Real Estate and Business Update for January 29, 2011 (Volume IV, Issue 5)

Manuel Farach

Two homestead cases are of note this week.
First, the second district ruled that a party may choose to purchase property and elect non-homestead treatment for the property, even if the person has minor children at the time of the purchase. For example, an election to purchase real property and title it as joint tenants with rights of survivorship defeats homestead on the property and the property passes to the remaining joint tenant. Marger v. De Rosa, — So.3d —-, 2011 WL 252942 (Fla. 2d DCA 2011).
In the second decision, the third district ruled that property that transfers from a life estate tenant to the remainderman upon the death of the tenant is re-assessed for tax purposes at that time. As is often the case, the house had built up substantial tax savings over eighteen years under the Save Our Homes section of the Florida Constitution due to the cap on assessments increasing only three percent per year. The unique twist in this case is that the son/remainderman, who had lived with and cared for his invalid father over the last eighteen years, claimed an exception under Florida Statute section 193.155 (3) (d), which provides there is no “transfer” according to law if the transfer is to someone who is “legally and naturally dependent on the [deceased] owner.” The son in this case attempted to argue that he was dependent on his father, and while sympathetic to his case, the third district ruled he did not meet the definition.
These two cases highlight the complexities associated with homestead, especially for descent and estate planning purposes.

See this week’s Case Law Update at Issue 5

Florida Real Estate and Business Law Update for January 22, 2011 (Volume IV, Issue 4)

Manuel Farach

The Second District Court of Appeal clarified an issue which has plagued construction and real estate lawyers for years: is the licensee qualifier for a shell corporation personally liable for construction defects when the shell corporation botches a job? The Florida Supreme Court seemed to indicate the answer was no in its decision of Murthy v. N. Sinha Corp., 644 So.2d 983 (Fla.1994), but that decision focused on the supervisory capacity of the qualifying agent and not the license status.
The Second District has squarely answered what was implied in Sinha,and the answer is “no.” While the reasoning of the decision is hard to decipher, it appears the court believes Florida Statute section 553.84 does not expressly provide a civil cause of action against the qualifying agent. Scherer v. Villas Del Verde Homeowners Ass’n, Inc., — So.3d —-, 2011 WL 148801 (Fla. 2d DCA 2011).
The fourth district set forth the items which it believes makes a proposal for settlement enforceable, and more interestingly, two of the three judges on the panel rqquested the Florida Legislature and Florida Supreme Court change the statute and rule to require a party receiving a proposal for settlement object to alleged deficiencies within a period of time otherwise waive objections to the proposal. Land & Sea Petroleum, Inc. v. Business Specialists, Inc., — So.3d —-, 2011 WL 148314 (Fla. 4th DCA 2011).
Finally, the fifth district ruled a code enforcement lien cannot trump a prior filed mortgage as doing so violates the priority of the Florida Recording Act statutory scheme, i.e., statutes control over inconsistent ordinances. City of Palm Bay v. Wells Fargo Bank, N.A., — So.3d —-, 2011 WL 180363 (Fla. 5th DCA 2011).

See this week’s Case Law Update at Issue 4

Florida Real Estate and Business Law Update for January 15, 2011 (Volume IV, Issue 3)

Manuel Farach

Homeowners’ associations, already under pressure from members behind in paying assessments, were recenty reminded of the necessity of re-recording their restrictive covenants to avoid elimination by the Marketable Record Title Act (“M.R.T.A.”).
Gerhard and Kelly Beth Matissek built an airplane hanger on their property in Pasco County, allegedly without complying with the restrictive covenants of their homeowners’ association. The Matisseks defended on various bases, including elimination of the restrictive covenant by MRTA. The association responded by stating the restrictions were not eliminated because various later recorded instruments referred to the restrictions and because the restrictions were re-recorded after the Matisseks bought their property.
The Second District Court of Appeal agreed with the Matisseks because the later instruments did not specifically refer to the location in the public records where the original restrictions were located, and because the re-recorded restrictions were outside the chain of title of the Matisseks. As a result, M.R.T.A. eliminated the restrictions as to the Matisseks.
A couple of things to note with regard to this decision. First, the elimination of the restrictive covenants was only as to the Matisseks; the court did not say the restrictions were entirely eliminated. Second, Chapter 712 provides a method for re-instituting restrictive covenants that have lapsed. Matissek v. Waller, — So.3d —-, 2011 WL 116144 (Fla. 2d DCA 2011).
The foruth district created a clear road map for those looking to plead fraud by re-iterating that the pleading rule requiring particularity is satisfied when a complaint alleges who committed the fraud, the substance of the fraud, the time frame and the substance of the fraud. Considering the pleading rules that hold allegations in a complaint are deemed admitted for purposes of motions to dismiss, complaints for fraud should now survive motions to dismiss. Someplace New, Inc. v. Francois, — So.3d —-, 2011 WL 92766 (Fla. 4th DCA 2011).
A final interesting note. Justice Elena Kagan issued her first opinion this past week; a decision on how the “means test” applies in consumer bankruptcy cases. This is not exactly a landmark case, and senior justices typically support a new justice by not dissenting to the new justice’s first opinion. Justice Scalia, however, objected on the grounds the majority was mis-reading the applicable statute. Justice Scalia has famously had phisolophical disagreements with Justice Breyer; maybe we can now add Justice Kagan to the list.

See this week’s Case Law Update at Issue 3.

Florida Real Estate and Business Law Update for January 8, 2011 (Volume IV, Issue 2)

Manuel Farach

In a blow to homeowner’s assocations, the third district ruled that Fla. Stat. sec. 720.305 (2), the statute section that limits the fines an association can impose on members for violation of its rules, is retrospective in nature. The Pfeffers apparently went two years over the time limit for building their home, and the assocation issued fines of $240,000 under its rules for delay in construction. The association’s rule was passed in 1993 (or 1994, which indicates the association’s records were not clear on this point), the statute limiting fines was enacted in 1995 and the violations occurred in 2007 through 2009. See  Tahiti Beach Homeowners Ass’n, Inc. v. Pfeffer, — So.3d —-, 2011 WL 13701 (Fla. 3d DCA 2011). The third district held the statute section is procedural and remedial in nature, and accordingly, was to applied retrospectively. The summary judgment in favor of the Pfeffers was upheld.
Also of note this week, the Fourth District Court of Appeal re-interated its rule that injunctions based on restrictive covenants can apply to individual corporate officers as well as companies, a form of “piercing the corporate veil” in restrictive covenant law. The fourth district also re-iterated that a trial court may rule that the injunction period run from the date of the issuance of injunction judgment. In other words, the court can extend the injunction beyond the contract date and have the applicable period begin on the date of judgment. University Medical Clinics, Inc. v. Quality Health Plans, Inc., — So.3d —-, 2011 WL 13721 (Fla. 4^th DCA 2011).

See this week’s Case Law Update at Issue 2

Florida Real Estate and Business Law Update for January 2, 2011 (Volume IV, Issue 1)

Manuel Farach

Welcome to the New Year.

There is nothing extraordinary in the opinions from the last week of 2010, but some are worthy of discussion.

First, the fifth district has re-affirmed that shareholders of a company can’t pay themselves while shutting down the company and ignoring the claims of creditors. Interestingly, the court’s opinion was based on fraudulent transfer theory as opposed to corporate requirements under Chapter 607. Pollizzi v. Paulshock, — So.3d —-, 2010 WL 5391523 (Fla. 5^th DCA 2010).

Second, certification of the class in the class action lawsuit against the Law Offices of David Stern was affirmed by the Fourth District Court of Appeal. The class is claiming excessive and fraudulent charges in foreclosures brought by the Law Offices of David Stern. Law Offices of David J. Stern, P.A. v. Banner, — So.3d —-, 2010 WL 5346669 (Fla. 4^th DCA 2010).

But probably most of interest to pratictioners is Cohen v. Chicago Title Ins. Co., — So.3d —-, 2010 WL 5347628 (Fla. 3d DCA 2010), in which the fourth district affirmed the longstanding rule that a title insurer is not on the hook for all monies given to its title agent. According to statute and established law, the title insurer is liable for the misappropriation of its agent only when funds are given to the agent for closing or title services; the title insurer is not responsible for misappropriated escrow funds. If this decision becomes final, Chicago Title may escape liability for claims approximating $10,000,000 arising from the collapse of Flagler Title.

See this week’s Case Law Update at Issue 1