Luani Plaza, Inc. v. Burton

Third District Court of Appeal
State of Florida
Opinion filed October 8, 2014.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D11-1792
Consolidated: 3D11-1952
Lower Tribunal Nos. 08-320-K; 08-937-K
________________
Luani Plaza, Inc., etc.,
Appellant/Cross-Appellee,
vs.
Michael Burton, d/b/a
Burton Family Partnership,
Appellee/Cross-Appellant.
Appeals from the Circuit Court for Monroe County, David J. Audlin, Jr.,
Judge.
John Marston (Key West); John R. Allison, III (Key West), for
appellant/cross-appellee.
Brett C. Powell and P. Brandon Perkins, for appellee/cross-appellant.
Before SHEPHERD, C.J., and WELLS and LAGOA, JJ.
SHEPHERD, C.J.
This is an appeal from a final judgment rendered after a bench trial,
resolving disputes between Dr. Michael Burton, the owner of two units in Luani
Plaza in the City of Key West, Florida, and Luani Plaza, Inc., the business owner’s
association (the “Association”) which administers the common areas of Luani
Plaza. We summarily affirm the well-reasoned final judgment of the trial court in
all respects sans one, that portion of the final judgment authorizing Dr. Burton to
convert his units into affordable housing units.1 A brief recitation of the facts of
this case is necessary to explain our decision.
FACTUAL AND PROCEDURAL BACKGROUND
Luani Plaza best can be described as a commercial plaza of businesses and
professional offices. The entire complex resembles a strip mall. It is zoned
“limited commercial” and consists of fifteen separate parcels, each a “unit.” The
units are held by individual business owners in fee simple. Each “unit” includes
that business owner’s individual structure, and the land in front and back of the
1 The parties agree the attorney’s fee issue raised by Luani Plaza is not ripe for
review. See, e.g., Demaio v. Coco Woods Lakes Ass’n, Inc., 637 So. 2d 369 (Fla.
4th DCA 1994) (holding prevailing party determination not ripe until trial court
actually enters an award of fees). We also clarify the issue raised by Dr. Burton
regarding damages for the delay in paving the parking areas. The trial court found
“defendant” liable for additional costs incurred by Luani Plaza due to the City’s
refusal to issue a permit. At this point, the City was a defendant in the action. The
award of $4,897.01 to Luani Plaza against Dr. Burton did not include an amount
for damages occasioned by the paving delay. The trial court determined the City
responsible for improperly denying the permit. Thus, we do not read the final
judgment as holding Dr. Burton liable for expenses associated with this delay.
2
structure. The fee simple boundaries of each unit are established by metes and
bounds descriptions found in a Declaration of Covenants, Conditions and
Restrictions, recorded by the developer of the Plaza in the public records of
Monroe County in 1982. Though not a condominium, the ownership constitutes “a
common interest community,” as generally described in the Restatement (Third) of
Property: Servitudes ‒ “a real-estate development or neighborhood in which
individually owned lots or units are burdened by a servitude that imposes an
obligation that cannot be avoided by nonuse or withdrawal.” Restatement (Third)
of Prop.: Servitudes § 6.2 (2000).
The recorded Declaration provides that covenants and restrictions run with
the land. There is no land owned jointly or in common by the owners of the units,
but each unit owner is a member of the Association. The Association is charged
by the Declaration with the responsibility to fix and collect assessments, and to
maintain the “Common Area” in good condition and repair. The “Common Area”
of the property is defined as “those areas upon which a building is not
constructed,” as shown in a schematic in the Declaration. Every owner has a right
and easement of enjoyment in and to the Common Area. Additionally, the
Declaration cedes architectural control and right of approval of all proposed
external modifications to structures within the project to the Association.
3
In 1990 and 2002, Dr. Burton (personally and through a family partnership)
became owner of two units in Luani Plaza. On July 8, 2003, Dr. Burton applied to
the Association for permission to erect dormers on the second floor of his units for
the purpose of creating storage space. The Association neither approved nor
disapproved the proposal. Rather, it advised Dr. Burton that the plans were not
sufficiently complete for the Association to be able to make a decision. Dr. Burton
ignored the request for further information and built the dormers.2 Thereafter,
without notice to the Association, Dr. Burton applied to the City to convert the
second floor of each unit to residential use. In connection therewith, Burton
obtained from the City a recordable affordable housing restriction declaration,
which he executed on December 7, 2007, without the prior knowledge or approval
of the Association.
The Luani Plaza Declaration contains 146 prohibited uses of the property,
ranging from “animal hospitals” to “vulcanization,” but is silent about residential
use. When the Association learned of Dr. Burton’s decision to convert his units to
residential use, it demanded he cease the conversion. Dr. Burton refused. On
February 11, 2008, the Association amended the Declaration (Fifth Amendment),
2Dr. Burton contends he did so in reliance on Article VIII of the Declaration that
deems a request approved unless the Board of Directors of the Association “fails to
approve or disapprove such design and location within thirty (30) days after said
plans and specifications have been submitted to it.” Burton maintains the Board of
Director’s response was neither and therefore he was authorized to continue with
his modification.
4
specifically to prohibit residential use of the units. When Dr. Burton nevertheless
continued to move forward with his project, the Association, on June 13, 2008,
filed the present action seeking a mandatory injunction against his use of the
property for residential purposes. It was not until May 25, 2010, that Dr. Burton
received a certificate of occupancy for the renovated units. The units first were
occupied as residential units two months thereafter.
The Association argues that the use of the units as residential dwellings is
incompatible with the existing commercial shopping center and professional office
use. Moreover, the Association claims the conversion by Dr. Burton of his two
units to residential use has increased the risk and cost of liability insurance to the
Association. We find the trial court erred in concluding that Dr. Burton could put
the units to residential use.
ANALYSIS
The issue presented requires an interpretation of the Declaration of
Covenants, Conditions and Restrictions of Luani Plaza, Inc., as amended, and more
particularly, as amended by the Fifth Amendment to the Declaration. The
Declaration and all properly adopted amendments thereto form a binding contract
among the owners of the “units” in Luani Plaza. See Cohn v. Grand Condo. Ass’n,
62 So. 3d 1120, 1121 (Fla. 2011). The interpretation of this contract and its
covenants is a matter of law, and therefore reviewable by this court de novo. See
5
Klinow v. Island Court at Boca W. Prop. Owner’s Ass’n, 64 So. 3d 177, 180 (Fla.
4th DCA 2011).
We note at the outset that the Fifth Amendment to the Declaration
prohibiting residential use of the units at Luani Plaza was properly adopted by the
unit owners. Article X, Section 3 of the Declaration provides that it “may be
amended at any time and from time to time upon execution and recordation of an
instrument executed by the Owners holding not less than four-fifths of the voting
interests.” The adoption of this amendment was done in accordance with these
procedural requirements.
Dr. Burton argues that the Fifth Amendment nevertheless is unenforceable
against him for two reasons: (1) the prohibition of the Amendment unreasonably
and arbitrarily denies him the use of his own private property; and (2) the
Amendment is being impermissibly applied against him retroactively. We find no
merit in either position.
We have no quarrel with Dr. Burton’s assertion that an amendment to a
declaration of covenants and restrictions concerning the use of real property cannot
be arbitrary, capricious or even promulgated in bad faith. See Klinow, 64 So. 3d at
p. 180 (citing Hollywood v. Island Court at Boca W. Prop. Owner’s Ass’n v.
Hampton, 40 So. 3d 784, 787 (Fla. 4th DCA 2010)). The test of enforceability of
an amendment to a restrictive covenant is one of reasonableness. Klinow, 64 So.
6
3d at 180. Any amendment made to a declaration of covenants and restrictions
“must be exercised in a reasonable manner so as not to destroy the general plan of
the development.” Holiday Pines Prop. Owners Ass’n v. Wetherington, 596 So. 2d
84, 87 (Fla. 4th DCA 1992); Zequera v. Centennial Homeowners’ Ass’n, 721 So.
2d 751, 752 (Fla. 3d DCA 1998) (applying “reasonableness” measure to determine
whether grantor lawfully exercised its rights to amend covenants and restrictions).
The Fifth Amendment to the Declaration in this case comprises a reasonable
exercise of the amending power of the Declaration. Luani Plaza was conceived as
a commercial business project, and that was its use for more than two decades
before Dr. Burton decided to try to impress a residential use upon the Plaza. It is
true that a prohibition on “residential use” is not among the 146 prohibited uses of
the project in the Declaration. However, a cursory perusal of these prohibitions,
especially when considered within the context of the entire document, leaves little
doubt the scrivener had but one thing in mind – commercial use – at the time of
drafting. The fact Dr. Burton declared in his application to the Association that he
wished to modify the units he owned by adding dormers for the purpose of
facilitating the use of the space as “storage,” followed by securing permits to
modify the interior of the units to serve as affordable housing without a mention to
the Association, suggests that Dr. Burton himself may at all times have interpreted
7
the Declaration as we do here. The arbitrariness and capriciousness of both usage
and process in this case seems to fall on Dr. Burton.3
Finally, the adoption of the Fifth Amendment did not impose an
impermissible retroactive regulation on Dr. Burton. The Declaration obligated Dr.
Burton to seek Association approval to modify the exterior of his units. There was
no similar requirement for interior modification. However, Dr. Burton was subject
to any amendments to the Declaration. See Flagler Federal Sav. & Loan Ass’n of
Miami v. Crestview Towers Condo. Ass’n, 595 So. 2d 198, 200 (Fla. 3d DCA
1992) (stating that in a common interest community governed by a declaration
authorizing amendments, “unit owners who acquire[] title prior to [an] amendment,
[are] bound by the Declaration as amended”); see also, Woodside Village Condo.
Ass’n v. Jahren, 806 So. 2d 453, 461 (Fla. 2002) (“Thus, we find that respondents
were on notice that the unique form of ownership they acquired when they
purchased their units . . . was subject to change through the amendment process,
and that they would be bound by property adopted amendments.”). In this case,
Dr. Burton was on notice of the prohibition against residential use not only by the
3 Dr. Burton also references Article X, Section 4, of the Declaration, which
provides for future annexation of residential property. However, annexing
contiguous property, which previously may have been used for residential
purposes, does not equate to converting original property, used exclusively for
commercial and professional purposes, to residential use. Rather the annexed
residential property would become commercial property upon being added to
Luani Plaza.
8
long-established character of use of Luani Plaza, but also by the recording of the
Fifth Amendment in the public records of Monroe County on February 11, 2008,
passed by the Association soon after it learned Dr. Burton planned to put his units
to residential use. Dr. Burton did not obtain a certificate of occupancy for his
converted units until May 25, 2010, more than two years after the Fifth
Amendment was recorded. The Fifth Amendment was not retroactively applied
against him. Rather, Dr. Burton proceeded with his interior improvements with
full knowledge, from the beginning, that his units could not be used for residential
purposes.
We reverse that portion of the final judgment which finds the Fifth
Amendment to the Declaration unenforceable against Dr. Burton, and remand for
further proceedings in accordance with this opinion.
Affirmed in part, reversed in part, and remanded.
9