Kraft v. Mason

• Decision Date: 28 February 1996
• Docket Number: No. 94-2544,94-2544
• Parties: 21 Fla. L. Weekly D538 Julian B. KRAFT; Falcon Food Service Company, Inc., Harold R. Newburg, Sea-Good Seafood, Inc., a Florida corporation, Seagood Trading Corporation, a Florida corporation, and Blaine H. Winship as partner of Winship & Byrne, Appellants/Cross-Appellees, v. Zelda Pincourt MASON, Appellee/Cross-Appellant.
• Court: Florida District Court of Appeals

Page 679

668 So.2d 679

21 Fla. L. Weekly D538

Julian B. KRAFT; Falcon Food Service Company, Inc., Harold R. Newburg, Sea-Good Seafood, Inc., a Florida corporation, Seagood Trading Corporation, a Florida corporation, and Blaine H. Winship as partner of Winship & Byrne, Appellants/Cross-Appellees, v. Zelda Pincourt MASON, Appellee/Cross-Appellant.

No. 94-2544.

District Court of Appeal of Florida Fourth District.

Feb. 28, 1996.

Reconsideration and Clarification Denied April 19, 1996.

Appeal and cross-appeal from the Circuit Court for Palm Beach County; Richard I. Wennet, Judge.

Edward A. Marod of Edward A. Marod, P.A., West Palm Beach, for Appellants/Cross-Appellees-Julian B. Kraft and Falcon Foods Service Company, Inc.

John E. Swisher, St. Petersburg, for Appellants/Cross-Appellees-Harold R. Newburg, Sea-Good Seafood, Inc. and Seagood Trading Corporation.

Russell S. Bohn of Caruso, Burlington, Bohn & Compiani, P.A., and Richard S. Cohen, West Palm Beach, for appellee/cross-appellant.

HENNING, PATTI ENGLANDER, Associate Judge.

STATEMENT OF THE FACTS

Julian Kraft, Harold Newburg and their companies were plaintiffs in a federal antitrust suit in the mid-1980s. They were represented by a law firm which, after a time, told them that the firm would be required to settle the case or withdraw from representation unless fees and costs were paid. Without the financial wherewithal themselves, the plaintiffs sought financing from others.

First, Kraft approached a gentleman named Gross with a contract drafted by Kraft himself. The contract provided for an interest in the antitrust suit if Gross would obtain a bank loan and, in turn, lend the proceeds to the plaintiffs. Specifically, the terms were for 20% of the first $1,000,000 recovered, 6% of the next $4,000,000 recovered and 3% of any recovery in excess of $5,000,000 in exchange for a loan of $100,000. The plaintiffs were obligated to pay Gross the first $100,000 of any recovery, and Gross was obligated to utilize that $100,000 in reducing the loan principal. Additionally, the loan was guaranteed and interest payments would be paid by the borrowers. Gross declined to provide the financing.

Still needing the funds, Kraft sought help from his sister Zelda Mason. She reviewed the loan agreement (identical to the one Kraft had drafted for Gross) and after considering the matter for a few weeks agreed to lend her brother the money. She made no changes in the loan document. She believed that the $100,000 loan would be repaid and that she would receive interest payments on the loan. She was also obligated by the loan agreement to use the first $100,000 received by her to reduce the loan principal. She testified that her brother said any additional money received under the loan agreement was like "icing on the cake" for her. Mason did not consider it a necessary incentive for making the loan. She had no expectations as to any further recovery. Important for issues presented to this court, we note that the contract contained no fixed repayment dates.

Once Mason lent the money, the antitrust lawsuit continued. The law firm modified its agreement with Kraft and Newburg to a straight contingent fee agreement. Because of this, Mason actually bore the cost of the litigation with her $100,000 loan.

In 1987, there was a partial settlement of the antitrust litigation for $200,000. Mason received $85,000 to reduce her loan obligations with the bank; with agreement of all, $15,000 was paid to her prior attorney; and all agreed the remaining $15,000 principal would be paid from any later settlement.

In June of 1987, Kraft stopped making the contractually mandated interest payments. By October, Mason demanded in writing full payment of the principal and unpaid interest. Testimony reveals that Kraft had repudiated the contract because of an unrelated family dispute Kraft had with his sister. Mason did not file a lawsuit at that time.

Eventually in December 1992, the antitrust suit settled for $5,015,000. Although the attorneys notified Mason in writing that she was entitled to $355,450 ¹, no money was actually disbursed at the direction of Kraft. He still believed he was entitled to a setoff for that family matter. Mason demanded her settlement proceeds and instituted this suit when she was not paid. The suit was defended on the basis that the original contract was champertous and usurious and that the suit had been filed outside the statute of limitations.

After a nonjury trial, the trial court entered final judgment on behalf of Mason rejecting all defenses. However, the trial judge rejected Mason's position that she was entitled to have her recovery based on the full settlement amount before deducting attorneys' fees. This is the appeal and cross-appeal to this court of those rulings.

MAINTENANCE AND CHAMPERTY

"Maintenance is an officious intermeddling in a suit which in no way belongs to the intermeddler, by maintaining or assisting either party to the action, with money or otherwise, to prosecute or defend it." 9 Fla.Jur.2d Champerty and Maintenance § 1 (1979). Under the modern view, "it is the act of one improperly, and for the purpose of stirring up litigation and strife, encouraging others either to bring [an] action[ ] or to ... defen[d a suit] which they have no right to make...." Id.

Champerty is a form of maintenance wherein one will carry on a suit in which he has no subject-matter interest at his own expense or will aid in doing so in consideration of receiving, if successful, some part of the benefits recovered. 14 C.J.S. Champerty and Maintenance § 1a (1991).

Historically, the common-law doctrines of champerty and maintenance arose in England from causes unique to society as it then existed. 14 Am.Jur.2d Champerty and Maintenance § 1 (1964). "The power of influential persons to whom rights of action were transferred in order to obtain their support and favor in suits brought to assert those rights was the cause of the rigid doctrine...." 14 C.J.S., supra, § 3. As civilization and law progressed, the need for these strict rules decreased. 14 Am.Jur.2d, supra, § 1. Today, none of the states adhere to the rigor of the original champerty and maintenance doctrines. Id.

Though Appellants argue to this court that we should follow the strict common-law definitions, the few cases in Florida on this subject support the more modern-day approach that officious intermeddling is a necessary element of champerty. We define officious as "offering unnecessary and unwanted advice or services; meddlesome, esp. in a highhanded or overbearing way." Webster's New World Dictionary 988 (2d col. ed. 1986).

In Brown v. Dyrnes, 109 So.2d 788 (Fla. 2d DCA 1959), the Second District Court determined there was sufficient evidence to support the jury's finding that the contract was champertous. The litigation in question was provoked by the champertor who unjustly aroused the suspicion of one litigant against the other. There, a widow inherited numerous parcels of real estate. Brown managed these properties for the husband and for the widow after her husband's death. Sometime later, the widow met the plaintiff/champertor and discussed the property. At the time she was content with the management services of Brown. The plaintiff/champertor, however, persuaded the widow to believe that Brown was profiting from the handling of her properties and that through a lawsuit she could recover a large judgment. Believing this, she contracted with the champertor, agreeing to pay him percentages of all properties and money recovered in the suit. Furthermore, if the suit settled without his consent, he would be paid for services rendered.

The litigation that ensued exonerated Brown, and the widow eventually had to pay him $10,000. Next, the champertor filed suit alleging that the widow owed him for his services in the unsuccessful litigation. This time, the widow prevailed. The Second District Court found the verdict could well be sustained on the theory the contract was champertous.

This court in Anderson v. Trade Winds Enterprises Corp. 241 So.2d 174 (Fla. 4th DCA 1970), cert. denied, 244 So.2d 432 (Fla.1971), accepted the definition of maintenance as stated above as well as the following definition of champerty: " 'a bargain by a champertor with a plaintiff or defendant for a portion of the matter involved in a suit in case of a successful termination of the action, which the champertor undertakes to maintain or carry on at his own expense.' " 241 So.2d at 177 (quoting 14 Am.Jur. § 3 (1964)). After accepting these definitions, this court determined that the facts in that case could not "even remotely resemble maintenance or champerty. In the first place there was obviously no officious intermeddling by anyone in a law suit. In the second place there was no bargaining between any person not involved in a law suit to acquire an interest in a matter in litigation". 241 So.2d at 177 (emphasis added).

In the instant case, Mason clearly did not act in an officious manner. She was not intermeddling in a lawsuit. She did not instigate the litigation. Her assistance was sought out by Kraft when he needed money to continue his lawsuit. She did not bargain for the terms under which she made the loan--they too were prepared by Kraft. Nor did she concern herself with the antitrust litigation or impose her views upon the attorneys or the litigants once she provided the loan.

Accordingly, this court holds that the trial court correctly rejected the champerty argument raised below.

USURY

There are four requirements necessary to establish usury:

1. a loan, express or implied.

2. an understanding between the parties that the money loaned must be repaid.

3. In consideration of the loan, a greater rate of interest than is allowed by law is paid or agreed to be paid by the borrower.

4. a corrupt intent to take more than the legal rate for the use of the money loaned.

See Jersey Palm-Gross, Inc. v....