IN THE SUPREME COURT OF FLORIDA CASE NO. SC11-1445 First District Court of Appeal Case No. 1D10-4072 LEONARD J. ACCARDO, et al, Petitioners, v. GREGORY BROWN, Property Appraiser of Santa Rosa County, et al, Respondents. RESPONDENTS’ ANSWER BRIEF ON REVIEW FROM THE FIRST DISTRICT COURT OF APPEAL Elliott Messer, Esq. Florida Bar No. 054461 Thomas Findley, Esq. Florida Bar. No. 0797855 Messer, Caparello & Self, P.A. 2618 Centennial Place Tallahassee, Florida 32308 Telephone (850)222-0720 Roy Andrews, Esq. Florida Bar No. 228291 Lindsay, Andrews & Leonard P.O. Box 586 Milton, Florida 32572 Telephone (850)623-3200 Counsel for Respondents
Transcript
IN THE SUPREME COURT OF FLORIDA
CASE NO. SC11-1445
First District Court of Appeal Case No. 1D10-4072
LEONARD J. ACCARDO, et al, Petitioners,
v.
GREGORY BROWN, Property Appraiser of Santa Rosa County, et al,
Respondents.
RESPONDENTS’ ANSWER BRIEF
ON REVIEW FROM THE FIRST DISTRICT COURT OF APPEAL
Elliott Messer, Esq. Florida Bar No. 054461 Thomas Findley, Esq. Florida Bar. No. 0797855 Messer, Caparello & Self, P.A. 2618 Centennial Place Tallahassee, Florida 32308 Telephone (850)222-0720
Roy Andrews, Esq. Florida Bar No. 228291 Lindsay, Andrews & Leonard P.O. Box 586 Milton, Florida 32572 Telephone (850)623-3200
Counsel for Respondents
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TABLE OF CONTENTS Page TABLE OF CONTENTS ............................................................................................... i TABLE OF CITATIONS .............................................................................................. ii STATEMENT OF THE CASE AND FACTS ............................................................. 1
A. Statement of the Case ............................................................................... 1 B. Statement of the Facts .............................................................................. 4
SUMMARY OF ARGUMENT .................................................................................. 17 ARGUMENT ............................................................................................................... 18
I. PETITIONERS’ BEACH HOMES AND CONDOMINIUM
UNITS ARE SUBJECT TO LOCAL GOVERNMENTAL AD VALOREN TAXATION ............................................................ 18
II. PETITIONERS ARE EQUITABLE OWNERS OF THEIR
BEACH HOMES AND CONDOMINIUM UNITS FOR AD VALOREN TAX PURPOSES .......................................................... 29
III. THE UNITED STATES CONSTITUTION DOES NOT
PROHIBIT TAXATION OF PETITIONERS’ INTERESTS ...... 42
IV. THE TAX COLLECTOR AND SANTA ROSA COUNTY HAVE STANDING TO CHALLENGE THE CONSTITUTIONALITY OF THE PETITIONERS’ INTERPRETATION OF THE RELEVANT STATUTES ........... 44
V. THE QUESTION REGARDING THE POSSIBLITY OF
LIENS OR TAX CERTIFICATES IS NOT RIPE ........................ 48 CONCLUSION ............................................................................................................ 50 CERTIFICATE OF SERVICE.................................................................................... 51 CERTIFICATE OF COMPLIANCE .......................................................................... 52
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TABLE OF CITATIONS Page Cases 1108 Ariola v. Jones, 71 So.3d 892 (Fla. 1st DCA 2011) ................................ 5, 21, 30 Accardo v. Brown, 63 So.3d 798 (Fla. 1st DCA 2011) ........................... 1, 4, 21, 30, 36 Adams v. Aetna Cas. & Sur. Co., 574 So. 2d 1142 (Fla. 1st DCA 1991) .................. 30 Alvin’s Stores, et al. v. Jones, No. 1D07-0149 (Fla. 1st DCA Oct. 22, 2007) .... 21, 22 AMFI v. Jones, No. 1D08-0402 (Fla. 1st DCA Oct. 28, 2008) ................................. 22 AMFI v. Kinney, 360 So. 2d 415 (Fla. 1978) .............................................................. 23 Ammerman v. Markham, 222 So. 2d 423 (Fla. 1969) ................................................ 41 Archer v. Marshall, 355 So. 2d 781 (Fla. 1978).................... 19, 21, 23, 25, 30, 38, 48 Baird v. Commissioner, 68 T.C. 115 (1977) .............................................................. 33 Bancroft Inv. Corp. v. City of Jacksonville, 27 So. 2d 162 (Fla. 1946) ..................... 31 Bell v. Bryan, 505 So. 2d 690 (Fla. 1st DCA 1987) ....................................... 22, 23, 30 Broward County v. Eller Drive Ltd. Partnership, 939 So. 2d 130 (Fla. 4th DCA ...... 2006) .................................................................................................................. 37 Caufield v. Cantele, 837 So. 2d 371 (Fla. 2002) ........................................................ 19 City of Miami v. Steckloff, 111 So. 2d 446 (Fla. 1959) .............................................. 44 Dade County School Bd. v. Radio Station WQBA, 731 So. 2d 638 (Fla. 1999) ....... 19 Dept. of Education v. Lewis, 416 So. 2d 455 (Fla. 1982) .......................................... 47 Dept. of Revenue v. Gibbs, 342 So. 2d 562 (Fla. 1st DCA 1977) .............................. 49
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Dept. of Revenue v. Skop, 383 So. 2d 678 (Fla. 5th DCA 1980) ............................... 31 Gay v. Jemison, 52 So. 2d 137 (Fla. 1951) ................................................................. 38 Green v. City of Pensacola, 108 So. 2d 897 (Fla. 1st DCA 1959) ............................ 47 Helvering v. F&R Lazarus & Co., 308 U.S. 252, 60 S.Ct. 209, 84 L.Ed. 226 (1939) .. ...................................................................................................................................... 31 Hialeah, Inc. v. Dade County, 490 So. 2d 998 (Fla. 3d DCA 1986) ............. 35, 39, 40 Kaulakis v. Boyd, 138 So. 2d 505 (Fla. 1962) ...................................................... 46, 47 Leon County Educational Facilities Authority v. Hartsfield, 698 So. 2d 526 (Fla.
1997) ............................................................................................................ 20, 33 MacNeill v. O’Neal, 238 So. 2d 614 (Fla. 1970) ........................................................ 19 Malu v. Security Nat’l Ins. Co., 898 So. 2d 69 (Fla. 2005) ........................................ 19 Marathon Air Services, Inc. v. Higgs, 575 So. 2d 1340 (Fla. 3d DCA 1991) ........... 38 Mikos v. Kings Gate Club, Inc., 426 So. 2d 74 (Fla. 2d DCA 1983) ............ 20, 31, 32 Offcutt Housing Co. v. County of Sarpy, 351 U.S. 253 (1956) .................................. 38 Parker v. Hertz Corp., 544 So. 2d 249 (Fla. 2d DCA 1989) .............31, 33, 34, 37, 40 Portofino Condominium Assoc. v. Jones, No. 1D07-2298 (Fla. 1st DCA Aug. 5,
Robbins v. Welbaum, 664 So. 2d 1 (Fla. 3d DCA 1995) ........................................... 38 Sans Souci v. Div. of Florida Land Sales and Condominiums, Dept. of Business
The Respondents, Gregory Brown, the Property Appraiser of Santa Rosa
County (the “Property Appraiser”), and Stan Nichols, the Tax Collector of Santa
Rosa County (the “Tax Collector”), accept, in part, the procedural history outlined
by the Petitioners in their “Statement of the Case and of the Facts.” Petitioners’
statement of facts, however, does not contain adequate reference to the procedural
1 The trial court order is in Respondents’ Appendix, Tab A, which will be cited to by the letter “A” followed by the tab number. Respondents will cite to the record in accordance with the method used in the district court, by reference to three separate appellate records or “divisions” as Petitioners described them in their district court brief. R1 refers to the record in Case No. 1D10-4072. R2 refers to the record in Case No. 1D07-6090. R3 refers to the record in Case No. 1D07-6065. The “R” cite is followed by “V” for volume and the page number.
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history or extensive record on the issue of equitable ownership. Therefore,
Respondents have prepared the “Statement of Facts” set forth below.
Petitioners have sued the Respondents in each year of this past decade in an
effort to avoid local government real property taxes on their condominium units
and beach homes on Navarre Beach on Santa Rosa Island. R2-V1-1; R3-V1-1;
R3-V59-9220. Many Petitioners have sued in each annual lawsuit since 2001. Id.
Petitioners’ annual lawsuits continue, despite three adverse appellate opinions;
three more per curiam affirmed opinions; and a stipulated judgment signed by
Petitioners, which bound the entire class of Petitioners for years 2002-2005. Id.
In the original action, Petitioner Lewis Ward and others challenged their
2001 assessments. R1-V14-2189, Tab A. In March 2004, the trial court rejected
their claim and held Petitioners’ interests were subject to local government real
property taxes. R1-V14-2189, Tab A. The First District affirmed. Ward v.
Brown, 919 So. 2d 462 (Fla. 1st DCA 2005). For tax years 2002 forward, the
Property Appraiser again assessed the condominium units and improvements as
real property. R3-V1-1. In 2002, the Property Appraiser also assessed the
condominium units to include each unit owner’s proportionate share of land, as
required by Section 718.120, Florida Statutes. For tax years 2002 through 2005,
Petitioner Ward and others again sued. R3-V1-1; R3-V59-9220. Ward and others
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were adjudicated to be “class representatives” for the class of petitioners. R3-V1-
46-76. The trial court found Ward’s lease presented common questions of fact and
law for all property interests on Navarre Beach. R3-V1-36-76 (Motion and Order
for Class Certification, Case No. 02-918-CA (Dec. 2002) (same orders in Case
Nos. 03-837-CA, 04-857-CA and 05-1039-CA). The trial court found the class
was represented by competent class counsel. Id.2
After the First District issued the opinion in Ward v. Brown in 2005, the
class of Navarre Beach taxpayers represented by Ward entered into a Stipulated
Judgment of Dismissal for tax years 2002-2005. R3-V59-9220. This final
judgment was entered on July 18, 2006. Id. (Stipulated Judgment of Dismissal,
Case Nos. 02-918, 03-837, 04-857 and 05-1039 (July 18, 2006). By such order,
each member of the Plaintiff class was directed to pay ad valorem taxes. Id.
Despite Ward v. Brown and the Stipulated Judgment, Petitioners filed the
instant lawsuit for tax year 2006 with new counsel. R2-V1-1. For tax years 2006
forward, the Property Appraiser included land in the assessed values. The
2 The original Ward v. Brown petitioners were represented by the Clark Partington firm. In 2002, the class of Navarre Beach residents added Carlton Fields and Ben Phipps, P.A., for the class action case. In 2006, they employed Shell, Fleming, Davis & Menge. In 2010, they added D’Alemberte & Palmer. Petitioners have been competently represented over the past decade by very capable lawyers.
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assessment of vacant land and land under non-condominium property was the only
issue not addressed in prior judgments.
In this case, both parties moved for summary judgment. R1-V1-111-117;
125-134. The trial court entered summary judgment for the Respondents. R1-
V13-2149. The trial court held Petitioners are equitable owners of their real
property, including improvements, condominium units and the land underlying
these interests. Id. The First District affirmed. Accardo v. Brown, 63 So. 2d 798
(Fla. 1st DCA 2011). The First District certified the question of whether Petitioners
should be allowed to pay the reduced intangibles tax, thereby escaping local
governmental ad valorem taxes. This Court accepted review.
B. Statement of the Facts.
The tax assessments at issue relate to beach homes and condominium units
acquired under 99-year leases with options to renew for additional 99-year periods.
In their own statement of facts, Petitioners fail to include record citations to the
relevant lease provisions. Petitioners broadly reference categories of lease
provisions in their brief with no record support. See Petitioners’ Initial Brief, pp.
4-5, in which they purport to describe similarities and differences in the leases.
Originally, Petitioners did not seek to make distinctions among the various
leases. Instead, Petitioners attached six representative leases to their Complaint,
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alleging these six leases contained provisions common to all. As the First District
confirmed on appeal, the six leases attached were “common to most of the leases
at issue.” Accardo Opinion, p. 4. The First District also noted: “[e]ach of the
attached leases was for a ninety-nine year term, and the lessees had the option
to renew for another term of ninety-nine years.” Id. (emphasis added). In the
companion case of 1108 Ariola v. Jones, 71 So. 2d 892 (Fla. 1st DCA
2011)(“Ariola Opinion”), the First District also noted: “the parties treated these
leases as identical for purposes of determination of the issues in this case.” Ariola
Opinion, p. 8. Thus, Petitioners alleged the leases with 99-year terms and 99-year
renewal terms to be representative.3
In most instances, the leases on Santa Rosa Island were directed to
developers, who built condominium units and sold them to Petitioners. Petitioners
concede their properties are used for private purposes. As the trial court held:
All of the Petitioners’ interests at issue in this action are used for purely private purposes. The Petitioners enjoy the capital appreciation and rental income derived from these interests. The Petitioners have the right to convey their interests without restraint; they have the right to encumber their properties with mortgages; they bear all of the risks of ownership; they bear the responsibility for insurance, maintenance and repair; and they are typically responsible by the terms of their lease documents for taxes imposed
3 The amicus brief of FAPTP relies on unknown, but incorrect, facts in arguing this case relates to “relatively short-term lessees (as few as 10 years).” FAPTA Amicus Brief, p. 1.
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upon their interests. The County, in contrast, does not bear any of the burdens typically associated with ownership of real property.
A-1, p. 2. This language of the trial court was adopted and quoted in the
appellate opinion under review. Accardo Opinion, p. 5. Because Petitioners
maintain virtually all of the benefits and burdens of ownership, the First District
held Petitioners are the equitable owners of their real property interests.
Notwithstanding Petitioners’ argument relating to the United States
Constitution, the land at issue is not federally owned property. R2-V2-200, Ex. A.
The United States does not even have bare legal title. Id. Instead, in 1947, the
land was conveyed to Escambia County. Id. Escambia County leased the part of
the island known as Navarre Beach to Santa Rosa County for 99 years with
automatic renewals for additional 99-year periods in perpetuity. R2-V2-200, Ex.
B. Both Escambia County and Santa Rosa County have subleased parts of the
island to private parties for development. Neither the United States government
nor any other governmental entity has ever objected. Both counties have joined in
numerous declarations of condominium under Chapter 718, Florida Statutes,
submitting the realty to private condominium ownership. R1-V1-141.
1. Class Representatives Ward and Coley
Petitioners Ward and Coley were lead Petitioners in the original litigation
and have participated in all subsequent litigation. Ward v. Brown. R1-V2-4
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(Ward Depo. p. 7). Although the instant case is not a class action, Petitioners
Ward and Coley were held to be class representatives when stipulated judgments
were entered in tax years 2002-2005. R3-V1-69; R1-V2-4 (Ward Depo., p. 7).
Both of these former class representatives own condominium units, Ward at
Emerald Surf, R1-V2-4, and Coley at Navarre Towers. R1-V5. Both interests
were adjudicated to be typical of Navarre Beach interests. R3-V1-36-76 (Motion
and Order for Class Certification, Case No. 02-918-CA (Dec. 2002) (similar
orders were also issued in Case Nos. 03-837-CA, 04-857-CA, 05-1039-CA); R1-
V2-4 (Ward Depo., p. 7). The cases for which they served as class representatives
were resolved by “stipulated judgment” by which local ad valorem taxes would be
paid. R1-V2-4 (Ward Depo., p. 8). R3-V59-9220.
For both Ward and Coley, the Santa Rosa Beach Administration entered
into agreements with developers to build and sell condominium units. R1-V2-4
(Ward Depo., Ex. A (prior Ward dep., Ex. #1); R1-V5 (Coley Depo., Ex. #4). Both
lease terms were for 99 years with renewal options for more 99 year periods. Id.,
Ward, Par. III.; Coley Par. III. The renewal option in Coley’s case is tied to the
term of the Escambia-Santa Rosa County lease, which renews automatically in
In each case, records were required to be kept for each “condominium unit
sold . . . ”. Id., Ward Par. V; Coley Par. XIV. Each agreement also provided that
the County would “join in the declaration of condominium.” Id., Ward Par. XIII.;
Coley Par. XIV. As noted in the Coley lease: “[I]n the event of the sale of a
condominium unit it shall not be necessary that Lessee [Developer] notify Lessor
[County] of such sale or that Lessor be paid a transfer fee, provided that Lessee
shall at all times maintain a current and accurate list of condominium owners
together, with the date of purchase and original purchase price of each unit.”
Id., Coley Par.XIV. In addition: “It is expressly agreed that the sale of a
condominium apartment or townhouse shall not be considered an assignment
or subletting, and prior contract (sic.) of Lessor [County] to such a sale shall not
be required.” Id., Coley Par. XIV.
The Declaration of Condominium for the Wards’ unit states in Paragraph
1.1 that the association owns fee title to the land. R1-V2-4 (Ward Depo., p. 12,
Ex. B, par. 1.1). For all Petitioners’ condominium units, Declarations of
Condominium were entered, committing the property to the condominium form of
ownership under Chapter 718, Florida Statutes. R1-V2-4 (Ward Depo., p. 12, Ex.
B, par. 1.2); R1-V5 (Coley Depo., p. 14, Ex. 3, Art. 1). Ward and Coley recognize
the condominium unit to include an undivided interest in the common elements.
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R1-V2-4 (Ward Depo., p. 13); R1-V5 (Coley Depo., p. 11-12). Tax notices show
these assessments were for the unit and a percentage of the common elements,
which include land. R1-V5 (Coley Depo., p. 29).
None of the property is used for governmental purposes. R1-V2-4 (Ward
Depo., p. 13). Ward and Coley pay for all utilities, including gas, water,
electricity, and sewer. R1-V2-4 (Ward Depo., Ex. A (prior Ward dep., Ex. 1), Par.
VI); Coley Par. VI. Petitioners are obligated to repair and maintain the premises.
Id., Ward Par. XI; Coley Par. XII. Moreover, under the heading “Taxes and
Assessments,” Ward and Coley are required to pay all assessed taxes. Id., Ward
Par. XII; Coley Par. XIII. The property is kept at the “sole risk of Lessee or Sub-
lessee” and the county is not responsible in any way for such property. Id., Ward
Par. XV; Coley Par. XVI. Petitioners must maintain liability and property
insurance. Id.; R1-V2-4 (Ward Depo., Ex. 8); Coley Par. XVI.
Mr. Ward paid $136,000 for his condominium unit. R1-V2-4 (Ward Depo.,
p. 7). A closing statement shows a “contract sales price” of $136,000 for the unit.
R1-V2-4 (Ward Depo., Ex. A (prior Ward dep., Ex. 9). The Wards have rented
the unit to third parties. R1-V2-4 (Ward Depo., Ex. A (prior Ward dep., Ex. 5,
7)(“Ward Tax Returns”). The Wards have enjoyed the rental income and reported
it on income tax returns from 1996 to present. Id. The Wards have depreciated
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the condominium and taken casualty losses on it. Id.; Rev.Rul. 69-89. The
County does not pay any costs associated with the property. Id., p. 15.
The Coleys signed a Residential Sale and Purchase Contract for their unit.
R1-V5 (Coley Depo., Ex. 2, 6). Mr. Coley understood his responsibility to pay
lawfully assessed taxes. R1-V5 (Coley Depo., p. 11). The Settlement Statement
stated a “contract sales price” of $325,000. R1-V5 (Coley Depo., Ex. #5). Mr.
Coley agreed that this was the “sales price.” R1-V5 (Coley Depo., p. 18). The
Coleys mortgaged the unit to secure financing, without any requirement for
County approval. R1-V5 (Coley Depo., p. 27; Ex. 5 (Mortgage to Regions Bank).
All of the land and improvements submitted to condominium ownership conferred
“private ownership.” R1-V5 (Coley Depo., p. 15, Ex. 3, Art. 2, par. 6). The
County pays no part of the repair or maintenance. R1-V5 (Coley Depo., p. 28).
The Coleys deduct the home mortgage interest on their income tax return. Id.
2. Other representative leases attached to Complaint as containing provisions “common” to Petitioners.
Santa Rosa County has negotiated many leases for private development of
realty on Navarre Beach to be “predominantly used for commercial or residential
purposes.” R2-V2-200 (par. 9); A-2. Petitioners attached six leases to their
Complaint, which are alleged to contain “lease provisions common to most of the
respective undeveloped land, residential, townhouse and condominium leases
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which are material to this Complaint.” R2-V2-200 (par. 7)(also A-2). The most
common example allows for a 99-year term, plus not just one 99-year renewal, but
also “an option for further renewals” into the future after 198 years.
The first representative lease containing provisions in “common” with all
others is a “Residential Lease” between the County and John Barry. R2-V2-200
(Ex. C); A-2-C. The lease term is 99 years with an option to renew for 99 more
years. Id.; Ex. C, par. 1, 14. The 99 year renewal is to be on “like covenants,
provisions and conditions as are in this lease contained, including an option for
further renewals.” Id.; Ex. C., par. 14; R1-V6-1005 (Alford Depo., p. 11)
(emphasis added). Thus, the renewals would continue past the first 99-year
renewal period for additional renewal periods on the same terms.4
The lease is for $330 per year during the original term and renewal periods.
R2-V2-200 (Ex. C., par. 2); R1-V6-1005 (Alford Depo., p. 11). The property is to
be used “as residential property for the purpose of constructing and maintaining a
beach home or seasonal or permanent residence thereon.” R1-V2-200 (Ex. C.,
par. 3). The property is not used for governmental purposes. R1-V6-1005 (Alford
Depo., p. 12). Although bare legal title to any building is stated to be with the
4 Per the Affidavit of Dennis Tackett, who works for Petitioners’ law firm, the format with an initial 99-year term, followed by another 99-year term, plus more 99-year renewals after that on like terms is the “most common.”
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County, such legal title is “subject, however, to the term of years and option to
renew granted to lessee.” R2-V2-200 (Ex. C., par. 4). The interest may be
“assigned, mortgaged, pledged or transferred.” R2-V2-200 (Ex. C., par. 12). The
current owner mortgaged the property. R1-V6-1005 (Alford Depo., p. 14). If the
property is sold, the current owner obtains the proceeds and nothing goes to the
County. R1-V6-1005 (Alford Depo., p. 15; 27). The County does nothing to
maintain the property. Id., p. 19. The lots can be sold without the County’s
permission. Id., p. 27.
The second lease attached to the Complaint is also a lease for 99 years, with
an option to renew for 99 years, and “further renewals” on like terms after that.
R2-V2-200 (Ex. D., par. 1)(A-2-D); R1-V7-1133 (Plauche Depo., p. 9). The lease
has similar provisions with respect to the benefits and burdens of ownership as did
the first common lease. It states: “Lessees shall pay and discharge all existing and
future taxes . . . assessments, duties, impositions and burdens assessed, charged or
imposed upon the Demised Premises.” R2-V2-200 (Ex. D., par. 11). The
property is not used for public purposes. R1-V7-1133 (Plauche Depo., p. 9). The
County does no maintenance on the property. Id., p. 10. This property is rented to
third parties. R1-V7-1133 (Plauche Depo., p. 12). The current owners enjoy the
rent for their own private benefit. Id. No part of the rent goes to the County. Id.
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The rent is reported on the owners’ tax return, and they deduct from taxable
income all costs of cleaning, mortgage interest, utilities, and depreciation. Id., p.
13-14. A closing statement set a contract “sales price” paid by the buyers. Id., p.
14. None of the “sales price” was paid to the County. Id., p. 15.
The next lease attached to the Complaint, containing terms “common” to all
Petitioners, is a lease between the County and Garland Jarvis for 99 years with an
option for an additional 99-year renewal. R2-V2-200 (Ex. E)(A-2-E). Currently,
Navarre Beach Venture holds this property. Mr. Richard Bennett testified at
deposition as the corporate representative of Navarre Beach Venture. R1-V8-1205
(Bennett Depo., p. 5). Mr. Bennett is the contractor, who developed the property.
Id., p. 6. Navarre Beach Venture owns several condominium units at issue. Id., p.
14. Mr. Bennett understood the assessments to be for each unit and an undivided
interest in the underlying land. Id., p. 38-39.
According to the original lease, the property was to be used “as business or
commercial property for the purpose of constructing, maintaining and renting
apartments, motels or cottage units.” R2-V2-200 (Ex. E., Par. 3). The interests
may be “assigned, mortgaged, pledged or transferred.” Id., Ex. E., Par. 15. This
agreement was amended to allow for “construction and sale of up to four hundred
hotel/motel units.” R2-V2-200 (Ex. E, Addenda, Par. 3). The Bennetts pledged
the property to Regions Bank for financing. R1-V8-1205 (Bennett Depo., p. 19).
The County has not paid for any part of the debt, construction, insurance, repair or
maintenance of the property. Id., p. 26. The property is not used for any
governmental purpose. Id., p. 26.
The fourth lease attached to the Complaint, containing terms “common” to
all Petitioners, has a term of 99 years with an “option to renew . . . for the
balance of [the County’s] lease term under its lease from the Santa Rosa
Island Authority.” R2-V2-200 (Ex. F)(A-2-F). Because the master lease from
the SRIA “shall automatically be renewed for a further term of ninety-nine (99)
years on the like covenants . . . including the right in lessee for further renewals,”
R2-V2-200 (Ex. B, Par. 6), the Ward Court held it is perpetual. Currently, Beach
Condominium Owners’ Association holds the interest. R1-V9-1366. The lease
contemplated the construction and sale of condominium units. R2-V2-200 (Ex. F.,
par. IV, VII, XIV). The County agreed to join in the declaration of condominium.
R2-V2-200 (Ex. F., par. XIV); R1-V9-1366 (Oliver Depo., p. 16). Paragraph XIV
provides: “[I]n the event of the sale of a condominium unit it shall not be
necessary that Lessee notify [the County] . . .”. Id. The agreement provides a
“sale of a condominium apartment . . . shall not be considered an assignment or
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subletting, and the prior consent of the [County] to such a sale shall not be
required.” R2-V2-200 (Ex. F., par. XIV). The units were timeshare units. R1-V9-
1366 (Oliver Depo., p. 8). When the structure was destroyed by a hurricane, the
unit owners terminated the condominium and now own as “tenants in common.”
Id., p. 9. The President of the owners’ association confirmed the vote not to
rebuild, stating: “Following termination, the property is now owned by the unit
owners, i.e., tenants in common.” Id., p. 22-23; depo. Ex. G (attached letter).
When the structure was destroyed, all insurance was paid to the owners. No
insurance proceeds went to the County. Id., p. 10. The lease had a 99-year term
with an option to renew as long as the Escambia County to Santa Rosa County
lease was in effect. Id., p. 12. The current owners are responsible for all taxes and
assessments on the property. R2-V2-200 (Ex. F., par. XIII). They hold the
property at their “sole risk” and insure the property. R2-V2-200 (Ex. F., par.
XVI); R1-V9-1366 (Oliver Depo., p. 21). The property has not been used for
governmental purposes. R1-V9-1366 (Oliver Depo., p. 14). The County has not
paid any insurance, repair or maintenance costs on the property. Id., p. 17.
The fifth lease attached to the Complaint, containing terms “common” to all
Petitioners, is a “Condominium Lease” between the County and Leonard Kaplan.
R2-V2-200 (Ex. G)(A-2-G). Currently, Mr. Charles Liberis holds the interest. R1-
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V11-1663. The agreement provides for construction of “condominiums for lease,
rent or sale.” R2-V2-200 (Ex. G, Par. 4). Mr. Liberis agrees the current
improvements, consisting of pilings, are owned by him and not by the County, for
the term of the lease. R1-V11-1663 (Liberis Depo., p. 14). The lessee is to pay all
taxes. R2-V2-200 (Ex. G, Par. 10). The interests may be assigned, mortgaged or
transferred. Id., Ex. G, Par. 12. The interest, including land, has been mortgaged
to Coastal Bank. R1-V11-1663 (Liberis Depo., p. 12-13). Mr. Liberis deducts
interest, office expenses and other expenses for the lot for income tax purposes.
Id., p. 17. If the interest is sold, the proceeds go to the bank and Mr. Liberis. Id.,
p. 12. No sales proceeds would go to the County. Id., p. 13. The County
consented to the filing of a Declaration of Condominium. R2-V2-200 (Ex. G, Par.
13). The lessee has the option to renew for an additional 99-year terms on like
terms, including an option for further 99-year renewals after that. Id., Ex. G., Par.
14. The property is not used for any governmental purposes. R1-V11-1663
(Liberis Depo., p. 18).
The sixth lease attached to the Complaint, containing terms “common” to all
Petitioners, is between the County and Navarre Beach Marina Corporation. R2-
V2-200 (Ex. H)(A-2-H). Shoreline Developers, LLC, now holds this property.
R1-V11-1663. The agreement is for a 99-year lease with an option for renewal.
17
R2-V2-200 (Ex. H, Par. 1). The renewal is to be on like terms with options for
further 99-year renewals. Id., Ex. H, Par. 18. The lease can be assigned,
mortgaged or transferred. Id., Ex. H, Par. 19. Shoreline Developers is responsible
for all assessed taxes. R1-V11-1663 (Liberis Depo., p. 23). Shoreline Developers
deducts expenses on the parcel on its federal income tax returns. Id., p. 28. If the
property is sold, Shoreline Developers will receive the proceeds, and the County
gets nothing. Id., p. 25. The parcel is not used for public purposes. Id., p. 30.
3. Local Governmental Services.
Petitioners enjoy the full benefit of County services. The children on
Navarre Beach attend Santa Rosa County schools. The County funds roads and
other County services for beach residents. The County does not maintain or repair
the subject properties. Instead, Petitioners bear the full burden of repairing,
maintaining and insuring their homes and land. R1-V1-141-144.
SUMMARY OF ARGUMENT
The certified question of whether Petitioners have rights tantamount to
ownership to support the assessment of local government ad valorem taxes has been
answered by this Court on prior occasions. In Williams v. Jones, 326 So.2d 425
(Fla. 1975) and its progeny, this Court held the interests of Petitioners on Santa
Rosa Island are “tantamount to ownership” and “equivalent of fee simple
18
ownership.” The law relating to Santa Rosa Island tax matters has been crystallized
by 40 years of case law, including four Florida Supreme Court opinions and six First
District Court of Appeal cases, all adverse to Petitioners. This Court has held
private leaseholders of governmental property used for purely private purposes on
Santa Rosa Island must pay local government real property taxes at “parity” with
other private owners. Williams v. Jones, 326 So.2d at 432. This Court has held
there is no “constitutional exemption” upon which Petitioners can base their claim
for preferential tax treatment. This Court further held any attempt to create one
legislatively for these interests on Santa Rosa Island “would undoubtedly be
discriminatory and violative of the equal protection provisions of the Florida and
United States Constitutions.” Id. Therefore, this Court should affirm.
ARGUMENT
I. PETITIONERS’ BEACH HOMES AND CONDOMINIUM UNITS ARE SUBJECT TO LOCAL GOVERNMENTAL AD VALOREM TAXATION.
Standard and Scope of Review: The standard of review is de novo. In
terms of the scope of review, this Court has authority to consider any issue raised
19
in the lower courts. Moreover, this Court can affirm the First District on
alternative grounds argued in the lower courts.5
Argument: The certified question is whether Petitioners’ beach homes and
condominium units may be taxed at the far lower intangibles tax rate administered
at the state level, while other citizens in Santa Rosa County pay a far greater rate
of tax as part of their local government ad valorem tax burden. This Court has
held the Petitioners’ interests on Santa Rosa Island are “tantamount to ownership”
and “equivalent of fee simple ownership.” Archer v. Marshall, 355 So. 2d 781,
784 (Fla. 1978); Williams v. Jones, 326 So. 2d 425 (Fla. 1975). These precedents
require Petitioners to pay local governmental ad valorem taxes at “parity” with
other citizens in order to fund local schools; police protection; and other local
governmental services within Santa Rosa County.
5 This Court is not limited to the certified question and may consider all issues
raised in the lower courts. Zirin v. Charles Pfizer & Co., 128 So. 2d 594, 596 (Fla. 1961); Caufield v. Cantele, 837 So. 2d 371, 377 n.5 (Fla. 2002); Savoie v. State, 422 So. 2d 308, 310 (Fla. 1982). In this case, Respondents raised several constitutional issues. The trial court ruled that preferential tax treatment for Petitioners would be unconstitutional. Therefore, this question may be reviewed. This Court is not limited to the reasons set forth by the lower courts. Dade County School Bd. v. Radio Station WQBA, 731 So. 2d 638, 645 (Fla. 1999); MacNeill v. O’Neal, 238 So. 2d 614, 615 (Fla. 1970); Malu v. Security Nat’l Ins. Co., 898 So. 2d 69, 73 (Fla. 2005). Radio Station WQBA and Malu address the “tipsy coachman” doctrine, which allows an appellate court to affirm despite finding error in the lower court, as long as there is an alternative basis to affirm.
20
Petitioners begin their argument by questioning whether the “court-
invented” concept of equitable ownership can be applied to ad valorem tax
statutes. Petitioners’ Initial Brief, p. 11. This question was answered long ago.
In Leon County Educational Facilities Authority v. Hartsfield, 698 So. 2d 526,
528 (Fla. 1997), for example, this Court cited a number of prior cases, in holding:
“The concept of equitable ownership in ad valorem taxation has long been a part
of Florida law.” In fact, the concept of equitable title for ad valorem tax purposes
is part of our Florida Constitution. Article VII, Section 6, of the Florida
Constitution, expressly refers to consideration of “legal or equitable title” in
determining ad valorem tax status. Petitioners’ effort to diminish the importance
of equitable ownership by calling it “court-invented” is unpersuasive.
In Leon County, this Court explained: “The Appellant [in Leon County]
rests its thesis on a literal interpretation of the quoted statute defining exemptions,
but this court is not limited to that. It is authorized to look through form to fact
and substance to answer the question of tax exemption or tax liability.” Id. at 528-
29. This Court cited several cases where equitable ownership controlled over
legal title, including one in which a taxpayer had no option to purchase or ability
to obtain legal title. Id. at 529 (citing Mikos v. Kings Gate Club, Inc., 426 So. 2d
In stark contrast to these cases directly addressing Santa Rosa Island,
Petitioners rely on (a) a per curiam affirmed opinion from Hernando County,
addressing facts not comparable to those on Santa Rosa Island; (b) an abrogated
Bell v. Bryan, 505 So. 2d 690 (Fla. 1st DCA 1987); and (c) a dissent in Ward v.
Brown, in which the dissenting judge relied on the discarded Bell case. Petitioners
do not mention in their brief the First District’s decision to recede from Bell. “The
effect of Ward was to recede from Bell 1 sub silentio.” Ariola Opinion, p. 14.
6 The Portofino condominium unit owners, who occupy 765 luxury
condominium units on Pensacola Beach, were unsuccessful in the Portofino case cited above. They have now filed an amicus curiae brief in the companion case. The courts in Portofino held that those plaintiffs own their condominium units. Despite these adverse judgments, they now urge the same, rejected arguments in an amicus curiae brief. In fact, both lawyers filing briefs in an amicus curiae capacity, Mr. Ben Phipps and Mr. Ed Fleming, were counsel for unsuccessful petitioners on Santa Rosa Island. Ward v. Brown; Portofino v. Jones. The arguments by Mr. Phipps and Mr. Fleming are not made as friends of the Court, but instead to re-argue their cases. The only distinction is that Portofino, in an amicus capacity, now misrepresents its own record, stating their unit owners had no options to renew. Portofino Amicus Brief, p. 1 (“none of the leases grant to the tenants the right to renew”). In truth, the Portofino leases all had 99 year original terms, with options to renew for additional 99 year periods. Portofino, No. 07-2292-2298 (Record on Appeal - V39-115, Ex. C)(also, Appendix, Tab 3)(Portofino lease with “full right and privilege at its election to renew this lease for a further term of ninety-nine years”).
23
In truth, this issue is unique to the First District. There is no other district
where condominium unit owners living on the beach are allowed to avoid their
obligations to local government and school districts through such machinations.
The relevant holdings of the First District, including the opinion under review,
apply to narrow facts in a unique context on Santa Rosa Island. Given the
abundance of authority in opinions from this Court and the First District, the
Petitioners’ argument based on the discarded Bell opinion must fail.
A. Williams v. Jones.
This Court has examined this unusual situation on Santa Rosa Island on at
least four prior occasions. Archer v. Marshall, 355 So. 2d 781, 784 (Fla. 1978);
AMFI v. Kinney, 360 So. 2d 415 (Fla. 1978); Williams v. Jones, 326 So. 2d 425
(Fla. 1975); Straughn v. Camp, 293 So. 2d 689 (Fla. 1974). In each case, this
Court reviewed the nature of the legal rights conferred on Santa Rosa Island and a
myriad of devices developed by petitioners and their counsel to manipulate the
structure so as to avoid the payment of local governmental taxes.
In 1975, petitioners on Santa Rosa Island made a similar argument to that
made in the case at bar, by urging this Court to find they should be taxed at the
reduced intangible tax rate. This Court emphatically rejected the argument,
holding petitioners had rights “tantamount to ownership of the fee.” Williams v.
24
Jones, 326 So. 2d at 436. This Court held it would “undoubtedly” be
unconstitutional if residents of Santa Rosa Island were allowed to escape local
government real property taxes and pay only intangibles tax, while similarly
situated residents on the mainland bear the full local tax burden. The Court held:
Basically, the Petitioners [on Santa Rosa Island] contend for a constitutional exemption from ad valorem real estate taxation where none exists and, if it did, such an exemption would undoubtedly be discriminatory and violative of the equal protection provisions of the Florida and United States Constitutions.
Id. at 432 (emphasis added). In other words, an answer in favor of Petitioners on
the certified question could never be supported by the Florida Constitution,
because there is no “constitutional exemption” to allow their beach homes to be
taxed at the reduced intangibles tax rate. The Williams v. Jones Court explained:
To accept the [beach homeowners’] contention . . . would not only result in such leasehold interests being taxed on the reduced intangible personal property ad valorem rate but would also deprive the political subdivisions wherein the leaseholds are situated from raising revenues from such source in order to defray the costs of the services supplied to the users thereof, services which include, especially, the education of the children of such users. The holder of a lease on Santa Rosa Island requires no less police protection, fire protection or education of his or her children than does his or her neighbor in the county who occupies under a fee simple title. Id., at 431 (emphasis added). This Court held the Santa Rosa Island
properties held by petitioners should be taxed “on a parity with other real
25
property in the private sector devoted to similar uses.” Id. at 430 (emphasis
added). This Court also examined the Equal Protection issue of whether
properties on Santa Rosa Island could avoid local taxation, while similar
properties not on the beach were taxable, holding: “No rational basis exists for
such a distinction.” Id. (emphasis added).
This Court re-emphasized the point in Archer v. Marshall, 355 So. 2d at
784, concluding: “[T]hese leaseholders have the equivalent of fee simple
ownership . . . .” (emphasis added). In Archer, this Court struck yet another
attempt by the petitioners on Santa Rosa Island to “manipulate” the form of the
transactions to avoid local taxes. Id. at 785. This Court analyzed not just the law,
but the fact that these Petitioners enjoy all of the benefits of the improvements:
[I]t cannot be said that Escambia County has or will receive any improvements of value upon the termination of the lease agreements. Certainly the improvements which have been made upon this property [specifically, on Santa Rosa Island] will have long since been destroyed prior to the end of the leases.
Archer v. Marshall, 355 So. 2d at 784. This Court has consistently
concluded Petitioners have interests equivalent to fee simple ownership.
Moreover, this Court has held no law could support taxation of these interests at
the “reduced intangible personal property ad valorem rate,” because there is no
support in the Florida Constitution for such treatment.
26
B. Sebring Airport Authority v. McIntyre Petitioners have argued the 1980 revisions to Chapter 196 were capable of
altering the holding in Williams v. Jones. Yet, the Legislature has no ability to
modify the constitutional principles described in Williams v. Jones, as the Florida
Constitution contains no “constitutional exemption” to support the treatment
sought by Petitioners. This Court confirmed the vitality of Williams v. Jones more
than twenty years after the 1980 revisions in Sebring Airport Authority v. McIntyre,
783 So. 2d 238 (Fla. 2001). Justice Lewis wrote a unanimous opinion in Sebring,
citing the portions of Williams v. Jones quoted above. Sebring involved a similar
attempt to contort the definition of “public purpose” to create a tax exemption.
The Sebring Court examined an exemption statute, which purported to define public
purpose to include private racetracks and sports stadiums, despite no authority for
such an exemption in the Florida Constitution.7
This Court held the statute “attempts to create an ad valorem tax
exemption for private, profit-making ventures conducted upon property leased
7 Whether sport stadiums or racetracks were good economic development tools was irrelevant. It is also irrelevant here, despite the argument by Portofino amicus. The Legislature has provided for an exemption based on economic development in Section 196.1995, Florida Statutes (2011). Petitioners have not applied for, nor do they qualify for that exemption. In terms of the governmental exemption now under review, economic impact is not a factor and the economic data filed by Portofino is not only outside the record, but irrelevant.
27
from a governmental entity – a result which the Florida Constitution does not
allow.” Id. at 241 (emphasis added). This fact pattern is very similar to the case at
bar, in which Petitioners suggest they are somehow fulfilling a public purpose. See
Petitioners’ Initial Brief, p. 12.8
In Sebring, this Court described Williams v. Jones as setting the “guiding
principles” for the constitutional analysis. Sebring noted Williams v. Jones was
“premised on a constitutional foundation that all privately used property must bear
the proper tax burden.” Id. at 243. The Sebring Court held Williams v. Jones gave
effect to the 1968 changes to the Florida Constitution and the “governmental-
governmental” standard, which requires governmental use of property to satisfy
constitutional requirements for a governmental exemption. Id. at 246. Purely
Yet, in Sebring, this Court held the Legislature had
no power to fashion such a definition, because only the Florida Constitution can
authorize local ad valorem tax exemptions. Similarly, in the case at bar, there is no
exemption in the Florida Constitution to support an exemption from local
government taxes for privately used beach homes and condominiums.
8 To the extent Petitioners rely on bond validation proceedings to argue their private condominiums serve a public purpose, Sebring held “bond validation cases . . . are not analogous to tax exemption cases, and the legal theories cannot be used interchangeably”; “tax exemption necessarily involves a direct shift in tax burden from the exempt property to other, non-exempt properties.” Sebring, at 250.
28
private uses, such as enjoyment of beach homes and condominium units, are not
governmental functions. There is no constitutional basis for exempting them.
This Court has established, in an interlocutory appeal filed by some of the
Petitioners in this case, that Petitioners seek an exemption. Ward v. Brown, 894
So. 2d 811, 812, 816 (Fla. 2004)(“we also reject the petitioners’ claim that they are
not claiming an exemption”). Thus, in the parlance of Sebring, these Petitioners
seek an exemption for privately used beach homes and condominiums, a “result
which the Florida Constitution does not allow.” Sebring, 783 So. 2d at 241. In
Sebring, this Court quoted the core part of Williams v. Jones, which held that if
petitioners were to pay tax at the “reduced intangible personal property ad valorem
rate,” this would violate the Florida Constitution. Sebring, 783 So. 2d at 248.
This Court also quoted the Williams v. Jones holding that there is no constitutional
exemption to support Petitioners’ argument “and, if it did, such an exemption
would undoubtedly be discriminatory and violative of the equal protection
provisions of the Florida and United States Constitutions.” Sebring, 783 So. 2d at
248 (quoting Williams, 326 So. 2d at 431-32).
This Court in Sebring also addressed the argument raised in Petitioners’
initial brief, relating to the appropriate deference accorded to the Legislature.
Contrary to Petitioners’ argument, however, this Court ruled the Legislature’s
29
power to classify is limited by the Florida Constitution: “[T]he Legislature’s
authority was not unbridled . . . the Court is responsible for measuring legislative
acts ‘with the yardstick of the Constitution.’” Id. at 245. In this case, the Florida
Constitution provides no authority for the Petitioners’ requested exemption from
local government ad valorem taxes.
In all, there are now four Florida Supreme Court opinions; three published
First District opinions; and three per curiam affirmed opinions, which are adverse
to Petitioners. All of these Courts reviewed extensive trial records and all types of
leases on Santa Rosa Island.9
II. PETITIONERS ARE EQUITABLE OWNERS OF THEIR BEACH HOMES AND CONDOMINIUM UNITS FOR AD VALOREM TAX PURPOSES.
In all of these cases, the courts construed the rights
granted to be equivalent of fee simple ownership. Given no constitutional support
for Petitioners’ claim for exemption, this Court should affirm.
Standard and Scope of Review: The standard of review is de novo. In
terms of the scope of review, this Court has the authority to consider any issue
raised in the lower courts. Moreover, this Court can affirm the First District on
alternative grounds argued in the lower tribunal.
9 Williams v. Jones noted one lease (not involved in this case) with only a 25 year term. That lease was subject to the same ruling that enforced collection of local government ad valorem taxation. Williams v. Jones, 326 So. 2d 429, n. 1.
30
Argument: Petitioners continue to argue they are not equitable owners.
Yet, this Court has held Petitioners’ interests are “tantamount to ownership” and
“equivalent of fee simple ownership.” Williams v. Jones; Archer v. Marshall. In
addition, the First District, in this context unique to their district, has established
Petitioners are equitable owners of their interests. Ward; Ariola; Accardo.
To counter these Florida Supreme Court and First District cases, Petitioners
rely on the Bell case, from which the First District has now receded. Ariola
Opinion, p. 14. Notwithstanding the Petitioners’ effort to persuade the Court that
the lawyers argued equitable ownership at the trial court level in Bell twenty-five
years ago, the First District’s now-receded-from opinion in Bell did not address
equitable ownership. Because the precedential effect of a decision is limited to the
four corners of an appellate opinion, Bell has no persuasive or precedential impact
in this case. Shaw v. Jain, 941 So. 2d 458, 461 (Fla. 1st DCA 2005)(quoting
claim must be strictly construed. See Sebring, 642 So. 2d at 1073 (governmental
exemption “strictly construed against the party claiming [the exemption]”).
Petitioners’ argument must also be viewed in light of the rule that substance,
not form, controls the outcome of tax disputes. In Parker v. Hertz, 544 So. 2d 249
(Fla. 2d DCA 1989), the Second District addressed an assessment of real property
tax on improvements held by a corporate lessee, Hertz Corporation, on land leased
from the government. The leasehold was used for Hertz’s rental car business at an
airport during a lease for only 25 years, which provided Hertz would not have
legal title to the improvements after the 25 year term. The Court held:
[W]e are persuaded that Hertz as a matter of law is endowed with sufficient indicia of ownership justifying the imposition of an ad valorem tax upon the improvements. In reaching our endpoint in this matter, we have followed the doctrine enunciated in Helvering v. F&R Lazarus & Co., 308 U.S. 252, 255, 60 S.Ct. 209, 210, 84 L.Ed. 226 (1939), some fifty years ago, that ‘[i]n the field of taxation, administrators of the laws and the courts are concerned with substance and realities, and formal written documents are not rigidly binding.
Parker v. Hertz, 544 So. 2d at 250 (emphasis added); see also Bancroft Inv. Corp
v. City of Jacksonville, 27 So. 2d 162 (Fla. 1946); Mikos v. Kings Gate Club, 426
32
So. 2d 74 (Fla. 2d DCA 1983)(cases employing substance over form to find
entities not having legal title to be owners of real property for tax purposes).
This Court must also decide this case in light of the fundamental principle
that, in a democracy, every person must bear their fair share of taxation. In the
context of Santa Rosa Island, this Court held: “We approach it on the premise that
this is a democracy in which every parcel of property is expected to bear its due
portion of the burden of government, unless exempted by the legislature in the
manner provided by Section 1, Article X of the Constitution. Courts have no more
important function than to direct the current of the law in harmony with sound
democratic theory.” Williams v. Jones, 326 So. 2d at 429 (quoting Justice Terrell
in Bancroft). This fundamental tenet, not the real estate question of equitable
conversion, controls the issue in the context of private use of public lands.10
A. The First District correctly concluded that Petitioners are Equitable Owners of their Beach Homes and Condominium Units.
All parties agree ownership for tax purposes includes “equitable
ownership.” Thus, legal title does not control the concept of ownership for tax
10 Equitable ownership is no concern to long-term commercial tenants of private property. There is no opportunity to escape real property taxation, because no tax exempt party is involved. Private parties allocate the burden of paying tax through contract negotiation, which is not affected by equitable ownership. The amicus FAPTP, agrees this is a “matter of contract” in these instances.
33
purposes. The First District in the case at bar cited Ward v. Brown, 919 So. 2d
462 (Fla. 1st DCA 2005) with approval, and followed Ward’s reliance on a number
of key factors for equitable ownership:
Petitioners have the [1] right to use or rent the improvements, [2] encumber their interests, [3] transfer their property rights, and [4] realize any appreciation in value from sale or rental income. They must [5] insure and [6] maintain the improvements and are [7] responsible for the payment of any taxes. Therefore, Petitioners are the equitable owners of the property.
Ward, at 463. The Ward Court analyzed these factors and held: “Because we
agree with the trial court that Petitioners have sufficient rights and duties
regarding the property to make them equitable owners, we affirm.” Ward, 919 So.
2d at 463 (citing Serv. Metro Corp. v. Bell, 786 So. 2d 1216 (Fla. 1st DCA 2001)
and Leon County Educ. Facilities Auth. v. Hartsfield, 698 So. 2d 526 (Fla.
1997).11
11 Portofino amicus curiae in the companion case, Ariola, agrees with Respondents on this point: “In finding the existence of equitable ownership, the Ward court did nothing more than apply the well-established principle that equity regards substance over form, and so a court will look past the form and to the fact and substance of a transaction to determine the true nature of the ownership interest in the property.” Portofino amicus also wrote: “The holding in Ward was in harmony with applicable statutory authority . . .” Portofino Brief in Ariola, p. 6.
34
In addition to the foregoing benefits of ownership, many Petitioners
depreciate their real property on their tax returns.12
Essentially, this type of analysis is akin to the “bundle of sticks” analysis for
determining ownership. If an individual has the majority of “sticks” or
“attributes” of ownership, then substance controls over form, and the individual
should be considered the owner. Petitioners make an effort to distort this legal test
In Parker v. Hertz, the Second
District cited the taking of depreciation as a factor in determining ownership. The
plaintiff Hertz argued it could not be considered the owner, because it could not
have title to the improvements at the end of the lease (25 year term). The Court
disagreed: “Hertz’s proprietary use of the improvements for its commercial
objectives, when coupled with the benefit of recapturing some amount of its
capital investment through depreciation, was perceived . . .as ample compensation
for subsequently parting with title.” Parker v. Hertz, 544 So. 2d at 252. Thus, the
improvements were deemed to be equitably owned by Hertz.
12 One must be an equitable owner to take depreciation deductions. Rev.Rul. 69-89, 1969-1 C.B. 59; Baird v. Commissioner, 68 T.C. 115 (1977). Here, the amicus FAPTP agrees Petitioners’ enjoyment of depreciation deductions signifies they are equitable owners. FAPTP Brief, p. 10 (“If the lessee is the equitable owner of the property, then the lessee gets to claim the depreciation deduction.”) By taking depreciation deductions, these Petitioners consider themselves equitable owners for federal tax purposes.
35
by analyzing each stick in isolation. Of course, this is not the test employed by the
courts, which is instead dependent on a review of the bundle as a whole.
In viewing the bundle of rights as a whole, Petitioners exercise rights of
dominion and control over the real property, just like any other citizen of Santa
Rosa County. The record contains ample indicia of ownership in terms of
Petitioners’ rights of possession and control; rights to encumber the property; and
rights to dispose of, alienate, or transfer property without interference and
restraint. In Hialeah, Inc. v. Dade County, 490 So. 2d 998, 1000 (Fla. 3d DCA
1986), the Court cited 42 Fla. Jurisprudence 2d, Property sec. 13 (1983):
“Ownership of property implies the right of possession and control thereof, as well
as the right to dispose of, alienate, or transfer the property rights freely and
without interference or restraint.” Here, Petitioners have all of these rights, which
are readily transferred in a free and open market without restraint. See Regency
Villas v. Keltner, 610 So. 2d 661, 663 (Fla. 1st DCA 1992) (Santa Rosa Island
properties “freely resell on the open market”).
In the case at bar, Petitioners went to closings; paid hundreds of thousands
of dollars for condominium units and beach homes; executed closing documents;
enjoyed unfettered possession; enjoyed rental income; enjoyed capital
appreciation; and took on burdens associated with ownership. This Court should
36
not disturb the conclusion that these individuals have interests “equivalent to fee
simple ownership,” as this Court has held on prior occasions.
Petitioners have the same benefits and burdens of ownership for the land as
well as the buildings. As Justice Polston observed in Ward: “[T]he Florida
Constitution expressly contemplates equitable ownership for leases with initial
terms of 99 years by providing homestead exemptions for leaseholds in excess of
98 years.” Ward v. Brown, 919 So. 2d at 464 (citing Art. VII, §6(a), Fla. Const.).
All of the leases with provisions “common” to all Petitioners (as attached to the
Complaint) and all of the leases for the former class representatives, have terms of
99 years with options for further 99-year renewals.13
B. The Existence of an Option to Buy is but one Factor in the Equitable Ownership Analysis.
Thus, the Ward v. Brown
opinion would have included land within its holding, if land had been an issue.
Land was at issue in the Accardo opinion below. The First District correctly held
Petitioners were equitable owners of both land and improvements.
Contrary to Petitioners’ argument, the tax issue in this case is not limited to
“equitable conversion.” The issue is not whether a private interest should be
committed to foreclosure or some other remedy, as it is in the equitable conversion
13 The amicus FAPTP, in the companion case, cites false facts in stating this case involves relatively short leases, allegedly as few as 10 years. FAPTP brief, p. 1.
37
cases. Instead, the issue here arises in an ad valorem tax context that is triggered
by private use of government leaseholds. These issues of taxation are rooted in
equitable and democratic principles, stemming from the Florida Constitution.
Petitioners’ argument to this Court to reverse its own precedent, plus six
First District opinions, upholding equitable ownership is superficial, because
equitable ownership in tax cases is not contingent upon an option to purchase. In
fact, Ward v. Brown found a lease with an “initial term of 99 years” is equivalent
to ownership, citing the 98-year test for equitable ownership in the Florida
Constitution, Article VII, Section 6(a). Ward v. Brown, 919 So. 2d at 464
(emphasis added). Thus, the Florida Constitution’s definition of equitable
ownership does not require an option to purchase or a perpetual lease.
Petitioners’ argument also overlooks cases like Parker v. Hertz, 544 So. 2d
249 (Fla. 2d DCA 1989), involving a 25 year lease in which legal title was in the
landlord at the end of the lease. There was no ability for Hertz to retain title. Yet,
Hertz was the owner for tax purposes. Many other cases do not fit within
Petitioners’ legal framework, including Broward County v. Eller Drive Ltd.
Partnership, 939 So. 2d 130 (Fla. 4th DCA 2006), in which Broward County had a
50-year lease with a private party. The Court noted: “The lease in the instant case
does not expressly state which party has ownership of the building during the term
38
of the lease.” Id., at 132. At the end of the lease, the improvements became the
property of the County. Yet, the Court held: “the lease provides [the private
lessee] with sufficient dominion over the building to conclude that [the private
lessee] owns the structure.” Id., at 133. The indicia of ownership in that case
included the private commercial use; responsibility for maintaining and insuring
the property; and the obligation for paying taxes. Id., at 134.
Another case not fitting Petitioners’ framework is Service Metro, in which a
private corporation was the equitable owner of a building, even though legal title
was with Escambia County. The Court relied on the benefits and burdens test to
hold: “We agree that Service Metro has sufficient rights and duties regarding the
property to make it the equitable owner.” Service Metro, 786 So. 2d at 1217.
The fact that one may not have the same interest in the future is irrelevant to
the issue of equitable ownership in the current tax year. In Robbins v. Welbaum,
664 So. 2d 1 (Fla. 3d DCA 1995), the Court held the equitable owner is the party
with the benefits and burdens of ownership on January 1st of the tax year. The
Court found a party had equitable ownership when it had an interest in real
property in trust for a 10-year period. Id. at 1. “Neither the statute nor the
constitution places such a time limit on beneficial title, and we decline to do so as
well.” Id. at 2; see also Offutt Housing Co. v. County of Sarpy, 351 U.S. 253
39
(1956); Williams v. Jones, 326 So. 2d 425; Archer v. Marshall, 355 So. 2d 781;
Gay v. Jemison, 52 So. 2d 137 (Fla. 1951); Service Metro Corp. v. Bell, 786 So.
2d 1216; Marathon Air Services, Inc. v. Higgs, 575 So. 2d 1340 (Fla. 3d DCA
1991)(all finding ownership for tax purposes without perpetual rights of
possession or options to purchase).
Although the existence of a nominal option to purchase has been cited in
other contexts as a factor in the equitable ownership analysis, the presence of an
option is not determinative. In the context of long term equipment leases, for
example, a nominal option to purchase may be a factor. Yet, Petitioners’ argument
that one must have an option to purchase in order to have the equivalency of
ownership is contradicted by this Court’s decisions involving leases on Santa Rosa
Island and the additional cases noted above.
This Court’s conclusion in Williams v. Jones that 99-year leasehold interests
on Santa Rosa Island are “tantamount to ownership of the fee” or “equivalent of
fee ownership” is not affected by Section 196.199(7), Florida Statutes. That
section provides lessees of governmental property for terms of 100 years or more
are deemed to be legal owners of such property. Many courts have held, despite
section 196.199(7), lessees were equitable owners of improvements in cases
involving lease terms less than 99 years. Most recently, the Ward v. Brown Court
40
rejected the argument that section 196.199(7) precluded taxation of improvements.
The Ward v. Brown Court cited Hialeah, Inc. v. Dade County, 490 So. 2d 998
(Fla. 3d DCA 1986), rev. denied, 500 So. 2d 544 (Fla. 1986), which had addressed
the same argument based on section 196.199(7):
Section 196.199(7) merely establishes two exceptions to the general rule that leaseholds or other possessory interests in government owned property are subject to intangible personal property taxation . . . The exceptions set forth in section 196.199(7) do not guide this court’s determination as to whether section 199.023(1)(f) applies in the first place, i.e., is the property government owned?
Id. at 1000 (emphasis added). In Hialeah, the court concluded the private lessee
for a term of 30 years had beneficial ownership.
The Parker v. Hertz Court reached the same result in response to the same
argument now made by Petitioners on the grounds of section 196.199(7):
Section 196.199(7) plays no part in determining Hertz’s [the private lessee’s] status as the owner of the improvements. Simply stated, we do not perceive the sweep of the word “owned” appearing in section 196.199(2)(b) to be measurable exclusively by section 196.199(7). . . . There is nothing within section 196.199(7) barring the examination of extrinsic criteria in deciding a question of ownership under section 196.199(2)(b). See Hialeah
Parker, at 251 (emphasis added). Thus, the Court held a private lessee for 25
years was “as a matter of law . . . endowed with sufficient indicia of ownership
justifying the imposition of an ad valorem tax upon the improvements.” Id. at
250. These cases and Article VII of the Florida Constitution (defining equitable
41
title to include 99 year leases) contradict any assertion that there is a cutoff at 100
years controlling the issue of equitable ownership.
C. Petitioners’ condominium units are distinct units of real property.
The majority of Petitioners own condominium units on Santa Rosa Island.
A condominium unit is a “form of ownership of real property.” §718.103(11),
Fla.Stat. (2011); see also Ammerman v. Markham, 222 So. 2d 423 (Fla. 1969)
(condominium units are real property for ad valorem tax purposes); Op. Att’y Gen.
Fla. 73-136 (1973) (“Article VII, §6(a) . . . declares the condominium form of
ownership to be real estate for homestead tax exemption purposes”).
When Petitioners purchase condominium units, they purchase those real
property interests, even if the underlying land is leased. Section 718.106(1),
Florida Statutes, provides: “A condominium parcel created by the declaration is a
separate parcel of real property, even though the condominium is created on a
leasehold.” This ownership right is exclusive. §718.103(27), Fla. Stat. (2011).
Petitioners’ condominium units came into being as distinct units of real
property upon filing the Declarations of Condominium. The County agreed to
submit its interest to the condominium form of ownership. Per section 718.104(6):
“A person who joins in, or consents to the execution of, a declaration subjects his
or her interest in the condominium property to the provisions of the declaration.”
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Thus, the County consented to subject its interests to the condominium form of
real property ownership.14
Because Petitioners have virtually all of the benefits and burdens of
ownership, Petitioners’ interests must be subject to local government ad valorem
taxes at parity with other citizens.
See also Sans Souci v. Div. of Florida Land Sales and
Condominiums, Dept. of Business Regulation, 421 So. 2d 623, 627-28 (Fla. 1st
DCA 1982), on later appeal, 448 So. 2d 1116 (Fla. 1st DCA 1984)(condominium
unit owners on Santa Rosa Island are legal owners of their units).
III. THE UNITED STATES CONSTITUTION DOES NOT PROHIBIT TAXATION OF PETITIONERS’ INTERESTS.
Standard and Scope of Review: The standard of review is de novo.
Argument: Petitioners argue the United States Constitution prohibits Santa
Rosa County from conveying the “land at Navarre Beach.” The Petitioners do not
direct this argument to condominium units or improvements. Instead, this issue is
limited to “Navarre Beach land.” Petitioners’ Initial Brief, p. 37.
The property rights conveyed to Petitioners are set forth in the leases,
contracts for purchase, and condominium documents. No dispute exists about the
terms of these documents. The issue in this case is not whether property rights
14 Section 718.120, F.S., “Separate taxation of condominium parcels . . .”, requires assessment of ad valorem taxes separately against each condominium unit.
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were improperly conveyed under the United States Constitution, but instead
whether the property rights actually conveyed were sufficient to confer equitable
ownership for ad valorem tax purposes.
The United States no longer has title to the land or improvements at issue.
The cases cited by Petitioners, pertaining to the Property Clause of the United
States Constitution, all deal with real property indisputably owned by the federal
government. Therefore, the cited cases have no relevance, because Escambia
County, not the United States, has bare legal title to the land.
The First District noted in the opinion below the deed of conveyance barred
transfer of legal title, but emphasized the issue was “whether [the Petitioners] are
the equitable owners.” Accardo Opinion, p. 7. Therefore, the deed of conveyance
“has no bearing on this issue.” Id. If the issue was the legitimacy of the
conveyance, Escambia County and the United States would be the parties to
resolve that issue. Yet, neither entity is a party in this case. In fact, no evidence
suggests either entity has ever claimed their rights were improperly conveyed.
Thus, Petitioners’ argument regarding the United States Constitution is pure
distraction to the real issues in this case.
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IV. THE TAX COLLECTOR AND SANTA ROSA COUNTY HAVE STANDING TO CHALLENGE THE CONSTITUTIONALITY OF THE RELEVANT STATUTES.
Standard and Scope of Review: The standard of review is de novo. In
terms of the scope of review, this Court has the authority to consider any issue
raised in the lower courts. Moreover, this Court can affirm the First District on
alternative grounds argued in the lower tribunal.
Argument: Petitioners argue the Tax Collector did not have standing to
raise defenses regarding the constitutionality of the Plaintiffs’ claimed exemption.
The trial court ruled that not only the Tax Collector, but also Santa Rosa County,
had standing. In their brief, Petitioners fail to address the standing of the County.
The Petitioners named Santa Rosa County as an additional party in this
case. They later tried to dismiss the County, but the trial court denied that relief.
Petitioners did not raise the question of the standing of the County in their
appellate brief in the First District. Therefore, the issue of the County’s standing
has been waived. City of Miami v. Steckloff, 111 So. 2d 446 (Fla. 1959).
The trial court concluded both the Tax Collector and County had standing:
“Because the general rule barring challenges to statutes is limited to those entities
that would challenge a statute affecting their duties, there is no prohibition that
would bar the County or Tax Collector from challenging the tax exemption
45
statutes at issue.” A-1, p. 9. The tax exemption statutes prescribe duties for the
Property Appraiser, but not for the Tax Collector or County. Therefore, both the
Tax Collector and the County have standing to raise these constitutional issues.
Petitioners cite The Crossings at Fleming Island v. Echeverri, 991 So. 2d
793 (Fla. 2008), which generally restricts public officials from challenging statutes
prescribing their duties. However, the Crossings did not address the standing of a
Tax Collector or a County. If a taxing authority, such as a county, city or school
district, has no standing to challenge dubious tax exemptions, then no party is
likely to make a challenge. Similarly, if the Tax Collector, who serves as
watchdog for local revenues, is also deprived of standing, then no party will make
such a challenge, even if an exemption is patently unconstitutional.
A Tax Collector and/or a local taxing district must be able to defend local
government revenues from legislative actions outside the bounds of the Florida
Constitution. This Court, having limited the Property Appraiser’s ability to
challenge unauthorized exemptions, must allow some entity to raise such
concerns. Otherwise, legislative efforts to favor special interests in an
unauthorized manner, such as those at issue in Sebring, will go unchecked. Both
the Tax Collector and County must have standing to raise constitutional issues
regarding tax exemption statutes, which they do not administer.
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The trial court found an additional basis for standing under the “public
funds exception.” A-1. This established exception to the general rule provides
public officials involved in the collection and disbursement of funds with standing
to raise constitutional issues. Kaulakis v. Boyd, 138 So. 2d 505 (Fla. 1962). The
Crossings did not address the public funds exception: “[W]e decline to review
whether the public funds exception is applicable to property appraisers wishing to
challenge the constitutionality of statutes.” Crossings, 991 So. 2d at 797.
In this case, the Tax Collector falls within the “public funds exception.”
The Tax Collector is the constitutional officer charged with the duty to collect and
disburse funds to the county, school boards and other taxing units. See Art. VIII,
§1(d), Fla. Const.; §197.332, Fla. Stat. (2011) (duties of tax collector include
collection of all taxes, interest and costs); §197.383 (tax collector distributes taxes
collected to each taxing authority); §197.3045 (tax collector distributes payments
received); §1011.17 and 1011.18, Fla. Stat. (2011) (tax collector’s duty to collect
and disburse money to local schools). The Tax Collector not only has duties
regarding the collection and disbursement of funds, but his office stands to lose
funds from its own budget in this case. §192.091, Fla. Stat. (2011). Thus, both
the Tax Collector and the County have direct economic standing.
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In Kaulakis, this Court cited the public funds exception to hold a
government entity has not just a right, but a duty, to bring such challenges. 138
So. 2d at 507; Dept. of Education v. Lewis, 416 So. 2d 455 (Fla. 1982). Courts
have upheld actions by taxing authorities challenging exemptions under the public
funds exception. Green v. City of Pensacola, 108 So. 2d 897 (Fla. 1st DCA 1959).
In Green, a Comptroller had standing to challenge a tax exemption. The Court
held: “[T]he necessity of protecting the public funds is of paramount importance,
and the rule denying to ministerial officers the right to question the validity of the
Act must give way to a matter of more urgent and vital public interest.” Id. at 901.
The Tax Collector is analogous to the Comptroller in Green. The Tax Collector
has a duty of “paramount importance” to collect the lawful amount of local tax
revenue. This “vital public interest” supports the Tax Collector’s standing to
address unconstitutional local tax exemptions that stand to deplete local revenues.
In this case, the trial court not only granted standing to the Tax Collector
and County, but also ruled Petitioners’ interpretation of the law to escape local
government ad valorem taxes would be unconstitutional. A-1, p. 10. The trial
court held Petitioners’ interpretation would be unconstitutional, because it would
(a) create a classification that would be discriminatory and violate the equal
protection provisions of Article I, section 2, of the Florida Constitution and the
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Fourteenth Amendment of the United States Constitution; (b) provide for an
exemption in the absence of express constitutional authority in violation of Article
VII, Section 3, of the Florida Constitution; (c) create a classification of properties
for ad valorem taxation purposes that violates Article VII, Section 4, of the Florida
Constitution; (d) fail to provide for taxation of Petitioners’ properties at a
“uniform rate” in violation of Article VII, Sections 2 and 4, of the Florida
Constitution; (e) impose a “state ad valorem tax” upon “real estate” in violation of
Article VII, Section 1, of the Florida Constitution. A-1, pp. 10-11.
Based on the rationale of Williams v. Jones, Archer v. Marshall, and more
recently, Sebring, this Court should uphold the trial court’s determination that the
taxing scheme urged by Petitioners would be unconstitutional. Just as in Williams
v. Jones, Petitioners’ argument that they should pay only the reduced intangibles
tax to the State is an argument for a “constitutional exemption from ad valorem
real estate taxation where none exists and, if it did, such an exemption would
undoubtedly be discriminatory and violative of the equal protection
provisions of the Florida and United States Constitutions.” Williams v. Jones,
325 So. 2d at 432. This Court should adhere to stare decisis on this point.
V. THE QUESTION REGARDING THE POSSIBILITY OF LIENS OR TAX CERTIFICATES IS NOT RIPE.
Standard and Scope of Review: The standard of review is de novo.
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Argument: The trial court held the Tax Collector has statutory authority to
sell tax certificates, if a Petitioner refuses to pay tax in the future. The First
District did not disturb this ruling. Nothing indicates the Tax Collector sold tax
certificates on any of Petitioners’ parcels. Thus, the issue is not ripe.
Under Section 197.432, Florida Statutes, tax certificates may not be sold
unless taxes are not paid. Here, taxes are not due while the matter is in litigation.
§194.171, Fla. Stat. (2011). Even if the issue becomes ripe if a taxpayer refuses to
pay tax, the Tax Collector agrees tax certificates will not affect the County’s bare
legal title. If issued, tax certificates would apply only to Petitioners’ private
interests. This is consistent with the uniform scheme in Florida for the collection
of taxes, including Section 197.432(9), Florida Statutes, which prohibits a lien on
the government’s interest. Because Petitioners are equitable owners of their
interests, however, section 196.199(2)(b) requires the assessment and collection of
such taxes by the same mechanism for all. This is no more complex than the
process by which banks currently foreclose on these private interests.
Petitioners cite Dep’t of Revenue v. Gibbs, 342 So. 2d 562 (Fla. 1st DCA
1977) as support for their argument. In Gibbs, however, the First District ruled tax
liens would not apply to leasehold interests in governmentally owned property.
Gibbs does not address equitably owned interests or condominium units. The
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instant matter, by contrast, involves liens on privately-owned improvements and
condominium units, not the government’s bare legal title. Thus, this Court should
uphold the First District’s conclusion on this point as well.
CONCLUSION
Petitioners have rights “tantamount to ownership” and “equivalent of fee
simple ownership.” Under the weight of authority of four Florida Supreme Court
opinions and six First District Court of Appeal cases, Petitioners’ privately used
beach homes and condominium units must be assessed local government real
property taxes at “parity” with other private owners of property in Santa Rosa
County. This Court has held there is no “constitutional exemption” upon which
Petitioners can base their claim for preferential intangibles tax treatment. This
Court has held any attempt to create one legislatively “would undoubtedly be
discriminatory and violative of the equal protection provisions of the Florida and
United States Constitutions.” Therefore, this Court should affirm.
Respectfully submitted, _______________________ Elliott Messer, Esq. Florida Bar No. 054461 Thomas M. Findley, Esq. Florida Bar No. 0797855 Messer, Caparello & Self, P.A. 2618 Centennial Place Tallahassee, Florida 32308
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Telephone: (850) 222-0720 Roy V. Andrews, Esq. Florida Bar No. 228291 Lindsay, Andrews & Leonard P.O. Box 586 Milton, Florida 32572 Telephone: (850) 623-3200 Counsel for Respondents
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct copy of the foregoing sent by
U.S. Mail to Danny L. Kepner, Esq., Shell, Fleming, Davis & Menge, P.A., 226
