Sea Quest Intern. v. Trident Shipworks

• Decision Date: 22 June 2007
• Docket Number: No. 2D05-5950.,2D05-5950.
• Citation: 958 So.2d 1115
• Parties: SEA QUEST INTERNATIONAL, INC., Appellant/Cross-Appellee, v. TRIDENT SHIPWORKS, INC., Appellee/Cross-Appellant.
• Court: Florida District Court of Appeals

958 So.2d 1115

SEA QUEST INTERNATIONAL, INC., Appellant/Cross-Appellee, v. TRIDENT SHIPWORKS, INC., Appellee/Cross-Appellant.

No. 2D05-5950.

District Court of Appeal of Florida, Second District.

June 22, 2007.

Stephen A. Marino, Jr., and Cristina M. Lopez of Ver Ploeg & Lumpkin, P.A., Miami, for Appellant/Cross-Appellee.

Jonathan W. Skipp and Stephanie H. Wylie of Horr, Novak & Skipp, P.A., Miami, for Appellee/Cross-Appellant.

DAVIS, Judge.

Sea Quest International, Inc. ("Sea Quest"), challenges the final judgment entered against Trident Shipworks, Inc. ("Trident"), alleging that the trial court erred in determining the amount of damages to be awarded Sea Quest. By cross-appeal, Trident also challenges the damages determination. We affirm in part and reverse in part.

Sea Quest and Trident entered into a written agreement for the construction of a 117-foot luxury yacht. Trident agreed to complete construction of the yacht by September 7, 1998. Not only did Trident fail to meet the contract date, but Sea Quest was dissatisfied with the quality of the construction that Trident had performed. Pursuant to the agreement, Sea Quest sought arbitration to settle the contract dispute. Trident responded by seeking protection through a Chapter 11 proceeding in the bankruptcy court. At all times material to these proceedings, St. Paul Fire and Marine Insurance Company ("St. Paul") provided Trident with insurance coverage. Specifically, St. Paul had issued Trident a total of four policies—two builder's risk policies, one general liability policy, and one umbrella liability policy.

Sea Quest filed its claim in the bankruptcy proceeding alleging that Trident owed Sea Quest $9.43 million for its violation of the construction agreement. Trident filed an objection to Sea Quest's claim. During the proceedings, the bankruptcy court issued an order authorizing Sea Quest to file an independent action naming Trident as a "nominal" defendant, thus allowing Sea Quest to pursue its claim against St. Paul for the damages covered by Trident's insurance policies. After the trustee in bankruptcy formulated an acceptable plan for distribution of Trident's assets, Trident withdrew its objection to Sea Quest's claim and the trustee made a pro rata distribution to Sea Quest of $258,473.57, or 2.74% of its claim. The distribution and discharge plan was confirmed on May 22, 2000, and no appeal was taken.

Prior to the bankruptcy court's approval of the discharge plan, St. Paul filed a declaratory judgment action in the United States District Court for the Middle District of Florida. The action named both Sea Quest and Trident as defendants and asked for a determination of the potential coverage issues raised by the four insurance policies. The complaint also asked the district court to determine the appropriate amount of damages if it found coverage to exist.

St. Paul then moved for a summary judgment on the issue of coverage, arguing that since Sea Quest had not obtained a judgment against Trident, a determination of coverage under the terms of the liability policies was premature. The district court agreed and, on October 19, 2001, granted summary judgment in favor of St. Paul on coverage issues related to the general liability policy and the umbrella policy. However, the district court determined that Sea Quest could proceed on the builder's risk policies as it was an additional named insured on those policies.

Pursuant to that determination, a nonjury trial was then held on the issues of coverage and damages under the two builder's risk policies. At issue was whether the policies covered Trident's poor workmanship or only covered damages that resulted from "fortuitous" events. St. Paul argued that all of the damages that Sea Quest claimed were outside of the scope of the policies' coverage. Accordingly, St. Paul offered no evidence to rebut the costs claimed by Sea Quest and "did not otherwise dispute the amount of loss. Rather, St. Paul limited its dispute to whether the losses sustained were `covered' losses under the policy." St. Paul Fire & Marine Ins. Co. v. Sea Quest Int'l, Inc., No. 8:00-CV-571-T-MSS, slip op. at 21 (M.D.Fla. Mar. 21, 2002). However, Sea Quest did present evidence in the form of two expert witnesses who testified to the damages Sea Quest had incurred as a result of Trident's failure to timely and properly construct the yacht as contemplated by the construction agreement.

At the conclusion of the hearing, the district court found that certain of the damages claimed by Sea Quest were covered by the builder's risk policies and others were not. Specifically, the court found that Sea Quest was entitled to $1,262,436.22 due to Trident's negligence and that this amount was covered by the policy. Id., slip op. at 13. The district court also found that the damages Sea Quest claimed for Trident's intentional misconduct were covered by the two policies and that the damage amount was $739,509. Id. However, the district court found that the damages claimed for Trident's failure to complete the construction were not recoverable under the builder's risk policies. Id., slip op. at 14. Likewise, the district court denied other damages as either being excluded from coverage under the two policies or lacking in sufficient proof.

St. Paul appealed the district court's order finding coverage under the two builder's risk policies, and Sea Quest cross-appealed the ruling that no coverage determination could be made under the two liability policies until Sea Quest obtained a judgment against Trident. While the Eleventh Circuit affirmed the district court's ruling that the coverage determination under the general liability and umbrella liability policies was premature, the court reversed the district court's order finding coverage under the builder's risk policies. See St. Paul Fire & Marine v. Sea Quest, 66 Fed.Appx. 844 (11th Cir. 2003) (unpublished table decision). Thus the Eleventh Circuit concluded that the builder's risk policies provided no coverage for Sea Quest's damages and that at least until liability was determined between Sea Quest and Trident, the liability policies provided no coverage either.

Following entry of the district court's order but prior to the Eleventh Circuit's decision, Sea Quest, in accord with the bankruptcy court's specific authorization, filed a two-count complaint against Trident in the Thirteenth Judicial Circuit in and for Hillsborough County.¹ The purpose of this action was to obtain a judgment against Trident so that it could proceed against St. Paul on the liability policies. Count one alleged damages based on negligence, and count two alleged breach of contract. The prosecution of the action was initially limited until the Eleventh Circuit entered its decision reversing the district court's order. Subsequently, upon the motion of Trident, the trial court dismissed the negligence count of the complaint, leaving only the breach of contract count.

Sea Quest then moved for summary judgment on the breach of contract count, arguing that liability and damages for the breach of contract claim already had been determined by another court and that further litigation of these issues was therefore barred by law. Specifically, Sea Quest pointed to its claim in the bankruptcy proceeding for $9.43 million, arguing that because Trident had withdrawn its objection to that claim and the pro rata distribution had been made based on that amount, the liability and damages issues already had been adjudicated by the bankruptcy court. In the alternative, Sea Quest argued that the United States District Court for the Middle District of Florida had determined Trident's liability and Sea Quest's damages at the nonjury trial. Sea Quest maintained that the district court's findings on liability and damages under the builder's risk policies were binding even though the Eleventh Circuit reversed the district court's finding that coverage existed under those policies.

The trial court rejected Sea Quest's argument regarding the bankruptcy proceedings but did agree that the liability and damages findings entered in the nonjury district court trial were binding. Accordingly, the trial court entered judgment against Trident for $2,423,775.22.² It is this judgment that both Sea Quest and Trident challenge.

Sea Quest's initial argument on appeal is that the trial court erred in refusing to adopt its $9.43 million claim in the bankruptcy proceeding as the amount determined to be Sea Quest's damages. Sea Quest argues that the principles of res judicata, equitable estoppel, and waiver required the trial court to grant summary judgment against Trident as to this amount. The trial court was correct to reject this argument.³

Because Sea Quest's argument that the bankruptcy proceeding adjudicated the liability of Trident on the breach of contract claim and the damages that Sea Quest incurred because of that breach, the federal rules of preclusion must be applied. See Baxas Howell Mobley, Inc. v. BP Oil Co., 630 So.2d 207 (Fla.3d DCA 1993). Although parties and state courts frequently use the terms res judicata and collateral estoppel, the federal courts more frequently refer to these as claim preclusion and issue preclusion. In re Kmart Corp., 362 B.R. 361 (Bankr.N.D.Ill.2007); see also S.E.L. Maduro (Fla.), Inc. v. M/V Antonio de Gastaneta, 833 F.2d 1477 (11th Cir.1987).

The rationale of the doctrine of claim preclusion (res judicata) is that there must be an end to litigation. Matter of Kroner, 953 F.2d 317 (7th Cir.1992). This doctrine may be applied to a bankruptcy court decision. Katchen v. Landy, 382 U.S. 323, 334, 86 S.Ct. 467, 15 L.Ed.2d 391 (1966). If a party can show identity of the parties, identity of the causes of action, and the existence of a final judgment in the initial proceedings, this principle precludes relitigation of the same cause of action. People Who Care v. Rockford Bd. of Educ., 68 F.3d 172 (7th...