla. 2d DCA 2002) (“The express terms of the addendum
provide Liu the right to unilaterally cancel the agreement for any reason. . . . To read such
requirements into this provision alters the express terms of the addendum.”); Fernandez v.
Homestar at Miller Cove, Inc., 935 So. 2d 547, 551 (Fla. 3d DCA 2006) (noting that “a court is
powerless to rewrite the contract to make it more reasonable or advantageous for one of the
contracting parties” (quoting Emergency Assocs. of Tampa, P.A. v. Sassano, 664 So. 2d 1000,
1003 (Fla. 2d DCA 1995)); Beach Resort Hotel Corp. v. Wieder, 79 So. 2d 659, 663 (Fla. 1955)
(“It is well settled that courts may not rewrite a contract . . . in order to relieve one of the parties
from the apparent hardship of an improvident bargain.”).
This said, the Court cannot resolve the separate question of whether Regions’ decision to
transfer the Escrow Funds to a non-interest bearing account a second time, beginning in July
2010, was legally justified. Although Regions asserts that it transferred Plaintiff’s funds to a
non-interest bearing account that year based upon the Escrow Agent’s request “that the account
type be changed to an account that incurs no service charges” (DSAF ¶ 83) — what is, at
Regions, a non-interest bearing account (see id.) — Plaintiff disputes this fact (see Pl.’s Resp.
DSAF ¶ 83). The parties have not supplied sufficient information to resolve that dispute as a
matter of law. Therefore, the Court denies summary judgment for both parties as it relates to
13
Case No. 11-21204-CIV-ALTONAGA/Simonton
Plaintiff’s breach of contract claim arising from Regions’ decision to transfer the Escrow Funds
to a non-interest bearing account in July 2010.
In sum, because the undisputed facts establish that Plaintiff clearly violated the
withdrawal limitations of the Customer Agreement in 2005, and that Regions’ decision to
transfer the Escrow Funds to a non-interest bearing account that same year was its legal right
under the Customer Agreement, the Court grants summary judgment for Regions, the nonmovant, on this portion of the breach of contract claim.8 However, because disputed issues of
material fact remain as to Regions’ decision to transfer Plaintiff’s funds to a non-interest bearing
account in July 2010, the Court denies summary judgment for both parties on Plaintiff’s breach
of contract claim as it pertains to Regions’ conduct for the period of time between July 2010 and
the present.
B.
BREACH OF FIDUCIARY DUTY
Plaintiff also seeks summary judgment on its breach of fiduciary duty claim. To prevail
under a theory of fiduciary liability, a plaintiff must allege “the existence of a fiduciary duty, and
the breach of that duty such that it is the proximate cause of the plaintiff’s damages.” Gracey v.
Eaker, 837 So. 2d 348, 353 (Fla. 2002) (citations omitted). Under Florida law, courts have
consistently held that the relationship of a bank to a borrower is that of creditor to debtor, and
While disputed issues of fact remain as to whether Plaintiff properly objected to Regions’ decision to
transfer the Escrow Funds to a non-interest bearing account in writing, as required by the Customer
Agreement, those issues are not material to resolution of Plaintiff’s breach of contract claim because the
Court has found that Regions did not violate the Customer Agreement in the first occasion it transferred
the funds. Whether Plaintiff properly complied with the Customer Agreement’s notice provision is an
affirmative defense raised by Regions, and not a cause of action. See Custer Med. Ctr. v. United Auto.
Ins. Co., 62 So. 3d 1086, 1096 (Fla. 2010) (“An affirmative defense is an assertion of facts or law by the
defendant that, if true, would avoid the action and the plaintiff is not bound to prove that the affirmative
defense does not exist.”). As such it is not an impediment for summary judgment in favor of the
Defendant. See, e.g., Caffey v. Limestone Cnty., Al., 243 F. App’x 505, 508 (11th Cir. 2007) (in affirming
summary judgment “[a]lthough each defendant raised various defenses . . . to Caffey’s claims, we need
not address those defenses here because we conclude that Caffey has failed to present evidence of a
violation of her Eighth Amendment rights.”).
8
14
Case No. 11-21204-CIV-ALTONAGA/Simonton
that as a general matter, a bank owes no fiduciary responsibilities. See First Nat’l Bank & Trust
Co. of Treasurer Coast v. Pack, 789 So. 2d 411, 414 (Fla. 4th DCA 2001); BCJJ, LLC v.
LeFevre, No. 8:09-CV-551-T-17EAJ, 2011 WL 989230, at *7 (M.D. Fla. Mar. 21, 2011).
Notwithstanding the general rule regarding the relationship between a bank and its
customer, Florida courts have held that “special circumstances” may impose a fiduciary duty on
a bank. Pack, 789 So. 2d at 415; see also Bldg. Educ. Corp. v. Ocean Bank, 982 So. 2d 37, 40–
41 (Fla. 3d DCA 2008); Susan Fixel, Inc. v. Rosenthal & Rosenthal, Inc., 842 So. 2d 204, 208
(Fla. 3d DCA 2003). For example, “where the lender 1) takes on extra services for a customer,
2) receives any greater economic benefit than from a typical transaction, or 3) exercises
extensive control,” a fiduciary relationship may arise. Pack, 789 So. 2d at 415 (quoting Capital
Bank v. MVB, Inc., 644 So. 2d 515, 519 (Fla. 3d DCA 1994)); see also Bldg. Educ. Corp., 982
So. 2d at 41 (“A fiduciary relationship may arise, however, under special circumstances where
the bank knows or has reason to know that the customer is placing trust and confidence in the
bank and is relying on the bank so to counsel and inform him.”) (internal quotation marks and
citation omitted).
Plaintiff asserts such “special circumstances” exist here for two reasons. First, Plaintiff
argues that following the execution of the Loan Agreement, Regions’ officers made various
representations and commitments that created a fiduciary relationship. (See Mot. 23; Am.
Compl. ¶¶ 40–45). Plaintiff further argues that there is an additional basis upon which to find a
fiduciary relationship existed between the parties: “By requiring that the Escrow Account be
opened with Regions Bank . . . [Regions] received a ‘greater economic benefit than from a
typical transaction.’” (Mot. 23 (quoting Pack, 789 So. 2d at 415)). Based upon the existence of
15
Case No. 11-21204-CIV-ALTONAGA/Simonton
a fiduciary relationship, then, Plaintiff argues that Regions breached its fiduciary duty when it
transferred the Escrow Funds to a non-interest bearing account. (See id. 23–27).
In its Response, Regions argues that it did not, indeed could not, have owed Plaintiff a
fiduciary duty because the parties expressly precluded the creation of a fiduciary relationship
through their various agreements. (See Resp. 12–13). Regions first notes that “at the outset of
their relationship, the parties executed a Loan Agreement that specifically provided that the sole
legal relationship between the parties would be that of debtor and creditor, and not a partnership
or joint venture, much less a fiduciary relationship.” (Id. 12). Regions further argues that
Plaintiff’s reliance upon Regions’ representatives’ alleged oral representations is misplaced
because the parties entered into a Consolidated Promissory Note through which “Cabana also
agreed to waive reliance upon any subsequent oral statements of the Bank.” (Id.). Finally,
Regions argues that “Cabana subsequently reaffirmed these agreements upon executing each of
the loan extension agreements in late 2007 and 2008.” (Id. 13).
Plaintiff disagrees that these agreements preclude the possibility of a fiduciary
relationship from arising, and in so doing, identifies a variety of disputed issues of fact that relate
to Plaintiff’s breach of fiduciary duty claim. Specifically, Plaintiff disputes the manner in which
the express waiver in the Loan Agreement and Promissory Note was intended to relate to the
Escrow Account (see Pl.’s Resp. DSAF ¶ 75), the manner in which the extension agreement was
intended to relate to the Escrow Account (see Pl.’s Resp. DSAF ¶¶ 73–74), and the nature of the
circumstances surrounding Regions’ representatives’ assertions (see Pl.’s Resp. DSAF ¶ 70).
The foregoing factual disputes constrain the Court from resolving the underlying question of
whether the parties entered into a fiduciary relationship.
16
Case No. 11-21204-CIV-ALTONAGA/Simonton
However, because the Court has already found that, as a matter of law, Regions’ decision
to transfer the Escrow Funds to a non-interest bearing account in 2005 was expressly permitted
by the parties’ contract, that part of Plaintiff’s fiduciary claim is now barred by Florida’s
economic loss rule.
Florida’s economic loss rule “provides that ‘parties to a contract can only seek tort
damages if conduct occurs that establishes a tort distinguishable from or independent of [the]
breach of contract.” Royal Surplus Ins. Co. v. Coachman Indus., Inc., 184 F. App’x 894, 902
(11th Cir. 2006) (quoting Jones v. Childers, 18 F.3d 899, 904 (11th Cir. 1994)). “Th[e] rule is
based upon the doctrine that ‘contractual principles are more appropriate than tort principles for
resolving economic loss claims.’” Id. (quoting Florida Power & Light Co. v. Westinghouse
Elec. Corp., 510 So.2d 899, 901 (Fla. 1987)). The economic loss rule therefore restrains “[a]
party to a contract” from “seeking to obtain a better bargain than originally made,” by
circumventing the legal rights and obligations provided for in a contract by bringing a tort claim.
Indem. Ins. Co. of N. Am. v. Am. Aviation, Inc., 891 So. 2d 532, 536–37 (Fla. 2004); see also
Nemec v. Shrader, 991 A.2d 1120, 1129 (Del. 2010) (“It is a well-settled principle that where a
dispute arises from obligations that are expressly addressed by contract, that dispute will be
treated as a breach of contract claim. In that specific context, any fiduciary claims arising out of
the same facts that underlie the contract obligations would be foreclosed as superfluous.”)
(footnote call number and citation omitted); CVC Claims Litig. LLC v. Citicorp Venture Capital
Ltd., 03 Civ. 7936 (DAB), 2006 WL 1379596, at *6–7 (S.D.N.Y. May 18, 2006) (finding that
breach of fiduciary claim cannot exist independently from a breach of contract claim where both
claims are based on the same operative facts because of the primacy of contract law).
17
Case No. 11-21204-CIV-ALTONAGA/Simonton
As relevant to Plaintiff’s breach of fiduciary duty claim, the economic loss rule applies
“where the parties are in contractual privity and one seeks to recover damages in tort for matters
arising from the contract.” Indem. Ins. Co., 891 So. 2d at 532. In other words, “[w]here the facts
surrounding a breach of contract action are indistinguishable from an alleged tort, and where the
alleged tort does not cause harm distinct from that caused by the breach of contract, a plaintiff is
barred from bringing a separate tort action.” Behrman v. Allstate Ins. Co., 388 F. Supp. 2d 1346,
1349 n.4 (S.D. Fla. 2005) (quoting Eye Care Int’l Inc. v. Underhill, 92 F. Supp. 2d 1310, 1315
(M.D. Fla. 2000)).
The economic loss rule bars Plaintiff’s breach of fiduciary duty claim as it pertains to
Regions’ 2005 decision because the claim arises from the same information that underlies the
breach of contract claim. See Royal Surplus Ins. Co., 184 F. App’x at 900–02 (holding that
where the trial court properly granted summary judgment on breach of contract claim, plaintiff’s
breach of fiduciary duty claim, based on “the same information that provided the basis for the
breach of contract claim,” was barred by the economic loss rule); see N. Am. Clearing, Inc. v.
Brokerage Computer Sys., Inc., 6:07-cv-1503-Orl-19KRS, 2008 WL 341309, at *4 (M.D. Fla.
Feb. 5, 2008) (“[T]he [economic loss] rule . . . appl[ies] when the claim for breach of fiduciary
duty is based upon and inextricably intertwined with the claim for breach of contract.”). Here,
the very action that constitutes the basis for Plaintiff’s breach of contract claim — Regions’
decision to transfer the Escrow Funds to a non-interest bearing account in 2005 — also
constitutes the basis for a portion of Plaintiff’s breach of fiduciary duty claim. Indeed, the
Amended Complaint makes this point explicit (see Am. Compl. ¶¶ 66, 70), while it similarly
reveals that the damages Plaintiff seeks for both of its claims are one and the same (see id. ¶¶ 67,
72). See Granat v. Axa Equitable Life Ins. Co., 06-21197-CIV, 2006 WL 3826785, at *5 (S.D.
18
Case No. 11-21204-CIV-ALTONAGA/Simonton
Fla. Dec. 27, 2006) (applying the economic loss rule to a breach of fiduciary duty claim where:
(1) “Plaintiffs alleged the same injury [in their claim for breach of fiduciary duty] . . . as they
alleged in their claim for breach of contract”; and where (2) “the damages that Plaintiffs request
for the alleged breach of fiduciary duty are the same damages that they requested in their breach
of contract claim”).
Both the withdrawal limitations on the account and the available remedy of transferring
the Escrow Funds in the event that limitation was violated are provisions otherwise part of “the
deal” contracted to between the parties. The Court has already found that Regions upheld its end
of the bargain insofar as its 2005 decision to transfer Plaintiff’s funds is concerned. This portion
of Plaintiff’s breach of fiduciary duty claim therefore seeks to avoid the legal effect of the
contract, impermissibly providing the Plaintiff with “a better bargain than originally made.”
Indem. Ins. Co., 891 So. 2d at 536.
Therefore, the Court grants summary judgment on Plaintiff’s breach of fiduciary duty
claim in favor of Regions as it relates to the damages arising out of Regions’ decision to transfer
the Escrow Funds to a non-interest bearing account in 2005. To the extent that Plaintiff’s breach
of fiduciary duty claim arises from Regions’ decision to transfer the Escrow Funds to a noninterest bearing account in 2010, however, the Court denies summary judgment as to both
parties.
IV. CONCLUSION
Based on the foregoing, it is
ORDER AND ADJUDGED as follows:
1. The Motion [ECF No. 68] is DENIED.
2. The Response [ECF No. 71], which the Court construes as a Cross-Motion for
19
Case No. 11-21204-CIV-ALTONAGA/Simonton
Summary Judgment, is GRANTED in part and DENIED in part.
DONE AND ORDERED in Chambers at Miami, Florida, this 5th day of March, 2012.
_________________________________
CECILIA M. ALTONAGA
UNITED STATES DISTRICT JUDGE
cc: counsel of record
20
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?