Pudlit 2 Joint Venture, LLP v. Westwood Gardens Homeowners Association

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
PUDLIT 2 JOINT VENTURE, LLP,
a Florida limited liability partnership,
Appellant,
v.
WESTWOOD GARDENS HOMEOWNERS ASSOCIATION, INC.,
a Florida corporation not-for-profit,
Appellee.
No. 4D14-1385
[May 27, 2015]
Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm
Beach County; Janis Brustares Keyser, Judge; L.T. Case No.
502013CA004260XXXXMB(AF).
Robin I. Frank of Shapiro Blasi Wasserman & Gora, P.A., Boca Raton,
for appellant.
W. Todd Boyd and Yvette R. Lavelle of Boyd Richards Parker &
Colonnelli, P.L., Miami, for appellee.
LEVINE, J.
The issue presented is whether the trial court’s reliance on a Florida
statute rather than the provisions of the homeowners’ association
declaration governing the parties in this case unconstitutionally impairs
appellant’s right to contract. Because the trial court’s application of the
statute impairs appellant’s freedom of contract, we conclude that the court
erred in granting summary judgment in favor of appellee and reverse and
remand for entry of summary judgment in favor of appellant.
Pudlit 2 Joint Venture, LLP, plaintiff/appellant, appeals the entry of
summary judgment and order of final dismissal in its breach of contract
and declaratory relief action against Westwood Gardens Homeowners
Association, Inc., defendant/appellee. Appellant purchased two properties
at foreclosure sales that were located within communities maintained by
the association. Subsequent to appellant’s purchases of the properties,
the association demanded payment for any and all unpaid association
assessments, including those that came due prior to appellant’s
ownership, under threat of a claims lien foreclosure. Appellant paid the
past-due assessments for both properties via check remitting that it “paid
under protest and with full reservation of all rights and remedies.”
Appellant filed suit against the association seeking damages for breach
of declaration (count I) and declaratory relief (count II), alleging that any
liens for past due assessments were extinguished by the foreclosure
judgments pursuant to the terms of the association’s Declaration of
Covenants, Conditions, and Restrictions. The association cross-moved for
summary judgment, arguing that section 720.3085, Florida Statutes
(2013), clearly mandates that appellant is jointly and severally liable with
the prior owners for all unpaid assessments on the subject properties, thus
amending the declaration. Appellant argued that section 720.3085 did not
impose liability upon appellant, because the declaration’s express terms
were not invalidated by the statute or waived by appellant, and imposition
of the statute against the declaration’s express terms would
unconstitutionally impair its contractual rights.
After a hearing, the trial court entered an order denying appellant’s
summary judgment motion and an order granting the association’s cross-
motion. After denying appellant’s motion for reconsideration, the trial
court entered a final order of dismissal of appellant’s claims. Appellant
timely appealed.
“The standard of review governing a trial court’s ruling on a motion for
summary judgment posing a pure question of law is de novo.” Major
League Baseball v. Morsani, 790 So. 2d 1071, 1074 (Fla. 2001). Contract
construction and statutory interpretation are both questions of law. See
Mena v. J.I.L. Constr. Grp. Corp., 79 So. 3d 219, 222 (Fla. 4th DCA 2012);
E.A.R. v. State, 4 So. 3d 614, 629 (Fla. 2009).
If the statute is clear and unambiguous, we will not look
behind its plain language for legislative intent or resort to
rules of statutory construction to ascertain intent. In such an
instance, “the statute’s plain and ordinary meaning must
control, unless this leads to an unreasonable result or a result
clearly contrary to legislative intent.”
Harvard ex. Rel. J.H. v. Vill. of Palm Springs, 98 So. 3d 645, 647 (Fla. 4th
DCA 2012) (citations omitted). Further, “[e]very statute must be read as a
whole with meaning ascribed to every portion and due regard given to the
semantic and contextual interrelationship between its parts.” Citizens
Prop. Ins. Corp. v. River Manor Condo. Ass’n, 125 So. 3d 846, 849 (Fla. 4th
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DCA 2013) (citation omitted). This principle “applies with equal force in
instances where a part of the statute standing alone may appear to be
clear and unambiguous.” Id. at 850.
“The declaration of condominium, which is the condominium’s
‘constitution,’ creates the condominium and ‘strictly governs the
relationships among the condominium unit owners and the condominium
association.’ A declaration of condominium must be strictly construed.”
Curci Vill. Condo. Ass’n v. Maria, 14 So. 3d 1175, 1177 (Fla. 4th DCA 2009)
(citation omitted). Furthermore, “[r]estrictions found within a Declaration
are afforded a strong presumption of validity, and a reasonable
unambiguous restriction will be enforced according to the intent of the
parties as expressed by the clear and ordinary meaning of its terms . . . .”
Shields v. Andros Isle Prop. Owners Ass’n, 872 So. 2d 1003, 1005-06 (Fla.
4th DCA 2004) (citation omitted). “Under Florida law, which governs this
dispute, ‘courts may not rewrite a contract or interfere with the freedom of
contract or substitute their judgment for that of the parties thereto in order
to relieve one of the parties from the apparent hardship or improvident
bargain.’” United States v. Bridgewater Cmty. Ass’n, 2013 WL 3285399,
at *9 (M.D. Fla. June 27, 2013) (citation omitted).
The statute at issue in this case, section 720.3085, provides:
A parcel owner is jointly and severally liable with the
previous parcel owner for all unpaid assessments that came
due up to the time of transfer of title. This liability is without
prejudice to any right the present parcel owner may have to
recover any amounts paid by the present owner from the
previous owner.
§ 720.3085(2)(b), Fla. Stat. (2013) (emphasis added). Further, under
Chapter 720, “the Legislature recognizes that certain contract rights have
been created for the benefit of homeowners’ associations and members
thereof before the effective date of this act and that ss. 720.301-720.407
are not intended to impair such contract rights.” § 720.302(2), Fla. Stat.
(2013) (emphasis added).
Significantly, the homeowners’ declaration in the present case provides
that a subsequent owner of a property within the association will not be
liable for payment of any assessments owed by the prior owner. Thus,
section 720.3085(2)(b) conflicts with the declaration of the association in
the case at bar, which provides:
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The annual and special assessments, together with such
late charges, interest thereon and costs of collection thereof,
as hereinafter provided shall be a charge on the land and shall
be a continuing lien upon the property upon which each such
assessment is made, and said lien may be enforced in the
same manner in which mortgages are enforced. Each such
assessment, together with such late charges, interest, costs,
and reasonable attorney’s fees, shall also be the personal
obligation of the person who was the Owner of such property
at the time when the assessments fell due. The personal
obligation for delinquent assessments shall not pass to his
successors in title unless expressly assumed by them.
....
The lien of the assessments provided for herein shall be
superior to all other liens save and except tax liens and
mortgage liens, provided said mortgage liens are first liens
against the property encumbered thereby (subject only to tax
liens). Sale or transfer of any Lot which is subject to a mortgage
as herein described, pursuant to a decree of foreclosure thereof,
shall extinguish the lien of such assessments as to payments
thereof which become due prior to such sale or transfer. No sale
or transfer shall relieve such Lot from liability for any
assessments thereafter becoming due or from the lien thereof.
(emphasis added).
The association’s argument that the legislature’s enactment of section
720.3085 amended the declaration is without merit. A declaration can be
amended according to the procedure outlined within the declaration, or
according to statute, by two-thirds’ approval of the homeowners. See
Grove Isle Ass’n, Inc. v. Grove Isle Assocs., LLLP, 137 So. 3d 1081, 1090
(Fla. 3d DCA 2014). Generally, “repeal or invalidation by implication [of
restrictions and provisions in a declaration] is not favored and generally
will not be presumed absent a clear legislative intent.” United States v.
Forest Hill Gardens E. Condo. Ass’n, 990 F. Supp. 2d 1344, 1349 (S.D. Fla.
2014). The declaration here provides the following amendment
procedures:
[A]s long as Declarant controls the Association, the Declarant
may make and file any amendment hereto required by the
Declarant or by the Federal National Mortgage Association or
Veteran’s Administration or Federal Housing Administration
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or Federal Home Loan Mortgage Corporation or any
governmental body with jurisdiction over the Property,
provided said amendment does not materially, adversely affect
the rights of a Lot Owner, as determined solely by the
Declarant, by an instrument executed only be the Developer.
Such amendment need not be signed or executed in the
manner otherwise provided for herein.
The only provisions in the declaration providing for automatic
amendment based on legislative action are limited to amendments which
are “required” by the plain language of the legislation. Nothing in the
language of section 720.3085(2)(b) demonstrates that it is “required” to be
adopted by Florida homeowners’ associations. Thus, the association
cannot argue that section 720.3085, as enacted by the Florida legislature,
automatically amended the association’s declaration.1 Compare Kaufman
v. Shere, 347 So. 2d 627, 627-28 (Fla. 3d DCA 1977) (holding that a
specific statutory provision “was incorporated into” the declaration “by
virtue of the express wording of the Declaration itself” which
“unequivocally states that provisions of the Condominium Act are adopted
‘as it may be amended from time to time’”), with Palm-Aire Country Club
Condo. Ass’n No. 2, Inc. v. F.P.A. Corp., 357 So. 2d 249, 251-52 (Fla. 4th
DCA 1978) (rejecting the lessees’ position that “the condominium
documents were automatically amended when the Condominium Act was
amended,” “because, unlike Kaufman, the condominium documents in
this case do not expressly adopt the provisions of the Condominium Act,”
and rather outline “an exclusive method of amendment which does not
include an automatic amendment whenever there is a change in the
Condominium Act”). Because the association did not amend its
declaration to specifically adopt section 720.3085, the section should not
be applied to supersede the express terms of the declaration.
Thus, the question in this case becomes whether application of section
720.3085(2)(b) unconstitutionally impairs appellant’s contractual rights
under the association’s declaration which absolves appellant of such
liability. As previously stated, section 720.3085(2)(b) was “not intended to
impair [] contract rights” which were “created for the benefit of
homeowners’ associations and members thereof before the effective date”
of the statute. See § 720.302(2), Fla. Stat. (2013).
1 Likewise, section 720.3085 does not declare association declaration provisions
which waive a third party purchaser’s liability for unpaid assessments on
foreclosed properties to be “null and void as against public policy.” Cf. §
720.3075(1), Fla. Stat. (2013) (specifying certain HOA declaration provisions that
are “declared null and void as against the public policy of this state”).
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Similar to the federal constitutional contract clause, the Florida
Constitution prohibits the impairment of contracts. Compare U.S. Const.
art. I, § 10, cl. 1 (“No State shall . . . pass any . . . Law impairing the
Obligation of Contracts . . . .”), with Fla. Const. art. I, § 10 (“No . . . law
impairing the obligation of contracts shall be passed.”). Thus, a basic tenet
of our constitution, both state and federal, is the prohibition on
impairment of contracts. Justice Joseph Story, in considering the
impairment of contracts by the states, stated that
[a]ny deviation from its terms, by postponing, or acceleration
the period of performance of which it prescribes, or by
imposing conditions not expressed in the contract, or by
dispensing with the performance of those, which are a part of
the contract, however minute, or apparently immaterial in
their effects upon it, impairs an obligation. A fortiori, a law,
which makes the contract wholly invalid, or extinguishes, or
releases it, is a law impairing it.
Joseph Story, A Familiar Exposition of the Constitution of the United
States § 244, at 197 (Regnery Gateway, Inc. 1986) (1859).
“An impairment occurs, . . . when a contract is made worse or is
diminished in quantity, value, excellence or strength.” Lawnwood Med.
Ctr., Inc. v. Seeger, 959 So. 2d 1222, 1224 (Fla. 1st DCA 2007). “In this
state, it is a ‘well-accepted principle that virtually no degree of contract
impairment is tolerable.’” Coral Lakes Cmty. Ass’n v. Busey Bank, N.A.,
30 So. 3d 579, 584 (Fla. 2d DCA 2010) (quoting Pomponio v. Claridge of
Pompano Condo., Inc., 378 So. 2d 774, 780 (Fla. 1979)). A third-party
beneficiary to a contract possesses the same constitutional right against
the impairment of that contract as the parties to the contract. See id.(citing Greenacre Props., Inc. v. Rao, 933 So. 2d 19, 23 (Fla. 2d DCA 2006)
(explaining that to enforce rights under a declaration, “[a] third party must
establish that the contract either expressly creates rights for them as a
third party or that the provisions of the contract primarily and directly
benefit the third party or a class of persons of which the third party is a
member”)).
In Coral Lakes, the bank instituted a foreclosure action against the
homeowners, adding the HOA as a defendant because of a lien for accrued
unpaid assessments. The HOA, relying upon section 720.3085, claimed
that if the bank purchased the mortgaged premises at a foreclosure sale,
then it would be jointly and severally liable with the previous owner to pay
the past due assessments. 30 So. 3d at 582. The bank argued that it was
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an intended third-party beneficiary of the HOA’s declaration which
provided that neither it nor a third-party purchaser at a foreclosure sale
would be liable for past due assessments.2 The trial court agreed with the
bank and entered a final judgment in foreclosure, ruling that the bank
would not be liable for unpaid assessments due to the HOA upon
purchasing the property. Id. at 583.
On appeal, the Second District agreed with the trial court’s analysis,
finding that first mortgagees, like the bank, “although not parties to the
Declaration that is the contract between the HOA and its members, are
clearly third-party beneficiaries of this contract.” Id. at 584. The court
concluded that “the Declaration’s plain and unambiguous language . . .
controls and absolves the Bank, as first mortgagee, from liability for any
assessments accruing before it acquires the parcel.” Id. at 583-84. Thus,
the appellate court affirmed, stating that “[t]o hold otherwise would
implicate constitutional concerns about impairment of vested contractual
rights.” Id. at 584. See also Ecoventure WGV, Ltd. v. Saint Johns Nw.
Residential Ass’n, 56 So. 3d 126, 127-28 (Fla. 5th DCA 2011) (holding that
section 720.3085 cannot “be applied to impose joint and several liability
on [appellant] for the unpaid homeowner’s association assessments
incurred by its mortgagor,” because imposing the statute on appellant
“‘would operate to severely, permanently, and immediately change the
parties’ economic relationship . . . a circumstance not supportable under
the law’”) (quoting Coral Lakes, 30 So. 2d at 584).
Here, the declaration provides that “[t]he personal obligation for
delinquent assessments shall not pass to his successors in title unless
expressly assumed by them” and “[s]ale or transfer of any Lot . . . pursuant
to . . . foreclosure . . . shall extinguish the lien of such assessments as to
payments thereof which become due prior to such sale or transfer.” Thus,
the declaration “expressly creates rights” for successors in title to
properties within the association, like appellant, and the declaration
provisions “primarily and directly benefit” successors in title. Rao, 933 So.
2The provision the bank relied upon states:
Where any person obtains title to a LOT pursuant to the foreclosure of a
first mortgage of record, or where the holder of a first mortgage accepts a
deed to a LOT in lieu of foreclosure of the first mortgage of record of such
lender, such acquirer of title, its successors and assigns, shall not be liable
for any ASSESSMENTS or for other moneys owed to Coral Lakes which are
chargeable to the former OWNER of the LOT and which became due prior
to acquisition of title as a result of the foreclosure or deed in lieu thereof,
unless the payment of such funds is secured by a claim of lien recorded
prior to the recording of the foreclosed or underlying mortgage.
Coral Lakes, 30 So. 3d at 581.
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2d at 23. Accordingly, appellant, a successor in title, is clearly an intended
third party beneficiary and holder of vested rights in the declaration. See
id.; Coral Lakes, 30 So. 3d at 584. Further, “the Declaration’s plain and
unambiguous language . . . absolves [appellant], as [successor through a
foreclosure sale], from liability for any assessments accruing before it
acquires the parcel.” Coral Lakes, 30 So. 3d at 583-84. Such “a
reasonable unambiguous restriction will be enforced according to the
intent of the parties as expressed by the clear and ordinary meaning of its
terms.” Shields, 872 So. 2d at 1005-06 (citation omitted).
In summary, the trial court’s reliance on section 720.3085(2)(b) rather
than the provisions of the declaration violated appellant’s right against the
impairment of contract, where appellant was a third-party beneficiary of
the declaration. Based on the plain, unambiguous language of the
declaration, absolving a successor in title from any liability for
assessments that accrued prior to the successor’s acquisition of title,
appellant was not liable for the unpaid assessments demanded by the
association. For these reasons, we reverse the summary judgment entered
in favor of the association and remand for entry of summary judgment in
favor of appellant.
Reversed and remanded with directions.
MAY and CIKLIN, JJ., concur.
* * *
Not final until disposition of timely filed motion for rehearing.
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