Florida Court of Appeals Permits Successor-In-Interest to Pursue Claims Originally Thought to Be Barred by Settlement Agreement

MBlock Investors, LLC v. Bovis Lend Lease, Inc., etc., et al., 44 Fla. L. Weekly d1432 (3d DCA 2019)

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Sophia L. Cahill

A Florida Appellate Court recently reversed a trial court’s decision granting summary judgment finding an issue of fact based upon an expert affidavit.  The underlying matter involved an action by MBlock Investors against Lend Lease (US) Construction, Inc. for latent defects following MBlock’s acquisition of a property commonly known as the Midblock Miami East Project (the “Property”).

EB Development initially owned and developed the Property.  EB hired Lend Lease as its general contractor and later transferred the Property to D/M Midtown after Lend Lease completed construction.  Lend Lease then sued EB and D/M Midtown for nonpayment.  EB counterclaimed based on several construction defects.  Lend Lease ultimately agreed to reduce its claim and discontinue the matter against EB and D/M Midtown in exchange for a release (“Release”).

The Release contained specific language about the claims released and those who were bound by the Release.  EB agreed to “[R]elease, acquit and forever discharge [Lend Lease]….from any and all claims…which EB may have against….[Lend Lease]…on account of any and all acts or omissions from the beginning of the world through the date of this Agreement which are known to EB, its employees, agents, partners….predecessors….and their respective successors and assigns…arising from the construction of the Project…”

D/M Midtown eventually defaulted on the construction loan and mortgage held by HSBC and agreed to convey the property to MBlock, which was an entity specifically formed by HSBC for the purpose of taking title to the Property.  Once MBlock took title, it sued Lend Lease for negligent construction and violations of the Florida Building Code, including latent defects in the Property.  Lend Lease argued that the Release barred MBlock’s claims, and the trial court agreed.

The appeals court considered two issues: (1) whether the Release applied to MBlock as EB’s successor; and (2) whether the Release precluded MBlock’s claims.  Relying on extensive case law and applying principles of res judicata, the Court found that MBlock was EB’s “successor” for claims arising out of the Release because MBlock took over the Property and all of EB’s rights with respect to that Property.  The Court reasoned that MBlock had a mutual or successive relationship to the same right that EB had when it settled with Lend Lease: a reduction in the amount owed to Lend Lease for its services in exchange for releasing Lend Lease from any claims arising from the construction of the Property.

Next, the Court considered whether the trial court erred in finding that the Release precluded MBlock’s latent defect claims. The Court determined that the Release only released Lend Lease from known claims arising out of the Project’s construction, which included, but was not limited to, specified claims identified in an exhibit to the Release.  The Court reasoned that the plain language of the Release did not cover any unknown claims (i.e. latent defects).  Because MBlock’s expert had opined that no professional or untrained layperson could have reasonably discovered the latent defects without destructive evaluation, the Court found that a genuine issue of fact existed and reversed the decision of trial court.

To view the full text of the court’s decision, courtesy of Bloomberg Law, click here.