Seminole Tribe of Florida v. Eastern Regional Director, Bureau of Indian Affairs, 53 IBIA 195 (2011)

• Court: Interior Board of Indian Appeals

INTERIOR BOARD OF INDIAN APPEALS Seminole Tribe of Florida v. Eastern Regional Director, Bureau of Indian Affairs 53 IBIA 195 (06/03/2011)

United States Department of the Interior

OFFICE OF HEARINGS AND APPEALS INTERIOR BOARD OF INDIAN APPEALS 801 NORTH QUINCY STREET SUITE 300 ARLINGTON, VA 22203

SEMINOLE TRIBE OF FLORIDA, Appellant, v. EASTERN REGIONAL DIRECTOR, BUREAU OF INDIAN AFFAIRS, Appellee.

Order Affirming Decision

Docket No. IBIA 09-37-A

June 3, 2011

The Seminole Tribe of Florida (Tribe) asked the Bureau of Indian Affairs (BIA) to cancel a commercial lease between the Tribe, as lessor, and Hollywood Mobile Estates, Ltd. (HME), as lessee, based on HME’s failure to cure certain alleged breaches of the lease, which included (1) failing to completely develop the leased premises; (2) entering into an unapproved leasehold mortgage with Michigan National Bank - Oakland (Michigan National) and into unapproved agreements and assignments related to that financing; and (3) mismanaging the property. The BIA Eastern Regional Director (Regional Director) declined the Tribe’s request to cancel the lease, finding that HME had not breached the lease.1 With respect to the management-related alleged defaults, the Regional Director additionally concluded that they could not serve as a basis to cancel the lease because the Tribe had ousted HME from the premises without affording HME an opportunity to cure those alleged defaults. We affirm the Decision because we find it to be reasonable and supported by the administrative record.2 The Regional Director correctly concluded that the Tribe has not demonstrated that HME committed any material breach of the lease. In addition, the1

for the related subsequent refinancing agreements and assignments of mortgage to the bank’s successors-in-interest by merger. Third, the Regional Director correctly concluded that HME’s failure to cure alleged management-related defects cannot serve as the basis for cancelling the lease when the Tribe itself — prior to giving HME any notice of these alleged breaches — ousted HME from the premises. Even assuming that the Tribe only learned of the management-related issues after taking possession, that would not excuse the requirement that BIA comply with the regulations and provide HME with due process, i.e., an opportunity to cure, before cancelling the lease. Thus we affirm, on this ground, the Regional Director’s conclusion that the alleged management-related deficiencies could not serve as a basis to cancel the lease. Background I. General

In 1969, the Tribe entered into a 50-year lease with Joseph L. Antonucci, for the development of a mobile home park, together with commercial facilities, community services and amenities for residents of the area, on a parcel of land which now apparently consists of approximately 105 acres. See Lease No. 048 (Lease), AR Tab 1; Opening Brief at 1.3 The lease was approved by BIA on March 11, 1969, under the authority of 25 U.S.C. § 415,4 and under the regulations then codified at 25 C.F.R. pt. 131 (1969) (Leasing and Permitting). Six months after executing the lease, the Tribe and Antonucci, with the approval of BIA, extended the term to 55 years. See AR Tab 2. Following several interim assignments of the lease, HME became the lessee through an assignment from DeAnza Properties. The Tribe consented to the assignment on March 20, 1986, and BIA approved it on March 21, 1986. See AR Tab 11. The consent3

the leased premises. Id. at 4-5. According to the Tribe, the provisions in the leasehold mortgage appeared to violate 25 U.S.C. §§ 177 and 81.11 The Tribe also objected to the collateral assignment of leases, rents and profits that HME and Michigan National had executed on March 24, 1986, and to the 1993 and 1998 mortgage modifications, as both substantively offensive and procedurally defective for lack of Tribal and BIA approval. Some of the Tribe’s substantive objections were the same or similar to its objections to the leasehold mortgage; an additional objection was that the guarantor individuals had been released from personal liability for indebtedness to the bank. See Notice of Default at 7-8. The Tribe stated that it was giving HME an opportunity to cure each of the defaults and breaches set forth in the notice within the time frames in Article 18 of the lease (e.g., the 60-day deadline for curing non-monetary defaults). The Tribe also stated that although the Tribe regarded the mortgage and all related documentation to be null and void ab initio, HME might want to put the bank on notice of the alleged defaults and breaches. The Tribe did not give notice to Michigan National or any of its successors-in-interest by merger.1211

Even were we to conclude that further approval of the mortgage or financing documents was required, we would find that the Tribe’s objections are misplaced and premature in the context of requesting that the lease be cancelled by BIA. At a minimum, given the representations made by the Tribe and BIA to HME, we agree with the Regional Director that before the lease should be cancelled, HME should be afforded a reasonable opportunity to present the mortgage and financing documents to BIA and the Tribe for approval, pursuant to article 14 of the lease. Article 14.C. provides that the Tribe and BIA “shall not unreasonably withhold approval” of any assignment or transfer, and the Tribe itself concedes that article 14.C. is subject to the arbitration provision in the lease. See Opening Brief at 10. Thus, under the circumstances, it would be premature to cancel the lease without at least addressing, and developing a more complete record on, the possibility of approval of the documents.21 V. Management-Related Breaches

After ousting HME from the premises, the Tribe identified numerous managementrelated alleged breaches of the lease, including HME’s alleged failure to follow its own rules and regulations, and state law, for operating a mobile home park for residents 55 years of age and over, allowing unauthorized commercial uses (a “used car lot”), allowing the premises to fall into a state of disrepair, and “knowingly” failing to take steps as manager to mitigate or eliminate criminal activity “about which HME knew or should have known.” Opening Brief at 26. The Regional Director concluded that the presence of some children living in the mobile home park did not violate the lease, which did not prohibit residency by persons under 55 years of age; that HME’s purported disregard for criminal activity did not rise to the level of causation and breach; that the evidence was insufficient to conclude that HME had materially breached the lease by permitting unauthorized commercial activities; and that21

Therefore, pursuant to the authority delegated to the Board of Indian Appeals by the Secretary of the Interior, 43 C.F.R. § 4.1, the Board affirms the Regional Director’s December 4, 2008, decision. I concur:

// original signed Steven K. Linscheid Chief Administrative Judge

// original signed Debora G. Luther Administrative Judge

[1]. See Letter from Regional Director to Spencer M. Partrich, HME, Dec. 4, 2008 (Decision), Administrative Record (AR) Tab 61.

2

The Tribe; HME; and Bank of America, N.A. and LaSalle Bank Midwest (successors-ininterest to Michigan National) requested oral argument. The Board finds that the comprehensive briefs filed by the parties are sufficient for presenting their respective arguments. Therefore the requests for oral argument are denied. 53 IBIA 195

Regional Director correctly concluded that alleged management-related deficiencies, even if they rose to the level of a breach, could not serve as a basis to cancel the lease when the Tribe itself — without affording HME an opportunity to cure — ousted HME from the premises. First, we agree with the Regional Director that HME’s failure to develop a 10-acre portion of the premises did not serve as a basis to cancel the lease. The lease was approved by BIA in 1969 and required the then-lessee to prepare and to submit for BIA approval, within the following year, a general plan and architect’s design for the full improvement and complete development of the premises. All permanent improvements were required to be completed within 5 years. None of the parties has located the development plan, but it is undisputed that neither the original lessee nor its successors-in-interest ever developed the 10-acre area. When HME became the lessee by assignment in 1986 — 17 years into the lease — the Tribe (and BIA) expressly agreed that there were no uncured defaults on the part of the lessee and that there was no event or occurrence which, but for the passage of time or the giving of notice, would constitute a default. As the successor-in-interest, HME stepped into the shoes of the prior lessees, acquiring the same obligations under the lease as those lessee predecessors-in-interest, but no new obligations. The Tribe now seeks to rely on general language in the lease expressing the parties intent that the leased property be utilized to its “highest and best use,” as the basis for finding HME in breach for failing to develop the 10-acre area. But that language was in the lease when the Tribe agreed, in 1986, that a 17-year failure by the prior lessees to develop the 10-acre area did not constitute a breach. Thus, we affirm the Regional Director’s decision that this issue did not provide a basis to cancel the lease. Second, the Regional Director correctly concluded that the Tribe and BIA approved, in 1986, the leasehold mortgage between HME and Michigan National, and the related and subsequent agreements, including financing renewals and assignments to successors-ininterest by merger, and therefore these transactions by HME do not constitute material breaches of the lease. The fact that the Tribe’s and BIA’s approval appears in a separate letter, rather than on the face of the mortgage and financing documents, does not prevent that...