IN THE SUPREME COURT OF FLORIDA

IN THE SUPREME COURT OF FLORIDA LEWIS Y. and BETTY T. WARD, et al., Petitioner, v. GREGORY S. BROWN, Property Appraiser of Santa Rosa County, et al., Case Nos. SC05-1765, SC05-1766 1st DCA Case No. 1D04-1629 Lower Tribunal Case No. 2001 CA 892 Respondent. / JURISDICTIONAL BRIEF OF PETITIONERS LEWIS Y. AND BETTY T. WARD On Review from the District Court of Appeal, First District, State of Florida Donald H. Partington Joseph C. Mellichamp, III Florida Bar No. 105455 Florida Bar No. 133249 William H. Stafford, III, Esq. CARLTON FIELDS, P.A. Florida Bar No. 70394 P.O. Drawer 190 LARRY, BOND, STACKHOUSE Tallahassee, FL 32302-0190 CLARK, PARTINGTON & HART Telephone: (850) 224-1585 P.O. Box 13010 Facsimile: (850) 222-0398 Pensacola, FL 32591-3010 Telephone: (850) 434-9200 Benjamin K. Phipps Facsimile: (850) 432-7340 Florida Bar No. 63151 THE PHIPPS FIRM P.O. Box 1351 Tallahassee, FL 32302 Telephone: (850) 222-7000 Facsimile: (850) 681-3998 Attorneys for Petitioners, Lewis K. and Betty Y. Ward

TABLE OF CONTENTS TABLE OF AUTHORITIES... ii PRELIMINARY STATEMENT... iii INTRODUCTION... 1 STATEMENT OF THE CASE AND FACTS... 1 SUMMARY OF ARGUMENT... 2 ARGUMENT... 3 I. THIS COURT HAS DISCRETIONARY JURISDICTION TO REVIEW THIS CASE... 3 II. THE DECISION UNDER REVIEW DECLARED A STATUTE INVALID, THUS VESTING MANDATORY JURISDICTION IN THIS COURT... 6 A. Respondents Raised the Constitutionality Of The Statutes Imposing Taxes On The Santa Rosa Leases... 6 B. The Decision of the District Court Is Subject to The Appeal Jurisdiction of This Court... 10 CONCLUSION... 10 CERTIFICATE OF SERVICE... 12 CERTIFICATE OF FONT COMPLIANCE... 12 i

TABLE OF AUTHORITIES STATE CASES Bell v. Bryan, 505 So. 2d 690 (Fla. 1st DCA 1987)... 8, 9 Bell v. Bryan, 519 So. 2d 1024 (Fla. 1st DCA 1988)... 8, 9 Harrell's Candy Kitchen v. Sarasota-Manatee Airport Authority, 111 So. 2d 439 (Fla. 1959)... 10 Leon County Educational Facilities Authority v. Hartsfield, 698 So. 2d 526 (Fla. 1997)... 6 Metropolitan Dade County v. Brothers of the Good Shepherd, Inc., 714 So. 2d 573 (Fla. 3d DCA 1998)... 3, 4, 5 Robbins v. Mt. Sinai Medical Center, Inc., 748 So. 2d 349, Fla. 3d DCA 1999)... 3, 4, 5 Ward v. Brown, 2005 WL 1412363 (Fla. 1st DCA, June 17, 2005)... 1, 2, 5 Williams v. Jones, 326 So. 2d 425 (Fla. 1975)... 8 FLORIDA STATUTES AND RULES Art. V, 3, Fla. Const.... 3, 4 10 196.199, Fla. Stat...2, 3, 7, 8, 9 Fla. R. App. P. 9.030... 1, 4, 8 MISCELLANEOUS Philip J. Padovano, Florida Appellate Practice (2005 ed.)... 10 ii

PRELIMINARY STATEMENT This brief addresses both the Petition for Discretionary Review based on conflict of decisions and the Notice of Appeal from a decision declaring a statute invalid. Although Rule 9.030(a)(1)(A)(ii) suggests in footnote 2 that the normal appeal procedures of the Florida Rules of Appellate Procedures govern the appeal, section II.A.4. of this Court s Internal Operating Procedures mandates that both jurisdictional issues here presented be consolidated. Undersigned counsel has been advised by the Office of the Clerk of this Court that both issues are to be addressed in a single, ten-page jurisdictional brief. iii

STATEMENT OF THE CASE AND FACTS This is a declaratory action involving a challenge to the Santa Rosa County Property Appraiser s assessment of county ad valorem tax on Petitioners intangible leasehold interest in county-owned property. Petitioners are leaseholders of improvements to property at Navarre Beach in Santa Rosa County, Florida. The land on which Petitioners improvements are built was conveyed by the United States of America to Escambia County in 1947 under a 99 year lease with automatic renewals. Petitioners have the right to use or rent the improvements, encumber their interests, transfer their property rights, and realize any appreciation in value from sale or rental income. Ward v. Brown, 2005 WL 1412363, at *1 (Fla. 1st DCA June 17, 2005). They will never obtain title to the property but must insure, maintain, or rebuild improvements to the property and are responsible for the payment of any taxes. Id. & n.1. The issue before the First District was whether Petitioners -- although they would never obtain title to the property -- have sufficient rights and duties regarding the leased property to make them equitable owners subject to county ad valorem taxation. Id. at *1. This arrangement is specifically recognized by the Florida Legislature as one in which the lessees hold only an intangible interest in the property and are 1

specifically subject to state intangible taxes. 196.199(2)(b), Fla. Stat. In addition, section 196.199(7), Florida Statutes, provides that property that is leased over 100 years shall be deemed owned, yet the property at issue here is leased for 99 years. The First District nonetheless held Petitioners are equitable owners of the property and are subject to county ad valorem taxation. The court reasoned that the statute simply does not address 99-year leases, or other circumstances from which equitable ownership may be found. Id. at *2. Judge Benton authored a dissenting opinion, explaining in great detail how the majority s opinion is in stark contrast to many decades of decisions relating to a county s authority to tax. Id. at *2-*8. SUMMARY OF ARGUMENT The district court acknowledged that Petitioners can never be the owners of the leasehold improvements they are required to maintain and rebuild and held that this was not fatal to a finding of equitable ownership for ad valorem tax purposes. This express holding is directly in conflict with decisions from the Third District Court of Appeal which held that there can be no equitable ownership unless the lessee has the right to become the full owner of the property at the end of the lease. 2

Therefore, this Court has jurisdiction and should accept this case. This Court also has mandatory jurisdiction over this case because the First District s decision declared a statute invalid. While the First District acknowledged that Petitioners, as lessees, can never be owners of either the land or the improvements on their leaseholds, it nevertheless held that they should be deemed equitable owners of the property for ad valorem tax purposes. This ruling effectively nullifies section 196.199(7), Florida Statutes, thus holding invalid statutes specifically written to impose state intangible taxes on all the Santa Rosa Island lessees under the Escambia County lease, but not local ad valorem taxes. The First District s opinion essentially adopted the arguments of unconstitutionality raised by Respondents. A decision of a District Court declaring invalid a state statute gives rise to the jurisdiction of this Court. Art. V, 3(b)(1), Fla. Const. ARGUMENT I. THE COURT HAS DISCRETIONARY JURISDICTION TO REVIEW THIS CASE The First District s decision expressly and directly conflicts with decisions from the following decisions of the Third District on the same issue of law -- Robbins v. Mt. Sinai Medical Center, Inc., 748 So. 2d 349 (Fla. 3d DCA 1999) and Metropolitan Dade County v. Brothers of the Good Shepherd, Inc., 3

714 So. 2d 573 (Fla. 3d DCA 1998). This Court has jurisdiction to review the case pursuant to article V, section 3(b)(3), Florida Constitution and Rule 9.030(a)(2)(A)(iv) Florida Rules of Appellate Procedure. In Robbins, the Third District held that the Lessee -- under a lease substantially similar to Petitioners lease here - - was not the equitable owner of the property because:... Florida courts have only granted a lessee equitable ownership of leased property when the lessee retained an option to purchase the leased property for nominal value.... In the instant matter, Lessee did not hold an option to purchase the subject property at nominal value. On the contrary, Lessee could only purchase the properties at the end of their lease terms at their fair market value subject to Lessor s approval. Based on the foregoing authorities, Lessee does not qualify as an equitable owner of the properties. 748 So. 2d at 351 (emphasis in original). Similarly, in Metropolitan Dade County, the court held that there could be no equitable ownership where the lessee did not have an option to purchase the improvements and was required to surrender the property and improvements at the end of the term. The lessee could not be found to be the equitable owner as the lessee did not have virtually all of the benefits and burdens of ownership. Id. at 573. The court cited many Florida cases to support its holding that there can be no equitable ownership 4

when, as here, the lessee can never be the owner of the leased property. Id. at 573-74. In direct contrast, the First District here recognized that Petitioners have the right to use or rent the improvements, encumber their interests, transfer their property rights, and realize any appreciation in value from sale or rental income. They must insure and maintain the improvements and are responsible for the payment of any taxes. Ward, 2005 WL 1412363, at *1. The Court specifically rejected as germane to the issue of equitable ownership the obligation of Petitioners to maintain and rebuild the property and the fact that Petitioners could never own their improvements at the end of the lease. Id. The court instead held that the obligation of the lessee to surrender the premises at the end of the lease so that the lessee could never own the improvements was irrelevant to the determination of equitable ownership. The First District s decision holding that the lessee is the equitable owner of the government-owned leased premises when the lessee can never own the improvements is in express and direct conflict with the Third District s holdings in Robbins and Metropolitan that there can be no equitable ownership when the lessee cannot obtain title to the property at the end of the lease, because without that right the lessee is not the owner of virtually all of the burdens and benefits of the leased 5

property. This Court should accept jurisdiction to maintain uniformity in the decisions and to clarify its prior ruling in Leon County Educational Facilities Authority v. Hartsfield, 698 So. 2d 526 (Fla. 1997), expressly holding that there can be no equitable ownership unless the lessee has virtually all of the benefits of ownership. Id. at 530. II. THE DECISION UNDER REVIEW DECLARED A STATUTE INVALID, THUS VESTING MANDATORY JURISDICTION IN THIS COURT A. Respondents Raised the Constitutionality of the Statutes Imposing Taxes On The Santa Rosa Leases At trial, Respondents argued in their Answer that the statutes providing for intangible taxation of the leaseholds on government-owned Santa Rosa Island were unconstitutional. They also argued the point extensively during the final hearing at the trial level. In its final judgment, however, the trial court determined that it was not required to address the constitutional issues. Nevertheless, Respondents again challenged the constitutionality of the statutes in the First District. Petitioners filed a motion to strike those portions of the answer brief, which was denied. Respondents were thus successful in seeking a determination of the validity of those statutes which specifically provided that persons holding a lease (on governmental property) which is originally leased for [less than] 100 years..., exclusive of renewal options could 6

not be deemed to be an owner of the property (or the improvements) and thus could not be subject to local ad valorem taxes, but would be subject to the state intangible tax. The decision under review therefore inherently invalidates sections 196.199(2)(b) and 196.199(7), Florida Statutes, in their application to Petitioners and all others similarly situated. From 1947 to 1962, the property on Santa Rosa Island was immune from taxation. The property had been conveyed from the United States to Escambia County for development for residential and commercial purposes. The conveyance to Escambia County specifically prohibited the sale of the property and permitted only leases. In 1962, Florida began a limited experiment in waiving its sovereign immunity with respect to private lessees of governmental property. The Santa Rosa Island leaseholds were excluded from this legislation. In 1971, however, the Legislature greatly expanded those government leaseholds on which it chose to waive its sovereign immunity and imposed taxes on the Santa Rosa Island leaseholds for the first time. The Santa Rosa leaseholds remained subject to ad valorem taxation at the local level from 1971 until 1980 when the Legislature decided to impose the state intangible tax on the leaseholds but to reassert sovereign immunity for local ad valorem taxes. Litigation ensued which upheld the 1980 act. Bell v. Bryan, 505 7

So. 2d 690 (1st DCA 1987); Bell v. Bryan, 519 So. 2d 1024 (1st DCA 1988). Local property appraisers abided by the statutes until the newly elected property appraiser in Santa Rosa County challenged the constitutionality of these statutes by imposing local ad valorem taxes on the leaseholds in his county, for the first time in 2001, which is at issue here. As pointed out in Judge Benton s dissent, in Williams v. Jones, 326 So. 2d 425, 436 (Fla. 1975), this Court acknowledged, the possibility that a charge in lieu of taxes was taken into consideration in establishing [the amount of the] rent before the 1971 tax was imposed. The Court recognized that an equitable adjustment of [the Santa Rosa Island lessees ] rental payments would be appropriate. The Legislature responded to this suggestion by enactment of Special Acts to provide just such relief, but its efforts were stymied. See Ward, 2005 WL 1412363 (Benton, J., dissenting) (discussing these legislative enactments). Ultimately, the Legislature resolved the inequity by amending section 196.199(7), in 1980, to remove the Santa Rosa Island lessees from the inequitable peril of ad valorem taxes on top of rents set to include a charge in lieu of taxes. It changed 99 years to 100 years exclusive of renewal options expressly to exclude the Santa Rosa Island leases which were then, as now, for 99 years with 99 year renewals. 8

Until the decision under review, this statute had been upheld and followed for twenty-one years following its approval by the First District in the Bell v. Bryan cases. Now, however, the Legislature s efforts to afford equitable relief to Santa Rosa Island leases have been stymied. The majority completely ignored (while the dissent discusses at length) the 1980 amendment to section 196.199(7) that was specifically directed to these leases - of which there are thousands. Contrary to the express language and the purpose of the statute, the First District determined that any lessee having a perpetually renewable lease is the owner of the leasehold, regardless of the initial term. Thus, under the court s holding, a one year lease with unlimited one-year renewals would create equitable ownership. It is unclear whether this holding extends to all aspects of ownership or is limited to only ad valorem taxation. Regardless, this result legally erroneous. This decision was not an affirmance of the reasoning and factual determinations of the trial court, but a de novo holding. The holding effectively invalidates the entire legislative determination as to all of the Santa Rosa Island leases, not just those before the court in this case. The record reflects that there are about 2000 such leases in Santa Rosa County and many more in Escambia County. 9

B. The Decision of the District Court Is Subject to the Appeal Jurisdiction of This Court It is not necessary that a determination by a district court expressly declare a statute constitutionally invalid. The word expressly, as used in article V, section (3)(b)(3) relating to this Court s discretionary jurisdiction is noticeably absent in section (3)(b)(1) relating to this Court s mandatory jurisdiction when a court declares a state statute invalid. Indeed, Judge Padovano, in his text Florida Appellate Practice, recognizes that this Court has jurisdiction to review by appeal a decision that inherently declares a state statute or constitutional provision invalid. Philip J. Padovano, Florida Appellate Practice, 3.4 (2005 ed.); see also Harrell s Candy Kitchen v. Sarasota-Manatee Airport Authority, 111 So. 2d 439 (Fla. 1959). CONCLUSION Based on the foregoing, this Court should accept jurisdiction in this case. Respectfully submitted, Donald H. Partington Joseph C. Mellichamp, III Florida Bar No. 105455 Florida Bar No. 133249 William H. Stafford, III, Esq. CARLTON FIELDS, P.A. Florida Bar No. 70394 P.O. Drawer 190 LARRY, BOND, STACKHOUSE Tallahassee, FL 32302-0190 CLARK, PARTINGTON & HART Telephone: (850) 224-1585 P.O. Box 13010 Facsimile: (850) 222-0398 Pensacola, FL 32591-3010 10

Telephone: (850) 434-9200 Benjamin K. Phipps Facsimile: (850) 432-7340 Florida Bar No. 63151 THE PHIPPS FIRM P.O. Box 1351 Tallahassee, FL 32302 Telephone: (850) 222-7000 Facsimile: (850) 681-3998 Attorneys for Petitioners, Lewis K. and Betty Y. Ward 11

CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the above was provided by U.S. Mail to J. Elliott Messer and Thomas M. Findley, Messer, Caparello & Self, P.A., Post Office Box 1876, Tallahassee, Florida 32302-1876; and Roy V. Andrews, Lindsay, Andrews & Leonard, Post Office Box 586, Milton, Florida 32572, on this day of October, 2005. Attorney CERTIFICATE OF COMPLIANCE I HEREBY FURTHER CERTIFY that the type size and style used throughout this brief is 12-point Courier New double-spaced, and that this brief fully complies with the requirements of Florida Rule of Appellate Procedure 9.210(a)(2). Attorney 12