Phillips v. Ostrer, 83-2686

• Decision Date: 31 December 1985
• Docket Number: No. 83-2686,83-2686
• Citation: 11 Fla. L. Weekly 141,481 So.2d 1241
• Parties: 11 Fla. L. Weekly 141, 7 Employee Benefits Cas. 1169 William PHILLIPS, Howard Jones, William Starr, Robert Edwards, Russell Warner, Buck McClennen, George Lewis, et al., as Trustees of the International Association of Bridge, Structural and Ornamental Iron Workers Local 272 Annuity Pay Plan, Appellants/Cross-Appellees, v. Louis C. OSTRER, Eugene Bowen, Martin Bessell, Michael Burke, Michael Famigliatti, Thomas Kilgellon, Charles Baker, John Nord, and Insurance Company of North America, Appellees/Cross-Appellants.
• Court: Florida District Court of Appeals

Page 1241

481 So.2d 1241

11 Fla. L. Weekly 141, 7 Employee Benefits Cas. 1169

William PHILLIPS, Howard Jones, William Starr, Robert Edwards, Russell Warner, Buck McClennen, George Lewis, et al., as Trustees of the International Association of Bridge, Structural and Ornamental Iron Workers Local 272 Annuity Pay Plan, Appellants/Cross-Appellees, v. Louis C. OSTRER, Eugene Bowen, Martin Bessell, Michael Burke, Michael Famigliatti, Thomas Kilgellon, Charles Baker, John Nord, and Insurance Company of North America, Appellees/Cross-Appellants.

No. 83-2686.

District Court of Appeal of Florida Third District.

Dec. 31, 1985.

Rehearing Denied Feb. 11, 1986.

Kurzban, Kurzban & Weinger and Steven Weinger, Miami, for appellants/cross-appellees.

Welbaum, Zook, Jones & Williams and Betsy L. Warwick, Miami; Ackerman, Bakst, Gundlach, Lauer & Zwickel, West Palm Beach; Joseph C. Segor; Bercuson, Cahan, Weksler & Lasky and Bernard Weksler, Miami, for appellees/cross-appellants.

Before BARKDULL, BASKIN and JORGENSON, JJ.

BASKIN, Judge.

Appellants were the trustees of the International Association of Bridge, Structural & Ornamental Iron Workers Local 272 Annuity Pay Plan [Annuity Pay Plan] on March 13, 1978, when they instituted an action against appellees: the former trustees; Louis Ostrer, the consultant for and administrator of the Annuity Pay Plan; and Insurance Company of North America [INA], the issuer of an honesty bond. They sought damages for fraud, negligence, and breach of fiduciary duties in connection with the purchase of insurance policies with funds contributed to the Annuity Pay Plan. ¹ The jury returned verdicts in their favor and the court entered a final judgment. In response to post-trial motions, however, the trial court entered orders which reduced the amount of the final judgment. Appellants challenge the trial court's ruling that the verdicts entered against the former trustees and Louis Ostrer constituted a triple recovery. In addition, appellants contend that the trial court's reduction of the judgment against INA was an unwarranted interference with the jury's findings. Agreeing with appellants' contentions regarding the judgment entered against the former trustees and the administrator of the Annuity Pay Plan, we reverse the order reducing the judgment as to them. We affirm, however, the trial court's reduction of the amount of the judgment against INA, but reinstate the court's ruling that the former trustees and INA are jointly and severally liable to appellants.

In cross-appeals, appellees argue that they should have prevailed because the collective bargaining agreement mandated the purchase of whole life insurance policies; the evidence is insufficient to support the jury verdict; the evidence regarding compensatory damages is too speculative to support the verdict; an exculpatory clause in the trust agreement insulated the trustees from liability; prejudicial misconduct by opposing counsel deprived them of a fair trial; and the trial court should have dismissed the claims against them as a matter of law. In addition, INA asserts that it was exonerated from liability when the bond's cancellation provisions became effective. ² We find no basis for granting the relief sought in the cross-appeals.

The Annuity Pay Plan was created as a result of industry-wide collective bargaining between negotiating teams for Iron Workers Local 272 and the management association. The purpose of the Annuity Pay Plan was to establish a severance fund and to provide iron workers with tax benefits gained from deferred compensation. Appellants sought to prove that the former trustees, who administered the fund, consulted with and were advised by Louis Ostrer, a convicted felon whose license had been suspended, ³ and that they fraudulently or negligently followed Ostrer's recommendations, purchasing individual whole life insurance policies for each person who performed two hours of iron work in Local 272 jurisdiction after May, 1972. They obtained no competitive bids and did not discuss with any other insurance consultant the type or amount of insurance necessary to cover participants. The former trustees spent 55% to 60% of the contributed funds on insurance premiums despite IRS prohibitions against the expenditure of more than 49.9% of contributions. An actuarial study disclosed that the Annuity Pay Plan was financially unsound and would become insolvent unless substantial changes were instituted. Ignoring the actuarial study, the trustees continued to follow Ostrer's plan, even though they were aware of a citation dated April 18, 1974, filed by the State of New York Insurance Department against Ostrer, trustees of a fund similar to the Iron Worker's Annuity Pay Plan, and others. The citation explained that it was improper for the New York trustees to deal with Ostrer because of his former convictions and license revocation and that the purchase of individual whole life insurance policies was excessively costly and generated unconscionably high commissions for Ostrer. After discussing the citation at a trustees' meeting on June 24, 1974, and expressing concern for their individual liability, the former trustees voted unanimously to purchase an additional insurance policy for each iron worker, rejecting lower-priced policies in favor of the policies recommended by Ostrer.

The Annuity Pay Plan purchased a Blanket Honesty Bond from INA, effective March 1, 1974. The Bond protected the Annuity Pay Plan for "any loss of other property ... through any fraudulent or dishonest act or acts committed by any employee ... during the term of the Bond." In the ensuing litigation, the court, in accordance with these provisions, granted INA a partial summary judgment, limiting its liability for loss to acts committed after the effective date of the Bond.

Appellants sought damages in excess of $1 million for fraud, breach of fiduciary duty, and negligence. The trial culminated in a jury verdict totaling $1,195,000, including $110,000 in punitive damages against the former trustees and Ostrer. Interrogatory verdicts instructed the jury, first, to assess total damages and then to state which of the defendants committed fraudulent acts. Their next task was to calculate the total amount of damages to be recovered for fraud as well as the amount recoverable from each defendant. The jury received similar verdict forms for the claims based on breach of fiduciary duty and on negligence. The jurors were then asked to determine whether any defendant should be held liable for punitive damages. Next, the jury was instructed to decide whether INA was liable for each defendant's actions, to determine the amount of INA's liability, and to state the date on which each trustee committed any fraudulent act giving rise to INA's liability. Finally, the jurors were asked to decide the date the "Annuity Pay Plan first learned of the dishonest or fraudulent acts." The jury found Ostrer liable for negligence and fraud, and each former trustee, except John Nord, liable for fraud, breach of fiduciary duty, and negligence; it found INA liable for the trustees' fraudulent or dishonest acts occurring after the effective date of its bond. Complying with the directives in the verdict forms, the jury apportioned the total damage award among the counts and defendants.

The trial court entered judgment in accordance with the jury's verdicts but, upon post-trial motions, ruled that the jury verdicts against the former trustees and Ostrer constituted triple recovery. The trial court then reduced the award of compensatory damages from $1,085,000 to $246,667, ⁴ relying upon Besett v. Basnett, 437 So.2d 172 (Fla. 2d DCA 1983), as legal authority for its reduction. The court also reduced the verdict against INA from $345,000 to $99,629.27, ⁵ finding that INA was liable only for the premiums paid on policies purchased after the effective date of the honesty bond.

We first direct our attention to the trial court's citation of Besett and the reduction of the judgment against the former trustees and Ostrer on the ground that the awards constituted triple recovery. According to Besett, verdicts based on multiple theories of recovery which contain the same elements of damage should result in a judgment predicated on a single count. While Besett may lead to reduction in some situations, we find it inapplicable to the facts and circumstances before us. In Besett, the jury considered negligence and fraud claims and determined that damages were proper on each count against a real estate broker who misrepresented the amount of land purchased. The Besett court held that because the proof necessary to establish both fraud and negligence was the same, only the greater award, based on fraud, should stand. In the case before us, however, the jury did not combine multiple awards for a single claim. Instead, the jury arrived at the total amount of the recovery first and, in response to the court's specific instructions, divided the damages into separate awards for the individual counts. The instructions in the interrogatory verdicts left the jury no alternative but to apportion the total award--no matter what sum it found represented the damages sustained. ⁶ In addition, the interrogatories reflect the jury's finding that the former trustees' actions evolved from negligence into fraud after the lapse of a period of time. Thus, the separate proof establishing liability for damages based on fraud and negligence precludes a ruling that appellants received a multiple award for a single claim. ⁷

The facts of this case distinguish it from Air Florida, Inc. v. Hobbs, 477 So.2d 40 (Fla. 3d DCA 1985). In Air Florida, this court held that although the evidence was sufficient to support the total award, there was no evidence to sustain the division of the award. The total amount of the jury award in Air Florida could be determined only by adding the damages incurred for the different...