CIMA Capital/Partners, LLC v. PH Cellular, Inc. - Carlton Fields

--- So.3d ----, 2010 WL 1222773 (Fla.App. 3 Dist.), 35 Fla. L. Weekly D738(Cite as: 2010 WL 1222773 (Fla.App. 3 Dist.))Page 1[2] Corporations 101 121(7)NOTICE: THIS OPINION HAS NOT BEEN RE-LEASED FOR PUBLICATION IN THE PER-MANENT LAW REPORTS. UNTIL RELEASED,IT IS SUBJECT TO REVISION OR WITHDRAW-AL.District Court of Appeal of Florida,Third District.CIMA CAPITAL PARTNERS, LLC, etc., Appellant,v.PH CELLULAR, INC., etc., Appellee.No. 3D09-1896.March 31, 2010.Background: Stock option holder brought actionagainst closely-held corporation for damagesarising out of alleged breach of contract. Followingbench trial, the Circuit Court, Miami-DadeCounty,Gisela Cardonne Ely, J., entered judgment for stockoption holder and ordered transfer of stock. Stockoption holder appealed.Holding: The District Court of Appeal, Suarez, J.,held that trial court should have awarded stock optionholder value of stock on date of breach.Reversed and remanded.West Headnotes[1] Damages 115 117115 Damages115VI Measure of Damages115VI(C) Breach of Contract115k117 k. Mode of Estimating Damagesin General. Most Cited CasesDamages for breach of contract are to be measuredas of the date of breach.101 Corporations101VIII Capital and Stock101VIII(D) Transfer of Shares101k115 Sales101k121 Remedies101k121(7) k. Damages or Amountof Recovery. Most Cited CasesTrial court, upon determining that closely-held corporationbreached contract with stock option holder,should have awarded stock option holder damagesrepresenting value of stock on date of contractbreach, rather than ordering specific performancethrough transfer of stock to stock option holder, instock option holder's contract action for damagesagainst closely-held corporation; value of stock haddecreased considerably from date of breach to dateof judgment, and damages were preferred legalremedy, in that parties had entered into written contract,business could be valued, and date of contractbreach was certain.Alvarez, Armas & Borron and J. Alfredo De Armasand Arturo Alvarez, Coral Gables, for appellant.Lipscomb, Brady & Bobadilla and Deborah B. Jofre, Miami, for appellee.Before SUAREZ, CORTIÑAS, and SALTER, JJ.SUAREZ, J.*1 CIMA Capital Partners, LLC seeks to reversethe final judgment awarding specific performanceand to remand for an award of damages. We reverseand remand. CIMA Capital Partners (CIMA) suedPH Cellular, Inc. (PHC), for breach of contract andthe trial court was able to quantify the amount ofdamages as of the date of the breach, which requiredan award of damages and not an award forspecific performance.CIMA brought an action at law for money damages© 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.

--- So.3d ----, 2010 WL 1222773 (Fla.App. 3 Dist.), 35 Fla. L. Weekly D738(Cite as: 2010 WL 1222773 (Fla.App. 3 Dist.))Page 2against PHC, a closely held corporation, in a suitfor breach of contract. The contract between CIMAand PHC specified that CIMA was entitled upon“successful funding” to “a warrant to purchase 5%of shares” so that it “could own, on exercise, fivepercent of the fully diluted shares.” CIMA properlyexercised its option, PHC refused to honor the provisionand terminated the relationship. The trialcourt conducted a bench trial and based on the evidencepresented correctly concluded that PHCbreached the contract and determined that theshares owed to CIMA at the time of breach wereworth $353,000. Nevertheless, the trial courtordered specific performance rather than award thedamages sued for by CIMA. CIMA argues on appealthat it should receive the value of the shares atthe time of breach, in December 2007, when PHCellular was worth approximately $7 million, ratherthan the shares themselves as ordered transferred bythe court in May 2009, when PH Cellular wasworth far less. We agree.[1] The aim of money damages is not merely to restorethe plaintiff to its former position, as in tort,but to award a sum that is equivalent to the performanceof the bargain; the attempt is to place theplaintiff in the position he would have been in hadthe contract been fulfilled. See Williston on Contracts,§ 64:1 (2002); Restatement (Second) ofContracts § 346 (1981). Damages for breach ofcontract are to be measured as of the date of breach.See Grossman Holdings Ltd. v. Hourihan, 414So.2d 1037 (Fla.1982); Lake Region Paradise Island,Inc. v. Graviss, 335 So.2d 341 (Fla. 2d DCA1976) (finding that where the contract provided thatplaintiff could purchase 10% interest in the business,valuation of the business was to be measuredat date of defendant's breach of contract, with interestup to the date of trial).[2] The trial court after taking evidence found thatPHC breached the contract with CIMA in December2007 and was able to determine the value ofPHC as of the date of breach and found five percentof that value to be $353,000. Instead of awardingthose damages, the trial court, without explanation,ordered specific performance by the transfer ofshares, at that time probably devalued. CIMA hadbrought an action at law for damages for breach ofcontract, not an action in equity for specific performance.Specific performance is the rare exceptionwhen only equitable relief is available, as inthe case of an oral contract. See Williston, § 64:1 at4-5 (2002). In this case, damages were the preferredlegal remedy where there was a written contractbetween the parties, measurable value to the business,and a date certain of the breach.*2 Furthermore, PHC cannot claim that because theshares are unsellable they cannot be valued. Valuationof closely-held shares is done all the time.See, e.g., Kay v. Key West Dev. Co., 72 So.2d 786,788 (Fla.1954) (“It is a matter of common knowledgethat stock in such closed or closely held corporationshave no recognized or standard marketvalue and in order to effect a sale thereof, prospectivepurchasers usually look into the financial status,management and background of such corporation.”);Munshower v. Kolbenheyer, 732 So.2d 385(Fla. 3d DCA 1999) (looking to New York law todetermine the “fair value” of closely held corporateshares); Landon v. Metropolitan Dade Co., 280So.2d 714 (Fla. 3d DCA 1973) (finding that considerationof cash value of taxpayers' stocks in aclosely held corporation may be used with otherfactors to arrive at a just valuation of the shares,such as ratio of assets to liabilities, funded debt,character of assets, value of assets, volume of business,impermanence of the business, attractivenessof the stock to investors, stability of net incomefrom the assets, or any other impediments to truetaxable value may be considered when making thestock assessment); 12 B William M. Fletcher,Fletcher Cyclopedia of the Law of Corporations, §5906.120 (supp.2007) (“Stock of closely held corporationscannot reasonably be valued by applicationof any inflexible formula; one tailored to theparticular case must be found.”).PHC relies on the inapposite case of Shearson Loeb© 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.

--- So.3d ----, 2010 WL 1222773 (Fla.App. 3 Dist.), 35 Fla. L. Weekly D738(Cite as: 2010 WL 1222773 (Fla.App. 3 Dist.))Page 3Rhoades, Inc. v. Medlin, 468 So.2d 272 (Fla. 4thDCA 1985), that held a showing of plaintiff's entitlementto damages for delay in delivery of stock isaccomplished by the plaintiff demonstrating thathad it possessed the shares, it would have sold themduring the interim between the breach and the actualdate of delivery. This is not the situation in thisaction. PHC did not delay delivering the shares-itrefused delivery outright, thus breaching the contractbetween itself and CIMA.We reverse the order on appeal and remand forentry of money damages to CIMA as measured onthe date of breach, together with prejudgment interest.Reversed and remanded.Fla.App. 3 Dist.,2010.CIMA Capital Partners, LLC v. PH Cellular, Inc.--- So.3d ----, 2010 WL 1222773 (Fla.App. 3 Dist.),35 Fla. L. Weekly D738END OF DOCUMENT© 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.