McCalla v. E.C. Kenyon Constr. Co.

Decision Date15 January 2016
Docket NumberNo. 1D14–5225.,1D14–5225.
Citation183 So.3d 1192
Parties Gary McCALLA and Dianne McCalla, Appellants, v. E.C. KENYON CONSTRUCTION COMPANY, INC., a dissolved Florida corporation, Douglas Herring, an Individual, and Timothy Young, an Individual, Appellees.
CourtFlorida District Court of Appeals

Peter A. Robertson, Erin Rohan Smith, William Douglas Stanford, Jr., and Randy R. Cardoza, III of the Robertson Firm, St. Augustine, for Appellants.

S. Grier Wells of GrayRobinson, P.A., Jacksonville and Kristie Hatcher–Bolin, Lakeland, for Appellees.

BENTON, J.

Gary McCalla asks us to reverse summary final judgment entered in favor of the contractor who built his house, E.C. Kenyon Construction Company, Inc. (Kenyon), and two of Kenyon's principals, Douglas Herring and Timothy Young, and send the case back. Concluding he is entitled to no less, we reverse and remand for further proceedings.

In a separate case filed earlier, No. 16–2008–CA–005588, Gary and his wife, the late Dianne McCalla, sued Kenyon for breach of the construction contract, breach of express and implied warranties, and violation of the Florida Deceptive and Unfair Trade Practices Act, and obtained a judgment against Kenyon for $627,657.48. Kenyon did not plead any offset as an affirmative defense in Case No. 16–2008–CA–005588. See Felgenhauer v. Bonds, 891 So.2d 1043, 1045 (Fla. 2d DCA 2004) ("It is well settled in contract actions that set-off is an affirmative defense that must be pleaded or it is waived."). Kenyon did not, indeed, defend the original lawsuit at all.

In the present case, No. 16–2012–CA–004988, the McCallas allege that, before final judgment was entered against it in Case No. 16–2008–CA–005588, Kenyon transferred all or most of its assets to Messrs. Herring and Young (who knew of the McCallas' pending claims), without receiving reasonably equivalent value in exchange. The complaint in the present case thus alleged fraudulent transfers within the meaning of sections 726.105(1) and 726.106, Florida Statutes, which rendered Kenyon unable to satisfy the McCallas' judgment against it.

A fraudulent conveyance action is an action by a creditor against a transferee directed against a particular transaction, which, if declared fraudulent, is set aside thus leaving the creditor free to pursue the asset, or it is an action against a transferee who has received an asset by means of a fraudulent conveyance and should be required to either return the asset or pay for the asset (by way of a judgment and execution).

Gen. Elec. Co. v. Chuly Int'l, LLC, 118 So.3d 325, 326 n. 1 (Fla. 3d DCA 2013). "A fraudulent conveyance action is simply another creditors' remedy." Yusem v. S. Fla. Water Mgmt. Dist., 770 So.2d 746, 749 (Fla. 4th DCA 2000) ("A fraudulent conveyance action, under section 726.108, is not an action against a debtor for failure to pay an amount owing from a prior judgment.").

In the order under review, the trial court concluded the McCallas were "not proper claimants" under section 726.108, Florida Statutes, "because such statutory provision does not provide for an award of money damages." We review this surprising legal conclusion de novo. See Volusia Cnty. v. Aberdeen at Ormond Beach, L.P., 760 So.2d 126, 130 (Fla.2000). Final orders entering summary judgment do not entail fact finding. When a defendant moves for summary judgment, "[t]he function of the court is solely to determine whether the appropriate record presented in support of summary judgment conclusively shows that the plaintiff cannot prove the claim alleged as a matter of law." Hervey v. Alfonso, 650 So.2d 644, 646 (Fla. 2d DCA 1995). We apply " 'the de novo standard of review to determine whether there are genuine issues of material fact and whether the trial court properly applied the correct rule of law.' " Glaze v. Worley, 157 So.3d 552, 553–54 (Fla. 1st DCA 2015) (citation omitted).

The trial court erred in ruling that section 726.108 does not authorize awards of money damages. The statute authorizes such awards against both fraudulent transferor and transferee, jointly and severally. See Hansard Constr. Corp. v. Rite Aid of Fla., Inc., 783 So.2d 307, 309 (Fla. 4th DCA 2001) (concluding "that a plaintiff may recover money damages against the transferor under the so-called catchall provision, section 726.108(1)(c)(3), of the Uniform Fraudulent Transfer Act" (boldface omitted)). Section 726.108, Florida Statutes, provides:

(1) In an action for relief against a transfer or obligation under ss. 726.101 –726.112, a creditor, subject to the limitations in s. 726.109 may obtain:
(a) Avoidance of the transfer or obligation to the extent necessary to satisfy the creditor's claim;
(b) An attachment or other provisional remedy against the asset transferred or other property of the transferee in accordance with applicable law;
(c) Subject to applicable principles of equity and in accordance with applicable rules of civil procedure:
1. An injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or of other property;
2. Appointment of a receiver to take charge of the asset transferred or of other property of the transferee; or
3. Any other relief the circumstances may require.
(2) If a creditor has obtained a judgment on a claim against the debtor, the creditor, if the court so orders, may levy execution on the asset transferred or its proceeds.

Section 726.109(2), Florida Statutes, provides that "to the extent a transfer is voidable in an action by a creditor under s. 726.108(1)(a), the creditor may recover judgment for the value of the asset transferred, as adjusted under subsection (3), or the amount necessary to satisfy the creditor's claim, whichever is less." See Myers v. Brook, 708 So.2d 607, 610 n. 1 (Fla. 2d DCA 1998) (noting that " section 726.109(2)(a), Florida Statutes (1993) permits a money judgment to be entered against the first transferee of the fraudulently conveyed assets").

The trial court also ruled that the appellees were "entitled to a setoff of both the Amerisure Lawsuit credit of $158,558.17 and the undifferentiated Green [e] Lawsuit settlement of $550,000.00 from the Judgment of $627,657.48.... The total of the settlement amounts of $708,558.17 exceed the Judgment, thereby extinguishing the underlying obligation for the instant action for fraudulent transfer." See generally Cornerstone SMR, Inc. v. Bank of Am., N.A., 163 So.3d 565, 568 (Fla. 4th DCA 2015) ("Whether the trial court awarded a proper set-off is a pure question of law reviewed de novo. ").

On March 30, 2012, the McCallas had filed suit against Amerisure Insurance Company (Amerisure), Kenyon's certified general liability policy carrier, alleging Amerisure wrongfully denied coverage intended for their benefit. On October 29, 2012, the McCallas settled with Amerisure for $65,000.00. As part of the settlement, the McCallas agreed to credit and deduct the sum of $158,558.17 from the judgment entered in their favor against Kenyon in the original action, Case No. 16–2008–CA–005588. The learned trial judge ruled that this credit or offset should inure to the benefit of Messrs. Herring and Young, no less than to Kenyon, and we have no occasion to revisit that ruling on this appeal.1

The trial court erred, however, in determining the appellees were entitled to set off the amount the McCallas received in settlement of malpractice claims they made against Christopher Greene, the first lawyer they retained to represent them in the original lawsuit against Kenyon, and his employers. The defendants in the professional malpractice action were never jointly and severally liable for the damages awarded in the original action against Kenyon. In Case No. 16–2008–CA–005588, Kenyon was adjudicated guilty of having damaged the McCallas long before the malpractice defendants ever entered the picture.

On February 9, 2011, before entry of the default judgment against Kenyon, the McCallas sued Mr. Greene and the two law firms who employed him while he represented them, alleging professional malpractice.2 In June of 2013, the McCallas settled their malpractice action for $550,000, an amount they assert they expended some $300,000 to obtain. As part of the settlement agreement, the McCallas discharged Mr. Greene and both law firms from liability for all claims in law and equity. But they reserved the right to pursue any claims they had or might have against any entity not a party to the settlement agreement, including specifically claims against Kenyon, Mr. Herring, and Mr. Young in the pending fraudulent transfer case.

It is a gross oversimplification at best to say, as was said in Blasland, Bouck & Lee, Inc. v. City of N. Miami, 283 F.3d 1286, 1295 (11th Cir.2002), that "the purpose of a setoff is to prevent a party from recovering twice for the same damages." See Gouty v. Schnepel, 795 So.2d 959, 966 (Fla.2001) (denying setoff where settling defendant was exonerated as joint tortfeasor even though doing so permitted the plaintiff to recover in the aggregate more than the jury awarded). In keeping with the majority view, as Justice Grimes explained in Wells v. Tallahassee Memorial Regional Medical Center, Inc., 659 So.2d 249, 251 (Fla.1995), Florida law holds that settlement dollars paid "by one tortfeasor should only extinguish that tortfeasor's liability and have no effect on another tortfeasor's liability" in the absence of joint and several liability.

While Case No. 16–2008–CA–005588 sounded in contract, joint and several liability is still key. See Osheroff v. Rauch Weaver Millsaps & Co., 882 So.2d 503, 506 (Fla. 4th DCA 2004). "Florida law regarding setoffs is found in sections 46.015(2), 768.041(2), and 768.31(5), Florida Statutes (1997)." D'Angelo v. Fitzmaurice, 863 So.2d 311, 314 (Fla.2003) (footnotes omitted). Pertinent here is section 46.015(2), which provides:

At trial, if any person shows the court that the plaintiff, or his or her legal representative, has delivered a written
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