Shazam or Frankenstein! When does claim on a covenant enforcement claim morph into a statutory claim? And, is there a back door to escape the strangle hold of unconstitutional impairment of contract defenses?

The First District Court of Appeal recently ruled that a de facto statutory claim may be created out of a covenant claim trigging entitlement to a prevailing attorney’s fee in Holiday Isle Improvement Ass’n., Inc. v. Destin Parcel 160, LLC, Case No. 1D17-5241 (Fla 1st DCA, October 15, 2018).

Background.

The attorney’s fee award at issue followed the covenant enforcement matter posted on September 17, 2018 in Holiday Isle Improvement Ass’n., Inc. v. Destin Parcel 160, LLC Case No. 1D17-2090 (August 30, 2018). The Association sought to require a developer to seek approval for construction plans. Because the covenant’s threshold for seeking approval was not met, that work was “commenced, erected or maintained,” the Association’s demand was premature and the summary judgment for the developer was affirmed.

The developer sought and was awarded attorney’s fee and costs, spawning this appeal.

Apparently the Association’s complaint alleged a violation of the covenant, expressly sought to declaratory relief pursuant to Chapter 86, Florida Statutes, the Declaratory Judgment Act, but apparently did not expressly state a claim pursuant to §720.305(1) Fla. Stat. (2013).

Fee Statute.

The appellate court held that the Association’s complaint was “a defacto action” pursuant to §702.305(1) because the Complaint sought the enforcement of the Association’s covenants. The appellate court explained that the statutes text provided that when a covenant claim seeks “redress” a prevailing party fee award would follow.

Setting out the exact manner in which the court emphasized the text assists in understanding the court’s holding, if not its rationale:

Each member and . . . and each association, are governed by, and must comply with, this chapter, the governing documents of the community, and the rules of the association. Actions at law or in equity . . . to redress alleged failure or refusal to comply with these provisions may be brought by the association . . . against:

* * *

(b) A member;

* * *

The prevailing party in any such litigation is entitled to recover reasonable attorney fees and costs ....

(Emphasis in Opinion, not in original).

This holding introduces a new concept, at least to community association litigation, the “de facto action.” In retrospect, and reading the fee statute strictly, the holding’s “de facto” creation may not have been necessary. It is suggested that the court could have simply held that the statute’s plain text applied to not only claims expressly pleading a statutory claim, but the statute also applied to a common law claim seeking redress of a breach of a covenant for which the last phrase in the above quote would provide a prevailing party fee basis. This suggestion is also consistent with the jurisprudence that attorney’s fees statutes are generally strictly construed as they are a derogation of the common law. See Willis Shaw Express, Inc. v. Hilyer Sod, Inc., 849 So. 2d 276, 278 (Fla 2003).

The opinion does state whether a statutory fees basis was alleged. This seems to be a strange omission, because if the statutory basis was pled, then the statute would have been implicated providing not just an implied or de facto basis, but an express, de jure basis.

Retroactive.

The court also held that the statute, adopted after the creation of the covenants, was not an unconstitutional retroactive impairment of contract. First, the court rationalized that the statute was applied only prospectively, the cause of action accruing after the statute became effective. Second, the covenants provided that remedies shall be “cumulative of all the remedies now or hereinafter provided by law,” thus, the covenants allowed remedies as of the time remedies were sought.

For the practitioner, the first rationale appears to fly in the face of earlier decisions holding that a right to attorney’s fee is a substantive right, and provision impacts substantive rights and cannot be retroactively applied. Interesting, the citation for the second half of the court’s rationale appears to contradict the first portion. Commodore Plaza at Century 21 Condominium Ass'n, Inc. v. Cohen, 378 So.2d 307 (Fla. App., 1979).

The second rationale is actually more compelling, the covenant’s own text stating: “the remedies herein stated shall be construed as cumulative of all other remedies now or hereafter provided by law” (emphasis added by court). Thus, especially if the claim for fees is made as special damages, not just as ancillary relief, this second rationale may be on firmer ground.

While the “cumulative of all other remedies” text is far from universal, the phrase does appear in a number of Declarations; thus, as always, a close reading of the text is de rigor!

Fin.

Best of wishes for a peaceful holiday period.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

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Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2018 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified:

Real Estate Attorney

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

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- Edmund Burke