Court Opinion

ID: 4587372
Source: CourtListenerOpinion
Date Created: 2020-11-18 16:03:02.016624+00
Date Added: 2024-06-11T13:49:49.948056
License: Public Domain

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
                              FOURTH DISTRICT

    TRITON STONE HOLDINGS, L.L.C., LOTUS BUSINESS, L.L.C.,
             JOSH KELLER, and RANDY C. MATHIS,
                        Appellants,

                                     v.

  MAGNA BUSINESS, L.L.C., DECIO MAGNANI, VOLANZ, L.L.C., and
                  LANDER AMERICA, INC.,
                           Appellees.

                              No. 4D19-2371

                           [November 18, 2020]

   Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; Carol-Lisa Phillips, Judge; L.T. Case No. CACE18-
006014.

   Christopher N. Bellows of Holland & Knight LLP, Miami, for appellants.

   Keith T. Grumer of Katz Barron, Fort Lauderdale, for appellees.

CURLEY, G. JOSEPH, Associate Judge.

   The Defendants below appeal from the trial court’s final judgment in
favor of the Plaintiffs, finding, among other things, that the parties’
handwritten document was an enforceable contract, and that the parties
had commenced performance, thereby manifesting an intent to be bound
by the agreement. The Defendants’ primary argument is that the final
judgment must be reversed because the parties did not agree to all
essential terms necessary for a lawful transfer of membership interests in
an LLC entitled “Lotus.” We agree with the Defendants and reverse.

                                   Lotus

    Lotus is a Florida limited liability company in the business of importing
and distributing ceramic products and mosaic tiles. The company is
governed by an operating agreement. Lotus consisted of four members,
all of which are business entities: Magna Business, L.L.C. (“Magna”);
Volanz, L.L.C. (“Volanz”); Lander America, Inc. (“Lander”); and Triton Stone
Holdings, L.L.C. (“Triton”), and each of which are participants in this
litigation.

   In 2012, Lotus was formed by Decio Magnani (“Magnani”) and Juliano
Kramer (“Kramer”), the principals of Magna and Lander, respectively. In
2015, Lotus admitted two additional members, Volanz and Triton.
Notably, Lotus’s operating agreement was amended in accord with its
dictates. The members agreed that Lotus would distribute Triton’s
products—such as granite and quartz slabs and plumbing products—in
addition to the ceramic and mosaic products it already imported.
Magnani, Magna’s principal, would serve as Lotus’s general manager. The
parties struggled in their merged operations.

                     Later Efforts to Restructure Lotus

    The Lotus members met in 2016 to discuss future options. They agreed
to restructure the company by removing Magnani as general manager,
replacing him with Triton’s principal, Josh Kessler (“Kessler”). It was also
agreed that Magnani would continue to manage the day-to-day operations
of the mosaic business, and Kessler would assume Lotus’s corporate and
financial responsibilities. It is worthy of comment that the operating
agreement was amended to reflect the change in corporate management
responsibilities.

   Despite the company’s restructuring, the business continued to
struggle. In May 2017, the parties agreed they needed to find a solution
or part ways. In August 2017, Kessler emailed the Lotus members’
principals, asking that they meet on August 22 and 23 to discuss capital
contributions and the company’s future.

    What the parties refer to as the “Dunkin Donuts meeting” took place
over two days in a Dunkin Donuts conference room near Lotus’s main
office.  It was decided that Triton would buy the other members’
participation units in Lotus. The group valued the company at $1.9
million.

   Volanz’s principal, Ricardo Diaz (“Diaz”), drafted a handwritten
document on notebook paper outlining the amounts payable to Volanz,
Magna, and Lander. The document provided that: “[parties] will sign
contracts and promissory notes as per pages 2 and 3.” Those pages, in
turn, described the future contracts for the sale of membership
participation units by: (1) Volanz to Triton; (2) Lander to Triton; and (3)
Magna to Triton. Promissory notes were to be issued to Volanz and
Lander.

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   Additionally, the handwritten document referenced many terms, which
included:
   (1) term: 32 months;
   (2) governing law: Florida;
   (3) right to prepay: Yes;
   (4) joint and several guarantors: Josh Kessler, Randy Mathis, and
       Triton;
   (5) costs and fees in the event of default: 10% of $1,135,250; and
   (6) interests: none.

    The document also provided that “Decio [Magnani] would leave the
company as soon as he receives payment.” Initially, the parties discussed
that Magnani would receive a severance package. The severance package
provision, however, was stricken from the document after Magnani agreed
to forgo severance in exchange for Triton’s promise to make a lump sum
payment for Magna’s membership interest.

    Kessler, Mathis, Diaz, Gayoso, and Kramer signed the handwritten
document prepared by Diaz. The handwritten document did not indicate
the capacity in which the individuals were signing, nor did it set a closing
schedule or reference the operating agreement requirements. Despite its
subject being the sale and transfer of membership interests in Lotus, the
agreement makes no reference to the operating agreement or its dictates
for completion of a “valid” transfer.

                       Events Following the Meeting

   Triton fired Magnani the very next morning. Magnani then contacted
Kessler asking for payment. A few days later, Kessler caused Lotus to
issue a check to Magna for $25,000. The memorandum line on Lotus’s
internal record states the purpose of the check was: “DEPOSIT PAYMENT
OF 100% SHARES.”

   A few months later, Lotus issued a second check payable to Magnani
for $12,500. After the second payment, Magnani texted Kessler again to
request payment. Kessler replied in a text message:

      Hey bud. You know. I don’t disagree with you I wish my
      partners and I could all pay as we agreed but together putting
      money on the business, we can’t agree to come up with the
      money just to pay all the bills.

  Two months later, Kessler sent Magnani a written offer by Triton to pay
Magnani fifty thousand dollars’ worth of tile inventory as final payment for

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Magna’s membership interest. The written offer also included a twenty-
four month non-compete covenant that prohibited Magnani from soliciting
Lotus’s clients. Magnani refused the offer.

   In March 2018, Kessler explained in an email to Magnani’s counsel that
Triton was unable to make payment. Kessler stated that the parties
needed a formal contract before any payment was made. He explained
that the Plaintiffs had sent Triton a formal contract based on the terms
commemorated in the handwritten outline, but Triton’s attorneys did not
consider it acceptable.

   Soon after, Magnani and the three selling members sued Triton,
Kessler, and Mathis for breach of contract. They did not sue Lotus. The
Plaintiffs sought to enforce the handwritten document and the personal
guarantees. In response, the Defendants assert that:

      (1) the handwritten agreement was merely an outline and proposal
          for a future contract;
      (2) the agreement was ambiguous and devoid of essential terms;
      (3) the agreement was signed by Kessler and Mathis in their
          individual capacity and not by Triton; and
      (4) there was no meeting of the minds on all essential terms.

   The trial court entered final judgment in favor of the Plaintiffs, finding,
among other things, that the parties’ handwritten document was an
enforceable contract, and that the parties had commenced performance,
thereby manifesting an intent to be bound by the agreement.

                           Arguments on Appeal

    The Defendants’ primary argument is that the final judgment must be
reversed because the parties did not agree to all essential terms necessary
for a lawful transfer of Lotus membership interests. The Defendants assert
that the Lotus operating agreement dictates the manner for any
enforceable Lotus membership transfer.         These transfers were not
referenced in the Dunkin Donuts agreement or otherwise performed.

   Even though the express terms of the Lotus operating agreement
provide that a transfer is only valid once the operating agreement is
amended to account for the terms of the transfer, the handwritten
agreement does not mention any conditions or procedures for the
conveyance of the Lotus membership interests. The operating agreement
also requires that it be signed by the transferee to effectuate a transfer.

                                      4
   In furtherance of their argument that this was nothing more than an
agreement to agree, the Defendants also note that the handwritten
document expressly provided that formal contracts and promissory notes
would be prepared and signed by the parties.

   The Plaintiffs attempt to counter this argument by suggesting that the
record contains competent substantial evidence to support the trial court's
conclusion that the handwritten document is an enforceable and binding
contract. They claim that the handwritten agreement contained all of the
essential terms, which include the identity of each seller, their
membership units, the sale price, and the payment terms. Further, the
document shows that Magna, Lander, and Volanz offered to sell Triton
their membership interests in exchange for the indicated sale price. The
agreement further provided that Magnani would leave the company upon
receiving full payment for his membership interest.

    The Plaintiffs assert that Triton manifested its acceptance of an
agreement by: (1) texting the Plaintiffs they intended to pay “as agreed”;
(2) excluding the Plaintiffs from participating in Lotus; and (3) by partially
paying Magnani for his membership interest. Triton also informed third
parties that Triton had purchased the entire company and did not allow
Magnani to attend industry trade shows on behalf of Lotus. Additionally,
Triton retained profits for its own benefit and made no reports to the other
members regarding the company’s status.

   The Plaintiffs suggest that Fineberg v. Kline, 542 So. 2d 1002, 1004
(Fla. 3d DCA 1988), is instructive. In that case, the Third District
explained that a party who “accepts the proceeds and benefits of a
contract” remains subject to “the burdens the contract places upon him.”
Id. Accordingly, defendants are estopped from repudiating their obligation
to pay the amounts indicated in the agreement. In Kline, however, while
assent was lacking, there was agreement or performance concerning all
essential terms. Id. The missing assent or terms were provided by the
parties’ performance. Here, the Defendants argue that essential terms are
missing and have not been provided by performance. At most, the
Defendants assert, the parties agreed to agree.

   In response to the fact that the handwritten document did not comply
with the Lotus operating agreement restrictions on transfers, the Plaintiffs
posit that the issue was not preserved for appellate review as it was not
raised below. 1

1The Plaintiffs also argued that even if compliance with the Lotus Operating
Agreement was raised as an issue at trial, it was moot because unanimous action

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                              Standard of Review

   A decision interpreting a contract presents an issue of law that is
reviewable by the de novo standard of review. See Mgmt. Computer
Controls, Inc. v. Charles Perry Constr., Inc., 743 So. 2d 627, 630 (Fla. 1st
DCA 1999). When the trial court's decision is based in part on factual
findings, it presents a mixed question of law and fact. See Fonte v. AT&T
Wireless Servs., Inc., 903 So. 2d 1019, 1023 (Fla. 4th DCA 2005) (citation
omitted). “The standard of review applicable to the trial court’s factual
findings is whether they are supported by competent, substantial
evidence.” Id.

    “The basic elements of an enforceable contract are offer, acceptance,
consideration, and specification of essential terms.” Jericho All-Weather
Opportunity Fund, LP v. Pier Seventeen Marina & Yacht Club, LLC, 207 So.
3d 938, 941 (Fla. 4th DCA 2016). “The question of whether the parties
intended to form a binding contract is determined by examining the
language of the document in question and the surrounding
circumstances.” Midtown Realty, Inc. v. Hussain, 712 So. 2d 1249, 1251–
52 (Fla. 3d DCA 1998). Moreover, if the parties prescribe terms to
effectuate a binding agreement, such terms are controlling. Where the
parties intend that there will be no binding contract until the negotiations
are reduced to a formal writing, there is no contract until that time. Club
Eden Roc, Inc. v. Tripmasters, Inc., 471 So. 2d 1322, 1324 (Fla. 3d DCA
1985); see also Housing Auth. of City of Fort Pierce v. Foster, 237 So. 2d
569 (Fla. 4th DCA 1970).

   The party seeking to enforce a purported agreement has the burden of
establishing assent to the essential terms by the opposing party. Carroll
v. Carroll, 532 So. 2d 1109, 1109 (Fla. 4th DCA 1988). “The definition of
‘essential term’ varies widely according to the nature and complexity of
each transaction and is evaluated on a case-by-case basis.” Lanza v.
Damian Carpentry, Inc., 6 So. 3d 674, 676 (Fla. 1st DCA 2009).

by the members would render any requirement in the Lotus Operating Agreement
unnecessary. The Plaintiffs cited to section 608.4231(6), Florida Statutes (2012),
which according to the Plaintiffs provides that “decisions of the . . . managing
members shall be made by majority vote of . . . managing members if at a meeting,
or by unanimous written consent.” (emphasis added). In response, the
Defendants correctly noted that Chapter 608 was repealed and replaced by
Chapter 605 (the new Limited Liability Company Act) in 2013. Under the current
law, the operating agreement controls and governs all relations between the
members and Lotus. § 605.0105(1)(a), Fla. Stat. (2017). Thus, the argument is
governed, and in this case largely resolved, by the strictures of the Lotus
operating agreement.

                                        6
    When determining whether there has been a meeting of the minds on
all essential terms, courts should distinguish preliminary negotiations
from a final agreement. A Florida appellate court outlined some of the
practical issues arising in an assessment of whether an enforceable
contract was reached during negotiations:

      Preliminary negotiations or tentative and incomplete
      agreements will not establish a sufficient meeting of the minds
      to create an enforceable agreement. Nor may an agreement
      be determined to be final where the record establishes that it
      is the intent of the parties that further action be taken prior
      to the completion of a binding agreement. Applications of
      these principles help assure that parties to litigation will not
      unintentionally be deprived of their access to a judicial
      determination, and that parties and their legal representatives
      will negotiate without fear of unintentionally entering into a
      binding agreement.

Williams v. Ingram, 605 So. 2d 890, 893–94 (Fla. 1st DCA 1992) (internal
citations omitted).

    The Defendants argue that the handwritten document is not an
enforceable agreement because it left open essential terms for future
negotiation. They contend that the Lotus operating agreement prescribes
the necessities for a valid agreement, which were not within the Dunkin
Donuts agreement and were not provided by performance. They assert
there was no evidence that these terms were ever negotiated or agreed on.
As a fundamental example, a closing or transfer date is not specified, nor
is there any evidence that a transfer of the Lotus membership interests
occurred or that anyone, including Magnani, tendered their interests.

    Rather than offer evidence of these terms, the Plaintiffs argue that the
Defendants did not preserve these arguments for appeal. In response, the
Defendants correctly note that in a bench trial, the insufficiency of the
evidence is properly raised for the first time on appeal. H.D. v. Dep’t of
Children & Families, 964 So. 2d 818, 819 (Fla. 4th DCA 2007) (in a bench
trial, the insufficiency of evidence is properly raised for the first time on
appeal).

   The Defendants also claim that the operating agreement required Lotus
to obtain legal and tax advice prior to any transfer. The Defendants argue
that this language is controlling, and, therefore, the handwritten
document is not a valid agreement for the transfer of the membership
interests. This portion of the Defendants’ argument fails because the

                                     7
operating agreement states quite clearly that a failure to obtain this advice
“shall not invalidate any such transfer.”

    The Defendants, however, present a dispositive argument regarding the
document’s failure to address the mandatory terms related to the transfer
of membership interests. The operating agreement provides that “[n]o
transfer . . . of membership rights in the company (a ‘transaction’) shall be
valid unless made pursuant to a writing that sets forth all material terms
of the transaction . . . .” The operating agreement also provides that “no
transfer . . . shall be valid unless the transferee or grantee signs this
[Operating] Agreement as appropriately amended to take account of the
terms of the transfer . . . .” (emphasis added).

   Here, the handwritten document stated the sale price, the installment
payments, the sellers, and other general conditions. The document,
however, provided no details concerning the transfer of the membership
interests, which was the purpose of the parties’ discussions. Among other
things, there is no mention of a closing date, issuance and transfer of
certificates, releases, indemnification, or mandatory execution of the
operating agreement or amendment.

    Theocles v. Lytras, 518 So. 2d 936 (Fla. 3d DCA 1987), is instructive in
this instance. There, the parties were partners in a restaurant business.
Id. at 936. The appellant argued that the parties agreed that one partner
would buy the other’s interest in the business. Id. The Third District
concluded that the record was devoid of competent evidence of a firm
agreement or of the terms essential to an enforceable agreement. Id. at
937. Significantly, the Third District noted, stock in the corporate entity
had never been issued, and there were no agreements or discussions
regarding a closing date, releases, tax and other liabilities, or obligations
to the owner of the business premises. Id.

   Similarly, in Midtown Realty, Inc., the Third District held that a two-
page letter of intent regarding the sale of a gas station was not a binding
contract but simply an agreement to agree. The court explained that the
sale of a gas station was a complex situation that included environmental
concerns, the attainment of licenses and government approval, and the
financing of a large sum of money. 712 So. 2d at 1252. Thus, the court
said, it was reasonable to conclude that the parties did not intend to be
bound by a skeletal letter of intent. Id. (emphasis added).

   Here, the record evidence shows that the parties intentionally left open
essential terms for future consideration. Given that the purpose of a
contract would be to transfer membership interests, the parties would

                                     8
have had to eventually discuss and agree on the method and timing of
conveyance and the subsequent mandatory amendment of the operating
agreement.     If the parties prescribe terms to effectuate a binding
agreement, such terms are controlling. See Club Eden, 471 So. 2d at 1324
(where the parties intend that there will be no binding contract until the
negotiations are reduced to a formal writing, there is no contract until that
time); see also Housing Auth. of City of Fort Pierce, 237 So. 2d 569 (Fla. 4th
DCA 1970), and Capital Asset Research Corp. v. Michael Swerdlow Co.,
Inc., 743 So. 2d 43, 44 (Fla. 4th DCA 1999) (where commitment to a
binding agreement is expressly conditioned upon execution in a certain
manner, an enforceable agreement does not exist until that specified
condition is satisfied). These terms are essential to the transaction, and
their absence is conclusive evidence that the parties did not reach a
binding contract to transfer interests in Lotus.

    Here, the Lotus Operating Agreement governed the manner that would
effectuate a valid, binding transfer. It was likewise undisputed that the
express conditions within the Lotus Operating Agreement were
unaddressed in the handwritten agreement and completely unsatisfied.
Therefore, in accord with the governing document, to wit, the Lotus
Operating Agreement, a binding transfer agreement was not created.
Rather, at most, the parties constructed an agreement to agree that was
to be formalized in an appropriate manner as prescribed by the Lotus
Operating Agreement.

   The Plaintiffs concede that under Florida law, agreements to agree are
not enforceable as a matter of law. Nevertheless, they claim that the
Defendants manifested their assent and formed a binding contract by
partially performing and enjoying the benefits of the agreement. Assent
can be manifested when all material terms are addressed. Here, that is
not the case. Mainly, the Plaintiffs argue that the Defendants began
performance by paying Magnani part of the money allegedly owed to
Magna. While partial payment did occur, it did not provide missing
essential terms. For example, had the interests been conveyed or even
tendered, the lack of a closing date might be removed as a missing
essential term.     This essential term, however, remained open and
unaddressed, like several others.

   Moreover, this factor does not cure the absence of a meeting of the
minds as to the material terms of the transaction. In Club Eden, the Third
District held that partial payment based on a memorandum of intent did
not create a binding contract where the memorandum was clear that no
rights or obligations would arise until the execution of an agreement
containing all terms and conditions. 471 So. 2d at 1324. Here too, the

                                      9
handwritten document clearly indicated that the parties were to execute
formal contracts and promissory notes. Just as important, the draft left
open key terms related to the transfer of the membership interests as
required by the Lotus operating agreement.

   The record also suggests that the Plaintiffs themselves did not believe
the handwritten document was a final, binding agreement.             They
acknowledged sending a formal draft of the contract to Triton for further
review and approval.

   “A party’s partial performance does not necessarily indicate a belief that
the other side is bound. A party may make some partial performance
merely to further the likelihood of consummation of a transaction it
considers advantageous.” Teachers Ins. & Annuity Ass’n of Am. v. Tribune
Co., 670 F. Supp. 491, 502 (S.D.N.Y. 1987).

   The Plaintiffs’ argument that Triton and Kessler never denied the
existence of the agreement and mentioned paying the money “as we
agreed” is also not dispositive. Kessler testified that he believed the
handwritten document was an agreement or proposal to enter a future
contract. It is therefore reasonable that he would refer to the proposal as
an agreement.

   Finally, the Plaintiffs’ argument that the Defendants are estopped from
disclaiming the contract because the Plaintiffs “changed their position”
and the Defendants “accepted the benefits” is unpersuasive as well. Triton
never received the benefit of the bargain, that is, the membership interests
in Lotus.

   For the reasons above, it is clear that the trial court erred in
determining that the purported agreement was an enforceable contract.
The handwritten draft did not contain essential terms, which must include
the mechanisms and conditions related to the legal transfer of the
membership interests. Accordingly, final judgment for the Plaintiffs is
reversed and remanded with instructions to grant appropriate relief. 2

    Reversed and remanded with instructions.

2Other arguments were advanced by the Defendants, which include the fact that
Lotus was not a target of the Complaint nor did it participate in the trial.
Nevertheless, Lotus was the subject of relief within the Final Judgment. While
this was also error, this issue and others raised are moot in light of the decision
above. Accordingly, they are not necessary for further review or consideration.

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GROSS and KUNTZ, JJ., concur.

                         *        *        *

    Not final until disposition of timely filed motion for rehearing.

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