Pohl Short News

Resulting Trust: The Law Will Protect Your Assets From Your Spouse’s Creditor

2009-09-03T13:54:00.000-07:00

Luxury Homes and Estates of Florida

In prior articles I have explained that assets owned by both husband and wife cannot be attached or sold to satisfy a creditor of only one spouse. Marital assets are protected in the State of Florida unless the creditor can show an obligation of both husband and wife.

Likewise, an asset solely owned by one spouse is not available to satisfy a creditor unless the same spouse is obligated to the creditor.

However, often when persons marry the husband or wife will give monies to their spouse to buy land or personal properties. If the spouse takes the title to the property in his own name, his judgment creditors may wrestle for control of the asset.

The creditor will argue that the new found property is owned by the debtor and available to satisfy the judgment.

However, in this circumstance the court recognizes that a resulting trust may be created by implication and deny the creditor a recovery.

The monies from the non-obligated spouse do not lose protection merely because an asset is purchased in trust. The fact that the debtor took the asset in his own name is conclusive. The court will determine where the monies came from to buy the asset (i.e., solely from the exempt spouse). Second, the court will examine the intent of the transaction. For example, if the wife gave the husband money to buy property and the husband purchased the property in his own name as a matter of convenience or as a representative of his spouse or family, the property will remain exempt from creditors.

A creditor enjoys the right to collect from assets owned by a debtor. In a resulting trust the asset was never owned by the debtor. Therefore, the asset is immune from collection activities.

The burden of establishing a resulting trust lies squarely on the shoulders of the spouse seeking to avoid collection.

The services of an attorney may be sought to safeguard the assets. However, when unsophisticated individuals engage in transactions the claims of a creditor may arise and ultimately require a trial to establish the parties’ intent respecting ownership of the asset.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

Shareholders Have Rights to Demand Corporate Financial Information

2009-09-02T13:52:00.000-07:00

Luxury Homes and Estates of Florida

Minority shareholders of corporations are not powerless in their efforts to monitor the financial activities of the majority shareholders or the officers of the corporation. On the contrary, complete and full disclosure of financial activities of the corporation is mandated by the Florida Statutes. Any shareholder can demand pursuant to Florida Statute 607.1602(1) and (2) an inspection of records. The demand must be made in writing and sent to the corporation’s principal place of business. Once the demand is received the corporation must allow the inspection of the corporation’s financial records during normal business hours.

The type of information that must be provided are as follows:
(a) records of all minutes of any meeting of shareholders and board of directors;
(b) accounting records of the corporation, including salary and bonus payments made to personnel and all records of vendors paid by the corporation;
(c) complete disclosure of all lawsuits pending or previously filed against the corporation;
(d) complete reporting of advances or expenses paid to any director, officer or employee;
(e) disclosure of the corporation’s issuance of additional shares or promises to pay shares to any party; and
(f) copies of financial statements that are required to be delivered to the shareholders each year

Pursuant to the Florida Statutes, the shareholder may appoint an attorney or agent to inspect the records for him. Not only is inspection required but copying of the documents is also permitted at the request of the shareholder or his agent. The corporation may impose a reasonable charge for copy costs.
If the corporation refuses to comply with the request for inspection a lawsuit may be filed and the court will order the inspection pursuant to §607.1604. The court, in ordering the inspection, may require the corporation to pay reasonable attorneys fees and costs to enforce the shareholder rights.

The mandatory disclosure is a powerful tool to be utilized by a shareholder because it keeps the majority owners or officers of the corporation from freezing out a minority shareholder and engaging in inequitable conduct.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

Settlement Offers May Not Be Introduced At Trial As Evidence

2009-09-01T13:48:00.000-07:00

Luxury Homes and Estates of Florida

The Florida Legislature and the Florida Evidence Code promote settlement of business disputes. In an effort to foster the settlement process the Florida Evidence Code specifically provides that settlement offers are inadmissible is subsequent litigation.₁

Despite this rule of evidence, I am routinely confronted with an opposing party’s effort to introduce settlement letters written between the parties discussing facts of a business dispute. The letter may have been written to posture or as a mea culpa in order to head off conflict. In either event, the letters sent prior to the commencement of litigation are privileged against disclosure in the courtroom. Rease v. Anheuser-Busch, 644 So.2d 1383, 1388 (Fla. 1st DCA 1994); Frank v. Ruwitch, 318 So.2d 188, 189 (Fla. 3rd DCA 1975). These rules are designed to encourage honest communication without fear of your own words being used against you.

Many attorneys argue that the language in a letter relating to the settlement offer should be stricken but admissions of fact should be introduced. This position is wrong. A letter containing a settlement offer is inadmissible in its entirety even though matters are discussed beyond the scope of the dispute claim. By way of example, in Benoit v. District, 463 So.2d 1260 (Fla.5th DCA 1985), the court reversed a judgment imposing liability on Benoit for a defective roof because a settlement letter was introduced as evidence. The roof had been constructed in 1977 pursuant to Benoit’s specifications. The owner of the building maintained that Benoit failed to warn users of its system not to combine its moisture barrier materials with asbestos because the asbestos would crack, thereby causing the roof to leak. Critical in the case was whether Benoit knew of the asbestos problem in 1977. As part of its case in chief, the owner placed into evidence a letter it received from Benoit dated February 25, 1982 which stated:

This letter is to confirm my phone conversation of this date with you…I pointed out the fact that my company does not recommend the use of asbestos felts on our tapered foam system and have published a statement to that effect. I am enclosing our application instructions dated 1976, wherein we state that asbestos felts are not acceptable over our system in that an organic felt or fiberglass membrane should be used.

The trial judge had simply blocked out the part of the letter pertaining to the settlement offer and admitted the remainder of the letter. The letter was exceedingly damaging to Benoit’s case because it established knowledge of a problem with asbestos before year 1977.

The Appellate Court overturned the jury verdict entered in favor of the owner. The Appellate Court stated that it was compelled to do so because the settlement letter should not have been admitted in evidence. The letter was written as an offer to settle and the court followed the rule and precluded the introduction of the letter as evidence.

It is recommended that before preparing any letter to compromise or settle a claim that the advice of an attorney should be sought.

₁Florida Statute 90.408: “Evidence of an offer to compromise a claim which was disputed as to validity or amount, as well as any relevant conduct or statements made in negotiations concerning a compromise, is inadmissible to prove liability or absence of liability for the claim or its value.”

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

CAN YOU AVOID A PERSONAL GUARANTY BY SIGNING AS AN OFFICER?

2008-03-01T12:49:00.000-08:00

Luxury Homes and Estates of Florida

In my practice I am often given the task of collecting delinquent accounts. One of my first priorities is to review any credit application and personal guarantees signed by the debtor corporation and its officers. A common trick is that an officer signs the credit application on behalf of the corporation and then attempts to avoid liability under the personal guaranty by signing as a corporate representative.

In other words, a clear cut personal guaranty will be executed as follows “John Smith-President of XYZ”.

Such a maneuver by a creative debtor is not uncommon. However, the courts do not allow a corporate officer to escape personal liability merely by affixing his title to the signature block on the personal guaranty.

The courts review the document to determine whether or not the guaranty is unambiguous. If the guaranty states that the signer is “personally” liable or guarantees the debt no further interpretation of the document is permitted and the document is a guaranty as a matter of law.

Simply signing the signature block and inserting an officer’s title cannot defeat the purpose of the guaranty. See Central National Bank of Miami v. Muskat Corp. of America, Inc., 430 So.2d 957 (Fla. 3rd DCA 1983); Nelson v. Ameriquest Technologies, Inc., 739 So.2d 161 (Fla. 3rd DCA 1999); Sabin v. Lowe’s of Florida, Inc., 404 So.2d 772 (Fla 5th DCA 1981).

The courts enforce guarantees. To hold otherwise would merely have a corporation guaranteeing its own debt which renders the guaranty a nullity. The law is not a fool!

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

ELECTRONIC SIGNATURES HAVE THE SAME FORCE AND EFFECT AS WRITTEN SIGNATURES

2008-01-01T06:28:00.000-08:00

Luxury Homes and Estates of Florida

In a paperless environment parties often execute contracts and submit governmental paperwork via the internet and other electronic media. Original signatures gave way to faxed signatures and now electronic signatures are an accepted method of execution. The “Government Paperwork Elimination Act” (“GPEA”) was signed into law on October 21, 1998. The GPEA requires federal agencies, by 2003, to allow individuals or entities that deal with the agencies the option to submit information or transact with the agency electronically. The GPEA specifically states that electronic records and their related electronic signatures are not to be denied legal effect, validity or enforceability merely because they are in electronic form. Florida followed suit. The Florida Electronic Signature Act of 1996 and Uniform Electronic Transfer Act (codified in Chapter 668, Florida Statutes) (collectively “Acts”) provide that unless otherwise provided by law, an electronic signature may be used to sign a writing and shall have the same force and effect as a written signature. The Acts further provide, similar to GPEA, that a record, signature, or a contract may not be denied legal effect or enforceability solely because the record, signature or contract is in electronic form. Note, however, that all parties involved in the transaction must agree to conduct the transaction by electronic means in order for the Acts to apply.

Florida government agencies are empowered to determine whether and to what extent they will send and accept electronic records and signatures. See Florida Statute 668.50(18)(a). Further, both the Florida Statutes and the Federal Statutes provide that the type of electronic signature required and the manner and format in which electronic records and signatures must be transmitted are to be determined on an agency-by-agency basis.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

CORPORATIONS: NOT A LICENSE TO STEAL

2008-01-01T06:24:00.000-08:00

Luxury Homes and Estates of Florida

Florida, as well as other states created by statute, corporate entities to shield owners from personal liability in order to promote trade and commerce. Ordinarily a shareholder will not be responsible for the debts of a corporation absent a guaranty to the corporate creditor. However, in certain circumstances the courts will allow a creditor to pierce the corporate veil and recover against individual shareholders.

The Florida Supreme Court established that in order to pierce the corporate veil there must be a showing of “improper conduct”. *Dania Jai-Alai Palace, Inc. v. Sykes, 450 So.2d, 1114, 1121 (Fla. 1984). It appears from Dania that the required showing is a two-step process: (1) alter ego, together with (2) some form of misconduct, which may be shown in a number of ways, including depletion of corporate assets for personal shareholder benefits or diversion of corporate property into the hands of shareholders.

The facts in Advertects involved shareholders who habitually operated numerous unsuccessful corporations; were the sole shareholders; and handled business affairs poorly. There the court refused to pierce the corporate veil because there was no showing that the shareholders improperly converted any of the corporate property to their own use or abused their positions. Thus, being a poor businessman and having a failed business does not subject one to personal liability. However, the facts in Walton v. Tomax Corp., 632 So.2d 178, 180 (Fla. 5th DCA 1994) achieved a different result. In that case, a fellow named Maguire was the manager of Tomax Corp. and his wife was the sole shareholder. A customer paid Tomax Corp. $20,000 as a deposit to construct a home. Maguire accepted deposit, never contacted the Plaintiff again, and a few months later filed for bankruptcy. The court found that the corporation could not pay its debts when the deposit was paid and that Maguire caused his company to make inappropriate distributions to himself and to his wife at the expense of corporate creditors. The court allowed an action to pierce the corporate veil and stated:

If a corporate officer who is in control of a corporation personally utilizes its assets for payment of personal obligations and generally treats the corporation as a sham, he can be liable on an alter ego theory.

The lessons in the cases are obvious. Establishing a corporation is not a license to steal. The corporate assets must be utilized for legitimate corporate purposes and not consumed or depleted for a shareholder’s personal gain.

*The Dania court relied, in part, on Advertects, Inc. v. Sawyer Industries, Inc.: “[Advertects] We rejected the proposition that a rule could be issued against individual stockholders to show cause why they should not be personally responsible for corporate debts absent a preliminary showing that the corporation is in actuality the alter ego of the stockholders and that it was organized or after organization was employed by the stockholders for fraudulent or misleading purposes, or in some fashion that the corporate property was converted assets depleted for the personal benefit of the individual stockholders, or that the corporate structure was not bona fidely established or, in general, the property belonging to the corporation can be traced into the hands of the stockholders.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

USURY: THE PITFALLS OF CHARGING TOO MUCH INTEREST

2007-04-01T06:35:00.000-07:00

Luxury Homes and Estates of Florida, April 2007

In the recent heated real estate environment, buyers went to great lengths to purchase property with the intent to flip same and make incredible profits. Often, the speculators were over extended and needed additional funds from friends and family members. Loans were secured with promises of quick and exorbitant returns.

Many times promissory notes were prepared by the individual without the aid of an attorney due to time constraints or merely to save money. A recent spat of these homespun promissory notes is now hitting the court system and with disastrous results to the lender.

Private lenders must be aware of Florida Statutes governing usury. Pursuant to Florida Statute 687.03, it is unlawful for a person to collect or attempt to collect interest on any obligation at a higher rate of interest than the equivalent of 18% per annum simple interest.

Pursuant to Florida Statute 687.04, any person who charged and collected usurious interest shall forfeit double the amount of interest paid.

In other words, not only are you not to collect usurious interest pursuant to the statute, as a penalty you will be required to pay double the amount of interest that you have received.

In the event that the lender seeks to enforce a promissory note that is usurious a defense or counterclaim may be received based on usury. The only amount of money that may be recovered is the actual principal sum loaned. *Further, the court may require that the principal be reduced by all interest paid pursuant to the statute.

*If the interest that you have charged exceeds 25% of the loan value you may be subject to enhanced penalties under Florida law.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

THE NAKED PROMISE TO BUY A HOME IS ENFORCEABLE

2007-01-01T06:33:00.000-08:00

Luxury Homes and Estates of Florida,

There appears to be a misconception that a deposit must be made by a buyer of real estate to seal the deal. The Standard Contract for Sale and Purchase often requires a deposit be paid, however, the failure of the buyer to deliver the deposit does not render the contract unenforceable.

On the contrary, in the case of Peterson Homes, Inc. v. Johnson, 691 So.2d 563 (Fla. 5th DCA 1997) the court ruled that the promise to purchase property creates a binding contract even though the purchaser has paid no earnest money deposit.

In Peterson Homes, the buyer signed a contract to purchase a home for $1.1 million. The buyer was required to pay a $600,000 deposit into escrow. Peterson Homes accepted the contract, however, the buyer neither paid the deposit nor attended the closing.

Peterson Homes filed suit and claimed breach of contract.

The trial court denied the claim on the grounds that the contract lacked consideration because the buyer failed to deliver the deposit.

Evidently the trial court reasoned that a buyer can sign a contract and elect not to deliver the deposit which effectively voids same.

The 5th DCA made short shrift of this argument. No part of the contract required that the earnest money deposited be paid at the time the agreement was signed. Therefore, the contract was not contingent upon the delivery of the deposit.

A signature on a contract is all that is required to have a legal and binding promise to purchase.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

MARKETABLE RECORD TITLE ACT: THE CLOCK MAY BE TICKING AGAINST HOMEOWNERS ASSOCIATIONS

2006-12-01T06:30:00.000-08:00

Luxury Homes and Estates of Florida,

Real property in Florida is subject to the Marketable Record Title Act*. This Act is designed to remove encumbrances against property in order to promote free and clear alienability of property. The Act generally applies to remove clouds from title which have not been re-recorded for thirty years.

In other words, if a document was recorded effecting the property over thirty years ago the Act may remove the claim from your title completely.

A core concern of the Marketable Record Title Act is that there be no hidden interest in property that could later be asserted against the property owner. See Blanton v. City of Pinellas Park, 887 So.2d 1224, 1232 (Fla. 2004).

The Marketable Record Title Act can extinguish homeowners’ covenants and restrictions if same have been abandoned and not re-recorded in the thirty year timeframe. The failure to preserve by re-recording can be fatal to homeowners associations covenants and restrictions. See Berger v. Riverwind Parking, LLP, 842 So.2d 918, 922 (Fla. 5th DCA 2000).

Homeowners associations are permitted to preserve their covenants and restrictions by recording a statement of the homeowners association’s claim pursuant to 712.06 of the Florida Statutes. H&F Land, Inc. Panama City-Bay County Airport and Industrial District 736 So.2d 1167 (Fla. 1999). The legislature adopted the statutory notice mechanism to preserve covenants and restrictions in 1997. Before that date homeowners associations routinely filed amendments, restatements and consolidations of the covenants and restrictions all designed to give notice in the chain of title in order to safeguard the restrictions from extinction.

Accordingly, each homeowners association must record it or lose it.

*Chapter 712 of the Florida Statutes.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

LIS PENDENS ARE NOT NECESSARILY FREE

2006-11-01T06:29:00.000-08:00

Luxury Homes and Estates in Florida, November 2006

A lis pendens is a recorded document describing real property that provides notice to all the world of a dispute. In a purchase and sale contract a buyer will often retain the right to sue for specific performance. In the event a contract turns sour the buyer may file a lawsuit to force the sale of the property. A lis pendens is recorded in order to prevent the seller from transferring the property to a third party and thereby avoiding the jilted buyer’s claim.

Fairness requires that a bond be posted to protect the interests of a seller. The lis pendens places a red-flag in the chain of title and limits the marketability of the property. The practical effects of the lis pendens is that the owner oftentimes cannot sell or mortgage the property. If the proponent of a lis pendens turns out to not have had a valid claim the adverse economic consequences to the seller are obvious.

The Supreme Court of Florida has ruled that in circumstances where a lis pendens is recorded against property that is not related to a recorded interest (i.e., a deed or lien), the trial court has discretion to require a bond to serve as protection against damages arising from an unjustified lis pendens*. Although the court retains discretion a bond is likely wherein the facts are thin. The court will schedule an evidentiary hearing to learn all the potential damages. The type of damages that the bond should protect against include, but are not limited to, the seller’s attorney’s fees, mortgage carry expense, property taxes, insurance, and erosion in sale price.

A buyer seeking to tie up the property with a lis pendens may be asked to put his money where his mouth is.

Simple fairness requires that if you deprive a seller of the right to sell the property you should compensate the seller in the event the buyer ultimately loses the case.

Before the Supreme Court’s announcement some districts in Florida thought it mandatory to post a bond. In other jurisdictions the courts deemed the trial court to have discretion but also required that the seller prove irreparable harm.

The Supreme Court removes any doubt: (1) the court retains discretion to require a bond; and (2) the seller need not show irreparable harm but merely demonstrate damages will likely flow from the cloud on title.

*The Supreme Court case is Medical Facilities Development, Inc. v. Little Arch Creek Properties, Inc., 675 So.2d 915 (Fla. 1996).

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

WHAT HAPPENS IF THE COST TO BUILD A HOME EXCEEDS THE CONTRACT PRICE?

2006-10-01T07:22:00.000-07:00

Luxury Homes and Estates in Florida, October 2006

There has been an explosion of home building in Central Florida. Builders often execute contracts for homes that will not be built and closed until over a year passes. The contract price is frozen, however, a cost spiral fueled by oil price increases and competition for raw materials with foreign countries and natural disasters have impacted builders.

In some cases the cost to actually construct the home exceeds the sale price.

Many builders saddled with the additional costs demand a price increase or threaten to walk off the job. The buyer should not panic.

Even under extreme situations where materials are not only more expensive but actually unavailable, Florida courts have held such not to be grounds for a price increase or to excuse non-performance.

There is little Florida caselaw dealing with the principal of commercial impracticability. However, those cases which address the issue hold that unexpected difficulties or expenses will not excuse a party to a contract from performance. North American Van Lines v. Collyer, 616 So.2d 177 (Fla. 5th DCA 1993); and City of Tampa v. City of Port Tampa, 127 So.2d 119 (Fla. 2nd DCA 1961). In City of Tampa, the court strict measure:

Inconvenience or the cost of compliance, though they might make compliance a hardship, cannot excuse a party from the performance of an absolute and unqualified undertaking to do a thing that is possible and lawful. Parties sui juris bind themselves by their lawful contracts, and the courts cannot alter them because they work a hardship. The rights of the parties must be measured by the contract which they themselves made. A contract is not invalid, nor is the obligor therein in any manner discharged from its binding effect, because it turns out to be difficult or burdensome to perform. It has been said that difficulties, even if unforeseen and however great, are no excuse, and that the fact that a contract has become more burdensome in its operation than was anticipated is not ground for its recision.

Florida’s legal position as to commercial impracticability, as stated in the above-cited language, reflects a traditional notion that performance is excused only when actually impossible. See also Valencia Center, Inc. v. Public Supermarkets, Inc., 464 So.2d 1267, 1268 (Fla. 3rd DCA 1985). (Although impossibility of performance can include extreme impracticability of performance, the courts are reluctant to excuse performance that is not impossible, but merely inconvenient, profitless, and expensive.)

In the final analysis, a builder will have little success arguing for a price increase merely because there is no profit left in the house or because he must come out of pocket to complete construction.

Visit our website for more information on this subject.

Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

Get Your Share of Surplus Funds Remaining After a Foreclosure Sale

2006-08-01T07:23:00.000-07:00

Luxury Homes and Estates in Florida, August 2006

Foreclosure actions are routinely filed by banks against homes if the borrower defaults in payment. Homeowners can also be subject to foreclosure actions for failure to pay homeowner’s association dues, assessments or mechanics liens.

As a result of the foreclosure process a sale is scheduled wherein the property is auctioned by the Clerk of the Court. If the bidding is zealous the property may sell for an amount far exceeding the judgment. The extra monies are retained by the court and designated as “surplus funds”.

A new Florida statute has been enacted dealing with surplus funds. The new law establishes a 60 day deadline to make a claim after the foreclosure sale is completed.

In the event that you are holding a subordinate interest in property and the bidding exceeds the value of the superior lien, mortgage or interest, you must make a claim within 60 days of the sale otherwise your rights in the surplus funds can be extinguished.

Accordingly, if you are named as a party in a foreclosure action you should carefully monitor the sale and if surplus funds are generated you must act quickly to make a claim.

Visit our website for more information on this subject.

Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

Lease Option/Renewal Deadlines Are Not Written In Stone

2006-01-11T07:41:00.000-08:00

Luxury Homes and Estates in Florida

If you miss a lease renewal deadline consult an attorney.

Leases often grant the tenant the right to renew the lease for an additional term. However, tenants routinely forget to give the appropriate notice. Once the error has been discovered the tenant provides a delinquent notice.

The landlord may terminate the lease in order to sell the property or re-let the premises and collect higher rent. The tenant can suffer extreme hardship due to loss of business location and loss of investment from build out of the premises. The courts can and do intervene on behalf of tenants to reinstate and mandate the renewal of a lease for an additional term. The courts recognize that it may be inequitable for a landlord to seize upon a technical breach to deny a tenant valuable property rights. The court may reinstate and renew the lease if the following factors are presented:

1. the delay in giving notice of renewal is slight;
2. the delay did not prejudice the landlord; and
3. the failure to renew the lease would cause the tenant extreme hardship.

A myriad of other factors are considered by the court and are deemed persuasive including whether or not the landlord allowed the tenant to make improvements and additional investment in the premises. The tenant will argue that he acted in reliance upon the renewed lease in making substantial improvements. The courts deem it unfair for a landlord to allow the tenant to make improvements only to snatch away the property.

The courts are also anxious to hear whether or not the landlord continued to have an open dialogue with the tenant and never objected to the tardy notice.

The tenant bears the burden to demonstrate that his failure to renew the lease was a product of a mistake, accident or other special circumstances.

In short, if you missed a deadline to renew your lease all may not be lost. A court of equity can intervene to renew the lease.

*See Dungan v. Haige, 54 So.2d 201 (Fla. 1951); Ledford v. Skinner, 328 So.2d 219 (Fla. 1st DCA 1976); Friendship Park Property Corporation v. Shaw, 505 So.2d 456 (Fla. 1st DCA 1987); and Thrifty Dutchman, Inc. v. Florida Supermarkets, Inc., 541 So.2d 634 (Fla. 3rd DCA 1989).

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

Beware of an Unconditional and Continuing Guaranty

2006-01-09T07:43:00.000-08:00

Luxury Homes and Estates in Florida

A standard business loan often requires an owner to execute a guaranty. Before signing a guaranty legal advice should be obtained regarding the ultimate financial exposure. Lenders often insert continuing and unconditional guaranty language. This type of guaranty renders a guarantor liable for all past, present and future obligations of the business. The exposure is almost unlimited. The business may incur a mountain of debt and in the event of default the guarantor is ultimately liable.

A dangerous aspect of executing a continuing guaranty is that the guarantor need not be contacted before new debt is obtained. A business may incur debt to the detriment of the guarantor without his or her knowledge.

A continuing guaranty remains effective until revoked. The guaranty is not limited to the life of the loan obtained contemporaneously with the guaranty and will not expire simply by a lapse of time.

Furthermore, even though the loan is paid in full the guarantor is not relieved of liability for new debt acquired by the business years after the original loan was paid.

The continuing and unconditional guaranty also applies to vendor and supplier accounts. Guarantees are routinely required in credit applications submitted by suppliers. If a business fails, closes its doors and files for bankruptcy the guarantor remains liable on all debt. Therefore, an individual should avoid signing an unconditional and continuing guaranty if he or she does not control the business debt or business accounts.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

“Sexual Harassment – How To Avoid Litigation.”

2006-01-07T07:52:00.000-08:00

Luxury Homes and Estates in Florida

There has been an explosion of employee lawsuits concerning sexual harassment. If you want to improve your chances of defending such a case you must be proactive.

First, there is no liability for circumstances of which you have no knowledge. The employee must provide you notice of the harassment. Once you receive notice of the claim, either oral or written, you must respond immediately. You should create a notebook or file to document every phase of the process. Please call upon the alleged victim to fully explain all the reasons, facts and incidents which that person deems harassment. Please understand that your mission should be to write an exhaustive statement.

Recently, I was involved in the initial meeting scheduled after receipt of a sexual harassment claim. I hired a stenographer, had the alleged victim sworn, interviewed the victim, and transcribed the entire meeting.

The reasons for doing so were to two fold: (1) I wanted a complete statement, under oath, from the party alleging harassment; and (2) I wanted to make sure that the story did not change or was embellished after the employee visited an attorney.

Second, request all documents, e-mails, notes, letters, cards or diaries saved by the victim pertaining to the harassment. You may be surprised to learn that your employees keep diaries. Diaries are often a tool recommended by attorneys cultivating potential harassment claims. By asking the question you can get an affirmative “no” and therefore avoid the specter that a diary will be subsequently fabricated.

Please write a letter to the alleged victim asking for all documentation or confirming that no documents exist.

Third, react openly, honestly and with sensitivity to the complaint. Often-times innocuous statements or comments are perceived as harassment. Validating the person’s concern and preventing uncomfortable future statements can avoid claims.

Fourth, conduct an investigation and question the alleged perpetrator. Again, exhaust the alleged perpetrator’s response to each of the alleged incidences of sexual harassment. Let the perpetrator know that a claim has been presented.

Instruct the perpetrator that there can be no retaliation for the claim. Also instruct the perpetrator to cease all offensive activities and unnecessary communication with the alleged victim.

Solicit the names of other employees, vendors or customers who have witnessed the alleged harassment. Interview the witnesses and document their memories with regard to the alleged events.

Fifth, after completing your investigation the management of the company must weigh the truth of the allegations. Write down limitations and controls designed to curtail the offensive behavior of the alleged perpetrator. Next, let the alleged victim know of the actions that you have taken.

The victim should be told in writing to contact you in the event further harassment does occur. Any future reports of harassment must likewise be investigated.

The management team must determine whether or not the alleged harassment is real and/or whether modifications in behavior can be achieved to avoid future harassment in the workplace. Each case is unique and must be decided in a rational way.

Management cannot afford to ignore reported harassment. If harassment continues after it has been reported and management has done nothing to ameliorate the situation the employee’s claims are ripe for litigation.

Employers should have written policies concerning sexual harassment. The policy should provide clear reporting instructions to any employee who feels that they have been a victim. An employee must be able to report to someone other than their immediate supervisor because often-times harassment occurs to subordinate employees.

In conclusion, it is suggested that each employer exhaust the victim of all facts supporting the claim. The company must investigate the complaint including, but not limited to, confronting the perpetrator. The company must take corrective action in order to avoid future incidents of sexual harassment. The company must monitor the situation to determine that its actions have been successful.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

“Covenants Not to Compete.”

2006-01-05T08:17:00.000-08:00

Luxury Homes and Estates in Florida

An employer with a business has much to lose if a dissident employee sets up a competing company. The employer could lose valuable trade secrets, confidential business information, or customer lists. In reaction to the threat employers went too far and required menial or low level employees to execute a covenant not to compete restricting their employment opportunities for a specified time and in a defined geographic area. The employee saddled with such a restrictive agreement could not find alternative employment.

The legislature attempted to level the playing field. Employers are entitled to enforce covenants not to compete in order to protect legitimate business interests. However, the covenant not to compete must be narrowly tailored to only protect legitimate business interests. 542.335 of the Florida Statutes provides that a non-compete can be enforced as long as: (1) an agreement is in writing; and (2) the employer is attempting to protect: (a) a trade secret; (b) valuable confidential business information; (c) substantial relationships with customers, patients or clients; or (d) extraordinary or specialized training invested in the employee.

Once the employer proves that it is attempting to protect a legitimate business interest the burden switches to the employee to claim that the restriction is overly broad or not reasonably tailored to protect the employers business.

An employer can seek to enjoin the employee from working in a competing company or starting his own company. Attorney’s fees may also be awarded to the prevailing party. The statute is designed to stop “unfair” competition, not competition per se. The balance undertaken by the court is to protect businesses but at the same time not unreasonably interfere with an individual’s right to work.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

“Homeowner’s Associations May Prohibit Parking Cars In The Street”

2006-01-03T08:22:00.000-08:00

Luxury Homes and Estates in Florida

Recently I was asked to research whether or not a homeowner’s association could prevent its members from using the street in front of their houses as a parking lot. Several homeowners in the subdivision routinely parked in the roadway which presented an obstacle to traffic and otherwise decreased the aesthetics of the neighborhood.

I researched Florida case law and found no controlling case. Accordingly, I expanded the scope of my research to foreign jurisdictions. Courts in other jurisdictions have upheld an association’s regulation over roadways and have entered injunctions against homeowner’s to prevent parking in the street. Specifically, the case of Verna v. The Links at Valley Brook Neighborhood Association, Inc. is a case prohibiting street parking. That case arose out of New Jersey and was decided in January of 2004.

In that case, a homeowner parked his work van in his driveway. The association’s restrictions prohibited parking of commercial vehicles at the homeowner’s property. Once the homeowner’s association delivered a letter complaining of the violation, the homeowner simply began parking his commercial van in the street.

The case went to court and the homeowner argued that the municipality controlled the streets: not the association. The court disagreed.

The court found that the association’s parking regulations promoted a neighborhood scheme which was created by the deed restrictions. Furthermore, the homeowner as a matter of contract agreed to additional regulations restricting parking.

The second case in support of the association’s right to restrict parking is Maryland Estates Homeowner’s Association v. Karen Puckett and Chris Schallert. The case essentially held that a homeowner must abide by all restrictions including restrictions against parking in the street. The homeowner cannot pick and choose which rules he will obey.

Foreign case law supports an association’s efforts to restrict street parking. Florida courts will likely prohibit parking in the street provided the restriction is found in the covenants and restrictions.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

“When Dealing With A Bank You Had Better Get It In Writing”

2006-01-01T12:39:00.000-08:00

Luxury Homes and Estates in Florida

Bank officers routinely meet with borrowers to talk about troubled loans. The banker and the borrower oftentimes leave the same meeting with divergent views regarding the parties’ obligation and agreements. The bank’s subsequent attempt to enforce its loan documents may invite retaliatory lawsuits.

In the 1980’s there was a plethora of litigation against banks claiming unfair collection practices. Borrowers would often claim that the bank made promises to extend credit or change the terms of a loan but would break the promise.

The lawsuits added to the costs of commercial lending because it created uncertainty with regard to the liability of participating banks. Accordingly, the Florida legislature engineered Statute 687.0304. This statute bars anyone from filing a case relying upon an alleged oral credit agreement.

In order to have an enforceable agreement against a bank the agreement must be (1) in writing; (2) express consideration; (3) set forth relevant terms and conditions; and (4) must be signed by both the bank and the borrower.*

Therefore, if you have negotiated with a bank manager that the bank will not foreclose, call the loan in default or seek default interest, attorneys fees or costs, the agreement is not binding unless an agreement is written and signed.

The statute has been tested in appellate courts and has survived judicial scrutiny.

In the final analysis, unless there is a written document there is no agreement with a bank.

*See 687.0304(2)

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

“Beware of Pool Contract Arbitration”

2005-03-09T08:23:00.000-08:00

Luxury Homes and Estates in Florida

There has been a proliferation of protective strategies employed by various industries in order to safeguard their members. One device has been to adopt an arbitration provision which requires the unwitting customer who signs a contract to participate in binding arbitration with a panel composed of other like-minded industry representatives. For example, used car salesmen, stock brokers and pool contractors have formed their own legal panels to review cases in a binding arbitration arena.

It is true that having arbitrators familiar with the industry can promote efficiencies. However, the appearance of impropriety is also presented.

I recently learned of a pool dispute concerning a local pool contractor. The arbitration clause in the contract required that a panel of three arbitrators be selected from the Florida Swimming Pool Association. The pool of potential arbitrators were composed solely of other local pool contractors.

The facts of the case were quite simple. A pool contract had been signed on November 14, 2003. It was contemplate the pool would be constructed well within a year as the homeowner would be moving into the property in November of 2004. However, a year later the pool was unfinished and the homeowner moved into the residence. In March of 2005(i.e., a full 16 months later), the pool had not been completed. The diamond brite pool surface coating, pool lights, pool filter, pool pumps, child safety fence and heater had not been installed. The owner made continuous demands of the pool contractor to finish its work. However, months went by with no work being performed and the pool contractor simply ignored all phone calls.

The owner had no choice but to hire a substitute pool contractor to finish the work at a substantially higher price.

At the arbitration, the pool contractor conceded that it never installed diamond brite coating or the pool equipment. However, the pool contractor argued that the hurricanes experienced in August and September of 2004 excused its performance.

Moreover, the pool contractor argued that the contractor did not provide for a completion date. In response, the owner argued that the contract certainly assumed a reasonable time for performance and after a year and a half the pool was not completed and the pool contractor abandoned the job.

The panel (composed of three area pool contractors) sided with the pool contractor and awarded the contractor money for work never performed and also ruled that once the contractor received full payment he had no liability for his workmanship or for warranties.

In essence the contractor never performed his contract yet received full payment. Furthermore, the pool contractor escaped any liability for faulty work.

There are two lessons to be learned from this case. First, never sign a contract for pool construction that does not have a date for completion. Second, strike any self serving arbitration provisions especially where the panel will be composed solely of other pool contractors.

As a footnote, the case is on appeal.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

“Construction Defects: A Homeowner Cannot File Suit Until Complying With Notice Under 558 Of The Florida Statutes.”

2005-03-07T12:41:00.000-08:00

Luxury Homes and Estates in Florida

The housing market has boomed in recent years in Central Florida. New home construction has strained the capacity of local builders, laborers and material suppliers. Litigation concerning faulty design or construction methods respecting homes is likewise on the rise.

To combat the marked increase in court filings, the legislature enacted Chapter 558 as an alternative to resolve construction disputes. Pursuant to the law a dissatisfied homeowner must supply his contractor, design professional, subcontractor or supplier notice of a claim listing all construction defects. The notice must include language as set forth in Section 558.005(2) of the Florida Statutes. The notice must also be delivered by certified mail. Upon receipt of the notice of defects a contractor has thirty (30) days to inspect the property and assess each of the alleged construction defects.

Within forty-five (45) days a contractor must provide a written response. In the response the contractor must address each of the alleged defects by:

(a) Offering to fix problem at no cost to the claimant;

(b) Offering to make a monetary payment to settle the disputed item;
(c) Disputing the claim and stating that it will not fix the problem; or
(d) Deferring to the contractor’s insurance company to determine a monetary offer which the homeowner may subsequently accept or reject.

If the contractor does not respond to the notice the homeowner is free to initiate litigation.

The statutes will not allow any lawsuit or arbitration to go forward without compliance with the notice provisions.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

“Statute of Limitations for Building Problems”

2005-03-06T08:24:00.000-08:00

Luxury Homes and Estates in Florida

The Florida Legislature has enacted statutes which limit the time that a party may bring a lawsuit to recover damages related to construction. Specifically, 95.11(c) applies to any action founded on the design, planning, or construction of an improvement to real property. The statute requires that any claim for defective construction must be initiated within four (4) years of the date an owner takes actual possession, is issued a certificate of occupancy or the date of the completion of a contract, whichever date last occurs.

However, the statute goes on to state that if there is a “latent defect” the time runs from the date the defect is discovered or should have been discovered.*

Thus, if a problem with the construction of a home or building is discovered four (4) years after the owner takes possession a lawsuit is barred unless the defect can be described as “latent”.

A latent defect is defined as one that is not apparent from the use of one’s ordinary senses.

Latent defects are generally considered to be hidden or concealed defects which are not readily discoverable. Alexander v. Sun Coast Builder, Inc., 837 So.2d 1056.

The determination of whether or not a defect is latent or not is a factual one to be determined on a case by case basis. Caselaw offers some guidance. In Hava Tampa Corporation v. McElvy, 417 So.2d 703, the court held that a roof leak is open and obvious and it did not matter whether the owner knew of the specific cause of the roof leak. Since it was obvious that the roof leaked the owner must initiate his lawsuit within four (4) years otherwise the claim would be barred.

In the case of Lakes of Meadow Village Homes Condominium v. Arvida, 714 So.2d 1120, the court considered building defects latent where they were discovered only after Hurricane Andrew damaged the building and exposed that the roof truss system lacked adequate bracing. The missing or improperly placed reinforcements on the bracings were concealed from view by the roof itself. The court allowed the lawsuit even though over four (4) years had past since the owner took possession of the building.

An owner upon discovering a defect with his building should immediately initiate an action to avoid the statute of limitations defense.

*In no event will an action be initiated 15 years after the date of actual possession by the owner, date of issuance of a certificate of occupancy, or the date of completion of a contract, whichever date is latest.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

“Basic Florida Mechanics Lien Law”

2005-03-05T09:16:00.000-08:00

Luxury Homes and Estates in Florida

If you are a homeowner in Florida, you will no doubt have occasion to contract for repairs or improvements to your property. You should know that the Florida lien law provides homeowners certain protections and also provides particular warnings to help homeowners navigate payment of multiple bills often from unknown suppliers, subcontractors and laborers.

Each supplier, subcontractor or in some cases laborers are directed by statute to give homeowners a notice that they have worked on the property. This notice is called “Notice to Owner” and must be delivered within 45 days of the first delivery of material or first work performed on your home. The failure to provide you a Notice to Owner within the time requisites results in the absolute loss of any right to claim a lien against the home.

Do not be alarmed by the receipt of a Notice to Owner from multiple parties, many of whom you do not know. The Notice is provided so that you can police your general contractor and ensure that every party has been paid.

The actual Notice to Owner will provide a warning. To avoid paying twice, homeowners are directed to contact the subcontractor or supplier to ensure that it has been paid prior to disbursement to the general contractor.

The statutes require that a supplier or subcontractor deliver the Notice to Owner by certified mail.

The Notice scheme is set up in such a way that homeowners can merely relax. The homeowner has no obligation to seek out parties who do not provide a Notice to Owner.

Homeowners should keep a log of each Notice to Owner received and require proof of payment from the general contractor before disbursing or require a progress payment affidavit from the contractor as a condition to make payment.

The failure to pay suppliers, subcontractors or the general contractor, may result in a lien placed against the home. A lien is a statutory creature which allows an unpaid lienor to sell the property at the courthouse steps, if necessary, in order to receive payment.

Each supplier or subcontractor must record a Claim of Lien within 90 days of the last date that the supplier, subcontractor or contractor worked at your home. The statutes also require that homeowners be provided a copy of the Claim of Lien, by certified mail, to ensure that the homeowner knows of the outstanding bill prior to disbursing any final payments to the general contractor.

Prior to making any final payment to a general contractor, homeowners should obtain a Final Contractor’s Affidavit wherein the general contractor swears that all subcontractors and suppliers have been paid in full under penalty of criminal law.

Great care should be exercised to make sure every lienor has been paid. Unpaid lienors may file an action to foreclose against the property. The advice of an attorney should be sought to explain the ins and outs of the Mechanics Lien Law and to assist in obtaining appropriate affidavits from the general contractor.

Visit our website for more information on this subject.

Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

“You Have Obtained a Final Judgment: Now What?”

2005-03-04T09:27:00.000-08:00

Luxury Homes and Estates in Florida

The public has a general view that once a judge has rendered his decision and a final judgment is entered the case is over. However, in the event that the plaintiff prevails and is awarded a money judgment or either the plaintiff or defendant prevails and is awarded attorneys fees a second part of the case involving collections is required.

I recently attended a hearing where a plaintiff was acting pro se (without the services of an attorney) and the judge awarded her a final judgment. She looked across the table and asked the defendant when she could expect his check. The defendant leered back across the table and merely laughed.

The plaintiff was extremely confused and frustrated. She left the hearing and I doubt she ever made any collection efforts. The final judgment she received that day was merely a piece of paper suitable for framing.

The collection process can be challenging. Occasionally, a defendant will offer to pay the final judgment or a portion thereof in order to obtain a full release or satisfaction of the final judgment.

However, more often than not, a defendant will refuse to pay. In this circumstance a certified copy of the final judgment should be recorded in each county wherein the defendant may own real property.

Furthermore, a judgment lien certificate should be filed in Tallahassee in accordance with 55.203 of the Florida Statutes. The judgment lien certificate, once filed, will provide notice and establish priority with regard to the debtor’s personal property. The judgment lien certificate is required to be filed before a party may instruct the sheriff to pick up personal property owned by the defendant and have same sold.

The most effective tool in order to collect a judgment is a garnishment to freeze a bank account. A garnishment procedure is invoked by filing the necessary forms with the clerk of the court which identify a bank or third party who may have in its possession monies owed to the defendant. The garnishment procedure is found in Chapter 77 of the Florida Statutes.

Once a garnishment is served upon a bank or third party the monies in the account are frozen pending notice to the defendant and an opportunity to dispute the seizure of funds.

The garnishment procedure is the best way to obtain payment because it is the least expensive method and simplest procedure.

The garnishment procedure is extremely effective in collecting judgments against corporations. The corporation may have several accounts receivable that will be paid in a 30-60 day timeframe. Serving the garnishment upon the customers of a corporation will intercept these monies. A judgment against an individual is more problematic.

An individual may be “the head of household” which severely restricts the percentage of the paycheck that can be garnished. Moreover, if the individual earns less than an established threshold, no garnishment can be obtained.

A plaintiff is also restricted as to the assets that are available to pay the judgment. For example, a judgment against a husband will not encumber assets, bank accounts or personal property owned by husband and wife. A judgment against one spouse generally does not encumber marital property.

A plaintiff’s efforts to obtain payment are often stymied by bankruptcy, homestead exemptions, head of household exemptions, marital asset exemptions as well as competing claims of other creditors.

A party would be wise to investigate the assets of a target prior to initiating litigation in order to assess the opportunities for collection. Otherwise you too could receive a paper judgment with no monetary value.

Visit our website for more information on this subject.

Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

“Liability of Successor Corporation/De Facto Merger”

2005-03-03T09:46:00.000-08:00

Luxury Homes and Estates in Florida

A corporation deep in debt often will try to eliminate liability by merely incorporating under a different name. In many circumstances the law will allow creditors of the defunct corporation to recover from the new corporation.

Generally, Florida law does not impose the liabilities of a predecessor corporation on a successor corporation unless:

1. The successor expressly or impliedly assumes obligations of the predecessor;
2. The transaction is a de facto merger;
3. The successor is a mere continuation of the predecessor; or
4. The transaction is a fraudulent effort to avoid the liabilities of the predecessor.
The case of Laboratory Corporation of America v. Professional Recovery Network ETC provides an excellent review of this area of law. In that case, a company owned exclusively by one shareholder, officer and director ran up a sizable debt in the amount of $500,000. Once the creditor demanded payment the owner discarded the corporation. He started a new corporate entity wherein he remained the sole shareholder, officer and director. The new entity engaged in the same business, had the same customers, the same employees and same telephone, fax numbers, accounting system and computerized database as the prior corporation.

The court made short shrift of this obvious effort to defraud creditors.

In determining whether or not a new corporate entity is part of a fraudulent scheme to avoid liabilities the court adopts several tests.

First, the court will examine whether or not reasonable value has been paid for assets that are transferred to the new corporation.

Second, the court will examine whether a de facto merger occurred wherein one corporation was merely absorbed by another (i.e. there is a continuity of the selling corporation evidenced by such things as the same management, personnel, assets, location, stockholders, customers, employees and location of operations).

By adopting these simple tests the court determines whether fraudulent intent exists to avoid payment to creditors.

Abandoning one corporation on Friday and starting a new corporation continuing the same business on the following Monday will most likely be determined a sham. Creditors should not be discouraged by such transparent maneuverings.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

“Embezzlement: An Employee Will Not Get Off The Hook By Asserting The 5th Amendment Privilege Against Self-Incrimination”

2005-03-01T09:48:00.000-08:00

Luxury Homes and Estates in Florida

I am often confronted with a dismayed employer who has realized that a trusted employee has stolen and embezzled substantial sums of money. The employer then is faced with the civil action filed against the employer in order to recover the stolen monies. Correspondingly, the employer often approaches the criminal authorities to have an action brought for theft.

Once the civil action is initiated a deposition of the employee shortly follows. The employee, represented by counsel, will often invoke the 5th Amendment privilege against self-incrimination. The privilege against self-incrimination is available to all parties in a civil action and is designed to prevent a party from admitting facts which would lead to a criminal conviction. However, the employee has done himself no favor in the civil action.

Florida courts recognize that once a party in a civil case invokes the 5th Amendment, the opposing party is entitled to an inference that the answer would have been a negative and against that party’s interest. Fraser v. Security & Investment Corp., 615 So.2d 841, 841-42 (Fla. 4th DCA 1993). Further, a party’s silence to questions will allow the court and jury to draw a negative inference. McCreery v. Fernandez, 882 So.2d 498 (Fla. 4th DCA 2004). Thus, an employee faced with a civil action may invoke the 5th Amendment or merely remain silent. In either even, the plaintiff’s counsel may utilize the response to build its case.

On the other hand, the court oftentimes will merely abate the civil action until the criminal action is completed in order to avoid prejudice to a defendant. However, the court is constrained to only abate an action as long as there is a defined time limit to the completion of the criminal action. The plaintiff, employer, seeking redress for the stolen monies will not be held up indefinitely. Thus, refusing to answer questions of the 5th Amendment will not provide a safe harbor to the thief in a civil action.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

“One Sided Construction Contracts May Not Be Enforced By The Courts.”

2005-01-03T10:06:00.000-08:00

Luxury Homes and Estates in Florida

In the current construction climate builders often dictate the terms of a construction contract. For some large builders form contracts are the norm. However, smaller contractors often negotiate the terms and don’t rely on form contracts.

However, all builders attempt to exact complete freedom and flexibility in the performance of the contract. Builders insert language in default clauses which are designed to make the builder immune from litigation or recovery.

One such device is a default clause that provides that if the builder cannot perform or will not perform, the buyer’s sole recourse is the recovery of the initial deposit.

Such default clauses are problematic because they are one sided and essentially allow the builder to build the home if it wants to and to sell the home to the buyer if it wants to.

The courts will not enforce such one-sided agreements.

In the case of Ocean Dunes of Hutchison Island Development v. Colangelo, 462 So.2d 437 (4th DCA 1985) the court ruled for the buyer and against the builder finding that this type of clause created a disparity in the obligations of the parties which is appalling. The court found that the builder’s obligations were illusory and struck the clause because there was no mutual obligation for performance between the parties.*

Thus, a buyer faced with the prospect of a builder who will not perform should consult an attorney. The builder’s self-serving and over reaching contract terms may not be enforceable.

*Other cases with similar holdings against the builder’s position are Hackett v. J.R.L. Development, Inc., 566 So.2d 601 (Fla. 2nd DCA 1990): and Blue Lakes Apartments, Ltd. v. George Gowing, 464 So.2d 705 (Fla. 4th DCA 1985).

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

“If Your Contract is Improperly Written, the Deposit May Not Be Retained in the Event of a Default.”

2005-01-02T10:14:00.000-08:00

Luxury Homes and Estates in Florida

In the ordinary real estate transaction, the buyer expresses his interest in a property by executing a contract. One routine provision is to require the seller to put up a good faith deposit. The deposit serves several purposes. One purpose is to ensure that the buyer is serious by putting money at risk. The second purpose is to afford the seller a pot of money for potential recovery in the event of a default.

Real estate contracts afford remedies upon the event of default including retaining a deposit as a liquidated damage. Liquidated damage clauses are inserted in order to limit the remedies available and to avoid litigation. However, a realtor must be aware of real estate contracts that afford the seller an election of remedies. If the contract affords the seller a choice of whether to retain the deposit as liquidated damages or sue for actual damages, the clause is void.*

The Florida Supreme Court held that a liquidated damages clause is invalid if the seller may either retain the deposit or bring an action for damages. Although the case was decided over ten (10) years ago, Appellate Courts routinely invalidate liquidated damages clauses which have not been changed.

Accordingly, it would behoove each agent, seller or buyer to review the contract language to make sure that the liquidated damages clause is enforceable.

*The Supreme Court case of Lefemine v. Baron, 573 So.2d 326 (Fla. 1991) discusses this issue. The liquidated damages clause at issue in Lefemine is as follows: Default by buyer: if buyer fails to perform the contract within the time specified, the deposits(s) made or agreed to be made by buyer may be retained or recovered by or for the account of seller as liquidated damages, consideration for the execution of the contract and in full settlement of all claims; whereupon all parties shall be relieved of all obligations under the contract; or seller, at his option, may proceed at law or in equity to enforce his rights under the contract.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

The Business of Winning, an Interview with Houston Short

2005-01-01T10:25:00.000-08:00

When Houston E. Short takes on a case, he goes to war.

He marshals his resources with the sole purpose of annihilating his adversary in the courtroom or at the mediation table.

“If you really have a successful case, it will never go to trial,” said Short, co-founder of Pohl & Short, a boutique law firm specializing in corporate law, commercial litigation, real estate law and personal finance.

While many clients know the basics of the legal world, some need brief tutorials to dispel preconceptions drawn from watching “The Practice” or reruns of “Perry Mason.” The firm’s 14 attorneys try to give those clients “a road map of what a lawsuit is,” said Short. “We destroy the myth that a case will go to trial in three months.”

Actually, only a small percentage of civil or criminal cases end in jury trials. The rest are resolved through mediation, arbitration, guilty pleas, or die for a lack of evidence.

Short, who earned his law degree from the University of Florida, opened the Winter Park firm in September 1993 with fellow attorney Frank L. Pohl. Within a few years, the firm received accolades and awards from the Greater Seminole Chamber of Commerce and the federal government for its innovation and vision.

Part of the success stems from the emotional as well as professional investment given each case, said Short. “We actually care about our clients and we maintain long relationships,” he said. “My clients are my best friends and I carry their concerns on my sleeve.”

On Occasion, that passion translates into cases where Pohl & Short becomes a white knight defending the vulnerable. In one instance the firm did free legal work for an elderly woman left destitute through the sale of her home, and in another charged a nominal fee to help a client get fair compensation on a land deal, said Short.

“We’ve done that on many occasions in the past and we will do that again when our hearts are so led,” he said.

The opportunity to make a positive difference in someone’s life is one of the attractions that drew Short to the legal profession after he graduated from Florida State University.

“Coming out I knew that I wanted to make differences, palpable differences with the people I came upon,” he said. “I could never understand people who just take a job or do something that they don’t care for.”

He has found that the law can be a rough business where no quarter is given.

“If you don’t think that, go to trial and be a nice guy and don’t be prepared and see what happens,” said Short, 43. “You’re going to use all your assets on the battlefield of the courtroom, and the lawyer is your general.”

When he is not waging legal warfare, Short enjoys spending time with his sons, Houston Jr., 12, and Noah, 6. In Addition to the usual baseball, basketball and soccer games, there are afternoons at area skateboard parks where Short, wearing the appropriate pads and helmets, does his best to be the Baby Boom’s answer to Tony Hawk.

He said there is a lesson in this he hopes his boys will carry with them as they move through life.

“They learn they can go out and it’s okay to fail,” he said. “The only failure is not to try.”

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“A Bank Account Owned by Husband and Wife is Immune from Collection by a Creditor of Only One Spouse”

2005-01-01T10:17:00.000-08:00

Luxury Homes and Estates in Florida

Once a husband and wife are married in the State of Florida the law recognizes a separate and distinct entity for property owned by husband and wife. Real and personal property owned by both husband and wife is recognized as owned by tenancy by entireties. This distinction is important in Florida because a creditor of only one spouse cannot pierce and obtain payment from assets owned by both husband and wife.

Most often, a husband and wife will open a checking account and savings account with a local bank. The signature card often allows either the husband or wife to withdraw funds from the account. You should designate any checking account owned by husband and wife as tenancy by entireties. However, failure to so designate the account does not defeat the immunity from creditors.

Collection attorneys often argue that an account designated not as tenancy by entireties but as a joint checking account is subject to collection.

Florida courts hold that even a joint account is afforded protections. The courts look at the intent of the husband and wife at the time of opening the account to determine whether or not the account is protected as an estate by entireties. The Gibson v. Marr, 395 So.2d 1278 (Fla. 4th DCA 1981); Roger Dean Chevrolet, Inc. v. Fischer, 217 So.2d 855 (Fla. 4th DCA 1969). The courts look at extrinsic facts including whether or not both the husband and wife “owned” the account, and whether the money to create the account came from assets or earnings from the couple after they were married, and whether or not the monies in the account are used to pay the expenses of the household.

These arguments should be marshaled if a creditor of one spouse garnishes the bank account of the husband and wife. You should contact an attorney familiar with collections and exemptions afforded the husband and wife to protect your rights.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.