Opinion
Case No. 5D21-35, 5D21-153
02-11-2022
OUTRIGGER BEACH CLUB CONDOMINIUM ASSOCIATION, INC., Laurie Allison Glazer, in Her Capacity as an Officer and Director of Outrigger Beach Club Condominium, Association, Inc., et al., Appellants, v. BLUEGREEN VACATIONS UNLIMITED, INC. and Vacation Trust, Inc., Appellees.
Lara J. Edelstein, and Kansas R. Gooden, of Boyd & Jenerette, P.A., Boca Raton, for Laurie A. Glazer, Kathleen McHugh, and Leonard Widen. Shannon L. Zetrouer, and Tyson J. Pulsifer, of Zetrouer Pulsifer, PLLC, St. Petersburg, for Outrigger Beach Club Condominium Association Inc. Grace L. Mead, and Andrea N. Nathan, and Joseph J. Onorati, of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., Miami, and Scott W. Cichon, of Cobb Cole, Daytona Beach, for Appellees.
Lara J. Edelstein, and Kansas R. Gooden, of Boyd & Jenerette, P.A., Boca Raton, for Laurie A. Glazer, Kathleen McHugh, and Leonard Widen.
Shannon L. Zetrouer, and Tyson J. Pulsifer, of Zetrouer Pulsifer, PLLC, St. Petersburg, for Outrigger Beach Club Condominium Association Inc.
Grace L. Mead, and Andrea N. Nathan, and Joseph J. Onorati, of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., Miami, and Scott W. Cichon, of Cobb Cole, Daytona Beach, for Appellees.
PER CURIAM.
AFFIRMED.
HARRIS and WOZNIAK, JJ., concur.
COHEN, J., dissents, with opinion.
COHEN, J., dissenting.
Outrigger Beach Club Condominium Association, Inc. ("the Association"), as well as its individual officers and directors, appeals the trial court's order granting final summary judgment, which determined that Bluegreen Vacations Unlimited, Inc. ("BVU") and Vacation Trust, Inc. ("VTI") (collectively, "Appellees"), were entitled to an immediate single-class election of the board of directors of the Association. The trial court's ruling turned on the interpretation of chapter 718, Florida's Condominium Act—specifically section 718.301, Florida Statutes (2020)—which governs the transfer of association control from developers to non-developer unit owners. For the reasons discussed below, I respectfully dissent.
As a practical matter, implementing a single-class election system would enable Appellees to obtain control of the Association by electing a majority of the board of directors.
The factual underpinnings of this case are not overly complicated, although there are a number of different corporate entities involved. In 1981, Hugh D. Upton developed Outrigger Beach Club ("Outrigger"), a 60-unit condominium and timeshare property in Ormond Beach, Florida. Outrigger's condominium units are committed to interval ownership in which units are conveyed to owners for time periods delineated in unit weeks. Each of the 60 units includes 52 unit weeks, creating a total of 3,120 unit weeks and corresponding voting units. Outrigger's Association is governed by a five-member board of directors.
There are a total of 3,060 voting units because the Association's governing documents require that one unit week be set aside for maintenance of each unit.
In 1987, Upton turned over control of Outrigger to the Association, but he retained ownership of some unit weeks and continued to act as Outrigger's manager under a management contract. Since turnover, the Association has been controlled by non-developer unit owners who have continuously elected three of the five board members. In 1994, Upton conveyed his remaining unit weeks to BVU and assigned the management contract to one of BVU's affiliates, Bluegreen Resorts Management, Inc. ("BRM").
BVU is a timeshare company that markets and sells condominium timeshare interests with accompanying points to use within its network of over 80 different resorts, the Bluegreen Vacation Club ("Vacation Club"). When BVU sells an interest in its Vacation Club, the purchaser does not receive title to a unit week; instead, pursuant to a trust agreement, BVU deeds a unit week to VTI as trustee and awards the purchaser vacation points based on the unit week's assigned value. The purchaser then uses those vacation points to stay at any of the numerous Vacation Club properties owned and operated by BVU. As a result, the voting rights appurtenant to those unit weeks remain under BVU's control. Upon acquiring Upton's unit weeks, BVU added Outrigger to its Vacation Club.
Since 1994, BVU has acquired additional unit weeks from individual owners for the benefit of its Vacation Club, amassing 1,024 unit weeks of Outrigger's 3,060 total voting units. Those unit weeks are similarly held in trust by VTI. Thus, Appellees now control approximately 33 percent of Outrigger's voting units, which based upon historical voting results, would enable them to control the Association under a single-class election system.
Despite having sufficient votes to control Outrigger's board of directors, BVU made no effort to do so. Over the years, BVU nominated only two of the five members of the board. However, in 2015 the board of directors voted to terminate the management contract with BRM, leading BRM to file a separate lawsuit. Over the course of the following three years, the Association did not conduct an election for its board of directors. As a result, BVU and VTI brought the instant action against the Association and its individual officers and directors, alleging breach of fiduciary duties and requesting injunctive relief to compel the Association to hold an election. During the pendency of the case, the Association held an election but implemented a dual-class voting system, which had the effect of preventing Appellees from obtaining post-turnover control of Outrigger. Thus, the underlying dispute became whether that dual-class voting system was appropriate, which posed the question of whether BVU and VTI qualified as "developers" under section 718.301. The parties filed cross motions for summary judgment, centering on those issues. The Association argued that because Appellees are subsequent developers of Outrigger, they are prohibited from exercising control of the Association after turnover, and the use of the dual-class election to avoid that result was proper. Appellees challenged the Association's contention that they were developers and argued that the plain language of section 718.301 restricted the voting powers of only "the developer" who "relinquishes control" to the non-developer unit owners, which in this case was Upton, not Appellees or any of its affiliates.
BVU's minority representation is consistent with public offering statements for the Vacation Club, wherein Bluegreen Corporation acknowledged that it did not have the right to control the board of directors of its "component site" owners’ associations; Outrigger is one of those component sites.
The trial court found that the question of whether BVU and VTI met the statutory definition of developers was "irrelevant, because even if they are, they do not fall in the category of developers whose voting rights section 718.301 is intended to circumscribe." Agreeing with Appellees’ proposed interpretation, the trial court determined that " ‘the developer’ to which section 718.301(1) refers is the developer who ‘relinquishes control of the association’ " because "one cannot ‘reacquire’ that which one did not originally have." The trial court reasoned that section 718.301(1) ’s use of "the" to describe "developer" required that conclusion. As a result, the trial court found that Appellees were entitled to an immediate single-class election. I find the trial court's analysis flawed.
This case hinges on whether we should focus on the word "the" as used in section 718.301(1) to describe "developer" or on the definition of "developer" in section 718.301(16), as well as the overall legislative scheme of the Condominium Act. The statute defines "developer" as: "a person who creates a condominium or offers condominium parcels for sale or lease in the ordinary course of business." § 718.103(16), Fla. Stat. (2020). Section 718.301(1) provides that upon transfer of association control from the developer to the non-developer unit owners, the non-developer unit owners are "entitled to elect at least a majority of the members of the board of administration of an association." The statute also provides: "After the developer relinquishes control of the association, the developer may exercise the right to vote any developer-owned units in the same manner as any other unit owner except for purposes of reacquiring control of the association or selecting the majority members of the board of administration." § 718.301(1)(g), Fla. Stat. Thus, it is clear that, following turnover, the developer is prohibited from reacquiring control of the association or selecting a majority of the board. In this case, it is undisputed that turnover occurred, and control passed from Upton, the original developer, to the Association in 1987. The question then is whether that prohibition applies only to the original developer or to a subsequent developer as well.
What the trial court ruled, and the majority affirms, is that section 718.301(1) ’s provision relating to reacquiring control of the association is limited only to the original developer. They do so by focusing on the use of the word "the" before "developer," rather than considering either the statutory definition of developer or the statutory scheme and its purpose as a whole. See Quarantello v. Leroy, 977 So. 2d 648, 652 (Fla. 5th DCA 2008) ("It is the general rule, in construing statutes, ‘that construction is favored which gives effect to every clause and every part of the statute, thus producing a consistent and harmonious whole.’ " (quoting Goode v. State, 50 Fla. 45, 39 So. 461, 463 (1905) )).
As an initial matter, given the broad scope of the statutory definition, I would find that Appellees qualify as developers within the meaning of the statute, because they "offer[ ] condominium parcels for sale or lease in the ordinary course of business." See § 718.103(16), Fla. Stat. To the extent that either BVU or VTI maintain they are not developers based on their method of using a trust agreement to sell condominium interests, such a scheme should not shield Appellees from developer status. Accepting that conclusion would have the effect of eviscerating the purpose of section 718.301, as it would permit subsequent developers to circumvent the provisions regarding reacquiring control of an association by creating alternate sales mechanisms to avoid the label of developer.
Case law and the legislative intent reflected in the whole of chapter 718 dictate that the prohibition against post-turnover control applies to both original and subsequent developers. In Bishop Associates Limited Partnership v. Belkin, 521 So. 2d 158, 163 (Fla. 1st DCA 1988), the First District found that in order to implement the legislative intent of section 718.301, "the word ‘developer’ ... should be interpreted to mean ‘subsequent developer’ ...." In Bishop, the original developer conveyed condominium units to a number of limited partnerships that subsequently leased out the units. 521 So. 2d at 159. Those entities subsequently obtained control of the condominium association through block voting. Id.
The First District held that the limited partnerships were subsequent developers under section 718.301 and as a result could not control the condominium association post-turnover. Id. at 163. While Bishop interpreted an earlier version of the statute, the prohibition against a developer reacquiring control of the association has remained in place. See § 718.301(1), Fla. Stat. Moreover, it is noteworthy that the version of the statute interpreted in Bishop also used "the" before "developer" when describing the requirement to relinquish control of the association and in describing post-turnover voting rights. See Bishop, 521 So. 2d at 161 (citing § 718.301(1)(c)–(d), Fla. Stat. (1985) ).
Furthermore, in 1992, the Florida Legislature instructed the Department of Business and Professional Regulation ("DBPR") to arbitrate disputes concerning condominium elections and turnover. See ch. 91–103, § 10, Laws of Fla. (1991); see also § 718.1255(4), Fla. Stat. Since then, DBPR has issued several arbitration decisions consistent with the holding in Bishop that "developer" within section 718.301 applies not only to the original developer, but also to subsequent developers. See Hamptons at Tampa Condo. Ass'n Inc. v. Unit Owners Voting for Recall, 2015 WL 4056020 (Fla. Dep't of Bus. & Pro. Regul. Arb. May 19, 2015) ; Phipps Plaza Condo. Ass'n Inc. v. Unit Owners Voting for Recall, 2015 WL 3993298 at *3 (Fla. Dep't of Bus. & Pro. Regul. Arb. May 7, 2015) (agreeing with Bishop that section 718.301 encompasses "subsequent developer"); Cail v. Sebastian Harbor Villas Condo. Owners’ Ass'n, Inc., 1996 WL 33664301 at *1 (Fla. Dep't of Bus. & Pro. Regul. Arb. Aug. 27, 1996) ("On its face, the provisions of section 718.301, Florida Statute, apply to all ‘developers’ as defined by section 718.103, Florida Statutes. The statute is not restricted in its operation to creating developers.").
DBPR declined to arbitrate the instant dispute.
Despite these rulings, or perhaps in acknowledgment of them, the Legislature has continued to reenact section 718.301, which indicates its intent to adopt the judicial construction of the statute. See Burdick v. State, 594 So. 2d 267, 271 (Fla. 1992) ("It is a well-established rule of statutory construction that when a statute is reenacted, the judicial construction previously placed on the statute is presumed to have been adopted in the reenactment."). Over the course of these reenactments, the Legislature has made no attempt to alter the statute's reach in terms of who qualifies as a developer, despite the judicial and administrative rulings that prohibit subsequent developers from reacquiring control of a condominium association post-turnover. The trial court's interpretation of section 718.301(1) runs contrary to the statute's intent that once control has been turned over to non-developer unit owners, it should remain there rather than revert back into the hands of either of the original or a subsequent developer. See Cail, 1996 WL 33664301 at *1 n.7 ("Once turnover is triggered, it may never be undone, and unit owners are thereafter entitled to majority representation." (citing Hamptons Dev. Corp. v. Div. of Fla. Land Sales, Condos., & Mobile Homes, 519 So. 2d 661 (Fla. 3d DCA 1988) )).
Both the trial court and Appellees maintain that the final sentence in section 718.301(1) supports the notion that only the original, relinquishing developer is prohibited from reacquiring control post-turnover; however, in my view that sentence, consistent with the statutory scheme as a whole, limits—rather than expands—the rights of developers post-turnover and clarifies those limitations. See § 718.301(1)(g), Fla. Stat. ("After the developer relinquishes control of the association, the developer may exercise the right to vote any developer-owned units in the same manner as any other unit owner except for purposes of reacquiring control of the association or selecting the majority members of the board of administration.") (emphasis added). To hold otherwise is to invite a diverse array of ownership schemes to avoid association control by non-developer unit owners, who, under the framework of chapter 718, are entitled to maintain and exercise control over condominium associations post-turnover.
Finally, the trial court's disapproval of the dual-class voting system implemented by the Association is misplaced. Regardless of a lack of language providing for dual-class voting in Outrigger's governing documents, the statutory purpose must be followed. For instance, in Cail, after DBPR invalidated elections that placed subsequent developers in control of the association post-turnover, it ordered dual-class voting as relief. 1996 WL 33664301 at *1. In other words, DBPR required a new election to be held in which the subsequent developers were allowed to vote only for the minority seat on the board. Id. Indeed, the dual-class voting scheme was required "regardless of any provisions to the contrary contained in the condominium documents." Id.; see also Harbourtowne at Country Woods Condo. Ass'n, Inc. v. Unit Owners Voting for Recall, 2005 WL 3844269 at *3 n.8 (Fla. Dep't of Bus. & Pro. Regul. Arb. July 22, 2015) ("It is incumbent on the association to adopt an election procedure that allows the developer class of owners, not entitled to vote for a majority of the board, to vote for one position separate and apart from the remainder of the owners voting for a majority of the board positions."). That is precisely what the Association attempted to do in this case.
The trial court noted that there was nothing in Outrigger's condominium documents supporting "the facially novel notion" of a class voting system. But DBPR decisions illustrate that class voting systems are warranted to avoid developer control post-turnover.
The trial court's narrow focus on the last sentence in section 718.301(1) runs afoul of the longstanding principle that statutory language must be interpreted within the meaning of the statute as a whole. See Forsythe v. Longboat Key Beach Erosion Control Dist., 604 So. 2d 452, 455 (Fla. 1992) ("It is axiomatic that all parts of a statute must be read together in order to achieve a consistent whole." (citation omitted)). Applying that principle and considering the statute's purpose, I would find that section 718.301(1) ’s use of "the developer" includes subsequent developers, such as Appellees. As this interpretation would permit a dual-class voting system, I respectfully dissent.