Pipeline Contractors, Inc., and The Hanover Insurance Company v. Keystone Airpark Authority, a political subdivision of the city of Keystone Heights, and Passero Associates, L.L.C., etc.

FIRST DISTRICT COURT OF APPEAL
STATE OF FLORIDA
_____________________________
No. 1D18-3601
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PIPELINE CONTRACTORS, INC., a
Florida corporation, and THE
HANOVER INSURANCE COMPANY,
a New Hampshire corporation,
Appellants,
v.
KEYSTONE AIRPARK AUTHORITY,
a political subdivision of the City
of Keystone Heights, and
PASSERO ASSOCIATES, L.L.C., a
Florida limited liability
company,
Appellees.
_____________________________
On appeal from the Circuit Court for Clay County.
Don H. Lester, Judge.
July 10, 2019
PER CURIAM.
Pipeline Contractors, Inc., (Pipeline) and The Hanover
Insurance Company (Hanover) challenge the trial court’s
determination that Keystone Airpark Authority (KAA) had
capacity to contract, to sue, and to be sued. We agree with the trial
court that estoppel applies to preclude this argument and affirm
the final judgment in favor of KAA.
In 2008, Pipeline and KAA entered into a contract for the
construction of new airport facilities at the Keystone Airpark.
Pipeline’s performance was guaranteed by a bond issued by
Hanover. KAA did not pay everything that Pipeline asserted it
was entitled to under the construction contract, and in 2010,
Pipeline sued KAA for breach of contract. KAA counterclaimed for
breach of contract based on defects in the work, and KAA filed a
third-party complaint against Hanover seeking relief under the
performance bond.
Little happened in the litigation for some six years. Then
Pipeline and Hanover amended their answer and moved for
summary judgment on KAA’s claims, asserting for the first time
that KAA’s lawsuit should be dismissed because KAA was not a
legal entity and did not have the capacity to contract, sue, or be
sued. In short, the argument was that under the Uniform Special
District Accountability Act of 1989 (Chapter 189, Fla. Stat. (1991)),
any special district comprising more than one county required the
Legislature’s authorization. All of the KAA district was within the
city limits of Keystone Heights, but the KAA district extended from
Clay County west into Bradford County. 1 Nonetheless, when the
KAA was formed in 1991, only the City of Keystone Heights, and
not the Legislature, acted in establishing it.
1 This geographic peculiarity is the result of history. The
airport was originally part of Camp Blanding when it was
constructed during World War II. See The 42J Story,
http://keystoneairport.com/the-42j-story/ (last visited July 2,
2019). In 1947, the airport property was acquired from the federal
government. Id. In 1963, the Town of Keystone Heights was
abolished, and the City of Keystone Heights established in its
place. Ch. 63-1496, Art. I, Laws of Florida at 1698-1700. Title to
the airport property remained vested in the City of Keystone
Heights, and the City was given “all powers and duties, including
police powers” over the property “as are exercised over those lands
included in the corporate limits of the City.” Ch. 63-1496, Art. XII,
Laws of Florida at 1736-37.
2
In 1992, the Legislature amended the law to provide that
legislative approval is not required for special districts comprising
more than one county, so long as the entire district is within a
single municipality. See § 189.403(3), Fla. Stat. (1992); cf. Forsythe
v. Longboat Key Beach Erosion Control Dist., 604 So. 2d 452, 455-
56 (Fla. 1992) (holding that the pre-amendment version’s plain
text provided that a special district with territory in multiple
counties was an independent special district requiring legislative
authorization). Pipeline and Hanover contended that the
legislative change did not cure the defect in KAA’s earlier
formation. 2
The trial court rejected the lack of capacity defense,
concluding that the court could deny Pipeline and Hanover’s
summary judgment motion without resolving whether KAA was
validly created or whether it later had the right to contract, sue, or
be sued. Instead, the court decided, because there was “no
question that Pipeline and Hanover [had] received the benefits of
the questioned contracts,” Pipeline and Hanover were estopped
from “challenging KAA’s capacity to contract.” After a seven-day
bench trial, the trial court entered a final judgment in favor of
KAA. 3
Pipeline and Hanover now appeal the trial court’s denial of
summary judgment. Arguing that the trial court’s application of
2 Pipeline and Hanover acknowledge that if KAA lacks
authority to contract, sue, or be sued, then Pipeline itself had no
ability to initiate this litigation years ago, that it had no right to
enforce its contract, and that Pipeline’s claims—like KAA’s—were
due to be dismissed. Pipeline also argues that its entitlement to
retain the hundreds of thousands of dollars received under the
contract is not before this court.
3 The detailed thirty-four-page final judgment resolved the
dispute about construction defects and Pipeline’s performance.
The court ultimately awarded KAA a total of $3,217,661.81.
Pipeline and Hanover do not contest the court’s findings or the
amount of the award. The only issue on appeal is whether the
court should have denied all relief based on KAA’s inability to
contract, sue, or be sued.
3
estoppel was in error, Pipeline and Hanover contend that the court
should have reached the merits of their argument regarding KAA’s
capacity and ruled in their favor. Pipeline and Hanover ask us to
reverse the trial court on the issue of estoppel and remand the case
with directions to vacate the final judgment and dismiss all claims
between the parties.
The trial court relied on Booske v. Gulf Ice Co., 5 So. 247 (Fla.
1888), in determining that estoppel applied. At issue in Booske
was a contract between individuals and a corporation. Id. at 248.
There was also a surety bond guaranteeing performance. Id. After
litigation ensued, the principal and obligor on the bond cited Gulf
Ice Company’s improper corporate creation in arguing that they
should be immune from liability on the contract. Id. at 250-51. In
rejecting this argument, the Florida Supreme Court held:
A person who has contracted with an association
assuming to be incorporated and acting in a corporate
capacity cannot, after having received the benefit of the
contract, set up as a defense to an action brought by such
company that the latter was not legally incorporated, or
had no authority to enter into the contract in a corporate
capacity.
Id. at 251.
Pipeline and Hanover argue that Booske and the principle
underlying it is not applicable here because KAA purported to be
a governmental special district, and the entities at issue in Booske
and other cases were business corporations. Our review thus turns
on whether a contract between private entities and a political
subdivision under these circumstances is subject to the same
estoppel principles.
Estoppel is an equitable doctrine “based on principles of fair
play and essential justice and arises when one party lulls another
party into a disadvantageous legal position.” Florida Dep’t of
Health & Rehab. Servs. v. S.A.P., 835 So. 2d 1091, 1096 (Fla. 2002).
“‘Estoppel’ has been defined as ‘the preclusion of a person from
asserting a fact by previous conduct inconsistent therewith, on his
own part, or the part of those under whom he claims.’” Quality
4
Shell Homes & Supply Co. v. Roley, 186 So. 2d 837, 840-41 (Fla.
1st DCA 1966) (quoting Coogler v. Rogers, 7 So. 391 (Fla. 1889)).
Pipeline and Hanover argue that KAA’s improper
organization as a political subdivision is the fact that makes
estoppel inapplicable here, but we see no meaningful distinction.
Just as estoppel can defeat a claim that a purported corporation
was not validly created, so too can estoppel defeat a claim that a
purported local special district was not validly created. In either
instance, the principle is that one cannot contract with an entity
as if it were validly created, reap the benefits of that agreement,
and later disavow the contract based on the invalid creation. In
fact, the doctrine has previously been applied to the benefit of
political subdivisions in contract disputes. See Billings v. City of
Orlando, 287 So. 2d 316, 318 (Fla. 1973) (estopping an argument
by former police officers of the City that certain provisions of a
contract were unconstitutional while noting that “[o]ne who
accepts the benefits of a contract cannot, having retained these
benefits, question the validity of the contract”).
Here, Pipeline and Hanover treated KAA as if it were a
properly organized entity with no issues of capacity for most of the
parties’ relationship. Pipeline performed (at least in part),
accepted payment on the contract, and engaged in years-long
litigation with KAA. Only after all that did Pipeline and Hanover
assert any issues of capacity. Because they accepted the benefits
of the contract through payment from KAA, Pipeline and Hanover
were properly estopped from raising the argument that the
contract was void in an attempt to avoid the burdens of the
contract embodied by KAA’s claims against them.
AFFIRMED.
RAY, C.J., and WETHERELL and BILBREY, 4 JJ., concur.
4 Judge Bilbrey was substituted for an original panel member
in this proceeding after oral argument. He has viewed the digital
recording of oral argument.
5
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Not final until disposition of any timely and
authorized motion under Fla. R. App. P. 9.330 or
9.331.
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David L. Worthy, Donald A. Niesen, and Christopher W. Lewis of
Niesen, Price, Worthy, Campo, P.A., Gainesville, for Appellants.
James J. Taylor Jr. and Katelyn T. Hardwick of the Taylor Law
Firm, P.A., Keystone Heights, for Appellees.
6