DOUGLAS ANTHONY PERERA v. DIOLIFE LLC, a Florida limited liability company

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
DOUGLAS ANTHONY PERERA,
Appellant,
v.
DIOLIFE LLC, a Florida limited liability company,
Appellee.
No. 4D18-892
[June 12, 2019]
Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; David A. Haimes, Judge; L.T. Case No.
062016CA006867AXXXCE.
J. David Huskey, Jr. of McGee & Huskey, P.A., Fort Lauderdale, for
appellant.
Lida Rodriguez-Taseff and Elan A. Gershoni of DLA Piper LLP (US),
Miami, for appellee.
ON APPELLEE’S MOTION FOR REHEARING EN BANC AND MOTION
FOR CERTIFICATION TO THE FLORIDA SUPREME COURT
KUNTZ, J.
Diolife LLC’s motion for rehearing en banc or, alternatively, for
certification of an issue of great public importance is denied. 1 We sua
sponte withdraw our prior opinion and issue this opinion in its place.
1 Perera requests that we sanction Diolife’s counsel for “numerous improper
statements criticizing this Court” and for filing an improper motion for rehearing.
We decline to issue sanctions but, as the Fifth District has done, we stress that
“[m]otions for rehearing are not to be used for the purpose of venting counsel’s
frustrations with the form or substance of the court’s decision.” Marion v.
Orlando Pain & Med. Rehab., 67 So. 3d 264, 265 (Fla. 5th DCA 2011) (citation
omitted).
Douglas Perera appeals the circuit court’s final judgment. The circuit
court entered judgment in Diolife’s favor on both Diolife’s action for
declaratory relief and on Perera’s counterclaims for breach of contract and
specific performance. The court found the parties orally modified a written
contract and, as a result, Diolife did not breach the contract. Alternatively,
the court found that if Diolife breached the contract, Perera suffered no
damages. Based on the facts and arguments presented, we reverse on
both conclusions and remand for entry of judgment for Perera.
Background
i. Pre-Lawsuit
Perera and Diolife entered into a Membership Interest Purchase
Agreement (“MIPA”), in which Perera agreed to sell to Diolife a 5%
membership interest in Cowboys Saloon Holdings, LLC for $200,000. The
parties completed this transaction of the MIPA.
The MIPA also gave Perera the option to sell another 5% interest in
Cowboys Saloon Holdings in exchange for another $200,000 from Diolife.
The option was exercisable in Perera’s sole discretion and required Diolife
to tender the purchase price. The MIPA required the sale of the additional
interest to close on or before March 31, 2016. This agreement to buy
another 5% of Cowboys Saloon Holdings also required Diolife to send
written notice to Perera when it was ready to close:
Agreement to Purchase and Sell the Additional Interest.
[Diolife] hereby irrevocably covenants and agrees to purchase
from [Perera], and [Perera] shall have the option (exercisable
in [his] sole discretion) to transfer, sell and deliver to [Diolife],
the Additional Interest in exchange for a total purchase price
of Two Hundred Thousand Dollars ($200,000.00) payable in
cash at the Second Closing . . . . [Diolife] shall send written
notice to [Perera] when it is ready to close on the purchase of
the Additional Interest (the “Closing Notice”), and such notice
shall be sent no later than March 21, 2016 . . . .
The MIPA specifically provided that it could not be amended orally or
through the parties’ actions:
Amendment and Waiver. The provisions of this Agreement
may be amended and waived only with the prior written
consent of the Seller and the Buyer, and no course of conduct
or failure or delay in enforcing the provisions of this
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Agreement shall be construed as a waiver of such provisions
or affect the validity, binding effect or enforceability of this
Agreement or any provision hereof.
The parties jointly filed a detailed statement of stipulated facts before
trial. They agreed that Diolife did not send the written notice by the March
21, 2016 deadline. Instead, on that day, Diolife’s counsel sent Perera’s
counsel an email stating he understood their clients had “discussed an
extension regarding the purchase of an additional 5% membership interest
in” Cowboys Saloon Holdings. He suggested “moving the notice and
closing date” and attached a draft amended agreement incorporating the
proposed new dates.
Two days later, Diolife’s counsel again emailed Perera’s counsel,
stating, “Thanks again for our call yesterday. Can you please provide the
discussed offer in writing so my client can have something concrete to
review?” Perera’s counsel responded, “2.5% for $200,000. Must close by
April 15. All other terms of the purchase option remain the same. This is
a non-binding offer that only becomes effective upon execution of definitive
documents.” These terms formed the purported oral modification of the
MIPA: Perera’s sale of a 2.5% interest for $200,000, with an April 15, 2016
closing date.
Six days later, Perera sent a text message to Diolife’s members stating
that Cowboys Saloon Holdings was “raising cash from other big funds and
ha[d] commitments for higher valuations.” The purported commitments
at higher valuations was the reason Perera was “pushing” Diolife’s
members to go through with the purchase before the closing deadline.
“Once the deadline passed,” however, Perera had to convince other
investors to allow Diolife to pay $200,000 but receive only a 2.5% interest
because the company’s value was increasing. Perera also stated in the
text message: “If you guys are not interested[,] I am OK with it but I am
doing my best. Let me know your thoughts.”
On April 5, 2016, Diolife’s counsel again emailed Perera’s counsel,
stating he “believe[d] [their] clients have agreed on these terms. Please
confirm same . . . .” On April 11, 2016, Perera’s counsel emailed Diolife’s
counsel and attached a “First Amendment to Membership Interest
Purchase Agreement.” Perera signed the attachment, and it reflected the
sale of a 2.5% interest for $200,000.
One day later, Diolife’s counsel emailed Perera’s counsel stating, “Our
client has informed us that they do not intend to move forward with the
transaction. Thanks.”
3
Seven days after Diolife notified Perera that it would not move forward,
Perera sent a demand letter to Diolife and stated in his cover letter that it
was his “final attempt to resolve this issue in an attempt to preserve a
working business relationship.”
ii. The Lawsuit
Nine days after it notified Perera that it would not be completing its
purchase of the additional interest in Cowboys Saloon Holdings, and only
two days after Perera sent his demand letter, Diolife brought an action for
declaratory judgment to determine whether Perera had a right to claim a
breach of the MIPA. Perera filed a counterclaim alleging a breach of
contract and seeking specific performance of the contract.
During the lawsuit, Perera remained willing to perform and signed an
affidavit stating, “I remain ready, willing and able to convey the 5%
Additional Interest to” Diolife. But the circuit court stated in the final
judgment that Cowboys Saloon Holdings was formally dissolved and “run
into the ground.”
The court first entered summary judgment against Perera on his claim
for specific performance. Next, after a non-jury trial, the court found for
Diolife on its claim for declaratory judgment and on Perera’s counterclaim
for breach of contract. Perera appeals the court’s judgment.
Analysis
Perera raises three issues on appeal, arguing the court erred by
concluding that: (i) the parties entered into an oral modification of the
MIPA, (ii) Perera did not suffer any damages even if Diolife breached the
MIPA, and (iii) Diolife did not anticipatorily repudiate the MIPA.
We agree with Perera’s first two points on appeal and reverse. Because
we reverse the judgment, we find it unnecessary to address the third issue
on appeal.
i. Diolife Breached the MIPA
The MIPA required Diolife to purchase another 5% membership interest
in Cowboys Saloon Holdings for $200,000 and to close by March 31, 2016.
It is undisputed the additional purchase did not happen by the deadline.
As a result, Diolife breached the original contract. But Diolife argued, and
the circuit court agreed, that the parties orally modified the MIPA before
any breach occurred.
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We first address whether the parties orally modified the MIPA.
When a contract does not address modification, oral modification of the
contract is generally permissible. Okeechobee Resorts, L.L.C. v. E Z Cash
Pawn, Inc., 145 So. 3d 989, 992 (Fla. 4th DCA 2014) (citations omitted).
But “[c]ontracting parties are at liberty to address any issue they see fit,
including the question of whether their agreement may be modified at all,
and, if so, how.” Id. at 993 (citation omitted).
Here, the MIPA contained a provision barring amendment other than
through a writing signed by all parties. When a contract contains such a
provision, any alleged oral modification is generally disposed of as a matter
of law, and the court should enforce the contract as written. Id. But this
rule has an exception dating to a 1956 opinion from our supreme court.
In Professional Insurance Corp. v. Cahill, 90 So. 2d 916 (Fla. 1956), the
court explained that even when the contract contains a provision
precluding oral modification,
[a] written contract or agreement may be altered or modified
by an oral agreement if the latter has been accepted and acted
upon by the parties in such manner as would work a fraud on
either party to refuse to enforce it.
Id. at 918 (citation omitted). In Okeechobee Resorts, we examined the
“judicial choirs’ lack of perfect harmony” in applying Cahill and the various
holdings from the courts. 145 So. 3d at 995. But we concluded that
despite the various applications of Cahill, Cahill remains binding
precedent. Id. We explained that this requires the plaintiff to prove:
(a) that the parties agreed upon and accepted the oral
modification (i.e., mutual assent); and (b) that both parties (or
at least the party seeking to enforce the amendment)
performed consistent with the terms of the alleged oral
modification (not merely consistent with their obligations
under the original contract); and (c) that due to plaintiff’s
performance under the contract as amended the defendant
received and accepted a benefit that it otherwise was not
entitled to under the original contract (i.e., independent
consideration).
Id. (emphases removed).
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Applying that test to this case, we conclude that the parties did not
modify the MIPA. Diolife argued the parties orally modified the closing
deadline and, as a result, it did not breach the contract. And the circuit
court agreed, finding the parties agreed—by oral conversations, text
messages, and emails—to extend the closing deadline.
But because the MIPA contains a provision precluding oral
modification, to establish an oral modification, Diolife needed to establish
that the parties acted on the modification and that it would “work a fraud”
on Diolife to refuse performance. See Cahill, 90 So. 2d at 918. Diolife
failed to meet this burden.
At best, Diolife presented evidence that on the day of the deadline, its
counsel sent an email about a potential revision to the MIPA. Days later,
after other emails, Perera’s counsel emailed Diolife’s counsel: “. . . All other
terms of the purchase option remain the same. This is a non-binding offer
that only becomes effective upon execution of definitive documents.”
Other messages from Perera included requiring Diolife to pay the same
$200,000 for only 2.5% of stock instead of the 5% set forth in the MIPA.
But the parties did not act on the communication about potentially
amending the MIPA. Most significantly, Diolife never acted on the MIPA or
the alleged oral modification because Diolife never sent Perera the required
funds. Thus, the Cahill requirement that the oral modification must have
been “accepted and acted upon by the parties” was not satisfied. See 90
So. 2d at 918.
As a result, the parties did not amend the MIPA, and Diolife breached
the agreement on March 31, 2016, when it failed to close on the purchase
of the additional interest in Cowboys Saloon Holdings. 2
ii. Perera Sustained Damages
The circuit court found that Perera sustained no damages, a conclusion
that would require judgment in Diolife’s favor even if Diolife breached the
2Diolife argues that there were two oral amendments to the MIPA. First, Diolife
argues the parties extended the deadline to close on the purchase of the
additional stock. Second, Diolife argues the parties modified the stock purchase
agreement. But Diolife made no payment to Perera for the additional interest; it
did not pay Perera by the original deadline or the allegedly extended deadline.
And when the allegedly extended deadline came, Diolife failed to make payment
pursuant to the original terms or the allegedly amended terms. Modified or not,
Diolife was in breach.
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contract. The circuit court determined that because the value of a 5%
interest in Cowboys Saloon Holdings exceeded $200,000 on the day of the
breach, Perera did not sustain a loss. We disagree.
In arriving at its conclusion, the court reasoned: 1) “the value of a 5%
membership interest in Cowboys Saloon was higher than the contract
value in the MIPA of $200,000.00, otherwise Mr. Perera would not have
been trying to get $200,000.00 for a 2.5% interest”; and 2) there were text
messages between the parties and “the agreement that Mr. Perera later
entered into, which the Court understands did not go forward . . . .” The
court considered the subsequent agreement but refused to consider that
the subsequent agreement did not go forward or that Cowboys Saloon
Holdings was dissolved. The court stated that it would not consider that
“point later in time.” But Perera’s attempts to obtain better terms in
exchange for excusing Diolife’s breach is not evidence of the market value
of the 5% interest in Cowboys Saloon Holdings. Furthermore, the court
relied on text messages that Perera sent after Diolife’s deadline to send
notice that it was prepared to complete the purchase. Finally, the
“agreement later entered into” occurred after the breach. In any event, the
court effectively used the out-of-pocket measure of damages to conclude
Perera sustained no damages.
But, in a breach of contract action, “[a] non-breaching party is entitled
to recover the benefit of its bargain under a contract.” Nat’l Educ. Ctrs.,
Inc. v. Kirkland, 635 So. 2d 33, 34 (Fla. 4th DCA 1993). “[T]he goal of
damages is to place the injured party in the same position in which it
would have been had the breach not occurred.” Tucker v. John Galt Ins.
Agency Corp., 743 So. 2d 108, 111 (Fla. 4th DCA 1999).
Perera was entitled to the benefit of his bargain. He did not have to
search for a potential second investor during the short time between
Diolife’s correspondence announcing it “did not intend to move forward
with the transaction” and the date Diolife filed the lawsuit. In total, only
nine days elapsed between Diolife’s correspondence withdrawing from the
MIPA and the date it filed the lawsuit. Even while the lawsuit was pending,
Perera testified by affidavit that he remained “ready, willing, and able” to
conclude the transaction as written in the MIPA.
On the date of the breach, March 31, 2016, Perera had a right to receive
$200,000 and, instead, he received nothing. See Shearson Loeb Rhoades,
Inc. v. Medlin, 468 So. 2d 272, 273 (Fla. 4th DCA 1985) (stating that
damages generally “should be measured as of the date of the breach”
(quoting Grossman Holdings Ltd. v. Hourihan, 414 So. 2d 1037, 1040 (Fla.
1982))). His text message bragging about the increased value of the
7
company does not change the fact that he did not receive the benefit of the
bargain—$200,000.
Yet Diolife passionately argues in its motion that “the benefit of the
bargain measure of damages absolutely requires a plaintiff to prove the
actual value of the property at the time of the breach.” In support of this
assertion, Diolife relies on Kind v. Gittman, 889 So. 2d 87, 90 (Fla. 4th DCA
2004). In Kind, we stated that “the ‘benefit of the bargain’ rule [ ] awards
as damages the difference between the actual value of the property and its
value had the alleged facts regarding it been true.” Id. (quoting Martin v.
Brown, 566 So. 2d 890, 891-92 (Fla. 4th DCA 1990)). But Kind involved
a claim for fraudulent inducement, and this appeal does not.
Still, Diolife is correct that the difference between the contract price and
the market value of the interest in the company is one potential measure
of damages. See, e.g., Estate of Callaway v. Garner, 772 S.E.2d 668, 670
(Ga. 2015); Miga v. Jensen, 96 S.W.3d 207, 216 (Tex. 2002); Aroneck v.
Atkin, 456 N.Y.S.2d 558, 559 (N.Y. App. Div. 1982); Langlois v. Maloney,
64 A.2d 697, 702 (N.H. 1949). Generally, these cases hold that damages
for breach of a stock purchase agreement are measured by comparing the
stock’s contract price to its market value. See Aroneck, 456 N.Y.S.2d at
559.
That is one potential measure of damages. It is not the only one. Diolife
incorrectly maintains it would be “unprecedented” to hold that the seller
of an interest in a business can receive the contract price. Based on these
facts and legal arguments, such a holding is not “unprecedented” or
“blatantly wrong.”
In fact, “where a buyer breaches his contract to purchase certain
specific shares of stock,” “[t]he general rule” allows the seller three options.
Annotation, Measure of Damages for Buyer’s Breach of Contract to
Purchase Shares of Stock, 44 A.L.R. 358 (1926) (citing Mason v. Decker, 72
N.Y. 595, 599 (N.Y. 1878)).
• First, “the seller may treat the stock as belonging to the buyer
and recover the contract price . . . .” Id.; see also 12A Fletcher
8
Cyc. Corp. § 5630 (2018) (“If the seller of stock has delivered
it, an action for the price agreed upon may be maintained.”). 3
• Second, the seller may “resell the property as agent of the
buyer and recover the difference between the contract price
and the net amount received on the resale.” Annotation,
Measure of Damages for Buyer’s Breach of Contract to
Purchase Shares of Stock, 44 A.L.R. 358 (1926).
• Third, the seller “may keep the shares of stock and recover as
his damages the difference between the contract price and the
value of the stock at the time when the buyer should have
accepted the same.” Id.
The first available remedy allows a plaintiff to seek the contract price
from the defendant, a remedy long ago accepted throughout this country.
See, e.g., Pittsburgh Hardware & Home Supply Co. v. Bown, 174 F. 981,
983 (3d Cir. 1909); Veatch v. Howard, 444 P.2d 865, 867 (Colo. 1968);
Davies v. Semloh Hotel, Inc., 44 P.2d 689, 691 (Utah 1935); Lam v. White,
264 S.W. 1113, 1115 (Ky. 1924); Tucker v. Scott, 186 P. 150, 151 (Cal.
1919).
Similarly, the Pennsylvania Supreme Court explained that the “law in
this state as well as elsewhere is that, where the vendor has tendered a
delivery of the specific property, for example, stock or bonds, required by
the contract, he is entitled to the agreed price.” Vilsack v. Wilson, 112 A.
17, 19 (Pa. 1920) (citations omitted). And the New York Court of Appeals
explained that when a buyer fails to tender the agreed purchase price for
stock, “it is too well-settled to be longer disputed that the plaintiff could
treat the stock as belonging to the defendant, and sue for and recover the
price agreed to be paid for it.” Mason, 72 N.Y. at 599 (citations omitted).
Like Diolife, a defendant recently argued to Connecticut’s intermediate
appellate court that “the only proper measure of damages is the difference
between the purchase price of the stock and the value of the stock.”
Whitney v. J.M. Scott Assocs., Inc., 137 A.3d 866, 871 (Conn. App. Ct.
2016). The court rejected the defendant’s argument and approved the trial
3Stock is delivered when an agreement to purchase is signed and the seller has
no further obligations. Jackson Land Co. v. Harbeson, 153 So. 2d 826, 828 (Fla.
1963) (“There was no failure on the part of the Harbesons to deliver the stock.
That was accomplished when the contract was signed.”); see also Radiation
Dynamics, Inc. v. Goldmuntz, 464 F.2d 876, 891 (2d Cir. 1972); Mason, 72 N.Y.
at 598.
9
court’s imposition of damages in the amount due on the agreement. Id. at
871-72 (awarding damages equal to the total amount due on the
agreement minus what the plaintiff had received).
Thus, the remedy awarded to Perera in this case is not
“unprecedented.” In fact, it appears the First District allowed the same
remedy in Black v. Frank, 176 So. 2d 113, 114-15 (Fla. 1st DCA 1965).
There, the seller of stock in a restaurant filed a breach of contract lawsuit
against the buyer. Id. at 114. The trial court awarded damages to the
seller “pursuant to the original agreement to purchase the assets.” Id. at
115. On appeal, the buyer argued the trial court erred in awarding
damages, as the proper remedy was to return the stock to the seller. Id.
The First District disagreed and held that the seller could obtain damages
in accordance with the obligations of the contract. Id.
And the Third District allowed the same remedy when a buyer refused
to pay for stock she requested a broker acquire. Mass v. Gordon, 101 So.
2d 836, 837-38 (Fla. 3d DCA 1958). The court explained that “the broker
has an election of remedies.” Id. at 837. The broker could “treat the stock
as the property of the customer, and sue for the full purchase price upon
a tender of the stock; or, he may sell the stock promptly or within a
reasonable time, and recover the difference between the purchase price
and the amount received on such sale.” Id.
The Florida Supreme Court has also recognized that a closely held
corporation may be treated differently when dealing with the breach of a
contract to purchase stock. The court held that “[t]he rule enunciated by
this Court . . . appears to be in accord with the weight of American
authority in holding that contracts for the sale of stocks that have no
recognized market value, or which are not readily procurable except from
the defendant will be specifically enforced.” McCutcheon v. Nat’l
Acceptance Corp., 197 So. 475, 478 (Fla. 1940) (citation omitted); see also
Jackson Land Co., 153 So. 2d at 828; Baruch v. W. B. Haggerty, Inc., 188
So. 797, 799 (Fla. 1939); Chace v. Johnson, 123 So. 519, 521 (Fla. 1929).
Similarly, we have explained that
[i]n Baruch . . . the [Florida Supreme Court] held that where
the corporation was a closed one, and where none of the stock
had ever been put on the market and had no readily
ascertainable market value and where the stock had no fixed
value and no par value, the buyer would be entitled to invoke
the aid of equity to enforce a contract for sale of stock.
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Further, the court found the doctrine of mutuality of remedy
would entitle the seller to specific performance[.]
Camp v. Parks, 314 So. 2d 611, 613–14 (Fla. 4th DCA 1975). 4 The fact
that Cowboys Saloon Holdings was an entity without stock on a public
market is a factor to be considered.
Perera was entitled “to pursue any remedy which the law affords.”
Black, 176 So. 2d at 115. In Black, the First District held the seller of
stock had a right to pursue the remaining contract amount from the buyer.
Id. So too does Perera. While the generally accepted remedy may be (and
should be) the difference between the agreed purchase price and the
market value of the stock, that is not a viable remedy in this case. On
these unique facts and based on the issues raised, Perera is entitled to the
$200,000 stated on the face of the MIPA.
Conclusion
Diolife breached the MIPA when it did not close on the purchase of the
additional 5% interest, and there was no valid oral modification. As a
result, Perera sustained damages in the amount of $200,000. We
therefore reverse the court’s judgment and remand for entry of judgment
consistent with this opinion.
Reversed and remanded.
GERBER, C.J., and TAYLOR J., concur.
* * *
FINAL UPON RELEASE; NO MOTION FOR REHEARING WILL BE
ENTERTAINED; MANDATE ISSUED SIMULTANEOUSLY WITH OPINION.
4Perera did not appeal the court’s judgment on his claim for specific performance,
perhaps because performance is now impossible, though it was possible when
Diolife filed the lawsuit.
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