Damages on the Grounds of Breach of Contract, Fraud, Violation of Florida’s Deceptive and Unfair Trade Practices Act and Florida’s RICO Act

Author: LegalEase Solutions 

Introduction

Plaintiff, a limited partnership created and domiciled in Colorado owns an apartment complex in Tampa, Florida. Plaintiff sues defendant Orkin in Florida state court for damages on the grounds of breach of contract, fraud, violation of Florida’s Deceptive and Unfair Trade Practices Act and Florida’s RICO Act. Plaintiff also sued for punitive and treble damages and attorney fees.  Defendant Orkin won a defense verdict and filed a motion to recover attorney fees and costs pursuant to Florida Deceptive and Unfair Trade Practices Act, RICO Act and Proposal of Judgment Act.

Question Presented Can the Plaintiff avoid any prospective judgment against it for attorney fees and costs by selling the real estate?

Short Answer No. The defendant has a right to payment of attorney fees and costs and therefore he has a claim under Uniform Fraudulent Transfer Act. Fla. Stat. § 726.102(3). Any transfer of property to defeat such claim will be a fraudulent conveyance and hence the Plaintiff cannot avoid the prospective judgment against it by selling the real estate.

Discussion A.    BECAUSE THE PREVAILING PARTY, DEFENDANT, HAS A STATUTORY AND SUBSTANTIVE RIGHT TO RECEIVE PAYMENT OF ATTORNEY FEES AND COSTS AND A POST JUDGMENT MOTION FOR ATTORNEY FEES IS AN INDEPENDENT AND COLLATERAL CLAIM, ANY ATTEMPTED TRANSFER OF PROPERTY TO DEFEAT SUCH A CLAIM IS A FRAUDULENT CONVEYANCE.

Generally in any civil action in Florida, a prevailing party may be entitled to attorney fees and costs. (See Florida Civil Practice And Procedure; Fla. Stat. § 57.105 and Fla. Stat. § 57.041). Further, enactments such as Florida’s civil RICO statute (Fla. Stat. § 772.104(3)), and Florida Deceptive and Unfair Trade Practices Act (Fla. Stat. § 501.2105) provide for attorney fees and costs to a prevailing party.[1]  In the case at hand, it is undisputed that the defendant being the prevailing party is entitled to this statutory and substantive right to attorney fees and costs.  Further, a post-judgment motion for attorney fees and costs raises an independent and collateral claim.[2]  See., National Envtl. Prods. v. Falls, 678 So. 2d 869 (Fla. 4th DCA 1996).[3] Therefore the defendant has a claim since it is entitled to a right to payment from the plaintiff. The Florida Uniform Fraudulent Transfer Act, (Fla. Stat. § 726.101 et seq) provides that a transfer of property by a debtor will be deemed to be a fraudulent conveyance if it is done with the objective to defeat a creditor’s “claim”.

Under Florida Uniform Fraudulent Transfer Act, Fla. Stat. § 726.102 (3) the term “claim” is given a wider connotation and as such it means a right of payment irrespective of whether the right is reduced to judgment.  A claim means “a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” Fla. Stat. § 726.102(3). This definition evidences the Legislature’s intent that the Act’s protection should apply to a wide class of claimants, regardless of the nature and status of the underlying claim.

Under Florida Uniform Fraudulent Transfer Act, Fla. Stat. § 726.105 (1) (a), a transfer made by a debtor is fraudulent, irrespective of whether the creditor’s claim arose before or after the transfer was made, if the debtor made the transfer with actual intent to hinder, delay, or defraud any creditor of the debtor, or without receiving a reasonably equivalent value in exchange for the transfer.  “Creditor” means a person who has a claim, Fla. Stat. § 726.102(4), and “debtor” means a person who is liable on such claim.  Fla. Stat. § 726.102(6).  Sub clause  (c) of Fla. Stat. § 726.102(6) further states that if the debtor is a partnership, the term  includes a general partner, a relative of a general partner or a person in control of the partnership, or another partnership in which the partnership in question is a general partner.

In the instant case, Orkin has a claim as defined under the Fraudulent Transfer Act which includes a right to payment whether or not it is reduced to judgment.  Orkin has a statutory and substantive right to payment of attorney fees and costs and pursuant to this right, Orkin has moved a post judgment motion for attorney fees and costs which by itself is an independent “claim”.  The relevant portion under the Fraudulent Transfer Act is that Orkin has a right to payment of attorney fees and costs and this need not be reduced to judgment.  Therefore, any transfer of real estate made to defeat Orkin’s claim will be a fraudulent transfer. Moreover, even assuming that the claim arose after the transfer was made, such transfer would still be a fraudulent transfer if the debtor made the transfer with actual intent to hinder, delay, or defraud any creditor of the debtor, or without receiving a reasonably equivalent value in exchange for the transfer. Fla. Stat. § 726.105 (1) (a).

Florida courts have considered the question of when a transfer is fraudulent, under various circumstances.  When the judgment debtor fraudulently transferred the property during the pendency of an action, the creditor has a right to declare the attempted transfer as a nullity and to sell the property and collect the proceeds. Foster v. Thornton, 125 Fla. 829 (Fla. 1936).  In Foster, the judgment debtor conveyed his property to his wife while the tort action was pending. The court ruled in favor of the creditor and held that the judgment creditor has the right to treat an attempted transfer of property to which the judgment debtor had the legal title as a nullity and to sell the property so conveyed under execution, as though no transfer by connivance had been made.  Id. at 837. The court further held that the creditor has a concurrent right in equity for the vacation of the fraudulent conveyance as an impediment to the full enforcement of the judgment, and to remove a cloud on the title to the property. Id. See also, Richard v. McNair, 121 Fla. 733, (1935); Balsley v. Union Cypress Co., 92 Fla. 706 (Fla. 1926).  Though these cases were decided prior to the enactment of Uniform Fraudulent Transfer Act (UFTA) (1988), the law declared by the court is still relevant since the new legislation continues the previous statutory law and codifies common law unless expressly replaced. Amjad Munim, M.D., P.A. v. Azar, 648 So. 2d 145, 152 (Fla. 4th DCA 1994).  The statute offers wide protection to creditors and courts presume intent to defraud regardless of actual motives of the parties when the legal effect of a conveyance is to hinder or delay creditors.  Amjad Munim, M.D., P.A. v. Azar, 648 So. 2d 145, 152 (Fla. 4th DCA 1994). Under Florida Civil Practice And Procedure, supplementary proceedings under Fla. Stat. § 56.29 are proceedings subsequent to judgment to aid a judgment creditor in collecting his judgment against the judgment debtor.  Pursuant to Fla. Stat. § 56.29 (5), a judge may order any property of a judgment debtor in the hands of any person or due to the judgment debtor to be applied toward the satisfaction of the judgment debt.  Gaedeke Holdings, Ltd. v. Mortg. Consultants, Inc., 877 So. 2d 824, 826 (Fla. 4th DCA 2004). In Gaedeke, the judgment creditor found the judgment debtor insolvent as he had fraudulently transferred assets to a third party. The appellate court directed the trial court to award costs against the judgment debtor and to apply the fraudulently transferred assets toward satisfaction of the debt, pursuant to Fla. Stat. § 56.29 (5). Id. at 826.

Further, in Swartz v. Lipsky, 241 So. 2d 448 (Fla. 3rd DCA 1970), the appellant obtained a judgment against the appellee for $ 4,800 plus costs. The appellee fraudulently transferred funds to her daughter and left the state to avoid the judgment.  The appellate court held that the transfer was fraudulent and not exempted because the Florida statute governing fraudulent transfers does not exempt transfers of property made more than a year prior to judgment.

In conclusion, Orkin’s post-judgment motion for attorney fees and costs raises a valid claim and Orkin is entitled to a right to payment, and irrespective of whether the right is reduced to judgment, any transfer of real estate by the Plaintiff to evade the judgment for payment of attorney fees and costs will be deemed to be a fraudulent conveyance.

  1. IN FLORIDA A NONRESIDENT PLAINTIFF IS REQUIRED TO POST A BOND OF $100 TO GUARANTEE COSTS AWARDED IN A JUDGMENT.

Fla. Stat. § 57.011 provides as follows:

When a nonresident plaintiff begins an action or when a plaintiff after beginning an action removes himself or his effects from the state, he shall file a bond with surety to be approved by the clerk of $ 100, conditioned to pay all costs which may be adjudged against him in said action in the court in which the action is brought. On failure to file such bond within 30 days after such commencement or such removal, the defendant may, after 20 days’ notice to plaintiff (during which the plaintiff may file such bond), move to dismiss the action or may hold the attorney bringing or prosecuting the action liable for said costs and if they are adjudged against plaintiff, an execution shall issue against said attorney.

While a plain reading of this section seems to indicate that it only applies when a non-resident plaintiff begins an action or while an action is pending, the court in Lady Cyana Divers, Inc. v. Carvalho, 561 So. 2d 612 (Fla. 3rd DCA 1990), made an adjudication on this section on a post-trial motion after a defense verdict was returned. In Lady Cyana Divers, Inc., the plaintiff, an out of state resident, filed a wrongful death action against the defendants on which a defense verdict was returned. Id. at 613. On a post trial motion to assess costs the plaintiff was held liable for $ 16,459.05 and the defendants filed a motion to recover the costs from the plaintiff’s counsel which was denied. Id. The court held that purpose of the statute was to protect prevailing defendants against suits brought by nonresident plaintiffs, so that the defendants are guaranteed up to $ 100 of their costs in the action. Id. The court recognized the section afforded little secured protection to prevailing defendants in lawsuits brought by nonresident plaintiffs since the $ 100 was not sufficient to cover all of the defendant’s costs in a typical lawsuit. Id. at 614. However, the court refrained from making any change to the section so as to give defendants greater secured protection since any changes should have been made by the legislature. Id.

In the instant case, the plaintiff has not made any bond pursuant to this section and therefore cannot avail itself of this section.

Conclusion

Because Orkin’s post-judgment motion for attorney fees and costs raises a valid claim any transfer of real estate by the plaintiff to evade payment of attorney fees and costs will be deemed to be a fraudulent conveyance.  Irrespective of whether such a right is reduced to judgment, any such transfer of real estate by the plaintiff with the intention to defeat a claim will be deemed to be a fraudulent conveyance.  Nevertheless, Fla. Stat. § 57.011 restricts payment of costs by a non-resident plaintiff to $100 on execution of a bond for the same amount under the circumstances prescribed in the section. However, the plaintiff in the instant case cannot seek recourse to this provision since it has not filed a bond as required under the section.

[1] Florida courts have held that a prevailing party has a statutory and substantive right to attorney’s fees and costs. For Eg., see Finkelstein v. North Broward Hospital Dist., 484 So. 2d 1241 (Fla. 1986), where the plaintiffs prevailed in a medical malpractice suit and the court held that since the provisions of the section awarding fees were mandatory, the plaintiffs could not be deprived of their substantive rights to attorney fees. Id.

[2] Any party seeking a judgment taxing costs, attorneys’ fees, or both shall serve a motion no later than 30 days after filing of the judgment. Fla. R. Civ. P. 1.525.

[3] Florida courts have held that a post judgment motion for attorney fees is a “collateral and independent claim” which the trial court has continuing jurisdiction to entertain within a reasonable time, notwithstanding that the litigation of the main claim may have been concluded with finality. Stockman v. Downs, 573 So. 2d 835 (Fla. 1991).