Full Opinion

DISTRICT COURT OF APPEAL OF FLORIDA SECOND DISTRICT CENTURY-NATIONAL INSURANCE COMPANY, Appellant, v. JACOB D. FRANTZ, Appellee. No. 2D22-1274 August 11, 2023 Appeal from the Circuit Court for Sarasota County; Hunter W. Carroll, Judge. Joseph Clancy and William J. McFarlane, III, of McFarlane Law, Coral Springs, for Appellant. Inguna Varslavane-Callahan and Michael T. Callahan of Callahan Law Firm, LLC, St. Petersburg, for Appellee. KHOUZAM, Judge. Century-National Insurance Company appeals a final judgment entered in favor of its Insured, Jacob D. Frantz. The trial court ruled that even though the Insured had been defaulted, he was nonetheless entitled to judgment on the pleadings due to the Insurer's failure to join indispensable parties. Although the court had authority to consider the Insured's opposition to entry of final judgment after default, it erred in ruling that third-party tort claimants are indispensable parties to this declaratory judgment action. We accordingly reverse and remand. BACKGROUND In May 2017, the Insurer filed a complaint against its Insured alleging the existence of a valid insurance policy but seeking a declaration of no bodily injury coverage and no duty to defend thereunder. The complaint alleges that the Insured was involved in a February 2015 car accident in Pennsylvania with a couple named the Mauricios, who had recently filed a lawsuit against the Insured in that state for injuries arising from the accident. The complaint alleges that the Mauricios' suit is still pending; it does not allege any resolution. After the Insured failed to respond to his Insurer's declaratory complaint, the Insurer obtained a clerk's default. Later, the Insurer filed a motion for final default judgment, which resulted in a June 2017 order in its favor. That order lacked language of finality, however, and the Insurer did not immediately seek a final order. Meanwhile, in Pennsylvania, the Mauricios pursued their claims against the Insured. The Insured was eventually defaulted there as well, and the Mauricios ultimately obtained an undefended final judgment against him in May 2018, after the complaint in this case was filed. Thereafter, in March 2019, the Insured and the Mauricios jointly sued the Insurer in Florida state court, raising two counts. The first count sought relief from the June 2017 order granting the Insurer's motion for final default judgment against the Insured, asserting that he had not been properly served. The second count alleged bad faith. The Insurer removed that joint action, and the federal court granted the Insurer's motion to dismiss. It ruled inter alia that the June 2 2017 order in this case granting the Insurer's motion for final default judgment was not in fact a final judgment because it lacked language of finality. The federal court dismissed that joint action without prejudice. Now aware that the June 2017 order in this case granting default judgment was not a final judgment, the Insurer moved in July 2019 for entry of final default judgment. The Insured responded, opposing entry of final default judgment and also moving to set aside the default. In September 2019, the trial court held a hearing on the Insured's motion to set aside default judgment. The court denied that motion, expressly finding that the Insured had not shown due diligence. Ultimately, however, the court entered an order in December 2019 denying the Insurer's motion for entry of default judgment on the basis that it lacked personal jurisdiction over the Insured. The Insurer appealed that order. This court reversed, holding that the Insured had waived his right to contest personal jurisdiction. See Century-Nat'l Ins. v. Frantz, 320 So. 3d 929, 931 (Fla. 2d DCA 2021) ("[W]e reverse the circuit court's order determining that it lacks personal jurisdiction and remand for further proceedings."). On remand from this court, the Insurer renewed its motion for entry of default final judgment. The Insured opposed the motion and asserted several defenses, including that the complaint failed to state a cause of action against him. He also sought judgment on the pleadings, asserting that the Mauricios were indispensable parties. Following a hearing and supplemental briefing, the trial court issued the ruling on review, granting the Insured's motion for judgment on the pleadings. In the judgment, the court acknowledged that the text of section 86.091, Florida Statutes (2022), "suggests strongly that a 3 plaintiff seeking a declaratory judgment would have the option of joining only some and not all parties who may have an interest in the outcome." Nonetheless, the court ruled that the Mauricios are indispensable parties here. It said that despite the statute's language, "there is long- standing precedent from the Florida Supreme Court strongly suggesting that other portions of Florida's declaratory judgment act contained in chapter 86 require that antagonistic and adverse interests are before the Court." Specifically, the trial court relied on language from May v. Holley, 59 So. 2d 636, 639 (Fla. 1952), stating it is "necessary in order to maintain the status of the proceeding as being judicial in nature and therefore within the constitutional powers of the courts" "that the antagonistic and adverse interests are all before the court by proper process or class representation." The court concluded that the fact the legislature had never taken action in response to this language, which "has been repeated over the decades," constituted legislative approval to disregard the contrary statutory language. See Goldenberg v. Sawczak, 791 So. 2d 1078, 1081 (Fla. 2001) ("Long-term legislative inaction after a court construes a statute amounts to legislative acceptance or approval of that judicial construction."). The trial court also quoted a statement from the Fifth District's decision in Allstate Insurance v. Conde, 595 So. 2d 1005, 1008 (Fla. 5th DCA 1992) (en banc), observing: "It is, of course, essential that the injured party be made a party to the declaratory judgment action." The court clarified that it did "not conclude this was the holding of Conde," but instead that it "certainly is persuasive authority suggesting the [Insurer] should have included the Mauricios in [its] complaint." This appeal followed. 4 ANALYSIS Although the parties have framed the issues differently in their briefs, the salient points on appeal are as follows: (I) whether the trial court had authority to consider the defaulted Insured's opposition to entry of final default judgment; (II) whether the third-party tort claimants are indispensable parties to this declaratory coverage action; and (III) whether to consider for the first time on appeal the Insured's alternative arguments for dismissal. As we now explain, (I) the trial court had the authority to consider the defaulted Insured's opposition to entry of final default judgment, but (II) it erred in ruling that the Mauricios are indispensable parties here. Finally, (III) we decline to reach these alternative issues on appeal in favor of remand to the trial court for determination in the first instance. I. The trial court had authority to consider the defaulted defendant's opposition to entry of default final judgment. The Insurer argues first that because the Insured had been defaulted, the trial court erred by even considering his opposition to entry of final judgment. We review de novo this question of the interpretation of the Florida Rules of Civil Procedure and the extent of the trial court's authority. See, e.g., Pino v. Bank of N.Y., 121 So. 3d 23, 30-31 (Fla. 2013). Although the Insurer's argument finds support in several general statements of law, it conflicts with the plain language of Florida Rule of Civil Procedure 1.500(e) and other authorities specifically setting forth exceptions to the general rules of default judgments. It is true that "[w]hen a default is entered, the defaulting party admits all well-pled factual allegations of the complaint." Donohue v. Brightman, 939 So. 2d 1162, 1164-65 (Fla. 4th DCA 2006) (citing State Farm Mut. Auto. Ins. v. Horkheimer, 814 So. 2d 1069, 1072 (Fla. 4th DCA 2001)). In the usual case, this means that "entry of default precludes a 5 party from contesting the existence of the plaintiff's claim and liability thereon. Thereafter, a party has the right to contest damages caused by the party's wrong but no other issue." Id. at 1165 (quoting Fla. Bar v. Porter, 684 So. 2d 810, 813 n.4 (Fla. 1996)). Even so, "the failure to state a cause of action is a fatal pleading deficiency not curable by a default judgment." Hogan v. Garceau, 880 So. 2d 823, 824 (Fla. 5th DCA 2004) (citing Becerra v. Equity Imps., Inc., 551 So. 2d 486 (Fla. 3d DCA 1989)). In particular, although a default operates to admit many things, [i]t does not admit facts not pleaded, not properly pleaded or conclusions of law. Fair inferences will be made from the pleadings but forced inferences will not. The party seeking affirmative relief may not be granted relief that is not supported by the pleadings or by substantive law applicable to the pleadings. A party in default may rely on the limitations. Id. (quoting Henry P. Trawick, Jr., Trawick's Fla. Practice and Procedure § 25-4, at 348 (1988 ed.)). In other words, "a default judgment must be based on well pleaded facts establishing liability against a defendant in default." Id. Consequently, entry of a final default judgment on a complaint that fails to state a cause of action against the defaulted defendant constitutes reversible error. Id. Consistent with these principles, rule 1.500(e) expressly gives the trial court broad authority after a default to investigate potential problems with entering or effectuating a final judgment. That subsection provides in relevant part: (e) Final Judgment. Final judgments after default may be entered by the court at any time . . . . If it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence or to make an investigation of any other matter to enable the court to enter judgment or to effectuate it, the court may receive affidavits, 6 make references, or conduct hearings as it deems necessary and must accord a right of trial by jury to the parties when required by the Constitution or any statute. (Underlined emphasis added.) Under this plain language, the court may "make an investigation of any . . . matter to enable the court to enter judgment or to effectuate it" and to that end may also "conduct hearings as it deems necessary." Here, given this express authority, the trial court was clearly permitted to consider the Insured's opposition to entry of final judgment. The Insured not only argued that the underlying complaint failed to state a cause of action, but also asserted that it had to be dismissed as a matter of law for failure to join indispensable parties. Accordingly, the court did not err in considering the Insured's opposition. See Hogan, 880 So. 2d at 824 (vacating final default judgment entered against defaulted defendant under fatal pleading deficiency). II. The third-party tort claimants are not indispensable parties to this declaratory judgment action. The substantive issue in this appeal is whether the third-party tort claimants are indispensable parties in this declaratory coverage action by the Insurer against its Insured. The Insurer contends that in entering judgment for the Insured on the basis that the Mauricios are indispensable parties, the trial court disregarded the plain language of the governing statute in favor of applying contrary language from a distinguishable judicial decision. We agree. Whether a party is indispensable under the applicable statute is a question of law reviewed de novo. See Fla. Dep't of Revenue v. Cummings, 930 So. 2d 604, 607 (Fla. 2006) (reviewing de novo trial court's decision to dismiss complaint based on failure to join indispensable party); see also Parker v. Parker, 185 So. 3d 616, 618 (Fla. 4th DCA 2016) ("We 7 review a trial court's decision to dismiss a complaint for failure to join an indispensable party under a de novo standard of review when that decision is based upon an interpretation of the Florida Statutes."). The parties agree that the analysis begins with section 86.091, titled "Parties," under the Declaratory Judgments Chapter. That statute provides in pertinent part: "When declaratory relief is sought, all persons may be made parties who have or claim any interest which would be affected by the declaration. No declaration shall prejudice the rights of persons not parties to the proceedings." In describing proper parties, the statute uses the word "may," which is permissive. See, e.g., City of Miami v. Save Brickell Ave., Inc., 426 So. 2d 1100, 1105 (Fla. 3d DCA 1983) ("In statutory construction, the word 'may' when given its ordinary meaning denotes a permissive term rather than the mandatory connotation of the word 'shall'." (citing I.E. Fixel v. Clevenger, 285 So. 2d 687, 688 (Fla. 3d DCA 1973))). By contrast, it uses the mandatory term "shall" in prohibiting prejudice to nonparties. Thus the plain language of the first sentence broadly permits but does not require all persons having or claiming an interest in the declaration to be parties. And the second sentence expressly contemplates the existence of persons who are not parties to the declaratory proceedings yet whose rights are implicated therein. This is consistent with settled authorities explaining that "[a] declaratory action obtained by an insurer against its insured is not binding on a third-party claimant who was not a party to the declaratory judgment action." Indep. Fire Ins. v. Paulekas, 633 So. 2d 1111, 1113 (Fla. 3d DCA 1994) (collecting cases); see also Tower Radiology Ctr. v. Direct Gen. Ins., 348 So. 3d 1147, 1150 (Fla. 4th DCA 2022) (same). 8 Nothing in the language of this statute supports the conclusion that the Mauricios are indispensable parties in this declaratory action between Insurer and Insured. Although as tort claimants against the Insured the Mauricios have claims to his proceeds under the policy, the first sentence simply says such claimants "may" be made parties. At the same time, the second sentence expressly protects them from prejudice from litigation in which they are not named. Considering both sentences together, the Mauricios could properly have been named as parties, but they are not indispensable parties, nor would a declaration made in their absence prejudice their rights. E.g., Paulekas, 633 So. 2d at 1113. Despite acknowledging that the plain language of the applicable statute "suggests strongly" that the foregoing analysis applies, the trial court instead applied apparently contrary language from May, saying it is "necessary" that "the antagonistic and adverse interests are all before the court by proper process or class representation." But May did not consider the issue of indispensable parties. Nor did it consider section 86.091 or a prior version thereof. Instead, May expressly discussed different statutes addressing declaratory jurisdiction and relief generally. Indeed, in context, the language from May that the trial court relied upon was not a pronouncement that courts lack jurisdiction over declaratory claims in the absence of "all" adverse interests being named as parties. Rather, it was part of a general discussion of the necessary ingredients for a proceeding to be "judicial in nature and therefore within the constitutional powers of the courts." 59 So. 2d at 639. The parties make no suggestion this proceeding is not judicial in nature. We conclude that the language the trial court applied does not control here. Our analysis also is not altered by the statement the trial court relied upon from the Fifth District's decision in Conde: "It is, of course, 9 essential that the injured party be made a party to the declaratory judgment action." 595 So. 2d at 1008. Like May, Conde did not involve the issue of indispensable parties. Instead, the issue in Conde was whether an insurer could pursue a declaratory action despite a pending factual dispute. See id. (certifying the question: "May the insurer pursue a declaratory action in order to have declared its obligation under an unambiguous policy even if the court must determine the existence or nonexistence of a fact in order to determine the insurer's responsibility?"). Furthermore, in Conde the Fifth District clarified that the observation the trial court relied upon here applied only "if they are to be bound by the coverage decision," which is fully consistent with the second sentence of section 86.091. Id. at 1008 n.6. Thus the Mauricios are not indispensable parties under Conde either. At bottom, the plain language of section 86.091 permits but does not require the third-party tort claimants to be named in this declaratory action between an Insurer and its Insured, and the parties have not identified any authorities establishing to the contrary. Accordingly, the trial court erred in ruling that the Mauricios are indispensable parties. III. The alternative arguments for dismissal here should be considered by the trial court in the first instance. Under the tipsy coachman doctrine, an order will be affirmed if the trial court reaches the correct result, even if it employed the wrong reasoning. E.g., Dade Cnty. Sch. Bd. v. Radio Station WQBA, 731 So. 2d 638, 644-45 (Fla. 1999). However, in considering whether to apply the doctrine, appellate courts have discretion to determine whether the record is sufficiently developed for review. See Powell v. State, 120 So. 3d 577, 591 (Fla. 1st DCA 2013) ("The tipsy coachman doctrine allows appellate courts to consider grounds for affirmance if the record supports 10 doing so; it does not compel them to overlook deficient records and blaze new trails that even the tipsiest of coachmen could not have traversed."). Here, as alternative bases for affirmance, the Insured advances multiple arguments that the complaint and its attachments fail to state a cause of action against him. Although the Insured raised these arguments below, the trial court did not reach them due to its ruling on indispensable parties. We decline to reach these arguments, as "[t]he trial court should address these issues in the first instance." One Call Prop. Servs., Inc. v. Sec. First Ins., 165 So. 3d 749, 755-56 (Fla. 4th DCA 2015) (declining to apply tipsy coachman doctrine, reversing dismissal, and remanding for consideration of alternative arguments); see also Stark v. State Farm Fla. Ins., 95 So. 3d 285, 289 n.4 (Fla. 4th DCA 2012) (declining to apply tipsy coachman doctrine, explaining "[a]n appellate court 'should not ordinarily decide issues not ruled on by the trial court in the first instance' " (quoting Akers v. City of Miami Beach, 745 So. 2d 532, 532 (Fla. 3d DCA 1999))). We accordingly reverse and remand for the trial court to consider these arguments in the first instance and for further proceedings consistent with this opinion. Reversed and remanded. MORRIS and BLACK, JJ., Concur. __________________________ Opinion subject to revision prior to official publication. 11