Cannot Proceed on Unpled Theory!
This is one case we use all the time now…the 2nd DCA recently issued a very helpful opinion that has direct application to foreclosure cases….
If the foreclosure defense attorney knows how to use it properly!
(and if the trial court agrees to uphold the law!)
Here’s what happens everyday in foreclosure court….banks get to plead whatever they want (owner/holder of note/enforcing the mortgage as servicer/enforcing note as owner/note is negotiable..and on and on and on.)
The plaintiffs get away with all kinds of alternative and inconsistent pleading, (“Plaintiff is the holder or the note and/or is entitled to enforce”), two completely different theories with completely different evidentiary hurdles.
But if they stumble in one and we nail them…it’s too bad for defendant, we’re going to let the plaintiff prevail under an unpled (and therefore undefended) claim.
The problem is courts are far too willing to just shrug their shoulders and say,
“you’re in foreclosure…too bad“
But look what happens in this case…there are unpled claims and even improper conduct, but the court holds them accountable…as they should….
GGB Profit Sharing Partnership (GGB) appeals from the amended final
judgment that finds that the appellees, Morton A. Goldberg and Carol Weber,1 are
entitled to a share of the proceeds GGB received from an employee dishonesty policy.
GGB argues that the trial court erred in finding for the appellees on a theory they had
not raised in the pleadings. We agree and reverse.
Appellee Goldberg was the managing partner of Goldberg, Goldstein &
Buckley, P.A. He was also the trustee and a fiduciary of the law firm’s profit sharing
plan (the Plan). The Plan suffered losses in excess of $2,000,000 as a result of criminal
conduct to which Goldberg pleaded guilty. Because of Goldberg’s conduct, the Plan
had to be terminated. Its assets were transferred to Appellant, GGB, which was formed
to succeed the Plan. Goldberg owned an interest in GGB in the form of an individual
retirement account that was entitled to receive cash distributions from the partnership.
Goldberg’s plea resulted in an order requiring him to pay restitution to
GGB and others. Goldberg, however, filed for bankruptcy. GGB instituted an adversary
proceeding against Goldberg in the bankruptcy case and eventually entered into a
settlement with him in which Goldberg agreed to allow GGB to set aside $400,000 of his
cash distributions in reparation for the losses he caused. The settlement agreement,
recognizing that in the criminal case Goldberg had been ordered to pay restitution to
GGB, among others, provided for Goldberg’s IRA to share in any restitution payments
made to GGB. Specifically, Paragraph 2 of the bankruptcy agreement states:
If and when the Partnership receives Restitution Payments,
the first $250,000.00 of such Restitution Payments received
by the Partnership shall be directed solely to Goldberg’s IRA.
Appellee, Carol Weber, is Goldberg’s former wife and an assignee of a
portion of Goldberg’s rights under the settlement agreement.
Any and all Restitution Payments received in excess of
$250,000.00 shall inure to the benefit of all participants in the
Partnership, including Goldberg’s IRA.
The settlement agreement defined “Restitution Payments” as the payments Goldberg
was required to make to “various ‘victim interest holders’ including [GGB]” as a result of
his criminal conviction.
GGB also filed a claim under its employee dishonesty policy and ultimately
settled with the insurance company for the net sum of $400,000. When GGB refused to
distribute any of the proceeds from the policy to Goldberg’s IRA, he filed a complaint for
declaratory judgment and damages. He alleged in his complaint that the $400,000
GGB received from the dishonesty policy was a “restitution payment” and, therefore, he
was entitled to recover his $250,000 under paragraph 2 of the bankruptcy settlement
At trial, Goldberg for the first time asserted an alternative basis for relief.
In his opening statement, Goldberg’s counsel explained:
So we’re actually seeking relief in the alternative. Mr.
Goldberg is entitled—is a 20 percent holder of GGB interest
and there was a $400,000 payment to the trust, at a
minimum he is entitled to an $80,000 payment as a
beneficiary of that trust. This is without regard to that issue
of restitution or whether there is restitution or not. This is so
because there’s no provision in the pension plan that would
work to deny Mr. Goldberg his right to that money.
GGB’s counsel objected to the new theory and argued as follows:
The Amended Complaint alleges one claim. The one claim
that is alleged in the amended complaint is that the
partnership received restitution payments. There is no claim
that the partnership received income from whatever source
and did not appropriately distribute that income to the plan
participants. That claim has not been pled. We are not
prepared to defend that claim, and allowing the plaintiff now
to depart so dramatically from their pleadings would be
In response to GGB’s objection, Goldberg pointed to paragraph 6 of its
amended complaint which alleged that “Plaintiffs also contend that they are entitled to
the benefits of the trusts that accrue to them by virtue of such instruments in addition to
any provisions of the ‘Settlement Agreement.’ ” The trial court found that paragraph 6
“stated[d] a claim for relief on the alternative basis” of Goldberg’s interest in GGB, and it
ultimately entered a judgment in Goldberg’s favor based on this “alternative basis.”
GGB argues this was error.
The issue for us to determine is whether the claim on which Goldberg
prevailed, which was based on his status as a trust beneficiary, satisfied Florida’s
pleading requirements. Florida Rule of Civil Procedure 1.110(b)(2) requires that a
complaint contain “a short and plain statement of the ultimate facts showing that the
pleader is entitled to relief.” In Arky, Freed, Stearns, Watson, Greer, Weaver & Harris,
P.A. v. Bowmar Instrument Corp., 537 So. 2d 561, 563 (Fla. 1988), the court explained
that “litigants at the outset of a suit must be compelled to state their pleadings with
sufficient particularity for a defense to be prepared.” We conclude that the claim in
paragraph 6 could not have put GGB on notice that Goldberg was alternatively seeking
a percentage of the insurance proceeds as a trust beneficiary.
Before trial, Goldberg had only sought the insurance proceeds as
restitution. The plain wording of paragraph 6 asserts a claim to “the benefits of the
trust,” not as an alternative means to obtain a payment from the proceeds of the
insurance policy but rather as a claim for payments owed “in addition to” any restitution
due to Goldberg under the bankruptcy settlement agreement. GGB notes that Goldberg
sought to amend the complaint to add paragraph 6 for the stated purpose of ensuring
that he would continue to receive the regular distributions that had been made to him by
GGB before and throughout the course of the litigation. GGB also points to Goldberg’s
interrogatory answers and pretrial compliance, both of which assert only that he was
seeking the $250,000 he was due under the bankruptcy settlement agreement for
“restitution.” Because paragraph 6 was not adequate to put GGB on notice of
Goldberg’s alternative theory, it was error for the trial court to consider it. See Arky, 537
So. 2d at 563 (concluding that a party is precluded from recovering on an unpled claim);
Agrofollajes, S.A. v. E.I. Du Pont De Nemours & Co., 48 So. 3d 976, 995 (Fla. 3d DCA
2010) (noting that it is error for the trial court to allow the plaintiffs to argue an issue at
trial that was not pleaded).
Accordingly, we reverse the judgment in favor of Goldberg and Weber and
remand for entry of judgment in favor of GGB.
Reversed and remanded with directions.
SILBERMAN and BLACK, JJ., Concur.