Erik P. Kimball, Judge.
This matter came before the Court upon Vero Beach Country Club, Inc.'s Motion for Summary Judgment on Count II of Its Third-Party Complaint and on the Millses' Counterclaim [ECF No. 43] (the "Motion for Summary Judgment") and the Affidavit of Timothy Straley [ECF No. 46] (the "Affidavit") filed by Vero Beach Country Club, Inc. ("VBCC"), the response thereto [ECF No. 48] and the Affidavit of William B. Mills [ECF No. 49] filed by William B. Mills and Mary Jane Mills (together, the "Defendants"), and the reply thereto [ECF No. 60] filed by VBCC.
VBCC owns and operates a private golf country club. In May 2003, the Defendants applied for membership at VBCC. Exh. A, ECF No. 46. That same month, VBCC accepted and executed the Defendant's membership application. Id. The Defendants have been members since that time.
As members of VBCC, the Defendants are governed by the VBCC Bylaws, Exh. B, ECF No. 46, and the VBCC Policies, Procedures, and Rules, Exh. C, ECF No. 46 (the "PPR").
The Defendants are obligated to pay to VBCC annual membership dues and "[a]ll fees and charges," such as sums due for golf, meals, and beverages. PPR, § C.2.a. Regarding overdue indebtedness, the PPR provides:
PPR, § C.2.
The PPR defines "misconduct" as a member's violation of the Bylaws or the PPR or "conduct injurious to the good order, peace, interest or welfare of [VBCC], its members and staff." PPR, § C.3.a. The VBCC board of directors may initiate an investigation of possible misconduct on its own volition. Id. The PPR provides the following enforcement mechanism for a member's alleged misconduct:
PPR, § C.3.b-c.
The Defendants jointly own Real Estate & Management Group, LLC ("REMG"). Schedule B, ECF No. 1, Case No. 15-29068-EPK. Mr. Mills is the president of REMG. Exh. A, ECF No. 46. The Defendants caused REMG to pay to VBCC the Defendants' annual membership dues and their fees and charges. Exh. D, ECF No. 46.
On October 28, 2015, Mr. Mills filed a voluntary chapter 7 bankruptcy petition. ECF No. 1, Case No. 15-29068-EPK. Michael
On September 21, 2017, the Trustee filed an adversary proceeding against REMG for judicial dissolution and for the appointment of a receiver. ECF No. 1, Adv. Proc. No. 17-01366-EPK. The Court granted the Trustee's request to appoint a receiver and, pursuant to Fla. Stat. § 605.0704, appointed Deborah C. Menotte as receiver of REMG (the "Receiver"). ECF No. 24, Adv. Proc. No. 17-01366-EPK. The Court authorized the Receiver to take control of REMG, to wind down and liquidate its assets, and, among other things, "to investigate and sue to avoid fraudulent or other improper transfers." Id.
On March 30, 2018, the Receiver sent a letter to VBCC demanding repayment of four years of sums that the Defendants caused REMG to pay to VBCC for annual membership dues, fees, and charges. Exh. D, ECF No. 46. The Receiver threatened legal action if VBCC failed to comply with the demand. Id. According to Tim Straley, general manager and chief operating officer of VBCC, VBCC was "greatly concerned" about the Receiver's demand because "[a]t this time, VBCC was also in the middle of a construction protect with financing where contingent liabilities had to be disclosed to VBCC's lender which would affect VBCC's debt ratio." ¶ 8, ECF No. 46.
On April 13, 2018, VBCC sent a letter to the Defendants demanding, among other things, that the Defendants defend or protect VBCC from the Receiver's demand. Exh. E, ECF No. 46. This letter warned the Defendants that failure to defend or protect VBCC may result in expulsion from VBCC and/or legal action for damages incurred by VBCC. Id. Shortly after VBCC sent this letter, the president of VBCC and Mr. Straley met in person with Mr. Mills and again demanded that the Defendants defend or protect VBCC from the Receiver's demand. ¶ 10, ECF No, 46. A few days later, VBCC sent the Defendants a draft written agreement requiring the Defendants to fully defend, indemnify and hold harmless VBCC from any and all claims brought by the Receiver against VBCC. Exh. F, ECF No. 46.
On May 4, 2018, the Defendants notified VBCC that the Defendants would neither defend or protect VBCC nor sign the proposed written agreement. ¶ 12, ECF No. 46.
On May 11, 2018, the Receiver filed the instant adversary proceeding against VBCC, seeking to avoid and recover $55,338.21, representing the sum of four years of transfers from REMG to VBCC on behalf of the Defendants. ECF No. 1. The Receiver's claims against VBCC were brought solely under the Florida Uniform Fraudulent Transfer Act, Fla. Stats. §§ 726.105(1)(b) and 726.106(1). Id.
On May 22, 2018, by letter entitled "Notice of Hearing," and pursuant to section C of the PPR, the secretary of the VBCC board of directors demanded that the Defendants "appear in person or provide written defenses as to why [the Defendants] should not immediately resolve all issues contained within [the adversary proceeding filed by the Receiver against VBCC] and if not, be suspended and/or expelled until the [adversary proceeding] is resolved without [VBCC] incurring any damages, expenses or attorneys' fees of any kind whatsoever." Exh. G, ECF No. 46. The letter scheduled a disciplinary
On May 24, 2018, prior to the disciplinary hearing, counsel for VBCC sent a letter to counsel for the Defendants indicating that "VBCC's board of directors voted to suspend [the Defendants'] VBCC membership and all associated benefits until this matter is fully resolved." Exh. H, ECF No. 46. The letter indicated that VBCC was negotiating with the Receiver to pay a sum less than the amount requested in the Receiver's complaint against VBCC. Id. The letter stated that payment by the Defendants to VBCC, in the full amount ultimately paid by VBCC to the Receiver, may restore the Defendants' membership rights. Id. According to Mr. Straley, "[w]hile VBCC board members approved this letter before it was sent, the [letter] erroneously states that [the Defendants'] membership was considered suspended, when in fact, that suspension would not potentially become effective until the June 5, 2018 meeting when a vote of the board was taken." ¶ 15, ECF No. 46.
On May 31, 2018, the Defendants, with the assistance of counsel, responded in writing to the VBCC notice of hearing. Exh. I, ECF No. 46. The Defendants indicated that they chose to respond in writing since the Defendants became informed that the board of directors had already voted to suspend the Defendants' membership. Id. The Defendants expressed their concern that the board of directors wrongfully suspended their membership prior to the June 5, 2018 hearing. Id. The Defendants stated that they may assert their legal rights in light of the wrongful suspension. Id.
The Defendants also refused to indemnify VBCC for any sums paid by VBCC to the Receiver. Id. The Defendants stated that neither the membership application, the Bylaws, nor the PPR require the Defendants to indemnify VBCC. Id. The Defendants disputed that the monies paid from REMG to VBCC were "fraudulent." Id. The Defendants claimed that REMG paid the membership dues, fees, and charges in lieu of paying Mr. Mills a salary. Id. The Defendants claimed that Mr. Mills used VBCC for business purposes, meeting and entertaining prospective business clients at the country club. Id. The Defendants claimed that REMG was never insolvent. Id. The Defendants also claimed that the Defendants received reasonably equivalent value for REMG's payments to VBCC. Id.
Thereafter, VBCC and the Defendants, each through counsel, exchanged communications via email. Exh. J, ECF No. 46. VBCC requested that the Defendants assist VBCC in defending against the Receiver's claims by providing VBCC with proof that REMG paid the dues, fees, and costs for a business purpose or in lieu of Mr. Mills' salary. Id. The Defendants continued to assert, without proof, that the payments from REMG to VBCC were proper business expenses. Exhs. J, L, and O, ECF No. 46. Ultimately, the Defendants refused to assist VBCC. Exh. P, ECF No. 46.
On June 5, 2018, pursuant to the notice of hearing, the VBCC board of directors convened to consider disciplinary actions against the Defendants. Because the Defendants elected to respond in writing to the notice of hearing, the Defendants did not attend the June 5, 2018 meeting. The board considered the Defendants' May 31, 2018 letter. The board unanimously voted to suspend the Defendants' membership. According to Mr. Straley, the board unanimously determined that the Defendants' refusal to indemnify or defend VBCC amounted to "misconduct under [section C.3. of the PPR] because it endangered the welfare of VBCC." ¶ 19, ECF No. 46.
That same day, VBCC memorialized the Defendants' membership suspension in a letter to the Defendants. Exh. K, ECF No. 46. The letter stated that the Defendants' membership is suspended "until all issues in the suit are resolved in [VBCC's] favor." Id. Despite the reasons provided by Mr. Straley, the letter did not explain that the suspension was for "misconduct" pursuant to section C.3. of the PPR or for "indebtedness" pursuant to section C.2. of the PPR. Id. As of the entry of this order, the Defendants' membership remains suspended and they are not permitted to frequent the country club.
As noted above, the Receiver filed this adversary proceeding against VBCC, seeking to avoid and recover $55,338.21, representing the sum of four years of transfers from REMG on behalf of the Defendants to VBCC. ECF No. 1. Despite VBCC's requests, the Defendants refused to indemnify or defend VBCC. On June 16, 2018, VBCC filed its third-party complaint against the Defendants, seeking contractual and common law indemnification from the Defendants for VBCC's liability to the Receiver. ECF No. 7. The Defendants answered the third-party complaint and filed a counterclaim against VBCC for breach of contract, claiming that VBCC wrongfully suspended the Defendants' membership rights. ECF No. 19. VBCC filed an answer and affirmative defenses to the Defendants' counterclaim. ECF No. 23.
On August 14, 2018, the Receiver filed a motion to approve a settlement agreement between the Receiver and VBCC. ECF No. 25. VBCC agreed to pay the Receiver $25,000.00 in full settlement of the Receiver's claims against VBCC. Id. The Defendants received notice of the proposed settlement agreement. Id. The Court set a hearing on September 26, 2018 to consider approval of the settlement agreement. ECF No. 28. The Defendants received notice of the September 26, 2018 hearing. ECF No. 29. The Defendants did not appear at the September 26, 2018 hearing. The Defendants did not otherwise object to approval of the settlement agreement. On October 1, 2018, the Court entered an order approving the settlement agreement. ECF No. 36. By that order, the Court approved the $25,000.00 payment from VBCC to the Receiver and dismissed with prejudice the Receiver's claims against VBCC. Id. The Court explicitly retained jurisdiction to adjudicate VBCC's third-party complaint against the Defendants and the Defendants' counterclaim against VBCC. Id.
In the third-party complaint, VBCC sues the Defendants on two counts: contractual indemnification and common law indemnification. ECF No. 7. Specifically, in light of the settlement, VBCC seeks contractual or common law indemnification from non-debtor Mrs. Mills for the entire $25,000.00 settlement paid by VBCC to the Receiver plus all attorney's fees and costs incurred by VBCC in defending this action. Because Mr. Mills filed bankruptcy and received a discharge of pre-petition obligations, VBCC seeks contractual or common law indemnification from Mr. Mills "for all
VBCC now seeks summary judgment on count II of its third-party complaint for common law indemnification, and summary judgment on the Defendants' counterclaim for wrongful suspension. VBCC does not seek summary judgment on count I of its third-party complaint for contractual indemnification.
Federal Rule of Civil Procedure 56, made applicable to this matter by Federal Rule of Bankruptcy Procedure 7056, provides that summary judgment is appropriate if the Court determines that the "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The moving party supports its assertion that a fact cannot be disputed by citing to the record, "including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials." Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party bears the burden of meeting this standard. Imaging Bus. Machs., LLC v. BancTec, Inc., 459 F.3d 1186, 1192 (11th Cir. 2006). "An issue of fact is `material' if it is a legal element of the claim under the applicable substantive law which might affect the outcome of the case." Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997). In considering a motion for summary judgment, the Court must construe all facts and draw all reasonable inferences in the light most favorable to the non-moving party. In re Pony Express Delivery Services, Inc., 440 F.3d 1296, 1300 (11th Cir. 2006).
VBCC seeks summary judgment on count II of its third-party complaint for common law indemnification. VBCC argues that it is wholly without fault for receiving payments from REMG and that it is only vicariously, constructively, derivatively, or technically liable to the Receiver due to the wrongful acts of the Defendants.
Under Florida law,
Florida common law indemnity applies only to personal injury tort claims, see, e.g., Radio Station WQBA, 731 So.2d 638, and certain breach of contract claims in the context of products liability. See, e.g., Diplomat Props., L.P., 114 So.3d 357; Hiller Group, Inc. v. Redwing Carriers, Inc., 779 So.2d 602 (Fla. 2nd DCA 2001); K-Mart Corp. v. Chairs, Inc., 506 So.2d 7 (Fla. 5th DCA 1987); Auto-Owners Ins. Co. v. Ace Elec. Serv., Inc., 648 F.Supp.2d 1371 (Dist. Ct. M.D. Fla. 2009); Mortg. Contr. Servs., LLC v. J & S Prop. Servs. LLC, 2018 U.S. Dist. LEXIS 109967 (Dist. Ct. M.D. Fla 2018). Florida courts have not applied common law indemnity to a fraudulent transfer claim brought under the Florida Uniform Fraudulent Transfer Act.
VBCC seeks summary judgment on the Defendants' counterclaim for wrongful suspension of the Defendants' membership rights. VBCC alleges that the board of directors properly suspended the Defendants' membership rights. In the Motion for Summary Judgment, VBCC cites both "misconduct" and "indebtedness" as cause for the suspension. The Defendants do not, in turn, seek summary judgment in their favor on their counterclaim; they simply request that the Court deny VBCC's Motion for Summary Judgment.
Pursuant to the PPR, the board of directors has the right to suspend any member for misconduct or for failure to satisfy an indebtedness to the country club. Misconduct is defined as a member's violation of the Bylaws or the PPR or "conduct injurious to the good order, peace, interest or welfare of [VBCC], its members and staff." PPR, § C.3.a. Though not explicitly defined in the governing documents, indebtedness results from a member's failure to pay VBCC annual membership dues or any fees and costs incurred at the country club. PPR, §§ C.2.a-b.
From the pre-suspension communications between VBCC and the Defendants, it is apparent that VBCC was considering suspension based on the Defendants' refusal to indemnify VBCC for any liability incurred as a result of the Receiver's claims and also based on the Defendants' failure to assist VBCC in defending against the Receiver's claims.
The Receiver's claims against REMG, which were based in constructive fraud under the Florida Uniform Fraudulent Transfer Act, were facially strong.
The Defendants initially asserted that Mr. Mills used VBCC for business purposes by meeting and entertaining prospective business clients at the country club. The Defendants initially stated that they would provide VBCC an affidavit listing the names of business clients that REMG gained through the Defendants' membership at VBCC. If Mr. Mills had in fact used the VBCC membership for REMG business then there would be some benefit to REMG, which could constitute reasonably equivalent value to REMG. But the Defendants ultimately provided no evidence of such business use and later confirmed there was none. See Deposition of
The Defendants also claimed that the payments from REMG to VBCC on behalf of the Defendants were in lieu of salary owed to Mr. Mills. But the Defendants provided no proof of this. Nor did the Defendants assist VBCC with any evidence to negate the Receiver's assertion that REMG was insolvent at the time of the transfers. The Receiver presented a prima facie case to recover constructively fraudulent transfers from VBCC.
After the Defendants refused to indemnify VBCC or assist VBCC in defending against the Receiver's claims, it became clear that VBCC had legal liability to the Receiver. VBCC appropriately settled for an amount less than half of the Receiver's claims. The Defendants' failure to indemnify VBCC or assist VBCC in defending against the Receiver's claims surely amounted to "conduct injurious to the good order, peace, interest or welfare of [VBCC]...." PPR, § C.3.a. VBCC properly suspended the Defendants' membership rights based on misconduct.
The Defendants argue that they cannot be guilty of misconduct under the PPR because the governing documents do not contain any indemnity provision, and so their refusal to indemnify VBCC cannot amount to a violation of the governing documents. But the definition of "misconduct" itself states that misconduct includes "conduct injurious to the good order, peace, interest or welfare of [VBCC] ...." PPR, § C.3.a.
VBCC also cites "indebtedness" as cause for suspension of the Defendants' membership. VBCC alleges that the $25,000.00 payment it made to the Receiver in settlement of the fraudulent transfer claims left the Defendants' obligations to VBCC unpaid to the same extent, resulting in an indebtedness that the Defendants are required to pay. The $25,000.00 settlement payment by VBCC to the Receiver undoubtedly resulted in an indebtedness on the part of the Defendants to VBCC, but that indebtedness did not arise until after the board of directors voted to suspend the Defendants' membership rights. VBCC cannot rely on such indebtedness as cause for the suspension VBCC determined prior to payment of the $25,000.00.
For the foregoing reasons, the Court ORDERS and ADJUDGES as follows:
