Point East Management Corp. v. Point East One Condominium Corp., Inc.
| Decision Date | 31 July 1973 |
| Docket Number | No. 42228,42228 |
| Citation | 282 So.2d 628,73 A.L.R.3d 603 |
| Parties | POINT EAST MANAGEMENT CORPORATION, a Florida corporation, Petitioner, Cross/Respondent, v. POINT EAST ONE CONDOMINIUM CORPORATION, INC., a Florida nonprofit corporation, et al., Respondents, Cross/Petitioners, |
| Court | Florida Supreme Court |
Darrey A. Davis, of McCarthy, Steel, Hector & Davis, Miami, for petitioner, cross-respondent.
Ray H. Pearson, Gerald F. Richman and Bertha Claire Lee, of Frates, Floyd, Pearson, Stewart, Proenza & Richman, Miami, for respondents, cross-petitioners.
By petition and cross-petition for writ of certiorari, we have for review a decision of the District Court of Appeal, Third District (258 So.2d 322), which allegedly conflicts with a prior decision of this Court (Lake Mabel Development Corporation v. Bird, 99 Fla. 253, 126 So. 356 (1930)) on the same point of law. We have determined that we have jurisdiction pursuant to Fla.Const., art. V, § 3(b)(3), F.S.A.
Petition is the original developers of the Point East condominium project, a management corporation contracted to manage the project for a period of 25 years, and lessors of a recreation facility to the condominium association on a 99-year lease. The various identities of petitioner simply represent different stages of the developers' involvement with the project. Petitioner developed the condominium project and, subsequent to the formation of the condominium associations, contracted with itself for management of the condominiums and for the lease.
Respondents are the condominium associations--as presently constituted by individual condominium unit owners--who brought suit for rescission of the lease and management contract, for damages in fraud, for damages for breach of a fiduciary duty, and for damages for breach of contract. All relief sought was denied by the trial court except for invalidation of the management contract, and the District Court of Appeal, Third District, affirmed.
Petitioner seeks a reversal of the District Court of Appeal on the invalidation of the management contract, and respondents, by cross-petition, seek reversals of the District Court of Appeal on the affirmance of all other holdings of the trial court.
We have carefully reviewed those issues raised by the cross-petition and find them to be without merit. However, we have determined that the point raised by petitioner is meritorious, and the District Court of Appeal must be reversed on its invalidation of the management contract.
The District Court of Appeal recognized that rescission of the management contract would not lie merely because it arose from the dealings of the developers with themselves while they constituted all of the members of the condominium associations and of the management corporation. Lake Mabel Development Corporation v. Bird, Supra.
However, the District Court of Appeal held that the 25-year management contract is void because it violates the provisions of the Condominium Act in Wresting the control of the management of the condominiums away from the associations. This interpretation is based on three sections of the Condominium Act.
First, Fla.Stat. § 711.03(2), F.S.A., defines the association as 'the entity responsible for the operation of a condominium.' Fla.Stat. § 711.03(12), F.S.A., then defines operation of the condominium as including 'the administration and management' of the property. Finally, the District Court of Appeal relies upon Fla.Stat. § 711.12(1), F.S.A., which provides:
'The operation of the condominium shall be by the association, the name of which shall be stated in the declaration.'
The District Court of Appeal then, in effect, rescinded the contracts complained of, holding them to be invalid because they
'(D)ivest from the association in a material or substantial degree the power and privilege granted it by the statute to operate the condominium . . ..' Point East Management Corporation v. Point East One Condominium Corporation, 258 So.2d 322, p. 325.
We cannot agree with the District Court of Appeal that the Legislature, by placing in the condominium associations the power and duty to manage the condominimum properties, intended to restrict the ability of the associations to contract for the management of the associations. The fact that the contract is of long duration does not make the contract any more objectionable, and as pointed out in Lake Mabel Development Corporation v. Bird, Supra, the fact that the developers of the condominiums contracted with themselves for the management contract does not invalidate it.
The Legislature has chosen, through the adoption of Fla.Stat. § 711.13(4), F.S.A., which became effective January 1, 1971, to allow the owners of condominium units to cancel initial management contracts by a vote of 75 per cent of the owners of the individual units. Accordingly, it must be assumed that the Legislature recognized the existence of and chose not to abolish such contracts. It is impossible, therefore, to discover a legislative prohibition against a management contract.
The fact of the contract and its terms were made known--or at least available--to all who bought or considered buying condominium units, and the contracts of sale included affirmation of the management contract. Admittedly, a prospective purchaser had no option as to the management contract, but he knew or should have known that the contract was part of the purchase price of his condominium unit. Considered in that light, enforcement of the contract cannot be said to work a hardship on the present condominium owners.
Accordingly, that portion of the decision of the District Court of Appeal, Third District, which sought to invalidate the management contract contract between petitioner and respondents is quashed, and the remainder of the decision is approved. The cause is remanded to the District Court of Appeal, Third District, for further proceedings not inconsistent herewith.
It is so ordered.
BOYD, J., dissents and agrees with ERVIN, J.
We are clearly without jurisdiction to decide the merits of petitioner's cause under Article V, Section 3(b)(3), Florida Constitution, F.S.A. The decision under review does not conflict with Lake Mabel Development Corporation v. Bird, 99 Fla. 253, 126 So. 356 (1930), and the writ of certiorari should now be discharged as having been improvidently issued.
Lake Mabel involved a defense raised in mortgage foreclosure proceedings brought by one of the original promoters against the corporation. The corporation sought to avoid the foreclosure by arguing that the promoters had made a substantial profit on the sale of the mortgaged lands in which they owned all of the outstanding stock.
this Court stated:
'A corporation cannot, while its promoters own all its outstanding stock, avoid in equity a purchase of property sold to it by its promoters at a large profit, represented by stock of the corporation issued to such promoters, since the corporation thus has full knowledge of the facts and the rights of innocent purchasers of stock have not arisen.' Id. at 358.
Note my dissenting opinion in Fountainview Association, Inc. #4 v. Bell, 214 So.2d 609, at 611 (Fla.1968).
The principles espoused in the 1930 Lake Mabel decision were never discussed by the District Court of Appeal below. Indeed, it is unlikely that the court gave any consideration to applying that decision to the cause presently under review for two reasons:
1) Unlike Lake Mabel, the instant case involves condominium association corporations that by their very nature are intended to be composed of members of the general public. 2) The Condominium Act was passed thirty-three years after the Lake Mabel decision, and was expressly designed by our Legislature 'to give statutory recognition to the condominium from of ownership of real property.' F.S., Section 711.02, F.S.A. In the case sub judice the District Court of Appeal rested its decision almost exclusively upon an interpretation of the provisions of that act. The Lake Mabel decision is wholly irrelevant and the citing of it for conflict is a legal non sequitur.
Having mistakenly reached the merits of petitioner's claim, the majority have proceeded to misconstrue the Condominium Act (F.S., Chapter 711, F.S.A.). The four similar management contracts between the condominium associations and the management corporation, which the trial court and the District Court of Appeal, Third District, have found to be invalid, contain provisions inimical to F.S., Sections 711.03(2), 711.03(12), and 711.12(1), F.S.A.
As is stated in the majority opinion, the petitioner, as developer of the condominium, contracted with itself for management of the condominium and for the lease. Thus, the management contracts were executed by the developers while they controlled the condominium associations prior to their present makeup of individual condominium apartment owners. The resulting lopsided character of these 'agreements' are best evidence by an examination of the provisions contained therein. The contracts extend for periods of up to twenty-five years with no right of termination by the condominium associations except for cause after sixty days notice of default. The manager (petitioner), 'to the exclusion of all persons including the Association (respondent) and its members (presently, the apartment owners)' is given, In part, the following powers:
1) The right to hire, supervise, and fire, 'in its absolute discretion' such persons as are required to fulfill its duties under the management agreement.
2) The power to collect All...
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