Long Term Management, Inc. v. University Nursing Care Center, Inc., 96-2616

• Decision Date: 12 December 1997
• Docket Number: No. 96-2616,96-2616
• Citation: 704 So.2d 669
• Parties: 22 Fla. L. Weekly D2775 LONG TERM MANAGEMENT, INC., Appellant, v. UNIVERSITY NURSING CARE CENTER, INC., Appellee.
• Court: Florida District Court of Appeals

Page 669

704 So.2d 669

22 Fla. L. Weekly D2775

LONG TERM MANAGEMENT, INC., Appellant, v. UNIVERSITY NURSING CARE CENTER, INC., Appellee.

No. 96-2616.

District Court of Appeal of Florida,

First District.

Dec. 12, 1997.

Rehearing Denied April 22, 1998.

Louis L. Long, Jr. of Butler & Long, Tallahassee, for Appellant.

Keith E. Hope of Keith Hope, P.A., Key Biscayne, for Appellee.

JOANOS, Judge.

Appellant, Long Term Management, Inc. (LTM), appeals an order of the trial court enforcing a settlement purportedly reached between LTM and University Nursing Care Center, Inc. (UNCC). The issues presented are: (1) whether the trial court's finding of a valid and enforceable settlement is supported by competent substantial evidence; (2) whether the trial court possessed subject matter jurisdiction to enforce a settlement and (3) whether the appointment of the substitute judge was invalid, thus voiding the enforcement order. We affirm in part and reverse in part.

LTM is a management company which was engaged to manage the day-to-day operation of UNCC. UNCC is a skilled nursing facility which derives ninety-eight percent of its revenue from public funding under the Medicare and Medicaid programs. Anthony Liuzzo is the sole shareholder of UNCC, and controls its activities. On September 19, 1994, LTM and UNCC entered into a management agreement, ostensibly to protect UNCC from state and federal regulators by assuring that Liuzzo had divested himself from the operation of the nursing home. ¹

On March 21, 1996, LTM filed a verified complaint against UNCC and Anthony Liuzzo, seeking declaratory and injunctive relief, and damages. According to the allegations of LTM's complaint, the management agreement entered into by the parties provided for automatic termination of the agreement upon the sale, lease or transfer of the nursing home, subject to a right of first refusal granted to LTM under section 6.01 of the agreement. When the parties entered into the agreement, UNCC was a debtor-in-possession in a Chapter 11 proceeding. The Bankruptcy Court ruled the management agreement, including its right of first refusal, was properly entered into by UNCC and was an enforceable and binding contract. In an order dated March 4, 1996, the Bankruptcy Court confirmed UNCC's fourth amended plan of reorganization, effectively concluding the UNCC Chapter 11 case. The court stated that LTM should pursue any contract claims it had against UNCC in state court. The LTM complaint further alleged that Liuzzo repeatedly advised LTM and others that he intended to get rid of LTM as soon as he concluded a lease agreement or stock sale with a third party, and did not intend to honor LTM's acknowledged right of first refusal. Paragraph 18 of the complaint provides:

18. In order to wrongfully deny LTM its legal right to have and possibly elect to exercise its right of first refusal should UNCC enter into a bona fide lease transaction or stock sale with Preferred Care, Inc. or any other third party, UNCC and Liuzzo have contrived a pretextual or "bogus" termination of the Plaintiff's Management Agreement under § 2.02 thereof.

On March 21, 1996, the trial court issued a temporary injunction, enjoining UNCC from: terminating the management agreement; changing the signatories on any bank accounts held in UNCC's name at First Union National Bank; seizing mail, checks, cash receipts or books and records of UNCC; and taking any other action having the purpose or effect of harassing, interfering with, or impeding LTM in the performance of the day-to-day operations of the nursing home. The injunction was intended to preserve the status quo until the respective rights, duties, and obligations of the parties were finally determined upon further order of the court.

Thereafter, UNCC and Liuzzo filed separate motions to dissolve the injunction. Liuzzo alleged the temporary injunction and the lawsuit were in violation of an order of the Bankruptcy Court. On April 11, 1996, the trial court entered an order terminating the temporary injunction. The court found LTM's possible loss of its right of first refusal could be compensated by monetary damages, and the threatened injury to LTM did not outweigh the possible harm to UNCC "in that the Defendants are under an absolute need to sell or lease the premises to some third party."

On April 12, 1996, UNCC filed a motion to dismiss the verified complaint. On May 17, 1996, UNCC filed a verified emergency motion to enjoin plaintiff LTM from removing or destroying books and records. The emergency motion for injunction stated, among other things, that on May 17, 1996, UNCC removed LTM and its personnel from the nursing home and totally terminated its contractual relationship with LTM. UNCC replaced LTM with Enterprise Health Management, Inc., "and physically took control of the Nursing Home, as well as the health care responsibilities of the patients." UNCC sought an injunction to prevent LTM "from removing, altering or destroying any and all books and records, including without limitation, any and all electronic data contained in computer systems located at Gainesville, Florida and New York City."

On May 23, 1996, the trial court entered an order granting First Union Bank's motion to intervene, and granting temporary injunctive relief as to funds on deposit by LTM for UNCC. UNCC then filed a motion for temporary injunction requiring LTM to deliver to UNCC the balance of funds paid to UNCC during April and May 1996 for the use and benefit of residents of the facility. The motion alleged that LTM had diverted and held funds paid to it by agencies of the state and federal governments, which funds UNCC required for operation of its facility.

Immediately before the May 28, 1996, hearing on the motions for injunction, the parties conferred outside the courtroom. When called to the courtroom, counsel for UNCC advised the trial court that the parties had reached a settlement, "subject to writing it down." LTM's counsel stated that LTM had turned over all of the books and records belonging to UNCC, and would retain computer software and hardware with "hard copy paper records" of that material to be provided to UNCC. Counsel further stated that from September 1995 through March 1996, LTM was entitled to a six percent management fee. Pursuant to the settlement, LTM would retain a three percent management fee for April and May from the money it then held in the nursing home accounts. LTM's counsel advised the trial court that the parties would exchange general releases, "identical in language and reciprocal." UNCC's counsel then told LTM's counsel to take the first "run through on the agreement," and get it to him.

Two days later, on May 30, 1996, UNCC filed a motion to enforce settlement. The motion alleged that the transcript of May 28, 1996, was enforceable and that "[e]xecution of a settlement document was not made a condition precedent to the settlement on the record but rather is a mere procedural formality which both parties are obliged to perform." UNCC sought an order enforcing the settlement and ordering First Union Bank to transfer from frozen accounts all funds held by the bank, except those necessary to pay the three percent management fee for April and May 1996.

At the hearing on the motion to enforce settlement and to release funds, UNCC's counsel argued it was clear the court was free to enforce all of the terms of the settlement as recited in UNCC's proposed order. LTM's counsel responded that the parties announced they had reached a settlement, subject to reducing the settlement to written form. LTM's counsel stated that as a courtesy, the parties informed the court of the settlement, but maintained that not all of the terms and conditions of the settlement were included in the oral announcement. LTM's counsel further advised there was an unresolved item concerning $150,000 which was still in dispute. It was LTM's position that the $150,000 would be assigned to LTM, with the right to try to collect the funds in return for LTM's voluntary reduction of the management fee from six percent to three percent, and for its voluntary relinquishment of the remaining term of the management contract.

UNCC's position was that the $150,000 would be treated as funds already received by LTM. According to UNCC's counsel, the $150,000 was not mentioned in the courtroom, because prior to entering the courtroom, the parties agreed the $150,000 was part of management fees.

The trial court advised that the court was willing to receive testimony as to the $150,000 in dispute. However, the court refused to sign a proposed order denying enforcement of the settlement. The court was of the view that there was a possibility a settlement could be reached. LTM's counsel then filed a motion requesting the presiding judge to disqualify himself. The proceedings were recessed to permit the judge to review the motion. When the presiding judge returned to the courtroom, he presented a substitute judge, and advised the proceedings would be conducted by the substitute judge.

The substitute judge received testimony from the presidents of LTM and UNCC, concerning their respective positions as to the disputed $150,000, as well as the other terms of the proposed settlement. At the conclusion of the hearing, the judge observed that he had a great deal to assimilate. The substitute judge found the issues for resolution were whether there was a mutual mistake in the parties' oral presentation of the agreement to the court; whether LTM's counsel was authorized to make a settlement which could bind LTM to the oral announcement of the settlement; and whether there was a meeting of the minds as to the $150,000, which the court found to be a material part of the agreement.

Four days later, the substitute judge entered the subject order enforcing the settlement. The court found the transcript of the settlement hearing revealed that LTM's president was...