N302DP, LLC v. Chardan Aero Corp.

Third District Court of Appeal
State of Florida
Opinion filed November 12, 2014.
Not final until disposition of timely filed motion for rehearing.
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No. 3D14-407
Lower Tribunal No. 09-6814
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N302DP, LLC,
Appellant,
vs.
Chardan Aero Corp, et al.,
Appellees.
An Appeal from the Circuit Court for Miami-Dade County, Sarah I. Zabel,
Judge.
Arnstein & Lehr and Susan E. Trench, for appellant.
Eric A. Arrington & Associates and Eric A. Arrington (Hollywood), for
appellees.
Before WELLS, EMAS and LOGUE, JJ.
EMAS, J.
Appellant, N302DP, LLC (“N302DP”) seeks review of a final judgment
which, though entered in its favor on the issue of breach, limited its damages to
$24,626.50. We hold that the trial court erred in so limiting N302DP’s damages,
and reverse and remand.
N302DP was formed in 2007 by R. Donahue Peebles for the purpose of
purchasing a Gulfstream IIB aircraft. Peebles had agreed to purchase the aircraft
after being approached by, and entering into negotiations with, Frederico
Machado, who was in the business of private jet management and charters.
Machado, who did not have the financial wherewithal or available credit to
purchase the $3.8 million aircraft, sought to have Peebles purchase the aircraft and
then lease it to Machado’s company, Chardan Aero Corporation (“Chardan”), for
five years, in exchange for, inter alia, Peebles having access to the aircraft for ten
days a month.
Under the terms of the “Aircraft Lease Terms and Charter Management
Agreement” (“the Agreement”), entered into between N302DP and Chardan on
July 16, 2007, N302DP had the right to use the aircraft for ten days each month,
and Chardan was entitled to use of the aircraft for the remainder of the month, for
the purpose of operating third-party charters. Chardan was entitled to collect all
revenue generated by the charter business, but was required to make monthly lease
payments of $24,626.50,1 and was responsible for all insurance, maintenance,
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repair, servicing, and other associated costs of the aircraft. N302DP would be
invoiced by Chardan for N302DP’s own charter expenses, including jet fuel, pilot
costs/expenses, and landing fees incurred for flights on its allotted days. The
Agreement also provided remedies upon termination and/or default:
12. Remedies on Termination or Default. In the event
of a termination and/or default of this Agreement, the
following remedies shall apply:
(a) Within sixty (60) days, a full accounting shall be
made . . .
(b) After such settlement of accounts, [Chardan] shall
turn over to [N302DP] the Aircraft, together with
all aircraft log records appertaining to the Aircraft,
and
(c) In addition to 12.1(a) and (b) above, in the event
of a termination due [ ] only to a default by
[Chardan], then [Chardan] shall be liable to
[N302DP] for the balance of the Lease Payments
through the end of the Term of the Agreement.
Machado also executed a personal guaranty of the Agreement.
On September 2, 2008, Chardan invoiced N302DP for charges and expenses
incurred from N302DP’s client aircraft hours which occurred between July and
August 2008. N302DP disputed some of the charges contained in that invoice and
the record reflects the parties had multiple discussions on this issue through early
1The monthly lease payment was based upon the monthly financing charges which
N302DP was obligated to pay pursuant to a loan agreement with Northern Trust
Bank.
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October. It is undisputed that thereafter, Chardan failed to make the next
scheduled lease payment of $24,626.50, due October 10, 2008.
On October 12, Machado notified Peebles that Machado’s lawyer would
send a termination letter the next day due to N302DP’s failure to pay the disputed
invoices. Peebles advised Machado that Chardan was in default for failure to pay
the October lease payment, and encouraged Machado not to proceed with declaring
N302DP in default at the risk of legal action. Nevertheless, N302DP was served
with a notice of default and termination letter on October 13.2
Thereafter, N302DP sued Chardan for breach of contract and Machado for
breach of guaranty and sought, as its remedy, the accelerated balance of all lease
payments as provided under the terms of the Agreement. It also alleged a claim
against both Chardan and Machado for breach of fiduciary duty for allegedly
abandoning the aircraft. Chardan filed a counterclaim for breach of contract and
unjust enrichment, alleging that N302DP had failed to pay properly-invoiced
charges. After a two-day bench trial, the trial court entered a final judgment finding
in favor of N302DP on its breach of contract claim against Chardan, denying
N302DP’s breach of fiduciary duty claims, and denying Chardan’s counterclaim.
Specifically, the court found that Chardan defaulted by failing to make the October
10 lease payment. This finding, combined with the trial court’s denial of the
2 Machado testified at trial that at this point, he was “waiting for [N302DP] to
default” so he could “end the relationship.”
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counterclaim,3 left Chardan as the only party in default. Nevertheless, the trial
court awarded N302DP damages in the amount of the single October 2008 lease
payment ($24,626.50), noting that since N302DP took possession of the plane by
October 16, 2008, and thereafter had the use and enjoyment of the plane, N302DP
was not entitled to any portion of the balance of the accelerated lease payments.
This appeal followed. N302DP contends that the trial court erred in finding
it was not entitled to the balance of the accelerated lease payments through the end
of the Agreement (50 months), asserting its entitlement to same because the
Agreement specifically provided for that remedy in the event of a default only by
Chardan. We agree.
The Agreement unambiguously provides that in the event of a termination
due only to a default by Chardan, it “shall be liable to [N302DP] for the balance of
the Lease Payments through the end of the Term of the Agreement.” There is
competent substantial evidence in the record to support the trial court’s finding that
Chardan defaulted on the Agreement by failing to pay the October lease payment.
Given this determination, and the trial court’s denial of Chardan’s counterclaim
(which was premised upon allegations that N302DP had breached and defaulted on
the Agreement), Chardan was determined below to be the only party in default.
Because the termination of the Agreement was “due only to a default by” Chardan,
3 Chardan did not cross-appeal the trial court’s adverse determination of its
counterclaim.
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N302DP was entitled, under the plain terms of the Agreement, to recover from
Chardan “the balance of the Lease Payments through the end of the Term of the
Agreement.” See Wolf v. Buchman, 425 So. 2d 182, 184 (Fla. 3d DCA 1983)
(holding “[a] lease, whether of real or personal property, may create or defeat the
right to the value of the lease as damages even upon return of the property”);
Chandler Leasing Div. v. Florida-Vanderbilt Dev. Corp., 464 F. 2d 267, 271 (5th
Cir. 1972) (holding that although there are multiple remedies available to a lessor
upon breach by the lessee under Florida law, including retaking possession of the
premises, those remedies are “intended to supply remedies when none are provided
in the lease.”)
Accordingly, we hold that it was error for the trial court to limit N302DP’s
damages to an amount representing the single lease payment of $24,626.50, and
reverse and remand for entry of a judgment in an amount of damages that includes
“the balance of the Lease Payments through the end of the Term of the
Agreement”, and for proceedings consistent with this opinion.
REVERSED AND REMANDED.
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