Medical Facilities Development, Inc. v. Little Arch Creek Properties, Inc.

• Decision Date: 15 March 1995
• Docket Number: No. 94-1662,94-1662
• Parties: 20 Fla. L. Weekly D711 MEDICAL FACILITIES DEVELOPMENT, INC., a Florida Corporation, Appellant, v. LITTLE ARCH CREEK PROPERTIES, INC., a Florida Corporation; and Robb Evans, as Trustee for Certain Assets of the United States, Appellees.
• Court: Florida District Court of Appeals

Page 1300

656 So.2d 1300

20 Fla. L. Weekly D711

MEDICAL FACILITIES DEVELOPMENT, INC., a Florida Corporation, Appellant, v. LITTLE ARCH CREEK PROPERTIES, INC., a Florida Corporation; and Robb Evans, as Trustee for Certain Assets of

the United States, Appellees.

No. 94-1662.

District Court of Appeal of Florida,

Third District.

March 15, 1995.

Rehearing Denied August 2, 1995.

Ruden, Barnett, McClosky, Smith, Schuster & Russell, and Nancy Gregoire and John R. Keller and Terrence Russell, Ft. Lauderdale, for appellant.

Stuzin and Camner and Stanley A. Beiley, for appellee Little Arch Creek Properties, Inc.

Before BARKDULL, LEVY, and GREEN, JJ.

LEVY, Judge.

This case presents for our consideration the question of under what circumstances a bond must be posted by the proponent of a lis pendens, when the lis pendens is not based upon a duly recorded instrument or construction lien. Based upon our conclusion that the law of this state permits a bond to be readily available to protect the interests of a property owner who has had a lis pendens filed against their property, we affirm the trial court's imposition of such a bond.

I.

Appellee Little Arch Creek Properties, Inc. (hereafter "LACPI") owns a medical office building which it sought to sell. Appellant Medical Facilities Development, Inc. (hereafter "Medical Facilities") is part of an organization which purchases and operates medical buildings. In December of 1993, Medical Facilities made an offer to purchase the building from LACPI for 5.5 million dollars. ¹ A series of correspondence and communications among LACPI, Medical Facilities, and other parties followed, but the sale was never completed.

Medical Facilities later filed suit against LACPI seeking specific performance of an alleged contract to purchase the building. Medical Facilities claimed that a purchase contract existed based upon the exchange of correspondence and communications. LACPI claimed, on the other hand, that the correspondence relied upon by Medical Facilities did not constitute an enforceable contract. This issue of whether a contract was formed between the parties is not before us at this time, and nothing in this opinion should be construed as a commentary on it. ²

The issue which is now properly before us grows out of the fact that prior to the filing of Medical Facilities' suit, LACPI had entered into a separate contract to sell the building to another entity for 6.5 million dollars. Therefore, after filing its suit, Medical Facilities also filed a notice of lis pendens ³ against the property. The existence of this lis pendens has prevented LACPI from closing on its 6.5 million dollar contract to sell the building.

Thereafter, LACPI moved to discharge the lis pendens, but the trial judge denied the motion. Alternatively, LACPI moved to require Medical Facilities to post a bond to protect LACPI in the event that it ultimately turns out that the lis pendens was wrongfully filed. The trial judge reserved ruling on this motion, and set it for hearing. At the hearing, the parties debated the proper legal standard which the trial judge should follow in determining whether a bond should be ordered. They also disagreed over the amount at which the bond should be set, if one was ordered.

The trial judge eventually ordered a bond of one million dollars to be posted by Medical Facilities "to pay such damages which LACP[I] may sustain as a result of the wrongful filing by Plaintiff of the lis pendens herein." Medical Facilities posted this bond, and has now brought this non-final appeal, challenging both LACPI's entitlement to a bond, as well as the amount of the bond. See Fla.R.App.P. 9.130(a)(3)(B); Roger Homes Corp. v. Persant Constr. Co., 637 So.2d 5, 6 n. 1 (Fla. 3d DCA 1994); Munilla v. Espinosa, 533 So.2d 895, 895 n. 1 (Fla. 3d DCA 1988).

II.

Florida Statutes section 48.23 governs the use of a lis pendens, and treats a lis pendens as one of two types. The first type exists where the action underlying the lis pendens is "founded" upon a duly recorded instrument or a construction lien. ⁴ Sec. 48.23(3), Fla.Stat. (1993). Courts have consistently held that a bond is not available in conjunction with this type of lis pendens. See Florida Peach Corp. of Am., Int'l Div., S.A. v. Lurie, 411 So.2d 339, 340 (Fla. 5th DCA 1982); Chapman v. L & N Grove, Inc., 244 So.2d 154, 157 (Fla. 2d DCA 1971). The other type of lis pendens, which is the type at issue in this case, exists where the underlying action is not founded on a duly recorded instrument or construction lien. Sec. 48.23(3), Fla.Stat. (1993). As to this second type of lis pendens, the statute authorizes the trial court to "control and discharge the notice of lis pendens as the court may grant and dissolve injunctions." Sec. 48.23(3), Fla.Stat. (1993). Unfortunately, this reference to the law of injunctions has resulted in the application of different legal standards when determining the entitlement to a lis pendens bond.

III.

The caselaw in the District Courts of Appeal reflects three different approaches to determining whether a lis pendens bond is appropriate when the action underlying the lis pendens is not founded upon a duly recorded instrument or construction lien.

The first approach is the most stringent, and requires that the party requesting the bond make a showing that the bond is necessary to protect them from irreparable harm. See Sparks v. Charles Wayne Group, 568 So.2d 512, 517 (Fla. 5th DCA 1990) ("[B]efore a bond is required the land owner must show that he will suffer irreparable harm in the event the lis pendens is unjustified...."); Feinstein v. Dolene, Inc., 455 So.2d 1126, 1128 (Fla. 4th DCA 1984) (where the action underlying a lis pendens is not based on a recorded instrument, a titleholder could demand a bond "if he could show the danger of irreparable harm in the event the lis pendens was unjustified."); Florida Communities Hutchinson Island v. Arabia, 452 So.2d 1131, 1132 (Fla. 4th DCA 1984) (bond is mandatory if irreparable harm would result without it); Glusman v. Warren, 413 So.2d 857, 858 (Fla. 4th DCA 1982) (same).

The second approach is more lenient, and leaves the setting of a bond to the trial judge's discretion, which should be exercised after considering whether the lis pendens will place a "cloud on the title." See Mohican Valley, Inc. v. MacDonald, 443 So.2d 479, 481 (Fla. 5th DCA 1984) ("A lis pendens is permitted and proper in these cases but the trial judge has the authority and discretion to require a bond to indemnify the defendants in case the lawsuit fails. Like injunctions, which have the potential of irreparable injury to a wrongly sued defendant, a judge should set a reasonable bond when the reasonable exercise of his discretion requires.... The test is simple: if the lis pendens places a cloud on the title that did not exist then a bond should be considered."); Andre Pirio Assocs. v. Parkmount Properties, Inc., N.V., 453 So.2d 1184, 1186 (Fla. 2d DCA 1984) (trial court has discretion to set a bond); CAM Corp. of Broward v. Goldberger, 368 So.2d 56, 57 (Fla. 4th DCA) ("[T]he fixing of the amount of an injunction bond is a discretionary matter. Clearly the requirement of a bond in an injunction proceeding is within the sound discretion of the trial court. This same rationale extends to the case presented here involving a lis pendens based on a contract."), cert. denied, 378 So.2d 343 (Fla.1979); see also Bailey v. Rolling Meadow Ranch, Inc., 566 So.2d 63, 65 (Fla. 5th DCA 1990) (restates the "cloud on the title" test, but then goes on to hold that irreparable harm existed, and remanded for an evidentiary hearing on the bond amount).

The third and final approach to a lis pendens bond simply treats the bond as being mandatory. See Porter Homes, Inc. v. Soda, 540 So.2d 195, 196 (Fla. 2d DCA 1989) (where a lis pendens is not founded upon a lawsuit involving a recorded instrument, section 48.23(3) "requires the posting of a bond."); Machado v. Foreign Trade, Inc., 537 So.2d 607, 607 n. 1 (Fla. 3d DCA 1988) ("The plaintiff's original claim not arising out of a document entitled to be recorded, ... it would have been appropriate, upon motion, to require a bond, the same as required in the issuance of a temporary injunction."); Munilla v. Espinosa, 533 So.2d at 895 (Fla. 3d DCA 1988) ("The action in the trial court not being 'founded' on a 'recorded instrument' or 'mechanic's lien', it was error for the trial court not to require the posting of a bond."); Nero v. Nero, 475 So.2d 1361, 1361-62 (Fla. 5th DCA 1985) (where the underlying cause of action is not based on a recorded instrument, "petitioners are entitled to such a bond to indemnify them from damages resulting from the wrongful imposition of the notice of lis pendens." (footnote omitted)); Sunrise Point, Inc. v. Foss, 373 So.2d 438, 439 (Fla. 3d DCA) (a bond is required where a lis pendens is not based upon a recorded instrument), cert. denied, 374 So.2d 99 (Fla.1979).

This third approach, which makes a bond mandatory, is the one adhered to in this District. Machado, 537 So.2d at 607 n. 1; Munilla, 533 So.2d at 895; Sunrise Point, 373 So.2d at 438. However, Medical Facilities has argued that the Supreme Court's subsequent language in Chiusolo v. Kennedy, 614 So.2d 491 (Fla.1993), has changed the law, and now requires that the imposition of a bond be predicated upon a showing of irreparable harm. We disagree with Medical Facilities' reading of Chiusolo.

IV.

In Chiusolo v. Kennedy, the Supreme Court resolved a certified conflict between the Fourth and Fifth Districts over the issue of who bears the burden of proof when a titleholder seeks to discharge a notice of lis pendens. Chiusolo stands for the proposition that the burden of proof in a hearing to discharge a lis pendens is upon the proponent of the lis pendens, who must show a "fair nexus" between the property and the lawsuit. ⁵ Chiusolo, 614 So.2d at 492. However, after...