Third District Court of Appeal
State of Florida
Opinion filed May 27, 2015.
Not final until disposition of timely filed motion for rehearing.
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Nos. 3D13-1599 & 3D13-1713
Lower Tribunal No. 09-60866
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Grove Key Marina, LLC and Scotty's Landing, LLC,
Appellants/Appellees/Cross-Appellees,
vs.
Fernando Casamayor, as tax collector for Miami-Dade County,
Appellee/Cross-Appellant
vs.
The City of Miami
Appellant/Appellee/Cross-Appellee
Consolidated Appeals from the Circuit Court for Miami-Dade County, Peter
A. Lopez, Judge.
Segall Gordich, P.A., and Norman S. Segall and Melissa Alagna, for Grove
Key Marina, LLC and Scotty’s Landing, LLC.
R. A. Cuevas, Jr., Miami-Dade County Attorney, and Jorge Martinez-Esteve
and Alexander Bokor, Assistant County Attorneys, for Fernando Casamayor, as
tax collector for Miami-Dade County.
Victoria Mendez, City Attorney, John A. Greco, Deputy City Attorney, and
Warren Bittner, Deputy Emeritus, for the City of Miami.
Before SHEPHERD, C.J., and ROTHENBERG and SCALES, JJ.
ROTHENBERG, J.
The case before us is a consolidation of three separate appeals: (1) The City
of Miami (“the City”) appeals an order finding it liable for past-due ad valorem
taxes owed on real property it owns but leases to Grove Key Marina, LLC (“Grove
Key”), which Grove Key in turn subleases, in part, to Scotty’s Landing, LLC
(“Scotty’s Landing”) (collectively, the “Lessees”); (2) the Miami-Dade County
Tax Collector, Fernando Casamayor (“the County”), cross-appeals that same order,
contending that the trial court should have allowed it to pursue remedies against
the Lessees for the unpaid taxes; and (3) the Lessees appeal an order denying their
motions for attorney’s fees following the trial court’s order absolving them of
payment for the past-due taxes. We affirm the trial court’s decision.
BACKGROUND
The City leased waterfront real property to Grove Key (a private, for-profit
entity) via a lease agreement (“lease”) signed on April 1, 1976. There is no “pass-
through” provision in the lease expressly passing responsibility for the ad valorem
property taxes from the City to Grove Key. The taxes provision in the lease
agreement provides:
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13. TAXES
The City covenants and agrees that the leased premises are to
be used and have been used for a governmental, municipal, or public
purpose or function that could be served by the City, that the
operation of the leased facility by the City would be a valid subject for
the allocation of public funds, that the consideration paid by the
Company [Grove Key] as described in this Lease Agreement is
reasonable and adequate and in the best interests of the City and the
public, and that the realty and leasehold interest of said leased
premises are exempt from ad valorem taxes in accord with the
provisions of Florida Statutes 196.199(2)(a) and Florida Statutes
196.012(5).
Scotty’s Landing thereafter began operating a bar and restaurant in the Grove Key
Marina pursuant to a management agreement between those parties.1 Grove Key
and Scotty’s Landing have the same principal officer.
Beginning in 1995, the County began sending property tax bills for the
subject property to the City. Every year the City forwarded these bills to Grove
Key, and every year Grove Key returned them to the City unpaid, arguing that the
City was responsible for the taxes. The County never sent a property tax bill to
either of the Lessees prior to the filing of the complaint by the Lessees in this case.
The taxes for the period from 1995-2011 have never been paid and have not been
1 The management agreement between Grove Key and Scotty’s Landing contains a
provision that requires Scotty’s Landing to pay any taxes that may arise due to
Scotty’s Landing’s operation on the premises: “[Scotty’s Landing] shall be
responsible for all federal, state and local taxes pertaining to the operation of the
snack shop, including ad valorem taxes on any personal or real property
attributable to snack shop or snack shop area.” This agreement has no bearing on
whether Grove Key or the City is liable for the unpaid property taxes, however,
and is relevant only insofar as it could impute some tax liability to Scotty’s
Landing if Grove Key were found responsible for the unpaid taxes.
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formally challenged by either the City or the Lessees. However, only the taxes
from 2007 through 2011 are at issue in this case due to the statute of limitations.
On September 12, 2012, the County threatened to revoke the Lessees’
occupational licenses and corporate charters unless they paid the outstanding
property taxes. The Lessees responded by filing suit against the County requesting
a declaratory judgment that the Lessees could not be held responsible for the
assessed taxes. The County responded by counterclaiming against the Lessees and
seeking a declaratory judgment that the Lessees did indeed owe the back taxes.
The County also filed a third party complaint against the City alleging that the City
could also be responsible for the unpaid assessments. The County’s position was
essentially that either the City or the Lessees owed the taxes, and it simply wanted
someone to pay them. It appears the County was unaware of the precise terms of
the lease agreement between the City and the Lessees prior to its counterclaim.
All three parties moved for summary judgment regarding the unpaid taxes,
and the trial court entered an order finding that (1) the Lessees had no duty to pay
the taxes based on the terms of the lease; and (2) the City is solely responsible for
the ad valorem taxes assessed between 2007 and 2011. Based on this ruling in
their favor, the Lessees subsequently sought attorney’s fees incurred in defending
the County’s counterclaim against them pursuant to sections 192.0105(3)(g) and
57.105 of the Florida Statutes. The trial court then entered a second order finding
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that the Lessees are not entitled to payment of their attorney’s fees. The City
appealed the portion of the trial court’s order finding it responsible for the unpaid
taxes, and the County appealed the portion of the order finding the Lessees were
not liable for the unpaid taxes (Case No. 3D13-1599). The Lessees appealed the
order denying their motion for attorney’s fees (Case No. 3D13-1713). All these
appeals were consolidated for our review.
ANALYSIS
The consolidated appeals before us present three discrete issues for our
review. First, is the City responsible for the unpaid ad valorem taxes on the
property? Second, can the County separately pursue the Lessees to secure
payment of the taxes even if the City owes the taxes? And finally, did the trial
court abuse its discretion by denying the Lessees’ motion for attorney’s fees? We
address these issues in turn.
I. The City alone is responsible for the unpaid ad valorem taxes.
The facts of this case are undisputed, and our determinations regarding
which party owes the unpaid property taxes and what remedial measures may be
available to collect those unpaid taxes require us to interpret and apply several
sections of the Florida Statutes. We accordingly review the trial court’s ruling on
those issues de novo. Borden v. East-European Ins. Co., 921 So. 2d 587, 591 (Fla.
2006).
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A. The City owes the unpaid taxes because the property is not being
exclusively utilized for public purposes.
The Florida Constitution provides: “By general law regulations shall be
prescribed which shall secure a just valuation of all property for ad valorem
taxation.” Art. VII, § 4, Fla. Const. There are certain exceptions and nuances to
this general rule, however, when the property at issue is governmentally owned.
For example, governmentally owned property that is used exclusively for public
purposes is completely exempt from property taxation. Art. VII, § 3, Fla. Const.; §
196.199(1), Fla. Stat. (2009). Conversely, when a city owns property that is then
leased to a private entity for a non-governmental purpose, the tax exemption is
lost. § 196.199(2), Fla. Stat. (2009); Capital City Country Club, Inc. v. Tucker,
613 So. 2d 448, 451-52 (Fla. 1993) (“[W]e conclude that the legislature could not
constitutionally exempt from real estate taxation municipally owned property
under lease which is not being used for municipal or public purposes.”). It is
axiomatic that, absent an express exemption, all real property owned by a
municipality and situated within the limits of that municipality is subject to ad
valorem taxation by the county in which the municipality is located.
It is undisputed in this case that the property at issue is not being used for a
public or governmental purpose; it is clearly proprietary. As such, it is similarly
clear that the property is not exempt from taxation, and the City is responsible to
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the County for the ad valorem taxes owed on the property. The only question
remaining on this issue is whether the City can pass its liability to the Lessees.
The Florida Supreme Court, interpreting the relevant statutory provisions,
has established that a municipality is responsible for the ad valorem taxes on
property leased to a private entity, while the private lessee is responsible for taxes
on the intangible leasehold interest in the property. Tucker, 613 So. 2d at 452.
However, a so-called “pass-through” provision in the lease expressly shifting the
municipality’s ad valorem tax obligations to the lessee contractually renders the
private lessee responsible to the city for the city’s tax burden. Id.
In Tucker, the City of Tallahassee owned real property that it subsequently
leased to a private country club for only $1 per year. Id. at 450. The lease
included a provision that required the club to pay all ad valorem taxes assessed
against the property. Id. The country club brought suit to challenge a property tax
assessed against it by arguing that it was being double-taxed for the same
property—once for the real property itself (the ad valorem taxes assessed by the
county) and once for the leasehold interest in the property (the intangible property
tax assessed by the state). Id. In rejecting the club’s argument, the Florida
Supreme Court held:
We reject the club’s contention that the imposition of real estate
taxes on the fair market value of the land and the imposition of
intangible taxes on the leasehold interest constitutes double taxation
of the property. Intangible personal property is property which is not
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itself intrinsically valuable, but which derives its chief value from that
which it represents. §§ 199.023(1), 192.001(11)(b), Fla.Stat. (1991).
The intangible tax is being imposed on the rights afforded to the club
under the lease. The real estate taxes, on the other hand, are being
imposed on the land itself. In Florida, real estate taxes are collected by
the county, while the intangible tax on leasehold interests is collected
by the state. In this case, the club, as the holder of a leasehold interest,
is legally responsible for the intangible tax. The club’s responsibility
for the real estate taxes, however, is contractual. It stems from the
pass-through provision in the lease wherein the club agreed to pay
the real estate taxes assessed against the land. Absent this
provision, the city, as owner of the property, would be responsible
for the real estate tax because the land is not being used for a
municipal or public purpose.
Id. at 452 (emphasis added). Under Tucker, a municipality is liable for any
property tax assessed, but if there is an express pass-through provision in the lease,
the lessee can be required to reimburse the municipality for the ad valorem taxes it
pays on the land. Intangible leasehold taxes, however, are the responsibility of the
lessee.2
2 The City also argues that Florida Administrative Code 12D-13.046, which was
promulgated by the Florida Department of Revenue, see section 195.027, Fla. Stat.
(2009), requires the Lessees to pay any taxes owed on the property. Section 12D-
13.046 of the code provides in full:
Taxation of Governmental Property Under Lease to Non-
Governmental Lessee.
When property is owned by a governmental unit and is leased to a
non-governmental lessee and has not been exempted from taxation,
the tax should be assessed to the non-governmental lessee. If no rental
payments are due pursuant to the agreement creating the leasehold
estate, or if the property meets the requirements of Section
196.199(7), F.S., the leasehold estate shall be taxed as real property.
Ad valorem real property taxes relating to government property,
levied on a leasehold that is taxed as real property under Section
196.199(2)(b), F.S., must be paid by the lessee. If such taxes are not
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Here, unlike the lease at issue in Tucker, there is no pass-through provision
in the agreement between the City and the Lessees requiring the Lessees to assume
the ad valorem taxes on the property. To the contrary, if anything, the lease
purports to exempt the Lessees from paying any property taxes at all.3 Because the
property is not exempt from ad valorem taxes based on public use, we find that the
City must pay the property taxes for which it is responsible. And because there is
no pass-through provision in the lease, the City cannot ultimately shift its liability
onto the Lessees.
B. The County cannot pursue remedies against the Lessees for unpaid taxes
never assessed against them
paid, the delinquent taxes become a lien on the leasehold and may be
collected and enforced under the provisions of Sections 197.412 and
197.413, F.S. The tax collector shall notify the Department of
delinquencies and action taken to collect the delinquent tax. If rental
payments are due, the leasehold estate shall be taxed as intangible
personal property in accordance with Chapter 199, F.S., and
delinquencies shall be processed as in the case of other intangible
personal property.
The City focuses only on the first sentence of 12D-13.046, ignoring the balance of
the provision. Section 12D-13.046 clarifies that the lessee must pay any taxes
resulting from its leasehold interest in the property, which is taxed as intangible
property if rental payments are due, as is the case here, and is taxed as real
property if no rental payments are due. See § 196.199(2)(b). It is undisputed in
this case that the Lessees have been paying the intangible property tax owed on
their leasehold interests, so they are in compliance with section 12D-13.046 of the
administrative code. The City has simply misinterpreted the provision.
3 The City does not have the authority to contractually prevent the County or State
from collecting taxes, nor can it determine whether or not a property is being
utilized for “public use.” We call attention to this provision merely to show that
the parties’ intentions was very clearly not to have the Lessees assume liability for
the ad valorem taxes on the property.
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Having determined that the City owes the ad valorem taxes on the property,
we now address the County’s argument that sections 197.432(10) and 196.199(8)
of the Florida Statutes authorize it to seek remedial action against the Lessees
irrespective of which party owes the unpaid taxes. The County contends that even
though there is no pass-through provision in the lease contractually obligating the
Lessees to pay the ad valorem taxes on the property—and the City is therefore
indisputably responsible for the property taxes, as explained above—the County
should still be able to simultaneously pursue an action against both the Lessees and
the City to persuade one of the two to pay the back taxes, leaving the paying party
to pursue its remedies against the non-paying party. This position is untenable.
While the County may have had some direct recourse against the Lessees if there
was a pass-through provision in the lease making them liable for the City’s portion
of the taxes, it cannot extort the Lessees into paying property taxes they clearly do
not owe by threatening to revoke the Lessees’ business licenses and charters.
Section 197.432 provides the procedure for the issuance and sale of tax
certificates to satisfy unpaid property tax assessments. See generally § 197.432.
Subsection (10) of section 197.432, however, exempts governmentally owned
property from the typical tax certificate procedure, and instead provides that
delinquent taxes owed on such property shall be enforced only as provided in
section 196.199(8). Section 197.432(10) provides, in full:
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A certificate may not be sold on, and a lien is not created in,
property owned by any governmental unit which has become subject
to taxation due to lease of the property to a nongovernmental lessee.
The delinquent taxes shall be enforced and collected in the
manner provided in s. 196.199(8). However, the ad valorem real
property taxes levied on a leasehold that is taxed as real property
under s. 196.199(2)(b), and for which no rental payments are due
under the agreement that created the leasehold or for which payments
required under the original leasehold agreement have been waived or
prohibited by law before January 1, 1993, must be paid by the lessee.
If the taxes are unpaid, the delinquent taxes become a lien on the
leasehold and may be collected and enforced under this chapter.
(emphasis added). Section 196.199(8) then provides, in full:
(8)(a) Any and all of the aforesaid taxes on any leasehold
described in this section shall not become a lien on same or the
property itself but shall constitute a debt due and shall be recoverable
by legal action or by the issuance of tax executions that shall become
liens upon any other property in any county of this state of the
taxpayer who owes said tax. The sheriff of the county shall execute
the tax execution in the same manner as other executions are executed
under chapters 30 and 56.
(b) Nonpayment of any such taxes by the lessee shall result in
the revocation of any occupational license of such person or the
revocation, upon certification hereunder by the property appraiser to
the Department of State, of the corporate charter of any such domestic
corporation or the revocation, upon certification hereunder by the
property appraiser to the Department of State, of the authority of any
foreign corporation to do business in this state, as appropriate, which
such license, charter, or authority is related to the leased property.
(emphasis added).
The County emphasizes section 196.199(8)(b) and argues that the statute
allows it to pursue remedial action against the Lessees for any taxes owed on
property that has lost its governmental exemption by way of a proprietary lease to
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a private entity. The County makes the novel, although not altogether
unreasonable, argument that the Florida Legislature intended 196.199(8) to be a
broad remedial measure for precisely this situation, such that the County should be
able to collect from either the City or the Lessees when they are both refusing to
pay the property tax by pointing the finger towards one another. According to the
County’s argument, the County could take the remedial actions against the Lessees
outlined in subsection (b) regardless of which party owed the taxes in order to
compel the Lessees to pay the tax, and then the Lessees could pursue an action for
contribution against the City if the City was actually the party responsible for the
payment of those taxes. The reasoning for this argument can be analogized to joint
and several liability with the right to contribution, whereby a party can
occasionally be forced to pay more than his share of a judgment, but can then
recover in a separate action against his co-tortfeasors for the amount by which he
overpaid. See § 768.31(2), Fla. Stat. (2013).
The County’s argument on this point, however, is founded on a misreading
of the statute. Section 196.199(8)(a) specifies that the subsection only applies to
taxes owed “on any leasehold” and allows liens to be imposed on other property in
the State “of the taxpayer who owes said tax.” Section 196.199(8)(b) further
clarifies that “nonpayment of any such taxes by the lessee” shall result in the
remedies enumerated therein. Read holistically, subsections 196.199(8)(a) and (b)
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simply prevent the County from imposing a lien on governmentally owned
property so as not to interfere with the property rights of another governmental
entity, but they allow a direct legal action to recover against the City if the City
owes the taxes and provide several additional alternative remedies if the Lessees
owe the taxes.
The statute cannot be read, however, to allow remedial action against a
lessee who does not in any way owe taxes on the property, such as the Lessees in
this case. We therefore find that the County cannot pursue any remedial action
against the Lessees for the delinquent ad valorem taxes owed solely by the City,
and accordingly affirm the trial court’s order on that point.
II. The trial court did not abuse its discretion by denying the Lessees’
motions for attorney’s fees.
The Lessees’ only contention of error on appeal is the trial court’s denial of
their motion for attorney’s fees, which motion is based on the argument that the
County and the City have asserted frivolous claims against them by trying to force
them to pay ad valorem property taxes they clearly do not owe. While the Lessees
have prevailed on their claim, this is a complicated area of the law, and we cannot
find that the trial court abused its discretion in denying the Lessees’ motion on
these facts.
In support of its motion for attorney’s fees, the Lessees cite sections 57.105
and 192.0105(3)(g) of the Florida Statutes. Section 57.105(1) provides:
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(1) Upon the court’s initiative or motion of any party, the court
shall award a reasonable attorney’s fee . . . to be paid to the prevailing
party . . . on any claim or defense at any time during a civil
proceeding or action in which the court finds that the losing party or
the losing party’s attorney knew or should have known that a claim or
defense when initially presented to the court or at any time before
trial:
(a) Was not supported by the material facts necessary to
establish the claim or defense; or
(b) Would not be supported by the application of then-existing
law to those material facts.
Similarly, section 192.0105(3)(g), one of the enumerated “Taxpayer Rights,”
provides that:
(g) The right of the taxpayer, property appraiser, tax collector,
or the department, as the prevailing party in a judicial or
administrative action brought or maintained without the support of
justiciable issues of fact or law, to recover all costs of the
administrative or judicial action, including reasonable attorney's fees,
and of the department and the taxpayer to settle such claims through
negotiations (see ss. 57.105 and 57.111).
(emphasis added). These statutory provisions essentially turn on the same
question: Did the losing party assert a frivolous action or claim it knew to be
unsupported by the facts or law?
The Florida Supreme Court has set a high bar for the recovery of attorney’s
fees under section 57.105 by holding that “[s]ection 57.105 fees will not be
awarded unless the court finds ‘a total or absolute lack of a justiciable issue, which
is tantamount to a finding that the action is frivolous . . . and so clearly devoid of
merit both on the facts and the law as to be completely untenable.’” Muckenfuss
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v. Deltona Corp., 508 So. 2d 340, 341 (Fla. 1987) (quoting Whitten v. Progressive
Cas. Ins. Co., 410 So. 2d 501, 505 (Fla. 1982)). In addition to the high threshold
required for the imposition of attorney’s fees sanctions, we also presume the trial
court’s finding regarding the award of attorney’s fees to be correct unless it is
completely unreasonable. See DiStefano Const., Inc. v. Fid. & Deposit Co. of
Maryland, 597 So. 2d 248, 250 (Fla. 1992) (“[T]he award of attorney’s fees is a
matter committed to sound judicial discretion which will not be disturbed on
appeal, absent a showing of clear abuse of discretion.”). The coalescence of these
two lofty standards is simply too much for the Lessees to overcome based on these
facts.
The taxation of governmentally owned property is a complicated matter, as
evidenced by our analysis above. When the Lessees sought a declaratory judgment
that they could not be held liable for the unpaid taxes, the County simply covered
its bases by counterclaiming for the payment of those taxes and then interpleading
the City. While it may now seem clear that the City owes the unpaid taxes, the
details of the lease agreement between the City and the Lessees were not known to
the County at the time, and the County was not unreasonable in seeking to secure
payment of the unpaid taxes. Furthermore, the County’s position that it could take
remedial action against the Lessees even after it became clear that the City owed
the taxes, while novel, is not completely unreasonable. The maze of statutory
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sections leading to the correct result could easily be misinterpreted to allow such
action, and we believe that the County’s arguments on that point are not
completely frivolous. We therefore affirm the trial court’s order on this issue as
well.
Affirmed.
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