The Fourth District Court of Appeal in Florida recently issued its decision in the case of Addison Construction Corp. et al. v. Leo A. Vecellio, Jr. & Kathryn C. Vecellio, 43 Fla. L. Weekly D625a. The court addressed two major issues in its ruling:
- Whether a judgment against multiple defendants with overlapping damage figures can lead to “double recovery” by a plaintiff .
- Whether the trial court improperly granted a set-off to defendants based on pre-trial settlements between the plaintiffs and several subcontractors.
BACKGROUND OF THE CASE
The Vecellio case arose out of the purchase of a large single-family home on Palm Beach Island and an agreement between the original contractor and the buyer to make certain repairs to issues on the property that were discovered during the inspection period under the purchase agreement. After the buyers purchased the residence, they discovered several instances of water intrusion within the home. The buyers first asked the contractor and its subcontractors to repair the alleged issues. When the builder and its subcontractors could not repair the issues, the buyers instituted their lawsuit against the contractor, 12 subcontractors who constructed the residence, the development company, and the owners who sold the property. During the course of litigation and before trial, the buyers settled with 10 subcontractors totaling $2,725,000 and the court granted the buyers’ request that the settlements not be mentioned or considered at trial. The trial court entered a comprehensive order on damages against the sellers and the contractor. The trial court determined that the buyers were entitled to over $3.5 million in damages and broke down the award as follows:
- $2,525,684.72 against the contractor under the warranty issued for the residence
- $3,339,654.04 against the development company and the sellers
- $2,365,651.01 against the sellers under the terms of the purchase agreement.
Several of these damages awards overlapped and further overlapped with the trial court’s award of $78,984.30 for the buyers’ fraud claims.
With regard to the first question, the court determined that Florida law and the restatement of judgments adequately protected against plaintiffs enjoying “double recovery.” The court concluded that while the buyers obtained several overlapping judgments, the law is clear that a party may be awarded overlapping judgments against multiple parties, but may not collect the same damages twice from two different parties. Thus, the contractor, development company, and sellers could use satisfaction of any overlapping judgments as a bar to payment of remaining judgments.
The court’s decision focused primarily on the second question, whether the court properly applied a set-off to the damages assessed against the defendants based upon the pretrial settlements with the subcontractors. Each settlement agreement provided that the buyers agreed not to seek recovery against the contractor and development company for damages caused by each subcontractor’s respective scope of work. The trial court ruled in favor of the contractor and development company argued that they should be granted a set-off equal to the amount of the settlements with the subcontractors to preclude double-recovery by the buyers.
The court held that it was impossible to determine whether the buyers would be receiving a double payment because the settlement agreements were broadly worded and did not specify the scopes of work released in each agreement. The court found that a set-off was appropriate given the vague nature of the language used in the settlement agreements between the buyers and the subcontractors. Because the settlement agreements failed to differentiate the damages settled for, the court held that it was impossible to know if the buyers would be receiving double recovery through the judgments.
IMPACT ON THE CONSTRUCTION INDUSTRY
The Fourth District Court of Appeal has significant impact for cases in Palm Beach, Broward, St. Lucie, Martin, Indian River, and Okeechobee Counties. Contractors should be aware of the potential costs and benefits to entering into settlement agreements with broad form releases. Contractors should be sure to consider these issues settling cases.
If you have any questions, please contact the attorney listed below.