Trial Court Erred by Blocking Amendment in Transaction Dispute With Developer, Appeals Court Rules

The Third District Court of Appeal has affirmed in part a ruling in favor of Miami developer PMG in a transaction dispute with a purchaser. 

The opinion, issued Wednesday, explains that requests for leave to amend a pleading should not be automatically denied unless there are certain exceptions.

Third DCA Judges Ivan Fernandez, Edwin Scales and Monica Gordo did, however, reverse the trial court’s ruling in part to allow the purchaser the opportunity to amend his pleadings, something the panel found he should’ve been allowed to do.

It started in 2014 when Stephen Hess, the appellant, visited a condominium in Miami-Dade called Muse, which was being developed by PMG. Hess reviewed promotional materials and floor plans for prospective units. Hess and his company Clearwater entered into a purchase agreement with PMG for three pre-construction units at Muse. Hess paid $6.1 million in deposits for the units to PMG. 

According to the opinion, four agreements were made and three were sent to Hess and Clearwater. In the agreement, if Hess and Clearwater defaulted on the payments, PMG was entitled to terminate the agreements and apply a specific damages clause to calculate PMG’s damages. 

“In the first agreement, the developer agreed that Hess could assign its interest in the agreements to an affiliated domestic corporate entity. The second agreement detailed modifications regarding an institutional mortgagee. The third only affected future purchasers and was not sent to Hess or Clearwater, and the fourth detailed changes to the property management agreement and reflected the unit’s final square footage,” wrote Gordo in the opinion. 

Hess and Clearwater did not send written notice to rescind the agreements to the amendments and in May 2018, assigned their rights, title, interests and obligations, to Muse units 1901, 2101 and 2201.

The notices were sent to PMG and closing was set for May 31, 2018, but the Muse entities didn’t close on time. The next month, PMG gave formal written notice of default and terminated the agreements.

In November 2018, Hess and Clearwater sued PMG for rescission, breach of contract and declaratory judgment, challenging the enforceability of the default damages clause in the agreements.

The court dismissed the declaratory judgment action without prejudice since the units had not been sold, but then Hess and Clearwater filed an amended complaint which included the Muse entities as co-plaintiffs, and sued for rescission and breach of contract.

Miami-Dade Circuit Judge William Thomas granted PMG’s motion for summary judgment and found Hess and Clearwater “lacked standing and the remaining claims were unsupported.” 

Hess then asked to amend his complaint to reassert his previous claim about the calculation of the deposits because he learned PMG resold one of the units. The trial court denied Hess’s motion and entered final judgment in PMG’s favor. The appeal to the Third DCA followed. 

‘The Panel Did What Was Right’

It was an error of the trial court to not allow an amendment, concluded the Third DCA. In the opinion, Gordo said Hess didn’t move to amend his pleadings to advance a new issue or undermine the trial court’s summary judgment liability determination. 

“Rather, the amendment sought to have the deposits distributed consistent with the terms of the default provision following the trial court determined the purchase agreements were not rescinded,” Gordo wrote. “Hess’s motion to amend was consistent with the trial court position at the hearing on the motion to dismiss, which stated entitlement to the deposits should be litigated after the issue of breach was determined.”

It’s a decision that Josh Rubens and Phillipe Lieberman of Kluger, Kaplan, Silverman, Katzen & Levine are happy about, as they represented PMG with Daniel Samson of Samson Appellate Law in Miami.

“We are pleased that the appellate court affirmed the summary judgment ruling in favor of PMG-S2 that the purchasers did not timely close on their units in violation of their purchase contracts, and the purchasers’ after the fact attempt to rescind the contracts for alleged misrepresentation of unit size, improper pledge of purchaser escrow deposits, and premature scheduling of closing had no merit,” said Rubens and Lieberman. “PMG-S2 looks forward to contesting any remaining claims for the return of any of the escrow deposit funds,”

Luis Quintana of Quintana Law Firm in Coral Gables, Michael Schlesinger of Schlesinger Law Group in Miami and Julissa Rodriguez of Shutts & Bowen in Miami represented Hess.

“Although not a complete victory, the panel did what was right to prevent a windfall. We are grateful for the opportunity to return to the trial court to litigate the return of the deposits,” said the team in a joint statement.

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