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Liork, LLC v. BH 150 Second Avenue, LLC

Florida Court of Appeals, Third District

February 21, 2018

Liork, LLC and Keren Ben Shimon, Appellants,
BH 150 Second Avenue, LLC, Appellee.

         Not final until disposition of timely filed motion for rehearing.

         An Appeal from the Circuit Court for Miami-Dade County No. 15-9465, Barbara Areces, Judge.

          Militzok & Levy, P.A. (Hollywood); Richard J. Lee (Hollywood), for appellants.

          Jonathan A. Heller; Jay M. Levy, for appellee.

          Before SUAREZ, SCALES and LUCK, JJ.

          LUCK, J.

         This case is about the enforceability of a subscription agreement between an investor and the company she invested in. The investor sought a declaratory judgment that the subscription agreement she signed was unenforceable because there was a lack of mutuality, and the liquidated damages clause calling for her to surrender her initial payments was an improper penalty provision. The trial court granted the investment company's motion for summary judgment, declaring the agreement was enforceable. We agree, and affirm.

         Factual Background and Procedural History

         In 2013, BH 150 Second Avenue, LLC, made an offering seeking accredited[1]investors to join in a business venture. The objective of the venture was to purchase a commercial building in downtown Miami and convert it into an office and retail condominium of approximately 100 units. The offering was intended as an alternative to obtaining institutional or bank financing for the project. The offering included a proposed operating agreement for the new business and a subscription agreement to be signed by each investor. Prior to making the offering, BH 150 contracted with the owners of the building it sought to purchase. The purchase price was $17.5 million and BH 150 paid a $1.1 million non-refundable deposit on the contract. The subscription agreement to be signed by the investors recited the existence of the contract and anticipated the transaction would close on or about November 1, 2013, although it allowed for an extension of one hundred twenty days if the renovations being performed were not completed in a timely fashion.

         On August 9, 2013, Keren Ben Shimon executed a subscription agreement where she agreed to pay $565, 000 at execution, $1, 130, 000 thirty days after execution, and the remaining $3, 955, 000 thirty days prior to the noticed closing date on the purchase of the building.[2] Upon completion of the project, Ben Shimon would be deeded title to four of the building's condominium units. Ben Shimon made three payments under the agreement totaling $3, 295, 000.

         On December 2, 2013, BH 150 notified Ben Shimon and the other investors that the closing on the purchase of the building was anticipated to occur on January 15, 2014. Ben Shimon was told that in accordance with the terms of her agreement the final payment of $2, 469, 154.04 needed to be made on or before December 16, 2013. Ben Shimon was unable to make the payment and asked for additional time. Ben Shimon was advised that another investor was willing to advance Ben Shimon the amount required to avoid default, but Ben Shimon did not accept this loan. BH 150 sent a default letter to Ben Shimon on December 19, 2013. Eventually, the developer of the office building chipped in the money needed to make up for the shortfall created by Ben Shimon's default, and BH 150 closed on the purchase of the building on February 28, 2014.

         In the wake of the default, Ben Shimon brought this declaratory relief action seeking to: (1) declare the subscription agreement void for lack of mutuality; (2) declare the liquidation damages clause unenforceable as a penalty; and (3) obtain a return of her initial payments BH 150 retained as a result of the default. The parties filed cross-motions for summary judgment, and after a hearing, the trial court denied Ben Shimon's motions and granted BH 150's motions. Ben Shimon appeals from the final summary judgment in favor of BH 150.

         Standard of Review

         Where, as here, based on undisputed facts, the trial court grants one party's cross-motion for summary judgment on a declaratory judgment action, our review is de novo. Lee Cty. Elec. Coop., Inc. v. City of Cape Coral, 159 So.3d 126, 127 (Fla. 2d DCA 2014) ("In the declaratory judgment proceeding, the City and LCEC filed cross-motions for summary judgment. The circuit court determined that the facts were undisputed, and it ruled in the City's favor based on the franchise ...

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