MacKenzie v. Centex Homes Ex Rel. Centex Real Estate Corp.

IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FIFTH DISTRICT
NOT FINAL UNTIL TIME EXPIRES TO
FILE MOTION FOR REHEARING AND
DISPOSITION THEREOF IF FILED
SARA R. MACKENZIE AND RALPH MACKENZIE,
Appellants,
v. Case No. 5D16-1254
CENTEX HOMES, BY CENTEX REAL ESTATE
CORPORATION, SULLIVAN RANCH HOMEOWNERS
ASSOCIATION, INC., AND BOARD OF DIRECTORS OF
SULLIVAN RANCH HOMEOWNERS ASSOCIATION, INC.,
Appellees.
________________________________/
Opinion filed December 22, 2016
Appeal from the Circuit Court
for Lake County,
William G. Law, Jr., Judge.
Sara R. MacKenzie, Mount Dora, for
Appellants.
Ronald D. Edwards, Jr., and Matthew G.
Brenner, of Lowndes, Drosdick, Doster,
Kantor & Reed, Orlando, for Appellee.
COHEN, J.
Sara and Ralph MacKenzie appeal summary final judgment entered in favor of
Centex Homes, et al. (“Centex”) and the Board of the Sullivan Ranch Homeowners’
Association (“the board” or “the HOA”) on Count II of their complaint. The MacKenzies
seek a declaration that Centex failed to meet its obligation to make capital contributions
to the HOA’s reserve accounts when it controlled the HOA 1 along with $993,988 in
resulting damages. The lower court entered summary final judgment in favor of Centex
after it found that section 720.308(1)(b), Florida Statutes (2015), excused Centex from
funding the reserve while it funded the deficit in the HOA’s current operating expenses.
We disagree with the court’s interpretations of section 720.308 and find that section
720.303(6), Florida Statutes (2015), required Centex to continue funding the reserve
accounts once they were established. We reverse the court’s entry of summary final
judgment and remand for further proceedings. 2
The MacKenzies have lived in Sullivan Ranch since 2007. Sullivan Ranch consists
of 692 residential lots divided into two sub-associations. The MacKenzies own a lot in the
second sub-association, a fifty-five and older community. The lots in Sullivan Ranch are
governed by the “declaration of covenants, conditions, and restrictions” and the second
amendment (“the declaration”), which were drafted by Centex. Centex was the developer
of Sullivan Ranch and appointed the members of the board until December 2015 when
the Board was turned over to the homeowners.
The MacKenzies filed the operative complaint, their fifth amended complaint, in
April 2015 while the HOA was still controlled by Centex. They alleged three counts but
only appeal summary judgment as to Count II. Count II alleged that Centex failed to make
1 “Reserve accounts” are monies set aside for future capital expenditures and
deferred maintenance of common areas. See § 701.303(6)(b), Fla. Stat. (2015). The goal
of establishing reserves is to reduce the need for special assessments. Amy S.
Thompson, Legislative Changes to Chapter 720: Homeowners’ Associations, Florida
Statutes, Regular Legislative Session 2007 and 2008, 82 Fla. Bar J. 20, 22 (Dec. 2008).
2 Appellees have asked that summary judgment be affirmed as to the current board
because they are not a proper party to this litigation. Even though this argument appears
to have merit, the proper remedy for the board is to seek dismissal under Florida Rule of
Civil Procedure 1.420(a)(1). See also Fla. R. Civ. P. 1.250(b).
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capital contributions to the HOA’s reserve accounts as required by sections 8.2 and 8.6(b)
of the declaration and subsections 720.303(6)(b),(d) and (f) of the Florida Statutes.
Centex contributed an initial $32,300 to the reserve funds in 2007. Centex later
stopped contributing to the reserve funds although it continued to include a line item for
reserve funds in the budget and collected reserve funds on the non-developer owned
properties. Centex opted to pay Sullivan Ranch’s operating expenses in lieu of making
any contributions to the reserve accounts and claimed that it had made no guarantee
about funding the reserves. The MacKenzies allege the HOA is due approximately
$993,988, and they seek a declaration that Centex was obligated to make capital
contributions during the time it controlled the HOA.
Centex argues that the MacKenzies lack standing to pursue their claim and that
the lower court lacked jurisdiction over the action because the MacKenzies had not met
the requirements for seeking a declaratory judgment under section 86.011, Florida
Statutes (2015). Centex has not filed a cross appeal; therefore, this Court has no
jurisdiction over the standing issue. See Philip J. Padovano, Florida Appellate Practice §
23:9 at 483 (2011) (“In the absence of a cross appeal, the appellee may only defend the
order of the lower court and may not seek affirmative relief from any part of the order.”).
A cross appeal is the proper method to seek review of an earlier non-final order when the
final order is entirely favorable to the appellee. See Fla. R. App. P. 9.130(g),(h); Allen v.
TIC Participations Tr., 722 So. 2d 260, 261 (Fla. 4th DCA 1998) (denying motion to
dismiss cross appeal). 3
3Centex urges this Court to affirm the order for lack of standing under the tipsy-
coachman doctrine. Yet lack of standing is not a proper tipsy-coachman argument
because it would require the order on appeal be dismissed rather than affirmed. The tipsy-
coachman doctrine only applies where the trial court “reaches the right result, but for the
wrong reason.” Robertson v. State, 829 So. 2d 901, 906 (Fla. 2002) (emphasis added).
3
HOA’s budgets indicate that no reserves are being provided for by making a specific
declaration in conspicuous font. § 720.303(6)(c)(1.), Fla. Stat. If reserve funds are
provided for in the budget but no accounts are actually established, the statute requires
that the failure to fund reserves be indicated in the budgets again using a conspicuous
font. § 720.303(6)(c)(2.), Fla. Stat. The statute provides that the reserves may be reduced
following a meeting and vote. § 720.303(6)(f), Fla. Stat.
Centex argues that because assessments are defined broadly to include all
monies owed to the HOA, an excuse from contributing “operating expenses and
assessments” must include more than just the operating expenses—it must excuse the
developer from paying the reserve contributions as well because reserve funds are
monies owed to the HOA. 5 Yet reading section 720.308(1)(b) to exhaust Centex’s funding
requirements creates a direct conflict with section 720.303(6), which requires reserve
accounts be funded once established or defunded according to a regular procedure with
specific notice to the homeowners. The legislature’s requirement that changes to funding
of the reserve accounts be conspicuously noted in the financial reports—reports which
must be made available to all homeowners pursuant to section 720.303(7)—evidences
an intent to keep homeowners aware of the state of reserve finances and to avoid allowing
developers and boards to surprise homeowners with unexpected special assessments.
Reading section 720.308(1)(b) not to address the reserve accounts—leaving the
original obligation to fund reserves in place—avoids a conflict with section 720.303(6) and
ensures that the purposes of the sections are met, given that section 720.303(6) was
specifically amended to provide for reserve accounts and avoid the need for special
5 See § 720.301(1), Fla. Stat (2015) (“‘Assessment’ . . . means a sum or sums of
money payable to the association, . . . which if not paid by the owner of a parcel, can
result in a lien against the parcel.”).
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Daniels, 158 So. 3d 629, 630 (Fla. 5th DCA 2014); Heylin v. Gulfstream Prop. & Cas. Ins.
Co., 147 So. 3d 659, 661 (Fla. 5th DCA 2014). When a statute is susceptible to only one
reasonable interpretation, the plain language of the statute controls. Fla. Dep’t of Highway
Safety & Motor Vehicles v. Hernandez, 74 So. 3d 1070, 1074 (Fla. 5th DCA 2011). Only
where the plain language of a statute is ambiguous—where a reasonable person could
find two different meanings leading to two different outcomes—will this Court resort to the
tools of statutory construction. Fla. Dep’t of Transp. v. Clipper Bay Invs., LLC, 160 So. 3d
858, 862 (Fla. 2015).
The Homeowners’ Association Act, which governs this action, “provide[s]
procedures for operating homeowners’ associations, and [] protect[s] the rights of
association members without unduly impairing the ability of such associations to perform
their functions.” § 720.302(1), Fla. Stat. (2015). Centex argues that section 720.308(1)(b)
excused it from funding the HOA’s reserve accounts. Section 720.308(1)(b) provides a
developer the right to avoid paying its share of “operating expenses and assessments”
on the lots the developer controls when it controls the board and elects to fund the
difference between the assessments received from the lot owners and the “operating
expenses incurred that exceed the assessments receivable.” § 720.308(1)(b), Fla. Stat.
This is referred to as “deficit funding.” See In re Majorca Isles Master Ass’n, Inc., No. 12-
19056-BKC-AJC, 2016 WL 6157437 at *10 (Bankr. S.D. Fla. Oct. 21, 2016). Centex
argues that by deficit funding the HOA, it was excused from any obligation to fund the
reserve accounts.
Centex’s argument depends on an ambiguity in section 720.308(1)(b)—the
subsection excuses a developer from paying its share of “operating expenses and
assessments” if the developer funds the deficit in operating expenses. § 720.308(1)(b),
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Fla. Stat. The subsection is unclear as to whether the developer is excused from all other
contributions, including contributions to the reserves, or if the developer is merely
excused from paying the regular assessments on the properties. The declaration is, if
anything, more ambiguous on this point as it specifically excludes contributions to
reserves from the operating expenses without specifying whether Centex is liable for
those expenses in addition to the operating deficit. Given this ambiguity, we turn to the
tools of statutory construction to resolve this dispute.
The doctrine of in pari materia requires that statutes related to the same subject
be “construed together to harmonize the statutes and to give effect to the Legislature’s
intent.” Deen v. Wilson, 1 So. 3d 1179, 1182 (Fla. 5th DCA 2009). The Florida Supreme
Court has specified that Florida courts have a duty to adopt constructions of statutes that
harmonize provisions within the same act. Knowles v. Beverly Enterprise-Fla., Inc., 898
So. 2d 1, 9 (Fla. 2004).
Section 720.303(6)(d) of the Homeowners’ Association Act requires an HOA to
fund reserve accounts once they have been established. 4 Section 8.2 of the declaration
likewise requires the board of Sullivan Ranch to include a reserve fund in its budgeting,
although it allows the board to exercise its “business judgment” in establishing the amount
of such reserves. Under the declaration, reserve funds are required to be held in a
separate account and to be used for “major maintenance, repair, or replacement of those
assets covered by the reserve budget . . . .” Although the statute allows an HOA that is
liable for deferred maintenance to forego creating reserve accounts, it requires that the
4See § 720.303(6)(d), Fla. Stat. (“Once established as provided in this subsection,
the reserve accounts must be funded or maintained or have their funding waived in the
manner provided in paragraph (f).”).
6
HOA’s budgets indicate that no reserves are being provided for by making a specific
declaration in conspicuous font. § 720.303(6)(c)(1.), Fla. Stat. If reserve funds are
provided for in the budget but no accounts are actually established, the statute requires
that the failure to fund reserves be indicated in the budgets again using a conspicuous
font. § 720.303(6)(c)(2.), Fla. Stat. The statute provides that the reserves may be reduced
following a meeting and vote. § 720.303(6)(f), Fla. Stat.
Centex argues that because assessments are defined broadly to include all
monies owed to the HOA, an excuse from contributing “operating expenses and
assessments” must include more than just the operating expenses—it must excuse the
developer from paying the reserve contributions as well because reserve funds are
monies owed to the HOA. 5 Yet reading section 720.308(1)(b) to exhaust Centex’s funding
requirements creates a direct conflict with section 720.303(6), which requires reserve
accounts be funded once established or defunded according to a regular procedure with
specific notice to the homeowners. The legislature’s requirement that changes to funding
of the reserve accounts be conspicuously noted in the financial reports—reports which
must be made available to all homeowners pursuant to section 720.303(7)—evidences
an intent to keep homeowners aware of the state of reserve finances and to avoid allowing
developers and boards to surprise homeowners with unexpected special assessments.
Reading section 720.308(1)(b) not to address the reserve accounts—leaving the
original obligation to fund reserves in place—avoids a conflict with section 720.303(6) and
ensures that the purposes of the sections are met, given that section 720.303(6) was
specifically amended to provide for reserve accounts and avoid the need for special
5 See § 720.301(1), Fla. Stat (2015) (“‘Assessment’ . . . means a sum or sums of
money payable to the association, . . . which if not paid by the owner of a parcel, can
result in a lien against the parcel.”).
7
assessments. See Ch. 2007-173, Law of Fla. § 9. Moreover, it forces developers to
comply with section 720.303(6) by either paying the reserve funds or waiving them at a
proper meeting and noting the absence of reserve funds in a conspicuous location in the
financial reports. Cf. Meritage Homes of Fla., Inc. v. Lake Roberts Landing Homeowners,
190 So. 3d 651, 652–53 (Fla. 5th DCA 2016) (affirming order requiring developer to pay
reserve funds based on the developer’s failure to follow proper procedures before waiving
funds).
Here, the declaration provides for reserve accounts, and Centex made an initial
contribution to the reserve fund in the amount of $32,300 before removing those funds.
Thus, under section 720.303(6), Centex is obligated to fund or maintain the reserves or
vote to reduce or eliminate them and provide notice in the HOA’s financial reports. See §
720.303(6)(d), Fla. Stat.
Centex argues, alternatively, that section 720.303(6) affects only the budgeting for
the reserves not the funding of such reserves. Although section 720.303(6) refers
specifically to “budgeting,” that section also speaks of “funding” and maintaining in
subsections (d) and (f). Those subsections unambiguously require that reserve accounts,
once established, must be funded or waived by a vote of the members, and they provide
no support for treating the obligation to budget as completely distinct from the obligation
to fund.
The difficulty with Centex’s position is clear when considering the disclosure
requirements of subsection 720.303(6)(c). Subsection (c) requires notice to homeowners
when the budget does not provide funding for reserve accounts. § 720.303(6)(c), Fla.
Stat. According to Centex, this is merely a requirement that a line item occur in the budget
for “reserve accounts” and the question of whether the funds actually exist is immaterial.
8
Under Centex’s interpretation, a board could completely defund the reserve accounts
without notifying homeowners, provided it continued to include a tally of what the reserve
accounts ought to contain. This interpretation is incorrect because the plain language of
subsection (c) requires the HOA to notify homeowners if it fails to fund the reserve
accounts established in the budget. See § 720.303(6)(c)(2.), Fla. Stat.
Mindful of this Court’s duty to construe statutory provisions as a whole where the
plain language is ambiguous, we conclude that section 720.308(1)(b) should not be read
to excuse a developer’s otherwise valid obligation to fund reserves while it controls the
HOA. Therefore, we reverse the summary final judgment and remand for further
proceedings consistent with this opinion.
REVERSED and REMANDED for further proceedings.
SAWAYA and EDWARDS, JJ., concur.
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