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).

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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.

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 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.

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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

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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).

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 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.

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 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”).

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 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.

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 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

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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

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 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.

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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.

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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.

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