Opinion
Case No. 2D20-215
05-28-2021
The BRODY IRREVOCABLE GRANTOR TRUST NO. 2, Appellant, v. Jeffrey BRODY, Appellee.
Michael J. Stanton of Stanton Cronin Law Group, PL, Tampa, for Appellant. John B. Liebman of O'Neill, Liebman and Cooper, P.A., Orlando, for Appellee.
Michael J. Stanton of Stanton Cronin Law Group, PL, Tampa, for Appellant.
John B. Liebman of O'Neill, Liebman and Cooper, P.A., Orlando, for Appellee.
ATKINSON, Judge.
The Brody Irrevocable Grantor Trust No. 2 (the Trust) appeals from the final judgment entered in favor of Jeffrey Brody, wherein the trial court found that a letter and checks that Brody sent to the Trust following the sale of collateral securing Brody's obligations under a Settlement Agreement constituted an accord and satisfaction. We reverse.
Jeffrey Brody entered into a Settlement Agreement with the Trust, which was established for the purpose of holding shares of Showtime Investments. Brody exercised his option to purchase the shares and executed a promissory note in favor of the Trust secured by a security interest in the shares. Brody defaulted under a modified obligation to the Trust, and the Trust brought suit against him. A final judgment was entered against Brody.
The Trust deferred collection on the judgment, electing instead to enter into the Settlement Agreement with Brody wherein he was obligated to make a series of payments totaling $94,000, which was defined as the "Settlement Amount," to be paid to the Trust "towards unpaid interest and attorneys' fees." These payments were due on or before various dates between 2014 and 2015, and pursuant to paragraph 8 of the Settlement Agreement they would "be apportioned equally against accruing interest on the Promissory Notes." Brody was also required to execute and deliver to the Trust three promissory notes each in the principal amount of $767,000.00, as well as a Stock Pledge Agreement of the shares of Showtime Investments. A balloon payment was due on the notes on or before January 1, 2026. The Settlement Agreement provided that if Brody sold the Showtime shares or the property it owned, "[t]he payments required by the Promissory Notes will be accelerated and declared immediately due (the 'Accelerated Payment')."
On May 31, 2016, Brody informed the Trust that Showtime Investments sold the properties it owned, triggering the Accelerated Payment provision in the Settlement Agreement. The letter provided as follows:
The sale price of the two parcels which are the subject of the Confidential Settlement Agreement dated October 3, 2014 was $8,625,000.00. Pursuant to
paragraph 7 of that Agreement the accelerated payment as of the date of the sale (50% of the sale price, less the amount of the mortgage debt and principal paid under the promissory notes) comes to $40,972.25. Enclosed herewith please find my check for payment in full of the accelerated payment due upon sale. I have also enclosed my check in the amount of $6,173.58 to pay in full the interest accrued on the promissory notes through this date pursuant to the payment terms contained in the three notes.
I appreciate all of your help and cooperation over the years and am pleased to conclude the transaction so that you may complete your obligations as Trustee. Please let me know if you have any questions or require any documentation.
Enclosed with the letter were two checks. The first check in the amount of $6173.58 indicates that it was "for 'final interest through 5·31·2016.' " The second check in the amount of $40,972.25 states that it was "for 'Accelerated payment in full.' " After consulting with its attorney, the trustee for the Trust deposited the checks.
In a letter dated June 8, 2016, counsel for the Trustee notified Brody that he was in default under the Settlement Agreement because he "reduced the payment by the amount of the outstanding mortgage on the Real Property in contravention of the Settlement Agreement." The letter stated that "paragraph 7 [only] limit[s] the total accelerated payment by the greater of 50% of the sales price or appraised value of the Real Property at the time of the sale, less the amount of principal paid on the notes to date." On June 20, 2016, the Trust filed suit against Brody for breach of the promissory notes, breach of the Settlement Agreement, and foreclosure of the collateral Stock Pledge Agreement. As part of his "second defense to the allegations contained in the Complaint," Brody asserted that the Trust's "cause of action is barred by accord and satisfaction."
The matter was set for a nonjury trial. The parties stipulated that Brody "made five (5) payments towards the promissory notes in the amounts of $10,514.07 each for the months of January through May 2016." They also stipulated that Brody "made a final payment totaling $47,146.00 on May 31, 2016 towards the promissory notes." They also agreed that "[b]ased on the face value of the promissory notes, and not applying any reduction that the parties dispute the applicability of under the [S]ettlement [A]greement, the balance on the promissory notes after receipt of the final payment would have been $2,372,581.70 as of June 1, 2016."
Counsel for Brody stated that the trial was essentially about "a dispute and misunderstanding about the terms of the [S]ettlement [A]greement pursuant to which the parties settled [the] prior case." He described paragraph 7 as providing for two scenarios where "[t]he amount owed could go up, the amount owed could go down based upon either the sale price or the appraisal," which the parties included because of the "very strong likelihood that the property would not be sold in a separate real estate transaction."
The trustee of the Trust testified that the promissory notes remained unpaid; the principal balance due was $2,301,000. This figure included the payments received from Brody. The amount due, as of the date of the trial, which included interest at the default rate was $4,176,643.74. The trustee testified that when he cashed Brody's two checks for $6173 and $40,972, he believed that they were payments; he stated, "I did not anticipate them being payments in full, and I contacted counsel who advised me to deposit them." He stated that he never had the intention not to seek the full amount due under the promissory notes.
Brody testified that he read the Settlement Agreement before preparing the calculation of what was owed: "I read it again before I figured out what I had to write checks for." He testified that when he made the calculation, he believed that it was the correct amount owed under paragraphs six and seven of the Settlement Agreement. He stated that when he drafted the letter, he incorrectly used the term "sale price" instead of "appraised value." However, he admitted that he represented to the Trustee that the sale price of the real property was $8,625,000. When asked whether he intended to mislead the Trust in any way, he answered, "Not at all." He testified that fifty percent of the value that he assigned to the two parcels of real estate was $4,312,500. Brody admitted that half of the sale price according to his reported figure was probably twice as much as was owed under the note. He made four amortized payments due under the notes. Brody said that he sent the checks in good faith and was not aware that there were any disputes about his calculation; "that," he explained, "came up at a later date." He further testified that his understanding of the Settlement Agreement was that it would include "an adjustment clause that would take into account the possibility of the property going up in value or down in value, and whatever it went down in value would be used to reduce what I had to pay the trust."
The court noted that "net sales" was not mentioned in paragraph 7 of the Settlement Agreement. The court found that the agreement was clear on its face and not subject to parol evidence. The trial court entered a final judgment against the Trust. The court identified the issue in the case as the interpretation of paragraph 7 of the Settlement Agreement. The court noted and rejected Brody's argument that the calculation was supposed to be the net sales price; it found the language in that paragraph was clear and could not be read as providing for a net sales price or appraisal value. The court concluded that "the letter and checks contain[ed] a conspicuous statement evidencing they were tendered as full payment," and that the Trust cashed the checks. As a result, the court found that the claim was barred by the accord and satisfaction that occurred when Brody tendered the May 31, 2016, letter along with the two checks, which the Trust deposited.
"Whether there is an accord and satisfaction ordinarily involves a pure question of intention, which is as rule a question of fact, but if the evidence creates no conflict concerning the intention, it is a question of law." Brewer v. Northgate of Orlando, Inc., 143 So. 2d 358, 361 (Fla. 2d DCA 1962) (citing U.S. Rubber Prods. v. Clark, 145 Fla. 631, 200 So. 385, 389 (1941) ). "Pure questions of law are reviewed de novo." Republic of Ecuador v. Dassum, 255 So. 3d 390, 394 (Fla. 3d DCA 2017). The trial court's factual findings are reviewed for competent, substantial evidence. Taylor, Bean & Whitaker Mortg. Co. v. Wright, 253 So. 3d 72, 73 (Fla. 1st DCA 2018). "[T]he issue is one for the jury when the question of whether or not accord and satisfaction has been proved depends upon proper and reasonable inferences to be drawn from the evidence." J. A. Cantor Assocs., Inc. v. Blume, 106 So. 2d 603, 604 (Fla. 3d DCA 1958).
The Trust contends that there was no competent, substantial evidence demonstrating a mutual intent of the parties to enter a new settlement agreement and that as a result, the trial court erred by concluding that there was an accord and satisfaction. The Trust points out that there was no dispute over the amount due under the Settlement Agreement at the time that Brody tendered the two checks—that the dispute arose only after the Trust sent Brody the demand letter approximately one week later. Brody counters that there was a dispute between the parties as to the amount due and that the Trustee should not have cashed the check marked "paid in full" if he intended for Brody to remain liable under the Settlement Agreement.
"An accord and satisfaction results as a matter of law only when the creditor accepts payment tendered on the expressed condition that its receipt is to be deemed to be a complete satisfaction of a disputed issue." Republic Funding Corp. of Fla. v. Juarez, 563 So. 2d 145, 147 (Fla. 5th DCA 1990). Accord and satisfaction is something that must be intended by the parties; it cannot happen by accident: "In the absence of a dispute and a finding or admission that the parties intended to, and did, reach an accord and agreed to resolve that dispute by payment of an agreed amount, a partial payment of a legal obligation does not act to satisfy and discharge that obligation." Id. In other words, there must be a superseding agreement to accept reduced payment in complete settlement of a dispute—a dispute that already existed at the time of the tender. Here, the "dispute" Brody argues was the subject of the purported accord and satisfaction arose after he tendered what he thought was the previously agreed amount.
Under these circumstances, in order to support that the parties intended to effect an accord and satisfaction, either (a) there needed to be a preexisting dispute about the amount owed (one that existed prior to the tender) or (b) the payment needed to be partial , pursuant to a mutual understanding that the reduced amount would completely satisfy the original obligation. Otherwise, Brody's language that the payment was "final" or in "full satisfaction" of the debt merely communicated his erroneous belief that he was performing under the existing agreement consistent with its original terms. It professes an opinion that he had paid all that was owed, not an offer to pay less than he owed. And the Trust's objection to the amount was not reneging on an accord and satisfaction, but rather a contrary opinion illuminating a misunderstanding between the parties as to what they had agreed to.
Brody's testimony is consistent with this conclusion—that there was neither a preexisting dispute as to the amount nor an offer to supersede the agreed amount with a new deal. There was no evidence presented regarding a dispute between the parties at the time that Brody tendered the letter and two checks. The parties had previously agreed, by virtue of the Settlement Agreement, on the terms of Brody's payment of the final judgment entered against him. Brody testified that he was not aware of any disputes about his calculation of the amount due under the Settlement Agreement, which he said he reviewed just prior to drafting the checks. The fact that the Trust subsequently disputed Brody's calculation does not change Brody's belief that he was adhering to the terms of the Settlement Agreement at the time he tendered the checks. As such, the record does not support that he intended his payment to achieve accord and satisfaction by conditioning it on acceptance as partial payment of a higher amount owed or as a complete settlement of a dispute that did not even exist at the time the payment was made.
In other words, it does not matter that Brody's erroneous calculation precipitated a dispute that arose after he tendered payment that he now contends led to an accord and satisfaction. The superseding agreement must be one to accept reduced payment in complete settlement of a dispute—of a dispute that already existed, because it formed the basis of the debt in the first place. It is certainly conceivable that under some circumstances a dispute about what was owed could give way to an accord and satisfaction in order to resolve it—E.g., I think I owe 100, but you think I owe 200; I'm tendering this payment of 150 conditioned on your agreement that your acceptance will effectuate a complete settlement of whatever it is that I do actually owe . However, the parties would have to have manifested a difference of opinion about what was owed prior to the tender in order for acceptance to give rise to accord and satisfaction. And the tendering party would have to make the case that the other party accepted what they both agreed was a reduction in the amount originally agreed to.
The record makes it clear that the opposite is true. Brody's payment to the Trust was not intended to be a partial payment of the settlement amount. Brody testified that he intended the payment he provided to the Trustee to constitute the full amount due under the Settlement Agreement, not a new "agreed amount." When he used the words "final" and "payment in full," Brody meant to convey that he believed he was satisfying the debt in conformity with the parties' previous Settlement Agreement. He admittedly did not intend to communicate that he was tendering a partial payment conditioned upon acceptance as satisfaction of the whole debt. Therefore, Brody's offer to pay what he thought was the full amount under the original agreement cannot have formed the basis of accord and satisfaction. Cf. St. Mary's Hosp., Inc. v. Schocoff, 725 So. 2d 454, 456 (Fla. 4th DCA 1999) ("An accord and satisfaction results as a matter of law only when the creditor accepts payment tendered on the expressed condition that its receipt is deemed to be a complete satisfaction of a disputed issue.").
Reversed and remanded.
LaROSE and MORRIS, JJ., Concur.