Opinion
1D22-573
09-27-2023
Inlet Beach Capital Investments, LLC, Appellant, v. The Enclave at Inlet Beach Owners Association, Inc., a Florida not for profit corporation, Becker & Poliakoff, P.A., John Townsend, Jay Roberts, Raymond Newman, James G. Waldschmidt, Randall Brown, Diana Tibbs, and Alan Mancuso, Appellees.
Bruce S. Rogow of Bruce S. Rogow, P.A., Cedar Mountain, NC; Tara A. Campion of Bruce S. Rogow, P.A., Boca Raton, for Appellant. William K. Thames of Vernis &Bowling of Northwest Florida, P.A., Pensacola, for Appellees The Enclave at Inlet Beach Owners Association, Inc., James G. Waldschmidt, Randall Brown, Diana Tibbs, and Alan Mancuso; Elaine D. Walter and Yvette Lavelle of Boyd, Richards, Parker, Colonnelli, P.L., Miami, for Appellees Becker & Poliakoff, P.A., John Townsend, Jay Roberts, and Raymond Newman.
Not final until disposition of any timely and authorized motion under Fla. R. App. P. 9.330 or 9.331.
On appeal from the Circuit Court for Walton County. Jeffrey E. Lewis, Judge.
Bruce S. Rogow of Bruce S. Rogow, P.A., Cedar Mountain, NC; Tara A. Campion of Bruce S. Rogow, P.A., Boca Raton, for Appellant.
William K. Thames of Vernis &Bowling of Northwest Florida, P.A., Pensacola, for Appellees The Enclave at Inlet Beach Owners Association, Inc., James G. Waldschmidt, Randall Brown, Diana Tibbs, and Alan Mancuso; Elaine D. Walter and Yvette Lavelle of Boyd, Richards, Parker, Colonnelli, P.L., Miami, for Appellees Becker & Poliakoff, P.A., John Townsend, Jay Roberts, and Raymond Newman.
KELSEY, J.
This appeal is about malicious prosecution. The parties are Inlet Beach, a lot owner (Lot Owner); The Enclave, a homeowners' association and officers (HOA); and a law firm and lawyers representing the HOA below (Lawyers).
The principal of Inlet Beach, David Pearson, is not a party here because the trial court ruled that he was not a proper party below; and he did not appeal the summary judgment. We have removed his name from the case style.
The property is a small, 18-townhome community in Walton County. The HOA Declaration of covenants and restrictions was recorded August 3, 2005. This was corrected in a new filing recorded August 5, 2005, to include the previously omitted legal description of the property.
The HOA Declaration is a comprehensive 10-page document detailing the rights and obligations of all property owners within the community. It includes an express provision empowering the HOA to "make assessments against the residential parcels as may be necessary or desirable for capital improvements, repair and maintenance of the common areas and to promote the recreation, health, safety and welfare of the owners of the residential parcels." Further, Article X of the Declaration, entitled "Assessment and Liens," authorizes imposition of liens on all subject properties, and begins with each owner's obligations: "Each owner, by acceptance of a deed for a residential parcel, is deemed to covenant and to agree to pay, when due, the various costs, charges, and assessments made by the Association as provided in this Declaration."
The developer obtained title to the property by deed executed August 4, 2005, and recorded August 17, 2005. The deed provides that it is "[s]ubject to all covenants, conditions, restrictions, easements and reservations of record."
The subdivision plat was recorded November 8, 2007, dedicating the platted common areas to the HOA. The plat bears the HOA's joinder and consent to the dedication, including "the property rights and maintenance responsibilities of all facilities and infrastructure." The plat also reflects Walton County's express disavowal of and refusal to accept "any obligation or express or imply any intent of construction or maintenance of the roads, alleys, rights-of-way, easements, public areas or infrastructure with this approval." That is, the County was not going to build or maintain the roads, streetlights, or other neighborhood improvements in the development. Rather, the HOA would have to collect assessments and undertake those functions for the benefit of the entire community, failing which those tasks would not be done-to the detriment of the entire community.
This Litigation.
Lot Owner bought four lots in foreclosure in 2011. By that time, all relevant documents-including the HOA Declaration, as amended; the developer deed; and the plat-were long since recorded in the public records. In connection with the purchases, and as required by section 720.401 of the Florida Statutes, Lot Owner received direct notice of the HOA's existence and that the lot owners were mandatory members of the HOA. Lot Owner's warranty deeds were made "subject to taxes for the current year, covenants, restrictions, and easements of record, if any" as to lots 5 and 6 (emphasis added). Similarly, as to lots 17 and 18, the deeds were "subject to zoning, restrictions, prohibitions and other requirements imposed by governmental authorities, restrictions and matters appearing on the plat, if there is a recorded plat, or contained in any other instrument recorded in the public records" (emphasis added). Lot Owner signed an additional agreement acknowledging restrictions and easements, and also acknowledging that "[h]omeowner Fees are in the amount of $75 per month." Further, Lot Owner's title insurance policies on the lots expressly provide that the lots are subject to the HOA Declaration.
In addition, Lot Owner paid HOA assessments as part of the closings, and paid at least one assessment on each lot thereafter. Then it stopped paying. Ultimately, the HOA filed claims of liens for assessments on Lot Owner's four lots, covering June 2011 through May 2012 plus an interim special assessment, totaling over $9,000.00. The HOA hired the Lawyers to foreclose on the HOA lien, and the Lawyers filed suit plus a notice of lis pendens. Lot Owner did not respond to the foreclosure suit, and the clerk entered a default.
A few months later, the HOA agreed to set aside the clerk's default in the foreclosure suit, but no further record activity occurred in that action. It was after the reinstatement that Lot Owner first asserted to the Lawyers and the HOA that the HOA lacked authority to encumber the property because the original Declaration of covenants and restrictions creating the HOA-and its associated assessment obligations and lien-imposition authority-was executed and recorded one day before the original developer took title to the property. The Declaration was first recorded August 3, 2005. The deed to the developer was executed on August 4, 2005. The Declaration was corrected to include the previously omitted legal description of the property, by a scrivener's affidavit recorded August 5, 2005. But Lot Owner argued this was insufficient to cure any defect, even though it was recorded after the developer obtained title, because the developer did not also sign it.
The developer is not a party to the litigation or appeal. The Lawyers here were not counsel for the developer and were not involved in the execution or recording of the deed.
The lawyers for the two sides conferred about the situation on and off, during which time the Lawyers were also discussing the pros and cons and possible workarounds with the HOA officers and members. Lot Owner submitted a partial payment for the overdue assessments, but when pressed for complete payment, including fees, and asked to sign an agreement resolving the issues so they would not arise again-an agreement all other lot owners signed- Lot Owner declined to cooperate.
The HOA separately filed a declaratory-judgment action to resolve the deficiency purportedly arising from the alleged recordation-date problem, asserting equitable grounds for relief. Ultimately, over a year later, the HOA dismissed the lien foreclosure suit "without prejudice," and later also dismissed its declaratory-judgment suit without prejudice, due to its financial inability to sustain the litigation. It released the claims of lien, while expressly retaining its rights in the "underlying debt and all charges relating thereto." Meanwhile, the Lawyers' pragmatic resolution efforts succeeded, in that every lot owner in the subdivision agreed to join the HOA and accept the assessment obligations on a volunteer basis-except this Lot Owner.
It appears the dec action, now just Lot Owner's counterclaims and cross claims, is still open on the docket, although it is not clear why since there has been no record activity in several years. See Enclave at Inlet Beach Owners Ass'n v. Inlet Beach Enclave, No. 13-CA-192 (Fla. 1st Cir. Ct., Walton Cnty., 2013).
Setting up the issues in this appeal, Lot Owner sued the Lawyers and the HOA for malicious prosecution and conspiracy to commit malicious prosecution. Lot Owner relied on the alleged recording defect to contend that it never had an enforceable obligation to pay HOA assessments, and further that the foreclosure action was so lacking in merit that maintaining it after revelation of the recording defect constituted malicious prosecution: specifically, that the Lawyers and HOA knew "to a legal certainty that no legal basis existed" for the lawsuit. Lot Owner sought compensatory and punitive damages in many millions of dollars (an amount clearly not targeting the HOA's meager coffers).
The trial court dismissed Lot Owner's malicious prosecution action, finding it barred by the litigation privilege. On appeal, we reversed and remanded for further proceedings. See Inlet Beach Cap. Invs., LLC v. Enclave at Inlet Beach Owners Ass'n, Inc. ("Inlet Beach I"), 236 So.3d 1140, 1141 (Fla. 1st DCA 2018). We noted that a claim for malicious prosecution requires proof of all six of the elements listed in Debrincat v. Fischer, 217 So.3d 68, 70 (Fla. 2017):
(1) an original criminal or civil judicial proceeding against the present plaintiff was commenced or continued; (2) the present defendant was the legal cause of the original proceeding against the present plaintiff as the defendant in the original proceeding; (3) the termination of the original proceeding constituted a bona fide termination of that proceeding in favor of the present plaintiff; (4) there was an absence of probable cause for the original proceeding; (5) there was malice on the part
of the present defendant; and (6) the plaintiff suffered damage as a result of the original proceeding.Inlet Beach I, 236 So.3d at 1142 (emphasis removed). If proof of any one of these elements fails, so too fails the malicious prosecution action. Alamo Rent-A-Car, Inc. v. Mancusi, 632 So.2d 1352, 1355 (Fla. 1994).
On remand, the parties filed cross-motions for summary judgment addressing the Debrincat factors as applied to Lot Owner's claims for malicious prosecution and conspiracy to commit malicious prosecution. Lot Owner argued that the alleged recording defect eliminated any possibility that the HOA had a right to pursue assessments, and that the voluntary dismissal of the foreclosure action reflected a lack of merit. The Lawyers and HOA argued that a dismissal without prejudice was not a bona fide termination in favor of Lot Owner. Further, the Lawyers and the HOA argued they had probable cause to initiate the foreclosure, that Lot Owner allowed a default judgment to be entered, and that Lot Owner's demands for settlement were unreasonable-all of which was sufficient to defeat a claim of malicious prosecution. They also argued there were several viable legal theories under which the HOA assessments could have continued.
In the final summary judgment now before us, the trial court concluded Lot Owner failed to establish three of the Debrincat factors. First, the voluntary dismissal of the HOA foreclosure action did not constitute a bona fide termination in Lot Owner's favor. Second, there were valid grounds to maintain the foreclosure action while awaiting resolution of valid legal and equitable arguments against Lot Owner's position-in other words, probable cause. Third, Lot Owner could not establish malice because it took ownership of its parcels with knowledge of the recorded Declaration and resulting assessment obligations.
We review these issues de novo. See DelMonico v. Traynor, 116 So.3d 1205, 1211 (Fla. 2013). We apply the recently adopted federal summary judgment standards. See In re Amends. to Fla. R. of Civ. Proc. 1.510, 309 So.3d 192, 192 (Fla. 2020). Stated simply, that test is whether a reasonable jury could return a verdict in favor of Lot Owner. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). We find that the trial court properly entered summary judgment against Lot Owner under this test. We affirm as to each of the court's three rationales, any one of which is sufficient to uphold the judgment.
We also agree that the claim for civil conspiracy to commit malicious prosecution lacked both factual basis and legal merit. We acknowledge Lot Owner's argument that the trial court overlooked its summary judgment response, but find that the responsive filing would not have changed the outcome below and does not change ours.
Voluntary Dismissal Did Not "Favor" Lot Owner.
First, Lot Owner did not "win" the foreclosure action just because the HOA voluntarily dismissed the suit without prejudice. "Without prejudice" is just that-it allows refiling, and it is not a merits disposition. No factual disputes are resolved. No law is made or rejected. There is neither winner nor loser. The HOA is still entitled to seek its damages for unpaid assessments and all related costs (including attorney fees and interest) as provided in the HOA documents that Lot Owner acknowledged upon buying the four lots. See Fla. R. Civ. P. 1.420(a)(1) (providing that a first voluntary dismissal without prejudice is not an adjudication on the merits unless the dismissing party states otherwise).
As a matter of law, voluntary dismissal without prejudice is not a bona fide termination for purposes of the Debrincat analysis. As one of our sister courts described it, a "bona fide termination" in favor of a party means that a reviewing court must be able to conclude that "the termination of the first suit was not only favorable to the defendant in that suit, but also that it demonstrated the first suit's lack of merit." Doss v. Bank of Am., N.A., 857 So.2d 991, 994-95 (Fla. 5th DCA 2003). See also Gill v. Kostroff, 82 F.Supp.2d 1354, 1365 (M.D. Fla. 2000) ("Voluntary dismissals are not considered bona fide terminations."). This record does not establish either of these factors.
Lot Owner's attempt to avoid this result is unavailing. Lot Owner twists the import of the Lawyers' attempts to put together a voluntary and pragmatic disposition of the recording issue (which succeeded as to all owners in the subdivision except Lot Owner). Lot Owner assumes that all attempts at a non-litigious resolution constituted an admission to a lack of merit in the substantive issues. But the two are not mutually exclusive, and it appears no court addressing similar facts has approved Lot Owner's reasoning. The trial court rejected that reasoning, and so do we. Attorneys should be encouraged to acknowledge potential problems frankly, and seek solutions. Doing so does not create a conspiracy or doom the legal merits of the underlying issues. Sometimes the most worried of lawyers end up succeeding. Further, there was merit in the Lawyers' position that the alleged recording defect was not fatal to the HOA's assessment powers, as discussed under the second issue.
The Lawyers and The HOA Had Valid Arguments.
Second, both the initial foreclosure action and the later declaratory judgment action raised valid theories for relief, defeating the claim of malicious prosecution-regardless of whether tested at inception or during the pendency of the foreclosure action. So long as a reasonable lawyer can validly view a claim as tenable-a test similar to that of "probable cause"-a claim of malicious prosecution cannot stand. C.A. Hanson Corp. v. Wicker, Smith, Blomqvist, Tutan, O'Hara, McCoy, Graham &Lane, P.A., 613 So.2d 1336, 1338 (Fla. 3d DCA 1993); see also Nw. Fla. Home Health Agency v. Merrill, 469 So.2d 893, 901 (Fla. 1st DCA 1985) (describing the question as whether there is "a reasonable ground of suspicion supported by circumstances sufficiently strong in themselves to warrant" a cautious lawyer's opinion that a claim is valid). The trial court properly resolved this claim in favor of the HOA and the Lawyers under the governing summary-judgment standard.
One valid argument by the Lawyers and HOA was the equitable principle that after securing the benefits of ownership by way of expressly acknowledging the burdens of ownership, Lot Owner was equitably estopped from asserting otherwise. Lot Owner was at all times on notice of the recorded Declarations, and repeatedly covenanted to be bound by them. We find it telling that Lot Owner paid assessments due at the closings, paid some assessments thereafter, and even wrote a check to pay fairly significant past-due assessments-all of which evidences both knowledge of and acquiescence to the assessment authority and obligations. Under such circumstances, "[c]ourts will enforce restrictive covenants against those who have notice of such restrictions." Davis v. Verandah at Lake Grady Homeowners Ass'n, Inc., 354 So.3d 1140, 1146 (Fla. 2d DCA 2023), review denied, SC2023-0240, 2023 WL 4487393 (Fla. July 12, 2023); see also Romak v. Naples Mobile Ests. Cmty. Ass'n, Inc., 373 So.2d 693, 695 (Fla. 2d DCA 1979) (enforcing declaration of covenants despite its not having been recorded before purchasers executed options to purchase binding them to the covenants). Lot Owner was improperly trying to have it both ways-keep the properties purchased under the known burden of disclosed and acknowledged HOA assessments, while also disavowing those known and expressly accepted obligations.
A related principle supporting the trial court's judgment is the remedy of equitable reformation. See Tobin v. Mich. Mut. Ins. Co., 948 So.2d 692, 696 (Fla. 2006) (recognizing reformation as an equitable remedy for the inadvertent and mistaken failure of a written instrument to express the parties' intent accurately). Three mistakes were alleged: early recording and omission of legal description as to the Declaration, and failure to include developer's signature on the corrective scrivener's affidavit. Even Lot Owner acknowledges these were mistakes-not that the HOA and developer intended to defeat the Declaration at the outset and for all time. This is a classic case for applying equitable reformation so the curative filing effects the obvious cure. This theory of relief also supports the trial court's judgment that valid arguments supported the lawsuits. The trial court correctly rejected Lot Owner's arguments and entered summary judgment in favor of the HOA and the Lawyers.
Lot Owner Could Not Establish Malice.
Third, as already established, Lot Owner was fully aware of the HOA obligations. The deeds expressed these obligations, as did a separate closing document that Lot Owner executed, as well as Lot Owner's title insurance policies on the lots. Lot Owner's payment of assessments at and after closing implicitly acknowledged the obligations. The Lawyers and the HOA were well within their rights both to initiate the foreclosure action and to pursue a resolution after Lot Owner asserted that the alleged recording defect invalidated the assessments ab initio. Lot Owner's arguments were but one perspective. The Lawyers'/HOA's arguments were another, and valid, perspective. See Davis, 354 So.3d at 1146.
Lot Owner relies heavily here, as it did below, on the Lawyers' communications with the HOA and other lot owners in an attempt to resolve the situation. That reliance is misplaced. Attorneys must make clients understand difficulties with their legal positions- e.g., that there is no directly controlling precedent, a bad outcome is theoretically possible, litigation may be protracted and expensive-and that some form of settlement could avoid many pitfalls. Giving clients that realistic assessment of a legal dispute is not by any means tantamount to admitting lack of merit such as would support a malicious prosecution claim. We reject Lot Owner's unilateral conclusion that the Lawyers' communications evidenced admission of a lack of merit, and we affirm the trial court's parallel conclusion to the contrary.
Because Lot Owner has not shown, and on this record cannot show, that all of the Debrincat factors were satisfied, the trial court correctly entered summary judgment for the Lawyers and the HOA.
AFFIRMED.
B.L. THOMAS and NORDBY, JJ, concur