       Third District Court of Appeal
                               State of Florida

                           Opinion filed May 27, 2015.
         Not final until disposition of timely filed motion for rehearing.

                               ________________

                         Nos. 3D13-1599 & 3D13-1713
                         Lower Tribunal No. 09-60866
                              ________________


        Grove Key Marina, LLC and Scotty's Landing, LLC,
                     Appellants/Appellees/Cross-Appellees,

                                        vs.

  Fernando Casamayor, as tax collector for Miami-Dade County,
                           Appellee/Cross-Appellant

                                        vs.

                             The City of Miami
                      Appellant/Appellee/Cross-Appellee


     Consolidated Appeals from the Circuit Court for Miami-Dade County, Peter
A. Lopez, Judge.

     Segall Gordich, P.A., and Norman S. Segall and Melissa Alagna, for Grove
Key Marina, LLC and Scotty’s Landing, LLC.

       R. A. Cuevas, Jr., Miami-Dade County Attorney, and Jorge Martinez-Esteve
and Alexander Bokor, Assistant County Attorneys, for Fernando Casamayor, as
tax collector for Miami-Dade County.
     Victoria Mendez, City Attorney, John A. Greco, Deputy City Attorney, and
Warren Bittner, Deputy Emeritus, for the City of Miami.


Before SHEPHERD, C.J., and ROTHENBERG and SCALES, JJ.

      ROTHENBERG, J.

      The case before us is a consolidation of three separate appeals: (1) The City

of Miami (“the City”) appeals an order finding it liable for past-due ad valorem

taxes owed on real property it owns but leases to Grove Key Marina, LLC (“Grove

Key”), which Grove Key in turn subleases, in part, to Scotty’s Landing, LLC

(“Scotty’s Landing”) (collectively, the “Lessees”); (2) the Miami-Dade County

Tax Collector, Fernando Casamayor (“the County”), cross-appeals that same order,

contending that the trial court should have allowed it to pursue remedies against

the Lessees for the unpaid taxes; and (3) the Lessees appeal an order denying their

motions for attorney’s fees following the trial court’s order absolving them of

payment for the past-due taxes. We affirm the trial court’s decision.

                                BACKGROUND

      The City leased waterfront real property to Grove Key (a private, for-profit

entity) via a lease agreement (“lease”) signed on April 1, 1976. There is no “pass-

through” provision in the lease expressly passing responsibility for the ad valorem

property taxes from the City to Grove Key. The taxes provision in the lease

agreement provides:



                                         2
      13. TAXES
            The City covenants and agrees that the leased premises are to
      be used and have been used for a governmental, municipal, or public
      purpose or function that could be served by the City, that the
      operation of the leased facility by the City would be a valid subject for
      the allocation of public funds, that the consideration paid by the
      Company [Grove Key] as described in this Lease Agreement is
      reasonable and adequate and in the best interests of the City and the
      public, and that the realty and leasehold interest of said leased
      premises are exempt from ad valorem taxes in accord with the
      provisions of Florida Statutes 196.199(2)(a) and Florida Statutes
      196.012(5).

Scotty’s Landing thereafter began operating a bar and restaurant in the Grove Key

Marina pursuant to a management agreement between those parties.1 Grove Key

and Scotty’s Landing have the same principal officer.

      Beginning in 1995, the County began sending property tax bills for the

subject property to the City. Every year the City forwarded these bills to Grove

Key, and every year Grove Key returned them to the City unpaid, arguing that the

City was responsible for the taxes. The County never sent a property tax bill to

either of the Lessees prior to the filing of the complaint by the Lessees in this case.

The taxes for the period from 1995-2011 have never been paid and have not been

1 The management agreement between Grove Key and Scotty’s Landing contains a
provision that requires Scotty’s Landing to pay any taxes that may arise due to
Scotty’s Landing’s operation on the premises: “[Scotty’s Landing] shall be
responsible for all federal, state and local taxes pertaining to the operation of the
snack shop, including ad valorem taxes on any personal or real property
attributable to snack shop or snack shop area.” This agreement has no bearing on
whether Grove Key or the City is liable for the unpaid property taxes, however,
and is relevant only insofar as it could impute some tax liability to Scotty’s
Landing if Grove Key were found responsible for the unpaid taxes.

                                          3
formally challenged by either the City or the Lessees. However, only the taxes

from 2007 through 2011 are at issue in this case due to the statute of limitations.

      On September 12, 2012, the County threatened to revoke the Lessees’

occupational licenses and corporate charters unless they paid the outstanding

property taxes. The Lessees responded by filing suit against the County requesting

a declaratory judgment that the Lessees could not be held responsible for the

assessed taxes. The County responded by counterclaiming against the Lessees and

seeking a declaratory judgment that the Lessees did indeed owe the back taxes.

The County also filed a third party complaint against the City alleging that the City

could also be responsible for the unpaid assessments. The County’s position was

essentially that either the City or the Lessees owed the taxes, and it simply wanted

someone to pay them. It appears the County was unaware of the precise terms of

the lease agreement between the City and the Lessees prior to its counterclaim.

      All three parties moved for summary judgment regarding the unpaid taxes,

and the trial court entered an order finding that (1) the Lessees had no duty to pay

the taxes based on the terms of the lease; and (2) the City is solely responsible for

the ad valorem taxes assessed between 2007 and 2011. Based on this ruling in

their favor, the Lessees subsequently sought attorney’s fees incurred in defending

the County’s counterclaim against them pursuant to sections 192.0105(3)(g) and

57.105 of the Florida Statutes. The trial court then entered a second order finding



                                          4
that the Lessees are not entitled to payment of their attorney’s fees. The City

appealed the portion of the trial court’s order finding it responsible for the unpaid

taxes, and the County appealed the portion of the order finding the Lessees were

not liable for the unpaid taxes (Case No. 3D13-1599). The Lessees appealed the

order denying their motion for attorney’s fees (Case No. 3D13-1713). All these

appeals were consolidated for our review.

                                    ANALYSIS

        The consolidated appeals before us present three discrete issues for our

review. First, is the City responsible for the unpaid ad valorem taxes on the

property?     Second, can the County separately pursue the Lessees to secure

payment of the taxes even if the City owes the taxes? And finally, did the trial

court abuse its discretion by denying the Lessees’ motion for attorney’s fees? We

address these issues in turn.

   I.       The City alone is responsible for the unpaid ad valorem taxes.

        The facts of this case are undisputed, and our determinations regarding

which party owes the unpaid property taxes and what remedial measures may be

available to collect those unpaid taxes require us to interpret and apply several

sections of the Florida Statutes. We accordingly review the trial court’s ruling on

those issues de novo. Borden v. East-European Ins. Co., 921 So. 2d 587, 591 (Fla.

2006).



                                         5
      A.   The City owes the unpaid taxes because the property is not being
           exclusively utilized for public purposes.
      The Florida Constitution provides: “By general law regulations shall be

prescribed which shall secure a just valuation of all property for ad valorem

taxation.” Art. VII, § 4, Fla. Const. There are certain exceptions and nuances to

this general rule, however, when the property at issue is governmentally owned.

For example, governmentally owned property that is used exclusively for public

purposes is completely exempt from property taxation. Art. VII, § 3, Fla. Const.; §

196.199(1), Fla. Stat. (2009). Conversely, when a city owns property that is then

leased to a private entity for a non-governmental purpose, the tax exemption is

lost. § 196.199(2), Fla. Stat. (2009); Capital City Country Club, Inc. v. Tucker,

613 So. 2d 448, 451-52 (Fla. 1993) (“[W]e conclude that the legislature could not

constitutionally exempt from real estate taxation municipally owned property

under lease which is not being used for municipal or public purposes.”). It is

axiomatic that, absent an express exemption, all real property owned by a

municipality and situated within the limits of that municipality is subject to ad

valorem taxation by the county in which the municipality is located.

      It is undisputed in this case that the property at issue is not being used for a

public or governmental purpose; it is clearly proprietary. As such, it is similarly

clear that the property is not exempt from taxation, and the City is responsible to




                                          6
the County for the ad valorem taxes owed on the property. The only question

remaining on this issue is whether the City can pass its liability to the Lessees.

      The Florida Supreme Court, interpreting the relevant statutory provisions,

has established that a municipality is responsible for the ad valorem taxes on

property leased to a private entity, while the private lessee is responsible for taxes

on the intangible leasehold interest in the property. Tucker, 613 So. 2d at 452.

However, a so-called “pass-through” provision in the lease expressly shifting the

municipality’s ad valorem tax obligations to the lessee contractually renders the

private lessee responsible to the city for the city’s tax burden. Id.

      In Tucker, the City of Tallahassee owned real property that it subsequently

leased to a private country club for only $1 per year. Id. at 450. The lease

included a provision that required the club to pay all ad valorem taxes assessed

against the property. Id. The country club brought suit to challenge a property tax

assessed against it by arguing that it was being double-taxed for the same

property—once for the real property itself (the ad valorem taxes assessed by the

county) and once for the leasehold interest in the property (the intangible property

tax assessed by the state). Id. In rejecting the club’s argument, the Florida

Supreme Court held:

             We reject the club’s contention that the imposition of real estate
      taxes on the fair market value of the land and the imposition of
      intangible taxes on the leasehold interest constitutes double taxation
      of the property. Intangible personal property is property which is not


                                           7
      itself intrinsically valuable, but which derives its chief value from that
      which it represents. §§ 199.023(1), 192.001(11)(b), Fla.Stat. (1991).
      The intangible tax is being imposed on the rights afforded to the club
      under the lease. The real estate taxes, on the other hand, are being
      imposed on the land itself. In Florida, real estate taxes are collected by
      the county, while the intangible tax on leasehold interests is collected
      by the state. In this case, the club, as the holder of a leasehold interest,
      is legally responsible for the intangible tax. The club’s responsibility
      for the real estate taxes, however, is contractual. It stems from the
      pass-through provision in the lease wherein the club agreed to pay
      the real estate taxes assessed against the land. Absent this
      provision, the city, as owner of the property, would be responsible
      for the real estate tax because the land is not being used for a
      municipal or public purpose.

Id. at 452 (emphasis added). Under Tucker, a municipality is liable for any

property tax assessed, but if there is an express pass-through provision in the lease,

the lessee can be required to reimburse the municipality for the ad valorem taxes it

pays on the land. Intangible leasehold taxes, however, are the responsibility of the

lessee.2

2 The City also argues that Florida Administrative Code 12D-13.046, which was
promulgated by the Florida Department of Revenue, see section 195.027, Fla. Stat.
(2009), requires the Lessees to pay any taxes owed on the property. Section 12D-
13.046 of the code provides in full:
      Taxation of Governmental Property Under Lease to Non-
      Governmental Lessee.
      When property is owned by a governmental unit and is leased to a
      non-governmental lessee and has not been exempted from taxation,
      the tax should be assessed to the non-governmental lessee. If no rental
      payments are due pursuant to the agreement creating the leasehold
      estate, or if the property meets the requirements of Section
      196.199(7), F.S., the leasehold estate shall be taxed as real property.
      Ad valorem real property taxes relating to government property,
      levied on a leasehold that is taxed as real property under Section
      196.199(2)(b), F.S., must be paid by the lessee. If such taxes are not

                                           8
      Here, unlike the lease at issue in Tucker, there is no pass-through provision

in the agreement between the City and the Lessees requiring the Lessees to assume

the ad valorem taxes on the property. To the contrary, if anything, the lease

purports to exempt the Lessees from paying any property taxes at all.3 Because the

property is not exempt from ad valorem taxes based on public use, we find that the

City must pay the property taxes for which it is responsible. And because there is

no pass-through provision in the lease, the City cannot ultimately shift its liability

onto the Lessees.

   B. The County cannot pursue remedies against the Lessees for unpaid taxes
      never assessed against them

       paid, the delinquent taxes become a lien on the leasehold and may be
       collected and enforced under the provisions of Sections 197.412 and
       197.413, F.S. The tax collector shall notify the Department of
       delinquencies and action taken to collect the delinquent tax. If rental
       payments are due, the leasehold estate shall be taxed as intangible
       personal property in accordance with Chapter 199, F.S., and
       delinquencies shall be processed as in the case of other intangible
       personal property.
The City focuses only on the first sentence of 12D-13.046, ignoring the balance of
the provision. Section 12D-13.046 clarifies that the lessee must pay any taxes
resulting from its leasehold interest in the property, which is taxed as intangible
property if rental payments are due, as is the case here, and is taxed as real
property if no rental payments are due. See § 196.199(2)(b). It is undisputed in
this case that the Lessees have been paying the intangible property tax owed on
their leasehold interests, so they are in compliance with section 12D-13.046 of the
administrative code. The City has simply misinterpreted the provision.
3 The City does not have the authority to contractually prevent the County or State

from collecting taxes, nor can it determine whether or not a property is being
utilized for “public use.” We call attention to this provision merely to show that
the parties’ intentions was very clearly not to have the Lessees assume liability for
the ad valorem taxes on the property.

                                          9
      Having determined that the City owes the ad valorem taxes on the property,

we now address the County’s argument that sections 197.432(10) and 196.199(8)

of the Florida Statutes authorize it to seek remedial action against the Lessees

irrespective of which party owes the unpaid taxes. The County contends that even

though there is no pass-through provision in the lease contractually obligating the

Lessees to pay the ad valorem taxes on the property—and the City is therefore

indisputably responsible for the property taxes, as explained above—the County

should still be able to simultaneously pursue an action against both the Lessees and

the City to persuade one of the two to pay the back taxes, leaving the paying party

to pursue its remedies against the non-paying party. This position is untenable.

While the County may have had some direct recourse against the Lessees if there

was a pass-through provision in the lease making them liable for the City’s portion

of the taxes, it cannot extort the Lessees into paying property taxes they clearly do

not owe by threatening to revoke the Lessees’ business licenses and charters.

      Section 197.432 provides the procedure for the issuance and sale of tax

certificates to satisfy unpaid property tax assessments. See generally § 197.432.

Subsection (10) of section 197.432, however, exempts governmentally owned

property from the typical tax certificate procedure, and instead provides that

delinquent taxes owed on such property shall be enforced only as provided in

section 196.199(8). Section 197.432(10) provides, in full:


                                         10
             A certificate may not be sold on, and a lien is not created in,
      property owned by any governmental unit which has become subject
      to taxation due to lease of the property to a nongovernmental lessee.
      The delinquent taxes shall be enforced and collected in the
      manner provided in s. 196.199(8). However, the ad valorem real
      property taxes levied on a leasehold that is taxed as real property
      under s. 196.199(2)(b), and for which no rental payments are due
      under the agreement that created the leasehold or for which payments
      required under the original leasehold agreement have been waived or
      prohibited by law before January 1, 1993, must be paid by the lessee.
      If the taxes are unpaid, the delinquent taxes become a lien on the
      leasehold and may be collected and enforced under this chapter.

(emphasis added). Section 196.199(8) then provides, in full:

             (8)(a) Any and all of the aforesaid taxes on any leasehold
      described in this section shall not become a lien on same or the
      property itself but shall constitute a debt due and shall be recoverable
      by legal action or by the issuance of tax executions that shall become
      liens upon any other property in any county of this state of the
      taxpayer who owes said tax. The sheriff of the county shall execute
      the tax execution in the same manner as other executions are executed
      under chapters 30 and 56.
             (b) Nonpayment of any such taxes by the lessee shall result in
      the revocation of any occupational license of such person or the
      revocation, upon certification hereunder by the property appraiser to
      the Department of State, of the corporate charter of any such domestic
      corporation or the revocation, upon certification hereunder by the
      property appraiser to the Department of State, of the authority of any
      foreign corporation to do business in this state, as appropriate, which
      such license, charter, or authority is related to the leased property.

(emphasis added).

      The County emphasizes section 196.199(8)(b) and argues that the statute

allows it to pursue remedial action against the Lessees for any taxes owed on

property that has lost its governmental exemption by way of a proprietary lease to



                                        11
a private entity.    The County makes the novel, although not altogether

unreasonable, argument that the Florida Legislature intended 196.199(8) to be a

broad remedial measure for precisely this situation, such that the County should be

able to collect from either the City or the Lessees when they are both refusing to

pay the property tax by pointing the finger towards one another. According to the

County’s argument, the County could take the remedial actions against the Lessees

outlined in subsection (b) regardless of which party owed the taxes in order to

compel the Lessees to pay the tax, and then the Lessees could pursue an action for

contribution against the City if the City was actually the party responsible for the

payment of those taxes. The reasoning for this argument can be analogized to joint

and several liability with the right to contribution, whereby a party can

occasionally be forced to pay more than his share of a judgment, but can then

recover in a separate action against his co-tortfeasors for the amount by which he

overpaid. See § 768.31(2), Fla. Stat. (2013).

      The County’s argument on this point, however, is founded on a misreading

of the statute. Section 196.199(8)(a) specifies that the subsection only applies to

taxes owed “on any leasehold” and allows liens to be imposed on other property in

the State “of the taxpayer who owes said tax.” Section 196.199(8)(b) further

clarifies that “nonpayment of any such taxes by the lessee” shall result in the

remedies enumerated therein. Read holistically, subsections 196.199(8)(a) and (b)



                                        12
simply prevent the County from imposing a lien on governmentally owned

property so as not to interfere with the property rights of another governmental

entity, but they allow a direct legal action to recover against the City if the City

owes the taxes and provide several additional alternative remedies if the Lessees

owe the taxes.

         The statute cannot be read, however, to allow remedial action against a

lessee who does not in any way owe taxes on the property, such as the Lessees in

this case. We therefore find that the County cannot pursue any remedial action

against the Lessees for the delinquent ad valorem taxes owed solely by the City,

and accordingly affirm the trial court’s order on that point.

   II.      The trial court did not abuse its discretion by denying the Lessees’
            motions for attorney’s fees.

         The Lessees’ only contention of error on appeal is the trial court’s denial of

their motion for attorney’s fees, which motion is based on the argument that the

County and the City have asserted frivolous claims against them by trying to force

them to pay ad valorem property taxes they clearly do not owe. While the Lessees

have prevailed on their claim, this is a complicated area of the law, and we cannot

find that the trial court abused its discretion in denying the Lessees’ motion on

these facts.

         In support of its motion for attorney’s fees, the Lessees cite sections 57.105

and 192.0105(3)(g) of the Florida Statutes. Section 57.105(1) provides:


                                           13
             (1) Upon the court’s initiative or motion of any party, the court
      shall award a reasonable attorney’s fee . . . to be paid to the prevailing
      party . . . on any claim or defense at any time during a civil
      proceeding or action in which the court finds that the losing party or
      the losing party’s attorney knew or should have known that a claim or
      defense when initially presented to the court or at any time before
      trial:
             (a) Was not supported by the material facts necessary to
      establish the claim or defense; or
             (b) Would not be supported by the application of then-existing
      law to those material facts.

Similarly, section 192.0105(3)(g), one of the enumerated “Taxpayer Rights,”

provides that:

             (g) The right of the taxpayer, property appraiser, tax collector,
      or the department, as the prevailing party in a judicial or
      administrative action brought or maintained without the support of
      justiciable issues of fact or law, to recover all costs of the
      administrative or judicial action, including reasonable attorney's fees,
      and of the department and the taxpayer to settle such claims through
      negotiations (see ss. 57.105 and 57.111).

(emphasis added).     These statutory provisions essentially turn on the same

question: Did the losing party assert a frivolous action or claim it knew to be

unsupported by the facts or law?

      The Florida Supreme Court has set a high bar for the recovery of attorney’s

fees under section 57.105 by holding that “[s]ection 57.105 fees will not be

awarded unless the court finds ‘a total or absolute lack of a justiciable issue, which

is tantamount to a finding that the action is frivolous . . . and so clearly devoid of

merit both on the facts and the law as to be completely untenable.’” Muckenfuss



                                         14
v. Deltona Corp., 508 So. 2d 340, 341 (Fla. 1987) (quoting Whitten v. Progressive

Cas. Ins. Co., 410 So. 2d 501, 505 (Fla. 1982)). In addition to the high threshold

required for the imposition of attorney’s fees sanctions, we also presume the trial

court’s finding regarding the award of attorney’s fees to be correct unless it is

completely unreasonable. See DiStefano Const., Inc. v. Fid. & Deposit Co. of

Maryland, 597 So. 2d 248, 250 (Fla. 1992) (“[T]he award of attorney’s fees is a

matter committed to sound judicial discretion which will not be disturbed on

appeal, absent a showing of clear abuse of discretion.”). The coalescence of these

two lofty standards is simply too much for the Lessees to overcome based on these

facts.

         The taxation of governmentally owned property is a complicated matter, as

evidenced by our analysis above. When the Lessees sought a declaratory judgment

that they could not be held liable for the unpaid taxes, the County simply covered

its bases by counterclaiming for the payment of those taxes and then interpleading

the City. While it may now seem clear that the City owes the unpaid taxes, the

details of the lease agreement between the City and the Lessees were not known to

the County at the time, and the County was not unreasonable in seeking to secure

payment of the unpaid taxes. Furthermore, the County’s position that it could take

remedial action against the Lessees even after it became clear that the City owed

the taxes, while novel, is not completely unreasonable. The maze of statutory



                                         15
sections leading to the correct result could easily be misinterpreted to allow such

action, and we believe that the County’s arguments on that point are not

completely frivolous. We therefore affirm the trial court’s order on this issue as

well.

        Affirmed.




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