Old Port Cove Property Owners Ass'n, Inc. v. Ecclestone, s. 84-510
| Decision Date | 31 December 1986 |
| Docket Number | 84-1236,Nos. 84-510,s. 84-510 |
| Citation | 12 Fla. L. Weekly 183,500 So.2d 331 |
| Parties | 12 Fla. L. Weekly 183 OLD PORT COVE PROPERTY OWNERS ASSOCIATION, INC., Appellant, v. E. Llwyd ECCLESTONE, Jr. Appellee. |
| Court | Florida District Court of Appeals |
Rod Tennyson of Powell, Tennyson & St. John, P.A., West Palm Beach, and Larry Klein of Klein & Beranek, P.A., West Palm Beach, for appellant.
Edna L. Caruso of Edna L. Caruso, P.A., West Palm Beach, and Slawson & Burman, North Palm Beach, for appellee.
Old Port Cove Property Owners Association (POA) appeals a final judgment holding that the developer, Ecclestone, did not breach his fiduciary duty to POA when he sold the development's entire road system to POA but retained for himself a rent-free easement in the road system to allow access to the commercial areas. Also, POA appeals the trial court's award of attorney's fees to Ecclestone. We affirm the trial court's holding that Ecclestone did not breach his fiduciary duty, but we reverse as to the award of attorney's fees.
Old Port Cove was a planned development community that was to be built in phases over a ten-year period. The development was to ultimately include 1,400 residential condominium units, yacht club, marina, swimming pools, tennis club, and commercial areas. As envisioned by the developer, all of these recreational facilities and commercial areas were designed to enhance the value of the condominium units.
Ecclestone was the original developer of the Old Port Cove Development. As part of the planned project, the developer created the Property Owners Association (POA). Old Port Cove contained several different condominium buildings, and each had its own condominium association. The POA was a central organization which provided for the maintenance and management of the entire community.
In 1971, while acting both as the developer and as the president of POA, Ecclestone sold the entire road system of the project to the POA, retaining a rent-free easement in the road system of the development for the benefit of the commercial areas. Ecclestone accomplished this transaction by conveying the road system in trust for his children to The Bank of Palm Beach and Trust Company. The Bank subsequently conveyed the road system to the POA in exchange for a promissory note for $1.95 million and purchase money mortgage on the roads. In order to repay the mortgage, the POA required its members, both present and future condominium owners, to pay a pro-rata share of principal and interest. The commercial areas of the development, which were owned by Ecclestone at the time of the road system sale, were not members of the POA and not required to make the pro-rata payment. Thus, as a result of the easement and because they are not members of the POA, the commercial areas have never had to contribute to the general maintenance of the road system but have nevertheless derived full use and benefit of the system. In addition to this rent-free easement to the commercial areas, Ecclestone also required continued access to allow him to complete the development and sale of the condominium units.
POA contends that the developer breached his fiduciary duty to the POA by requiring it to purchase the project roads and assume responsibility for their maintenance, while excluding commercial areas which the developer owned from any responsibility in the road maintenance.
We agree with the trial court's finding that the developer did not breach his fiduciary duty to POA. The standard for examining transactions between a developer and a property owners' association is based on corporate law principles of fiduciary duty. In Avila South Condominium Association v. Kappa Corporation, 347 So.2d 599 (Fla.1977), the Florida Supreme Court held:
[A]ny officer or director of a condominium association who has contracted on behalf of the association with himself, or with another corporation in which he is, or becomes substantially interested, or with another for his personal benefit may be liable to the association for that amount by which he was unjustly enriched as a result of his contract. However, no director or officer shall be required to return any portion of moneys paid by the association where it is shown that he received the funds with the consent of the association or with the consent of a substantial number of the individuals comprising the association.
The Avila opinion is premised upon Florida corporate law principles that a director has the duty to perform his duties "in good faith, in a manner he reasonably believes to be in the best interests of the corporation, and with such care as an ordinarily prudent person in a like position would use under similar circumstances." Fla.Corp.Code, § 607.114(4), Fla.Stat. (1985). Additionally, Florida corporate law provides that when confronted with director conflicts of interest, such as those alleged here, the contract will be upheld providing it is "fair and reasonable as to the corporation at the time it is authorized." Fla.Corp.Code, § 607.124(1)(c), Fla.Stat. (1985). Thus, to uphold the contract, the road system sale must have been reasonable at the time the POA and the developer entered into the contract.
It is clear from the applicable statutes and the Avila decision that self-dealing per se is not actionable. The court in Avila recognized that developers need some degree of flexibility in order to facilitate the financing of condominium projects which will ultimately benefit the purchasers of the development after the developer has realized his fair profit. Certain public interests may be served by leaving to developers the possibility of self dealing, such flexibility may facilitate financing of some phases of some projects, with resulting economies that can be passed on to the public. Avila, 347 So.2d at 607. Thus, to prevail under Avila, the plaintiff must show that a director of the association contracted with himself, or a corporation under his control, for his personal benefit, and that he received unjust enrichment as a result of the transaction. In addition, the plaintiff must show that the director received funds without the consent of the association or of a substantial portion of the members of the association. Id.
Furthermore, it is the trial judge, after careful consideration of the facts in each case and based upon specific findings, who has the discretion to decide whether an officer of a condominium association (who has contracted on behalf of the association with himself or with a corporation for his personal benefit) has breached his fiduciary duty to the members of the association. Id. at 599.
In the instant case, the trial judge made the following findings of fact, all of which are supported in the record by substantial, competent evidence:
1. In approximately 1970 or 1971, the defendant, Ecclestone, conceived the creation of a condominium development involving approximately 1400 units encompassing a total community atmosphere with its amenities blending to the waters of Lake Worth and the Atlantic Ocean. Admittedly, the defendant owned all the land involved in the development and his intentions were profit motivated.
2. The undertaking was unique and staggering, envisioning multiphased development transcending a decade which was extremely complex.
3. At the time this law suit was filed in 1980 the development was most successful to all parties concerned.
4. To accomplish the defendant's ultimate goal in this development, it became necessary to create multiple corporations, joint ventures and condominium entities; many of which were reconstructed during the course of the phased development.
5. During the planning, creation and development stages many problems arose concerning finance, governmental limitations and regulations on the local, state and federal levels and decisions were required to be made, without which, the development would never have come into fruition.
6. The decision which has generated this law suit surrounds the problem of ingress and egress by the developer over the property dedicated to condominium ownership, not only during its phased development, but perpetually to commercial areas owned and controlled by the defendant, which areas were retained by the defendant, and not submitted to condominium ownership. It was never the defendant's intent to gratuitously convey his right of ingress and egress and then subsequently repurchase them for monetary consideration.
The problem of the defendant's ingress and egress was of no consequence so long as he retained full ownership to the private road system he created serving the condominium area. This road system was purposely retained as private ownership and not dedicated to the public so as to ensure privacy to the ultimate users of the condominium property. If the road system was to be conveyed directly to the unit owners, the price of their individual unit should reflect a proportionate cost of the roadway system; yet, retaining the reservation of ingress and egress.
Ultimately, the defendant made the decision which has generated this litigation. He conveyed, by special warranty deed, the roadway system to the Bank of Palm [Beach] & Trust Company, as Trustee, on May 14, 1971 and in that deed is contained the language set forth as follows:
"Subject also to the perpetual rent free use of all property, either granted by deed or easement, by ... E. Llwyd Ecclestone, Jr., ... and their respective invitees, successors and assigns."
7. The bank then conveyed, on July 29, 1971, to the plaintiff, Old Port Cove Property Owners Association, Inc., the roadway system and in its legal description was contained the same reservation of the perpetual rent free use of all property, either granted by deed or easement, etc.
8. The consideration paid by the POA to the bank was $1,950,000. secured by a promissory note and mortgage, which mortgage had the same language contained...
To continue reading
Request your trial
-
Tinwood N.V. v. Sun Banks, Inc., 89-2281
...prudent person in a like position would use under similar circumstances." § 607.111(4), Fla.Stat. (1985); Old Port Cove Property Owners v. Ecclestone, 500 So.2d 331 (Fla. 4th DCA 1986), rev. denied, 509 So.2d 1118 (1987). A director or officer of a corporation, acting as its agent in the pu......
-
Wendt v. La Costa Beach Resort Condominium
...and unjust enrichment further convinces us that the lessors indemnification argument must fail."); Old Port Cove Prop. Owners Ass'n v. Ecclestone, 500 So.2d 331, 336 (Fla. 4th DCA 1986) ("We are convinced that the reasoning of Penthouse and Century Village applies to the facts of this The d......
-
Shechtman v. Jockey Club III Ass'n, Inc., 92-2369
...PER CURIAM. Affirmed. See Avila South Condominium Ass'n v. Kappa Corp., 347 So.2d 599 (Fla.1977); Old Port Cove Property Owners Ass'n, Inc. v. Ecclestone, 500 So.2d 331 (Fla. 4th DCA 1986), review denied, 509 So.2d 1118 (Fla.1987); Sec. 718.115(1), Fla.Stat. ...
-
Old Port Cove Property Owners Ass'n, Inc. v. Ecclestone
...Property Owners Association, Inc. v. Ecclestone (E. Llwyd, Jr.) NO. 69,974 Supreme Court of Florida. MAY 28, 1987 Appeal From: 4th DCA 500 So.2d 331 Rev. ...