3rd DCA Rules Claimant in Negotiations Culminating in Settlement Cannot Rely on Oral Representations by the Party Asserted to have been Dishonest

In Sugar v. Estate of Stern, 2015 Fla. App. LEXIS 14018 (Fla. 3d DCA 2015), the Third DCA held that general releases executed in February 2011 and December 2011 barred an attempt (by three of Idelle Stern’s three daughters, “Appellees”) to relitigate transfers relating to a bank account located at Bank Leumi in Israel. Therefore the opposing parties (Idelle Stern’s fourth daughter and her husband, Judy and Sam Sugar, “Appellants”) did not have to disgorge pre-settlement transfers to them from Bank Leumi, but denied relief to the Appellants who sought the recovery of proceeds turned over to the Estate of Idelle Stern by Bank Leumi. The Court further noted that this was based, in part, because after the assertion of claims involving dishonesty, the claimant (Appellees) in negotiations culminating in a settlement and release cannot rely on oral representations made by the party (Appellants) already asserted to have been dishonest.

In the subject case, Bank Leumi transferred in 2005 approximately $350,000 to Appellants, who had been managing Idelle Stern’s (“Decedent” a/k/a “Ward”) affairs. By January 2011, the Decedent had been adjudicated incapacitated and the Ward’s Guardian sued Appellants for allegedly misappropriating funds and abusing Idelle Stern. As a result of the litigation, a settlement agreement and general releases were executed in February 2011 by the Appellants and the Guardian, and approved by the trial court.  Subsequently, in July 2011, the Guardian sued the Appellees again alleging misappropriation.  Following a settlement conference in July 2011, the Guardian, Appellees and Appellants entered into a global settlement which was reflected in an agreement containing bullet points describing the parties’ understanding.  The introductory recitation stated it was based upon the parties’ representations but no specific recitations were listed.  Appellees claimed that during settlement negotiations that Sam Sugar denied knowing anything about any Israeli account and that they relied upon his representation.  While the settlement agreement was approved by the trial court, there was a subsequent dispute about the terms of the releases. 

In November 2011, the Guardian received a letter from Bank Leumi in Israel and Appellees asserted this was their first indication of the existence of this account.  Appellees wanted a carve out provision in the releases pertaining to the newly discovered Israeli funds.  In December 2011, the trial court ordered the parties to sign a general release without the requested post-settlement carve out provision.  The Appellees complied and did not appeal the trial court’s order.  Later, in April 2013, Bank Leumi released information about the account to the Guardian.  After Decedent’s death, Bank Leumi transferred 1.1 million dollars to the Estate.  Appellees then sought to recover the funds, approximately $350,000, the Appellants received in 2005 and that the Appellants be precluded from receiving any proceeds from the Bank Leumi account via the Estate.  Appellants filed a cross-motion to enforce the 2011 settlement agreement and alleged the existence of the Bank Leumi account was disclosed and the Guardian was aware of same before the settlement.  The trial court denied Appellants cross-motion and ordered Appellants to disgorge the $350,000 transfer back to the Estate and that Judy Sugar waived any entitlement to the Israeli account funds in the February 2011 settlement.  The trial court ruled the Appellants could not enforce the release since they did not make full disclosure.

However, on appeal, the Third DCA reversed the disgorgement order, affirmed the successor trial judge’s ruling order denying Appellants cross-motion for distribution of a part of the Bank Leumi proceeds, and reversed the ruling that Appellees could pursue an action for wrongful taking against the Appellants.  To this point, the Third DCA noted that oral representations made during settlement negotiations have no apparent evidentiary foundation in a later attempt to avoid the settlement terms because of alleged misrepresentation. Statements during settlement negotiations concerning liability, the absence of liability, or value, are privileged and inadmissible in subsequent proceedings in the same case. The Third DCA cited in support Section 90.408, Fla. Stat., Bern v. Camejo, 168 So. 3d 232, 236 (Fla. 3d DCA 2014), and Agan v. Katzman & Korr, P.A., 328 F.Supp. 2d 1363, 1372 (S.D.Fla.2004).

For its reasoning, the Third DCA observed that this was as simple as the adage, “fool me once, shame on you; fool me twice, shame on me,” but stated more eloquently by Justice Davis of the Florida Supreme Court in Columbus Hotel Corp. v. Hotel Management Co., 156 So. 893, 902 (Fla. 1934).  Thus, the Third DCA affirmed the trial court in part and reversed in part, with directions to enter final judgment denying relief to Appellees regarding their claims against Appellants for pre-settlement transfers from the Bank Leumi account, and denying relief to Appellants with respect to those proceeds which were turned over to the Estate of Idelle Stern by Bank Leumi.

If you or anyone you know is in need of representation in actions involving Guardianship, Probate and/or Trust Disputes, or questions pertaining to such proceedings, please contact The Law Offices of Glenn M. Mednick, P.L., at (954) 315-1154 or gmednick@mednicklawgroup.com.