Allie v. Ionata
| Decision Date | 07 February 1985 |
| Docket Number | No. 83-1709,83-1709 |
| Citation | 10 Fla. L. Weekly 316,466 So.2d 1108 |
| Parties | 10 Fla. L. Weekly 316 Robert C. ALLIE and Rosemary Allie, et al., Appellants, v. Fred IONATA, et ux., et al., Appellees. |
| Court | Florida District Court of Appeals |
We withdraw the opinion previously filed in this case and substitute the following in its place:
This is the second appearance of this case before us. See Allie v. Ionata, 417 So.2d 1077 (Fla. 5th DCA), review denied, 424 So.2d 761 (Fla.1982). The relevant background facts are set forth in that opinion. In summary, the original plaintiffs (Ionata) sought rescission of two real estate contracts whereby they had purchased two tracts of land, one in North Carolina and one in Tennessee, from their accountant and his family (Allie). The action was filed in 1980, four years and several months after execution of the contracts. Ionata sought rescission and restitution based on fraud and breach of a fiduciary relationship. Allie asserted the applicable statute of limitations (§ 95.11(3), Fla.Stat.) as an affirmative defense, and counterclaimed for the balance due on the purchase money notes for the two tracts.
The counterclaim was held in abeyance by the trial court and the issues raised by plaintiffs' complaint were submitted to jury trial for certain factual determinations. The jury found, by way of interrogatory verdicts, that Allie had breached a fiduciary relationship (Allie did not volunteer to Ionata what he had originally paid for the properties), but that he was not guilty of fraud (he did not make a false statement of fact inducing reliance thereon by Ionata to the latter's damage).
The interrogatory verdict returned by the jury in regard to whether Allie breached a fiduciary relationship with Ionata in the sale of the real property was yes. It was in response to the following instruction:
If a fiduciary fails to deal fairly and in good faith with the one who has placed his confidence and trust in him, it is a breach of the duty he owes to them and such actions would constitute constructive fraud. Here, the Plaintiffs complain that Defendant, Robert Allie, breached his fiduciary duty to them by failing to advise them fully of all relevant facts pertaining to the sale of the described lands.
If you find the Defendant has breached his fiduciary duty, then this will nullify Plaintiffs' consent to enter into the land contracts and the Plaintiffs will therefore be entitled to rescission of those contracts.
The interrogatory verdict as to whether Allie committed fraud in the sale of the property to the Ionatas was no. It was in response to the following instruction:
Fraud in the sale of property consists of the following elements: One, a false statement of fact or facts; two, known by the Defendant to be false when made; three, made for the purpose of inducing the Plaintiff to act in reliance; and four, relied upon by the Plaintiff; and five, resulting in damage.
It is apparent from the jury instructions 1 that the jury finding of a breach of fiduciary duty was a finding of constructive fraud and, therefore, the jury finding that there was no fraud related to actual, as opposed to constructive, fraud. Florida courts have recognized that constructive fraud may exist independently of an intent to defraud. It is a term which is applied to a great variety of transactions that equity regards as wrongful, to which it attributes the same or similar effects of those that follow from actual fraud and for which it gives the same or similar relief. Thus, constructive fraud is deemed to exist where a duty under a confidential or fiduciary relationship has been abused. Douglas v. Ogle, 80 Fla. 42, 85 So. 243 (1920); Harrell v. Branson, 344 So.2d 604 (Fla. 1st DCA), review denied, 353 So.2d 675 (Fla.1977).
Based on the jury findings, the trial court then entered judgment granting Ionata rescission of the contracts and damages based on the jury verdicts, and denied Allie's counterclaim. On appeal, we held that Ionata's action for rescission was barred by the applicable four-year statute of limitations, section 95.11(3)(l ), Florida Statutes, since it had not been extended by fraudulent concealment by Allie under section 95.031(2), as established by the jury finding that there was no (actual) fraud by Allie. See Allie (Case I) at 1078-79. We reversed the lower court judgment, and remanded "for entry of judgment for [the Allies]...." 2
After remand, Allie amended his pending counterclaim for contractual damages, which had been revived by our reversal. In response thereto, Ionata filed an answer and a "counter-counterclaim," 3 attempting to renew his claim for rescission and restitution based on the prior jury finding of constructive fraud. The trial court allowed this "counter-counterclaim" based upon the "sword-shield" principle relating to statutes of limitations, i.e., a party otherwise barred from instituting an action because of a time limitation is freed from that bar when he acts in a defensive posture. See, e.g., Payne v. Nicholson, 100 Fla. 1459, 131 So. 324 (Fla.1930); Beekner v. L.P. Kaufman, Inc., 145 Fla. 152, 198 So. 794 (Fla.1940). As a result, in November, 1983, the trial court denied summary judgment to Allie and entered summary judgment for Ionata again rescinding the notes and contracts pertaining to the two parcels, and granting judgment for Ionata for the amounts previously paid to Allie. 4
On this appeal, it is contended by Allie that the prior appeal in 1982 precluded the affirmative remedy of rescission and restitution for Ionata. Our first inquiry, then, must be whether or not Ionata's "counter-counterclaim" actually is a permissible defense of recoupment 5 based on constructive fraud against Allie's counterclaim for the balance due on the notes. Ionata maintains that the statute of limitations does not bar his defense of recoupment, citing to Bull v. United States, 295 U.S. 247, 55 S.Ct. 695, 79 L.Ed. 1421 (1935). He contends:
Almost without exception, cases from other jurisdictions dealing with recoupment so recognized and named, run to the effect that if a defendant's claim is in fact a recoupment, the general statutes of limitations do not defeat it; on the contrary, it may be availed of defensively, as long as the plaintiff's cause of action exists. Annot., 1 A.L.R.2d 630, 666 (1948). By the reasoning of such decisions, the IONATAS have the right to raise FRED C. ALLIE'S breach of fiduciary duty to recoup at least the full amount of damages sought by the ALLIES in their Amended Counterclaim.
We agree with Ionata's contention. Therefore, the next question is whether recoupment is limited to reducing the amount of Allie's claim, or whether such recoupment may include affirmative relief--i.e., rescission and restitution.
In Payne v. Nicholson, supra, the landmark case in this area, the Florida Supreme Court determined that:
The defense of recoupment exists so long as the plaintiff's cause of action exists, and may be asserted, though the claim as an independent cause of action is barred by limitations. Huggins v. Smith, 141 Ark. 87, 216 S.W. 1, 16 A.L.R. 323. See, also, Annotations, 16 A.L.R. 339.
Id. at 326. In Beekner, the supreme court similarly upheld the right to raise an affirmative defense of usury when a lender attempted to collect on a usury-infected contract, though the claim of usury as an affirmative cause of action would have been barred by the statute of limitations. Neither case explicitly held that recoupment, otherwise barred, was limited to a defense against the amount of the adverse claim, and could not be employed to obtain an affirmative judgment.
The First District has read the Florida Supreme Court case of Payne, and the statutory development of recoupment in Florida, to allow a counterclaim of recoupment by a defendant when that claim would have been barred by the statute of limitations in a direct action. In Cherney v. Moody, 413 So.2d 866 (Fla. 1st DCA 1982), the First District held that "a compulsory counterclaim in recoupment permits the recovery of an affirmative judgment even though barred as an independent cause of action by the running of the statute of limitation." Id. at 869. See also Evans v. Parker, 440 So.2d 640 (Fla. 1st DCA 1983). On the other hand, the Third District has explicitly refused to allow a defendant to recover an affirmative judgment based upon a counterclaim in recoupment when it has been barred by the statute of limitations. See Hilsenroth v. Kessler, 446 So.2d 147 (Fla. 3d DCA 1983); Horace Mann Ins. Co. v. DeMirza, 312 So.2d 501 (Fla. 3d DCA 1975). In the latter case the Third District said:
At common law the plea of recoupment was only defensive in nature. See, Payne v. Nicholson, 1930, 100 Fla. 1459, 131 So. 324. However, it was like the present compulsory counterclaim in that under the plea of recoupment the damages claimed had to arise out of the same transaction as the plaintiff's claim. Ibid.
Further, in Payne v. Nicholson, cited above, the court observed that the defense of recoupment exists so long as the plaintiff's cause of action exists, even though the defendant's claim may be barred as an independent...
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