Opinion
Case No. 6D23-489
10-27-2023
Joe D. RIGGINS a/k/a Joe David Riggins and Barbara Riggins a/k/a Barbara Jean Riggins, Appellants, v. CLIFFORD R. RHOADES, P.A. and Clifford R. Rhoades, Appellees.
Kevin J. D’Espies, of D’Espies Law P.A., Sebring, for Appellants. Richard M. Jones and Andrew M. Feldman, of Klein Park & Lowe, P.L., Miami, for Appellees.
Appeal from the Circuit Court for Highlands County. Angela J. Cowden, Judge. Lower Tribunal No. 2021-CA-000065
Kevin J. D’Espies, of D’Espies Law P.A., Sebring, for Appellants.
Richard M. Jones and Andrew M. Feldman, of Klein Park & Lowe, P.L., Miami, for Appellees.
BROWNLEE, J.
Joe and Barbara Riggins appeal from an order dismissing their counterclaim and third-party complaint with prejudice. They advance two arguments on appeal, First, Appellants argue the trial court impermissibly considered materials outside the four corners of their pleadings when ruling on Appellees’ omnibus motion to dismiss. Second, they argue the trial court erred in taking judicial notice of the final judgment entered in a separate action filed in Okeechobee County circuit court, where the parties did not stipulate to the court doing so, and where that judgment was not attached to the pleadings. As to the third-party complaint, we agree and reverse.
This case was transferred from the Second District Court of Appeal to this Court on January 1, 2023.
In 2008, Appellants retained the Appellees, Clifford R. Rhoades, P.A. and attorney Clifford R. Rhoades, to prepare loan documents, in order to assist Appellants in lending money to Brenda Gay Phillips. Rhoades initially prepared a promissory note, by which Phillips borrowed $21,795.37 from Appellants. The note provided for an interest rate of 12% per year. As security for the note, Rhoades prepared a mortgage, which Phillips executed and delivered to Appellants. Rhoades later assisted the parties with several modifications of the loan documents, and, in December of 2010, the parties finally signed a "Corrective and Updated Agreement." According to that updated agreement, Phillips owed Appellants $117,359.05.
When Phillips passed away, David A. Hagen, as Personal Representative of the, Estate of Brenda Gay Phillips ("the Estate"), sued Appellants in Okeechobee County circuit court alleging, inter alia, that the loan documents were usurious and unenforceable. Rhoades defended Appellants in that case. The Okeechobee court eventually entered final judgment ("the Okeechobee Judgment") in Appellants’ favor. That court found, in relevant part, that the Estate was not entitled to relief on its claim that the loan documents set an unlawful interest rate and that the interest remains lawfully recoverable.
After the Okeechobee case concluded, Clifford R. Rhoades, P.A. sued Appellants, his clients in the Okeechobee action, for unpaid legal fees. Appellants responded by filing a counterclaim and third-party complaint, joining Clifford R. Rhoades individually in the suit. In their pleadings, Appellants asserted legal malpractice claims against Rhoades and his firm for failing to provide appropriate legal counsel, and for preparing usurious loan documents, in violation of the Florida Statutes. Specifically, in their pleadings, Appellants claimed Rhoades and the law firm breached their duty of care by: (a) negligently creating documents that gave the Estate a basis for filing suit; (b) failing to provide competent legal representation in response to the Estate’s lawsuit; (c) failing to understand and convey to Appellants that the interest rate was usurious so that the issue could be corrected; and (d) drafting, negotiating, and advising Appellants and Phillips to execute documents, which were improperly created and resulted in subsequent litigation between the parties. Appellants sought actual damages in the form of all attorney’s fees paid to, or claimed by, Rhoades and his firm for defending Appellants in the Okeechobee case, as well as all fees paid for preparing the "inappropriate" loan documents. Notably, the Okeechobee Judgment was not attached to either the counterclaim or the third-party complaint.
In response, Rhoades and his law firm filed their Omnibus Motion to Dismiss Counterclaim and Third-Party Complaint and attached the Okeechobee Judgment as an exhibit to the motion. They argued the trial court could take judicial notice of the Okeechobee Judgment and claimed it was impliedly incorporated into Appellants’ pleadings. Rhoades and the firm then urged the trial court that—because the Okeechobee Judgment declared the documents were legally enforceable—Appellants could never prove their legal malpractice claims and those claims should be dismissed. Appellants countered that the trial court could not look to matters outside the four corners of the counterclaim and third-party complaint, and, consequently, the motion to dismiss should be denied.
The trial court dismissed both the third-party complaint and the counterclaim with prejudice. In its order, the court took judicial notice of the Okeechobee Judgment and concluded the findings in that judgment—which pertained to different parties —precluded Appellants’ cause of action here:
Appellees were not parties to the Okeechobee case, and the Estate is not a party to this case.
The Court takes judicial notice of the Final Judgment entered on November 20, 2020 in Okeechobee County. In paragraph 14, the Final Judgment specifically found the Phillips did not meet their burden of proving the required corrupt intent on the part of Riggins for usury. In addition to this finding, the Okeechobee court found that the fact that the parties engaged in a joint venture, even if there was an otherwise unlawful rate of interest imposed, said interest remains lawfully recoverable. Lastly, the Okeechobee court found the usury claim was barred by the statute of limitations. While the Riggins argue the Phillips were not successful in their litigation against the Riggins due to the running of the statute of limitations with regard to the usury claim, a review of the entire Final Judgment reveals that it is not the only reason the Phillips were unsuccessful. For the Riggins to be successful in their claims here, this Court would have to determine that the documents Rhoades drafted were usurious. This issue was fully litigated in Okeechobee, and that court declined to make that finding. In other words, the documents were not rendered invalid by the litigation.
Appellants now appeal that order. As to the dismissal of the third-party complaint, we have jurisdiction. See Art V, § 4(b)(1), Fla. Const. As to the dismissal of the counterclaim, we do not.
The Third-Party Complaint
[1–4] A final order dismissing a complaint with prejudice is reviewed de novo. See Norwich v. Glob. Fin. Assocs., LLC, 882 So. 2d 535, 536 (Fla. 4th DCA 2004). "A motion to dismiss … tests the legal sufficiency of a complaint to state a cause of action and is not intended to determine issues of ultimate fact." Landmark Funding, Inc. ex. rel. Naples Syndications, LLC v. Chaluts, 213 So. 3d 1078; 1079 (Fla. 2d DCA 2017). When examining the sufficiency of a complaint, "the court must accept the facts alleged therein as true and all inferences that reasonably can be drawn from those facts must be drawn in favor of the pleader." Schneiderman v. Baer, 334 So. 3d 326, 330 (Fla. 4th DCA 2022) (quoting MEBA Med. & Benefits Plan v. Lago, 867 So. 2d 1184, 1186 (Fla. 4th DCA 2004)). In addition, the court must follow the four-corners rule, strictly confining its review to the four corners of the complaint and any attachments incorporated into the complaint. Santiago v. Mauna Loa Invs., LLC, 189 So. 3d 752, 755–56 (Fla. 2016). Conversely, the mere attachment of documents to a motion to dismiss does not allow for their consideration in deciding the motion. See Kidwell Grp. LLC v. Fla. Farm Bureau Cas. Ins. Co., 348 So. 3d 1239, 1241 (Fla. 2d DCA 2022) (quoting Enlow v. E.C. Scott Wright, P.A., 274 So. 3d 1192, 1193 (Fla. 5th DCA 2019)).
[5] Nor may judicial notice be used to side-step the four-corners rule. See Schneiderman, 334 So. 3d at 330; see also Papa John’s Int’l, Inc. v. Cosentino, 916 So. 2d 977, 983 (Fla. 4th DCA 2005) ("This court has followed the general rule that a court may not look beyond a complaint and its attachments to take judicial notice of a separate legal proceeding when ruling on a motion to dismiss."); Norwich, 882 So. 2d at 537 ("While the defenses of res judicata and collateral estoppel may be resolved through a motion for summary judgment, the trial court erred when it ventured outside the four corners of the complaint, took judicial notice of the final judgment of dissolution of marriage, and dismissed the complaint with prejudice."). There are exceptions to this rule, however, such as where the defendant properly requests the court take judicial notice and the parties stipulate that it may do so. See Schneiderman, 334 So. 3d at 330.
[6] No such stipulation occurred in this case. Nonetheless, the trial court took judicial notice of the Okeechobee Judgment, which was not attached to the pleadings, and then expressly relied on that judgment to determine Appellants could not prevail on their claims because the loan documents were not rendered invalid by the Okeechobee litigation. In doing so, the trial court impermissibly looked beyond the four corners of the third-party complaint and relied on extraneous material to resolve issues of ultimate fact. This was error. Regardless of whether the law firm can ultimately prevail given the Okeechobee Judgment, which we do not decide today, it was premature for the trial court to rely on that document and resolve these issues on a, motion to dismiss. See Chaluts, 213 So. 3d at 1080 ("It was premature … to resolve these issues on the motions to dismiss that were tendered by the parties in defense to Landmark’s complaint.").
[7] Rhoades defends the order below by arguing the trial court properly considered the Okeechobee Judgment because Appellants expressly referred to it in the third-party complaint. They rely on Veal v. Voyager Property & Casualty Insurance Co., 51 So. 3d 1246 (Fla. 2d DCA 2011), for this proposition. In Veal, the Second District found the trial court could properly review the terms of a settlement agreement not attached to the complaint because the complaint impliedly incorporated the terms of that agreement. Id. at 1249–50. In so finding, the Second District explained the complaint referred to the settlement agreement, and Veal’s standing to sue was premised on the terms of that agreement. Id.; see also One Call Prop. Servs., Inc. v. Sec. First Ins. Co., 165 So. 3d 749, 752 (Fla. 4th DCA 2015) (holding the trial court properly determined an insurance policy was impliedly incorporated where "[t]he complaint refers to the policy, and One Call’s standing to bring suit is premised on an assignment of the policy").
We are unpersuaded. Unlike Veal, as pled, Appellants’ standing in this case does not depend upon the Okeechobee Judgment. And Appellants’ mere reference to the Okeechobee action, without more, is not sufficient for the judgment to be impliedly incorporated into the third-party complaint. See Schneiderman, 334 So. 3d at 331 ("The doctrine [of incorporation by reference] cannot be stretched to allow for the mention of a prior proceeding in a complaint to open the door to the trial court considering the entirety of the prior proceeding in ruling on a motion to dismiss, where the petitioners’ standing to bring suit was not dependent upon the records from the prior proceeding."). Thus, the doctrine of implied incorporation cannot save the trial court’s consideration of the Okeechobee Judgment here.
Because Veal and One Call are distinguishable from this case, we need not—and do not—decide at this time whether we agree with the holdings of these cases or whether the doctrine of implied incorporation recognized in these cases and Schneiderman is consistent with the Florida Rules of Civil Procedure.
[8] Rhoades next argues the third-party complaint should have been dismissed in any event for the failure to plead damages. Again, we disagree. As to Appellants’ damages claim, the trial court found that "the Riggins[es] cannot establish a claim that the documents were improperly drafted, thus the claim that the improperly drafted documents caused the Riggins[es] to incur damages for defense of the Phillips lawsuit also fails." The trial court’s finding that the damages claim must fail, therefore, was premised on its earlier conclusion that the Okeechobee Judgment forecloses any claim that the documents were improperly drafted. But we have already explained that the trial court’s consideration of the Okeechobee Judgment was erroneous. Because the trial court’s finding that the damages claim must fail likewise derives from the improper consideration of that judgment, it too was erroneous.
The Counterclaim
[9, 10] The dismissal of Appellants’ counterclaim, however, is different. Because we find the counterclaim was compulsory, rather than permissive, we have no jurisdiction to review the order dismissing that pleading.
We have an independent obligation to examine our jurisdiction in every case. See Shassian v. Riverwalk Park, LLC, 365 So. 3d 484, 486 (Fla. 6th DCA 2023).
[11–13] Unlike permissive counterclaims, which do not arise from the same transaction or occurrence as the main claim, "[e]ompulsory counterclaims bear a logical relationship’ to the plaintiff’s claims in that they arise out of the ‘same aggregate of operative facts as the original claim.’ " Proino Breakfast Club, II, Inc. v. OGI Cap., Inc., 331 So. 3d 846, 849 (Fla. 2d DCA 2021) (quoting 4040 IBIS Circle, LLC v. JPMorgan Chase Bank, 193 So. 3d 957, 960 (Fla. 4th DCA 2016)). This distinction is critical for our purposes because, as the Fourth District put it:
[I]f this court finds that a counterclaim is permissive, then the partial final judgment adjudicating the counterclaim is immediately appealable. On the other hand, if this court finds that a dismissed counterclaim is compulsory, then the order dismissing the counterclaim is "not appealable until a final disposition of the original cause has [been] obtained on the merits."
4040 IBIS Circle, LLC, 193 So. 3d at 960 (quoting Johnson v. Allen, Knudsen, De-Boest, Edwards & Rhodes, P.A., 621 So. 2d 507, 509 (Fla. 2d DCA 1993)). Thus, orders dismissing compulsory counterclaims are non-final and non-appealable. See Dennis v. Pavlakos, 464 So. 2d 1323, 1324 (Fla. 5th DCA 1985) ("An order dismissing a compulsory counterclaim is a non-final, non-appealable order.").
Here, Appellants’ counterclaim, which alleges legal malpractice against the law firm, arises from the same transaction or occurrence as the attorney’s fees sued upon in the law firm’s complaint. It is, therefore, compulsory. See Hollywood Lakes Country Club, Inc. v. Silver & Waldman P.A., 737 So. 2d 1194, 1195 (Fla. 3d DCA 1999) ("Because the alleged malpractice occurred and the fees were incurred in the same case, the Dade case is a compulsory counterclaim to the Broward case." (citing Johnson, 621 So. 2d at507 (holding malpractice action and a fee dispute based upon the same representation invokes the compulsory counterclaim provision of Rule 1.170(a)))). And, because Appellants’ counterclaim is compulsory, the order dismissing that pleading is neither final nor appealable, and we have no jurisdiction to review that portion of the order until the final disposition in this case.
Despite the notice from the Second District Court of Appeal that was previously entered in this action, we do not have jurisdiction to review the dismissal of the counterclaim under Florida Rule of Appellate Procedure 9.110(k). That rule confers jurisdiction upon an appellate court to review a "partial final judgment" that "disposes of a separate and distinct cause of action that is not interdependent with other pleaded claims." As we have previously explained, however, the counterclaim and the law firm’s complaint are interdependent, and the complaint between those parties is still pending.
For these reasons, we reverse that portion of the trial court’s order dismissing the third-party complaint with prejudice and remand for further proceedings consistent with this opinion. We dismiss the remainder of the appeal for lack of jurisdiction.
REVERSED and REMANDED, in part; DISMISSED, in part.
NARDELLA and MIZE, JJ., concur.