Court Opinion

ID: 3198294
Source: CourtListenerOpinion
Date Created: 2016-04-27 15:04:23.039242+00
Date Added: 2024-06-11T07:39:12.349639
License: Public Domain

Third District Court of Appeal
                               State of Florida

                           Opinion filed April 27, 2016.
         Not final until disposition of timely filed motion for rehearing.

                               ________________

                               No. 3D14-2034
                         Lower Tribunal No. 07-31623
                             ________________

      C.P. Motion, Inc., and the Raymond and Selma Weisbein
                          Irrevocable Trust,
                                   Appellants,

                                        vs.

               Richard Goldblatt and Valerie Goldblatt,
                                    Appellees.

      An Appeal from the Circuit Court for Miami-Dade County, Abby Cynamon,
Judge.

      Michael L. Wolowitz; AM Law and Gary M. Murphree, for appellants.

      Akerman LLP and Lawrence D. Silverman, for appellees.

Before LAGOA, SALTER, and EMAS, JJ.

      LAGOA, J.

      Appellants, C.P. Motion, Inc. (“CP”), and the Raymond and Selma

Weisbein Irrevocable Trust (“WT”), appeal from an order denying CP’s motion to
substitute party and a final order dismissing CP’s counterclaim against Appellees,

Richard Goldblatt and Valerie Goldblatt (the “Goldblatts”).1 For the following

reasons, we reverse.

I.    FACTUAL AND PROCEDURAL HISTORY

      As set forth in Goldblatt v. C.P. Motion, Inc., 77 So. 3d 798 (Fla. 3d DCA

2011), in 1999, Richard Goldblatt and Raymond Weisbein formed CP to distribute

orthopedic equipment.     The parties subsequently terminated their business

relationship, and on February 13, 2004, the Goldblatts and CP entered into a

Settlement and Release Agreement (the “Agreement”). Under the Agreement, the

Goldblatts were paid $2.7 million in cash and given $4.0 million in debt

forgiveness in exchange for their ownership interests in CP. The Goldblatts also

agreed to a five-year restrictive covenant, which restricted the Goldblatts from

conducting any business that competed with CP. Paragraph 23.6 of the Agreement

provides:

            This Agreement is binding upon, and shall inure to the
            benefit of, the parties and their respective heirs,
            executors, administrators, successors, and assigns. No
            party may assign, delegate or otherwise transfer his, her

1 This Court is authorized to review the order denying CP’s motion to substitute
party as Florida Rule of Appellate Procedure 9.110(h) authorizes review of “any
ruling or matter occurring before filing of the notice [of appeal].” The phrase
“ruling or matter” means rulings and orders “‘directly related to and an aspect of
the final [order]’ under review”—in this case the dismissal of CP’s counterclaim.
Portis v. Seatruck, Inc., 98 So. 3d 1234, 1235 (Fla. 3d DCA 2012) (quoting Cygler
v. Presjack, 667 So. 2d 458, 461 (Fla. 4th DCA 1996)); see also, Deutsche Bank
Nat’l Trust Co. v. Plageman, 133 So. 3d 1199, 1200 (Fla. 2d DCA 2014).
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             or its rights, duties or obligations hereunder without the
             prior written consent of the other parties, which consent
             shall not be unreasonably withheld.

The Goldblatts and CP each accused the other of breaching the Agreement, and in

2007, the Goldblatts filed suit against CP. CP filed a counterclaim alleging that the

Goldblatts breached the restrictive covenant.2

      While the lawsuit between the Goldblatts and CP was proceeding, WT

commenced an action in Miami-Dade County to enforce a secured loan to CP (the

“WT action”). On April 3, 2009, the trial court in the WT action entered an agreed

final judgment for money damages and foreclosing security interest, finding that

WT had a valid and enforceable security interest in all of CP’s assets, and

foreclosing that security interest in favor of WT. The trial court directed the sale

of the assets in a commercially reasonable manner, and CP’s assets were

subsequently transferred to WT on May 11, 2009.

      Meanwhile, on March 31, 2009, in the lawsuit between the Goldblatts and

CP, the trial court entered an order granting summary judgment in favor of CP on

CP’s motion for summary judgment as to liability under its counterclaim for

breach of contract against Richard Goldblatt. In its order, the trial court found that

Richard Goldblatt “admitted in sworn deposition testimony that he has violated the

non-competition agreement at issue in this suit.” The trial court subsequently

2 The counterclaim contained three counts: breach of the Agreement (Count I),
permanent injunction (Count II), and misappropriation of trade secrets (Count III).
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entered final judgment against the Goldblatts on June 21, 2010, finding them

jointly and severally liable in the amount of $4,969,339.

      The Goldblatts appealed the final judgment to this Court. See Goldblatt, 77
So. 3d at 799. This Court affirmed in part, reversed in part, and remanded for

further proceedings. Specifically, we affirmed the final judgment—including the

trial court’s conclusion that the restrictive covenant was enforceable and that the

Goldblatts were jointly and severally liable—but reversed the judgment award and

remanded “for a proper determination of the actual damages.” Id. at 801.

      On March 15, 2011, CP filed for Chapter 7 bankruptcy protection. On

March 14, 2012, the Chapter 7 Trustee of the CP bankruptcy estate, pursuant to 11

U.S.C. § 554, formally noticed the abandonment of the counterclaims and claims

asserted against the Goldblatts.

      On remand from this Court’s opinion in Goldblatt, CP filed a motion to

substitute party under Florida Rule of Civil Procedure 1.260(c). CP sought to

substitute WT as the defendant/counter-plaintiff in place of CP. CP argued that

WT was the sole owner of all claims against the Goldblatts as a result of the

transfer of CP’s assets to WT via the WT action and the bankruptcy Trustee’s

abandonment of CP’s counterclaim and claim. In response, the Goldblatts argued

that WT could not enforce the Agreement because the transfer of the Agreement

that occurred in the WT action violated the terms of paragraph 23.6 of the

Agreement and section 542.335(1)(f)2, Florida Statutes (2013).

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       After a hearing, the trial court denied the motion to substitute. The trial

court found that WT could not “enforce that agreement as an assignee” because

neither WT nor CP obtained consent from the Goldblatts to assign or transfer the

Agreement as required by paragraph 23.6 of the Agreement and section

542.335(1)(f)2, Florida Statutes (2013). The Goldblatts then filed a motion to

dismiss the counterclaim arguing that because the trial court denied the motion to

substitute and CP had abandoned all interest in its counterclaim when it filed for

bankruptcy, CP’s counterclaim should be dismissed. Specifically, the Goldblatts

argued that “there is no plaintiff at this point.” The trial court granted the motion

and dismissed CP’s counterclaim on July 24, 2014. This appeal followed.

II.    STANDARD OF REVIEW

       The standard of review of an order dismissing a complaint is de novo.

Mender v. Kauderer, 143 So. 3d 1011, 1013 (Fla. 3d DCA 2014).

III.   ANALYSIS

       CP and WT argue that the trial court erred in concluding that, because

neither obtained the Goldblatts’ consent to the judicial transfer of CP’s assets to

WT in the WT action, WT is not entitled to seek damages for breach of the

Agreement. Their argument has merit, as neither paragraph 23.6 of the Agreement

nor section 542.335 preclude the transfer or assignment of a chose in action.3

3 A “chose in action” is the “right to bring an action to recover a debt, money, or
thing.” Black’s Law Dictionary (9th ed. 2009).
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      Section 542.335(1)(f)2 places limits on the enforcement of a restrictive

covenant by an assignee or successor:

            (1) Notwithstanding s. 542.18 and subsection (2),
            enforcement of contracts that restrict or prohibit
            competition during or after the term of restrictive
            covenants, so long as such contracts are reasonable in
            time, area, and line of business, is not prohibited. In any
            action concerning enforcement of a restrictive covenant:

                    ....

            (f) The court shall not refuse enforcement of a
            restrictive covenant on the ground that the person
            seeking enforcement is a third-party beneficiary of such
            contract or is an assignee or successor to a party to such
            contract, provided:

                    ....

            2. In the case of an assignee or successor, the restrictive
            covenant expressly authorized enforcement by a
            party’s assignee or successor.

(emphasis added).

      Paragraph 23.6 of the Agreement, in turn, provides as follows:

            This Agreement is binding upon, and shall inure to the
            benefit of, the parties and their respective heirs,
            executors, administrators, successors, and assigns. No
            party may assign, delegate or otherwise transfer his,
            her or its rights, duties or obligations hereunder
            without the prior written consent of the other parties,
            which consent shall not be unreasonably withheld.

(emphasis added).

                                        6
      Florida law distinguishes between the assignment of performance due under

a contract and the assignment of a claim for damages (or a chose in action) arising

from breach of contract. See, e.g., Cordis Corp. v. Sonics Int’l, Inc., 427 So. 2d
782 (Fla. 3d DCA 1983). In Cordis, this Court dealt with whether Mexcor’s claim

for commissions flowing from the termination of its distributorship agreement with

Sonics International, Inc., could be assigned to a third party. The agreement at

issue in Cordis provided that the “rights of Distributor [Mexcor], hereunder shall

not be assigned or transferred, either voluntarily or by operation of law, without

[Sonics International’s] written consent.” Id. at 782. This Court held that this

language in the agreement had “no effect upon Mexcor’s well-established right

freely to assign its chose in action for the damages caused by Sonics’ breach.” Id.

at 783. As this Court explained:

                   It is clear that, while contractual provisions against
            assignability are generally enforceable in Florida, Troup
            v. Meyer, 116 So. 2d 467 (Fla. 3d DCA 1959), the clause
            relied on by Sonics is inapplicable to the present
            situation.     One which, like this, forbids only the
            assignment of a party's “rights” under a contract simply
            does not preclude the assignment of an accrued claim for
            damages arising from its breach.

Id.; see also Aldana v. Colonial Palms Plaza, Ltd., 591 So. 2d 953 (Fla. 3d DCA

1991) (holding that anti-assignment clause did not prevent assignment of right to

receive payments due); Charles L. Bowman & Co. v. Erwin, 468 F.2d 1293, 1297

(5th Cir. 1972) (“The law draws a distinction . . . between assignment of

                                         7
performance due under a contract and assignment of the right to receive

contractual payments.”); Rosecrans v. William S. Lozier, Inc., 142 F.2d 118, 124

(8th Cir. 1944) (“The prohibition of the contract against assignment is against an

assignment of the rights and privileges under the contract. This prohibition of

assignment does not, however, prohibit the assignment of a claim for damages on

account of breach of the contract.”).

      Similarly, in H & J Contracting, Inc. v. Jacobs Engineering Group, Inc., No.

15-61462, 2015 WL 6504543, at *3 (S.D. Fla. Oct. 28, 2015), the U.S. District

Court for the Southern District of Florida held that the anti-assignment clause in an

agreement did not prohibit assignment of a claim for damages due to breach of

contract. The court reasoned that a clause which included the language that

“[n]either this Agreement nor any interest herein shall be assigned, transferred, or

encumbered by either party” referred to an interest in the performance of the

agreement, not to recovery of damages for breach of the agreement. Id. at *1.

Because the agreement did not prevent assignment of a claim for damages arising

from breach of the agreement, the court in H & J Contracting denied the

defendant’s motion to dismiss. Id. at *3.

      Here, as in Cordis and H & J Contracting, the language in paragraph 23.6

does not prevent an assignee or transferee from pursuing an accrued claim for

damages arising from breach of the Agreement. That WT is seeking to proceed on

a chose in action for an accrued claim for damages, rather than to enforce the

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restrictive covenant contained in the Agreement, is evident from the fact that the

Goldblatts’ breach of the Agreement was established by the trial court order prior

to the date of the transfer of CP’s assets to WT. In its March 31, 2009, order

granting summary judgment as to liability, the trial court found that Richard

Goldblatt “admitted in sworn deposition testimony that he has violated the non-

competition Agreement at issue in this suit,” in an attempt to “mitigate” damages

the Goldblatts believed due to them from CP. On April 3, 2009, therefore, WT

acquired in the WT action CP’s claim against the Goldblatts for money damages

arising from the Goldblatts’ breach of the Agreement’s restrictive covenant, not

CP’s right to enforce the terms of the restrictive covenant itself. That transfer was

not precluded by section 542.335 or paragraph 23.6 of the Agreement.

      We now turn to the trial court’s dismissal of CP’s counterclaim. First, as

explained above, the April 3, 2009, transfer via judicial foreclosure effected a

legally permissible transfer to WT of CP’s chose in action against the Goldblatts

for money damages arising from the Goldblatts’ breach of the Agreement’s

restrictive covenant. The trial court therefore relied on an erroneous basis to deny

CP’s motion to substitute party.

      Second, the fact that CP filed for bankruptcy did not bar it from proceeding

on its counterclaim. On March 14, 2012, pursuant to 11 U.S.C. § 554, the Chapter

7 Trustee of the CP bankruptcy estate formally noticed the abandonment of the

counterclaims and claims asserted against the Goldblatts.       Once a bankruptcy

                                         9
trustee formally abandons a cause of action, the cause of action is re-vested with

the debtor. See In re VonGrabe, 332 B.R. 40, 44 (Bankr. M.D. Fla. 2005); In re

Pilz Compact Disc, Inc., 229 B.R. 630, 638 (Bankr. E.D. Pa. 1999)

(“Abandonment . . . removes property from the bankruptcy estate and returns the

property to the debtor as though no bankruptcy occurred.” (quoting 3 Norton

Bankruptcy Law and Practice 2d, § 53.1, at 53-2 to 53-4 (1997) (footnotes

omitted))). The trial court therefore erred in dismissing CP’s counterclaim, and the

counterclaim must be permitted to proceed for a proper determination of actual

damages resulting from the Goldblatts’ admitted breach of the Agreement (i.e., the

issue on remand from our prior decision in this Goldblatt).

      As noted, the trial court denied CP’s motion to substitute based on an

erroneous conclusion of law. On remand, however, the trial court is not required

to substitute WT for CP as the defendant/counter-plaintiff. CP filed its motion to

substitute party pursuant to Florida Rule of Civil Procedure 1.260(c). That rule

provides, in part:

             In case of any transfer of interest, the action may be
             continued by or against the original party, unless the
             court upon motion directs the person to whom the interest
             is transferred to be substituted in the action or joined with
             the original party.

As our sister court has stated in the context of the transfer of a chose in action:

             Rule 1.260(c) addresses “any transfer of interest,” which
             necessarily includes the transfer of interest in a chose
             of action through a court-ordered auction. As such,

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             under the plain language of the rule, after the transfer, the
             action may be continued in the name of the plaintiff.
             Substitution is not necessary, but the trial court may
             allow substitution upon motion by a party.

Levine v. Gonzalez, 901 So. 2d 969, 972-73 (Fla. 4th DCA 2005) (emphasis

added); see also Schmidt v. Mueller, 335 So. 2d 630, 631 (Fla. 2d DCA 1976)

(stating that once trial judge had concluded that transfer of cause of action had

occurred, “two alternatives were available to the court: (1) to allow the action to be

continued in the name of the plaintiff . . . or (2) to allow [the corporation to which

the cause of action was transferred] to be either substituted for or joined with the

original party-plaintiff”); Miami Airlines, Inc. v. Webb, 114 So. 2d 361, 363 (Fla.

3d DCA 1959) (“[W]e hold that two alternatives are presented where there is a

transfer of the cause of action pending suit. The action may be continued in the

name of the original party, or the court may upon application allow substitution of

the transferee.”).

      Finally, we note that transfer of an interest in a cause of action cannot be the

basis of dismissal of the action. See Sun States Utils., Inc. v. Destin Water Users,

Inc., 696 So. 2d 944, 945 (Fla. 1st DCA 1997) (“[T]ransfer of an interest in a cause

of action pending litigation may be the basis for the substitution of parties, but not

dismissal of the action.”); Schmidt, 335 So. 2d at 631 (finding that trial court erred

in dismissing plaintiff’s case on ground that the real party in interest was not

before the trial court when during trial plaintiff assigned assets to corporation);

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Miami Airlines, 114 So. 2d at 363 (“But the court has no discretion to terminate

the action and to enter adverse judgment on the merits solely because a transfer of

interest has been made pending the suit.”); see also Gas Dev. Corp. v. Royal Oak

Builders, Inc., 253 So. 2d 738 (Fla. 4th DCA 1971). Therefore, on remand, the

matter may proceed either in the name of CP, or if the trial court orders, WT may

be substituted as the defendant/counter-plaintiff.

IV.   CONCLUSION

      We conclude that the trial court erred in in dismissing CP’s counterclaim,

which dismissal was based on its prior order denying CP’s motion to substitute WT

as a party. The 2009 transfer of CP’s claim for damages from the Goldblatts’

breach of contract constituted a transfer of a chose in action, which was not

precluded by either section 542.335(1)(f)2, Florida Statutes (2013),        or the

Agreement.      Moreover, the bankruptcy Trustee’s abandonment of CP’s

counterclaim and claims against the Goldblatts did not terminate those claims but

instead re-vested the cause of action with CP. Accordingly, we reverse the order

dismissing CP’s counterclaim and the order denying motion to substitute, and

remand for a proper determination of actual damages in accordance with this

Court’s instructions in Goldblatt, 77 So. 3d at 801.

      Reversed and remanded for further proceedings.

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