Opinion
No. 2D21-1159
07-08-2022
Daniel JOY and Madeline Joy, Appellants, v. OAKS CLUB CORPORATION, Appellee.
Daniel F. Joy, pro se; Gregg M. Horowitz, Sarasota; and George R. McLain, Sarasota, for Appellants. Ryan W. Owen and David L. Boyette of Adams and Reese LLP, Sarasota, for Appellee.
Daniel F. Joy, pro se; Gregg M. Horowitz, Sarasota; and George R. McLain, Sarasota, for Appellants.
Ryan W. Owen and David L. Boyette of Adams and Reese LLP, Sarasota, for Appellee.
ROTHSTEIN-YOUAKIM, Judge.
On this appeal from the entry of final summary judgment, Daniel and Madeline Joy (the Joys) challenge the trial court's conclusion that the Oaks Club Corporation (Club) properly used its bylaw amendment procedure to require that a property owner purchase a new Club membership for each additional lot or condominium unit acquired in the Oaks real estate development. Because redefinition of the membership requirement instead required amendment of the Declaration of Covenants (Declaration) by a super-majority of the property owners, we reverse.
A. Factual and Procedural Background
The Oaks is an upscale real estate development in Osprey, Florida, located on Sarasota Bay. It includes three residential neighborhoods comprising waterfront homes, townhouses, villas, and high-rise condominiums. It also includes the Club, which operates two golf courses, a tennis and aquatics complex, a fitness and wellness center, and dining facilities.
From 1985, when the Declaration was recorded, until 2015, when the Club amended its bylaws, an existing Oaks property owner could purchase a new lot or condominium unit within the Oaks without purchasing an additional Club membership. For this thirty-year period, the source of the mandatory Club-membership requirement was the Declaration.
The Club changed this requirement in 2015 but did so by amending its bylaws instead of the Declaration. Under the 2015 bylaw amendments—apart from a few exceptions and some grandfathering—an existing Oaks property owner who purchases additional property must now also purchase an additional Club membership with each new Oaks property acquired.
The Joys first purchased property—a condominium—at the Oaks in 2017. As required by the Declaration, they also purchased a Club membership at that time. Their application with the Club obligated them to abide by its bylaws.
When the Joys sought to purchase a second condominium in 2020, they were told they must purchase a second Club membership based on the 2015 bylaw amendments. After the Club refused to waive that requirement, the Joys walked away from their purchase of the second condominium, forfeiting their deposit. The Joys then sued the Club, seeking declaratory relief in Count One and injunctive relief and damages in Count Two. They contended that the 2015 amendments to the bylaws were void and that only an amendment to the Declaration could change the mandatory Club-membership requirement. The Club counterclaimed for declaratory relief, asking the trial court to conclude that the bylaw amendments were lawful.
The Joys ultimately moved for final summary judgment on each of their claims and on all of the Club's affirmative defenses. The Club likewise sought summary judgment on its declaratory judgment claim and on its affirmative defenses of statute of limitations, equitable estoppel, and laches, asking the trial court to declare that the 2015 bylaw amendments were valid.
After a hearing, the trial court denied the Joys' motion and granted the Club's motion. This appeal follows.
B. Analysis
The Club, like many such nonprofit corporations in Florida, is governed by its Declaration, articles of incorporation, and bylaws. Here, the mandatory Club-membership requirement found its initial home in the Declaration, not in the bylaws.
Several provisions in the Declaration create and inform the Club-membership requirement. Article II, section 2, reads, in pertinent part:
[T]he Developer can not [sic] amend this Declaration or any other restriction or covenant relating to the Property, in such a way as to modify the requirements that: (a) all Property Owners must be Members; or (b) all Members must be Property Owners ....
(Emphasis added.) The Declaration, in turn, defines "Property Owner" as "the record owner, whether one or more persons or entities, of the fee simple title to any Homesite which is a part of the Property." "Homesite" is "any platted residential lot or condominium unit in Oaks I or Oaks II." Finally, article III, section 1, states: "All Property Owners have received written acceptance of their membership application in the Club for their membership in the Club." The Declaration expressly states that its obligations, including the covenant to be a Club member, "run with the land."
Oaks I and Oaks II are the platted lots and condominiums that collectively make up the Oaks' three neighborhoods.
Article VI, section 1, describes the super-majority required to amend the Declaration:
The covenants, set forth herein may be amended at any time and from time to time upon the execution and recordation of an instrument executed by Property Owners owning not less than seventy-five (75%) percent of the Homesites ....
The Club's bylaws, in contrast, can be amended by a simple majority vote of the Club's board of governors together with a majority vote of the Club's equity members. The 2015 bylaw amendments were passed initially by the Club's governing board and later by the Club's equity members at the annual meeting.
In some circumstances, the bylaws may also be amended by a super-majority vote of the board of governors alone. That is not what happened here.
The Declaration includes language delineating the scope of the Club's powers and responsibilities, stating that the Club "shall administer and operate the facilities and amenities ... for the exclusive use and benefit of the Oaks Club Corporation members." In addition, article III, section 5, titled Equal Treatment of Property Owners, provides, in pertinent part:
The Club acknowledges and covenants that Members who own Property in Oaks I shall be treated no less favorably than Members who own Property in Oaks II, and that Members who own Property in Oaks II shall be treated no less favorably than Members who own Property in Oaks I. Such equal treatment of all Members extends to all rights of access to and use of the Club Facilities, the terms by which Property Owners may become Members, the annual dues to be paid by the Members, and all other duties and benefits of being a Member in the Club. Nothing herein shall be construed as preventing the Club from establishing different rights pertaining to each class or from establishing different initiation fees based solely upon the date of initiation or the number of Members of the Club ....
The trial court reasoned that the Club's authority to "administer and operate" the Club, together with the Club's authority to set "the terms by which Property Owners may become Members," necessarily delegated to the Club any decision about redefining the mandatory membership requirement. We disagree.
Summary judgment is proper only if (1) there is no genuine issue of material fact and (2) the moving party is entitled to judgment as a matter of law. Fla. R. Civ. P. 1.510(a) (2020); see Volusia County v. Aberdeen at Ormond Beach, L.P. , 760 So. 2d 126, 130 (Fla. 2000). This court reviews de novo a grant of summary judgment. Id. If the record reveals even the slightest doubt that a genuine issue of material fact might exist, summary judgment is improper. Cook v. Bay Area Renaissance Festival of Largo, Inc. , 164 So. 3d 120, 122 (Fla. 2d DCA 2015) (citing Schmidt v. State Farm Mut. Ins. Co. , 750 So. 2d 695, 698 (Fla. 2d DCA 2000) ).
The trial court decided the summary judgment motions under Florida's old summary judgment standard; we must do likewise. See Guzman v. S. Fid. Ins. Co. , 332 So. 3d 67, 70 n.2 (Fla. 2d DCA 2021) (noting that the new summary judgment standard "does not apply to judgments entered before its effective date of May 1, 2021").
"Where the determination of the issues of a lawsuit depends upon the construction of a written instrument and the legal effect to be drawn therefrom," however, "the question at issue is essentially one of law only and determinable by entry of summary judgment." Angell v. Don Jones Ins. Agency , 620 So. 2d 1012, 1014 (Fla. 2d DCA 1993) (citing Kochan v. Am. Fire & Cas. Co. , 200 So. 2d 213, 220 (Fla. 2d DCA 1967) ). This court may reach a construction or interpretation of a contract contrary to that of the trial court. See Bethany Trace Owners' Ass'n v. Whispering Lakes I, LLC , 155 So. 3d 1188, 1191 (Fla. 2d DCA 2014).
The Club's Declaration is its "constitution." See Beachwood Villas Condo. v. Poor , 448 So. 2d 1143, 1145 (Fla. 4th DCA 1984) (quoting Schmidt v. Sherrill , 442 So. 2d 963, 965 (Fla. 4th DCA 1983) ); see also Pepe v. Whispering Sands Condo. Ass'n , 351 So. 2d 755, 757 (Fla. 2d DCA 1977) (recognizing that a declaration "is more than a mere contract spelling out mutual rights and obligations of the parties thereto[;] it assumes some of the attributes of a covenant running with the land, circumscribing the extent and limits of the enjoyment and use of real property"). And a declaration of covenants must be strictly construed. Cool Spaze, LLC v. Boca View Condo. Ass'n , 292 So. 3d 769, 772 (Fla. 4th DCA 2020) (citing Cali v. Meadowbrook Lakes View Condo. Ass'n "B" Inc. , 59 So. 3d 363, 367 (Fla. 4th DCA 2011) ). So long as a bylaw does not contravene an express provision of the Declaration, or a right reasonably inferable therefrom, it is valid. Beachwood Villas, 448 So. 2d at 1145 ; see also S & T Anchorage, Inc. v. Lewis , 575 So. 2d 696, 698 (Fla. 3d DCA 1991) ("The articles and bylaws must be consistent with the provisions of the superior document, the Declaration.").
The Club is neither a homeowners nor a condominium association subject to Florida's statutory framework for such entities. Nevertheless, the concept that a declaration of covenants takes precedence over articles of incorporation and bylaws is still wholly applicable to the Club, a nonprofit corporation organized under chapter 617 of the Florida Statutes. See Heron at Destin W. Beach & Bay Resort Condo. Ass'n v. Osprey at Destin W. Beach , 94 So. 3d 623, 628 (Fla. 1st DCA 2012) (explaining that a declaration acts as the "constitution" of a nonprofit master association and "strictly governs the relationships among the members and the association," regardless of whether the master association qualifies as an "association" under section 718.103(2) of the Florida Statutes (2009) ).
Given that the obligation of an Oaks property owner to purchase a single club membership was based for thirty years on the Declaration, we are hard-pressed to see how the Club could redefine the membership requirement through a simple bylaw amendment. The Declaration requires only that all property owners be members; once membership is obtained, the Declaration imposes no limitations on the nature or scope of the property that may be owned. Thus, the right of a property owner to own multiple properties while only being required to purchase one Club membership is certainly a right that is "reasonably inferable" from the Declaration. See Beachwood Villas , 448 So. 2d at 1145.
Moreover, the Declaration includes no specific grant of authority to the Club to redefine the mandatory membership requirement through either rule-making or a bylaw amendment. To the extent that the Club argues that it has the authority to do so based on its power to "administer and operate" or to "set the terms by which Property Owners may become members," this argument does not survive closer scrutiny.
Specifically, the Club is charged with "administer[ing] and operat[ing] the facilities and amenities located on the Oaks II Property for the exclusive use and benefit of the Oaks Club Corporation members." We refuse to expand a provision about operating Club "facilities and amenities" (such as golf courses, dining rooms or saunas) to include a conferral of authority to redefine the mandatory Club-membership requirement.
We likewise refuse to expand the Declaration's language concerning the Club's authority to "set[ ] the terms by which a Property Owner may become a Member" to encompass the authority to require that an owner purchase additional memberships. The Club's argument that this language gives the Club authority to redefine the mandatory membership requirement through a bylaw amendment confuses the Club's authority to set the amount of an initiation fee with the authority to require initiation in the first place. Indeed, if Club management truly had the authority to redefine the mandatory membership requirement through the bylaw amendment process as they did, this provision would have used the word "must" instead of "may." Other language in article III, section 5 confirms this point. This section states in conclusion that nothing therein shall prevent the Club from "establishing different initiation fees based solely upon the date of initiation," which language is consistent with the authority to decide how much to charge in any given year for initiation fees but not indicative of authority to redefine the mandatory membership requirement.
Finally, the "setting the terms" language appears in the "equal treatment" section of the Declaration ("Such equal treatment of all Members extends to ... the terms by which Property Owners may become Members."). This section prevents the Club from discriminating against property owners based on where they buy their property within the Oaks development. In other words, all things being equal, the Club may not charge a property owner in Oaks I more for an equity or social membership than an owner in Oaks II, and vice versa. In sum, article III, section 5 does not delegate authority to the Club to redefine the mandatory membership requirement.
Because no provision of the Declaration delegates to the Club rule-making authority on the scope of mandatory Club-membership, the 2015 bylaw amendment is ultra vires. See S & T Anchorage , 575 So. 2d at 698 ("The Declaration does not empower the Association to sell or convey the dock areas or the common areas.... Even if, as Anchorage asserts, the Assignment and settlement were adopted pursuant to a proper vote as provided by the Association bylaws, the absence of authority to execute such documents renders them ultra vires ...."); Cool Spaze , 292 So. 3d at 772 ("The association's governing documents authorized approval of all leases, subleases, or other occupation of a unit. It did not authorize the association's approval of unit transfers, title transfers, or sales." (emphasis omitted)). To redefine the membership requirement, the Club must instead amend the Declaration, which requires the consent of seventy-five percent of the property owners. Because the Club failed to do so, we reverse the trial court's grant of summary judgment in its favor.
In granting summary judgment to the Club, the trial court placed great emphasis on Highland Lakes Property Owners Ass'n v. Schlack , 724 So. 2d 621 (Fla. 5th DCA 1998). Schlack states, "We ... have taken the position that an association's authority is derived from the Declaration and the bylaws if the bylaws are not inconsistent with the Declaration." Id. at 622 (emphasis omitted). But this statement requires greater scrutiny. As the court noted in In re Walker , No. 07-14797, 2008 WL 1781181, at *4 (Bankr. S.D. Fla. 2008) : "In Schlack , relied upon by the HOA, the declaration at issue actually did authorize the purchase of property such as was the subject of the dispute in the case. The bylaws clarified and more clearly defined the right to purchase, but the bylaws were not the source of the right to purchase at issue." Here, the Declaration is the source of the mandatory Club-membership requirement.
We also conclude that the trial court should have granted the Joys' motion for summary judgment on the Club's statute of limitations defense and should have denied the Club's motion as to equitable estoppel. To obtain summary judgment on an affirmative defense, the movant has the burden of conclusively establishing that no genuine issue of material fact exists. Morroni v. Household Fin. Corp. III , 903 So. 2d 311, 312 (Fla. 2d DCA 2005). "Once an affirmative defense is raised, the movant has the additional burden of either disproving or establishing the legal insufficiency of the affirmative defense." Wilson v. Pruette , 422 So. 2d 351, 352 (Fla. 2d DCA 1982) (citing Stewart v. Gore , 314 So. 2d 10 (Fla. 2d DCA 1975) ).
We acknowledge that this is not an accurate statement of the standard for obtaining summary judgment under the new rule.
We review de novo the trial court's application of legal issues concerning a statute of limitations. Hamilton v. Tanner , 962 So. 2d 997, 1000 (Fla. 2d DCA 2007). Because the Joys' claims are based on the core contention that the amended bylaws conflict with and are contrary to the Declaration, they are founded on a written instrument. Consequently, section 95.11(2)(b), Florida Statutes (2020) (providing that an action founded on a written instrument must be commenced within five years), provides the applicable statute of limitations. See Harris v. Aberdeen Prop. Owners Ass'n , 135 So. 3d 365, 367 (Fla. 4th DCA 2014).
The Club alleged that section 95.11(2)(b) barred both of the Joys' claims.
In the affidavit filed with its summary judgment motion, the Club concedes that the amended bylaw was enacted under article XVII, section 2 of the bylaws, which requires the approval of both the Governing Board and the equity members. The amended bylaw, therefore, was not adopted by the Club until it was passed by both a majority of the board and the equity owners of the Club on April 2, 2015. Moreover, the amended bylaw was not recorded until July 6, 2015. Because the Joys filed their original complaint challenging the amended bylaw on April 21, 2020, less than five years after the amended bylaw was recorded, the statute of limitations does not bar their claims. See Hilton v. Pearson , 208 So. 3d 108, 110 (Fla. 1st DCA 2016) ("[A] suit challenging the validity of an amendment to restrictive covenants must be filed within five years of the date that the amendment is recorded even if the suit alleges that the amendment was void because it was not properly enacted."); see also Harris, 135 So. 3d at 368 (holding, in a lawsuit challenging a property owners association's amendment to its governing documents, that the statute of limitations still began to run from the date on which the amendment was recorded in the public records notwithstanding that plaintiff landowner did not acquire her property until after the amendment).
Although the trial court ruled that the Joys are equitably estopped from challenging the legality of the amended bylaw, the record establishes that a genuine issue of material fact precludes summary judgment on this issue. This court has recognized that "[t]he doctrine of estoppel should be applied with great caution and is applied only where to refuse its application would be virtually to sanction a fraud." Pelican Island Prop. Owners Ass'n v. Murphy , 554 So. 2d 1179, 1181 (Fla. 2d DCA 1989) (citing Brickell Bay Club Condo. Ass'n v. Hernstadt , 512 So. 2d 994, 996 (Fla. 3d DCA 1987) ). Although a party may be equitably estopped from repudiating the obligations and validity of a transaction after accepting its benefits, see Head v. Lane , 495 So. 2d 821, 824 (Fla. 4th DCA 1986), it is impossible on this record to say as a matter of law that before bringing this action, the Joys knew all material facts pertaining to the amended bylaws and the specific benefits that they would receive therefrom. See 28 Am. Jur. 2d Estoppel and Waiver § 61 (2022) ("Knowledge of the facts is essential to estoppel by acceptance of benefits."); Sun Operating Ltd. P'ship v. Holt , 984 S.W.2d 277, 292 (Tex. App. 1998) ("As to Vantage's proposition that the Holts were estopped, as a matter of law, from claiming that the entire lease expired because they accepted $50 from Oakwood, we again disagree. Before one's acceptance of a benefit can amount to an estoppel, it must be shown that the benefit was accepted with knowledge of all material facts." (citing Frazier v. Wynn, 472 S.W.2d 750, 753 (Tex. 1971) )).
The Club likewise moved for summary judgment on its affirmative defense of laches. It is unclear whether the trial court specifically ruled on this defense; regardless, although laches may bar a claim that is otherwise timely under the statute of limitations where "strong equities appear," see Appalachian, Inc. v. Olson , 468 So. 2d 266, 269 (Fla. 2d DCA 1985), genuine issues of material fact likewise preclude summary judgment on this defense. Nothing in the record suggests that the Joys failed to act diligently in bringing this lawsuit. Further, the Club has not demonstrated conclusively that it relied to its detriment on the Joys' filing of this lawsuit in April 2020 rather than closer to the time they purchased their condominium in late 2017. See id. ("Laches is based upon an unreasonable delay ... in asserting a known right which causes undue prejudice to the party against whom the claim is asserted." (first citing Bethea v. Langford , 45 So. 2d 496 (Fla. 1949) ; and then citing Van Meter v. Kelsey, 91 So. 2d 327 (Fla. 1956) )).
Moreover, the Club has not identified any specific economic benefit the Joys received from the amended bylaws. Instead, in the affidavit submitted by the Club below, the Club aggregated the "benefits" received by all property owners at the Oaks, making it impossible to determine the extent of any purported benefit specific to the Joys. This aggregation of benefits rendered it impractical for the Joys to remit to the Club any specific benefit they purportedly received before filing their lawsuit. See Barnett Nat'l Bank of Jacksonville v. Murrey , 49 So. 2d 535, 536 (Fla. 1950) (explaining "that a beneficiary who has received benefits under ... an instrument is not thereby estopped to contest the validity of the instrument if he returns the benefits promptly," among other things).
C. Conclusion
Because the trial court erred in concluding that the Club was authorized to redefine the Club-membership requirement by amending its bylaws, we reverse the grant of summary judgment in favor of the Club and remand with instructions that summary judgment be entered in favor of the Joys on the invalidity of the 2015 bylaw amendments, subject to any unresolved affirmative defenses. We also reverse the summary judgment in favor of the Club on its statute of limitations and equitable estoppel defenses and direct that upon remand, the trial court grant summary judgment in favor of the Joys on the Club's statute of limitations defense. We remand for all other further proceedings consistent with this opinion.
Reversed; remanded with instructions.
KHOUZAM and STARGEL, JJ., Concur.