Opinion
3:20-bk-02569-RCT
08-15-2022
In re Wildwood Villages, LLC, Debtor.
Chapter 11
ORDER ON THE AHC'S APPLICATION FOR ADMINISTRATIVE EXPENSE
Roberta A. Colton, United States Bankruptcy Judge
Before the Court is the Ad Hoc Residents' Committee's ("AHC") Application for Administrative Expense Under § 503(b) (Docs. 582, 593, 919); Debtor's Objection thereto (Doc. 595, 607); the AHC's and Debtor's supplemental briefing (Docs. 626, 629); and this Court's Order on the AHC's Application for Administrative Expense (Doc. 666). On June 27, July 14, and July 15, 2022, a trial was held on the issue of the lot owners' damages resulting from Debtor's elimination of the recreational facilities, which is the basis for their Application for Administrative Expense.
The AHC moved to amend its Administrative Claims to correct instances where the claimant's name and the deed conflicted (Doc. 906), and the Court granted the motion (Doc. 908).
Transcripts of the trial can be found at Docs. 963-65.
I. Procedural Background
Debtor Wildwood Villages, LLC filed a petition for relief under Subchapter V of Chapter 11 on August 28, 2020. On February 23, 2022, this Court confirmed Debtor's liquidating plan. The effective date of the confirmed plan was March 10, 2022.
Docs. 518, 617, 697.
Doc. 711.
Debtor is a mobile home subdivision developer that owned the recreational facilities and the common areas of Wildwood Country Resort ("Wildwood") since 2003. Wildwood is made up of three mobile home subdivisions: (1) Water Wheel Adult Mobile Home Community and R.V. Park ("Water Wheel"), (2) Hearty Host Lake Resort ("Hearty Host"), and (3) Heritage Wood 'N Lakes Estates ("Heritage Wood").
The Deed Restrictions for the Wildwood subdivisions require Debtor to perform certain services at Wildwood (such as maintaining the streets; mowing, landscaping, and providing lighting for the common areas; and providing garbage pickup) as well as providing recreational facilities for the Wildwood lot owners. In exchange, the Deed Restrictions require the lot owners to pay Debtor a monthly maintenance fee based on Debtor's actual costs, plus a reasonable profit margin, not to exceed 10% of the fair market value of the recreational facilities operated and maintained by Debtor on behalf of the lot owners. The Deed Restrictions remain in force for Heritage Wood and Hearty Host, but the Deed Restrictions for Water Wheel were terminated on December 31, 2020.
AHC Exs. 1-3: Docs. 855-1, 855-2, 855-3.
AHC Exs. 1-3: Docs. 855-1, p. 8; 855-2, p. 5-6; 855-3, p. 12.
AHC Exs. 1-3: Docs. 855-1, p. 8-9; 855-2, p. 6; 855-3, p. 12-13; Doc. 771, p. 6-8.
AHC Exs. 1-3: Doc. 855-3, p. 15; Doc. 855-2, p. 7; Doc. 855-1, p. 4, 43.
Many current and former Wildwood lot owners have asserted claims against Debtor based on allegations that Debtor has been overcharging them for their monthly maintenance fees since 2011. These pre-petition claims will be set for trial at a later date. In addition, in January of 2021, Debtor, without Court approval, eliminated the recreational facilities that the Deed Restrictions required Debtor to provide and for which Debtor, through March 2022,continued to charge the lot owners unreduced monthly maintenance fees under threat of foreclosure. Thereafter, with Court approval, Debtor leased and then sold the underlying property and adjacent property to Live Oaks Community Church.
Doc. 964, p. 72. The Court takes judicial notice of the Liquidating Trustee's filings showing a reduction in the MMF for April 2022 (Doc. 750) and another reduction in the MMF for May and June 2022 (Doc. 819).
On August 31, 2020, Debtor sought clarification from the bankruptcy court that it could pursue foreclosure proceedings against lot owners who did not pay their monthly maintenance fees. (Doc. 8).
Docs. 235, 655, 684.
After Debtor eliminated the recreational facilities, the AHC filed the instant Application for Administrative Expense for their resulting damages. The AHC seeks administrative expense priority for the lot owners' claims under 11 U.S.C. § 503(b). Section 503(b)(1) provides, in relevant part, that after notice and a hearing, the Court shall allow the actual, necessary costs and expenses of preserving the estate as administrative expenses. "Section 503 priorities should be narrowly construed in order to maximize the value of the estate preserved for the benefit of all creditors." The claimant bears the burden of establishing that the claim consists of an actual and necessary post-petition expense. Furthermore, "[b]ankruptcy courts have broad discretion in determining whether an administrative expense claim justifies allowance."
The AHC's Application for Administrative Expense also sought damages for post-petition overcharges for monthly maintenance fees unrelated to the recreational facilities, as well as for post-petition attorney's fees incurred in allegedly making a substantial contribution to this bankruptcy case. The Court rejected these two additional bases for administrative expense priority. (Doc. 666, p. 15-18).
In re Piper Aircraft Corp., 169 B.R. 766, 776 (Bankr. S.D. Fla. 1994) (citation omitted).
See Matter of Dayhuff, 185 B.R. 971, 973 (Bankr. N.D.Ga. 1995) (citation omitted).
Id. (citations omitted).
After considering the parties' briefings on the issue, the Court issued an order finding that the lot owners' damages claims resulting from Debtor's post-petition elimination of the recreational facilities are entitled to administrative priority. Specifically, the Court stated the following:
Doc 666
The Court finds the lot owners have established that the destruction of the recreational facilities without having replacement facilities in place is a covenant violation by Debtor that directly resulted in a benefit to the estate. As such, it gives rise to potential damages entitled to administrative priority. A trial will be set to determine the amount of any such damages.
Doc 666 p 18
Debtor moved for clarification of the Order, and this Court stated:
The Order at issue granted the AHC's request for administrative priority for the damages claim resulting from Debtor's post-petition destruction of the recreational facilities. The damages suggested by the AHC include post-petition monthly maintenance fee overcharges for recreational facilities that do not exist and/or the diminution of property values after the recreational facilities were destroyed. Thus, the damages sought relate to the loss of the use of the recreational facilities (i.e., two pools, jacuzzi, tennis courts, pool locker facility, and arts and-crafts building), as well as the loss of use of the real property where the recreational facilities had been located, which had previously been available to the lot owners. Of course that loss would be mitigated, at least in part, by any reduction in the monthly maintenance fee given to the lot owners due to the loss [of] the recreational facilities.
Doc 795 p 1-2
Thereafter, a trial was held to determine the amount of the lot owners' damages resulting from Debtor's elimination of the recreational facilities.
The AHC's trial exhibits can be found at Docs. 855, 912, 917, 918, 941. Debtor's trial exhibits can be found at Docs. 858-70, 883, 901, 940. The annotated exhibit lists identifying the exhibits admitted into evidence can be found at Docs. 932, 933, 951-53.
II. Findings of Fact and Conclusions of Law
The AHC consists of 68 lot owners that own 71 lots in Wildwood. These lot owners seek damages in the form of post-petition monthly maintenance fee ("MMF") overcharges for recreational facilities that do not exist, as well as the resulting diminution of their property values. These lot owners presented evidence regarding their overpayment of MMF mainly through their expert, Andrea Bauman, CPA, who identified the costs incurred by Debtor that she believed should have been passed through to the lot owners in the MMF. The AHC asks the Court to subtract these "allowable" costs from the MMF that they paid to arrive at the amount of their MMF overpayment. Additionally, the AHC presented evidence regarding their claimed diminution in value damages for their properties mainly through their expert, Ron Oxtail, MAI.
Three lot owners owned two properties during the relevant period-Donnell and Peggy Mills, Wildwood One, LLC, and Harley and Charlotte Wroten.
The AHC must prove the lot owners' damages with reasonable certainty; damages cannot be speculative. As explained by one court:
See Hudson Marine Mgmt. Svcs., Inc. v. Thomas Miller (Miami), Inc., 417 Fed.Appx. 845, 847-48 (11th Cir. 2011).
Although it is required that the damages claimed be certain and not left to speculation and conjecture, it is evident that the damages recoverable nearly always involve some uncertainty. Consequently, the rule is that the damages claimed must be capable of ascertainment with only a reasonable degree of certainty. It is sufficient that there be a reasonable basis of computation. Damages are not rendered uncertain so as to prevent their recovery because they cannot be calculated with absolute exactness. It is enough that the results be only approximate.
Mere difficulty in the assessment of damages is not a sufficient reason for denying their recovery where the right to them has been established. Moreover, a defendant whose wrongful act
creates the difficulty is not entitled to complain that the amount of the damages cannot be accurately fixed.
Jerrico, Inc. v. Washington Nat. Ins. Co., 400 So.2d 1316, 1318 (Fla. 5th DCA 1981) (quoting 17 Fla.Jur.2d, Damages, s 18 (1980)).
Thus, there must be sufficient evidence to satisfy the mind of a prudent person as to the amount of damages sustained, as well as a reasonable basis in the evidence for the amount awarded.
See Schimpf v. Reger, 691 So.2d 579, 580 (Fla. 2d DCA 1997).
A. Overpayment of MMF
The AHC contends that Debtor overcharged the lot owners for their MMF after Debtor eliminated the recreational facilities. The AHC retained an expert, Andrea Bauman, CPA, to determine the appropriate amount of Debtor's costs that should have been passed through to the lot owners in their MMF during the relevant period-January 1, 2021 through March 9, 2022.
"Because administrative expenses preserve the bankruptcy 'estate,' what matters is that the claim accrues against the estate before it ceases to exist. While typically the estate ends when the plan is confirmed, the plan can extend the life of the estate to a later date[,] such as the effective date." Ellis v. Westinghouse Electric Co., LLC, 11 F.4th 221, 234 (3d Cir. 2021) (internal citations omitted). In this case, the effective date of the confirmed plan was March 10, 2022. (Doc. 711). Thus, the lot owners' administrative expense claims extend to MMF payments made through March 9, 2022.
To do this, Bauman reviewed some of Debtor's financial records. Debtor kept its records for Wildwood in QuickBooks, and Bauman analyzed the Transaction List by Vendor ("TLV") generated by Quickbooks for transactions that occurred between January 2021 and March 2022. She testified that she went through these transactions with the AHC's counsel to determine which cost transactions should be eliminated, because they related to the recreational facilities or were disallowed by the Court in an unrelated order.
AHC Ex. 20: Doc. 855-20.
The Court issued two orders regarding the AHC's unsecured, non-priority claims for MMF overpayments that occurred prior to Debtor's elimination of the recreational facilities. (Docs. 771, 833). The first order, which was used by AHC's counsel in guiding Bauman, found that certain costs could not be passed on to the lot owners in their MMF. (Doc. 771). That order was later reconsidered, and the Court's conclusions regarding which costs could be included in the MMF changed as to some categories of costs. (Doc. 833). However, neither order was relevant to the AHC's administrative claim for damages resulting from the elimination of the recreational facilities beyond the Court's finding that the amount of profit that could be passed through to the lots owners in the MMF was based on the fair market value of the recreational facilities, which no longer exist. (Doc. 771, p. 6-8). Bauman, however, did not consider a profit component for the MMF, and as such, her analysis should not have been based on either of these two orders.
After performing her initial analysis, Bauman eliminated costs that she believed were related to the demolition and removal of the former clubhouse, as well as remodeling the proposed new clubhouse. She also recalculated the payroll and IRS payments based on Debtor's monthly operating reports. Finally, for costs that she believed related to litigation, adequate protection payments, and capital improvements, she eliminated them based on the unrelated order of the Court. After making these adjustments, Bauman concluded that a proper MMF based on the allowable costs would be $86.57.
Alternatively, Bauman eliminated the actual insurance costs set forth in the TLV and replaced them with the projected insurance costs set forth in Debtor's Second Amended Plan. Additionally, she eliminated the actual payroll and IRS payments set forth in the TLV and replaced them with the management fee used in the current management contract with Newby. Based on this alternate analysis, Bauman concluded that an alternative proper MMF based on the remaining allowable costs would be $66.20.
Debtor retained its own expert to rebut Bauman's expert report, Marcie Bour, CPA. After reviewing Bour's rebuttal report criticizing many of Bauman's eliminated costs and her lack sufficient information to perform an adequate analysis, Bauman adjusted her calculations to add back in certain costs that she had previously eliminated. After her updated analysis, Bauman concluded that a proper MMF based on the allowable costs would be either $104.64 or $88.50.
For the reasons that follow, the Court finds that Bauman's analysis and conclusions are not particularly helpful for the Court to determine the amount that the lot owners were overcharged in their MMF due to Debtor's elimination of the recreational facilities. First, Bauman did not possess sufficient information in order to determine which costs related to the recreational facilities and which did not. Essentially, she relied on the AHC's counsel's opinion as to which costs should be excluded, and he, also, did not have a sufficient basis for his opinions.
There is a pending Motion for Sanctions filed by the AHC regarding Debtor's alleged failure to turn over requested documents. (Doc. 853). However, even if Debtor had turned over the documents requested by the AHC, Bauman's analysis still would not be helpful to the Court, as there is no evidence that all of the costs set forth in the TLV were passed through to the 2021 Compilation Report. Furthermore, the 2021 costs from the TLV that were included in the 2021 Compilation Report were not passed on to the lot owners in their MMF until July 2022. (AHC Ex. 30: Doc. 855-30).
Second, Bauman eliminated costs that she believed related to litigation, adequate protection payments, and capital improvements; these were not costs related to Debtor's elimination of the recreational facilities. Bauman eliminated these costs based on an unrelated order of the Court regarding the proper calculation of the MMF in general. These costs, even if they should not have been passed through to the lot owners, did not result from the elimination of the recreational facilities and cannot be considered as MMF overpayments entitled to administrative priority.
To the extent that these costs should not have been passed through to the lot owners, the lot owners may pursue these costs as part of their general, unsecured claims against Debtor under the plan.
Third, the evidence presented at trial showed that the costs passed through to the lot owners in the MMF are those set forth in Debtor's yearly compilation report prepared by Debtor's accountant, John Rallis, CPA. However, there was no evidence presented that all of the 2021 costs set forth in the TLV were included in the 2021 Compilation Report. Instead, there was evidence from Debtor's principal, Jonathon Woods, that not all costs incurred each year were included in the compilation reports and passed through to the lot owners in their MMF.
The 2021 Compilation Report was discussed during the testimony of Bauman, Marcie Bour, and Debtor's principal, Jonathon Woods; however, it was not admitted into evidence.
Doc. 964, p. 87-93, 138.
Fourth, Debtor's 2021 actual costs were not passed through in the MMF during the relevant period-January 1, 2021 through March 9, 2022. Instead, Debtor calculated the MMF charged to the lot owners in the following manner: When the 2019 Compilation Report was created in early 2020, the lot owners were given notice of the actual costs reflected therein and that those costs would be passed through to them in their July 2020 through June 2021 MMF. Then when the 2020 Compilation Report was created in early 2021, the lot owners were given notice of the actual costs reflected therein and that those costs would be passed through to them in their July 2021 through June 2022 MMF. Thus, during the relevant period, the 2019 Compilation Report was used to generate the January 2021 through June 2021 MMF of $379,and the 2020 Compilation Report was used to generate the July 2021 through March 2022 MMF of $385. The actual costs set forth in the TLV, to the extent that they were included in the 2021 Compilation Report, were not passed through to the lot owners in their MMF until July 2022.
Doc. 964, p. 238.
While the 2019 Compilation Report indicates a $476 MMF, the lot owners were only charged a $379 MMF. The Court takes judicial notice of Debtor's Responses to Interrogatories that have been filed in this case to explain the lower amount charged. (Doc. 383-2). Debtor stated that pursuant to an agreement with a Resident Association in connection with a 1996 class action settlement agreement, Debtor reduced the amount of profit passed through to the lot owners in the MMF from $158.55 to $61.03. (Doc. 383-2, p. 6-7).
Doc. 964, p. 73; AHC Ex. 32: Doc. 855-32; AHC Ex. 31: Doc. 855-31.
The Court takes judicial notice of the Liquidating Trustee's filing regarding the $238 MMF to be charged to the lot owners from July 2022 through June 2023. (Doc. 874). The Court can determine that the $238 MMF comes from the 2021 Compilation Report given the testimony at trial regarding the 2021 Compilation Report, as well as Debtor's statements to the lot owners in an exhibit admitted in evidence. (Doc. 964, p. 62-63, 140; AHC Ex. 30: Doc. 855-30, p. 3).
Based on the above, it is clear that the MMF paid by the lot owners during the relevant period of time included costs related to the recreational facilities. However, those costs were incurred in 2019 and 2020-prior to Debtor's elimination of the recreational facilities. The AHC put on evidence through their expert, Bauman, that costs incurred in 2020 should be passed through to the lot owners in their MMF during the relevant period of time, because those costs were incurred while the recreational facilities existed. As such, the only amount passed through to the lot owners in their MMF during the relevant period of time that should not have been passed through was the profit component of the MMF.
Doc. 963, p. 224-25.
When seeking restitutionary damages, as the lot owners in this case are, the defendant must be given a credit for the value of its partial performance. See Beefy Trail, Inc. v. Beefy King Intern., Inc., 267 So.2d 853, 858 (Fla. 4th DCA 1972) (stating that "if restitution is sought[,] the plaintiff must return to the defendant any part performance of value rendered by defendant; such part performance must be allowed as a credit to the defendant as against the amount alleged owed to the plaintiff as restitution for the breach"). The Court notes that a different analysis applies to the Water Wheel lot owners, as their Deed Restrictions expired on December 31, 2020. Thus, there was no basis for Debtor to continue to collect a MMF after the expiration of the Water Wheel Deed Restrictions. While the Court accepts that Debtor calculated the MMF based on the actual expenses of a prior period, the Court does not accept Debtor's position that it can continue to collect MMF after its right to collect such fees under the Deed Restrictions terminated. It does not matter that Debtor chose to calculate its MMF based on actual past expenses; Debtor no longer had a right to collect a MMF after December 2020 when the Deed Restrictions expired. Furthermore, the evidence presented at trial showed that Debtor collected a MMF from the moment it purchased Wildwood in 2003-so for some period of time, the MMF was not calculated based on Debtor's past actual expenses (and as such, Debtor is not prejudiced by this ruling). Thus, for the Water Wheel lot owners, they have an administrative priority claim for the improperly included profits in their MMF paid during the relevant period. As to the remainder of the MMF that they paid during the relevant period, such claims are not entitled to administrative priority, because those result from the expiration of the Deed Restrictions, not from Debtor's elimination of the recreational facilities. Thus, the Water Wheel lot owners may pursue these remainder claims as part of their general, unsecured claims against Debtor under the plan.
Specifically, the Deed Restrictions provide that the MMF could include a reasonable profit component, not to exceed 10% of the fair market value of the recreational facilities operated and maintained by Debtor on behalf of the lot owners. But by January 1, 2021, Debtor no longer operated and maintained recreational facilities on behalf of the lot owners, and as such, no profit could be included in the MMF under the Deed Restrictions. The evidence at trial showed that profit of $61.03 was included in the MMF for January 2021 through June of 2021, and profit of $158.55 was included in the MMF for July 2021 through March of 2022.Based on this evidence, the Court finds that Debtor overcharged the lot owners by including these profit amounts in the MMF after it had eliminated the recreational facilities. As such, the lot owners are entitled to administrative priority for their claims that Debtor overcharged them by including these profit amounts in their MMF during the relevant period.
AHC Exs. 1-3: Docs. 855-1, p. 8-9; 855-2, p. 6; 855-3, p. 12-13; Doc. 771, p. 6-8.
AHC Ex. 32: Doc. 855-32; AHC Ex. 31: Doc. 855-31.
After reducing the January 2021 through June 2021 MMF of $379 by the $61.03 profit component, the resulting MMF for this period would be $317.97 per month. Likewise, after reducing the July 2021 through March 2022 MMF of $385 by the $158.55 profit component, the resulting MMF for this period would be $226.45 per month.
Thus, to the extent that the lot owners produced evidence that they paid these MMF during the relevant period, their overpayment claims based on the profit component are entitled to administrative priority.
B. Diminution in Value
Next, the AHC seeks administrative expense priority for their claims for the alleged decrease in value of their properties caused by Debtor's elimination of the recreational facilities. The evidence of these alleged damages came primarily through their expert appraiser, Ron Oxtail, MAI, who has over 45 years of experience. Oxtal testified regarding his ultimate opinions that: (1) for the lot owners in Hearty Host and Heritage Wood (whose Deed Restrictions remain in force), the average impact on their properties was a decrease in value of $25,900 each; and (2) for the lot owners in Water Wheel (whose Deed Restrictions expired prior to Debtor's elimination of the recreational facilities), the average impact on their properties was a decrease in value of $2,600 each.
Doc. 963, p. 39.
1. Oxtal's Opinions
Oxtal conducted paired sales data analysis of two other 55 and older age-restricted communities, Heritage Hernando and Arbor Lakes, to come to his conclusions. "In a paired sales analysis, the appraiser identifies two properties that are as similar as possible except for one factor." "When the sales are compared, the difference in price is best explained by that particular feature that distinguishes the properties."
The Wildwood subdivisions' Deed Restrictions provide that they are age restricted, 55+ communities. (AHC Ex. 1-3: Docs. 855-1, p. 11; 855-2, p. 2; 855-3, p. 29).
Atlantic Coast Pipeline, LLC ("ACP") v. 0.07 acre in Nelson County, Virginia, 396 F.Supp.3d 628, 648 (W.D. Va. 2019).
McCann Holdings, Ltd. v. United States, 111 Fed.Cl. 608, 626 (2013).
By conducting this paired sales data analysis, Oxtal concluded that Debtor's elimination of the recreational facilities decreased the Hearty Host and Heritage Wood lot owners' property values by $20 per square foot. After determining that the average home size for the Heritage Wood and Hearty Host lot owner claimants is 1,294 square feet, Oxtal multiplied the 1,294 square feet by the $20 per square foot decrease in value to conclude that Debtor's elimination of the recreational facilities caused these lot owners' property values to decrease by $25,880 each, which he rounded up to $25,900.
With regard to the Water Wheel lot owners (whose Deed Restrictions expired prior to Debtor's elimination of the recreational facilities), Oxtal opined that the average impact on their properties was a decrease in value of $2,600 each. He based his opinion on the fact that even though the Water Wheel Deed Restrictions had expired prior to Debtor's elimination of the recreational facilities, Debtor had told the Water Wheel lot owners that it would provide relocated recreational facilities that they would have the option of using for a fee. However, as of July 27, 2021, when Debtor withdrew its zoning application for the new recreational facilities, it became clear that Debtor was not going to provide even limited, relocated recreational facilities. Therefore, Oxtal concluded that the Water Wheel lot owners lost the opportunity to use the proposed new recreational facilities, and he valued this loss as being equal to 10% of the loss sustained by the Heritage Wood and Hearty Host lot owners (which he rounded up to $2,600 each).
AHC Ex. 29-30: Docs. 855-29; 855-30, p. 3.
AHC Ex. 27: Doc. 855-27.
2. Oxtal's Analysis and the Bases for His Opinions
To determine the diminution in property values, Oxtal conducted paired sales data analysis of two other 55 and older age-restricted communities, Heritage Hernando and Arbor Lakes. Both Heritage Hernando and Arbor Lakes are located in Hernando County (four miles apart), but Arbor Lakes has numerous community amenities and Heritage Hernando has none.
Doc. 963, p. 63-64.
Oxtal then selected four home sales in Heritage Hernando and four from Arbor Lakes, made four pairings containing one home sale from Heritage Hernando and one from Arbor Lakes in each pair, adjusted the values of each home in each pair based on various factors (including market conditions, year built, lot size, and presence of a private pool) so that the only remaining variable, he believes, was whether the home was located in a community that had amenities. Oxtal then determined the difference in value per square foot of the homes within each pair to come up with a range of $19.44 to $35.43 per square foot, which he believes represents the decrease in price per square foot that resulted from the home not being located within a community with amenities. Based on this, he concluded that given Wildwood's smaller lot sizes and the inferior nature, condition, and quality of the eliminated recreational facilities, the elimination of the recreational facilities at Wildwood caused a loss of $20 per square foot to the Heritage Wood and Hearty Host lot owners' properties.
After Oxtal conducted the paired sales data analysis of Heritage Hernando and Arbor Lakes, Oxtal did supplementary analysis to confirm the accuracy of his valuation. Specifically, he did a mobile home park rental comparison of nineteen land leased mobile home communities that were age-restricted to people 55 and older in central Florida. Only one of those communities did not have any community amenities, and its monthly rent was $155 per month lower than the average monthly rental rate for the other eighteen communities. Oxtal then annualized the differential monthly rental rate ($155 x 12) and then adjusted it down by 10% (to account for any management fees and/or vacancy that may occur), which equaled $1,674 per unit. Oxtal then capitalized the $1,674 annualized amount by 6% (based on a JLL publication for Three Star properties), which equaled $27,900-slightly more than the $25,900 value that resulted from his paired sales data analysis of the homes in Heritage Hernando and Arbor Lakes. Finally, Oxtal consulted with two developers and a national homebuilder to confirm that the loss of community amenities would reduce property values within the community.
3. Evaluation of Oxtal's Opinions
Debtor pointed out, and Oxtal agreed, that the better method for determining diminution in value is doing a before and after comparable sales analysis for each lot owner's property.A before and after comparable sales analysis would consist of finding three to five similar properties to the subject property on or around the "before" date, and finding three to five similar properties to the subject property on or around the "after" date, and then comparing the before and after values.
Doc. 963, p. 60, 103-106, 110.
Doc. 963, p. 103-106
Oxtal testified that he could not find sufficient "after" comparator properties in order to do a before and after analysis. He further testified that he believed that his paired sales data analysis still resulted in reliable opinions. While the Court acknowledges that paired sales data analysis is a well-recognized and accepted appraisal methodology, the Court finds that Oxtal's specific application of it in this case did not take not take into account several important variables.
Doc. 963, p. 60.
Doc. 963, p. 110, 159.
See Morrow v. Allstate Indemnity Company, 2020 WL 11629213, at *9 (M.D. Ga. June 1, 2020) (noting that paired sales analysis is a valuation method accepted by the appraisal literature).
For example, the properties used for the paired sales data analysis are not similar to Wildwood. Wildwood is located in Sumter County, and both Heritage Hernando and Arbor Lakes are located in Hernando County. Wildwood is located in the more desirable location near the Villages, whereas Heritage Hernando and Arbor Lakes are 20 miles away. Wildwood consists primarily of mobile homes and manufactured homes, while Heritage Hernando and Arbor Lakes consist entirely of site-built homes, making them superior communities with average home prices substantially higher than Wildwood. And, the amenities in Arbor Lakes are superior in quality and condition as compared to Wildwood's former recreational facilities.
Doc. 963, p. 74, 89,135, 151, 175. The Villages is a community located within a mile of Wildwood where the median home value is $325,000. (Doc. 963, p. 177).
Doc. 963, p. 74, 133-34, 146.
Doc. 963, p. 138.
Oxtal believes that his paired sales data analysis shows that when a property is located in a community with amenities, the value of the property will be $20 higher per square foot. However, the Court is not convinced that the $20 per square foot value for these comparator communities with superior homes can be used to value the properties in Wildwood's mobile home subdivisions. Furthermore, there was very little evidence regarding the specific age, type, and condition of the amenities at Arbor Lake and those formerly at Wildwood such that the Court would feel confident that they were truly similar and that the resulting $20 per square foot valuation attributable to amenities is reliable. Superior amenities likely cause higher property values, and it appears that based on the limited evidence presented at trial, Arbor Lake's amenities were superior to those that previously existed at Wildwood.
Additionally, there were many characteristics that distinguished the two comparator properties from each other, other than the existence or non-existence of amenities. For example, Arbor Lakes is a lake-oriented community, and the demographics of Arbor Lakes is not as good as those at Heritage Hernando. Arbor Lakes is a little further from shopping, the neighborhood income is lower, and the overall home values are lower in Arbor Lakes than Heritage Hernando. Heritage Hernando has bigger lots, and the lots do not back up to each other like those in Arbor Lakes. Arbor Lakes is an older community (started in the mid-90s), while Heritage Hernando was started in 2005. Arbor Lakes is a community with 400+ houses, while Heritage Hernando is smaller, with 60+ houses. While Oxtal believes that he adequately accounted for these differing characteristics by adjusting the property values in his analysis, the Court is not convinced that the only differing characteristic that affected the comparator properties' values after Oxtal's adjustments was the existence (or lack thereof) of amenities.
Doc. 963, p. 63.
Doc. 963, p. 63.
Doc. 963, p. 63.
Doc. 963, p. 64.
Doc. 963, p. 149, 155.
Doc. 963, p. 65-72.
Furthermore, during the relevant period of time, the Florida housing market accelerated substantially and the average sales price in Wildwood was also increasing. Given this, Debtor's counsel specifically asked Oxtal whether the real issue was not whether the lot owners' properties lost value, but whether they gained value at the same level as comparable properties. Oxtal agreed that was another way of framing the issue. When asked whether his testimony at trial addressed the reframed issue, Oxtal admitted that it did not.
Doc. 963, p. 135, 143-44. Even if there was actual evidence that sales prices were decreasing in Wildwood during the relevant time, which there was not, other factors-such as Debtor's litigation and bankruptcy, as well as the poor condition of the roads in Wildwood-could be the cause (or at least a contributing reason). (Doc. 963, p. 144, 177).
Doc. 963, p. 136.
Doc. 963, p. 136.
Doc. 963, p. 136.
Debtor's counsel also pointed out that if the Court accepted Oxtal's valuation, that would mean that when the property located at 5625 Hancock Drive sold in 2021 for $51,000, the property had lost $25,900 in value due to the elimination of the recreational facilities. The Court agrees with Debtor on this point-such a large loss in value does not seem likely based on the elimination of recreational facilities.
Doc. 963, p. 140.
Oxtal responded regarding the 5625 Hancock Drive sale that he determined the average aggregate loss for all of the lot owner claimants, so smaller properties would likely have suffered a smaller decrease in value. However, the Court must determine the individual loss for each claimant, so to that extent, Oxtal's ultimate opinion of a decrease in value of $25,900 per lot owner is not helpful.
Doc. 963, p. 140, 145.
Oxtal also did a mobile home park rental comparison analysis of nineteen land leased mobile home communities that were age-restricted to people 55 and older in central Florida to confirm his findings from the paired sales data analysis. One of those nineteen communities did not have any community amenities, and its monthly rent was $155 per month lower than the average monthly rental rate for the other eighteen communities. After doing calculations to annualize and capitalize the $155 rental rate difference, Oxtal believes the resulting figure of $27,900 supported his findings from the paired sales data analysis that the lot owners' decrease in property values was $25,900. For this supplementary analysis to be meaningful, the $155 rental rate difference must result solely from the lack of amenities. However, Oxtal just assumes that the rental rate difference resulted from the lack of amenities. In fact, several of the other eighteen communities had rental rates that were less than the one community without amenities. Thus, the Court finds that this supplementary analysis is not convincing.
AHC Ex. 22: Doc. 855-22, p. 38.
Finally, Oxtal failed to do the most important thing-account for the fact that the lot owners will no longer be paying for the recreational facilities. He even acknowledged during his testimony that, in general, lower fees would probably enhance property values. Thus, any decrease in value from the elimination of the recreational facilities would have to be adjusted to account for any increase in value from not having to pay for the recreational facilities in the MMF. The evidence presented by the AHC failed to do this.
Doc. 963, p. 192.
4. The Lot Owners' Alleged Damages
The Court finds that Oxtal's opinion-that the Heritage Wood and Hearty Host lot owners' properties suffered a decrease in value of $25,900 each-is not credible or reliable. Consequently, the Court rejects Oxtal's related opinion that the Water Wheel lot owners were damaged in an amount equal to 10% of the Heritage Wood and Hearty Host lot owners' diminution damages. Damages must be proven with reasonable certainty, and the AHC did not meet their burden with respect to their claim for diminution damages. Thus, the Court rejects the lot owners' claims for diminution damages in their entirety.
Additionally, several of the lot owners bought their properties in 2021-after Debtor eliminated the recreational facilities-and thus, they could not have suffered a diminution in value. Specifically, the following lot owners were deeded their property in 2021: Robert Adams, Barbara Alexson, Arthur and Sharon Glaser, Donnell and Peggy Mills (5453 Williamsburg Lane), James Hampton and Susan Stoltz, Kimberly Workman, and Harley and Charlotte Wroten. (AHC Ex. 26: Doc. 855-26).
III. Conclusion
Based on the above, the Court finds that the lot owners are entitled to administrative expense priority for their claims of MMF overpayments to the extent that they paid MMF during the relevant period of time that contained the improperly included profit component. The lot owners do not have an administrative priority claim for any diminution damages.
Attached to this Order is a chart setting forth the amount of each lot owner's administrative priority claim for their MMF overpayments. The total amount of all MMF overpayments entitled to administrative priority is $116,407.49.
Evidence used to calculate the number of months for which each lot owner paid their MMF during the relevant period came from the lot owners' administrative claim forms and Debtor's account statements for each lot owner. (AHC Exs. 15, 35: Doc. 855-15; Doc. 855-35).
It is SO ORDERED.
Attorney Erik Johanson is directed to serve a copy of this order on interested parties who do not receive service by CM/ECF and file a proof of service within three days of its entry.
Lot Owner Address Subdivision No. of Months of MMF Through 3/9/22 MMF Overpayment Rhonda Adkins 5477 Lansing Dr WW 14: Jan 21 - Feb 22 $1,634.58 Robert Bechtel 5571 Lansing Dr WW 14: Jan 21 - Feb 22 $1,634.58 Kathleen Harrington and John Dowd 5550 Lansing Dr WW 15: Jan 21 - Mar 22 $1,793.13 Mary Lynne Miller 5500 Heritage Blvd WW 15: Jan 21 - Mar 22 $1,793.13 Donnell Mills and Peggy Mills 5570 Lansing Dr WW 15: Jan 21 - Mar 22 $1,793.13 Carol Tessada Revocable Trust 5531 Lansing Dr WW 15: Jan 21 - Mar 22 $1,793.13 John Lester 5552 Heritage Blvd WW 14: Jan 21 - Feb 22 $1,634.58 Toni Groh Revocable Trust 5581 Lansing Dr WW 14: Jan 21 - Feb 22 $1,634.58 Robert Adams 5625 Hancock Dr HH 9: July 21 - Mar 22 $1,426.95 Barbara Alexson 5591 Columbus Cir HH 14: Feb 21 - Mar 22 $1,732.10 Ernest Barrette and Kathleen Barrette 5515 Williamsburg Ln HH 13: Jan 21 - Jan 22 $1,476.03 Scott, Andrew, Patricia, and Ronald Beaulieu 5543 Williamsburg Ln HH 13: Jan 21 - Jan 22 $1,476.03 Todd Bentley and Elaine Bentley 5673 Hancock Dr HH 15: Jan 21 - Mar 22 $1,793.13 Marilyn Fimbel 5533 Williamsburg Ln HH 15: Jan 21 - Mar 22 $1,793.13 Tara Finney 5450 Columbus Cir HH 15: Jan 21 - Mar 22 $1,793.13 Robert Fleming and Shirley Fleming 5556 Columbus Cir HH 15: Jan 21 - Mar 22 $1,793.13 William Garnett 5602 Williamsburg Ln HH 15: Jan 21 - Mar 22 $1,793.13 21 Arthur Glaser and Sharon Glaser 5574 Columbus Cir HH 11: May 21 - Mar 22 $1,549.01 Wildwood One, LLC 5634 Hancock Dr HH 13: Jan 21 - Jan 22 $1,476.03 Wildwood One, LLC 5495 Williamsburg Ln HH 13: Jan 21 - Jan 22 $1,476.03 Villamelia, LLC 5676 Hancock Dr HH 13: Jan 21 - Jan 22 $1,476.03 Leonard Maltz and Victoria Miller 5499 Columbus Cir HH 14: Jan 21 - Feb 22 $1,634.58 Daniel Mathes and Ellen Mathes 5604 Columbus Cir HH 15: Jan 21 - Mar 22 $1,793.13 Barbara Reynolds 5593 Hancock Dr HH 15: Jan 21 - Mar 22 $1,793.13 Judy K. Schmidt 5527 Williamsburg Ln HH 14: Jan 21 - Feb 22 $1,634.58 Jacques Skutt and Theresa Skutt 5494 Columbus Cir HH 15: Jan 21 - Mar 22 $1,793.13 Marilynne Stone Family Trust 5502 Columbus Cir HH 15: Jan 21 - Mar 22 $1,793.13 Stephen Stone and Nancy Stone 5612 Williamsburg Ln HH 15: Jan 21 - Mar 22 $1,793.13 Richard Thackston and Martha Welch 5616 Hancock Dr HH 15: Jan 21 - Mar 22 $1,793.13 Mark Titus 5609 Hancock Dr HH 15: Jan 21 - Mar 22 $1,793.13 Steven Titus 5590 Hancock Dr HH 15: Jan 21 - Mar 22 $1,793.13 Christopher Upton and Karen Upton 5527 Columbus Cir HH 15: Jan 21 - Mar 22 $1,793.13 Michael and Gail Upton and Valerie Watson 5648 Hancock Dr HH 14: Jan 21 - Feb 22 $1,634.58 Bruce Weber and Margaret Weber 5551 Williamsburg Ln HH 13: Jan 21 - Jan 22 $1,476.03 22 William Abraham 5210 Liberty Ct HW 10: Jan 21 - Oct 21 $1,000.38 Lois Bakker 5321 Lexington Cir HW 15: Jan 21 - Mar 22 $1,793.13 Lester and Ramona Barnett 5230 Lexington Cir HW 15: Jan 21 - Mar 22 $1,793.13 Mary Clark 5397 Heritage Blvd HW 15: Jan 21 - Mar 22 $1,793.13 John Collins and Kathleen Collins 5229 Hartford Ln HW 15: Jan 21 - Mar 22 $1,793.13 Thomasine DeShaw 5282 Lexington Cir HW 15: Jan 21 - Mar 22 $1,793.13 Paul Doiron 5146 Stratford Ct HW 15: Jan 21 - Mar 22 $1,793.13 Kathleen Erickson, Terry and Susan Swenson 5372 Lexington Cir HW 12*: Jan 21 - Jan 22 *missing/partial payment after Aug 2021 $1,317.48 Anthony Godish or Ronda Godish 5224 Liberty Ct HW 14: Jan 21 - Feb 22 $1,634.58 Richard Gregoire and Joan Gregoire 5161 Lexington Cir HW 15: Jan 21 - Mar 22 $1,793.13 Mohamed Gulamhussein 5388 Heritage Blvd HW 15: Jan 21 - Mar 22 $1,793.13 Roger and Janet Hamm 5459 Heritage Blvd HW 13: Jan 21 - Jan 22 $1,476.03 James Hampton and Susan Stoltz 5474 Williamsburg Ln HW 14: Feb 21 - Mar 22 $1,732.10 Allan and Linda Harris 5252 Oxford Ct HW 14: Jan 21 - Feb 22 $1,634.58 Wildwood Two, LLC 5163 Cambridge Ct HW 13: Jan 21 - Jan 22 $1,476.03 Todd Krueger 5150 Lexington Cir HW 14: Jan 21 - Feb 22 $1,634.58 23 Leonard and Donna Kushner/Kushner Trust 5395/5366 Heritage Blvd1 HW 15: Jan 21 - Mar 22 $1,793.13 Jack Kyle and Judy Kyle 5175 Oxford Ct HW 15: Jan 21 - Mar 22 $1,793.13 Linda Lajoie-Cyr and Johnny Cyr 5217 Stratford Ct HW 15: Jan 21 - Mar 22 $1,793.13 Elizabeth Mendenhall 5254 Cambridge Ct HW 15: Jan 21 - Mar 22 $1,793.13 James Morris and Kathryn Morris 5191 Cambridge Ct HW 15: Jan 21 - Mar 22 $1,793.13 Glen Perkins and Margaret Perkins 5229 Oxford Ct HW 14: Jan 21 - Feb 22 $1,634.58 Donell Mills and Peggy Mills 5453 Williamsburg Ln HW 11: May 21 - Mar 22 $1,549.01 John Reid 5438 Heritage Blvd HW 14: Jan 21 - Feb 22 $1,634.58 Brandt Riggin 5201 Oxford Ct HW 11*: Jan 21 - Dec 21 *missing/partial payments after Sept 2021 $1,158.93 Paul Rullo 5224 Oxford Ct HW 14: Jan 21 - Feb 22 $1,634.58 Dale Sayotovich 5175 Stratford Ct HW 15: Jan 21 - Mar 22 $1,793.13 Mary Shellenberger 5197 Hartford Ln HW 13: Jan 21 - Jan 22 $1,476.03 Lois Stanton 5247 Hartford Ln HW 13: Jan 21 - Jan 22 $1,476.03 Basile Summers and Elizabeth Summers 5240 Lexington Cir HW 15: Jan 21 - Mar 22 $1,793.13 Robert Valentich and Rebecca Valentich 5313 Lexington Cir HW 12*: Jan 21 - Jan 22 *No Nov 21 payment $1,317.48 Grace Ward 5394 Heritage Blvd HW 15: Jan 21 - Mar 22 $1,793.13 24 Bruce Wentrick and Karren Wentrick 5147 Lexington Cir HW 15: Jan 21 - Mar 22 $1,793.13 Grady and Patricia Williamson 5234 Lexington Cir HW 14*: Jan 21 - Mar 22 *missing Feb or Mar 22 $1,634.58 Kimberly Workman 5210 Liberty Ct HW 6: Oct 21 - Mar 22 $951.30 Harley Wroten and Charlotte Wroten 5255 Liberty Ct HW 11: Jan 21 - Nov 21 $1,158.93 Harley Wroten and Charlotte Wroten 5212 Oxford Ct HW 7: Sept 21 - Mar 22 $1,109.85 TOTAL: $116,407.49