Court Opinion

ID: 9349248
Source: CourtListenerOpinion
Date Created: 2022-12-21 16:02:03.269171+00
Date Added: 2024-06-11T16:46:35.358277
License: Public Domain

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
                             FOURTH DISTRICT

                       COSTA INVESTORS, LLC,
                             Appellant,

                                    v.

             LIBERTY GRANDE, LLC and MOSES BENSUSAN,
                            Appellees.

                             No. 4D21-2676

                          [December 21, 2022]

   Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; Keathan B. Frink, Judge; L.T. Case No. CACE 18-11130
(12).

  Victor K. Rones of the Law Offices of Victor K. Rones, P.A., North Miami
Beach, for appellant.

  Bart A. Houston of The Houston Firm, Fort Lauderdale, for appellee
Moses Bensusan.

WARNER, J.

   Appellant, Costa Investors, LLC, appeals the order granting final
summary judgment in favor of appellee Moses Bensusan on Costa
Investors’ complaint alleging fraud. The court determined that Bensusan
could not be liable for fraudulent representations in an investor contract,
because Bensusan signed as president of the corporation and not
individually. Because a corporate officer who actively participates in a
fraud can be liable even while acting in a corporate capacity, we reverse
the summary judgment.

                                  Facts

    The underlying lawsuit originates out of the ownership and
development of four adjacent properties (the “Costa property”) that were
first purchased and owned by Liberty Grande LLC (“Liberty”). Bensusan
was president and the manager of Liberty and was also president of Costa
Hollywood Property LLC, which was a wholly owned subsidiary of Liberty.
Costa Hollywood Property’s business was to build the Costa Hollywood
Hotel on the Costa Property.

   On August 28, 2015, Liberty transferred the Costa Property by special
warranty deed to Costa Hollywood Property. The deed was signed by
Bensusan on behalf of Liberty as Grantor and recorded on September 3,
2015. Just three weeks after the transfer of the Costa property, Bensusan
on behalf of Costa Hollywood retained the services of UniSource Inc. to
prepare documents to raise funds through an EB-5 Investor program. 1

   Costa Investors (a group of EB-5 investors) and Liberty entered into a
Loan and Security Agreement in which Costa Investors agreed to make a
loan to Liberty as borrower for the development of the Costa Property. The
loan agreement provided that Costa Investors would provide a loan not to
exceed fifty million dollars to Liberty for financing costs related to Liberty’s
development of “Costa Hollywood”, “a new two-building, six-level, luxury
condominium-hotel development in Hollywood[.]”               Pursuant to the
agreement, Liberty granted to Costa Investors “a security interest, Lien
and mortgage” in the “assets that comprise the Project” including “the
Land and the Improvements thereon” in exchange for the loan to develop
and construct the Project. The land specified in the contract was the same
land that Liberty transferred to Costa Hollywood the previous month.

    Bensusan signed the Agreement on behalf of Liberty. The agreement
provided that the Borrower “has good, marketable and insurable fee simple
title to the Land, and good title to the rest of the Project, subject to no
Lien,” when in fact the property had been transferred to Costa Hollywood.
The agreement included a Borrower Certificate signed by Bensusan on
Liberty’s behalf stating that the “representations and warranties” made by
Liberty in the loan agreement were “true and correct in all material
respects on and as of the date hereof with the same effect as if made on
the date hereof.”

  In Article 2.2, the agreement provided that none of the individual
managers or corporate officers would be liable for the obligations of the
Borrower (Liberty). However, Article 7.3 provided:

1 The EB-5 program, also known as the Immigrant Investor Program, was created
by the United States Congress to stimulate the U.S. economy through investment
for development projects.     The program allows foreign investors to gain
permanent residence in the U.S. with certain investment requirements. See Am.
Immigr. Council, The EB-5 Visa Program: What It Is and How It Works (Feb. 2,
2016),       https://www.americanimmigrationcouncil.org/research/eb-5-visa-
program-what-it-and-how-it-works.

                                       2
         Liability Limitation.      No members, officers, directors,
         employees, agents, or representatives of Borrower will have
         any personal liability hereunder (except for fraud or intentional
         misconduct), and Lender agrees to seek recovery of any sums
         due under the Loan Documents solely from the Collateral
         securing the Loan from time to time.

(Emphasis supplied.) After execution of the agreement, Costa Investors
loaned Liberty two million dollars pursuant to the agreements.

   Liberty defaulted on the Loan and Security Agreement, at which point
Costa Investors discovered Bensusan’s representation that Liberty owned
the Costa property was not true.         When confronted with these
misstatements, Bensusan admitted that there was a problem as to the
ownership and the creation of Costa Hollywood. He “communicated his
apologies” and stated that the “defaults and ownership of the property
would be forthwith resolved[.]”

    When the matter was not resolved, Costa Investors filed an affidavit in
the public records alleging that it had entered into an agreement with
Liberty for the development and construction of the Costa property. The
affidavit was filed “in order to reflect for recording purposes” Costa
Investors’ interest in the property. Attached to the affidavit was the Loan
and Security Agreement and four notes, each for $500,000 or two million
dollars total.

    After the affidavit was filed, plaintiff Costa Hollywood Property sued
Costa Investors for slander of title to real property, alleging that the
affidavit had false statements and was disparaging to plaintiff Costa
Hollywood Property’s title to the Costa property. Costa Investors filed an
answer, affirmative defenses, counterclaim, and third-party complaint
against Liberty and Bensusan. Among other claims, 2 Costa Investors
alleged fraud as to Bensusan, fraud and conspiracy to defraud as to
Bensusan, and negligent misrepresentation as to Bensusan.

   In the fraud count, Costa Investors referenced the representations
made “[u]nder the terms of the Loan and Security Agreement and
Certification” as being fraudulent because Bensusan falsely represented
that Liberty had title to the Costa property, when Bensusan knew that
representation was false. Thus, Bensusan knew that Liberty could not

2   The operative pleading is the second amended third-party complaint.

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provide a security interest in the collateral at the time he made the
representation.

   In the fraud and conspiracy count, Costa Investors alleged that
Bensusan was the manager and controlling principal of Liberty and Costa
Hollywood Property. Costa Investors alleged that Bensusan executed the
loan agreement and the certification on behalf of Liberty, and that
Bensusan’s representations regarding ownership of the Costa Property
were known by him to be false at the time he made the representations.
Costa Investors also alleged Liberty’s and Bensusan’s representation that
a security interest in the collateral was provided by the loan agreement
was false and known to be false at the time it was made. The negligent
misrepresentation count repeated the claims of knowledge and alleged
Bensusan negligently made the representation that a security interest in
the collateral had been provided.

   The prayer for relief in all three counts against Bensusan stated that
Costa Investors sought damages, including special damages caused to the
investors through the loss of the EB-5 investment status. Bensusan’s
answer denied the allegations in the complaint.

   Bensusan filed a motion and an amended motion for summary
judgment. He argued that Costa Investors’ tort claims against him were
barred by the independent tort doctrine because “[a]ll of the claims against
Bensusan . . . fail[] to allege any tortious conduct separate and apart from
the conduct alleged to be a breach of the Agreement” with Liberty. Even if
the independent tort doctrine did not apply, the complaint “premised
[counts 2, 3, 4 against Bensusan] entirely on representations or covenants
made by Liberty expressly in the Agreement” to which Bensusan was not
a party. Bensusan contended that case law precluded liability in his
individual capacity because the contract was signed in his corporate officer
capacity, and Costa Investors had not sought to pierce the corporate veil.
Bensusan also maintained in the motion that clauses in the loan
agreement itself precluded his liability including the clause that
disclaimed any personal liability or personal guarantees for Liberty’s
obligations.

   Costa Investors filed a response to the motion and a statement of facts
with reference to evidence upon which it relied.

   After the hearing, the trial court entered summary judgment for
Bensusan. The trial court made several findings, including that the action
arose out of the loan agreement and that Bensusan signed the agreement
as an officer of Liberty. The court relied on the liability limitation of Article

                                       4
2.2, as well as the contract’s integration and merger clause which stated
that all prior oral representations were superseded by the agreement.

   The court determined that all of Bensusan’s alleged improper conduct
was not separate or distinct from the alleged improper conduct that was
the subject of the breach of contract claim against Liberty, thus applying
the independent tort doctrine. As well, the court found that Bensusan
made no representation of fact prior to entry of the agreement which could
support the fraud, conspiracy, or negligence claims. Thus the court
concluded no genuine dispute existed as to any material fact as to Costa
Investors’ counts for fraud, conspiracy to defraud and negligent
misrepresentation. Costa Investors appeals the final judgment.

                                 Analysis

   This court reviews de novo a trial court’s grant of summary judgment.
Boyles v. Jimenez, 330 So. 3d 953, 957 (Fla. 4th DCA 2021); People’s Tr.
Ins. Co. v. Chen, 333 So. 3d 208, 212 (Fla. 4th DCA 2022).

   The trial court incorrectly concluded that the independent tort doctrine
prevented Bensusan’s liability. The independent tort doctrine is a general
principle of law that provides “a plaintiff may not recover in tort for a
contract dispute unless the tort is independent of any breach of contract.”
Un2jc Air 1, LLC v. Whittington, 324 So. 3d 1, 3 (Fla. 4th DCA 2021)
(quoting Island Travel & Tours, Ltd., Co. v. MYR Indep., Inc., 300 So. 3d
1236, 1239 (Fla. 3d DCA 2020)). “This principle only applies, however, to
the parties to the contract.” Id. (emphasis added).
    Here, as Bensusan stated below in his statement of undisputed facts
and as is apparent from the loan agreement, he was only the signatory for
Liberty; he was not a party to the Agreement. Accordingly, the trial court’s
reliance on the independent tort doctrine to determine that Bensusan was
not liable was error. See Un2jc Air, 324 So. 3d at 3 (finding the
independent tort doctrine did not apply to appellee who was not a party to
the agreement).

    Instead, the court should have analyzed the complaint to determine
whether the evidence was sufficient to show that fraud occurred and
whether Bensusan could be liable for fraud or negligent conduct when he
actively participated in the fraud, even when he signed as a corporate
officer.

  “As a general rule, ‘a false statement of fact, to be a ground for fraud,
must be of a past or existing fact, not a promise to do something in the

                                     5
future.’” Wadlington v. Cont’l Med. Servs., Inc., 907 So. 2d 631, 632 (Fla.
4th DCA 2005) (emphasis added) (quoting Vance v. Indian Hammock Hunt
& Riding Club, Ltd., 403 So. 2d 1367, 1371 (Fla. 4th DCA 1981) (citing 27
Fla. Jur. 2d, Fraud and Deceit, § 24))). “[F]raudulent (‘knowingly false’)
representations . . . of a present fact . . . constitute[] fraud in the
inducement.” Prewitt Enters., LLC v. Tommy Constantine Racing, LLC, 185
So. 3d 566, 569 (Fla. 4th DCA 2016).

   The agreement and Borrower’s Certificate, both signed by Bensusan on
behalf of Liberty, made false statements of “existing fact.” Prior to
Bensusan signing those documents on behalf of Liberty, he had previously
transferred title to the Costa Property from Liberty to another one of his
entities, Costa Hollywood Property. The agreement represented Liberty as
the owner of Costa Property which was an existing false statement of fact,
and the agreement falsely purported to give Costa Investors a security
interest and mortgage on the Costa Property. The Borrower’s Certificate,
which Bensusan also signed on behalf of Liberty, made additional false
statements of existing fact, including that “all ‘representations and
warranties’ made by Liberty in the loan agreement were “true and correct
in all material respects.” Thus, Bensusan was not entitled to summary
judgment based upon the court’s conclusion that Bensusan had not made
any false statements of material fact.

    The central question is whether Bensusan can be held individually
liable for this fraud evidenced by the agreement and certificate when he
signed as the corporate officer of Liberty. We hold that he can.

   The case of Home Loan Corp. v. Aza, 930 So. 2d 814, 815 (Fla. 3d DCA
2006), is instructive. In Aza, a mortgage lender brought an action arising
out of a residential loan transaction against various parties, including the
president of the title services company involved in the transaction. Id. at
815. Against the president, the lender alleged causes of action for fraud
and negligent misrepresentation. Id. The trial court dismissed the claims
against the president, concluding that the president had signed the
relevant documents in her capacity as corporate president and could not
be held personally liable for any fraud or negligent misrepresentations in
them. Id.

   On appeal, the court noted that the complaint alleged that the president
prepared, signed, and certified the HUD–1 settlement statement, which
contained the knowingly false statements and material misrepresentations
regarding the down payments by the borrower. Id. at 815. The Third
District looked to this Court’s decision in Orlovsky v. Solid Surf, Inc., 405
So. 2d 1363, 1364 (Fla. 4th DCA 1981), in which we opined:

                                     6
      A director or officer of a corporation does not incur personal
      liability for its torts merely by reason of his official character;
      he is not liable for torts committed by or for the corporation
      unless he has participated in the wrong.               Accordingly,
      directors not parties to a wrongful act on the part of other
      directors are not liable therefor. If, however, a director or
      officer commits or participates in the commission of a tort,
      whether or not it is also by or for the corporation, he is liable to
      third persons injured thereby, and it does not matter what
      liability attaches to the corporation for the tort. A contrary rule
      would enable a director or officer of a corporation to perpetrate
      flagrant injuries and escape liability behind the shield of his
      representative character, even though the corporation might
      be insolvent or irresponsible.”

Aza, 930 So. 2d at 815–16 (emphasis original); see also 8A Fla. Jur. 2d
Business Relationships § 348 (2022 ed.) (same); compare with E & A
Produce Corp. v. Olmo, 864 So. 2d 447, 448 (Fla. 3d DCA 2003) (finding
record did not show any competent evidence that the vice president was
involved in any of the acts of the corporation, so summary judgment in her
favor was proper).

    The Third District in Aza concluded that the allegations sufficiently
alleged the president of the corporation’s “personal involvement” and
“participation in the tortious acts which resulted in [the plaintiff’s]
injuries.” Aza, 930 So. 2d at 816; see Diversified Mgmt. Sols., Inc. v. Control
Sys. Research, Inc., No. 15-81062-CIV, 2016 WL 4256916, *10 (S.D. Fla.
May 16, 2016) (citing Aza for the proposition that an officer does not incur
personal liability for actions of the corporation “if the president did not
participate in the wrong”) (emphasis added).

    Generally, courts have applied an “active participation theory” in
holding officers and directors individually liable when they actively
participated in the torts of the corporation. See Speiser et al., 1A Am. Law
of Torts § 4:24 (2022) (“[I]t appears that a director or officer may be held
directly liable for his or her own wrongful act—as is any agent or employee
or servant—such as negligence, . . . fraud, illegal or irregular issuance of
securities, conversion, and the like. The cases stress participation—or at
least knowledge amounting to acquiescence in the wrongful act.”)
(emphasis original). “Under the participation theory, the court imposes
liability on the individual as an actor rather than as an owner . . . not
predicated on a finding that the corporation is a sham and a mere alter
ego of the individual corporate officer.” Sereda v. Ctr. City Acquisitions,

                                       7
LLC, 222 A.3d 1161, 1169 (Pa. Super. Ct. 2019) (quoting Vill. at Camelback
Prop. Owners Ass’n v. Carr, 538 A.2d 528, 533 (Pa. Super. Ct. 1988)).
“Instead, liability attaches where the record establishes the individual’s
participation in the tortious activity.” Id.

    For instance, in National Acceptance Co. of America v. Pintura Corp., 418
N.E.2d 1114 (Ill. App. Ct. 1981), the court considered whether the
president and sole shareholder of a corporation who signed endorsements
of checks for the corporation could be held individually liable for the
alleged conversion of those checks when he signed them on behalf of and
for the sole benefit of the corporation. Id. at 1116. The court determined:

      One of the purposes of a corporate entity is to immunize the
      corporate officer from individual liability on contracts entered
      into in the corporation’s behalf. In contrast, although the
      officer is not liable for the corporation’s torts simply by virtue
      of his office, corporate officer status does not insulate him from
      individual liability for the torts of the corporation in which he
      actively participates. Thus a corporate officer may be liable
      for the negligence of the corporation; for fraud; trespass to
      realty; wilfully inducing breach of contract; and conversion[.]

Id. at 1116–17 (internal citations omitted) (emphasis added).

   The court concluded that the president actively participated by
endorsing and depositing the checks and thus rendered himself
individually liable for the conversion of the funds. Id. at 1117. The
president argued that if he was held liable for the conversion that he would
in effect be forced to pay a corporate debt incurred by virtue of the
contract. Id. The court rejected that argument, stating, “[a]lthough a
corporate officer is not generally liable for breach of contract, his status
does not shield him from liability for tortious acts from which the breach
proximately resulted.” Id.

    Similarly, Bensusan actively participated in the wrong, i.e., fraud and
misrepresentation, by signing the agreement and Borrower’s Certificate
purporting to show Liberty as the owner of Costa Property when Bensusan
had, on behalf of Liberty, previously transferred the title from Liberty to
another one of his entities. Bensusan actively participated in offering to
Costa Investors in the agreement a “security interest, Lien and mortgage”
in the “assets that comprise the Project” including “the Land and
Improvements thereon” in order to obtain loans from Costa Investors.
Under the active participation theory, Bensusan can be personally liable
for his fraudulent statements even though he signed on behalf of Liberty.

                                      8
See Aza, 930 So. 2d at 815–16; Orlovsky, 405 So. 2d at 1364. Otherwise,
Bensusan would be able to perpetrate this flagrant fraud and escape
liability behind the shield of his representative character. See Aza, 930
So. 2d at 816.

    The other bases for the trial court’s grant of summary judgment were
also incorrect. The court relied on the contract’s Article 2.2 which provided
no officer liability for the performance of Liberty’s obligations, together with
the contract’s merger clause. Neither absolve Bensusan of liability. First,
Article 2.2 merely absolves Bensusan from any personal liability for the
performance of Liberty’s obligations. Here, Costa Investors did not sue
Bensusan for breach of contract but for the damages caused by
Bensusan’s fraud, particularly the loss of the EB-5 investment status and
its investment. The merger clause also does not apply, because Costa
Investors sued for the fraudulent statements which appeared within the
agreement itself. The fraudulent statements were not misrepresentations
made prior to the actual execution of the agreement.

    Finally, the court overlooked the contract’s Article 7.3, which provides:
“Liability Limitation. No members, officers, directors, employees, agents,
or representatives of Borrower will have any personal liability hereunder
(except for fraud or intentional misconduct).” This provision specifically
recognizes that an officer may be liable for fraud. Bensusan cannot escape
liability based upon the terms of the contract itself.

                                 Conclusion

    The trial court erred in granting summary judgment in favor of
Bensusan, because the evidence shows that a fraud was committed, and
Bensusan actively participated in the fraud. We thus reverse and remand
for further proceedings.

   Reversed and remanded.

DAMOORGIAN and CONNER, JJ., concur.

                             *         *         *

   Not final until disposition of timely filed motion for rehearing.

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