Cornerstone SMR, Inc. v. Bank of Am., N.A.

Decision Date08 April 2015
Docket NumberNo. 4D13–2064.,4D13–2064.
Citation163 So.3d 565
PartiesCORNERSTONE SMR, INC., Appellant, v. BANK OF AMERICA, N.A., a Foreign Corporation, Appellee.
CourtFlorida District Court of Appeals

Andrew S. Berman of Young, Berman, Karpf & Gonzalez, P.A., Miami, for appellant.

Tricia J. Duthiers and J. Randolph Liebler of Liebler, Gonzalez & Portuondo, Miami, for appellee.

Opinion

WARNER, J.

After appellant, Cornerstone, obtained a judgment against appellee, Bank of America, for conversion arising from embezzlement by one of Cornerstone's employees, the Bank moved to offset the recovery by monies Cornerstone obtained in settlement with the employee. Cornerstone objected that it would not be made whole, because the judgment against the Bank did not compensate Cornerstone for all of its losses, due to the expiration of the statute of limitations on many of the embezzled funds. The trial court allowed a “pro rata” set-off, to which the Bank objected. Both parties appeal, Cornerstone claiming that no set-off should have been allowed and the Bank claiming that a full set-off of the entire settlement amount should have resulted in no recovery for Cornerstone. Because we conclude that section 768.041(2), Florida Statutes (2012), compels a full set-off, we agree with the Bank's position on both the appeal and cross appeal and reverse.

Cornerstone, a small start-up company in the radio-dispatch business, was developing its business and operating with a handful of employees. Its bookkeeper was responsible for overseeing the day-to-day financial operations. Between July 2002 and June 2007, the bookkeeper stole money from Cornerstone by taking checks made out to Cornerstone to Bank of America, where Cornerstone had an account, and depositing them into an account owned by JustTime, Inc., a corporation controlled by the bookkeeper. Her theft was not discovered until 2007.

Cornerstone commenced suit against the bookkeeper, JustTime, and the Bank in August 2008. It sued the bookkeeper for civil theft, conversion, and breach of fiduciary duty; it sued JustTime for civil theft and conversion; and it sued the Bank for conversion of an instrument pursuant to section 673.4201, Florida Statutes, breach of good faith and fair dealing, and breach of fiduciary duty. As to the Bank, Cornerstone alleged the Bank “had an obligation to and was solely responsible to verify the genuineness of the endorsements, the identity of the persons presenting the checks for deposit, and that the checks were deposited to the account in the name of the payee.” The Bank answered, raising multiple defenses, including the four-year statute of limitations, which it claimed began to run on each check when it was cashed. Cornerstone responded that the statute did not begin to run until Cornerstone discovered the theft in 2007.

In April of 2010, Cornerstone settled with the bookkeeper as part of her entry of a guilty plea to criminal charges. She agreed to: (1) pay Cornerstone a lump-sum payment of $32,000 on execution of the agreement; (2) pay Cornerstone $1,500 a month for ten years; (3) assign her interest in Cornerstone shares to Cornerstone; and (4) testify in the pending civil lawsuit against the Bank. Cornerstone filed notice of the settlement and dismissed the bookkeeper and JustTime. The Bank then amended its answer to claim that any award should be set-off by the value of the bookkeeper settlement.

At trial, the parties stipulated that the case involved 126 checks totaling $478,490. The parties stipulated that the bookkeeper had paid Cornerstone $41,000 under the settlement and would pay Cornerstone $212,000 over a period of ten years. They also stipulated that “BANK OF AMERICA is entitled to a setoff that will reduce CORNERSTONE's claim against BANK OF AMERICA in the value of [the bookkeeper's] settlement with CORNERSTONE.” As one of the issues to be determined at trial, they identified: “Whether the award in favor of CORNERSTONE be [sic] set off or reduced by any recovery received from third parties.”

Cornerstone presented damage calculations totaling $582,354.63, which it reached by adding the face value of the checks to the accrued interest and then subtracting the value of the settlement reduced to present money value. The Bank contested Cornerstone's reduction-to-present value calculation. The Bank also argued Cornerstone's calculations failed to account for the value of the stock the bookkeeper assigned back to the company. Cornerstone took the position that the stock had no value.

Following the bench trial, the court entered an order finding for Cornerstone only on its conversion claim. On the statute of limitations defense, the court found the four-year statute began to run upon the deposit of each check, and therefore barred recovery on all but forty-eight checks, totaling $146,743.23. The court found the Bank was entitled to a “pro rata offset” based on the value of the settlement with the bookkeeper, and that the offset—which would consist of the cash settlement and stock, plus payments over time calculated at present money value—should be applied to the Bank's $146,743.23 post-statute-of-limitations liability. It determined that the stock collected by Cornerstone from the bookkeeper had value. It ordered the parties to submit calculations to accomplish the court's intent.

Instead, Cornerstone moved for rehearing of the order, contending that the set-off should be taken against the total amount of its damages, including those checks which it was barred from recovering from the Bank by the statute of limitations. Based upon its calculations using the larger numbers, the amount of its uncompensated loss exceeded the amount found due from the Bank. So Cornerstone argued that recovery of the entire $146,743.23 (the value of the post-statute-of-limitation checks) would “not create a windfall for Cornerstone nor constitute a duplicative payment, and therefore, there is no basis to reduce the amount found to be due from [the] Bank[.]

The Bank opposed rehearing. Among the many arguments it made, it pointed to section 768.041(2), Florida Statutes (2012), which required that the set-off should be applied to “any judgment to which the plaintiff would be otherwise entitled at the time of rendering judgment[.] Moreover, the Bank argued that to apply the offset as advocated by Cornerstone would not result in reduction of the Bank's liability, which was not the intent of the statute. Instead, the Bank contended that only two numbers were needed to calculate the set-off: the amount of damages recovered against the Bank ($146,743.23) and the present money value of the settlement. The present money value amount would be offset against the damages recovered to determine the net judgment.

The court denied the motion for rehearing but, as neither party had submitted proposed calculations, the court made its own.

The court later entered a final judgment, which contained the following calculation:

Checks converted from 10/ 11/ 2005 to 6/ 11/ 2007 $146,743.23
Interest on above checks from conversion to date of trial + 61,794.65
$208,537.88
Pro-rata offsets for settlement payments reduced to present value, shares of
Cornerstone, and LLC shares 86,676.00
For a total of $121,861.88

The court entered judgment for the total against the Bank, which then moved for rehearing itself, arguing that settlement should not be applied pro rata. Instead, the full amount of settlement should be applied against the amount the trial court found due to the bank, which would result in a zero recovery for Cornerstone. The trial court denied the motion for rehearing, prompting an appeal by Cornerstone and cross-appeal by the Bank.

Whether the trial court awarded a proper set-off is a pure question of law reviewed de novo, and “no deference is given to the judgment of the lower courts.” D'Angelo v. Fitzmaurice, 863 So.2d 311, 314 (Fla.2003). Nevertheless, the issues presented must have been properly preserved. For this reason, we do not address Cornerstone's argument that set-off should not apply at all, because the Bank and the bookkeeper were not joint tortfeasors and not necessarily liable on the same theories. This argument was first made in the reply brief. See Duncan–Osiyemi v. Osiyemi, 117 So.3d 882, 883 n. 1 (Fla. 4th DCA 2013) (We decline to consider any issue raised for the first time in the reply brief.”).

“The common law ... provided that a release of one joint tortfeasor discharged the obligation or liability of any other joint tortfeasor.” Thomas D. Sawaya, 6 Fla. Prac., Personal Injury & Wrongful Death Actions § 7:11 (2014–15 ed.). The Florida Legislature abolished this common law rule in section 768.041, Florida Statutes (2012), which provides:

(1) A release or covenant not to sue as to one tortfeasor for property damage to, personal injury of, or the wrongful death of any person shall not operate to release or discharge the liability of any other tortfeasor who may be liable for the same tort or death.

However, in the same statute, the Legislature also established a method for setting off the damages recovered against one tortfeasor:

(2) At trial, if any defendant shows the court that the plaintiff, or any person lawfully on her or his behalf, has delivered a release or covenant not to sue to any person, firm, or corporation in partial 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.

§ 768.041(2), Fla. Stat. (2012) (emphasis added); accord § 46.015(2), Fla. Stat. (2012) (containing materially identical language); see also § 768.31(5), Fla. Stat. (2012) (effect of release or covenant not to sue on rights of contribution).

The set-off provision in section 768.041(2) “was designed to prevent duplicate or overlapping compensation for identical damages.” Gordon v. Marvin M. Rosenberg, D.D.S., P.A., ...

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