Escadote I Corp. v. Ocean Three Limited Partnership

Third District Court of Appeal
State of Florida
Opinion filed December 21, 2016.
Not final until disposition of timely filed motion for rehearing.
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No. 3D15-668
Lower Tribunal No. 06-10808
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Escadote I Corp.,
Appellant,
vs.
Ocean Three Limited Partnership, etc., et al.,
Appellees.
An Appeal from the Circuit Court for Miami-Dade County, Bronwyn C.
Miller and Beth Bloom, Judges.
GrayRobinson and Juan C. Martinez, for appellant.
Koeller, Nebeker, Carlson & Haluck and Chad N. Dunigan (Orlando);
Kopelowitz Ostrow Ferguson Weiselberg Gilbert and John J. Shahady and Thomas
R. Shahady (Fort Lauderdale), for appellees.
Before SUAREZ, C.J., and SHEPHERD and SALTER, JJ.
SALTER, J.
Escadote I Corporation (“Escadote”) appeals two aspects of a final judgment
entered following years of construction-related litigation: (a) the amount of a set-
off allowed by the trial court against Escadote’s jury verdict for $2,050,000.00 as
against the appellees, and (b) the denial of prejudgment interest on the amount of
the collateral settlement that was the basis for the set-off claimed by appellees. We
reverse with respect to the order on the amount of the set-off, and we affirm the
trial court’s denial of prejudgment interest as applied to the corrected set-off
amount.
I. Facts and Procedural History
Escadote purchased a high-rise condominium in the Ocean Three
Condominium in Sunny Isles, Florida. In 2006, Escadote commenced a circuit
court action against the developer (appellee Ocean Three Limited Partnership;
“Developer”), the general contractor (appellee John Moriarty & Associates of
Florida, Inc.; “Contractor”), and the Ocean Three Condominium Association
(“Association”), for claims of water intrusion and mold infestation in Escadote’s
unit. Escadote’s claims included separate counts against the various defendants,
but only the statutory claim against the Association1 included a demand for
1 Escadote’s claim against the Association (Count IV of the Second Amended
Complaint) alleged a breach of the Association’s duty to maintain and repair
common elements under section 718.113, Florida Statutes (2007).
2
Escadote’s attorney’s fees. The basis for attorney’s fees against the Association
was alleged to be section 718.303, Florida Statutes (2007).
The case proceeded to trial by jury in March 2010. On the last day before
submission of the case to the jury, the Association and Escadote reached a
settlement for $375,000.00. The jury later returned a verdict against the Developer
and Contractor, jointly and severally, for $2,050,000.00. The trial judge at the
time granted the Developer’s and Contractor’s motion for judgment in accordance
with prior motions for directed verdict, entering a final judgment for the Developer
and Contractor. Escadote appealed that ruling to this Court, which reinstated the
jury verdict. John Moriarty & Assocs. of Fla. v. Murton Roofing Corp., 128 So.
3d 58 (Fla. 3d DCA 2013).
In its Order on Plaintiff’s Motion for Entry of Judgment entered after
remand, the trial court described the Escadote-Association settlement: 2
Under the terms of the settlement, the Association was to tender
$375,000 in exchange for a full release of all claims. The settlement
2 To address a concern expressed in the dissent, the confidentiality of the
settlement agreement was recognized and consented to by the appellees. In
footnote 2 of the Developer’s and Contractor’s memorandum in support of their
motion for set-off, they acknowledged that “[t]he Settlement Agreement was
produced by Plaintiff’s counsel to Defendants’ counsel and is referred to in this
Memorandum. However, the Settlement Agreement contains a confidentiality
provision that prohibits it from being filed with the Court. As a result, Defendants
have not attached the Settlement Agreement to this Memorandum.” In short, both
sides acknowledged the pertinent allocation provision (including the amounts
allocated to each claim) within the Escadote-Association agreement, but they
agreed not to file the agreement itself.
3
agreement provided that $500 of the settlement was attributable to
damages and the remainder was intended to reimburse Escadote for
attorney’s fees. Funds were tendered and a joint release was executed
on April 28, 2010.
The trial court was aware of the allocation and referred to it in her order on setoff.
The fact of allocation and amount of the allocation to Escadote’s attorney’s fee
claim against the Association, $374,500.00, were uncontroverted.
On remand following Escadote’s successful appeal and reinstatement of the
jury verdict, the Developer and Contractor filed a motion for collateral set-off,
claiming that the entire $375,000.00 recovery by Escadote from the Association
should be applied to reduce the amount of the jury verdict to be reflected in the
final judgment. Escadote argued that only $500.00 of the recovery should be
applied to reduce the jury verdict and judgment amount, as $374,500.00 had been
apportioned by the settling parties in their settlement agreement to compensate
Escadote for a claim unique to its case against the Association—a claim for
statutory attorney’s fees under the condominium statute.3
The trial court disallowed the apportionment sought by Escadote and instead
ordered that the entire amount would be allowed as a set-off to reduce Escadote’s
judgment against the Developer and Contractor. In a separate order, the trial court
also denied Escadote’s claim for prejudgment interest on the full set-off amount
3 In interrogatory responses in August 2009, Escadote listed its attorney’s fees
through May 31, 2009, as $496,371.40. In its pretrial compliance filing a month
before trial, Escadote disclosed attorney’s fees of $741,000.00.
4
from the date of loss (found in a previous order to be December 24, 2003) through
the date the Association actually paid the $375,000.00 settlement. This appeal
followed.
II. Analysis
Each of the issues presented—the determination of the proper set-off
amount and Escadote’s entitlement to prejudgment interest from the date of loss to
the date the settlement amount was paid—is a question of law which we consider
under a de novo standard of review. Cornerstone SMR, Inc. v. Bank of Am., N.A.,
163 So. 3d 565, 568 (Fla. 4th DCA 2015) (stating that set-off is a pure question of
law, with no deference given to the judgment of the trial court); Argonaut Ins. Co.
v. May Plumbing Co., 474 So. 2d 212 (Fla. 1985) (finding that prejudgment
interest on a party’s out-of-pocket pecuniary losses is a legal entitlement once a
verdict has liquidated those damages as of a date certain). The trial court’s
interpretation of the release as a waiver by Escadote of a right to prejudgment
interest on the set-off amount is also reviewed de novo. Muniz v. Crystal Lake
Project, LLC, 947 So. 2d 464 (Fla. 3d DCA 2006).
A. Set-off
Set-offs for collateral recoveries are available pursuant to section
768.041(2), Florida Statutes (2010). The statute specifies that if a defendant
demonstrates that a plaintiff has released a “person, firm, or corporation in partial
5
satisfaction of the damages sued for, the court shall set off this amount from the
amount of any judgment to which the plaintiff would be otherwise entitled at the
time of rendering judgment and enter judgment accordingly.” Section 46.015(2),
Florida Statutes (2010), includes a nearly-identical provision that, for purposes of
this case, operates in the same way as section 768.041(2). Cases interpreting the
statutes have established two principles that apply to this case.
1. “The Damages Sued For”
First, as the statute requires, the settlement recovery sought to be set off
must be “in partial satisfaction of the damages sued for.” If the settlement funds
are applicable to a claim asserted only against the settling co-defendant, the non-
settling co-defendants are not eligible for a set-off in the amount of the settlement.
Wells v. Tallahassee Mem’l Reg’l Med. Ctr., 659 So. 2d 249 (Fla. 1995).
Expressed another way, the statutes “presuppose the existence of multiple
defendants jointly and severally liable for the same damages.” Id. at 253(emphasis provided); D’Angelo v. Fitzmaurice, 863 So. 2d 311, 314 (Fla. 2003);
Gouty v. Schnabel, 795 So. 2d 959, 965 (Fla. 2001) (the underlying rationale of
Wells is that “the operation of the setoff statutes was premised upon the
determination that the defendant was jointly and severally liable for the same
damages.”) (emphasis provided).
6
The record demonstrates that Escadote responded in interrogatory answers
and in pretrial compliance with a distinct articulation that attorney’s fees were
claimed as damages under Count IV (and only in Count IV) against the
Association. In the memorandum in support of their joint motion for set-off in
2014, the Developer and Contractor attached Escadote’s responses to
interrogatories of August 5, 2009, itemizing $8,508,895.72 in damages through
June 26, 2009. Item 8 of that damages list was characterized by Escadote as an
affirmative claim under Count IV, the claim against the Association, for attorney’s
fees in the amount of $496,371.40. The preface to the interrogatory answers
included a statement that “The figures for Carrying expenses, Interest, Attorneys’
fees and Costs are very likely to change as these damages will continue to accrue
until trial and beyond.” (Emphasis provided).
The Developer’s and Contractor’s memo in support of their 2014 motion for
set-off acknowledged, in paragraph 6, that “Plaintiff also disclosed damages for
attorney’s fees in the amount of $496,371.40 against the Association, which
represents only 5.8% of [Escadote’s] claim.” (Emphasis provided). The memo
also attached Escadote’s pretrial compliance filed in February 2010, which
included in its “Specification of Damages” a claim for attorney’s fees of
$741,000.00. Escadote neither sought nor recovered any attorney’s fees from the
Developer or the Contractor.
7
2. Apportionment vs. Undifferentiated Recovery
The second principle applicable to the record in this case is that, in a case in
which a settlement recovery is not apportioned between (a) claims for which co-
defendants are jointly and severally liable with the settling co-defendant, and (b)
claims which were only asserted against the settling co-defendant, the entire
amount of the undifferentiated recovery is allowable as a set-off. Dionese v. City
of West Palm Beach, 500 So. 2d 1347 (Fla. 1987) (reasoning that although
plaintiffs apportioned settlement funds among the plaintiffs in a particular
manner, the funds were not allocated among the separate and distinctive causes of
action, so the total amount of the settlement was allowed as a set-off). In the
present case, Escadote and the Association were on opposite sides of the case and
Escadote’s claim against the Association included an element of damages that was
not a part of Escadote’s claim against the Developer and the Contractor.
When a settlement recovery is allocated between claims with different and
distinctive damage elements, set-off should only be allowed to co-defendants
jointly and severally liable for the same claims. Devlin v. McMannis, 231 So. 2d
194, 196 (Fla. 1970) (section 768.041(2) “authorizes to be set off from a judgment
against one joint tort-feasor only the amount constituting a settlement for the
damages or damage elements recoverable in the same cause of action against
another joint tort-feasor”).
8
The obvious purpose of the statutory provisions is to prevent a windfall to a
plaintiff—a double recovery on a particular claim for which the non-settling
defendants are identically liable. “The set-off provision in section 768.041(2) ‘was
designed to prevent duplicate or overlapping compensation for identical
damages.’” Cornerstone SMR, 163 So. 3d at 569 (quoting Gordon v. Marvin M.
Rosenberg, D.D.S., P.A., 654 So. 2d 643, 644 (Fla. 4th DCA 1995)) (emphasis
provided).
3. Application of the Principles in This Case
Applying these two principles to the present case, Escadote asserted a claim
for statutory attorney’s fees against the Association which was not and could not
be asserted against the co-defendants, Developer and Contractor.4 Although the
Developer and Contractor argue here that Escadote could have claimed attorney’s
fees in the counts of its complaint directed against the Developer and Contractor
(under the original purchase agreement relating to the unit), Escadote made no
such claim and could not have recovered legal fees that it did not plead. See
Stockman v. Downs, 573 So. 2d 835, 837-38 (Fla. 1991). It follows that the
Developer and Contractor were not jointly and severally liable for attorney’s fees
and costs claimed by Escadote against the Association and only the Association.
4 Section 718.303, Florida Statutes (2010), provides for an award of legal fees to
the prevailing party in litigation between an association and a unit owner.
9
Further, Escadote’s responses to interrogatories and its pretrial disclosures in
this record demonstrate that the allocation of $374,500.00 cannot objectively be
characterized as a “windfall” or double recovery. Escadote’s attorney’s fees, as
disclosed by Escadote a month before the trial, were nearly twice the settlement
amount paid by the Association, and none of those fees were recoverable from the
Developer or Contractor. The jury verdict form naturally omitted any reference to
attorney’s fees, as these are determined by the court rather than a jury, and the
damages of $2,050,000.00 were awarded based upon “the breach(es) of implied
warranty relating to the diminished value of Unit 3405.” Those damages are not
the “same” damages collectible by Escadote from the Association, because the
Association was also uniquely liable for statutory attorney’s fees.
The second principle, that apportionment of settlement funds is only
appropriate when the settling parties have allocated the settlement between (a)
claims for which co-defendants are jointly and severally liable with the settling co-
defendant, and (b) claims which were only asserted against the settling co-
defendant, is also satisfied in the present case. As already noted, the trial court’s
order entering judgment found that “[t]he settlement agreement provided that $500
of the settlement was attributable to damages and the remainder was intended to
reimburse Escadote for attorney’s fees.” Reliance by the Developer and
Contractor on Dionese, supra, is misplaced because the “private, unilateral
10
agreement” in that case was among the plaintiffs, not among the separately pleaded
claims for differing elements of liability. Dionese actually held that “an agreement
to apportion the proceeds of a settlement agreement must be found on the face of
the settlement agreement and agreed to by all of the parties involved in the
settlement.” 500 So. 2d at 1351. There is no dispute that the allocation was in the
settlement agreement and that Escadote and the Association were “all of the
parties” involved in that settlement.
The Developer and Contractor argue that Dionese, supra, and Alexander v.
Seaquest, Inc., 575 So. 2d 765 (Fla. 4th DCA 1991), require the trial court to reject
a “private and unilateral” settlement apportionment taking place after a jury verdict
without notice to the non-settling party, because “the non-settling tort-feasors lose
the right to settle.” They candidly concede that this issue was not raised by them
in the trial court.
We reject the argument for other reasons as well: as noted, Dionese involved
an apportionment among the plaintiffs, not among different claims with differing
damages elements. Alexander involved the inconsistency between a probate
court’s apportionment of a settlement to an estate (“just under six percent”) and an
earlier jury verdict determining that the estate was entitled to “thirty percent of the
total verdict” against the non-settling defendants. Alexander, 575 So. 2d at 766.
As the Fourth District observed in Alexander, “[a]pparently, the probate judge did
11
not know that the wrongful death action had gone to trial and that the jury had
determined that the estate was entitled to thirty percent of the total verdict.” Id.
No such record is before us in the present case.
Finally, the Developer and Contractor did not demonstrate that the terms
agreed upon by Escadote and the Association, including apportionment, were
reached after the jury verdict. There is no dispute that the settlement was reached
before the claims against the Developer and Contractor were submitted to the jury,
and that the Developer and Contractor were aware that the settlement had occurred
before their own claims went to the jury. The Developer and Contractor cannot
claim, and have not claimed, that they could not have renewed settlement
negotiations based on the announcement that the Association had settled with
Escadote (an announcement made before the presentation of the remaining claims
against the Developer and Contractor to the jury).
For these reasons, there was no overlapping or duplicate recovery beyond
the $500.00 allocated to the compensatory damages, and no windfall inherent in
the recovery of legal fees by Escadote against the Association on the Association’s
unique statutory obligation to pay attorney’s fees. We reverse the order granting
the defendants’ motion for a collateral set-off of $375,000.00, and remand for the
entry of an order granting that motion to the limited extent of $500.00.
B. Prejudgment Interest
12
We affirm the trial court’s denial of Escadote’s motion for prejudgment
interest on the amount of the set-off, with such interest commencing on the date of
loss established for other compensatory damages, through the date of the jury
verdict (as was allowed for the amounts awarded by the jury on the claims against
the Developer and Contractor).5 Such an award of prejudgment interest is
inappropriate, because Escadote settled with the Association and issued a release
that was all-inclusive as of the date of the settlement. Escadote did not carve out
or preserve any claim for prejudgment interest antedating the settlement and
payment. To the contrary, Escadote accepted a liquidated sum for its claims
asserted against the Association, and this included any additional sum for
prejudgment interest. See AXA Equitable Life Ins. Co. v. Gelpi, 12 So. 3d 783,
785 (Fla. 3d DCA 2009). We thus affirm the trial court’s denial of Escadote’s
claim for prejudgment interest on the amount of the set-off (though on remand
prejudgment interest will be payable on the jury verdict amount as reduced by
$500.00 rather than $375,000.00).
III. Conclusion
We reverse the Order on Defendant’s Motion for Collateral Set-Off, and
remand the case to the trial court for a reduction of the set-off amount to $500.00
and the entry of an amended final judgment against the Developer and the
5 By virtue of our reduction of the allowable set-off to $500.00, this issue on
appeal becomes far less consequential.
13
Contractor reflecting that reduction (effective as of the date of the jury verdict).
We affirm the trial court’s order denying prejudgment interest on the amount of the
settlement proceeds recovered by Escadote from the Association to be applied as a
reduced set-off.
Affirmed in part, reversed in part, and remanded for further proceedings.
SUAREZ, C.J., concurs.
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Escadote I Corp. v. Ocean Three Limited Partnership, etc., et al.
Case No. 3D15-668
SHEPHERD, J., concurring in part and dissenting in part.
I concur in Part II.B of the majority opinion, holding that pre-judgment
interest on the amount of the settlement proceeds recovered by Escadote I Corp.
from Ocean Three Condominium Association should be calculated from the date of
the settlement. However, I respectfully dissent from Part II.A, in which the
majority reverses the order of the trial court setting off the full $375,000 settlement
sum against the jury verdict based upon a private agreement between the parties
about which we know nothing, not even the date the deal was struck. In fact, the
only written evidence the parties deigned to supply this court confirming their
settlement is a general release signed by Escadote I more than thirty days after the
end of the trial in which Escadote I acknowledged “receipt” of the an
undifferentiated $375,000 in consideration of the release.
On the record as we have it, we cannot decipher why the trial court ruled as
it did. Although the settlement agreement was exhibited to the trial judge at the
hearing on the motion for collateral set-off, Escadote elected not to trust this court
15
with a copy of this all-important document “because of concerns regarding
confidentiality.”6 Not only that, we also are not favored with a transcript of the
hearing on the Developer’s and Contractor’s joint motion for set off. It may be
that the facts as they unfolded at the hearing revealed the apportionment was an
afterthought. See Alexander v. Seaquest, Inc., 575 So. 2d 765 (Fla. 4th DCA
1991) (“[T]he apportionment of a settlement comes too late if done after the jury
verdict because the non-settling tortfeasors lose their right to settle, thus frustrating
the purpose of section 768.31(5), Florida Statutes 1987.”). It may be the hearing
revealed that the apportionment was not reached as a result of an arms-length
negotiation, that the amounts of the respective allocations could not be
substantiated, or that it was executed after the general release and therefore
unenforceable. It seems apparent on the record as we have it that it is unlikely the
Association had any particular interest or care in whether or how the settlement
amount was allocated. All we have from the trial court on the motion and hearing
thereon is a one-line trial court order stating that the motion for collateral set-off is
“granted.”
Escadote has the burden of demonstrating error in the record of the
proceedings. All we know from the record in this case is that at some unknown
6 The writer hopes he can be forgiven if he takes offense at Escadote’s lack of trust
in the ability of this court to maintain confidentiality of documents submitted to us
on appeal. The courts of this state regularly receive documents, and in certain
types of cases complete case files, under seal.
16
time the condominium unit owner and its governing body made a private
agreement to allocate $375,000 in settlement funds, $500 to “damages” and
$374,500 to attorney’s fees. Escadote I and the Association agree that at least
some part of the settlement proceeds must be assigned to the defendants’ joint and
several liability to Escadote I. Where an apportionment agreement is
unenforceable, the entire amount of the settlement is set off against the jury
verdict. See Dionese v. City of West Palm Beach, 500 So. 2d 1347 (Fla. 1987).
Escadote I has not brought us a sufficient record to overturn the decision of the
trial court. For this reason, I respectfully dissent from Part II.A of the majority
opinion.
17