Holdings v. Mercantile Bank

• Decision Date: 18 May 2011
• Docket Number: No. 1D10–1886.,1D10–1886.
• Citation: Holdings v. Mercantile Bank, 78 So.3d 558 (Fla. App. 2011)
• Parties: TIERRA HOLDINGS, LTD, Appellant, v. MERCANTILE BANK, a Florida banking corporation, Appellee.
• Court: Florida District Court of Appeals

78 So.3d 558

TIERRA HOLDINGS, LTD, Appellant,

v.MERCANTILE BANK, a Florida banking corporation, Appellee.

No. 1D10–1886.

District Court of Appeal of Florida, First District.

May 18, 2011.

Jeptha F. Barbour and Stella J. Lane of Marks Gray, P.A., Jacksonville, for Appellant.

Michael G. Tanner, Thomas E. Bishop, Stuart F. Williams, and Helen A. Peacock of Tanner Bishop, Jacksonville, for Appellee.

VAN NORTWICK, J.

Tierra Holdings, Ltd.(“Tierra”) appeals a trial court order which (1) awarded Tierra its costs and attorney's fees incurred after December 1, 2006, the date of its valid proposal for settlement pursuant to section 768.79, Florida Statutes(2006), in the breach of contract claim filed against Tierra by Mercantile Bank (“Mercantile”), and (2) awarded Mercantile all of its costs and attorney's fees incurred through trial in connection with its breach of contract claim against Tierra, pursuant to a prevailing party attorney's fees provision in the contract.Tierra conceded below that Mercantile was the prevailing party under the contract, but argued that its proposal for settlement cut off Mercantile's entitlement to fees under the contract which were incurred after the date of the proposal.The trial court rejected Tierra's argument, ruling that section 768.79 contained no language which would expressly authorize the modification of a contractual attorney's fees provision and that to read such a rule into the statute would contravene the parties' economic expectations under the contract without express statutory support.Because section 768.79 must be strictly construed and the statute, as written, does not support the interpretation advanced by Tierra, we affirm.

Factual and Procedural Background

In May 2004, Mercantile and Tierra, through its sole general partner Diamond “S”Development Corporation(“Diamond”), entered into a contract under which Mercantile agreed to sell two parcels of real estate to Tierra.The contract provided that Parcel 2 would not be used for a bank or a banking related business for a period of five years.The contract also provided that the “prevailing party” in any litigation in connection with the contract would be entitled to all costs and expenses including attorney's fees.¹

The sale was closed in June 2004, at which point the parties executed a special warranty deed which provided for a six-month restriction against bank-related use of Parcel 2, rather than the five-year restriction provided by the contract.In March 2005, after the expiration of the six-month restriction, Tierra sold Parcel 2 to Pilot Bank, which subsequently operated a bank on the property.

After discovering the sale of Parcel 2 to Pilot Bank, Mercantile filed a two-count complaint against Tierra and Diamond, alleging breach of contract and unjust enrichment.Tierra and Diamond served Mercantile with a proposal for settlement on December 1, 2006, pursuant to rule 1.442,Florida Rules of Civil Procedure, andsection 768.79, Florida Statutes.Tierra and Diamond offered to pay Mercantile $178,200 ² in resolution of all claims, including Mercantile's claim for attorney's fees and court costs under the contract.Mercantile did not accept the offer.

The case proceeded to trial on August 13, 2007.As the trial court found: “Tierra and Diamond continued to dispute damages for the breach of contract claim even after they admitted they breached the contract shortly before trial and after they knew that Mercantile was only going to claim $16,232.00 in damages for Count I.”The jury returned a verdict in favor of Mercantile awarding damages in the amount of $16,232 for the breach of contract claim and, after a bench trial, the court awarded an additional $725,000 in damages for the unjust enrichment claim.Tierra moved to set aside the jury verdict, arguing that the evidence of damages was speculative and that a reasonable fact-finder could not determine what, if any, damages Mercantile suffered.The trial court denied the motion and entered a final judgment on October 3, 2007, retaining jurisdiction to determine attorney's fees and costs.

On appeal before this court, Tierra and Diamond challenged the award of damages on the unjust enrichment claim, arguing that the claim was precluded by the existence of an express contract.In Diamond ‘S” Development Corp. v. Mercantile Bank,989 So.2d 696(Fla. 1st DCA2008), this court agreed with Tierra that Mercantile could not pursue both a breach of contract claim and an unjust enrichment claim.There, we held that Mercantile's “unjust enrichment claim was precluded by the existence of an express contract between the parties concerning the same subject matter.”Id. at 697.Thus, having recovered on the breach of contract claim, Mercantile was precluded from pursuing the quasi-contract claim for unjust enrichment.The case was remanded.On remand, the trial court entered an amended final judgment retaining jurisdiction to determine the issue of attorney's fees and costs.

On December 30, 2008, Tierra and Mercantile moved for attorney's fees and costs.Mercantile, relying on the attorney's fees and costs provision of the contract, sought fees and costs incurred in regard to its breach of contract claim.Tierra moved for attorney's fees and costs pursuant to rules 1.442and1.525,Florida Rules of Civil Procedure, andsection 768.79, Florida Statutes.At the hearing on the parties' motions, Mercantile conceded that Tierra was entitled to recover some fees and costs under section 768.79, and Tierra conceded that Mercantile was the prevailing party in regard to the breach of contract claim and thus entitled to recover some fees and costs under the contract.Tierra argued, however, that Mercantile could recover only those fees and costs incurred up to the date of Tierra's proposal for settlement.

In its order, the trial court rejected Tierra's argument that its proposal for settlement cut off Mercantile's contractual right to fees as of the date of the proposal, reasoning that the language of section 768.79 does not expressly authorize the sort of modification of a contractual attorney's fees provision that Tierra proposed.Accordingly, the trial court awarded Mercantile the full amount of costs and fees incurred with respect to its breach of contract claim in the amount of $232,381.62.Tierra does not contend on appeal that this amount was unreasonable for the services provided.Further, the trial court found that Tierra's December 1, 2006 proposal for settlement conformed with the requirements of rule 1.442andsection 768.79, that the proposal was made in good faith, and that the verdict obtained by Mercantile combined with the $22,256.50 in fees and $684.00 in costs incurred before the date of Tierra's proposal was at least 25% less than Tierra's offer.Therefore, the court awarded Tierra fees and costs in the amount of $208,627.95.Accordingly, in the final judgment for attorney's fees and costs, the trial court awarded Mercantile $23,753.67, the difference between the award of Mercantile's fees and costs, and the award of Tierra's fees costs and costs.

Tierra appeals, raising an issue of first impression, arguing that a valid proposal for settlement under section 768.79, Florida Statutes, cuts off a prevailing party's claim for contractual attorney's fees and costs incurred after the date of the proposal.

Standard of Review

A trial court's ruling on a motion to tax attorney's fees and costs pursuant to section 768.79 is reviewed de novo.Jacksonville Golfair, Inc. v. Grover,988 So.2d 1225, 1226(Fla. 1st DCA2008).Further, where the trial court's ruling turns on an issue of statutory interpretation, the trial court's interpretation of the statute is also reviewed de novo because “[t]he interpretation of a statute is purely a legal matter.”Kephart v. Hadi,932 So.2d 1086, 1089(Fla.2006).

Statutory Background

The original offer of judgment rule of procedure, adopted by the Florida Supreme Court in 1972, was modeled after its federal counterpart, Federal Rule of Civil Procedure Rule 68.In re the Florida Bar,265 So.2d 21, 40–41(Fla.1972).This rule, rule 1.442, was a cost-shifting mechanism by which the adverse party would be required to pay the offeror its costs incurred after the offer was made if the judgment ultimately obtained was not more favorable than the offer of judgment.Costs were the only sanctions imposed under the original rule and the original rule did not authorize an award of attorney's fees.Sarkis v. Allstate Ins. Co.,863 So.2d 210, 218 n. 5(Fla.2003).³

In 1986, the Florida Legislature enacted the original version of section 768.79, Florida Statutes, authorizing the award of attorney's fees.863 So.2d at 218.The Florida Supreme Court responded in 1988, requesting that the Civil Procedure Rules Committee examine the legislative enactment and rule 1.442, and the Committee petitioned for the adoption of a new rule.In its ruling on the petition, the Supreme Court recognized the confusion generated by the differences between the legislative enactment and rule 1.442 as it existed at the time.Id. at 219.SeeFlorida Bar re Amendment to Rules of Civil Procedure, Rule 1.442 (Offer of Judgment),550 So.2d 442, 442–43(Fla.1989).The Court withdrew the then existing rule 1.442 and replaced it with a new rule which reflected the major components of section 768.79andsection 45.061.⁴Sarkis,863 So.2d at 219–20.

In 1990, the Legislature amended section 768.79, Florida Statutes, adopting its current language.Ch. 90–119, § 48, at 400,Laws of Fla. Subsection (1) of section 768.79 provides:

In any civil action for damages filed in the courts of this state, if a defendant files an offer of judgment which is not accepted by the plaintiff within 30 days, the defendant shall be entitled to recover reasonable costs and attorney's fees incurred by her or him or on the defendant's behalf pursuant to a policy of liability insurance or other...