In a case of first impression, on April 22, 2015, in Jax Utilities Management, Inc. v. Hancock Bank, the First District Court of Appeal of Florida held that the liability of a construction lender that stops funding a construction loan is limited to statutory claims to the exclusion of common law claims (No. 1D14-664, (Fla. Dist. Ct. App. Apr. 22, 2015)).

In December 2005, Plummer Creek, as owner, and Jax Utilities Management, Inc., as contractor, entered into an agreement to develop a residential neighborhood. To fund the project, Plummer Creek entered into a loan agreement with Peoples First Community Bank. Under the loan agreement, an event of default occurred if Plummer Creek:

In May 2009, Plummer Creek's investors decided to stop funding the project. In response, Peoples First notified Plummer Creek in June 2009 that it would not make future advances under the loan agreement. Plummer Creek missed an interest payment on June 27, 2009.

Jax, who was not notified of Plummer Creek's investors' or Peoples First's decisions, submitted two payment applications for nearly $500,000 to Plummer Creek on June 30, 2009. Plummer Creek neither paid Jax nor submitted the payment applications to Peoples First.

In December 2009, Peoples First went into receivership under the Federal Deposit Insurance Corporation and Hancock Bank assumed its assets and liabilities. Hancock Bank initiated foreclosure proceedings against the failed project in March 2011.

Jax, who remained unpaid, filed an action in December 2011 against:

Jax argued that:

Hancock Bank moved for summary judgment based on the affirmative defenses found in:

The trial court granted Hancock Bank's summary judgment motion and the current appeal followed.

The district court denied Jax's claim that the statute of limitations runs from the initiation of foreclosure proceedings. Section 95.11(5)(b) of the Florida Statutes states that "an action to enforce an equitable lien arising from the furnishing of labor, services, or material for the improvement of real property" must be commenced within one year from the last day the labor, services or materials were rendered. Even though the parties disagreed about the exact date of Jax's last day of work, both dates were beyond the one year statute of limitations period.

Section 713.3471 of the Florida Statutes shields a construction lender from liability to a contractor for ceasing to make further advances as long as the lender gives notice to the contractor within five business days of its decision. The statute's purpose was to protect contractors from performing work for which they would not receive payment. Under the statute, if the lender fails to give notice, the contractor has a statutory cause of action for expressly prescribed damages, unless the failure to notify was intended to defraud the contractor.

The district court noted that the common law usually remains in effect when there is a statutory conflict, except when the statute expressly says otherwise or if it "is so repugnant to the common law that the two cannot coexist." The district court reasoned that Section 713.3471 precluded the common law because:

As a result of these considerations, the district court was persuaded that:

The district court further noted that Jax had the option to bring statutory claims, but it instead elected to bring common law claims. Jax's common law claims were ultimately barred in light of the statutes and Hancock Bank's summary judgment was upheld.

Counsel for contractors in Florida and jurisdictions that have similar statutes should not rely on any common law theories to recover from construction lenders. Statutory remedies may be the only relief available for contractors.

Counsel for lenders should ensure that the lender's actions comply with statutory requirements. To avoid liability to contractors, lenders must give the required statutory notices within the prescribed time periods.