Opinion
No. 3D18-2540
12-04-2019
CONRAD FLB MANAGEMENT, LLC, etc., et al., Appellants, v. DIAMOND BLUE INTERNATIONAL, INC., etc., et al., Appellees.
Crabtree & Auslander, and John G. Crabtree, Charles M. Auslander and Brian C. Tackenberg, Key Biscayne, for appellants. Ava J. Borrasso, P.A., and Ava Borrasso, Miami, for appellees.
Crabtree & Auslander, and John G. Crabtree, Charles M. Auslander and Brian C. Tackenberg, Key Biscayne, for appellants.
Ava J. Borrasso, P.A., and Ava Borrasso, Miami, for appellees.
Before EMAS, C.J., and SCALES and HENDON, JJ.
SCALES, J.
Appellants, defendants below, CFLB Partnership, LLC, formerly known as Conrad FLB Partnership, LLC (at times referred to herein as "Partnership, LLC"); CFLB Management, LLC, formerly known as Conrad FLB Management, LLC (at times referred to herein as "Management, LLC"); and Jose E. Cabanas ("Cabanas") appeal a December 17, 2018 amended final summary judgment in which the trial court determined that Partnership, LLC and Cabanas were liable on two promissory notes, both of which had been executed by Cabanas in his capacity as manager of Management, LLC. Because issues of fact exist regarding the parties' intent to hold Partnership, LLC and Cabanas responsible for Management, LLC's note obligations, we reverse the final summary judgment as to these appellants, but affirm as to Management, LLC.
I. Relevant Background
While most of the relevant background facts are not in dispute, they are convoluted, as they involve two loans for which one individual and two separate, albeit related, entities, both of which underwent name changes, have been found liable.
Conrad FLB Management, LLC was incorporated as a Delaware limited liability company in August 2012. Just over a year later, in November 2013, this entity changed its legal name to CFLB Management, LLC. At all times material Cabanas was the manager of this entity.
Conrad FLB Partnership, LLC was incorporated as a Delaware limited liability company in August 2012. In October 2013, this entity changed its legal name to CFLB Partnership, LLC. At all times material Cabanas was the manager of this entity. Despite Conrad FLB Management, LLC already having changed its legal name to CFLB Management, LLC, on April 8, 2015, Cabanas executed two due-on-demand promissory notes as the "Manager/Authorized Signatory" for Conrad FLB Management, LLC. The signature blocks for both notes appear as indicated below:
Date: 4/8 , 2015 ________ CONRAD FLB MANAGEMENT, LLC, a Delaware limited liability company By: Jose E. Cabanas Its: Manager/Authorized Signatory Date: 4/8 , 2015 ________ CONRAD FLB MANAGEMENT, LLC, a Delaware limited liability company By: Jose E. Cabanas Its: Manager/Authorized Signatory
The terms of each note were identical, memorializing loans made to "Conrad FLB Management, LLC" in the amount of one million dollars. The notes identified appellees, plaintiffs below, Diamond Blue International, Inc., a British West Indies company, and Fundacion Lemar, a Panamanian company, as the lenders and the notes' payees.
Appellees allege that they each transferred the loaned funds to "the Conrad FLB Management account" on April 14, 2015, and, on the following day, Management, LLC transferred the funds to an affiliated entity, Partnership, LLC. Appellees further allege that the loaned funds were used in connection with a development project in Fort Lauderdale owned by Partnership, LLC. Appellees further allege that, pursuant to the terms of the notes, demand was made for repayment on May 19, 2016.
After the notes were not paid despite demand, appellees filed a single complaint, as amended, in the circuit court, naming as defendants: (i) Conrad FLB Management, LLC doing business in Florida as CFLB Partnership, LLC; (ii) CFLB Management, LLC f/k/a Conrad FLB Management, LLC; (iii) CFLB Partnership, LLC f/k/a Conrad FLB Partnership, LLC; and (iv) Jose E. Cabanas.
Because it was undisputed that the two notes had not been paid pursuant to the notes' terms, appellees moved for summary judgment against all four defendants named in the amended complaint. The summary judgment record contained two affidavits filed by Cabanas: (i) an affidavit stating that CFLB Management, LLC f/k/a Conrad FLB Management, LLC had never "done business as CFLB Partnership, LLC" ("First Affidavit"); (ii) and an affidavit stating that Cabanas had signed the notes only in his representative capacity for Management, LLC ("Second Affidavit").
Concluding that all four named defendants were liable on the notes, the trial court entered the challenged final summary judgment. For the reasons stated below, we affirm in part, reverse in part, and remand with instructions. II. Analysis
The standard of review applicable to a summary judgment is de novo . Volusia Cty. v. Aberdeen at Ormond Beach, L.P., 760 So. 2d 126, 130 (Fla. 2000).
A. Summary Judgment as to Management, LLC
As an initial matter, we affirm the summary judgment as to Management, LLC. There is no dispute that Cabanas executed the two promissory notes in his capacity as manager of this entity. Similarly, there is no dispute that payment demand was made and that amounts alleged due under the notes have not been paid. Indeed, at oral argument, counsel for appellants conceded that the judgment was properly entered against this entity.
B. Summary Judgment as to Partnership, LLC
Section 673.4011(1) of the Florida Statutes provides that a person is not liable on a promissory note unless either (a) the person signed the note, or (b) the person is represented by an agent who signed the note. There is no dispute that, despite being related entities, Management, LLC is a separate and distinct entity from Partnership, LLC. There is also no dispute that Partnership, LLC did not execute the two promissory notes. Nevertheless, appellees argue, and the trial court concluded, that because (i) Management, LLC was conducting business as Partnership, LLC, and (ii) Partnership, LLC had accepted the benefits of the proceeds, Partnership, LLC was liable under the notes. We address, in turn, each ground for imposing liability on Partnership, LLC.
As discussed later in this opinion, section 673.4021 of the Florida Statutes outlines the rules applicable to a note signed in a representative capacity by an agent of the maker.
In this case, not only is the note not signed by Partnership, LLC, but Cabanas filed the First Affidavit plainly stating that Management, LLC had never done business as Partnership, LLC and the Second Affidavit plainly stating that he signed the notes as an agent of Management, LLC. Together, these affidavits created, at the very least, a question of fact precluding summary judgment on the issue of whether Partnership, LLC is liable for Management, LLC's notes. See Ameril Corp. v. N.Y. Reg'l Rail Corp., 943 So. 2d 264, 264 (Fla. 3d DCA 2006) (reversing summary judgment when questions of fact remain regarding liability under promissory notes); Killgo v. Hoffman, 320 So. 2d 417, 417-18 (Fla. 3d DCA 1975).
Appellees also argue that Partnership, LLC should be held liable for Management, LLC's note because Partnership, LLC accepted the benefits of the loan proceeds – an argument that appellees characterize as a "ratification." We, however, have been provided no authority supporting appellees' proposition that liability may be imposed on a non-signatory simply because the non-signatory benefitted from the loan proceeds and is related to the signing entity. While a successor entity may ratify an agreement entered into by a predecessor entity, and a principal may ratify an agreement entered into by an unauthorized agent, we are not aware of any ratification principle that otherwise alters the plain and unambiguous liability restrictions prescribed in section 673.4011(1). We, therefore, reverse that portion of the summary judgment finding Partnership, LLC liable on the promissory notes, and remand for further proceedings consistent with this opinion.
See Jupiter Mortg. Corp. v. Bank of Am., N.A., 871 So. 2d 1019, 1019 n.1 (Fla. 3d DCA 2004).
See Spurrier v. United Bank, 359 So. 2d 908, 910 (Fla. 1st DCA 1978).
C. Summary Judgment as to Jose Cabanas
The challenged summary judgment also found, as a matter of law, that Jose Cabanas was personally liable on the promissory notes, despite both Cabanas signing the notes as an agent of "Conrad FLB Management, LLC" and Cabanas's Second Affidavit stating that his signature was made in a representative capacity. Appellees argue that, because Conrad FLB Management, LLC did not exist as an entity at the time Cabanas signed the two promissory notes (the entity had changed its name to CFLB Management, LLC approximately seventeen months prior), section 673.4021(2)(b) imposes personal liability on Cabanas. In relevant part, this statute reads:
(2) If a representative signs the name of the representative to an instrument and the signature is an authorized signature of the represented person, then the following rules apply:
....
(b) [I]f the form of the signature does not show unambiguously that the signature is made in a representative capacity or if the represented person is not identified in the instrument ... the representative is liable on the instrument unless the representative proves that the original parties did not intend the representative to be liable on the instrument .
§ 673.4021, Fla. Stat. (2015) (emphasis added).
Appellees suggest that, because the signature blocks of the notes identify the entity's former name, then as a matter of law: (1) Cabanas's signature "does not show unambiguously that the signature is made in a representative capacity" and "the represented person is not identified in the instrument;" and (2) Cabanas is unable to prove that the original parties did not intend for Cabanas to be liable on the notes. We disagree with both suggestions.
First, the argument advanced by appellees contravenes nearly a century of Florida jurisprudence regarding the effect of a corporate name change. Our Supreme Court noted in Stewart v. Preston, 80 Fla. 473, 80 Fla. 479, 86 So. 348, 349 (1920) :
The change in the name of a corporation has no effect whatever upon its property, rights, or liabilities. It continues as before responsible in its new name for liabilities previously contracted or incurred, and has the right to sue on contracts made or liabilities incurred to it – before the change ... The change in the name of a corporation has no more effect upon its identity, as a corporation, than the change in the name of a natural person has upon his identity.
As the above passage makes clear, Conrad FLB Management, LLC's mere name change to CFLB Management, LLC had no effect on the entity's identity. See Sears Termite & Pest Control, Inc. v. Arnold, 745 So. 2d 485, 486 (Fla. 1st DCA 1999). No doubt, the notes' maker should have been accurately identified by its then current name, "CFLB Management, LLC," instead of by its former name, "Conrad FLB Management, LLC." But given our de novo review of the trial court's summary judgment, we cannot conclude that, as a matter of law, Cabanas's mis-identifying the company by its former name transformed Cabanas from the entity's agent into its personal guarantor. Second, we also disagree with appellees' suggestion that Cabanas's misidentification of the maker entity precludes, as a matter of law, Cabanas from proving to a fact-finder that the parties did not intend for Cabanas to be liable on the notes, as expressly contemplated by the last portion of 673.4021(2)(b) (italicized in the statutory excerpt, above). In light of Cabanas's Second Affidavit (where he attests that it was his intent to sign the notes only in a representative capacity for Management, LLC), it was error for the trial court to conclude, as a matter of law, that Cabanas's misidentification of the maker in the two notes imposed personal liability on him. We conclude that a genuine issue of material fact as to whether the parties intended for Cabanas to be personally liable on the notes, precludes the entry of summary judgment. See Turkish v. Brody, 221 So. 3d 1206, 1216 (Fla. 3d DCA 2016) (reversing summary judgment in favor of estate seeking to collect on promissory notes when genuine issues of material fact exist to determine decedent's intent and personal representative's waiver); see also Walker v. Smith, 257 F. Supp. 2d 691, 698 (S.D. N.Y. 2003) (confirming that a corporate officer signing an instrument on behalf of the corporation is not liable personally, even in a circumstance when the name of the corporation on the instrument is mis-identified). We, therefore, reverse that portion of the summary judgment finding Cabanas liable on the promissory notes, and remand for further proceedings consistent with this opinion.
In his initial brief, Cabanas characterizes this misidentification as a "scrivener's error."
III. Conclusion
We affirm the trial court's final summary judgment finding Management, LLC liable on the two notes. We reverse the judgment as to both Partnership, LLC and Cabanas, and remand for proceedings consistent with this opinion.
Affirmed in part; reversed in part and remanded.