Crapo v. Provident Grp.—Continuum Props., L.L.C.

• Decision Date: 08 February 2018
• Docket Number: No. 1D17–280,1D17–280
• Citation: 238 So.3d 869
• Parties: Edward A. CRAPO, as Alachua County Property Appraiser, Appellant, v. PROVIDENT GROUP—CONTINUUM PROPERTIES, L.L.C., a Florida not-for-profit limited liability company, and Von Fraser, in his capacity as Alachua County Tax Collector, Appellees.
• Court: Florida District Court of Appeals

238 So.3d 869

Edward A. CRAPO, as Alachua County Property Appraiser, Appellant,

v.PROVIDENT GROUP—CONTINUUM PROPERTIES, L.L.C., a Florida not-for-profit limited liability company, and Von Fraser, in his capacity as Alachua County Tax Collector, Appellees.

No. 1D17–280

District Court of Appeal of Florida, First District.

February 8, 2018

John C. Dent, Jr., and Jennifer A. McClain of Dent & McClain, Chartered, Sarasota, for Appellant.

David K. Miller of Broad and Cassel LLP, Tallahassee, for Appellee Provident Group—Continuum Properties, L.L.C.

Lewis, J.

Appellant, Edward A. Crapo, as Alachua County Property Appraiser, appeals a Final Declaratory Judgment in which the trial court determined that property used for student housing that is legally owned by Appellee, Provident Group—Continuum Properties, L.L.C., is equitably owned by the University of Florida ("UF") and is, thus, immune from ad valorem taxation. For the reasons that follow, we affirm.

Appellee owns legal title to the property at issue known as "The Continuum." The property is located near UF's campus in Gainesville and consists of 350,000 square feet, most of which is dedicated for graduate and professional student housing. Appellee's sole member is Provident Resources Group, Inc., a nonprofit corporation that, as one of its charitable functions, assists public universities to acquire, develop, and operate student housing. Appellee's Amended and Restated Articles of Organization describes its purpose as follows:

The Company is organized exclusively to further the stated charitable purposes of its Sole Member, a Georgia nonprofit and an organization exempt from Federal Income tax. Specifically, the Company is organized for the purpose of planning, developing, financing, equipping, operating, and maintaining a student housing facility and certain ancillary facilities located in Gainesville, Florida, exclusively for the benefit of [UF] and its students, consistent with the terms of a Student Housing Agreement by and between the University and the Company. The Company may engage in any lawful business activity permitted by the Act in furtherance of the foregoing purposes.

Article V, entitled "Public Benefit," sets forth:

The Company shall operate exclusively in furtherance of the above stated charitable purposes and shall not engage in any activities that would jeopardize the tax exempt status of the Sole Member. No substantial part of the Company's activities will be carrying on propaganda or otherwise attempting to influence legislation. No part of the real earnings of the Company or any of its operations shall result in private inurement or impermissible benefits to private interests or individuals. The Company shall not be operated for pecuniary profit.

Pursuant to its Operating Agreement, Appellee is to "undertake the acquisition, financing, equipping, ownership, operation and maintenance of the Student Housing Facility for the benefit of the University and its students, consistent with the terms and provisions of the Student Housing Agreement, which purpose is in furtherance of the stated charitable purposes of the Sole Member...." The Board of Managers is to "utilize any available surplus cash flow of the Company solely and exclusively in furthering the Charitable Activities of the Company, consistent with the stated charitable purposes of the Sole Member." Upon the "winding up of the Company," the "Company Property (or the proceeds thereof)" must be distributed in the "following order and priority: (a) to creditors ... (b) to the University ... (c) to the Sole Member of the Company for distribution in accordance with its charitable purposes ...."

The Student Housing Agreement, which Appellee and UF's Board of Trustees executed on August 9, 2010, explains "that there is a need for additional housing for graduate and professional school students," that Appellee desired to assist UF in meeting the need for additional housing, and that Appellee would, with the support and direction of UF's Department of Housing and Residence Education, implement housing educational programs and policies to serve the needs of UF's graduate and professional school students. UF "shall market and promote the Facility as a University-affiliated housing option for University Students." Appellee agreed "that all net revenues from operations of the Facility shall be used solely for the purpose of furthering the Charitable Activities." UF acknowledged that it "shall directly and substantially benefit from the development, operation and management of the Facility by Provident and that the Facility will provide a much needed addition to the housing supply ...." Upon the repayment in full of the project's financing, "all right, title, and interest in and to the Property shall be conveyed from Provident to the University or to another similarly situated charitable organization ...." If all or a portion of the property were to be taken by condemnation or other eminent domain proceedings, "any award or compensation payable in connection with such Taking shall be paid to the following priority: (i) first, to satisfy any remaining repayment obligations under the Continuum Financing ... (ii) second, to the University ...."

The Declaration of Covenants and Restrictions for the property provides that "Declarant hereby covenants that the Property herein ... shall be used exclusively as a housing community with related retail and ancillary uses ...." UF "shall have the right to enforce ... all restrictions, covenants and conditions imposed by the provisions of this Declaration."

In April 2013, Appellee sought declaratory relief for tax immunity from May 28, 2010, to the date of judgment and also sought a refund of taxes for a portion of 2010 and for 2011. After the trial court granted Appellant's motion to dismiss the action for lack of subject matter jurisdiction, Appellee filed an amended complaint as the "Trustee for the use and benefit of the University of Florida." Appellee sought tax immunity for 2010 through 2014 and again sought a refund of taxes for a portion of 2010 and for 2011. The trial court granted Appellant's motion to dismiss the amended complaint, a ruling which Appellee appealed. In Provident Group–Continuum Properties, L.L.C. v. Crapo , 157 So.3d 409, 410 (Fla. 1st DCA 2015), we reversed the dismissal order, setting forth in part:

[T]he documents don't state that appellant was "trustee" of the property being held "in trust" for the University, but the documents are otherwise replete with statements regarding the powers and duties of appellant for the benefit of the University, including provisions requiring ultimate disposition of the trust property to the University, all of which establish the creation of a trust.

We conclude that the documents established a trust for the benefit of the University of Florida, and thus appellant, as trustee, has standing to contest the tax assessment and is not barred by the time limit of section 194.171(2).

Thereafter, Appellee filed a second and third amended complaint, seeking a declaration of tax immunity for the property "for partial year 2010 and for the years 2011 through 2016; and alternatively, to exemption for 2014 through 2016." It again sought a refund of taxes for a portion of 2010 and for 2011.

During the non-jury trial, Norbert W. Dunkel, UF's Associate Vice–President for Student Affairs and Auxiliary Operations, testified that UF included the housing project at issue "as a part of the Department of Housing and Residence Education website." He explained that UF began looking into expanding its graduate and professional housing in 2008. Because doing so "would cost [UF] about a quarter billion dollars," which was not feasible, Dunkel looked into "a public-private partnership to provide graduate and professional school housing ...." Working with Appellee enabled UF to meet its housing needs for graduate and professional students. UF participates in committees or boards that oversee the project and considers the project a substantial benefit. UF markets the project and hires and trains a master's level professional staff member who lives onsite and is responsible for the "overall residence education of the site," which includes responding to such things as roommate issues, programming issues, and student discipline issues. UF does not provide those types of services to private for-profit housing projects. Any surplus funds for the project are used for payment of the debt.

Donovan Hicks, Appellee's Executive Vice–President, Chief Legal Officer, and Corporate Secretary, testified that Appellee is a "501(c)(3) organization" that "pursues activities in multiple areas, including lessening burdens of government." He explained that the project at issue involved a private non-profit party collaborating with a university to achieve a stated objective of that university and to eliminate certain risks that "universities try to avoid by designing, constructing these projects, financing them, without the university having to incur that indebtedness and able to still get the benefit ... and then ultimately ownership of the project." Appellee had no financial investment of its own in the property. When asked about any surplus funds that would result from tax immunity, Hicks testified, "Any type of resulting excess cash flow or surplus has to be, under the terms of our agreement with [UF], either reinvested in the project, for example, any—taking care of any capital improvement needs that the project might have, assisting the University." When asked who benefits from a surplus cash flow, he replied, "Well, I would...