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Stull v. Fox

October 4, 2010


The opinion of the court was delivered by: Manuel L. Real United States District Judge


Following a bench trial on July 6-7, 2010, the Court makes the following Findings of Fact and Conclusions of Law:


1. Plaintiff and counterclaim-defendant Tom Stull ("Stull") filed his complaint on July 14, 2009. Defendant removed to this Court on August 20, 2009. There was no motion to remand. The complaint asserted five causes of action: three causes of action for breach of alleged oral agreements relating, respectively, to a project in Panama called "Vida Nueva," a project in Costa Rica called "Pacifico Colonial" and a second project in Costa Rica, one cause of action for intentional interference with prospective business relationships, and one cause of action for common-law unfair competition.

2. Fox filed an answer and counterclaim on September 28, 2009, denying liability and asserting claims for breach of contract and unjust enrichment arising from an alleged partnership in a Costa Rican real-estate development. Fox later amended this pleading to correct the description of the alleged partnership to relate to the Vida Nueva project in Panama.

3. Based on the later stipulation of the parties, Stull's claims for intentional interference with prospective business relationships and unfair competition, and Fox's counterclaim for unjust enrichment, were dismissed without prejudice.

4. Trial commenced on July 6, 2010. Both parties waived jury, and the case was tried to the Court.

5. Prior to resting, Fox moved pursuant to Federal Rule of Civil Procedure 15(b) to amend to conform the pleadings to the proof. In particular, Fox first noted that the evidence admitted on the contract issues framed by the pleadings and Final Pretrial Conference Order also supported claims for breach of fiduciary duty and breach of duties imposed under the Uniform Partnership Act.

6. The Court finds that granting the motion to amend to conform to proof will aid in presenting the merits of the claims and legal theories raised by the evidence, and that Stull has not satisfied the Court that permitting the amendment would prejudice his action or defense on the merits of those claims or theories. The Court therefore granted the motion to amend to conform to proof and will consider the merits of the legal theories and claims and defenses raised by the evidence admitted at trial.

7. Before resting, Fox offered to introduce additional evidence relevant only to a claim for punitive damages, should the Court find the foundation had been established for such a claim. In order to expedite and economize, the Court ordered, pursuant to Rule 42(b), that the issue of punitive damages will be considered, if at all, in a separate trial, should one be necessary based on the Court's findings of fact and conclusions of law.


8. Fox has been a real estate developer for about 20 years. (7/7/10 Transcript, p. 6.)

9. In 2006, Fox traveled to Panama on a one-way ticket in order to locate and commence a real-estate development project. (7/7/10 Transcript, p. 9.) He located a desirable property on the Pacific coast of Panama, made up of six contiguous parcels totaling about 1,000 acres, all under common ownership. (7/7/10 Transcript, pp. 10-11.) After spending a few weeks walking on the land, Fox believed that once the jungle was cleared away it would produce at least three homesites with highly valuable ocean views, and would be an ideal candidate for development. (7/7/10 Transcript, p. 10.)

10. Fox negotiated agreements to buy the property, taking title to two of the parcels with owner-financed mortgages and acquiring options to purchase the remaining four parcels at specified purchase prices. (7/7/10 Transcript, p. 11.) The total agreed purchase price for the six parcels was $1.2 million, of which Fox made a down payment of $175,000 and the seller financed the rest. (7/7/10 Transcript, p. 10-11.) This property is called Vida Nueva. (7/7/10 Transcript, p. 8.)

11. Fox began to clear the Mountain portion of Vida Nueva and discovered many lots with spectacular ocean views. (7/7/10 Transcript, p. 12-13.) Fox then sold a portion of the Mountain portion of the Vida Nueva property to TCHoldings (sometimes referred to as Terry and Curtis). (7/7/10 Transcript, p. 14-15.) The sales price was $360,000, or $3 per square meter. (7/7/10 Transcript, p. 15.) Fox then identified 37 lots that could be sold on the remaining Mountain portion of Vida Nueva. (Ex. 4; 6/7/10 Transcript, p. 48; 6/6/10 Transcript, p. 82.)

12. During the time he controlled the property, Fox paid off the mortgages to the seller on the two mortgaged Vida Nueva parcels and paid the annual option fees on the four Vida Nueva parcels that were subject to his option rights. (7/7/10 Transcript, p. 17.)

13. Fox and some investors formed a company called Global Venture Capital to pursue the development of Vida Nueva. Fox owned 45% of GVC and the investors owned the remaining 55%. Fox contributed his rights to Vida Nueva to Global Venture Capital and the investors committed to provide about $1.5 million in funding. In fact, however, the investors provided only about $500,000 of the promised funding before the downturn in the US real estate market prevented them from providing the remainder of their commitment. (7/7/10 Transcript, p. 16.)

14. Fox approached Stull in early November 2007 with a proposal to have Stull lend Fox $350,000 or $500,000 for Fox to continue with the development of Vida Nueva. (Ex. 5 p. 1.) Stull arranged to have Kevin Beer ("Beer") travel to Panama to perform due diligence on the Vida Nueva project. (7/6/10 Transcript, p. 30, 36-37, 81.)

15. After Beer reported back on his investigation of Vida Nueva, Stull and Fox spoke on the telephone. Stull said he did not want to make a loan to Fox, but wanted to fund the project, with the two splitting any resulting profits equally. (7/7/10 Transcript, p. 18, 20.) It was then agreed that Fox would travel to Stull's home in Santa Ynez, California, to discuss the details of the arrangement. (7/6/10 Transcript, p. 84.)

16. The meeting in Santa Ynez occurred in mid-December 2007. It lasted several hours, and was attended by Fox, Stull and Beer. (7/6/10 Transcript, p. 84-85.) The Court finds that the parties entered into an agreement with the following terms:

(a) Fox will contribute his rights to the Vida Nueva parcels, with Stull agreeing to advance the funds required to (i) buy-out the existing investors in Global Venture Capital, and (ii) pay to the land owner the specified purchase prices of the four parcels on which Fox held options. (7/6/10 Transcript, p. 62; 7/7/10 Transcript, pp. 18-19.)

(b) Stull will provide the necessary financing for the development of Vida Nueva and will control the overall development. (7/6/10 Transcript, pp. 32, 36, 89; 7/7/10 Transcript, p. 20.)

(c) These advances by Stull will be repaid (plus a 10% interest charge) before any profits are calculated. After Stull has been paid back, the net profits will be shared by Fox, Stull and Beer. Beer will receive 10% of the profits, with Stull and Fox sharing the remaining profits equally -- i.e., 45% each. (7/6/10 Transcript, pp. 32-33, 35, 54-55, 87, 89; 7/7/10 Transcript, p. 20.)

(d) Fox will be in charge of sales and marketing of Vida Nueva. (7/6/10 Transcript, p. 32, 87; 7/7/10 Transcript, pp. 21, 26.)

(e) Beer will be in charge of all accounting, administration and construction management. (7/6/10 Transcript, pp. 32, 33, 70, ...

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