STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SOUTHERN HERITAGE DEVELOPMENT, ) INC., SEAY ENTERPRISES, INC. ) and JIMMY BOYNTON REALTY, INC., ) (KINHEGA LANDING), )

)

Petitioners, )

)

vs. ) CASE NO. 93-5945F

)

STATE OF FLORIDA, ) DEPARTMENT OF COMMUNITY AFFAIRS, )

)

Respondent. )

)

) STEPHEN STOUTAMIRE, H. LOUIS, ) HILL and H. LOUIS HILL, JR., ) (KINHEGA OAKS), )

)

Petitioners, )

)

vs. ) CASE NO. 93-5946F

)

STATE OF FLORIDA, ) DEPARTMENT OF COMMUNITY AFFAIRS, )

)

Respondent. )

)

FINAL ORDER

Notice was provided and on January 14, 1994, a formal hearing was conducted pursuant to Section 120.57(1), Florida Statutes. The hearing location was Tallahassee, Florida, and Charles C. Adams was the Hearing Officer.

APPEARANCES

For Petitioners: Michael P. Bist, Esquire (Kinhega Landing) GARDNER, SHELFER, ET AL.

1300 Thomaswood Drive

Tallahassee, Florida 32312

For Petitioners: Guyte P. McCord, III, Esquire (Kinhega Oaks) MACFARLANE & FERGUSON

Post Office Box 82 Tallahassee, Florida 32302

For Respondent: David J. Russ, Esquire

Department of Community Affairs 2740 Centerview Drive

Tallahassee, Florida 32399-2100

STATEMENT OF THE ISSUES

By these consolidated actions, the Petitioners seek to recover attorney's fees and costs as alleged prevailing small business parties under authority set forth in Section 57.111, Florida Statutes.

PRELIMINARY STATEMENT

The present Petitioners were Respondents in the case of State of Florida, Department of Community Affairs v. Killearn Properties, Inc., et al., DCA Case No. 90-NOV-5/DOAH Case No. 90-6033DRI, and among the appellants in the case of Killearn Properties, Inc., et al. v. Department of Community Affairs, in the District Court of Appeal, First District, State of Florida, consolidated Case Nos. 92-251, 92-309, 92-370, and 92-507.

The Department of Community Affairs, in its Notice of Violation, directed to the present Petitioners and others, DCA Case No. 90-NOV-5, accused Kinhega Landing and Kinhega Oaks of violating the terms of a Development Order issued by Leon County, Florida, on March 23, 1976. When Kinhega Landing and Kinhega Oaks, together with other named respondents, contested the Notice of Violation, the case was forwarded to the Division of Administrative Hearings to resolve the fact disputes. The action was assigned DOAH Case No. 90-6033DRI.

Following the final hearing, a Recommended Order was issued on August 28, 1991 recommending that the Department of Community Affairs dismiss the Notice of Violation pertaining to alleged misconduct by the principals in Kinhega Landing and Kinhega Oaks. The Department of Community Affairs rejected these recommendations when entering its Final Order on January 23, 1992. This led to the aforementioned appeal and the opinion of August 16, 1993. The District Court of Appeal absolved the principals in Kinhega Landing and Kinhega Oaks of any misconduct alleged in the Notice of Violation.

In turn, the present Petitioners sought reimbursement for attorney's fees and costs associated with their defenses to the allegations set forth in the Notice of Violation, DCA Case No. 90-NOV-5. The respective petitions seeking attorney's fees and costs were brought following entry of an Amended Final Order by the Department of Community Affairs on October 6, 1993 dismissing the Notice of Violation as it pertained to the Kinhega Landing and Kinhega Oaks principals.

The present cases were heard at a consolidated hearing in response to a Joint Motion to Consolidate filed by the parties.

The Department of Community Affairs does not contest the status of the Petitioners as small business parties and that the Petitioners were prevailing parties in the litigation involving the Notice of Violation. The Department of Community Affairs has defended the present actions based upon its contention that it was "substantially justified" in bringing the actions against the present Petitioners pursuant to the Notice of Violation. The Department of Community Affairs also has urged that there are special circumstances which exist which would make the award of attorney's fees and costs unjust.

At this hearing, the Respondent called witness David Jordan, the primary attorney for the Department of Community Affairs in pursuing the action against Kinhega Landing and Kinhega Oaks through the Notice of Violation.

The present record is also constituted of Joint Exhibit No. 1, Kinhega Landing No. 1, and Kinhega Oaks Nos. 1-10. Included within the exhibits was the transcript of the hearing in DCA Case No. 90-NOV-5/DOAH Case No. 90-6033DRI.

The Notice of Violation, Recommended Order, Final Order, Appellate Opinion, and Amended Final Order pertaining to that action are also included with this record.

The parties were given the opportunity to submit Proposed Final Orders. The fact finding set forth in the Proposed Final Orders is discussed in the attached Appendix to this Final Order.

FINDINGS OF FACT

1. In accordance with Chapter 380, Florida Statutes, the Department of Community Affairs (Department), at times relevant to this inquiry, has maintained the duty and responsibility to enforce and administer that law.

   
   

2. Following entry of the subject Development Order on March 23, 1976, Leon County, Florida, became responsible for administering that Development Order in accordance with Chapter 380, Florida Statutes.

   
   

3. The Development Order had been issued upon application by Killearn Properties, Inc., the principal developer.

   
   

4. Through property conveyance, the principals within Kinhega Landing and Kinhega Oaks purchased parcels within the geographical boundaries of the development of regional impact (DRI) authorized by Chapter 380, Florida Statutes, and the subject of the Development Order.

   
   

5. The property transactions pertaining to the parcels purchased by the Kinhega landing and Kinhega Oaks groups, when recorded in the property records for Leon County, Florida, did not reflect the existence of the Development Order, nor did any history of the chain of title indicate that the parcels were within the DRI.

   
   

6. The record does not reflect that the developer, Killearn Properties, Inc., and other persons subsequently involved with the conveyance of the subject parcels purchased by the Kinhega Landing and Kinhega Oaks principals made the Kinhega Landing and Kinhega Oaks groups aware that the parcels being purchased were within the DRI.

   
   

7. The Development Order contained a requirement that the DRI be served by a wastewater treatment facility from the inception. The Development Order did not allow the use of septic tanks for individual lots as an interim measure pending the availability of wastewater treatment service through a central plant.

   
   

8. Contrary to the requirements set forth in the Development Order, certain restrictive covenants recorded within the public records of Leon County, Florida, pertaining to the parcels purchased by the Kinhega Landing and Kinhega Oaks groups indicated that septic tanks could be utilized. The Kinhega Landing and Kinhega Oaks groups were mindful of the restrictive covenants which allowed the use of septic tanks. This knowledge was gained through an examination of the public records of Leon County, Florida.

9. Moreover, in seeking preliminary plats, the principals for Kinhega Landing and Kinhega Oaks were subsequently issued preliminary plats, pursuant to conditions which allowed the use of septic tanks for individual homeowners and lots pending the availability of wastewater treatment through a central service. Notwithstanding the fact that Leon County was responsible for administering the Development Order and acting consistent with its terms, the Leon County employees who issued the preliminary plats knowingly acted contrary to the terms set forth in the Development Order by allowing septic tanks, instead of requiring the provision of wastewater treatment through central service.

   Neither did the Leon County employees apprise the Kinhega Landing and Kinhega Oaks groups that the Development Order existed, and thereby allow those groups to make their own determination concerning the consistency of the preliminary plats when measured against the requirements set forth in the Development Order.

   
   

10. Chapter 380, Florida Statutes, as it existed when the Development Order was issued did not mandate that the Development Order be recorded in the public records of Leon County, Florida. The amendments which were made to Chapter 380, Florida Statutes, following the date upon which the Development Order was entered did not retroactively mandate the need to record the existence of the Development Order in the public records of Leon County, Florida. That fact taken together with the inability to ascertain the existence of the Development Order through property records related to the specific parcels purchased by the Kinhega Landing and Kinhega Oaks groups, the failure by the initial developer, Killearn Properties, Inc., and others who had been involved with the subject parcels to advise the Kinhega Landing and Kinhega Oaks groups that the parcels being purchased were subject to a Development Order, and the failure by Leon County officials to advise the Kinhega Landing and Kinhega Oaks principals that the parcels were subject to a Development Order, establishes that the Kinhega Landing and Kinhega Oaks groups were without actual or constructive notice of the requirement to provide central wastewater service.

    To the contrary, Leon County employees provided advice that specifically violated the terms set forth in the Development Order, in a setting in which the Leon County officials were charged with the responsibility to act consistent with the terms set forth in the Development Order. This leads to the conclusion that the Kinhega Landing and Kinhega Oaks groups could not reasonably have ascertained that the Development Order existed as a means of avoiding actions that were inconsistent with the Development Order. This finding also takes into account that the property records reflecting restrictive covenants, as they would inform the public, allowed the use of septic tanks and coincided with the development permission given by the planning officials within Leon County.

    
    

11. When investigating and deciding to bring the Notice of Violation, the Department spent considerable time in discussion with the Killearn Properties, Inc., principals. It had no contact with the Kinhega Landing and Kinhega Oaks principals. The Department also met with Leon County concerning the County's administration of the terms of the Development Order. The Department never asked anyone employed by Leon County whether County employees had told the Kinhega Landing and Kinhega Oaks groups that a Development Order had been entered which limited the manner in which development could be pursued, to include the inability to use septic tanks on individual homeowner lots. Neither does it appear that the Department interrogated the principals for Killearn Properties, Inc. concerning whether those individuals had told the principals at Kinhega Landing and Kinhega Oaks that the parcels purchased by the latter groups were under restrictions and were subject to requirements set forth in the Development Order. Nor does it appear that the Department interrogated anyone else concerning advice to these groups about the existence of the Development Order.

12. The Department was aware that the preliminary plats for Kinhega Landing and Kinhega Oaks allowed the use of septic tanks until central sewer service became available and held the opinion that this arrangement violated the requirement to provide wastewater treatment service from a central location from the inception of the DRI.

    
    

13. Although the Department has stated that it decided to name Kinhega Landing and Kinhega Oaks in the Notice of Violation to bring before the administrative tribunal all parties necessary for an adjudication of rights and remedies in the overall DRI, in fact, the Department did not name all parties who had property rights subject to the DRI when seeking enforcement through the Notice of Violation.

    
    

14. Moreover, it did not occur to the Department that it would be advisable to inquire of the principals within Kinhega Landing and Kinhega Oaks concerning their knowledge of the existence of the Development Order. As stated, the Department had no realization concerning whether the County had advised the principals within Kinhega Landing and Kinhega Oaks regarding the existence of the Development Order when those entities applied for preliminary plats. The Department, when deciding to bring the Notice of Violation against Kinhega Landing and Kinhega Oaks, made note of the conditions associated with the issuance of the preliminary plats wherein it was anticipated that the individual homeowners would need to tie into central sewer service when it was made available. The Department then assumed that it was common knowledge in the development community that the property encompassed within the DRI, to include Kinhega Landing and Kinhega Oaks parcels, was under a Development Order.

    
    

15. In addition to looking at the Leon County plat records concerning the Kinhega Landing and Kinhega Oaks parcels, which reflected the permission to use septic tanks subject to availability of central wastewater service, the Department did "some title work" related to the Kinhega Landing and Kinhega Oaks parcels. None of the activities can be seen to educate the Department as to the existence of a Development Order which knowledge could be imputed to Kinhega Landing and Kinhega Oaks principals.

    
    

16. The Department was aware that the Development Order had been issued in 1976 at a time when there was no requirement to record the Development Order in the public records of Leon County, Florida. Further, the Department knew that the Development Order had not been recorded in the public records of Leon County, Florida.

    
    

17. At the point in time where the decision was being reached to name Kinhega Landing and Kinhega Oaks in the Notice of Violation, the Department assumed, without rational basis, that Leon County affirmatively stated to Kinhega Landing and Kinhega Oaks that the parcels held by those entities were within the DRI.

    
    

18. At hearing, concerning the request to be reimbursed for attorney's fees and costs, counsel for the Department who was principally responsible for the case involving the Notice of Violation was uncertain whether the Department of Community Affairs had inquired of Leon County concerning whether Leon County had made Kinhega Landing aware of the existence of the Development Order.

19. Moreover, the Department of Community Affairs assumed that because the Development Order did not allow the use of septic tanks and that the preliminary plats allowed the use of septic tanks on an interim basis, this was seen as evidence that Leon County had brought the existence of the Development Order to the attention of Kinhega Landing and Kinhega Oaks. Such assumption lacked any rational basis.

    
    

20. The present Petitioners learned of the existence of the Development Order when served with the Notice of Violation. The Department of Community Affairs became aware that the Kinhega Landing and Kinhega Oaks groups did not know of the Development Order after the Department of Community Affairs had filed the Notice of Violation, and notwithstanding that knowledge continued to pursue the underlying action.

    
    

21. When deciding to file the Notice of Violation against Kinhega Landing and Kinhega Oaks, the Department was not aware of any specific legal authority which would support the conclusion that purchasers without notice of the existence of the Development Order would nonetheless be bound by the Development Order and could not defend themselves against acts taken contrary to the Development Order, such as installation of septic tanks in a setting in which the Development Order only allowed wastewater treatment through a central service.

    
    

22. Without regard for specific precedent concerning the legal question of whether bona fide purchasers for value, purchasers without knowledge of the Development Order, could defend their actions which were inconsistent with the Development Order, the Department proceeded with its Notice of Violation because it declined to resolve the question of whether those purchasers would nonetheless be held to comply with the Development Order.

    
    

23. The Kinhega Landing and Kinhega Oaks principals are prevailing same business parties whose respective expenses in defending the notice of violation exceed $15,000.00.

    
    

24. In summary, the Department of Community Affairs was aware that Kinhega Landing and Kinhega Oaks principals were not subject to constructive notice concerning the existence of the Development Order when charging Kinhega Landing and Kinhega Oaks principals with the notice of violation. The Department of Community Affairs failed to establish whether the Kinhega Landing and Kinhega Oaks principals had actual knowledge of the existence of the Development Order prior to bringing the Notice of Violation against those parties and the assumptions which the Department of Community Affairs made concerning actual notice by Kinhega Landing and Kinhega Oaks principals were not reasonable assumptions, especially when relying on Leon County to impart knowledge in a setting in which the Department of Community Affairs had concluded that Leon County had violated the Development Order in its own right, when allowing septic tanks to be used in lieu of wastewater treatment through central service. Misfeasance by Leon County in relation to that topic did not create the proper inference that Kinhega Landing and Kinhega Oaks principals were willing participants in that course of conduct.

    
    

25. Kinhega Landing and Kinhega Oaks principals were not aware of the existence of the Development Order prior to being charged with the Notice of Violation.

    CONCLUSIONS OF LAW

    
    

26. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action pursuant to Sections 57.111 and 120.57(1), Florida Statutes.

    
    

27. When the Department of Community Affairs instituted the Notice of Violation against the Kinhega Landing and Kinhega Oaks groups and others, this constituted action "initiated by a state agency." See Section 57.111(3)(b), Florida Statutes.

    
    

28. To defend that case each set of Petitioners in these consolidated actions, DOAH Case Nos. 93-5945F and 93-5946F incurred "attorney fees and costs" as defined at Section 57.111(3)(a), Florida Statutes. The respective attorney's fees and costs exceeded $15,000.00. The respective parties in the two actions may not be awarded attorney's fees and costs which shall exceed $15,000.00. See Section 57.111(4)(d), Florida Statutes.

    
    

29. Both the Kinhega Landing and Kinhega Oaks groups are "small business parties" as defined at Section 57.111(3)(d), Florida Statutes. Both the Kinhega Landing and Kinhega Oaks groups are "prevailing small business parties" within the meaning of Section 57.111(3)(c), Florida Statutes.

    
    

30. It having been determined that the Petitioners in these actions are small business parties who have prevailed in a proceeding initiated by the Department of Community Affairs, the Petitioners are entitled to receive

    $15,000.00 in attorney's fees and costs respectively absent the Department of Community Affairs proving that it was "substantially justified" in bringing the Notice of Violation or upon proof that special circumstances existed which would make the award of the attorney's fees and costs unjust. See Section 57.111(3)(e) and (4)(a), Florida Statutes.

    
    

31. To be substantially justified the Department of Community Affairs had to have a reasonable basis in law and fact at the time it initiated the action against the Petitioners through the Notice of Violation. The Department was not sufficiently apprised of the facts to conclude that it had a reasonable factual basis for proceeding against the Kinhega Landing and Kinhega Oaks groups premised on the allegation that those parties had violated the Development Order by proceeding with the development process that used septic tanks instead of the required wastewater treatment through central service. The Department of Community Affairs did not make reasonable inquiry about the knowledge of the Kinhega Landing and Kinhega Oaks group on that subject before proceeding against those parties. In addition, the Department of Community Affairs had no reasonable basis in law to believe that they could proceed against the Kinhega Landing and Kinhega Oaks groups even should it be determined that those parties were bona fide purchasers for value, under the purported legal theory that Chapter 380, Florida Statutes, would take precedence over the estoppel claims made by the Kinhega Landing and Kinhega Oaks groups. When the Department of Community Affairs determined to charge Kinhega Landing and Kinhega Oaks with the Notice of Violation it was unaware of any specific precedent which would favor the opportunity to enforce Chapter 380, Florida Statutes, for violation of the Development Order through employment of septic tanks as opposed to use of wastewater treatment through central service, even where the accused parties were bona fide purchasers for value, meaning that the parcels had been purchased without actual or constructive notice of the existence of the Development Order. The Department of Community Affairs without the benefit of precedent proceeded in a manner which treated the issue as one of first impression, having expressed

    an interest in resolving the question of whether the enforcement responsibilities set forth in Section 380, Florida Statutes, would allow the Department of Community Affairs to proceed against bona fide purchasers for value, purchasers without notice. In effect, the Department of Community Affairs was taking a chance that it would be found to have authority to proceed against bona fide purchasers for value who had unknowingly acted contrary to the terms of the Development Order.

    
    

32. Ultimately, at hearing and in the aforementioned decision reached by the appellate court, the Department of Community Affairs' argument that the bona fide purchasers for value could not defend themselves against the allegations in the Notice of Violation was rejected. While it appears that the Department of Community Affairs' principal argument in the appellate case was associated with the position that Kinhega Landing and Kinhega Oaks had not met a duty to inquire concerning the existence of the Development Order, a position which the court discarded in favor of the opinion that the Kinhega Landing and Kinhega Oaks could not reasonably have discovered the existence of the Development Order within the public records and in fact would have found information contrary to the terms of the Development Order as set forth in the restricted covenants. Having concluded that Kinhega Landing and Kinhega Oaks were bona fide purchasers for value, the appellate the court determined that the Department of Community Affairs was estopped from enforcing the Development Order against Kinhega Landing and Kinhega Oaks. Given that the "case of first impression" pursued by the Department of Community Affairs was resolved adverse to the Department, it must be concluded that no reasonable basis in law existed when the decision was reached to pursue the action to charge Kinhega Landing and Kinhega Oaks principals with the Notice of Violation.

ORDER

Upon consideration of the facts found and the conclusions of law reached, it is

ORDERED that petitions for attorney's fees and costs are granted and the State of Florida, Department of Community Affairs, shall pay the Kinhega Landing and Kinhega Oaks groups $15,000.00 each.

DONE AND ENTERED this 10th day of March, 1994, in Tallahassee, Florida.

CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 10th day of March, 1994.

APPENDIX TO FINAL ORDER

CASE NOS. 93-5945F and 93-5946F

The following constitutes the discussion of the proposed fact finding by the parties.

Kinhega Landing's Facts:

Paragraphs 1 through 5 are subordinate to facts found.

Paragraph 6 is rejected where it calls for use of facts found in the recommended order. The record from the enforcement proceeding has been used in deliberating this case.

Paragraphs 7 and 8 are subordinate to facts found.

Paragraph 9 is not necessary to the resolution of the dispute. Paragraph 10 is subordinate to facts found.

Kinhega Oak's Facts:

Paragraphs 1 through 7 are subordinate to facts found. Paragraph 8 is not necessary to the resolution of the dispute. Paragraphs 9 and 10 are subordinate to facts found.

Paragraph 11 is not necessary to the resolution of the dispute. Paragraphs 12 and 13 are subordinate to facts found.

Paragraphs 14 through 16 are not necessary to the resolution of the dispute.

Paragraph 17 is subordinate to facts found.

Department of Community Affairs's Facts:

Paragraphs 1 through 15 are subordinate to facts found. Paragraphs 16 and 17 are not relevant.

Paragraph 18 is not necessary to the resolution of the dispute. Paragraph 19 is rejected.

Paragraphs 20 and 21 are not necessary to the resolution of the dispute.

COPIES FURNISHED:

Michael P. Bist, Esquire GARDNER, SHELFER, ET AL.

1300 Thomaswood Drive

Tallahassee, FL 32312

Guyte P. McCord, III, Esquire MACFARLANE & FERGUSON

Post Office Box 82 Tallahassee, FL 32302

David J. Russ, Esquire Department of Community Affairs 2740 Centerview Drive

Tallahassee, FL 32399-2100

Linda Loomis Shelley, Secretary Department of Community Affairs 2740 Centerview Drive

Tallahassee, FL 32399-2100

Dan Stengle, General Counsel Department of Community Affairs 2740 Centerview Drive

Tallahassee, FL 32399-2100

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is entitled to judicial review pursuant to Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate procedure. Such proceedings are commenced by filing one copy of a notice of appeal with the agency clerk of the Division of Administrative Hearings and a second copy, accompanied by filing fees prescribed by law, with the District Court of Appeal, First District, or with the district court of appeal in the appellate district where the party resides. The notice of appeal must be filed within 30 days of rendition of the order to be reviewed.

Docket for Case No: 93-005945F

Orders for Case No: 93-005945F