Does Your Settlement Agreement Allow for the Automatic Entry of Final Judgement Upon Default?

A Florida appellate court reminds us that such terms are enforceable only if the movant has strictly complied with any notice requirements.

It is a common technique utilized in settlement agreements: the automatic entry of a final judgment for a specified amount in the event the defendant defaults on its payment obligations. These are commonly known as “ex parte judgment” or “springing judgment” provisions. To effectively enforce such a provision, however, the plaintiff needs to prove not only non- compliance by the defendant with its payment obligations, but also the plaintiff’s strict compliance with any notice requirements. In Aboumahboub v. Honig, 40 Fla. Law Weekly D2717a (Fla. 4th DCA Dec. 9, 2015), the Fourth District Court of Appeal determined that the trial court should have vacated an ex parte final judgment because the plaintiff failed to strictly comply with the notice provisions of the settlement agreement. Namely, the plaintiff failed to send default notices to the specific email addresses set forth in the settlement agreement. The Court explained:

The decision in this case is controlled by the interplay between two legal principles, namely that parties have broad discretion in fashioning the terms of a settlement agreement, while provisions in an agreement that permit a court to take ex parte action are strictly and narrowly construed.

Florida Rule of Civil Procedure 1.540(b) provides as follows:

On motion and upon such terms as are just, the court may relieve a party or a party’s legal representative from a final judgment, decree, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; … (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party….

(Emphasis added). “The standard of review of an order on a rule 1.540(b) motion is whether there has been an abuse of discretion.” Vilvar v. Deutsche Bank Trust Co. Ams., 83 So. 3d 853, 854 (Fla. 4th DCA 2011) (citing J.J.K. Int’l, Inc. v. Shivbaran, 985 So. 2d 66, 68 (Fla. 4th DCA 2008)). That discretion must be exercised based upon facts ascertainable from the record. Moss v. State Farm Mut. Auto Ins. Co., 328 So. 2d 495, 496 (Fla. 4th DCA 1976).

Federal Home Loan Mortgage Co. v. Molko, 602 So. 2d 983 (Fla. 3d DCA 1992), succinctly states the law regarding interpretation of settlement agreements:

Settlement agreements “are governed by the rules for interpretation of contracts.” Robbie v. City of Miami, 469 So. 2d 1384, 1385 (Fla. 1985). The clear expression of the meaning of a contract may not be modified by court interpretation, Pafford v. Standard Life Ins. Co., 52 So. 2d 910 (Fla. 1951); BMW of N. Am., Inc. v. Krathen, 471 So. 2d 585, 587 (Fla. 4th DCA 1985), review denied, 484 So. 2d 7 (Fla. 1986); “[i]f the terms are clear and unambiguous, the express terms control.” Avery Dev. Co. v. Bast, 582 So. 2d 150, 151 (Fla. 4th DCA 1991).

Id. at 983. The settlement agreement provided for written notice of default to be sent to the addresses provided in the agreement, and specified that all notices be sent to those addresses. Honig did not send his notice to the email address in the agreement. Rather, his attorney emailed the notice to two other addresses and sent it by certified mail to the physical address listed in the agreement. Only the certified letter complied with the terms of the settlement agreement.

Recognizing this fact, Honig’s motion for default final judgment did not mention email service but relied on the return receipt from the certified mail, which was sent to the physical address in the settlement agreement, to establish delivery of the notice to the appellants on March 10th. Honig swore that the appellants had not made any payment and refused to make further payments, despite the fact that he had received the specified default payment four days prior to the filing of the motion and within the five-day cure period. This constituted a misrepresentation which should have resulted in the vacation of the final judgment. The trial court abused its discretion in denying the motion when the facts from the record conclusively established the misrepresentation.

At the hearing, Honig backed away from his motion for final judgment by claiming, alternatively, that he relied on the email of the notice to addresses other than the one contained in the settlement agreement. The email was sent on March 6th and thus required a cure of the default by March 11th. However, for the court to rely on either email address to conclude that notice was sufficient would contravene the express terms of the agreement. The court cannot modify the express terms of the agreement. Molko, 602 So. 2d at 983. Also, even using March 6th as the date of email delivery, the five-day cure period would have expired on March 11th, the day after the certified letter was delivered. At the very least, the appellants would have a case of mistake or excusable neglect when they measured the time to cure from the date of delivery of the certified letter, which complied with the terms of the agreement, rather than the March 6th date, which was based on the use of email addresses not contained in the settlement agreement.

This was, after all, an ex parte motion for entry of final judgment. Due process requires strict compliance with any agreement that permits the entry of an ex parte judgment. Entry of ex parte orders are very much disfavored in the law. This is one lesson of Fricker v. Peters & Calhoun Co., 21 Fla. 254 (1885). There, the Florida Supreme Court described the rule requiring notice to a defendant before an application for a receiver as “very strict,” subject to narrow exceptions such as “in a case of grave emergency, demanding the immediate interference of the court for the prevention of irreparable injury.” Id. at 256-57; see also Fla. R. Civ. P. 1.610(a)(1) (concerning temporary injunctions without notice); Mercy Lu Enters., Inc. v. Liberty Mut. Ins. Co., 681 So. 2d 758, 759 (Fla. 4th DCA 1996) (observing that “[d]ue process values” require “strict compliance with the statutory requirements” of substituted service of process). Where strict compliance with the notice terms of an agreement is not observed, the ex parte judgment must be vacated.

For these reasons, the trial court abused its discretion in denying the motion to vacate the default final judgment. We reverse and remand for the vacation of the judgment.

Aboumahboub, 40 Fla. L. Weekly D2717a *2-4 (bold emphasis supplied).

Thus, before seeking the ex parte entry of a final judgment for alleged non-compliance with payment or other obligations of a settlement agreement, it is critical for the movant to ensure it has strictly complied with any governing notice and cure requirements.

Copyright 2015

Matthew J. Meyer is a Partner in our Florida office.