AFH-Bay Fund, LLC v. City of Largo, Florida , 227 So. 3d 740 ( 2017 )

NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING
MOTION AND, IF FILED, DETERMINED
IN THE DISTRICT COURT OF APPEAL
OF FLORIDA
SECOND DISTRICT
AHF-BAY FUND, LLC, )
)
Appellant, )
)
v. ) Case No. 2D14-408
)
CITY OF LARGO, FLORIDA, )
a municipal corporation, )
)
Appellee. )
________________________________ )
Opinion filed September 27, 2017.
Appeal from the Circuit Court for Pinellas
County; John A Schaefer, Judge.
Joseph H. Lang, Jr., and Christopher W.
Smart of Carlton Fields Jorden Burt, P.A.,
Tampa, for Appellant.
Elizabeth W. Neiberger of Bryant Miller
Olive P.A., Tallahassee, and Alan S.
Zimmet and Nicole C. Nate of Bryant
Miller Olive P.A., Tampa, for Appellee.
ON REMAND FROM THE FLORIDA SUPREME COURT
MORRIS, Judge.
In City of Largo v. AHF-Bay Fund, LLC, 215 So. 3d 10 (Fla. 2017), the
Florida Supreme Court quashed, in part, our decision in AHF-Bay Fund v. City of Largo,
169 So. 3d 133 (Fla. 2d DCA 2015). Accordingly, the mandate of this court issued in
this case on July 31, 2015, is withdrawn; the opinion and judgment of this court filed on
April 22, 2015, is withdrawn and vacated insofar as it is in conflict with or fails to
conform to the views expressed in the opinion and judgment of the Florida Supreme
Court; and the opinion and judgment of the Florida Supreme Court are adopted and
made part of the opinion and judgment of this court. We adhere to our prior judgment
and opinion except as it is withdrawn and vacated. On remand, we now solely consider
the third issue raised by AHF-Bay Fund (AHF) in the prior appeal, which we previously
declined to address due to our decision on another issue.
I. Background
For purposes of this appeal on remand,1 only a brief recitation of the
underlying facts is necessary. This case involves the City of Largo's claims for breach
of contract and enforcement of a covenant at law. The action was based on a PILOT
agreement entered into by AHF's predecessor in interest, RHF Brittany Bay, LLC (RHF),
and the City. A PILOT agreement is an agreement which requires an entity that is
otherwise exempt from ad valorem taxation to make "payments in lieu of taxes" to a
local government. In this case, RHF entered into the PILOT agreement with the City in
return for the City's assistance in obtaining financing so that RHF could develop the
subject property to provide affordable housing for persons with low to moderate income.
The PILOT agreement did not indicate that it was a covenant running with
the land, but it did specify that it was binding on any subsequent owners of the subject
property as long as certain conditions were met. The PILOT agreement was not
recorded in the official public records. However, there is no dispute that simultaneously
1
A full recitation of the facts can be read in our prior opinion. AHF-Bay
Fund, 169 So. 3d 133.
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with the execution of the PILOT agreement, the parties executed a memorandum of
agreement that was properly recorded in the official public records. The memorandum
indicated that the PILOT agreement was available for inspection in the City clerk's office
and that it imposed certain covenants running with the land. Attached to the
memorandum was a copy of the property's legal description.
AHF acquired the property in November 2005 but failed to make the
annual payments required by the PILOT agreement beginning in 2006, denying
knowledge of either the PILOT agreement or the memorandum of agreement. AHF
asserted that the documents were not shown to be exceptions to coverage in its title
insurance policy and that the documents were not referenced in the special warranty
deed by which AHF took title.
The City ultimately filed suit based on AHF's refusal to make the required
payments. The trial court granted the City's motion for summary judgment in part and
entered a final judgment in favor of the City. The City was awarded $685,158.23 in
damages and prejudgment interest.
In the prior appeal, AHF argued that the trial court erred for three reasons:
(1) the PILOT agreement was not a covenant running with the land; (2) the PILOT
agreement was contrary to Florida law as well as Florida's public policy; and (3) AHF
could not be held liable for the payments under the PILOT agreement because it was
neither a party nor a beneficiary under the PILOT agreement. We summarily rejected
the first argument. AHF-Bay Fund, LLC, 169 So. 3d at 134. However, we agreed with
AHF on the second issue, concluding that the PILOT agreement not only violated public
policy but also violated section 196.1978, Florida Statutes (2000), and article VII, § 9(a)
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of the Florida Constitution. We also certified a question to the Florida Supreme Court
based on our resolution of the second issue. Finally, because we concluded that the
resolution of the second issue was dispositive, we declined to address AHF's third
issue.
The City of Largo sought review in the Florida Supreme Court, and the
court answered the certified question in the negative and quashed our prior opinion
based only on our resolution of the second issue. AHF-Bay Fund, LLC, 215 So. 3d at
17-18. The Florida Supreme Court did not address the first issue as it was beyond the
scope of the certified question. Id. Thus that portion of our prior opinion and judgment
remains valid. We are now asked to determine the merits of AHF's third argument that
it should not be held liable under the PILOT agreement.
II. Analysis of the case on remand.
AHF argues that it cannot be sued for breach of the PILOT agreement
because it was not a party to or a third-party beneficiary of the contract and because it
did not assume or agree to the terms of the contract.2 AHF raises this issue as distinct
and separate from the issue of whether the PILOT agreement was a covenant running
with the land. But as we explain, AHF was bound by the PILOT agreement regardless
of whether the agreement was a covenant running with the land.
A breach of contract action may be based on a party's breach of a
covenant. Cf. A.R. Holland, Inc. v. Wendco Corp., 884 So. 2d 1006, 1007-08 (Fla. 1st
2
As an alternative reason for why it could not be held personally liable for
breach of contract, AHF argued that governments are limited to imposing a tax lien
against a party that fails to pay ad valorem taxes. However, due to the Florida Supreme
Court's conclusion that the payments due under the PILOT agreement are not taxes,
AHF-Bay Fund, LLC, 215 So. 3d at 17, we find no merit to this argument and do not
address it further.
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DCA 2004) (involving breach of contract action based on breach of a restrictive
covenant). And here, the memorandum of agreement was filed in the public records,
specifically referenced the PILOT agreement, and noted that the PILOT agreement
imposed covenants running with the land. Consequently, AHF was—at the very least—
on constructive notice of the PILOT agreement when it purchased the property. Having
been properly filed in the public records, the memorandum of agreement with the
attached legal description of the property provided subsequent purchasers with facts
that, had they been investigated, would have led a prudent man to discover the
existence and contents of the PILOT agreement. See Sapp v. Warner, 141 So. 124,
127-28 (Fla. 1932); see also Regions Bank v. Deluca, 97 So. 3d 879, 883 (Fla. 2d DCA
2012) ("Constructive notice is a legal inference, and it is imputed to . . . subsequent
purchasers by virtue of any document filed in . . . the official records." (quoting Dunn v.
Stack, 418 So. 2d 345, 349 (Fla. 1st DCA 1982))). AHF is therefore bound by the
provisions of the PILOT agreement. Cf. Silver Blue Lake Apartments, Inc. v. Silver Blue
Lake Home Owners Ass'n, 245 So. 2d 609, 611 (Fla. 1971) (recognizing that parties are
bound by restrictive agreements where they take property with notice of the contract
because "[i]n such a case, the person violating the agreement, though not a party to it,
is a privy in conscience with the maker" (quoting Langenback v. Mays, 60 S.E.2d 240,
241 (Ga. 1950))); Vetzel v. Brown, 86 So. 2d 138, 140-41 (Fla. 1956) (affirming
dismissal of appellants' complaint where they had constructive notice of recorded
restrictive covenants and implied actual notice because of a statement in their deed that
the title was subject to easements and restrictions of record); A & P Inv. Grp. v. Circle
Prop. Owners Ass'n, 741 So. 2d 1139, 1139 (Fla. 4th DCA 1998) (affirming trial court's
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finding that an unrecorded agreement as to shared expenses of recreation facilities
executed by the appellant's predecessor in title was binding on the appellant because
the appellant had notice of the agreement when it purchased the property).
The fact that AHF's title insurance company failed to locate the
memorandum of agreement and, as a result, the PILOT agreement itself during the title
search is unfortunate, but it does not relieve AHF from its obligation under the PILOT
agreement. AHF's remedy lies with the title insurance company.3 Similarly, while AHF's
special warranty deed may not have referenced the PILOT agreement, any dispute over
that issue is between AHF and RHF. It does not relieve AHF from its obligation to make
the required payments to the City.
Moreover, we note that even if AHF had not been provided with
constructive notice of the PILOT agreement, our conclusion regarding the binding
nature of the PILOT agreement would remain the same because we previously rejected
AHF's argument that the PILOT agreement was not a covenant running with the land.
See Silver Blue Lake Apartments, Inc., 245 So. 2d at 611 (recognizing that a restrictive
agreement that runs with the land is binding on a subsequent purchaser "regardless of
notice").
Affirmed.
SILBERMAN and BLACK, JJ., Concur.
3
Our record includes correspondence from a title insurance company to
AHF indicating that the title insurance company had agreed to make a payment to AHF
based on the City's claim for payment, though not in the amount for which AHF was
ultimately held liable to the City. A copy of a check from the title insurance company to
AHF is also included in our record.
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