County Civil Court: CONTRACTS – An implied covenant of good faith exists in all contractual relationships, but relief should not have been granted when it was not sought in the pleadings. Affirmed in part, Reversed in part. Philip Wetter v. Sonia Ortiz, No. 2010-AP-000017-ES, (Fla. 6th Cir.App.Ct. June 20, 2011).
NOT FINAL UNTIL TIME EXPIRES FOR REHEARING AND, IF FILED, DETERMINED
IN THE CIRCUIT COURT OF THE SIXTH JUDICIAL CIRCUIT
OF THE STATE OF FLORIDA, IN AND FOR PASCO COUNTY
v. Case No: 10-AP-000017-ES
Lower No: 05-CC-003688-ES
Appeal from Pasco County Court
County Judge Robert P. Cole
Scott W. Fitzpatrick, Esq.,
Eric C. Fleming, Esq.,
W. Todd Smith, Esq.,
ORDER AND OPINION
Appellant raises two issues on appeal. Appellant first argues that the trial court erred as a matter of law in finding that sole and absolute discretion means dual and conditional discretion under Florida law. This argument lacks merit as Appellant overlooks the implied covenant of good faith and fair dealing that exists in all contractual relationships. Appellant also contends that he was denied due process when the trial court entered judgment against him when Appellant was provided no notice of the relief being sought against him. We agree on that point and remand this cause. Therefore, this Court affirms in part and reverses in part the trial court’s order as set forth below.
On November 21, 2005, Sonia Ortiz filed a complaint against Sunset Realty Association, Philip Wetter (broker for Sunset Realty), and Alday-Donaldson Title Agencies of America. Ms. Ortiz and Philip Wetter entered into an independent contractor agreement for Ms. Ortiz to act as a real estate agent for Sunset Realty. Sonia Ortiz worked as a licensed real estate agent for Sunset Realty from March 19, 2005 through July 2005. In her complaint, Ms. Ortiz sought $5,017.66 in unpaid wages and an equitable lien against a commission check in the amount of $12,555.00 being held by Alday-Donaldson.
On February 8, 2008, the trial court entered an order interpleading funds and dismissing Defendant Alday-Donaldson. A bench trial was held before Judge Cole on September 16, 2010, after which the trial court entered judgment against Mr. Wetter for $15,000.00 plus costs and attorney’s fees. In its judgment, the trial court made the following factual findings:
On March 19, 2005, Sonia Ortiz entered into a contract with Philip Wetter, the licensed broker. Sean and Ann Fisher were the owners of Sunset Realty, but not licensed real estate brokers. The contract indicated that Sonia Ortiz would receive 90% of any commission due to Sunset Realty on a property sale and certain portions of those monies would be kept aside to pay taxes for Ms. Ortiz. In August 2005, Sean Fisher terminated Ms. Ortiz, who had four pending real estate transactions. Ms. Ortiz was paid 90% of the commission due to Sunset after closing on two of those properties. On the third and fourth transactions, Ms. Ortiz was paid nothing even though the transactions were completed.
The third transaction was known as the “Ivy Lake” property. Ms. Ortiz represented the buyer, Patsy Lynch. Patsy Lynch testified that Ms. Ortiz “did everything an agent should do.” In her opinion, Ms. Ortiz deserved 100% of her commission. She also denied knowing Philip Wetter or Sean and Ann Fisher.
The fourth transaction was known as the “Pointe Alexis” property. Ms. Ortiz represented the buyer, Marcello Millar. Marcello Millar testified that but for the extra effort of Ms. Ortiz, the sale would have fallen through. Mr. Millar was extremely laudatory of Ms. Ortiz’s work. He also denied knowing Philip Wetter or Sean and Ann Fisher.
After Ms. Ortiz’s termination, Sean Fisher attended the closings and precluded Ms. Ortiz from attending. Philip Wetter testified that he knew of no commission money paid to Sean Fisher on the third and fourth transactions, though he stated that Sean Fisher claimed participation in the third and fourth sales.
The trial court found that Sean and/or Ann Fisher made the decisions on what was paid out, not Philip Wetter. While the trial court doubted that Philip Wetter had the discretion to pay or not pay one cent to Ms. Ortiz under the contract, if he did have discretion, the trial court found his actions to be a gross, unconscionable abuse of that discretion, considering Ms. Ortiz had done everything except go to the closing on the properties to facilitate the sale. In clause 3(c)(6), the contract states that a terminated associate will be paid for anything earned by her work prior to termination less any amounts the broker needs to pay another “licensee” to complete the pending transaction for which the associate was responsible prior to termination. Philip Wetter testified he was not aware of anything paid to Sean Fisher for supposedly finishing up the “Ivy Lake” and “Pointe Alexis” sales.
The trial court found that any need for Sean Fisher to finish Sonia Ortiz’s work on the two transactions was minimal at best. The trial court awarded Sonia Ortiz damages of $15,000, though the trial court noted that actual damages were in excess of the court’s jurisdictional limit, costs of $887.53, and attorney’s fees of $12,967.50. The order was entered September 17, 2010. Appellant, Philip Wetter, filed a timely notice of appeal on October 12, 2010.
LAW AND ANALYSIS
Appellant argues that the trial court erred as a matter of law in finding that sole and absolute discretion means dual and conditional discretion under Florida law. Specifically, Appellant points that paragraph 3(c)(2) of the contract states that if two or more associates participate in rendering a brokerage service to the public, or claim to have done so, the broker will determine in his “sole and absolute” discretion the amount of the fee due to the associates. As such, Appellant alleges that the trial court’s order deprived him of having sole and absolute discretion in determining the commission amount due to Ms. Ortiz.
Appellant, however, overlooks that an implied covenant of good faith and fair dealing exists in all contractual relationships. Speedway Superamerica, L.L.C. v. Tropic Enters., Inc., 966 So. 2d 1, 3 (Fla. 2d DCA 2007). What the good faith and fair dealing obligation mean is that a failure to perform or enforce in good faith a specific duty or obligation under the contract, constitutes a breach of that contract or makes unavailable, under the particular circumstances, a remedial right or power. Cont’l Cas. Co. v. City of Jacksonville, 550 F.Supp.2d 1312, 1337 (M.D. Fla. 2007). The implied covenant of good faith and fair dealing even applies in contracts that specifically allow for a decision based on the “sole discretion” of one of the parties. Sepe v. City of Safety Harbor, 761 So. 2d 1182 (Fla. 2d DCA 2000). The implied covenant and fair dealing is designed to protect the parties’ reasonable expectations. Cox v. CSX Intermodal, Inc., 732 So. 2d 1092, 1097 (Fla. 1st DCA 1999).
Since sole discretion does not permit a party to make a discretionary decision that violates the covenant of good faith, Appellant was not at liberty to capriciously deprive Ms. Ortiz of all her commission. The contract provided that Ms. Ortiz would receive 90 percent of any commission due to Sunset after closing, less a portion to be set aside for taxes. Sean Fisher’s work on the Pointe Alexis and Ivy Lakes closings was minimal at best. With no evidence that Sean Fisher was a licensee or even paid for his work on the two remaining transactions, Ms. Ortiz should receive the entire 90 percent. Appellant clearly violated the covenant of good faith and fair dealing. As such, Appellant’s argument lacks merit.
Appellant next argues that the trial court erred as a matter of law and deprived him of due process by entering judgment against him, when he was provided no notice of relief being sought against him for the Pointe Alexis transaction. Count I of Ortiz’s complaint sought monetary judgment against Sunset and Wetter in the amount of $5,017.66 plus attorney’s fees and costs for the Pointe Alexis transaction. Count II did not seek a monetary judgment, rather an equitable lien against a commission check for the Ivy Lakes transaction that was originally held by Alday-Donaldson and subsequently transferred to the trust account of Ortiz’s counsel. Ortiz sought additional relief against Wetter on the Ivy Lakes transaction for the first time during trial, and the trial court awarded Ortiz such relief against Appellant, which was not requested in the pleadings.
It was improper for the trial court to enter a money judgment against Appellant when no pleading for such relief had ever been filed. Granting relief which was not sought in the pleadings constitutes reversible error. Gelman v. Gelman, 24 So. 3d 1281 (Fla. 4th DCA 2010). The judgment under review must be reversed. Upon remand, the trial court should allow the filing of additional pleadings by both sides and make an appropriate determination of the issues then presented. Since the judgment awards damages against Wetter for $15,000, plus costs and fees, but makes no distinction between counts, the trial court shall also separate the amounts in rendering its judgment. It is therefore,
ORDERED AND ADJUDGED that the trial court’s order is AFFIRMED in part and REVERSED in part and this cause REMANDED with actions consistent with this order and opinion.
DONE AND ORDERED in Chambers, at New Port Richey, Pasco County, Florida this 20th day of June 2011.
Original order entered on June 20, 2011 by Circuit Judges Stanley R. Mills, W. Lowell Bray, Jr., and Daniel D. Diskey.