                                      IN THE DISTRICT COURT OF APPEAL
                                      FIRST DISTRICT, STATE OF FLORIDA

ISLAND RESORTS                        NOT FINAL UNTIL TIME EXPIRES TO
INVESTMENTS, INC.,                    FILE MOTION FOR REHEARING AND
                                      DISPOSITION THEREOF IF FILED
      Appellant,
                                      CASE NO. 1D15-2916
v.

CHRIS JONES, PROPERTY
APPRAISER FOR ESCAMBIA
COUNTY, FLORIDA; JANET
HOLLEY, TAX COLLECTOR
FOR ESCAMBIA COUNTY,
FLORIDA; ET AL.,

      Appellees.


_____________________________/

Opinion filed March 21, 2016.

An appeal from the Circuit Court for Escambia County.
Edward P. Nickinson, III, Judge.

Edward P. Fleming and R. Todd Harris of McDonald, Fleming, Moorhead,
Pensacola, for Appellant.

Thomas M. Findley and Robert J. Telfer, III of Messer Caparello, P.A., Tallahassee,
for Appellees.


LEWIS, J.

      Appellant, Island Resorts Investments, Inc., which possesses a leasehold

interest in a twelve-acre parcel of unimproved land on Pensacola Beach in Escambia
County, appeals the trial court’s Final Judgment in favor of Appellees, Chris Jones,

the property appraiser for Escambia County, and Janet Holley, the tax collector for

Escambia County. Appellant challenges the trial court’s determination that it is the

equitable owner of the leased land and, as such, its leasehold interest is subject to ad

valorem real property taxes. For the reasons that follow, we reverse the trial court’s

Final Judgment upon concluding that Appellant is not the equitable owner of the

leased land and its leasehold interest is subject only to intangible personal property

taxes pursuant to section 196.199(2)(b), Florida Statutes (2011).

                                     Background

      The land at issue was conveyed by the United States to Escambia County in

1947 pursuant to a Deed of Conveyance that permitted the county to lease the land

for purposes it deemed to be in the public interest, but prohibited the county from

conveying or otherwise disposing of the land. In 1997, the Santa Rosa Island

Authority, an agency of Escambia County, leased about forty acres of land to Gary

Work as Trustee of the Pensacola Beach Land Trust pursuant to a Development

Lease Agreement (“Master Lease”). In 2008, Gary Work as Trustee of the Pensacola

Beach Land Trust leased a twelve-acre parcel of land to Appellant pursuant to a

Development Sublease Agreement.

      Appellant subleased the twelve-acre land subject to the terms and conditions

of the Master Lease for a period of 99 years, with the right to negotiate a renewal on

                                           2
such terms and conditions that are mutually agreeable to the parties. The land is

leased for development as a high density residential/commercial property, but is

currently undeveloped and contains no improvements. Appellant must pay lease

fees; maintain liability, flood, windstorm, fire, and casualty insurance; pay all future

ad valorem real property taxes, if any, and all other future taxes and assessments

imposed on the subleased property; repair or rebuild any building or improvement

in the event of damage or destruction; and pay for all its utilities. Appellant shall

also have the right to assign, sublease, or otherwise convey or to mortgage all or

portions of the subleased property. Title to any buildings or improvements on the

leased property vests in Escambia County, and Appellant is required to deliver and

surrender possession of the subleased property upon the expiration or termination of

the lease.

      Following this Court’s issuance of Accardo v. Brown, 63 So. 3d 798 (Fla. 1st

DCA 2011), and 1108 Ariola, LLC v. Jones, 71 So. 3d 892 (Fla. 1st DCA 2011), the

Escambia County Property Appraiser began assessing ad valorem property taxes on

leased lands on Pensacola Beach, including Appellant’s leased property. In 2011,

Appellant filed its First Amended Complaint, seeking a declaratory judgment that

its interest in the land may only be taxed as intangible personal property under

section 196.199(2)(b), Florida Statutes, and an injunction prohibiting the assessment

and collection of ad valorem taxes on the land. In their Answer and Affirmative

                                           3
Defenses, Appellees alleged that Appellant is the equitable owner of the leased land,

denied that Appellant is entitled to a tax exemption under Chapter 196, and raised

numerous affirmative defenses, including that Appellant’s interpretation of section

196.199 would lead to an unconstitutional result. The parties subsequently filed

competing motions for summary judgment, disputing whether Appellant is the

equitable owner of the leased land and thus subject to ad valorem real property taxes

and whether Appellees’ constitutional arguments fail for lack of standing and on

their merits. In its Order on Cross-Motions for Summary Judgment, the trial court

denied Appellant’s motion and granted Appellees’ motion upon concluding that

Appellant is the equitable owner of the land and its leasehold interest is therefore

subject to ad valorem taxes. The trial court subsequently entered a Final Judgment

pursuant to its Order on Cross-Motions for Summary Judgment in favor of

Appellees, and this appeal followed.

                                       Analysis

      A trial court’s order granting final summary judgment is reviewed de novo to

determine whether there are genuine issues of material fact and whether the court

properly applied the correct rule of law. Glaze v. Worley, 157 So. 3d 552, 553-54

(Fla. 1st DCA 2015); see also Castleberry v. Edward M. Chadbourne, Inc., 810 So.

2d 1028, 1029 (Fla. 1st DCA 2002) (“Summary judgment is appropriate if there is




                                          4
no genuine issue of material fact and if the moving party is entitled to a judgment as

a matter of law.”).

      On appeal, the parties agree that Appellant’s lease is not perpetually

renewable and that the leased land is undeveloped. They dispute, however, whether

Appellant’s leasehold interest in the unimproved land is subject only to intangible

personal property taxes pursuant to section 196.199, Florida Statutes, or whether

Appellant is the equitable owner of the land and thus subject to ad valorem taxation.

      Section 196.199, Florida Statutes (2011), is titled “Government property

exemption” and provides in pertinent part:

      (2) Property owned by the following governmental units but used by
      nongovernmental lessees shall only be exempt from taxation under the
      following conditions:
                                         ...
      (b) Except as provided in paragraph (c), the exemption provided by this
      subsection shall not apply to those portions of a leasehold or other
      interest defined by s. 199.023(1)(d), Florida Statutes 2005, subject to
      the provisions of subsection (7). Such leasehold or other interest shall
      be taxed only as intangible personal property pursuant to chapter 199,
      Florida Statutes 2005, if rental payments are due in consideration of
      such leasehold or other interest. All applicable collection,
      administration, and enforcement provisions of chapter 199, Florida
      Statutes 2005, shall apply to taxation of such leaseholds. If no rental
      payments are due pursuant to the agreement creating such leasehold or
      other interest, the leasehold or other interest shall be taxed as real
      property. Nothing in this paragraph shall be deemed to exempt personal
      property, buildings, or other real property improvements owned by the
      lessee from ad valorem taxation.

      (c) Any governmental property leased to an organization which uses
      the property exclusively for literary, scientific, religious, or charitable
      purposes shall be exempt from taxation.
                                          5
                                         ...
      (7) Property which is originally leased for 100 years or more, exclusive
      of renewal options, or property which is financed, acquired, or
      maintained utilizing in whole or in part funds acquired through the
      issuance of bonds pursuant to parts II, III, and V of chapter 159, shall
      be deemed to be owned for purposes of this section.

(Emphasis added). Section 196.199(2)(b) was first adopted in 1980 and has not been

materially altered since then. Accardo v. Brown, 139 So. 3d 848, 851 (Fla. 2014)

(hereafter “Accardo”). The statute is tied to section 199.023(1)(d), Florida Statutes

(2005), which was repealed effective January 1, 2007, and defined intangible

personal property as including “‘all leasehold or other possessory interests in real

property owned by [governmental entities], which are undeveloped or

predominantly used for residential or commercial purposes and upon which rental

payments are due.’” Id.

      “‘The concept of equitable ownership in ad valorem taxation has long been a

part of Florida law.’” Id. at 852 (quoting Leon Cty. Educ. Facilities Auth. v.

Hartsfield, 698 So. 2d 526 (Fla. 1997)). “The lessee is deemed to be the leased

property’s equitable owner if the lessee holds ‘virtually all the benefits and burdens

of ownership’ of the leased property.” Robbins v. Mt. Sinai Med. Ctr., Inc., 748 So.

2d 349, 351 (Fla. 3d DCA 1999) (quoting Hartsfield, 698 So. 2d at 530)). The Third

District explained:

      Valid “burdens and benefits” considered by Florida courts include the
      lessee’s obligation to insure, maintain and pay taxes on the leased
      property, as well as the lessee’s option to purchase the leased property
                                          6
      at the end of the lease term. None of these factors, including an option
      to purchase, convey to a lessee equitable title to leased property when
      considered individually. However, when these factors are considered in
      relation to one another, the courts may determine that a lessee is the
      equitable owner of leased property. In considering all of these
      aforementioned factors, Florida courts have only granted a lessee
      equitable ownership of leased property when that lessee retained an
      option to purchase the leased property for nominal value.

Id. at 351 (internal citations omitted) (citing in part Hartsfield); see also Accardo v.

Brown, 63 So. 3d 798, 801 (Fla. 1st DCA 2011), approved by, 139 So. 3d 848 (Fla.

2014).

      In Accardo, the Florida Supreme Court considered whether the lands and

improvements on certain leaseholds on Navarre Beach on Santa Rosa Island were

subject to intangible personal property taxes instead of ad valorem real property

taxes. 139 So. 3d at 849. The supreme court explained that the subleases generally

provided for an initial 99-year term and further renewals on like terms; required the

lessees to pay rentals and bear the responsibility for insurance, maintenance, repair,

and the payment of taxes; provided that title to any buildings or improvements would

vest in the lessor upon the termination of the lease; and granted the lessees the right

to enjoy the capital appreciation and rental income derived from their interests,

convey their interests without restraint, and encumber their properties with

mortgages. Id. at 850. The court noted in a footnote that the appellants “point out

that some of the subleases are not perpetually renewable, but they do not make an

argument that is specific to those leases”; thereafter, the court made no mention of
                                           7
the non-perpetually renewable leases and based its analysis and conclusion on the

perpetually renewable nature of the subleases. Id. at 852 n.2., 852-57. With regard

to the underlying lands, the supreme court reasoned and concluded in part as follows:

      . . . [T]he threshold question [is] whether the property in question is
      “real property owned by” a governmental entity. § 199.023(1)(d), Fla.
      Stat. (2005). Our case law regarding the application of the equitable
      ownership doctrine makes clear that the person or entity holding
      equitable title to real property will be deemed the owner of the property
      for ad valorem tax purposes. . . .

      As the First District did in Ward, we also reject the petitioner taxpayers’
      argument that equitable ownership can exist under a leasehold only
      where there is a right ultimately to acquire legal title. The interest of a
      lessee under a perpetually renewable lease is not materially different
      from the interest of a lessee under a lease for a term of years providing
      the right for the lessee to obtain title for nominal consideration upon the
      termination of the lease. In both circumstances, the lessee effectively
      has the right to exercise perpetual dominion over the property.

      . . . None of the obligations imposed on the petitioner taxpayers are
      sufficient to defeat the conclusion that they hold “virtually all the
      benefits and burdens of ownership” of the improvements and the land.

Id. at 855-57. Because the appellants were the equitable owners of the property,

section 196.199(2)(b) was inapplicable. Id. at 857; see also 1108 Ariola, LLC v.

Jones, 139 So. 3d 857, 859 (Fla. 2014) (explaining that its holding in Accardo “that

the taxpayers in that case are the equitable owners of both the improvements and the

underlying   land,   turns   on    the   fact   that   the   leases   are   perpetually

renewable”). Cf. 1108 Ariola, LLC, 139 So. 3d at 858-60 (concluding that the

lessees were the equitable owners of the improvements on their leaseholds on

                                          8
Pensacola Beach, even though they did not have a perpetual lease or the right to

ultimately purchase the property for nominal value, because they failed to establish

that they do not hold virtually all the benefits and burdens of ownership of the

improvements where they did not present any argument concerning the useful life of

the improvements); Leon Cty. Educ. Facilities Auth. v. Hartsfield, 698 So. 2d 526,

527-30 (Fla. 1997) (holding that the appellant/lessee was the equitable owner of the

project because the lessor held legal title only to facilitate the project’s financing,

served as a conduit through which lease payments were used to repay the holders of

the certificates of participation that financed the project, and could not make any

profit and the appellant could acquire legal title by paying nominal

consideration); Ward v. Brown, 919 So. 2d 462, 463-65 (Fla. 1st DCA 2005)

(holding that the appellants were the equitable owners of the improvements on their

leaseholds on Navarre Beach and thus were not exempt from ad valorem property

taxes pursuant to section 196.199 because their 99-year leases were perpetually

renewable; they had the rights to use or rent the improvements, encumber their

interests, transfer their property rights, and realize any appreciation in value from

the sale or rental income; and they were responsible for insuring and maintaining the

improvements and for paying the taxes); Hialeah, Inc. v. Dade Cty., 490 So. 2d 998,

998-1001 (Fla. 3d DCA 1986) (holding that the appellant/lessee was the equitable

owner of the property and thus was subject to ad valorem real property taxes on the

                                          9
land because the thirty-year lease between it and the city was a mortgage given that

it was intended merely for securing money, the city held legal title to the property

only as security and all the burdens and obligations of ownership rested with the

appellant, and the appellant could acquire the property for nominal consideration

upon its payment of the debt); Mikos v. King’s Gate Club, Inc., 426 So. 2d 74, 74-

76 (Fla. 2d DCA 1983) (holding that the mobile home owners were the equitable

owners of the lots for ad valorem tax purposes because they had perpetual dominion

over their designated sites as members of the nonprofit corporation that had fee

simple ownership of the mobile home park and was prohibited from selling or

leasing any lot).

      Based on the facts of this case and the foregoing authorities, we conclude that

Appellant is not the equitable owner of the leased land. This is not a case entailing

the taxation of land where the lessee has the right to the perpetual renewal of its

lease, the lessee has the right to purchase the property for nominal consideration at

the end of the lease, the lessor holds legal title merely as security, or the lessee

otherwise has perpetual dominion over the property. Neither does this case involve

the taxation of improvements. Rather, Appellant bears all the burdens during the

term of the lease, at the end of which all the rights to the property revert to the lessor.

We further conclude that Appellant otherwise meets the requirements of section

196.199(2)(b)—that is, rental payments are due in consideration for the leasehold

                                            10
interest; the property was not originally leased for 100 years or more, exclusive of

renewal options; and the property was not financed, acquired, or maintained through

the issuance of bonds—, requiring the taxation of its leasehold interest in the land

only as intangible personal property.

      Turning now to Appellees’ constitutional challenge to section 196.199, we

reject their argument upon finding that they lack standing to raise the

constitutionality of this statute. See § 197.332(1), Fla. Stat. (2011) (providing that

the tax collector has the authority and obligation to collect taxes, interests, and

costs); Crossings At Fleming Island Cmty. Dev. Dist. v. Echeverri, 991 So. 2d 793,

794-803 (Fla. 2008) (holding that a property appraiser acting in his or her official

capacity lacks standing to raise the constitutionality of a statute as a defense in an

action by a taxpayer; finding its earlier holding in State ex rel. Atlantic Coast Line

Railway Co. v. State Board of Equalizers, 94 So. 681 (Fla. 1922), “that a public

official may not defend his nonperformance of a statutory duty by challenging the

constitutionality of the statute” to be binding and to “promote[] an important public

policy of ensuring the orderly and uniform application of state law”; and

citing Miller v. Higgs, 468 So. 2d 371 (Fla. 1st DCA 1985), disapproved on other

grounds by Capital City Country Club, Inc. v. Tucker, 613 So. 2d 448 (Fla. 1993),

as holding that the property appraiser lacked standing to file a declaratory action

alleging that Chapter 80-368, Laws of Florida, was an unconstitutional

                                         11
reclassification of leasehold interests in government-owned land because “‘[s]tate

officers and agencies are required to presume that the legislation affecting their

duties is valid, and they do not have standing to initiate litigation for the purpose of

determining otherwise’”). We also find inapplicable the public funds exception,

which provides that a ministerial officer has standing to challenge the

constitutionally of a law providing for the disbursement of public funds, because the

statute being challenged does not require the expenditure of public funds. See §

196.199, Fla. Stat. (“Government property exemption”); Echeverri, 991 So. 2d at

797 (“[C]aution[ing] that past precedent indicates that the public funds exception is

a narrow exception.”); Branca v. City of Miramar, 634 So. 2d 604, 606 (Fla. 1994)

(recognizing the public funds exception when the law requires the expenditure of

public funds); Santa Rosa Cty. v. Admin. Comm’n, Div. of Admin. Hearings, 642

So. 2d 618, 623 (Fla. 1st DCA 1994), approved in part, disapproved in part, Santa

Rosa Cty. v. Admin. Comm’n, Div. of Admin. Hearings, 661 So. 2d 1190 (Fla. 1995)

(“Legislation which affects the duties of state officers and agencies is presumed

valid, and such parties do not have standing to assert otherwise. Exceptions to this

rule exist where ‘the objecting party can show that he will be injured in his person,

property or other material right by virtue of the statute in question,’ or where the law

requires an expenditure of public funds.”) (Internal citations omitted).




                                          12
                                    Conclusion

      Accordingly, we REVERSE the trial court’s Final Judgment and REMAND

for further proceedings consistent with this opinion.



SWANSON and WINOKUR, JJ., CONCUR.




                                         13
