CRC 603 and CRC 1103, LLC v. North Carillon, LLC, 2011 WL 3916151 (Fla. 3d DCA Sept. 7, 2011)

This case is a South Florida special, arising out of the purchase of high-end condominium units in 2006. Borrowing a phrase from former Fed. Chairman Alan Greenspan, Judge Vance Salter referred to the period as “an irrationally exuberant real estate market.” At issue were deposits, exceeding $176,000.00 a piece, on two units. Pursuant to Florida Statute §718.202, a purchase contract is voidable (and the deposits recoverable by the buyers) if the developer failed to comply with the statute, which in §1 requires the developer to hold a deposit of up to 10% of the sales price in an escrow account, and in §2 requires any amounts in excess of 10% of the sales price to be held in a “special escrow account. ” The issue in the case was whether a developer could use a single escrow account versus two separate accounts. The trial court had dismissed the buyers’ action against the developer and the escrow agent.

Judge Salter and his colleagues at the Third DCA found the opinion of federal Judge Cecilia Altonaga, in Double AA International Investment Group, Inc. v. Swire Pacific Holdings, Inc., 674 F.Supp.2d 1344 (S.D. Fla. 2009), to be persuasive. Judge Altonaga ruled that given the plain language of the statute by giving meaning to each word as written, and avoiding an interpretation that would render portions of the statute surplusage (i.e., the use of the word “special,” in §2) the Court concluded that the statute requires the developer to establish two separate escrow accounts.

Simple enough?  Not quite. In the spring of 2010, at the behest of developers, and in response to the December 2009 opinion from Judge Altonaga, Florida’s Legislature amended §718.202.  The amendment purported to be a “clarification” of the statute, and permitted use of a single escrow account. The buyers argued, and the Third District agreed, that the 2010 amendment could hardly have been intended to “clarify” a set of escrow requirements that were enacted by the Legislature more than 25 years ago. Furthermore, even if the 2010 amendment was intended as a clarification, and therefore could be applied retroactively, the Third District found that retroactive application would be unconstitutional as it would impair the buyers’ vested contractual rights in violation of Article I, §10, of the Florida Constitution. The court did, however, affirm the dismissal of the claims against the escrow agent.