Article Courtesy of The JD Supra Business Advisor
By James Savalli

Published December 22, 2016

Recently, in Ventana Condominium Ass’n, Inc. v. Chancey Design Partnership, Inc., et al., 2016 WL 4259999 (Fla. 2d DCA), the Second District Court of Appeal held that the Plaintiff, Ventana Condominium Association, Inc. (the “Ass’n”), was not the successor in interest to the prior owner of Ventana Condos, Ventana Tampa, LLC (the “Developer”), and reversed the trial court’s grant of summary judgment that had been contingent upon such a relationship between the two.[1]

Sometime prior to July 2008, the Developer of the Ventana Condominiums (the “Condos”) contracted with Hardin Construction Company, LLC (“Hardin”) to build the Condos, and with Chancey Design Partnership, Inc. (“Chancey Design” or “Chancey”) to design them. Issues with delays and additional costs arose, and the Developer and Hardin entered into a Mediated Settlement Agreement (the “MSA”) which provided, among other things that: (i) Hardin was given authority to take action on behalf of the Developer against Chancey Design–although it made no mention of this being an assignment of the Developer’s interest in any such claims; and (ii) that the MSA was binding upon the parties’ successors, assigns, and all those holding title under them.

Thereafter, in July 2008, Hardin sued Chancey Design in its own right and on behalf of the Developer. During the pendency of the suit, a final judgment of foreclosure was obtained on the project by Mercantile Bank, which thereafter assigned its interest in same to BMR Funding, LLC (“BMR”). Notably, there were to be assignments of the Developer’s interests in the ongoing litigation between Hardin and Chancey Design in both the final foreclosure judgment and Mercantile’s assignment of same to BMR, yet neither included any such language and/or reference to the Developer’s agreement to do so. The lawsuit was settled in February 2010, and in May 2010, Hardin—for itself and BMR—and Chancey Design executed a general release (the “Release”).

In July 2010, the Ass’n obtained operation and control of the Condos through turnover from the Developer. And in July 2014, the Ass’n sued Chancey Design and two of its employees (the “Chancey Defendants”), and Hardin, alleging design defects in the Condos’ amenities deck. The Chancey Defendants moved for summary judgment, and the trial court granted the motion finding that: (1) the Ass’n is a successor to the Developer (i.e. BMR); (2) that the Developer had assigned its claims against the Chancey Defendants to Hardin in the MSA; and (3) that such assigned claims had been settled in the Release. The Second DCA, however, disagreed—finding that: (1) the Ass’n was neither “stepping in the shoes” of the Developer, nor was it a successor in interest to same; (2) there was no assignment in the MSA, rather merely the establishment of an agency relationship between the Developer and Hardin, and that the MSA was insufficient to put the Ass’n on notice as to its contents; and (3) the language in the Release was ambiguous as to whether or not future losses were to be captured by it.

While all of the Court’s findings are informative for any attorney representing any such parties, or any such party exploring dispute resolution for a similar scenario—a common one in our current economy of significant condominium construction—the finding that the Ass’n was not the successor in interest to the Developer is considerable given that the Developer at one point solely controlled the Ass’n.

In Florida, condominium associations are created through strict adherence to the Condominium Act, i.e. Chapter 718, Florida Statutes. The Court, in determining that the Ass’n was not the successor in interest to the Developer reviewed the applicable sections of the Condominium Act in conjunction with the Developer’s actions in the prior litigation. Specifically, the Court, pointing to §§ 718.104, 718.111, 718.112, and 718.301, Florida Statutes, emphasized that, although a developer may control a condominium association for some time prior to the unit owners, that it is a distinct and separate entity from the association. Thus, the Ass’n “could have been a party to the original litigation based on the language of section 718.111 or through the filing of the lawsuit on behalf of the Association by the Developer, but it was not.” Rather, the Court found the rights and interests at issue in the original lawsuit against Chancey Design were those of the Developer, in its capacity as same, and not those of the Ass’n. Therefore, in the lawsuit before the Court, the Association had not “stepped into the shoes” of the Developer, or otherwise succeeded to rights that the Developer had in the original litigation, and the Court determined that it sought to assert its own rights and not those that had previously been released by the Developer.

Although the facts of this case are a bit convoluted, what is clear is this: had the Developer, or any other party to the original dispute(s), been clear on the specifics of Florida’s Condominium Act, such party(ies) would have been well advised to ensure that the Ass’n was made a party to such dispute(s). This idea is especially true as here, where construction defects—the purported correction of which may carry with it additional latent defects—had been the subject of a previous dispute between the parties.

[1] Although not the subject of this Blog post, the trial court’s ruling was also premised upon a finding that the defects complained of by the Condo Ass’n were covered by a prior litigation that had been dispatched of via a confidential settlement agreement and general release. The Second District Court’s handling of this component of the trial court’s ruling is interesting, as it determined that in addition to its lack of application to the Condo Ass’n, the language in the general release was ambiguous with respect to what the parties intended to release because it did “not include language indicating that all claims ‘both known and unknown’ or ‘whether now known or unknown.’” Id. at *6.

Ventana Condominium Ass’n, Inc. v. Chancey Design Partnership, Inc., et al., 2016 WL 4259999 (Fla. 2d DCA)