IN THE SUPREME COURT OF FLORIDA. CASE NO. SC First District Court of Appeal Case No. 1D LEONARD J. ACCARDO, et al, Petitioners,

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1 IN THE SUPREME COURT OF FLORIDA CASE NO. SC First District Court of Appeal Case No. 1D LEONARD J. ACCARDO, et al, Petitioners, v. GREGORY BROWN, Property Appraiser of Santa Rosa County, et al, Respondents. RESPONDENTS ANSWER BRIEF ON REVIEW FROM THE FIRST DISTRICT COURT OF APPEAL Elliott Messer, Esq. Florida Bar No Thomas Findley, Esq. Florida Bar. No Messer, Caparello & Self, P.A Centennial Place Tallahassee, Florida Telephone (850) Roy Andrews, Esq. Florida Bar No Lindsay, Andrews & Leonard P.O. Box 586 Milton, Florida Telephone (850) Counsel for Respondents

2 TABLE OF CONTENTS Page TABLE OF CONTENTS... i TABLE OF CITATIONS... ii STATEMENT OF THE CASE AND FACTS... 1 A. Statement of the Case... 1 B. Statement of the Facts... 4 SUMMARY OF ARGUMENT ARGUMENT I. PETITIONERS BEACH HOMES AND CONDOMINIUM UNITS ARE SUBJECT TO LOCAL GOVERNMENTAL AD VALOREN TAXATION II. III. IV. PETITIONERS ARE EQUITABLE OWNERS OF THEIR BEACH HOMES AND CONDOMINIUM UNITS FOR AD VALOREN TAX PURPOSES THE UNITED STATES CONSTITUTION DOES NOT PROHIBIT TAXATION OF PETITIONERS INTERESTS THE TAX COLLECTOR AND SANTA ROSA COUNTY HAVE STANDING TO CHALLENGE THE CONSTITUTIONALITY OF THE PETITIONERS INTERPRETATION OF THE RELEVANT STATUTES V. THE QUESTION REGARDING THE POSSIBLITY OF LIENS OR TAX CERTIFICATES IS NOT RIPE CONCLUSION CERTIFICATE OF SERVICE CERTIFICATE OF COMPLIANCE i

3 Cases TABLE OF CITATIONS Page 1108 Ariola v. Jones, 71 So.3d 892 (Fla. 1 st DCA 2011)... 5, 21, 30 Accardo v. Brown, 63 So.3d 798 (Fla. 1 st DCA 2011)... 1, 4, 21, 30, 36 Adams v. Aetna Cas. & Sur. Co., 574 So. 2d 1142 (Fla. 1st DCA 1991) Alvin s Stores, et al. v. Jones, No. 1D (Fla. 1st DCA Oct. 22, 2007)... 21, 22 AMFI v. Jones, No. 1D (Fla. 1st DCA Oct. 28, 2008) AMFI v. Kinney, 360 So. 2d 415 (Fla. 1978) Ammerman v. Markham, 222 So. 2d 423 (Fla. 1969) Archer v. Marshall, 355 So. 2d 781 (Fla. 1978)... 19, 21, 23, 25, 30, 38, 48 Baird v. Commissioner, 68 T.C. 115 (1977) Bancroft Inv. Corp. v. City of Jacksonville, 27 So. 2d 162 (Fla. 1946) Bell v. Bryan, 505 So. 2d 690 (Fla. 1st DCA 1987)... 22, 23, 30 Broward County v. Eller Drive Ltd. Partnership, 939 So. 2d 130 (Fla. 4th DCA ) Caufield v. Cantele, 837 So. 2d 371 (Fla. 2002) City of Miami v. Steckloff, 111 So. 2d 446 (Fla. 1959) Dade County School Bd. v. Radio Station WQBA, 731 So. 2d 638 (Fla. 1999) Dept. of Education v. Lewis, 416 So. 2d 455 (Fla. 1982) Dept. of Revenue v. Gibbs, 342 So. 2d 562 (Fla. 1st DCA 1977) ii

4 Dept. of Revenue v. Skop, 383 So. 2d 678 (Fla. 5th DCA 1980) Gay v. Jemison, 52 So. 2d 137 (Fla. 1951) Green v. City of Pensacola, 108 So. 2d 897 (Fla. 1st DCA 1959) Helvering v. F&R Lazarus & Co., 308 U.S. 252, 60 S.Ct. 209, 84 L.Ed. 226 (1939) Hialeah, Inc. v. Dade County, 490 So. 2d 998 (Fla. 3d DCA 1986)... 35, 39, 40 Kaulakis v. Boyd, 138 So. 2d 505 (Fla. 1962)... 46, 47 Leon County Educational Facilities Authority v. Hartsfield, 698 So. 2d 526 (Fla. 1997)... 20, 33 MacNeill v. O Neal, 238 So. 2d 614 (Fla. 1970) Malu v. Security Nat l Ins. Co., 898 So. 2d 69 (Fla. 2005) Marathon Air Services, Inc. v. Higgs, 575 So. 2d 1340 (Fla. 3d DCA 1991) Mikos v. Kings Gate Club, Inc., 426 So. 2d 74 (Fla. 2d DCA 1983)... 20, 31, 32 Offcutt Housing Co. v. County of Sarpy, 351 U.S. 253 (1956) Parker v. Hertz Corp., 544 So. 2d 249 (Fla. 2d DCA 1989)...31, 33, 34, 37, 40 Portofino Condominium Assoc. v. Jones, No. 1D (Fla. 1st DCA Aug. 5, 2008)... 21, 22 Regency Villas v. Keltner, 610 So. 2d 661 (Fla. 1st DCA 1992) Robbins v. Welbaum, 664 So. 2d 1 (Fla. 3d DCA 1995) Sans Souci v. Div. of Florida Land Sales and Condominiums, Dept. of Business Regulation, 421 So. 2d 623 (Fla. 1st DCA 1982) iii

5 Savoie v. State, 422 So. 2d 308 (Fla. 1982) Sebring Airport Authority v. McIntyre, 783 So. 2d 238 (Fla. 2001)... 26, 27, , 31, 45, 48 Serv. Metro Corp. v. Bell, 786 So. 2d 1216 (Fla. 1st DCA 2001)... 33, 38 Shaw v. Jain, 941 So. 2d 458 (Fla. 1st DCA 2005) Straughn v. Camp, 293 So. 2d 689 (Fla. 1974) The Crossings at Fleming Island v. Echeverri, 991 So. 2d 793 (Fla. 2008)... 45, 46 Ward v. Brown, 894 So. 2d 811 (Fla. 2003)... 28, 30, 31 Ward v. Brown, 919 So. 2d 462 (Fla. 1st DCA 2005)...2, 3, 6, 7, 21, 22, , 36, 37, 39 Williams v. Jones, 326 So. 2d 425 (Fla. 1975)...17, 18, 19, 23, , 27, 28, 29, 30, 32, 38, 39, 48 Zirin v. Charles Pfizer & Co., 128 So. 2d 596 (Fla. 1961) Statutes Fla. Stat Fla. Stat Fla. Stat Fla. Stat , 40, 49 Fla. Stat Fla. Stat Fla. Stat iv

6 Fla. Stat Fla. Stat Fla. Stat Fla. Stat Fla. Stat Fla. Stat Fla. Stat , 42 Fla. Stat Fla. Stat Florida Constitution Art. I, 2, Fla. Const Art. VII, 1, Fla. Const Art. VII, 2, Fla. Const Art. VII, 3, Fla. Const Art. VII, 4, Fla. Const Art. VII, 6, Fla. Const , 36, 37, 41 Art. VIII, 1, Fla. Const Art. X, 1, Fla. Const v

7 Florida Attorney General Opinions 73 Op. Att y Gen. 136 (1973) Other Authorities 42 Fla. Jurisprudence 2d, Property 13 (1983) U.S. CONST. amend. XIV Rev. Rul , 33 vi

8 STATEMENT OF THE CASE AND FACTS A. Statement of the Case 1 Petitioners contend their private condominium units and beach homes on Santa Rosa Island are exempt from local government ad valorem taxation. Petitioners argue they should only be taxed at the much lower statewide tax rate on intangible property. The trial court held Petitioners interests were subject to local government ad valorem taxes. A-1. The First District Court of Appeal affirmed, holding Petitioners are the equitable owners of their beach homes and condominium units and therefore subject to local government ad valorem taxes. Accardo v. Brown, 63 So. 2d 798 (Fla. 1 st DCA 2011) ( Accardo Opinion ). The Respondents, Gregory Brown, the Property Appraiser of Santa Rosa County (the Property Appraiser ), and Stan Nichols, the Tax Collector of Santa Rosa County (the Tax Collector ), accept, in part, the procedural history outlined by the Petitioners in their Statement of the Case and of the Facts. Petitioners statement of facts, however, does not contain adequate reference to the procedural 1 The trial court order is in Respondents Appendix, Tab A, which will be cited to by the letter A followed by the tab number. Respondents will cite to the record in accordance with the method used in the district court, by reference to three separate appellate records or divisions as Petitioners described them in their district court brief. R1 refers to the record in Case No. 1D R2 refers to the record in Case No. 1D R3 refers to the record in Case No. 1D The R cite is followed by V for volume and the page number. 1

9 history or extensive record on the issue of equitable ownership. Therefore, Respondents have prepared the Statement of Facts set forth below. Petitioners have sued the Respondents in each year of this past decade in an effort to avoid local government real property taxes on their condominium units and beach homes on Navarre Beach on Santa Rosa Island. R2-V1-1; R3-V1-1; R3-V Many Petitioners have sued in each annual lawsuit since Id. Petitioners annual lawsuits continue, despite three adverse appellate opinions; three more per curiam affirmed opinions; and a stipulated judgment signed by Petitioners, which bound the entire class of Petitioners for years Id. In the original action, Petitioner Lewis Ward and others challenged their 2001 assessments. R1-V , Tab A. In March 2004, the trial court rejected their claim and held Petitioners interests were subject to local government real property taxes. R1-V , Tab A. The First District affirmed. Ward v. Brown, 919 So. 2d 462 (Fla. 1 st DCA 2005). For tax years 2002 forward, the Property Appraiser again assessed the condominium units and improvements as real property. R3-V1-1. In 2002, the Property Appraiser also assessed the condominium units to include each unit owner s proportionate share of land, as required by Section , Florida Statutes. For tax years 2002 through 2005, Petitioner Ward and others again sued. R3-V1-1; R3-V Ward and others 2

10 were adjudicated to be class representatives for the class of petitioners. R3-V The trial court found Ward s lease presented common questions of fact and law for all property interests on Navarre Beach. R3-V (Motion and Order for Class Certification, Case No CA (Dec. 2002) (same orders in Case Nos CA, CA and CA). The trial court found the class was represented by competent class counsel. Id. 2 After the First District issued the opinion in Ward v. Brown in 2005, the class of Navarre Beach taxpayers represented by Ward entered into a Stipulated Judgment of Dismissal for tax years R3-V This final judgment was entered on July 18, Id. (Stipulated Judgment of Dismissal, Case Nos , , and (July 18, 2006). By such order, each member of the Plaintiff class was directed to pay ad valorem taxes. Id. Despite Ward v. Brown and the Stipulated Judgment, Petitioners filed the instant lawsuit for tax year 2006 with new counsel. R2-V1-1. For tax years 2006 forward, the Property Appraiser included land in the assessed values. The 2 The original Ward v. Brown petitioners were represented by the Clark Partington firm. In 2002, the class of Navarre Beach residents added Carlton Fields and Ben Phipps, P.A., for the class action case. In 2006, they employed Shell, Fleming, Davis & Menge. In 2010, they added D Alemberte & Palmer. Petitioners have been competently represented over the past decade by very capable lawyers. 3

11 assessment of vacant land and land under non-condominium property was the only issue not addressed in prior judgments. In this case, both parties moved for summary judgment. R1-V ; The trial court entered summary judgment for the Respondents. R1- V The trial court held Petitioners are equitable owners of their real property, including improvements, condominium units and the land underlying these interests. Id. The First District affirmed. Accardo v. Brown, 63 So. 2d 798 (Fla. 1 st DCA 2011). The First District certified the question of whether Petitioners should be allowed to pay the reduced intangibles tax, thereby escaping local governmental ad valorem taxes. This Court accepted review. B. Statement of the Facts. The tax assessments at issue relate to beach homes and condominium units acquired under 99-year leases with options to renew for additional 99-year periods. In their own statement of facts, Petitioners fail to include record citations to the relevant lease provisions. Petitioners broadly reference categories of lease provisions in their brief with no record support. See Petitioners Initial Brief, pp. 4-5, in which they purport to describe similarities and differences in the leases. Originally, Petitioners did not seek to make distinctions among the various leases. Instead, Petitioners attached six representative leases to their Complaint, 4

12 alleging these six leases contained provisions common to all. As the First District confirmed on appeal, the six leases attached were common to most of the leases at issue. Accardo Opinion, p. 4. The First District also noted: [e]ach of the attached leases was for a ninety-nine year term, and the lessees had the option to renew for another term of ninety-nine years. Id. (emphasis added). In the companion case of 1108 Ariola v. Jones, 71 So. 2d 892 (Fla. 1 st DCA 2011)( Ariola Opinion ), the First District also noted: the parties treated these leases as identical for purposes of determination of the issues in this case. Ariola Opinion, p. 8. Thus, Petitioners alleged the leases with 99-year terms and 99-year renewal terms to be representative. 3 In most instances, the leases on Santa Rosa Island were directed to developers, who built condominium units and sold them to Petitioners. Petitioners concede their properties are used for private purposes. As the trial court held: All of the Petitioners interests at issue in this action are used for purely private purposes. The Petitioners enjoy the capital appreciation and rental income derived from these interests. The Petitioners have the right to convey their interests without restraint; they have the right to encumber their properties with mortgages; they bear all of the risks of ownership; they bear the responsibility for insurance, maintenance and repair; and they are typically responsible by the terms of their lease documents for taxes imposed 3 The amicus brief of FAPTP relies on unknown, but incorrect, facts in arguing this case relates to relatively short-term lessees (as few as 10 years). FAPTA Amicus Brief, p. 1. 5

13 upon their interests. The County, in contrast, does not bear any of the burdens typically associated with ownership of real property. A-1, p. 2. This language of the trial court was adopted and quoted in the appellate opinion under review. Accardo Opinion, p. 5. Because Petitioners maintain virtually all of the benefits and burdens of ownership, the First District held Petitioners are the equitable owners of their real property interests. Notwithstanding Petitioners argument relating to the United States Constitution, the land at issue is not federally owned property. R2-V2-200, Ex. A. The United States does not even have bare legal title. Id. Instead, in 1947, the land was conveyed to Escambia County. Id. Escambia County leased the part of the island known as Navarre Beach to Santa Rosa County for 99 years with automatic renewals for additional 99-year periods in perpetuity. R2-V2-200, Ex. B. Both Escambia County and Santa Rosa County have subleased parts of the island to private parties for development. Neither the United States government nor any other governmental entity has ever objected. Both counties have joined in numerous declarations of condominium under Chapter 718, Florida Statutes, submitting the realty to private condominium ownership. R1-V Class Representatives Ward and Coley Petitioners Ward and Coley were lead Petitioners in the original litigation and have participated in all subsequent litigation. Ward v. Brown. R1-V2-4 6

14 (Ward Depo. p. 7). Although the instant case is not a class action, Petitioners Ward and Coley were held to be class representatives when stipulated judgments were entered in tax years R3-V1-69; R1-V2-4 (Ward Depo., p. 7). Both of these former class representatives own condominium units, Ward at Emerald Surf, R1-V2-4, and Coley at Navarre Towers. R1-V5. Both interests were adjudicated to be typical of Navarre Beach interests. R3-V (Motion and Order for Class Certification, Case No CA (Dec. 2002) (similar orders were also issued in Case Nos CA, CA, CA); R1- V2-4 (Ward Depo., p. 7). The cases for which they served as class representatives were resolved by stipulated judgment by which local ad valorem taxes would be paid. R1-V2-4 (Ward Depo., p. 8). R3-V For both Ward and Coley, the Santa Rosa Beach Administration entered into agreements with developers to build and sell condominium units. R1-V2-4 (Ward Depo., Ex. A (prior Ward dep., Ex. #1); R1-V5 (Coley Depo., Ex. #4). Both lease terms were for 99 years with renewal options for more 99 year periods. Id., Ward, Par. III.; Coley Par. III. The renewal option in Coley s case is tied to the term of the Escambia-Santa Rosa County lease, which renews automatically in perpetuity. Coley Par. IV; Ward v. Brown, 919 So. 2d 462 (Fla. 1 st DCA 2005). 7

15 In each case, records were required to be kept for each condominium unit sold.... Id., Ward Par. V; Coley Par. XIV. Each agreement also provided that the County would join in the declaration of condominium. Id., Ward Par. XIII.; Coley Par. XIV. As noted in the Coley lease: [I]n the event of the sale of a condominium unit it shall not be necessary that Lessee [Developer] notify Lessor [County] of such sale or that Lessor be paid a transfer fee, provided that Lessee shall at all times maintain a current and accurate list of condominium owners together, with the date of purchase and original purchase price of each unit. Id., Coley Par.XIV. In addition: It is expressly agreed that the sale of a condominium apartment or townhouse shall not be considered an assignment or subletting, and prior contract (sic.) of Lessor [County] to such a sale shall not be required. Id., Coley Par. XIV. The Declaration of Condominium for the Wards unit states in Paragraph 1.1 that the association owns fee title to the land. R1-V2-4 (Ward Depo., p. 12, Ex. B, par. 1.1). For all Petitioners condominium units, Declarations of Condominium were entered, committing the property to the condominium form of ownership under Chapter 718, Florida Statutes. R1-V2-4 (Ward Depo., p. 12, Ex. B, par. 1.2); R1-V5 (Coley Depo., p. 14, Ex. 3, Art. 1). Ward and Coley recognize the condominium unit to include an undivided interest in the common elements. 8

16 R1-V2-4 (Ward Depo., p. 13); R1-V5 (Coley Depo., p ). Tax notices show these assessments were for the unit and a percentage of the common elements, which include land. R1-V5 (Coley Depo., p. 29). None of the property is used for governmental purposes. R1-V2-4 (Ward Depo., p. 13). Ward and Coley pay for all utilities, including gas, water, electricity, and sewer. R1-V2-4 (Ward Depo., Ex. A (prior Ward dep., Ex. 1), Par. VI); Coley Par. VI. Petitioners are obligated to repair and maintain the premises. Id., Ward Par. XI; Coley Par. XII. Moreover, under the heading Taxes and Assessments, Ward and Coley are required to pay all assessed taxes. Id., Ward Par. XII; Coley Par. XIII. The property is kept at the sole risk of Lessee or Sublessee and the county is not responsible in any way for such property. Id., Ward Par. XV; Coley Par. XVI. Petitioners must maintain liability and property insurance. Id.; R1-V2-4 (Ward Depo., Ex. 8); Coley Par. XVI. Mr. Ward paid $136,000 for his condominium unit. R1-V2-4 (Ward Depo., p. 7). A closing statement shows a contract sales price of $136,000 for the unit. R1-V2-4 (Ward Depo., Ex. A (prior Ward dep., Ex. 9). The Wards have rented the unit to third parties. R1-V2-4 (Ward Depo., Ex. A (prior Ward dep., Ex. 5, 7)( Ward Tax Returns ). The Wards have enjoyed the rental income and reported it on income tax returns from 1996 to present. Id. The Wards have depreciated 9

17 the condominium and taken casualty losses on it. Id.; Rev.Rul The County does not pay any costs associated with the property. Id., p. 15. The Coleys signed a Residential Sale and Purchase Contract for their unit. R1-V5 (Coley Depo., Ex. 2, 6). Mr. Coley understood his responsibility to pay lawfully assessed taxes. R1-V5 (Coley Depo., p. 11). The Settlement Statement stated a contract sales price of $325,000. R1-V5 (Coley Depo., Ex. #5). Mr. Coley agreed that this was the sales price. R1-V5 (Coley Depo., p. 18). The Coleys mortgaged the unit to secure financing, without any requirement for County approval. R1-V5 (Coley Depo., p. 27; Ex. 5 (Mortgage to Regions Bank). All of the land and improvements submitted to condominium ownership conferred private ownership. R1-V5 (Coley Depo., p. 15, Ex. 3, Art. 2, par. 6). The County pays no part of the repair or maintenance. R1-V5 (Coley Depo., p. 28). The Coleys deduct the home mortgage interest on their income tax return. Id. 2. Other representative leases attached to Complaint as containing provisions common to Petitioners. Santa Rosa County has negotiated many leases for private development of realty on Navarre Beach to be predominantly used for commercial or residential purposes. R2-V2-200 (par. 9); A-2. Petitioners attached six leases to their Complaint, which are alleged to contain lease provisions common to most of the respective undeveloped land, residential, townhouse and condominium leases 10

18 which are material to this Complaint. R2-V2-200 (par. 7)(also A-2). The most common example allows for a 99-year term, plus not just one 99-year renewal, but also an option for further renewals into the future after 198 years. The first representative lease containing provisions in common with all others is a Residential Lease between the County and John Barry. R2-V2-200 (Ex. C); A-2-C. The lease term is 99 years with an option to renew for 99 more years. Id.; Ex. C, par. 1, 14. The 99 year renewal is to be on like covenants, provisions and conditions as are in this lease contained, including an option for further renewals. Id.; Ex. C., par. 14; R1-V (Alford Depo., p. 11) (emphasis added). Thus, the renewals would continue past the first 99-year renewal period for additional renewal periods on the same terms. 4 The lease is for $330 per year during the original term and renewal periods. R2-V2-200 (Ex. C., par. 2); R1-V (Alford Depo., p. 11). The property is to be used as residential property for the purpose of constructing and maintaining a beach home or seasonal or permanent residence thereon. R1-V2-200 (Ex. C., par. 3). The property is not used for governmental purposes. R1-V (Alford Depo., p. 12). Although bare legal title to any building is stated to be with the 4 Per the Affidavit of Dennis Tackett, who works for Petitioners law firm, the format with an initial 99-year term, followed by another 99-year term, plus more 99-year renewals after that on like terms is the most common. 11

19 County, such legal title is subject, however, to the term of years and option to renew granted to lessee. R2-V2-200 (Ex. C., par. 4). The interest may be assigned, mortgaged, pledged or transferred. R2-V2-200 (Ex. C., par. 12). The current owner mortgaged the property. R1-V (Alford Depo., p. 14). If the property is sold, the current owner obtains the proceeds and nothing goes to the County. R1-V (Alford Depo., p. 15; 27). The County does nothing to maintain the property. Id., p. 19. The lots can be sold without the County s permission. Id., p. 27. The second lease attached to the Complaint is also a lease for 99 years, with an option to renew for 99 years, and further renewals on like terms after that. R2-V2-200 (Ex. D., par. 1)(A-2-D); R1-V (Plauche Depo., p. 9). The lease has similar provisions with respect to the benefits and burdens of ownership as did the first common lease. It states: Lessees shall pay and discharge all existing and future taxes... assessments, duties, impositions and burdens assessed, charged or imposed upon the Demised Premises. R2-V2-200 (Ex. D., par. 11). The property is not used for public purposes. R1-V (Plauche Depo., p. 9). The County does no maintenance on the property. Id., p. 10. This property is rented to third parties. R1-V (Plauche Depo., p. 12). The current owners enjoy the rent for their own private benefit. Id. No part of the rent goes to the County. Id. 12

20 The rent is reported on the owners tax return, and they deduct from taxable income all costs of cleaning, mortgage interest, utilities, and depreciation. Id., p A closing statement set a contract sales price paid by the buyers. Id., p. 14. None of the sales price was paid to the County. Id., p. 15. The next lease attached to the Complaint, containing terms common to all Petitioners, is a lease between the County and Garland Jarvis for 99 years with an option for an additional 99-year renewal. R2-V2-200 (Ex. E)(A-2-E). Currently, Navarre Beach Venture holds this property. Mr. Richard Bennett testified at deposition as the corporate representative of Navarre Beach Venture. R1-V (Bennett Depo., p. 5). Mr. Bennett is the contractor, who developed the property. Id., p. 6. Navarre Beach Venture owns several condominium units at issue. Id., p. 14. Mr. Bennett understood the assessments to be for each unit and an undivided interest in the underlying land. Id., p According to the original lease, the property was to be used as business or commercial property for the purpose of constructing, maintaining and renting apartments, motels or cottage units. R2-V2-200 (Ex. E., Par. 3). The interests may be assigned, mortgaged, pledged or transferred. Id., Ex. E., Par. 15. This agreement was amended to allow for construction and sale of up to four hundred forty-eight (448) condominium apartment/office/condotel/townhome and/or 13

21 hotel/motel units. R2-V2-200 (Ex. E, Addenda, Par. 3). The Bennetts pledged the property to Regions Bank for financing. R1-V (Bennett Depo., p. 19). The County has not paid for any part of the debt, construction, insurance, repair or maintenance of the property. Id., p. 26. The property is not used for any governmental purpose. Id., p. 26. The fourth lease attached to the Complaint, containing terms common to all Petitioners, has a term of 99 years with an option to renew... for the balance of [the County s] lease term under its lease from the Santa Rosa Island Authority. R2-V2-200 (Ex. F)(A-2-F). Because the master lease from the SRIA shall automatically be renewed for a further term of ninety-nine (99) years on the like covenants... including the right in lessee for further renewals, R2-V2-200 (Ex. B, Par. 6), the Ward Court held it is perpetual. Currently, Beach Condominium Owners Association holds the interest. R1-V The lease contemplated the construction and sale of condominium units. R2-V2-200 (Ex. F., par. IV, VII, XIV). The County agreed to join in the declaration of condominium. R2-V2-200 (Ex. F., par. XIV); R1-V (Oliver Depo., p. 16). Paragraph XIV provides: [I]n the event of the sale of a condominium unit it shall not be necessary that Lessee notify [the County].... Id. The agreement provides a sale of a condominium apartment... shall not be considered an assignment or 14

22 subletting, and the prior consent of the [County] to such a sale shall not be required. R2-V2-200 (Ex. F., par. XIV). The units were timeshare units. R1-V (Oliver Depo., p. 8). When the structure was destroyed by a hurricane, the unit owners terminated the condominium and now own as tenants in common. Id., p. 9. The President of the owners association confirmed the vote not to rebuild, stating: Following termination, the property is now owned by the unit owners, i.e., tenants in common. Id., p ; depo. Ex. G (attached letter). When the structure was destroyed, all insurance was paid to the owners. No insurance proceeds went to the County. Id., p. 10. The lease had a 99-year term with an option to renew as long as the Escambia County to Santa Rosa County lease was in effect. Id., p. 12. The current owners are responsible for all taxes and assessments on the property. R2-V2-200 (Ex. F., par. XIII). They hold the property at their sole risk and insure the property. R2-V2-200 (Ex. F., par. XVI); R1-V (Oliver Depo., p. 21). The property has not been used for governmental purposes. R1-V (Oliver Depo., p. 14). The County has not paid any insurance, repair or maintenance costs on the property. Id., p. 17. The fifth lease attached to the Complaint, containing terms common to all Petitioners, is a Condominium Lease between the County and Leonard Kaplan. R2-V2-200 (Ex. G)(A-2-G). Currently, Mr. Charles Liberis holds the interest. R1-15

23 V The agreement provides for construction of condominiums for lease, rent or sale. R2-V2-200 (Ex. G, Par. 4). Mr. Liberis agrees the current improvements, consisting of pilings, are owned by him and not by the County, for the term of the lease. R1-V (Liberis Depo., p. 14). The lessee is to pay all taxes. R2-V2-200 (Ex. G, Par. 10). The interests may be assigned, mortgaged or transferred. Id., Ex. G, Par. 12. The interest, including land, has been mortgaged to Coastal Bank. R1-V (Liberis Depo., p ). Mr. Liberis deducts interest, office expenses and other expenses for the lot for income tax purposes. Id., p. 17. If the interest is sold, the proceeds go to the bank and Mr. Liberis. Id., p. 12. No sales proceeds would go to the County. Id., p. 13. The County consented to the filing of a Declaration of Condominium. R2-V2-200 (Ex. G, Par. 13). The lessee has the option to renew for an additional 99-year terms on like terms, including an option for further 99-year renewals after that. Id., Ex. G., Par. 14. The property is not used for any governmental purposes. R1-V (Liberis Depo., p. 18). The sixth lease attached to the Complaint, containing terms common to all Petitioners, is between the County and Navarre Beach Marina Corporation. R2- V2-200 (Ex. H)(A-2-H). Shoreline Developers, LLC, now holds this property. R1-V The agreement is for a 99-year lease with an option for renewal. 16

24 R2-V2-200 (Ex. H, Par. 1). The renewal is to be on like terms with options for further 99-year renewals. Id., Ex. H, Par. 18. The lease can be assigned, mortgaged or transferred. Id., Ex. H, Par. 19. Shoreline Developers is responsible for all assessed taxes. R1-V (Liberis Depo., p. 23). Shoreline Developers deducts expenses on the parcel on its federal income tax returns. Id., p. 28. If the property is sold, Shoreline Developers will receive the proceeds, and the County gets nothing. Id., p. 25. The parcel is not used for public purposes. Id., p Local Governmental Services. Petitioners enjoy the full benefit of County services. The children on Navarre Beach attend Santa Rosa County schools. The County funds roads and other County services for beach residents. The County does not maintain or repair the subject properties. Instead, Petitioners bear the full burden of repairing, maintaining and insuring their homes and land. R1-V SUMMARY OF ARGUMENT The certified question of whether Petitioners have rights tantamount to ownership to support the assessment of local government ad valorem taxes has been answered by this Court on prior occasions. In Williams v. Jones, 326 So.2d 425 (Fla. 1975) and its progeny, this Court held the interests of Petitioners on Santa Rosa Island are tantamount to ownership and equivalent of fee simple 17

25 ownership. The law relating to Santa Rosa Island tax matters has been crystallized by 40 years of case law, including four Florida Supreme Court opinions and six First District Court of Appeal cases, all adverse to Petitioners. This Court has held private leaseholders of governmental property used for purely private purposes on Santa Rosa Island must pay local government real property taxes at parity with other private owners. Williams v. Jones, 326 So.2d at 432. This Court has held there is no constitutional exemption upon which Petitioners can base their claim for preferential tax treatment. This Court further held any attempt to create one legislatively for these interests on Santa Rosa Island would undoubtedly be discriminatory and violative of the equal protection provisions of the Florida and United States Constitutions. Id. Therefore, this Court should affirm. ARGUMENT I. PETITIONERS BEACH HOMES AND CONDOMINIUM UNITS ARE SUBJECT TO LOCAL GOVERNMENTAL AD VALOREM TAXATION. Standard and Scope of Review: The standard of review is de novo. In terms of the scope of review, this Court has authority to consider any issue raised 18

26 in the lower courts. Moreover, this Court can affirm the First District on alternative grounds argued in the lower courts. 5 Argument: The certified question is whether Petitioners beach homes and condominium units may be taxed at the far lower intangibles tax rate administered at the state level, while other citizens in Santa Rosa County pay a far greater rate of tax as part of their local government ad valorem tax burden. This Court has held the Petitioners interests on Santa Rosa Island are tantamount to ownership and equivalent of fee simple ownership. Archer v. Marshall, 355 So. 2d 781, 784 (Fla. 1978); Williams v. Jones, 326 So. 2d 425 (Fla. 1975). These precedents require Petitioners to pay local governmental ad valorem taxes at parity with other citizens in order to fund local schools; police protection; and other local governmental services within Santa Rosa County. 5 This Court is not limited to the certified question and may consider all issues raised in the lower courts. Zirin v. Charles Pfizer & Co., 128 So. 2d 594, 596 (Fla. 1961); Caufield v. Cantele, 837 So. 2d 371, 377 n.5 (Fla. 2002); Savoie v. State, 422 So. 2d 308, 310 (Fla. 1982). In this case, Respondents raised several constitutional issues. The trial court ruled that preferential tax treatment for Petitioners would be unconstitutional. Therefore, this question may be reviewed. This Court is not limited to the reasons set forth by the lower courts. Dade County School Bd. v. Radio Station WQBA, 731 So. 2d 638, 645 (Fla. 1999); MacNeill v. O Neal, 238 So. 2d 614, 615 (Fla. 1970); Malu v. Security Nat l Ins. Co., 898 So. 2d 69, 73 (Fla. 2005). Radio Station WQBA and Malu address the tipsy coachman doctrine, which allows an appellate court to affirm despite finding error in the lower court, as long as there is an alternative basis to affirm. 19

27 Petitioners begin their argument by questioning whether the courtinvented concept of equitable ownership can be applied to ad valorem tax statutes. Petitioners Initial Brief, p. 11. This question was answered long ago. In Leon County Educational Facilities Authority v. Hartsfield, 698 So. 2d 526, 528 (Fla. 1997), for example, this Court cited a number of prior cases, in holding: The concept of equitable ownership in ad valorem taxation has long been a part of Florida law. In fact, the concept of equitable title for ad valorem tax purposes is part of our Florida Constitution. Article VII, Section 6, of the Florida Constitution, expressly refers to consideration of legal or equitable title in determining ad valorem tax status. Petitioners effort to diminish the importance of equitable ownership by calling it court-invented is unpersuasive. In Leon County, this Court explained: The Appellant [in Leon County] rests its thesis on a literal interpretation of the quoted statute defining exemptions, but this court is not limited to that. It is authorized to look through form to fact and substance to answer the question of tax exemption or tax liability. Id. at This Court cited several cases where equitable ownership controlled over legal title, including one in which a taxpayer had no option to purchase or ability to obtain legal title. Id. at 529 (citing Mikos v. Kings Gate Club, Inc., 426 So. 2d 74 (Fla. 2d DCA 1983). This directly contradicts Petitioners chief argument. 20

28 This Court must elevate substance over form. To do otherwise would expose the law to an endless variety of manipulation, some of which has already been noted by this Court in reference to Santa Rosa Island. See Archer v. Marshall, 355 So. 2d 781, 784 (Fla. 1978)(addressing tax situation on Santa Rosa Island: It is fundamentally unfair for the Legislature to statutorily manipulate assessment standards and criteria to favor certain taxpayers over others. ) The certified question does not ask this Court to revisit the issue of equitable ownership. To the contrary, the certified question assumes Petitioners are equitable owners, by incorporating the phrase because appellants are the equitable owners. This is certainly understandable, given three prior written opinions (and three additional per curiam affirmed opinions) from the First District, which firmly establish Petitioners as equitable owners of their interests in this unique context on Santa Rosa Island. Ward v. Brown, 919 So. 2d 462 (Fla. 1st DCA 2005); 1108 Ariola v. Jones, 71 So. 3d 892 (Fla. 1 st DCA 2011)(this case); Accardo v. Brown, 63 So. 2d 798 (Fla. 1 st DCA 2011)(the companion case); see also Portofino Condominium Assoc. v. Jones, No (Fla. 1st DCA Aug. 5, 2008)(per curiam); Alvins Stores et al. v. Jones, No (Fla. 21

29 1st DCA Oct. 22, 2007)(per curiam); AMFI v. Jones, No (Fla. 1st DCA Oct. 28, 2008)(per curiam). 6 In stark contrast to these cases directly addressing Santa Rosa Island, Petitioners rely on (a) a per curiam affirmed opinion from Hernando County, addressing facts not comparable to those on Santa Rosa Island; (b) an abrogated Bell v. Bryan, 505 So. 2d 690 (Fla. 1 st DCA 1987); and (c) a dissent in Ward v. Brown, in which the dissenting judge relied on the discarded Bell case. Petitioners do not mention in their brief the First District s decision to recede from Bell. The effect of Ward was to recede from Bell 1 sub silentio. Ariola Opinion, p The Portofino condominium unit owners, who occupy 765 luxury condominium units on Pensacola Beach, were unsuccessful in the Portofino case cited above. They have now filed an amicus curiae brief in the companion case. The courts in Portofino held that those plaintiffs own their condominium units. Despite these adverse judgments, they now urge the same, rejected arguments in an amicus curiae brief. In fact, both lawyers filing briefs in an amicus curiae capacity, Mr. Ben Phipps and Mr. Ed Fleming, were counsel for unsuccessful petitioners on Santa Rosa Island. Ward v. Brown; Portofino v. Jones. The arguments by Mr. Phipps and Mr. Fleming are not made as friends of the Court, but instead to re-argue their cases. The only distinction is that Portofino, in an amicus capacity, now misrepresents its own record, stating their unit owners had no options to renew. Portofino Amicus Brief, p. 1 ( none of the leases grant to the tenants the right to renew ). In truth, the Portofino leases all had 99 year original terms, with options to renew for additional 99 year periods. Portofino, No (Record on Appeal - V39-115, Ex. C)(also, Appendix, Tab 3)(Portofino lease with full right and privilege at its election to renew this lease for a further term of ninety-nine years ). 22

30 In truth, this issue is unique to the First District. There is no other district where condominium unit owners living on the beach are allowed to avoid their obligations to local government and school districts through such machinations. The relevant holdings of the First District, including the opinion under review, apply to narrow facts in a unique context on Santa Rosa Island. Given the abundance of authority in opinions from this Court and the First District, the Petitioners argument based on the discarded Bell opinion must fail. A. Williams v. Jones. This Court has examined this unusual situation on Santa Rosa Island on at least four prior occasions. Archer v. Marshall, 355 So. 2d 781, 784 (Fla. 1978); AMFI v. Kinney, 360 So. 2d 415 (Fla. 1978); Williams v. Jones, 326 So. 2d 425 (Fla. 1975); Straughn v. Camp, 293 So. 2d 689 (Fla. 1974). In each case, this Court reviewed the nature of the legal rights conferred on Santa Rosa Island and a myriad of devices developed by petitioners and their counsel to manipulate the structure so as to avoid the payment of local governmental taxes. In 1975, petitioners on Santa Rosa Island made a similar argument to that made in the case at bar, by urging this Court to find they should be taxed at the reduced intangible tax rate. This Court emphatically rejected the argument, holding petitioners had rights tantamount to ownership of the fee. Williams v. 23

31 Jones, 326 So. 2d at 436. This Court held it would undoubtedly be unconstitutional if residents of Santa Rosa Island were allowed to escape local government real property taxes and pay only intangibles tax, while similarly situated residents on the mainland bear the full local tax burden. The Court held: Basically, the Petitioners [on Santa Rosa Island] contend for a constitutional exemption from ad valorem real estate taxation where none exists and, if it did, such an exemption would undoubtedly be discriminatory and violative of the equal protection provisions of the Florida and United States Constitutions. Id. at 432 (emphasis added). In other words, an answer in favor of Petitioners on the certified question could never be supported by the Florida Constitution, because there is no constitutional exemption to allow their beach homes to be taxed at the reduced intangibles tax rate. The Williams v. Jones Court explained: To accept the [beach homeowners ] contention... would not only result in such leasehold interests being taxed on the reduced intangible personal property ad valorem rate but would also deprive the political subdivisions wherein the leaseholds are situated from raising revenues from such source in order to defray the costs of the services supplied to the users thereof, services which include, especially, the education of the children of such users. The holder of a lease on Santa Rosa Island requires no less police protection, fire protection or education of his or her children than does his or her neighbor in the county who occupies under a fee simple title. Id., at 431 (emphasis added). This Court held the Santa Rosa Island properties held by petitioners should be taxed on a parity with other real 24

32 property in the private sector devoted to similar uses. Id. at 430 (emphasis added). This Court also examined the Equal Protection issue of whether properties on Santa Rosa Island could avoid local taxation, while similar properties not on the beach were taxable, holding: No rational basis exists for such a distinction. Id. (emphasis added). This Court re-emphasized the point in Archer v. Marshall, 355 So. 2d at 784, concluding: [T]hese leaseholders have the equivalent of fee simple ownership.... (emphasis added). In Archer, this Court struck yet another attempt by the petitioners on Santa Rosa Island to manipulate the form of the transactions to avoid local taxes. Id. at 785. This Court analyzed not just the law, but the fact that these Petitioners enjoy all of the benefits of the improvements: [I]t cannot be said that Escambia County has or will receive any improvements of value upon the termination of the lease agreements. Certainly the improvements which have been made upon this property [specifically, on Santa Rosa Island] will have long since been destroyed prior to the end of the leases. Archer v. Marshall, 355 So. 2d at 784. This Court has consistently concluded Petitioners have interests equivalent to fee simple ownership. Moreover, this Court has held no law could support taxation of these interests at the reduced intangible personal property ad valorem rate, because there is no support in the Florida Constitution for such treatment. 25

33 B. Sebring Airport Authority v. McIntyre Petitioners have argued the 1980 revisions to Chapter 196 were capable of altering the holding in Williams v. Jones. Yet, the Legislature has no ability to modify the constitutional principles described in Williams v. Jones, as the Florida Constitution contains no constitutional exemption to support the treatment sought by Petitioners. This Court confirmed the vitality of Williams v. Jones more than twenty years after the 1980 revisions in Sebring Airport Authority v. McIntyre, 783 So. 2d 238 (Fla. 2001). Justice Lewis wrote a unanimous opinion in Sebring, citing the portions of Williams v. Jones quoted above. Sebring involved a similar attempt to contort the definition of public purpose to create a tax exemption. The Sebring Court examined an exemption statute, which purported to define public purpose to include private racetracks and sports stadiums, despite no authority for such an exemption in the Florida Constitution. 7 This Court held the statute attempts to create an ad valorem tax exemption for private, profit-making ventures conducted upon property leased 7 Whether sport stadiums or racetracks were good economic development tools was irrelevant. It is also irrelevant here, despite the argument by Portofino amicus. The Legislature has provided for an exemption based on economic development in Section , Florida Statutes (2011). Petitioners have not applied for, nor do they qualify for that exemption. In terms of the governmental exemption now under review, economic impact is not a factor and the economic data filed by Portofino is not only outside the record, but irrelevant. 26

34 from a governmental entity a result which the Florida Constitution does not allow. Id. at 241 (emphasis added). This fact pattern is very similar to the case at bar, in which Petitioners suggest they are somehow fulfilling a public purpose. See Petitioners Initial Brief, p Yet, in Sebring, this Court held the Legislature had no power to fashion such a definition, because only the Florida Constitution can authorize local ad valorem tax exemptions. Similarly, in the case at bar, there is no exemption in the Florida Constitution to support an exemption from local government taxes for privately used beach homes and condominiums. In Sebring, this Court described Williams v. Jones as setting the guiding principles for the constitutional analysis. Sebring noted Williams v. Jones was premised on a constitutional foundation that all privately used property must bear the proper tax burden. Id. at 243. The Sebring Court held Williams v. Jones gave effect to the 1968 changes to the Florida Constitution and the governmentalgovernmental standard, which requires governmental use of property to satisfy constitutional requirements for a governmental exemption. Id. at 246. Purely 8 To the extent Petitioners rely on bond validation proceedings to argue their private condominiums serve a public purpose, Sebring held bond validation cases... are not analogous to tax exemption cases, and the legal theories cannot be used interchangeably ; tax exemption necessarily involves a direct shift in tax burden from the exempt property to other, non-exempt properties. Sebring, at

35 private uses, such as enjoyment of beach homes and condominium units, are not governmental functions. There is no constitutional basis for exempting them. This Court has established, in an interlocutory appeal filed by some of the Petitioners in this case, that Petitioners seek an exemption. Ward v. Brown, 894 So. 2d 811, 812, 816 (Fla. 2004)( we also reject the petitioners claim that they are not claiming an exemption ). Thus, in the parlance of Sebring, these Petitioners seek an exemption for privately used beach homes and condominiums, a result which the Florida Constitution does not allow. Sebring, 783 So. 2d at 241. In Sebring, this Court quoted the core part of Williams v. Jones, which held that if petitioners were to pay tax at the reduced intangible personal property ad valorem rate, this would violate the Florida Constitution. Sebring, 783 So. 2d at 248. This Court also quoted the Williams v. Jones holding that there is no constitutional exemption to support Petitioners argument and, if it did, such an exemption would undoubtedly be discriminatory and violative of the equal protection provisions of the Florida and United States Constitutions. Sebring, 783 So. 2d at 248 (quoting Williams, 326 So. 2d at ). This Court in Sebring also addressed the argument raised in Petitioners initial brief, relating to the appropriate deference accorded to the Legislature. Contrary to Petitioners argument, however, this Court ruled the Legislature s 28

36 power to classify is limited by the Florida Constitution: [T]he Legislature s authority was not unbridled... the Court is responsible for measuring legislative acts with the yardstick of the Constitution. Id. at 245. In this case, the Florida Constitution provides no authority for the Petitioners requested exemption from local government ad valorem taxes. In all, there are now four Florida Supreme Court opinions; three published First District opinions; and three per curiam affirmed opinions, which are adverse to Petitioners. All of these Courts reviewed extensive trial records and all types of leases on Santa Rosa Island. 9 In all of these cases, the courts construed the rights granted to be equivalent of fee simple ownership. Given no constitutional support for Petitioners claim for exemption, this Court should affirm. II. PETITIONERS ARE EQUITABLE OWNERS OF THEIR BEACH HOMES AND CONDOMINIUM UNITS FOR AD VALOREM TAX PURPOSES. Standard and Scope of Review: The standard of review is de novo. In terms of the scope of review, this Court has the authority to consider any issue raised in the lower courts. Moreover, this Court can affirm the First District on alternative grounds argued in the lower tribunal. 9 Williams v. Jones noted one lease (not involved in this case) with only a 25 year term. That lease was subject to the same ruling that enforced collection of local government ad valorem taxation. Williams v. Jones, 326 So. 2d 429, n

37 Argument: Petitioners continue to argue they are not equitable owners. Yet, this Court has held Petitioners interests are tantamount to ownership and equivalent of fee simple ownership. Williams v. Jones; Archer v. Marshall. In addition, the First District, in this context unique to their district, has established Petitioners are equitable owners of their interests. Ward; Ariola; Accardo. To counter these Florida Supreme Court and First District cases, Petitioners rely on the Bell case, from which the First District has now receded. Ariola Opinion, p. 14. Notwithstanding the Petitioners effort to persuade the Court that the lawyers argued equitable ownership at the trial court level in Bell twenty-five years ago, the First District s now-receded-from opinion in Bell did not address equitable ownership. Because the precedential effect of a decision is limited to the four corners of an appellate opinion, Bell has no persuasive or precedential impact in this case. Shaw v. Jain, 941 So. 2d 458, 461 (Fla. 1st DCA 2005)(quoting Adams v. Aetna Cas. & Sur. Co., 574 So. 2d 1142, 1153 (Fla. 1st DCA 1991)( We may not look beyond the opinion, itself, in our search for the material facts. ) In the case at bar, the First District correctly held Petitioners are equitable owners of their beach homes and condominium units. Petitioners argument that their interests are exempt from real property ad valorem taxation must be strictly construed against them (1), Fla.Stat. (2011); Sebring, 642 So. 2d at 30