| [1] |
Third District Court of Appeal State of
Florida, July Term, A.D., 2009 |
| [2] |
No. 3D08-3051 |
| [3] |
2009.FL.0003979 |
| [4] |
November 12, 2009 |
| [5] |
SUSAN COHN, APPELLANT,
v.
THE GRAND CONDOMINIUM ASSOCIATION, INC.; PH HOTEL, INC.; AND PH RETAIL,
INC., APPELLEES. |
| [6] |
An Appeal from the Circuit Court for
Miami-Dade County, Sarah I. Zabel, Judge. Lower Tribunal No. 07-44460. |
| [7] |
Eric M. Glazer; Bruce S. Rogow and Cynthia
E. Gunther, for appellant. |
| [8] |
Katzman Garfinkel Rosenbaum, Daniel S.
Rosenbaum, Joseph W. Janssen, III, and Richard Valuntas; Siegfried,
Rivera, Lerner, De La Torre & Sobel and H. Hugh McConnell, for
appellees. |
| [9] |
The opinion of the court was delivered by:
Cope, J. |
| [10] |
Before COPE, GERSTEN and SUAREZ, JJ. |
| [11] |
This is an appeal of a summary judgment
which found subsection 718.404(2), Florida Statutes (2007),
unconstitutional as applied to The Grand Condominium. We affirm. |
| [12] |
The Grand Condominium was created in 1986.
It is a mixed-use condominium consisting of 810 residential units (owned
individually), 141 retail units (owned by the appellee PH Retail, Inc.),
and 259 commercial units (owned by PH Hotel, Inc.). The commercial units
are a DoubleTree Hotel. The retail units are shops on the first two
floors of the condominium. Appellant Susan Cohn is a residential unit
owner. |
| [13] |
In 1986 when the condominium was created,
there was no specific statute regulating mixed-use condominiums. The
articles of incorporation for The Grand Condominium Association, Inc.,
(and the Association's by-laws,) provide for a board of directors
consisting of seven members. Two members are elected by the residential
unit owners, two are elected by the commercial unit owners, and two are
elected by the retail unit owners. These six then select a seventh
member. The Grand was turned over by the developer to the Association in
1993. |
| [14] |
In 1995, the legislature enacted section
718.404, Florida Statutes (1995), entitled Mixed-Use Condominiums. Ch.
95-274, § 38, Laws of Fla. Subsection (2) of section 718.404 addressed
voting and stated: "Subject to s. 718.301, where the number of
residential units in the condominium equals or exceeds 50 percent of the
total units operated by the association, owners of the residential units
shall be entitled to vote for a majority of the seats on the board of
administration." § 718.404(2), Fla. Stat. (1995). The statute was
silent on the issue of retroactivity. |
| [15] |
In 2007, the legislature amended
subsection (2) by adding: "This subsection shall apply
retroactively as a remedial measure." Ch. 2007-173, § 5, Laws of
Fla. After the 2007 amendment, Ms. Cohn requested that the voting
arrangements be changed at The Grand to give a majority of the board
membership to the residential unit owners in accordance with subsection
718.404(2). |
| [16] |
The Association filed a declaratory
judgment action. The Association sought a declaration that, among other
things, subsection 718.404(2) constituted an impairment of the
obligation of contract under Article I, Section 10 of the Florida
Constitution. XXX 1 The Grand
and Cohn filed motions for summary judgment. |
| [17] |
The trial court held the 2007 amendment to
subsection 718.404(2) unconstitutional as applied to The Grand. The
Grand had been organized in 1986, prior to the enactment of section
718.404 in 1995, and the voting arrangements were legal when the
condominium was organized. The court held the 2007 retroactivity
provision constituted an impairment of contract.
XXX 2 Ms. Cohn has appealed. |
| [18] |
The Florida Constitution provides,
"No . . . law impairing the obligation of contracts shall be
passed." Art. I, § 10, Fla. Const. The Florida Supreme Court's
leading case in the context of condominium regulation is Pomponio v.
Claridge of Pompano Condo., Inc., 378 So. 2d 774 (Fla. 1979). Where a
state statute is enacted under the state's police power, "we must
weigh the degree to which a party's contract rights are statutorily
impaired against both the source of authority under which the state
purports to alter the contractual relationship and the evil which it
seeks to remedy." Id. at 780. |
| [19] |
Quoting Allied Structural Steel Co. v.
Spannaus, 438 U.S. 234, 244-45 (1978), the Court said: |
| [20] |
In applying these principles to the
present case, the first inquiry must be whether the state law has, in
fact, operated as a substantial impairment of a contractual
relationship. The severity of the impairment measures the height of the
hurdle the state legislation must clear. Minimal alteration of
contractual obligations may end the inquiry at its first stage. Severe
impairment, on the other hand, will push the inquiry to a careful
examination of the nature and purpose of the state legislation. Several
factors to be considered in this balancing test were identified in
Spannaus: |
| [21] |
(a) Was the law enacted to deal with a
broad, generalized economic or social problem? |
| [22] |
(b) Does the law operate in an area which
was already subject to state regulation at the time the parties'
contractual obligations were originally undertaken, or does it invade an
area never before subject to regulation by the state? |
| [23] |
(c) Does the law effect a temporary
alteration of the contractual relationships of those within its
coverage, or does it work a severe, permanent, and immediate change in
those relationships irrevocably and retroactively? |
| [24] |
Pomponio, 378 So. 2d at 779 (footnotes
omitted). |
| [25] |
It is our view that the voting
arrangements in a condominium are of great importance, and the change
imposed by subsection 718.404(2) operates as a substantial impairment of
the existing contractual relationship. We therefore proceed to consider
the three parts of the Pomponio test. |
| [26] |
The first question is, "Was the law
enacted to deal with a broad, generalized economic or social
problem?" The record now before us is devoid of any explanation of
the problem which led to the enactment of the retroactivity provision.
The 2007 legislative staff report has been made part of the record. The
staff report lists the retroactivity provision as one of a number of
amendments contained in chapter 2007-173, Laws of Florida, but there is
no explanation of the problem which led to its adoption. The staff
report did, however, note that the amendment might be vulnerable under
the Pomponio decision as being an unconstitutional impairment of
obligation of contract. Fla. S. Jud. Comm. CS for SB902 (2002) Staff
Analysis, (April 18, 2007) at 17-18. |
| [27] |
The second question is, "Does the law
operate in an area which was already subject to state regulation at the
time the parties' contractual obligations were originally undertaken, or
does it invade an area never before subject to regulation by the
state?" Pomponio, 378 So. 2d at 779. At the time The Grand was
organized in 1986, condominiums were subject to significant regulation
under chapter 718, Florida Statutes, but special regulations for
mixed-use condominiums did not come into existence until 1995. The Grand
conformed to chapter 718 when it was organized. |
| [28] |
The third question is, "Does the law
effect a temporary alteration of the contractual relationships of those
within its coverage, or does it work a severe, permanent, and immediate
change in those relationships irrevocably and retroactively?"
Pomponio, 378 So. 2d at 779. In this case the change would be severe,
permanent, and immediate. |
| [29] |
We conclude that the Pomponio test is not
satisfied. The 2007 retroactivity amendment must be invalidated as an
impairment of the obligation of contract. |
| [30] |
For the stated reasons, we affirm the
trial court's judgment. See also Wellington Prop. Mgmt. v. Parc Corniche
Condo. Ass'n, Inc., 755 So. 2d 824 (Fla. 5th DCA 2000); Tradewinds of
Pompano Ass'n v. Rosenthal, 407 So. 2d 976 (Fla. 4th DCA 1982);
Commodore Plaza at Centry 21 Condo. Ass'n, Inc. v. Cohen, 378 So. 2d 307
(Fla. 3d DCA 1979). |
| [31] |
Affirmed. |
| |
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Opinion Footnotes |
| |
|
| [32] |
XXX 1
The Association gave notice of the action to the Attorney General, who
declined to participate in the litigation. See§ 86.091, Fla. Stat.
(2007). |
| [33] |
XXX 2
While the trial court's order refers to section 718.404, it is clear
that subsection (2) was the specific provision challenged by the
declaratory judgment action. |
