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Oceancrest Condominium Apartments, Inc. v. Donner
Citations: 504 So. 2d 447; 12 Fla. L. Weekly 689; 1987 Fla. App. LEXIS 7078Docket: No. 85-2250
Court: District Court of Appeal of Florida; March 3, 1987; Florida; State Appellate Court
An appeal was brought by Oceancrest Condominium Apartments, Inc. against a circuit court order that granted the defendants—William Donner, Roseanne Vaughn, Harry Kanter, and Amy Steele—a new trial after a jury initially ruled in favor of the plaintiff. The appellate court affirmed the order for a new trial but also granted alternative relief upon remanding the case. The plaintiff alleged that the defendants, as officers and directors, breached their fiduciary duties and violated condominium statutes by failing to collect assessments from condominium units owned by the developer. The defendants denied the allegations and presented three affirmative defenses: (1) prior agreements by the plaintiffs that maintenance fees were not due due to delays in closing; (2) they had compensated the association adequately in kind; and (3) Amy Steele was not an officer or director during the relevant time, thus should not be a defendant. They also claimed that a contract (not attached in the documentation) included an indemnification agreement that postponed assessment collection for four months after the first closing. The association sought to strike two of these defenses, arguing their relevance and applicability under Chapter 718, but the motion was denied without prejudice. During the trial, the court struck the first affirmative defense at the close of the plaintiff’s case. The defendants later added a defense of immunity under Florida Statutes and a counterclaim for unjust enrichment. A mistrial motion arose due to inappropriate questioning of Steele, and after the plaintiff's case, the court granted a directed verdict for the defendants on one count but denied it on another. The court reserved rulings on the mistrial motions and ultimately instructed the jury on the remaining affirmative defenses, including setoff and immunity. The jury determined that Kanter, Donner, and Ms. Vaughn violated the condominium act, imposing damages of $131,767 against Kanter and Donner, though the court did not enter a judgment. Following the granting of a motion for a new trial filed by Donner and Kanter, the association appealed. Oceancrest Condominium Apartments, Inc. serves as the condominium association, while Kanter Enterprises, Inc. and Donner Enterprises, Inc. were identified as the developer and co-developer/contractor, respectively. Roseanne Vaughn, an employee of Donner Enterprises, served alongside Harry Kanter and William Donner as officers and directors of the association until unit owners assumed control in August 1983. The initial certificate of occupancy was issued in June 1982, shortly before the first unit's sale. Throughout the period leading to the takeover, the developer retained ownership of several units and faced financial difficulties, failing to pay maintenance fees assessed on both developer-owned and unit owner-owned units. The defense argued that the developer prioritized spending on common area improvements over paying assessments, which were not enforced by the association. Testimony revealed that Ms. Vaughn relied on assurances from Mr. Donner regarding the developer's financial management and its impact on unpaid assessments. Patricia Gordon, an expert witness, calculated that the developer owed $142,000 in unpaid maintenance fees and deficits, with insufficient funds in the required reserve accounts due to the lack of payments from developer-owned units. The court addressed several issues: I. It upheld the decision to grant a new trial. II. It found an error in directing a verdict on the second count of the plaintiff's complaint but correctly dismissed punitive damages. III. It erred in not striking the defendants' affirmative defenses related to "in-kind services" and "guaranteed maintenance." The retrial is necessitated by two primary factors. First, legal precedent from Ford Motor Company v. Kikis establishes that the standard for reviewing a trial court’s decision to grant a new trial hinges on whether there was an abuse of discretion. If reasonable individuals could disagree with the trial court's decision, it is not considered an abuse of discretion. This principle is reinforced by earlier cases, including Canakaris v. Canakaris and Delno v. Market Street Railway Company, which emphasize that judicial discretion, while sometimes perceived as arbitrary, must be exercised within reasonable bounds, defined by the specifics of the case and the court's judgment. Discretion is deemed abused only when the court's actions are arbitrary or unreasonable. The second factor influencing the retrial concerns specific trial occurrences. Both parties acknowledged that only two relevant episodes transpired, contradicting the trial court's reference to three. The first episode involved the plaintiff attempting to introduce the defendants' worth during direct examination, leading to a defense objection and a motion for mistrial. The second episode arose during cross-examination when the plaintiff sought to reveal the defendant's financial success in other projects, also breaching a pre-trial ruling (Motion in Limine). Furthermore, after a recess, during cross-examination, the plaintiff suggested that the defendant had conferred with his attorney about altering his testimony, prompting another motion for mistrial, which the court did not rule upon immediately. The alleged second episode referenced in the trial did not occur. The trial court inaccurately described a "third" episode involving Mr. Donner, particularly regarding an alleged instruction to alter his testimony. During cross-examination, Mr. Donner was questioned about a statement he supposedly made that he did not care if the Association lost money, to which he repeatedly denied having said. When asked about financial concerns related to the Association, Mr. Donner acknowledged a general concern about losing money in business but specifically denied being concerned about the Association losing money. The conversation implied he might have discussed changing his statement with his attorney after the recess, although he claimed not to remember. Applying the test from *Ford v. Kikis*, the court noted that reasonable legal professionals could have differing opinions on the trial judge's decisions. The Association argued that the questioned cross-examination was appropriate and that no objection based on attorney-client privilege was raised by Mr. Donner's counsel. The court concluded that the trial judge reasonably believed the jury was prejudiced by the improper question, as indicated by Judge Stone’s concurrence, emphasizing the trial judge's role in assessing jurors' reactions. Unlike *St. Azile v. King Motor Center, Inc.*, where a mistrial was warranted due to more severe accusations, the current judge recognized prejudice and acted accordingly. The assessment of jurors' attention and understanding of the question's significance was highlighted as crucial in determining the impact of the improper question on the verdict. The two episodes are ordered based on their perceived severity. The first, less inflammatory, involved cross-examination of a defendant in a condominium project case concerning a $2,000,000 note she guaranteed. During questioning, she denied signing the note in her individual capacity, explaining her choice to sign without being identified as her husband's wife due to concerns about liability for the loan. She expressed regret over the financial losses linked to the project, emphasizing the necessity of the bank's mortgage extension to complete construction. A motion for mistrial was raised after the plaintiff's counsel suggested that both defendants were profiting from other developments, potentially violating a pre-trial order that barred discussion of the defendants' net worth. The trial court opted to defer a ruling on the mistrial until after the plaintiff's case concluded. The trial court's inclusion of this episode in its order was likely influenced by the pre-trial directive. The text suggests that state courts might benefit from adopting practices similar to those of Federal District Court Judge James C. Paine, who sought juror feedback on trial episodes' prejudicial effects. The trial court was found to have erred in directing a verdict for the defendants regarding the plaintiff's second count, which alleged willful and wanton failure to collect assessments, benefitting the defendants at the association's expense. The writer references a relevant case, B. J Holding Corporation v. Weiss, which indicated that similar allegations do not constitute a separate tort supporting punitive damages. Defendants Sternberg, Okun, and Halpern argue that the court incorrectly instructed the jury on personal liability for their roles as initial officers and directors of the condominium association regarding B. J’s unpaid maintenance fees for unsold units. They reference legal principles stating that corporate officers are not liable for corporate debts merely due to their official positions. However, the court finds this principle inapplicable, as the defendants are being held accountable not as officers of B. J but as initial directors of the condominium association who failed to fulfill their duty to collect payments from B. J. The court emphasizes the quasi-fiduciary relationship of officers and directors, who must act with loyalty and good faith toward the corporation and its shareholders. They can be liable for damages resulting from breaches of trust under common law. The court affirms the jury's instruction on personal liability and finds sufficient evidence to support the verdict against the defendants. Additionally, the court critiques the plaintiff's bifurcation of the complaint into two counts, asserting that both counts inherently address the same issue: the board's failure to collect assessments as mandated by Florida law (Chapter 718). The trial court should have treated the complaint as a single count regarding breaches of duty associated with board membership. The court notes that even non-board officers, like Amy Steele, retain responsibilities under B. J Holding Corp. The jury's decision to find one director, Roseanne Vaughn, in breach of duty but not liable for damages raises concerns and may justify a new trial. The court suggests that inconsistencies in the jury's verdict indicate a potential bias against certain defendants, complicating the overall judgment. An error identified pertains to the failure to dismiss the defendants' affirmative defense of "guaranteed maintenance." Under Section 718.116(8)(b), Florida Statutes (1983), a developer can be excused from paying common expenses if they guarantee, in writing, that maintenance fees will not exceed a certain amount, with increases covered by the developer for a specified duration. The appellee asserts that the Declaration of Condominium supports this defense; however, while it mirrors the statutory language, it does not confirm that the developer made such a guarantee. The appellants reference the sales contract, which states that the seller will contribute to common expenses per the declaration but does not guarantee a cap on those expenses. Instead, it indicates that the monthly expenses are estimated and not assured. The contract appears to allude to the four-month grace period allowed by Section 718.116(8)(a). Therefore, this defense should not be permitted in the new trial, nor should any claims for developer payment of maintenance fees during the grace period be allowed. Judge Dell concurs with the conclusion, while Judge Stone concurs with a separate opinion.