Palma v. S. Fla. Pulmonary ± Critical Care, LLC, No. 3D19-1347
| Decision Date | 16 September 2020 |
| Docket Number | No. 3D19-1347 |
| Citation | 307 So.3d 860 |
| Parties | Erick A. PALMA, M.D., et al., Appellants, v. SOUTH FLORIDA PULMONARY ∓ CRITICAL CARE, LLC, Appellee. |
| Court | Florida District Court of Appeals |
Podhurst Orseck, P.A., and Joel D. Eaton, for appellants.
Law Offices of Robert P. Frankel, P.A., and Robert P. Frankel (Plantation), for appellee.
Before SCALES, MILLER, and GORDO, JJ.
Appellants, Michael J. Hernandez, M.D., Erick A. Palma, M.D., and Pedro A. Sevilla Saez-Benito, M.D., three physicians formerly employed by appellee, South Florida Pulmonary and Critical Care, LLC ("SFPCC"), challenge an adverse final judgment. The decree, entered in favor of SFPCC, imposes liability upon the physicians, under alternative theories of unjust enrichment and contribution, for an adjusted pro rata share of the outstanding balance due under two promissory notes. Applying the Uniform Commercial Code, along with the relevant limited liability company operating agreement, we find the physicians were mere accommodation indorsers under the notes. Hence, SFPCC, the party accommodated, is barred from recovery.
This dispute arises out of a series of renewals, modifications, and extensions of an existing line of credit, along with a separately executed term loan agreement. SFPCC is a limited liability company specializing in pulmonary and critical care services. The entity is comprised of several member physicians, along with numerous non-member employees. Member physicians render treatment in SFPCC's offices and the facilities of various hospitals affiliated with Baptist Health South Florida.
In 2011, Marquis Bank (the "Bank") extended a $150,000.00 line of credit to Dr. Palma and other physician members of SFPCC to provide working capital for the business entity. Over the next several years, the Bank extended and eventually increased the line of credit to one million dollars, yielding freshly executed promissory notes denoting SFPCC as a borrower and the then-physician members, including Drs. Hernandez, Palma, and Sevilla, as co-borrowers.
By 2016, SFCC had enjoyed significant expansion, resulting in greater operational expenses and other financial needs, and sought to renew the most recent iteration of the note. After requiring the member physicians to furnish their individual tax returns and personal financial statements, the Bank approved the credit application.
However, it mandated the execution of a separate $350,000.00 term loan, payable in predetermined installments. As with the prior loan documents, the notes evidencing the revolving line of credit and term loan designated most then-member physicians as co-makers. 1
Shortly after the paperwork was completed, Hernandez, Palma, and Sevilla left the practice to pursue other ventures. Upon their exit, SFPCC demanded payment of a proportional share due under the notes, calculated according each physician's respective membership and departure date. The physicians refused, maintaining they bore no individual liability to SFPCC for the debt.
SFPCC then filed suit, seeking recovery in contribution, or, alternatively, unjust enrichment. The physicians answered the complaint and raised various affirmative defenses. After the pleadings closed, the dispute proceeded to a bench trial. At the conclusion, the lower tribunal entered a final judgment in favor of SFPCC, imposing damages reflecting a share of the remaining balance due under the loans, as of the physicians’ disassociation dates, adjusted by any applicable termination compensation. The instant appeal ensued.
The narrow issue before us is whether, upon their separation from employment, the physicians were liable to SFPCC for a pro rata share of the balance due under the notes. We rely upon two principal sources to determine the rights and duties of the parties. The first is Article 3 of the Uniform Commercial Code—Negotiable Instruments, as adopted and codified in chapter 673, Florida Statutes (2020). The second is the First Amendment to the South Florida Pulmonary and Critical Care, LLC Physician Group Governance Agreement (the "Governance Agreement").
Our interpretation of both involves pure issues of law, subject to de novo review. See Arnold, Matheny and Eagan, P.A. v. First Am. Holdings, Inc., 982 So. 2d 628, 632 (Fla. 2008) () (citation omitted); Dep't of Trans. v. United Cap. Funding Corp., 219 So. 3d 126, 129 (Fla. 2d DCA 2017) (); Smith v. Reverse Mortg. Sols., Inc., 200 So. 3d 221, 224 (Fla. 3d DCA 2016) () (citation omitted); see also Espinosa v. Pavel Pardo Invs., LLC, 296 So. 3d 949, 950-51 (Fla. 3d DCA 2020) () (citation omitted). However, to the extent that factual findings are implicated, we defer to the lower court, as "[w]hen a cause is tried without a jury, the trial judge's findings of fact are clothed with a presumption of correctness on appeal, and these findings will not be disturbed unless the appellant can demonstrate that they are clearly erroneous." Chackal v. Staples, 991 So. 2d 949, 953 (Fla. 4th DCA 2008) (citation omitted).
We first examine the relevant Code provisions. 2 "The Uniform Commercial Code (UCC) was created by the American Law Institute and the National Conference of Commissioners on Uniform State Laws." Michael T. Hensley et al., Damages in the Typical Commercial Case, 20140521A NYCBAR 272 (2014). "The primary importance of the Uniform Commercial Code is the certainty and uniformity which it provides for commercial transactions." New Conn. Bank & Tr.Co., N.A. v. Stadium Mgmt. Corp., 132 B.R. 205, 209 (D. Mass. 1991) (citation omitted).
Under common law, "[t]he contract of suretyship [was] created when, to obtain some credit or other advantage for another, the surety engage[d] to be liable for him to another." James L. Elder, Stearns on Suretyship § 2.1, at 8 (5th ed. 1951). Consistent with this adage, chapter 673, Florida Statutes, defines the characteristics and rights of a variety of surety known as an "accommodation party." 3 Section 673.4191(1), Florida Statutes, provides:
If an instrument is issued for value given for the benefit of a party to the instrument ("accommodated party") and another party to the instrument ("accommodation party") signs the instrument for the purpose of incurring liability on the instrument without being a direct beneficiary of the value given for the instrument, the instrument is signed by the accommodation party "for accommodation."
See also In re Kelaidis, 276 B.R. 266, 270 (Bankr. 10th Cir. 2002) ( ) (quoting Permanent Editorial Board for the UCC, PEB Commentary on the Uniform Commercial Code, Commentary No. 11, at 2 (West 1998)).
The suretyship status of the accommodation party precludes direct liability to the accommodated party. Gehrig v. Ray, 332 So. 2d 703, 705 (Fla. 1st DCA 1976) () (citation omitted). Indeed, this prohibition on direct recourse is codified in section 673.4191(5), Florida Statutes, as follows:
An accommodation party who pays the instrument is entitled to reimbursement from the accommodated party and is entitled to enforce the instrument against the accommodated party. An accommodated party who pays the instrument has no right of recourse against, and is not entitled to contribution from, an accommodation party.
Nonetheless, accommodation parties remain directly accountable to the holder of the instrument and legally responsible, in contribution, to their co-accommodation makers. Dobrow v. Bryant, 427 So. 2d 809, 810 (Fla. 5th DCA 1983).
"[W]hether a [party] is an accommodation [indorser] is a question of fact," ascertained from the language of the pertinent instrument and the surroundings circumstances. U.C.C. § 3-419 cmt. 3 (Am. Law Inst. 2002). The putative accommodation party bears the burden of proof. 11 Am. Jur. 2d Bills and Notes § 69 (2020).
In the instant case, the stated purpose of the loans was the funding of expenses accrued by SFPCC, a party to the pertinent instruments. Although the relevant note renewals reflected their signatures, 4 the then-physician members were not disbursed any of the loan proceeds. As it is undisputed that SFPCC received the entirety of the funds, the instruments were "issued for value given for the benefit of" SFPCC. § 673.4191(1), Fla. Stat.
Nonetheless, SFPCC asserts the payment of salaries, bonuses, and other advantages render the physicians direct beneficiaries of the loans, divesting them of accommodation party status under the definition set forth in the Code. As "[a]ny deviations from traditional, accepted interpretations of the Code should ... come from the legislature and not from the courts," we respectfully disagree. Stadium Mgmt. Corp., 132 B.R. at 209 (citation omitted).
It is axiomatic a member's "benefit [from a loan given to the limited liability company] is only derivative and thus ‘indirect.’ " Neil B. Cohen, Suretyship Principles in the New Article 3: Clarifications and Substantive Changes, 42 Ala. L. Rev. 595, 601 (1991) . Indeed, this conclusion comports with...
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