BOCA PETROCO v. PETROLEUM REALTY

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Docket Number

No. 4D07-3140.

Attorney(S)

Alexander D. Varkas, Jr. and Robert A. Sweetapple of Sweetapple, Broeker Varkas, P.L., Boca Raton, for appellants. Mitchell W. Berger and Fred O. Goldberg of Berger Singerman, Fort Lauderdale, for appellees.

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Smart Summary

Factual and Procedural Background

This case arises from a series of lease agreements involving gas stations in Florida and Georgia. The landlord filed suit in 2004 for breach of contract due to nonpayment of rent and other charges. On the eve of trial, the parties reached a detailed settlement agreement which the court approved and retained jurisdiction to enforce. The tenant agreed to pay outstanding rent at a discounted schedule, cover insurance and taxes, dismiss pending appeals, and execute additional guaranties. The settlement included provisions for automatic writ of possession and affidavit of damages upon uncured default.

Shortly after the settlement, the tenant defaulted, prompting the landlord to seek enforcement. The trial court upheld the settlement agreement's enforceability, and this court affirmed on appeal. The landlord obtained possession of the properties after the tenant’s continued defaults, and the lease expired in June 2006.

The dispute at issue concerns environmental violations on the leased properties. The original lease required the tenant to comply with environmental laws and remediate violations or indemnify the landlord. The settlement agreement also required monthly environmental reports detailing remediation efforts. Notices of default were sent to the tenant for failure to cure environmental violations and file reports. The landlord sought damages for these uncured violations, which the tenant challenged as beyond the court’s continuing jurisdiction under the settlement agreement.

The trial court awarded damages for environmental remediation costs after a hearing held post-possession and lease expiration. The tenant appeals this portion of the judgment.

Legal Issues Presented

Whether the trial court had continuing jurisdiction under the settlement agreement to award damages for the tenant’s failure to correct environmental violations, or whether such damages constituted general damages for breach of contract requiring a separate lawsuit.

Arguments of the Parties

Appellant's Arguments

The trial court lacked continuing jurisdiction under the settlement agreement to award damages related to environmental breaches because these damages were general contract damages, not enforcement of the settlement terms.
Relying on Paulucci v. General Dynamics Corp., the tenant argued that damages for breach of contract must be pursued in a separate action and cannot be adjudicated under the court’s retained jurisdiction enforcing the settlement.
The tenant raised the jurisdictional challenge at the first opportunity when damages for environmental breaches were sought, thus did not waive the argument by failing to raise it earlier.
The doctrine of law of the case does not bar this challenge because prior appeals concerned enforcement of the settlement, not breach of the lease.

Appellee's Arguments

The landlord contended the tenant waived the jurisdiction argument by not raising it earlier.
The landlord argued that prior appellate decisions affirming enforcement of the settlement agreement constitute the law of the case, precluding the tenant from challenging continuing jurisdiction to award damages for breach.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Paulucci v. General Dynamics Corp., 842 So.2d 797 (Fla. 2003)	Limits on continuing jurisdiction of a trial court to enforce settlement agreements; distinction between enforcement of settlement terms and general breach of contract claims requiring separate suits.	The court applied Paulucci to hold that the trial court lacked continuing jurisdiction to award damages for breach of the lease’s environmental provisions because those damages were general contract damages outside the scope of settlement enforcement.
Trico V Petroleum, Inc. v. Petroleum Realty I, LLC, 939 So.2d 1075 (Fla. 4th DCA 2006) (table)	Affirmance of trial court’s enforceability ruling on the settlement agreement.	The court cited this precedent to confirm that the settlement agreement was enforceable and that jurisdiction was retained to enforce its terms.
Boca Petroco, Inc. v. Petroleum Realty I, LLC, 956 So.2d 464 (Fla. 4th DCA 2007) (table)	Affirmance of trial court's award of damages for financial defaults under the settlement agreement and retention of jurisdiction.	Used to confirm that prior damages awards for rent, taxes, and insurance defaults were within the scope of the court's continuing jurisdiction under the settlement agreement.
Gen. Dynamics Corp. v. Paulucci, 797 So.2d 18, 20 (Fla. 5th DCA 2001)	Distinction between enforcement of contract terms and breach of contract claims.	Quoted to illustrate that enforcement presupposes continuing contractual validity, while breach claims arise after termination and seek damages as substitute for performance.

Court's Reasoning and Analysis

The court analyzed the scope of its continuing jurisdiction under the settlement agreement, relying primarily on the Florida Supreme Court’s decision in Paulucci v. General Dynamics Corp.. The court explained that while it retained jurisdiction to enforce the settlement agreement, such jurisdiction is limited to enforcing the agreement’s terms and does not extend to awarding general damages for breach of contract that are not specified in the settlement. The court emphasized the legal distinction between enforcement of a contract—which assumes the contract remains valid and requires compliance—and a breach of contract action, which assumes the contractual relationship has ended and seeks damages as a substitute for performance.

Because the damages awarded for environmental violations represented general contract damages for breach rather than enforcement of the settlement terms, the court concluded that the trial court exceeded its jurisdiction by including those damages in the final judgment. The court rejected the landlord’s arguments that the tenant waived its jurisdictional challenge or that the law of the case doctrine barred reconsideration. Prior appeals concerned enforcement issues, not breach claims, so the doctrines did not apply.

Accordingly, the court reversed the portion of the final judgment awarding damages for environmental breaches and remanded for that portion to be vacated, without prejudice to the landlord filing a separate suit for those damages. The court affirmed the remainder of the judgment, which was clearly within the scope of the settlement agreement and the court’s retained jurisdiction.

Holding and Implications

The court’s final disposition was to affirm in part, reverse in part, and remand with directions. Specifically, it reversed the portion of the final judgment awarding damages for environmental violations because the trial court lacked continuing jurisdiction under the settlement agreement to enter such damages. The court remanded with instructions to vacate that portion of the judgment, allowing the landlord to pursue those claims independently in a separate lawsuit.

The remainder of the final judgment, including damages for unpaid rent, taxes, and insurance, was affirmed as properly within the court’s jurisdiction under the settlement agreement. The decision clarified the limited scope of continuing jurisdiction to enforce settlement agreements and reinforced the distinction between enforcement actions and breach of contract claims requiring separate proceedings. No new precedent was established beyond the application of existing law to the facts of this case.

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BOCA PETROCO, INC., AH M. Jaferi, Trico V Petroleum, Inc., Trico VI Petroleum, Inc., Trico VII Petroleum, Inc., USA Grocers Group, Inc., JAF In v. stment Group, Inc., USAG Petro, LLC, USAG Oil Gas, Inc., Appellants,

ON MOTION FOR WRITTEN OPINION

WARNER, J.

We withdraw our prior opinion and substitute the following in its place.

Appellants ("tenant") challenge a final judgment awarding appellees ("landlord") damages for breach of a lease agreement. The tenant contends that the trial court did not have continuing jurisdiction under a settlement agreement to award damages for its failure to correct environmental problems on the property, because those constituted general damages for breach of contract and not enforcement of the settlement agreement. To the extent that the final judgment included sums for breach of the lease's obligation to remediate environmental issues, we reverse. We affirm the remainder of the judgment.

This case arises from a series of lease agreements of gas stations in Florida and Georgia. In 2004 the landlord filed suit for breach of contract for nonpayment of rent and other charges under the lease. On the eve of trial, the case settled with a detailed settlement agreement which was read into the record. The court approved the verbal settlement agreement and retained jurisdiction to enforce its terms. The tenant agreed, among other things, to pay part of the outstanding rent; adhere to a new rent schedule at a 40% discount; pay future insurance and taxes for all units; dismiss two pending appeals in a separate action between the parties; and execute additional guaranties. If the tenant defaulted on any financial obligation, it agreed to an "automatic writ of possession" and an "affidavit prove up of damages" based upon any uncured default.

Almost immediately, the tenant defaulted on its obligations under the settlement agreement, which began a three-year attempt by the landlord to obtain compliance with the terms of the settlement. At first, the landlord sought to vacate the settlement agreement based upon the lack of meeting of the minds, but after a lengthy hearing in January of 2006, the trial court deemed the agreement enforceable and ordered the tenant to comply. The tenant appealed this ruling, and this court affirmed. Trico V Petroleum, Inc. v. Petroleum Realty I, LLC, 939 So.2d 1075 (Fla. 4th DCA 2006) (table).

In accordance with the settlement agreement, the landlord then filed an ex parte motion for writ of possession together with an affidavit of amounts due under the lease and settlement agreements. The court found the tenant in breach of the leases and liable for $14,230,990.47 in damages due to failure to pay pre- and post-settlement rent, taxes, and insurance. The court continued to reserve jurisdiction to enforce the settlement agreement. The tenant appealed this issue, and again this court affirmed. Boca Petroco, Inc. v. Petroleum Realty I, LLC, 956 So.2d 464 (Fla. 4th DCA 2007) (table). In the meantime, the landlord obtained possession of the properties, and the lease expired in June of 2006.

As concerns the environmental issue and judgment for damages involved in this appeal, the original lease required the tenant to comply with all environmental laws and to pay for any remedial work necessary to cure environmental violations or to indemnify the landlord if the tenant failed to remediate the violation. The settlement agreement also addressed environmental issues and required the tenant to "provide a full monthly environmental [] report for all the premises due on the first business day of each month to the [landlord]. This report is to include the detail that is provided as to steps being taken to remedy current environmental issues and to detail the compliance with lease provisions on environmental contamination issues."

On December 23, 2005, and again on March 7, 2006, the landlord sent the tenant a notice of default of the environmental provisions contained in the original leases as environmental violations had been assessed at the Georgia service stations. It also contended that the tenant had failed to file the reports required under the settlement agreement. It demanded that the violations be cured within thirty days. When the violations were not cured, the landlord filed several motions for possession and damages for the uncured environmental violations. The tenant objected that the assessment of damages for the violations was beyond the continuing jurisdiction of the court in the settlement agreement.

The court held a hearing on the environmental violations and damages in February 2007, after the landlord had obtained possession of the premises based upon the other financial defaults as to rent, and also after the lease had terminated. Based upon that hearing, the court found that the tenant had failed to correct environmental violations and awarded the landlord $1,901,000 in damages as the cost to correct. It incorporated this into a final judgment for the unpaid rent and ultimately included this amount in a final judgment based upon the unpaid rent, taxes, and insurance. From this order the tenant appeals.

The tenant claims that pursuant to Paulucci v. General Dynamics Corp., 842 So.2d 797 (Fla. 2003), the trial court did not have continuing jurisdiction to assess damages for breach of contract on the environmental violations. We agree, as the trial court reserved jurisdiction to enforce the settlement agreement, and the damages assessed were not an enforcement of the settlement agreement.

In explaining the continuing jurisdiction of a trial court to enforce a settlement agreement, the Paulucci court held:

[W]hen a court incorporates a settlement agreement into a final judgment or approves a settlement agreement by order and retains jurisdiction to enforce its terms, the court has the jurisdiction to enforce the terms of the settlement agreement even if the terms are outside the scope of the remedy sought in the original pleadings. However, the extent of the court's continuing jurisdiction to enforce the terms of the settlement agreement is circumscribed by the terms of that agreement. Thus, if a party is claiming a breach of the agreement and is seeking general damages not specified in the agreement, the appropriate action would be to file a separate lawsuit.

Id. at 803 (footnote omitted). The court also set forth the distinction between enforcement of a settlement agreement and breach of the agreement:

We further approve of the distinction between the enforcement of the terms of the agreement and a general claim for breach of the agreement set forth by the Fifth District in its decision below:

By enforcing a contract, it is assumed that the contract has continuing validity and a party is ordered to comply with its terms. A breach of contract action presupposes that the contractual relationship is at an end because of a material breach by one party and damages are sought by the non-breaching party as a substitute for performance.

Id. (quoting Gen. Dynamics Corp. v. Paulucci 797 So.2d 18, 20 (Fla. 5th DCA 2001)). Here, the landlord sought damages for a breach of the lease and settlement agreements. Damages substituted for performance of the lease agreements. The settlement agreement did not include payment of these damages as one of its terms. Thus, pursuant to Paulucci, this claim should have been brought as an independent suit.

The landlord claims, however, that the tenant either waived this argument or our decisions on the prior appeals make the circuit court's jurisdiction the law of the case. We reject both arguments. The tenant raised the court's continuing jurisdiction to determine damages for breach of the environmental claims the first time the landlord sought them. While it did not raise this issue in a myriad of prior motions directed to other aspects of the settlement agreement, the issues in those motions and pleadings directly involved issues of enforcement, e.g., requiring the production of guarantees, payment of rent, or exercise of an option to purchase under the lease. All these matters affirmed the lease agreement. In contrast, seeking damages for breach of the lease assumes that the contract is at an end, and "damages are sought by the non-breaching party as a substitute for performance." Id.

The landlord also claims that our affirmance of prior court orders involving the settlement are the law of the case such that the tenant cannot challenge continuing jurisdiction to award damages for breach of contract. Those appeals, however, involved issues of enforcement of the leases as amended by the settlement agreement rather than breach of the original leases. For the same reason that waiver does not apply, so too does the doctrine of law of the case not apply.

Because the trial court did not have continuing jurisdiction under the settlement agreement to enter a judgment for damages for breach of the lease agreement to cure environmental violations, we reverse that portion of the final judgment which includes damages for those breaches. We remand for vacation of that portion of the final judgment, without prejudice to the filing of an independent suit for those damages.

We affirm on the other issues raised in this appeal, as the remainder of the final judgment was specifically contemplated in the settlement agreement for which jurisdiction was reserved, and the procedures used comported with the terms of the settlement.

Affirmed in part, reversed in part, and remanded with directions.

POLEN and TAYLOR, JJ., concur.