Opinion
Case Nos. 2D20-2371 2D20-2370
08-18-2021
Robert E. SCHMIDT, Jr., Appellant, v. John M. SABOW, and Boulder Venture South, LLC, Appellee. Kelly C. Schmidt, Appellant, v. John M. Sabow and Boulder Venture South, LLC, Appellees.
Marion Hale and Sharon E. Krick of Johnson, Pope, Bokor, Ruppel & Burnes, LLP, Clearwater, for Appellant Robert E. Schmidt, Jr. Kelli A. Edson of Quarles & Brady, LLP, Tampa, for Appellant Kelly C. Schmidt. Samuel J. Heller and Marc Julius Wolfson of Heller Law PLLC, St. Petersburg, for Appellees.
Marion Hale and Sharon E. Krick of Johnson, Pope, Bokor, Ruppel & Burnes, LLP, Clearwater, for Appellant Robert E. Schmidt, Jr.
Kelli A. Edson of Quarles & Brady, LLP, Tampa, for Appellant Kelly C. Schmidt.
Samuel J. Heller and Marc Julius Wolfson of Heller Law PLLC, St. Petersburg, for Appellees.
STARGEL, Judge. Robert E. Schmidt, Jr., and Kelly C. Schmidt appeal from the final judgment entered in favor of John M. Sabow, wherein the trial court found that a consent and joinder signed by the Schmidts in their individual capacities constituted a personal guarantee of the obligations under the 2005 Amended and Restated Independent Contractor Agreement entered into by Boulder Ventures South, LLC, and Mr. Sabow. Because this argument fails due to res judicata, the statute of limitations, and the lack of specificity in the consent and joinder which would qualify it as a personal guarantee, we reverse.
Factual Background
Robert Schmidt is a real estate developer who creates different single-purpose limited liability companies for each development. One reason he uses these individual LLCs is to protect his and his wife's personal liability for each development. Robert Schmidt created Boulder Ventures South, LLC, for a shopping center development in Pinellas County. The Schmidts together owned 100% of Boulder Ventures while Robert Schmidt was the manager of Boulder Ventures.
Mr. Sabow and Mr. Schmidt, as manager of Boulder Ventures, signed an Amended and Restated Independent Contractor Agreement (the Agreement) that was effective December 1, 2004. The Agreement defined Mr. Sabow's duties in developing new business and managing day-to-day real estate projects. Additionally, the Agreement described how Mr. Sabow would be compensated and appears to envision compensating Mr. Sabow in the same manner for future developments as the Agreement required Boulder Ventures to pay him. The Agreement granted Mr. Sabow a 30% interest in the net value of a development described as the "Parkside Mall" project. Mr. Sabow attempted to have the Schmidts personally guarantee the terms of the Agreement. Mr. Schmidt refused to sign a personal guarantee, but he and his wife eventually did sign a consent and joinder to the Agreement. The terms of the consent and joinder were as follows:
The terms of the Agreement contemplated additional compensation for Mr. Sabow, but this appeal deals solely with the Parkside Mall 30% net value compensation.
The undersigned, Robert E. Schmidt, Jr., individually, and Kelly C. Schmidt, individually, hereby join into and acknowledge, agree and consent to the terms and provisions of the Amended and Restated Independent Contractor Agreement dated effective December 1, 2004 by and between Boulder and John M. Sabow, and further agree to be fully bound [sic] all of the terms and provisions thereof.
When asked about the consent and joinder, Mr. Sabow testified: "A personal guarantee would have been better, but yes, this is what I got and this is what I ended up with." Mr. Sabow then admitted that the consent and joinder did not mention anything about the Schmidts paying Mr. Sabow. He then asserted that he signed the Agreement "hoping it would be legally sufficient."
2009 Litigation
Eventually, Robert Schmidt fired Mr. Sabow who then filed a three-count complaint for (i) breach of the Agreement against Boulder Ventures, KB Parkside, LLC (which was another entity owned by the Schmidts), and the Schmidts in their individual capacities; (ii) injunctive relief for the breach of the Agreement; and (iii) a declaratory judgment solely against Boulder Ventures. Count one alleged that the Schmidts executed a consent and joinder to the Agreement which individually bound them to the Agreement while also alleging the defendants breached the Agreement when they failed to pay Mr. Sabow compensation following his termination. The trial court dismissed count two prior to trial and granted the Schmidts' motion for involuntary dismissal of count one in the final judgment. However, the trial court did grant Mr. Sabow declaratory relief in count three while determining: "[Mr. Sabow] and Boulder Ventures were parties to a contract effective December 1, 2004, that was guaranteed by Defendants Robert and Kelly Schmidt." The court also found that Mr. Sabow was owed $5,230,153.46 under the terms of the Agreement. All of the defendants timely appealed this order.
Mr. Sabow then filed a motion for supplementary relief seeking entry of an order of money damages against each defendant, jointly and severally, for the $5,230,153.46 in awarded damages plus interest. The motion was granted in part and denied in part. The trial court determined that the total amount of compensation Boulder Ventures owed Mr. Sabow including interest was $5,400,238.46, but the trial court only entered the supplemental judgment against Boulder Ventures and did not enter judgment against the Schmidts or KB Parkside, LLC. Boulder Ventures timely appealed this supplemental order; Mr. Sabow failed to file a cross-appeal.
On appeal, this court affirmed the final judgment and supplemental final judgment but remanded "for the limited purpose of having the trial court delete from the findings of fact and conclusions of law the statement that the Schmidts guaranteed the agreement." Boulder Venture S. LLC v. Sabow , 204 So. 3d 114, 116 (Fla. 2d DCA 2016). This court noted that the Schmidts were named as defendants in count one for breach of contract and that count one was resolved in favor of the Schmidts. Id. at 115 n.1. The court went on to note that count one may have placed the guarantee
issue in play because it was brought against the Schmidts individually. Mr. Sabow has not, however, cross-appealed that aspect of the final judgment. Although the trial court declined to award monetary relief against the Schmidts in the supplemental final judgment based at least in part on its belief that their issue was at issue in the appeal, Mr. Sabow has not cross appealed that denial of relief either.
Id.
2015 Litigation
Mr. Sabow then filed the instant litigation while the previous case was pending before this court. In relevant part, the complaint asserted that Boulder Ventures and Mr. Sabow entered into the Agreement and that the Schmidts personally guaranteed the Agreement by virtue of the consent and joinder. Mr. Sabow then asserted that the Schmidts were jointly and severally liable for the amount Boulder Ventures owed him and that each of them had breached the Agreement by failing to pay him. The Schmidts filed multiple motions for summary judgment asserting the action was barred by res judicata, the rule against splitting causes of action, and collateral estoppel. The trial court denied these motions.
During a deposition, Mr. Sabow asserted that the Schmidts breached the Agreement when he was fired in December 2007. As the instant litigation was not commenced until 2015, Mr. Schmidt then filed a motion for summary judgment based on statute of limitations because the breach of contract action was not commenced within five years of the breach. The trial court denied this motion as well. In its final judgment, the trial court determined that whether the consent and joinder constituted a personal guarantee by the Schmidts was "not properly explored in the 2009 litigation nor was it an issue essential to the findings and judgment [in that litigation]." For this reason, the trial court found collateral estoppel did not bar the claims in the instant litigation. The trial court then denied the Schmidts' res judicata claim because
[i]t is unclear if any evidence or facts necessary to support the claim of personal liability of the Schmidts were introduced at the 2014 trial regarding the 2009 litigation, and to the extent they may have been, they were not resolved by the Court in resolving Count one. However, they are necessary and vital to the Court's finding in the instant case.
The trial court denied the Schmidts' statute of limitations argument by finding the instant case did not accrue until the 2014 final judgment was entered, and therefore, the claims were not barred by the statute of limitations.
The trial court then determined that the consent and joinder as written was unambiguous and clearly evidenced a personal liability by each of the Schmidts in their individual capacity. The trial court found both Schmidts to be individually responsible for Boulder Venture's judgment debt and entered judgment against the Schmidts, jointly and severally, in the amount of $5,400,238.46.
Analysis
The Schmidts challenge the trial court's determination that collateral estoppel, res judicata, and the statute of limitations did not bar Mr. Sabow's claims. Additionally, the Schmidts assert on appeal the trial court erred in determining that the consent and joinder was a personal guarantee, in refusing to allow a set-off for amounts Mr. Sabow owed Boulder Ventures, and in striking the Schmidts' demand for a jury trial. We reverse because the trial court erred in determining res judicata and the statute of limitations did not bar Mr. Sabow's claims in the instant litigation. Furthermore, the trial court erred in determining that the Schmidts agreed to personally guarantee the terms of the Agreement by virtue of signing the consent and joinder. As these issues are dispositive of this appeal, we decline to comment on the remaining issues.
Res Judicata
This court reviews de novo a trial court's decision regarding the application of res judicata to claims for relief. See Campbell v. State , 906 So. 2d 293, 295 (Fla. 2d DCA 2004).
The purpose of the doctrine [of res judicata] is to prevent relitigation of matters and to produce certainty as to individual rights. Four conditions must be met: identity of the thing sued for; identity of the cause of action; identity of parties; and identity of the quality in the person for or against whom the claim is made.
Dep't of Revenue v. Ferguson , 673 So. 2d 920, 922 (Fla. 2d DCA 1996).
Under the doctrine of res judicata, "[a] judgment on the merits rendered in a former suit between the same parties or their privies, upon the same cause of action, by a court of competent jurisdiction, is conclusive not only as to every matter which was offered and received to sustain or defeat the claim, but as to every other matter which might with propriety have been litigated and determined in that action."
Livingston v. Frank , 150 So. 3d 239, 243 (Fla. 2d DCA 2014) (alteration in original) (quoting Kimbrell v. Paige , 448 So. 2d 1009, 1012 (Fla. 1984) ). "Time and again, the courts have expressly rejected the proposition, advanced by [appellee] here, that a claimant may avoid the res judicata prohibition by changing either the relief requested or the theory under which the claim is made." Pelphrey-Weigand v. Weigand , 283 So. 3d 822, 827 (Fla. 2d DCA 2019) (citing Gordon v. Gordon , 59 So. 2d 40, 43 (Fla. 1952) ).
In the 2009 litigation, Mr. Sabow asserted in count one that the Schmidts, along with Boulder Ventures, breached the Agreement by not paying Mr. Sabow for his 30% net value interest in the Parkside Mall development following his termination of employment. This count was involuntarily dismissed which "operates as an adjudication on merits." Fla. R. Civ. P. 1.420(b). In count three, Mr. Sabow requested the trial court issue declaratory relief determining the amount of compensation Mr. Sabow was owed under the Agreement. He only named Boulder Ventures as a defendant in count three and did not name either of the Schmidts individually in this count, even though the Schmidts were named individually in the two other counts which were involuntarily dismissed. Mr. Sabow prevailed on count three only, and he then moved for supplemental relief against all defendants, jointly and severally, for the damages awarded to him under count three. Even though Mr. Sabow attempted to assert that the Schmidts had personally guaranteed Boulder Venture's obligations under the Agreement, the trial court only granted this motion with respect to Boulder Ventures. During the hearing on his motion for supplemental relief, Mr. Sabow's counsel described the 2009 litigation as "[a]ll of the evidence, all of the argument, everything was surrounding the liability of defendants jointly and severally."
In the 2015 litigation, Mr. Sabow asserted that the Schmidts, by virtue of the consent and joinder, had personally guaranteed all of Boulder Ventures' obligations under the Agreement and were each jointly and severally liable for the $5,230,153.46 in damages previously awarded to Mr. Sabow. He also asserted the Schmidts breached the Agreement by failing to pay him the $5,230,153.46 awarded under the final judgment for the 2009 litigation.
Under these circumstances, the trial court erred in determining res judicata did not prevent the 2015 claims Mr. Sabow asserted against the Schmidts. Mr. Sabow previously asserted that both Schmidts were jointly and severally liable for the amount he was owed under the Agreement following his termination of employment. In 2009, he raised this claim in the involuntarily dismissed count one and in his motion for supplemental relief. The 2009 litigation involved the same parties and the same counsel. During the 2009 litigation, Mr. Sabow's counsel stated that "all of the evidence, all of the argument, everything" regarded each of the defendants, including both Schmidts in their individual capacities, being jointly and severally liable for the breach that occurred when Boulder Ventures did not pay Mr. Sabow following Mr. Sabow's termination. Res judicata exists to prevent the relitigation of claims which were, or could have been, asserted in previous litigation. See Livingston , 150 So. 3d at 243-44.
We find unpersuasive Mr. Sabow's assertion on appeal that the 2015 litigation is a different cause of action for res judicata purposes because "the 2009 Litigation never litigated or determined [the Schmidts'] personal liability under the Agreement." It appears that since at least 2009, Mr. Sabow has been seeking payment from the Schmidts for the amount he was owed following his December 2007 termination of employment. He filed the 2009 litigation and included a breach of contract claim against Boulder Ventures and the Schmidts personally seeking damages for breach of the Agreement. The trial court granted the Schmidts' motion for involuntary dismissal of this claim. Mr. Sabow then requested declaratory relief in count three seeking to determine the amount he was owed in compensation under the Agreement. He only named Boulder Ventures in count three. Thereafter, he filed a motion for supplemental relief seeking a final judgment against all defendants for the amount awarded under count three of his amended complaint. The trial court only entered judgment against Boulder Ventures, at least partially because Mr. Sabow failed to include the Schmidts in count three. Mr. Sabow did not appeal the trial court's order, which only granted supplemental relief regarding Boulder Ventures and failed to grant relief against the Schmidts individually. He then filed the 2015 litigation in an attempt to recover from the Schmidts individually for the final judgment entered in the 2009 litigation. As such, res judicata prevents Mr. Sabow from attempting a second bite at the apple to correct failures in legal strategy occurring in previous litigation.
Statute of Limitations
The issue of whether a cause of action is barred by the statute of limitations is also a question of law subject to de novo review. Lexon Ins. Co. v. City of Cape Coral , 238 So. 3d 356, 358 (Fla. 2d DCA 2017). Actions for breach of written contract must be brought within five years of the breach. § 95.11(2)(b), Fla. Stat. (2004) ; BDI Constr. Co. v. Hartford Fire Ins. Co. , 995 So. 2d 576, 578 (Fla. 3d DCA 2008) ("[I]t is well-established that a statute of limitations runs from the time of the breach."). "For a breach of contract action, it is well established that a statute of limitations ‘runs from the time of the breach, although no damage occurs until later.’ " Med. Jet, S.A. v. Signature Flight Support-Palm Beach, Inc. , 941 So. 2d 576, 578 (Fla. 4th DCA 2006) (quoting 18 Richard A. Lord, Williston on Contracts § 2021A (3d ed. 1978)). This rule even applies if the consequential damages are not ascertained at the time of the breach. Id. (quoting Fradley v. County of Dade , 187 So. 2d 48, 49 (Fla. 3d DCA 1966) ) ("Florida has followed this general rule that a cause of action for breach of contract accrues at the time of the breach, ‘not from the time when consequential damages result or become ascertained.’ ").
In the 2009 litigation, Mr. Sabow asserted a breach of contract claim against both Schmidts and Boulder Ventures in his attempt to recover the compensation he was due under the Agreement as of his termination in December 2007. While being deposed in the instant litigation, Mr. Sabow asserted that "[the Schmidts] owed me every penny, personally, in December of 2007." The only breach of contract giving rise to any damages is the failure of Boulder Ventures to pay Mr. Sabow under the terms of the Agreement following his termination.
Mr. Sabow attempts to assert on appeal that his causes of action for statute of limitations purposes did not accrue until the trial court issued its final judgment granting count three in the 2009 litigation and determining the amount of damages. The fact that the trial court did not determine the applicable factors for the compensation calculation and total amount of damages until 2014 does not delay the running of the statute of limitations for Mr. Sabow's attempt to collect from the Schmidts. See Med. Jet, S.A. , 941 So. 2d at 578. Mr. Sabow clearly was aware of both (i) the breach of contract claim on account of Boulder Ventures' failure to pay him following his termination and (ii) the purported personal guarantee by the Schmidts when he filed the initial litigation in 2009. He then waited until eight-and-a-half years following his December 2007 termination of employment to file the instant breach claims against the Schmidts personally. As such, the trial court erred in determining the five-year statute of limitations did not bar the claims asserted by Mr. Sabow in the instant litigation. See § 95.11(2)(b).
Consent and Joinder as a Personal Guarantee
A trial court decision interpreting a contract is a question of law subject to de novo review before this court. On Target, Inc. v. Allstate Floridian Ins. Co. , 23 So. 3d 180, 182 (Fla. 2d DCA 2009). "A guaranty is a promise to pay the debt of another on the default of the person primarily liable for payment or performance." Fort Plantation Invs., LLC v. Ironstone Bank , 85 So. 3d 1169, 1171 (Fla. 5th DCA 2012). Under Florida law, a personal guarantee must be in writing and signed by the guarantor. § 725.01, Fla. Stat. (2004). "When interpreting a contract, the court must first examine the plain language of the contract for evidence of the parties' intent." Murley v. Wiedamann , 25 So. 3d 27, 29 (Fla. 2d DCA 2009).
In this case, the consent and joinder does not include the language typically included in a personal guarantee. See, e.g., Chris Craft Indus., Inc. v. Van Valkenberg , 267 So. 2d 642, 643 (Fla. 1972) (finding a personal guarantee existed where the guarantor signed a document stating, "I hereby guaranty the full and prompt payment of the above promissory note and of all extensions and renewals thereof which extensions and renewals may be made without notice to or consent of the undersigned"). The Florida Supreme Court has determined:
Every agreement which is required to be in writing by the statute of frauds must be certain in itself, or capable of being made so by a reference to something else whereof the terms can be ascertained with reasonable certainty without recourse to parol proof, or it will not be carried into effect.
Eckman v. Brash , 20 Fla. 763, 772 (1884).
Notwithstanding Mr. Sabow's assertions, the trial court erred when it determined that the consent and joinder was "unambiguous" and "clearly evidences personal guarantee on the part of [the Schmidts] to all the terms and provisions of the Agreement, including payment." Even though he had hoped to have the Schmidts sign a personal guarantee of the Agreement, Mr. Sabow admitted the consent and joinder does not contain the word "guarantee" or contain any provision regarding the Schmidts possibly paying Mr. Sabow if Boulder Ventures failed to pay him any compensation due under the Agreement. At trial, a banker with significant experience regarding guarantees testified that the consent and joinder did not appear similar to any of the guarantees he reviewed during his thirty-five years of banking experience.
The consent and joinder does not contain any "special promise to answer for the debt, default or miscarriage of another person" or any language indicating that it was intended to be a personal guarantee under Florida law. See § 725.01. Therefore, it does not appear to us that the consent and joinder is an enforceable personal guarantee.
Mr. Sabow asserts the fact that the Schmidts admitted in their answer to ¶31 of the 2009 complaint which stated "[the Schmidts] joined in the Agreement and agreed to be bound along with Boulder" somehow sheds light on the Schmidts' personal liability. However, in admitting to ¶31, it appears to us that the Schmidts merely were admitting to the explicit terms of the consent and joinder which stated the Schmidts individually "join into and acknowledge, agree and consent to the terms and provisions of the [Agreement] ... and further agree to be fully bound [sic] all of the terms and provisions thereof" rather than admitting to personal liability for any compensation Boulder Ventures owed Mr. Sabow.
Given the failure of the consent and joinder to explicitly state that the Schmidts are personally guaranteeing Boulder Ventures' obligations to pay Mr. Sabow, coupled with the other language in the Agreement, we believe one reasonable interpretation of the consent and joinder is that it would bind the Schmidts to apply the same terms contained in the Agreement to future developments involving Mr. Sabow and other entities that would not be parties to the Agreement. See § 725.01, Murley , 25 So. 3d at 29. Absent the consent and joinder, Mr. Sabow likely would have no legal recourse to enforce section 3(c) of Exhibit A to the Agreement regarding the compensation he would receive in future projects as the Schmidts used single-purpose LLCs for each development. See Hatadis v. Achieva Credit Union , 159 So. 3d 256, 259 (Fla. 2d DCA 2015) ("The goal in construing the contract language is to reach a reasonable interpretation of the entire agreement in order to accomplish its stated purpose and meaning.").
Accordingly, we reverse the final judgment in favor of Mr. Sabow and remand for further proceedings consistent with this opinion.
Reversed and remanded.
NORTHCUTT and CASANUEVA, JJ. Concur.