ROGERS v. MITZI

Citation Codes

Equivalent Citations

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Docket Number

Nos. 89-2577, 90-263.

Attorney(S)

Jodi R. Lazar of Fisher, Rushmer, Werrenrath, Keiner, Wack Dickson, Orlando, for appellant. James J. Files of Cloninger and Files, Oviedo, for appellees.

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Smart Summary

Factual and Procedural Background

Thomas R. Rogers, appellant and defendant below, and appellees/plaintiffs John J. Mitzi and Francis J. Gorman were partners in various real estate investments governed by two partnership agreements and a trust agreement drafted by Rogers. Mitzi and Gorman contributed cash, while Rogers contributed cash, management and legal services, and improvements to the investment property. Mitzi and Gorman filed suit against Rogers alleging breach of fiduciary duty, fraud and deceit, conversion, and sale of unregistered securities. Following a non-jury trial, the trial court found Rogers guilty of constructive fraud and awarded compensatory damages equal to Mitzi and Gorman’s cash investments as well as punitive damages.

Rogers filed two appeals: one challenging the trial court’s denial of his motion to recuse the judge, and another contesting the final judgment finding him guilty of constructive fraud and the damages awarded.

Legal Issues Presented

Whether the trial court erred in denying Rogers’ motion to recuse the trial judge.
Whether the trial court properly found Rogers guilty of constructive fraud despite the plaintiffs’ complaint.
Whether the trial court’s award of compensatory damages was supported by the evidence.
Whether the punitive damages award was justified under the facts and law.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Douglas v. Ogle, 80 Fla. 42, 85 So. 243 (Fla. 1920)	Definition and existence of constructive fraud where fiduciary duty is abused.	Supported the court’s conclusion that Rogers’ breach of fiduciary duty constituted constructive fraud.
Allie v. Ionata, 466 So.2d 1108 (Fla. 5th DCA 1985)	Constructive fraud in fiduciary relationships.	Reinforced the sufficiency of pleading constructive fraud through breach of fiduciary duty.
Harrell v. Bransen, 344 So.2d 604 (Fla. 1st DCA 1977), rev. denied, 353 So.2d 675 (Fla. 1977)	Constructive fraud and fiduciary duty principles.	Used to confirm the legal basis for constructive fraud in this case.
Laniewicz v. Rutenberg Construction Company, 580 So.2d 203 (Fla. 5th DCA 1991)	Damages and rescission principles in fraud cases.	Supported reversal of damages award based on rescission theory due to lack of request or showing.
Supple v. Supple, 347 So.2d 774 (Fla. 3d DCA 1977)	Damages and rescission in breach of contract/fraud context.	Further supported the court’s conclusion regarding proper measure of damages.
Argonaut Insurance Company v. May Plumbing Company, 474 So.2d 212, 215 (Fla. 1985)	Prejudgment interest entitlement and statutory rate application.	Authorized awarding prejudgment interest from the date of loss.
Cook v. Deltona Corp., 753 F.2d 1552, 1563 (11th Cir. 1985) (applying Florida law)	Standards for awarding punitive damages in fraud cases.	Supported reversal of punitive damages due to absence of aggravating circumstances.
First Interstate Development Corp. v. Ablanedo, 511 So.2d 536 (Fla. 1987)	Requirement of deliberate and knowing misrepresentation for punitive damages.	Confirmed that no deliberate misrepresentation was shown to justify punitive damages.
John Brown Automation, Inc. v. Nobles, 537 So.2d 614, 618 (Fla. 2d DCA 1988), rev. denied, 547 So.2d 1210 (Fla. 1989)	Negligent misrepresentation insufficient to support punitive damages.	Supported the conclusion that negligent misrepresentation cannot sustain punitive damages award.
Turner v. Turner, 529 So.2d 1138, 1140-41 (Fla. 1st DCA 1988)	Procedures for remand to determine appropriate damages.	Authorized remand for recalculation of compensatory damages consistent with opinion.

Court's Reasoning and Analysis

The court first addressed the procedural issue, affirming the denial of Rogers’ motion to recuse the trial judge as lacking merit. Regarding the constructive fraud claim, the court found that the theory was properly pled in the complaint as part of the breach of fiduciary duty count, supported by established Florida case law defining constructive fraud as an abuse of fiduciary duty. The evidence was deemed substantial and competent to uphold the finding of constructive fraud.

However, the court determined that the damages awarded by the trial court were unsupported by the record. The trial court’s damages were based on rescission, but no party had requested rescission nor shown that monetary damages would be inadequate. Instead, damages should be measured by the difference between Rogers’ actual capital contributions (cash or property) and his contractual obligations, excluding services such as attorney work. The court also found that Rogers improperly reduced his partnership interest by the amount of a partnership deposit on a property he individually purchased.

The court further held that Mitzi and Gorman are entitled to prejudgment interest at the statutory rate from the date they sustained their loss.

The punitive damages award was reversed because Mitzi and Gorman failed to demonstrate aggravating circumstances such as deliberate and knowing misrepresentation causing detrimental reliance. Mere failure to perform a promise or negligent misrepresentation does not justify punitive damages under Florida law.

Holding and Implications

The court affirmed in part, reversed in part, and remanded the case.

The order denying the motion to recuse was affirmed. The finding of constructive fraud against Rogers was affirmed. The compensatory damages award was reversed and remanded for recalculation consistent with the court’s instructions, including the exclusion of services as capital contributions and proper accounting for partnership interests. The punitive damages award was reversed due to insufficient evidence of willful misconduct.

This decision directly affects the parties by modifying the damages recoverable by Mitzi and Gorman and eliminating punitive damages, but it does not establish new precedent beyond the application of existing Florida law to the facts.

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THOMAS R. ROGERS, APPELLANT, v. JOHN J. MITZI AND FRANCIS J. GORMAN, APPELLEES.

ON MOTION FOR REHEARING AND/OR CLARIFICATION

DIAMANTIS, Judge.

We grant rehearing pursuant to the timely motion filed by appellees, withdraw the prior opinion, and issue the following in its place.

Appellant/defendant below Thomas R. Rogers brings this consolidated appeal from the final judgment entered in favor of appellees/plaintiffs below John J. Mitzi and Francis J. Gorman following a non-jury trial. We affirm in part, reverse in part, and remand for further proceedings.

The parties in this case were partners in various real estate investments by virtue of two partnership agreements and a trust agreement, all of which were drafted by Rogers. Mitzi and Gorman contributed cash to the partnerships while Rogers contributed a combination of cash, management and legal services, and improvements to the investment property. Mitzi and Gorman brought an action against Rogers alleging breach of fiduciary duty, fraud and deceit, conversion, and sale of unregistered securities. The trial court found Rogers guilty of constructive fraud and awarded compensatory damages to Mitzi and Gorman in amounts equal to their respective cash investments, and punitive damages.

In case number 89-2577 Rogers appeals the order of the trial court denying his motion to recuse. Finding no merit in the issue raised by Rogers we affirm the order of the trial court.

In case number 90-263 Rogers appeals the final order of the trial court finding Rogers guilty of constructive fraud. Rogers argues that the trial court erred in finding constructive fraud because this theory was not properly pled in the plaintiffs' complaint. This argument lacks merit. The theory of constructive fraud is plead in count two of the fourth amended complaint which alleges breach of fiduciary duty, as that count also alleges that Rogers' breach of fiduciary duty was the equivalent of fraud. A constructive fraud is deemed to exist where a duty under a confidential or fiduciary relationship has been abused. Douglas v. Ogle, 80 Fla. 42, 85 So. 243 (Fla. 1920); Allie v. Ionata, 466 So.2d 1108 (Fla. 5th DCA 1985); Harrell v. Bransen, 344 So.2d 604 (Fla. 1st DCA 1977), rev. denied, 353 So.2d 675 (Fla. 1977). We further hold that there was substantial competent evidence to support the trial court's finding of constructive fraud.

However, the evidence does not support the award of damages entered by the trial court. The trial court awarded damages based essentially upon the theory of rescission, yet there is no showing that monetary damages would not have sufficed and no party asked for rescission. Laniewicz v. Rutenberg Construction Company, 580 So.2d 203 (Fla. 5th DCA 1991); Supple v. Supple, 347 So.2d 774 (Fla. 3d DCA 1977). Mitzi and Gorman are entitled to compensatory damages based upon the difference between what Rogers actually contributed as capital in cash or property to the RMG Partnership and the $15,000 which he was obligated to contribute under the RMG Partnership Agreement. Additionally, Mitzi and Gorman are entitled to damages based upon their respective interests in the RMG partnership for the purchase by Rogers individually of Moorings Unit 101. Rogers improperly reduced his interest in the RMG partnership by $12,650 to represent the $12,650 deposit that the partnership had put down on Moorings Unit 101.

In this regard, we hold that the term "cash or its equivalent" as used or contemplated in this agreement means cash or property and not attorney's services or other services.

Mitzi and Gorman are also entitled to prejudgment interest at the statutory rate from the date that the trial court determines that they sustained their loss. Argonaut Insurance Company v. May Plumbing Company, 474 So.2d 212, 215 (Fla. 1985).

We also reverse the award of punitive damages in this case because Mitzi and Gorman failed to show any aggravating circumstances sufficient to justify such an award. See Cook v. Deltona Corp., 753 F.2d 1552, 1563 (11th Cir. 1985) (applying Florida law). The record does not establish that Rogers made a deliberate and knowing misrepresentation designed to cause and actually caused detrimental reliance by Mitzi and Gorman. See First Interstate Development Corp. v. Ablanedo, 511 So.2d 536 (Fla. 1987). We further recognize that the mere failure to perform a promise does not constitute fraud which would give rise to punitive damages, absent a specific purpose in the defendant not to perform the contract at the time it was entered. Negligent misrepresentation in this context will not support an award of punitive damages. John Brown Automation, Inc. v. Nobles, 537 So.2d 614, 618 (Fla. 2d DCA 1988), rev. denied, 547 So.2d 1210 (Fla. 1989).

In summary, we affirm the order denying Rogers' motion to recuse the trial judge. We also affirm the finding of constructive fraud. However, we reverse the awards of compensatory damages and remand the cause to the trial court to award compensatory damages consistent with this opinion and to take testimony on this matter if necessary. Turner v. Turner, 529 So.2d 1138, 1140-41 (Fla. 1st DCA 1988). We also reverse the awards of punitive damages.

AFFIRMED in part; REVERSED in part; and REMANDED.

HARRIS and GRIFFIN, JJ., concur.