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Pipeline Contractors, Inc. v. Keystone Airpark Authority

Florida Court of Appeals, First District

July 10, 2019

Pipeline Contractors, Inc., a Florida corporation, and The Hanover Insurance Company, a New Hampshire corporation, Appellants,
v.
Keystone Airpark Authority, a political subdivision of the City of Keystone Heights, and Passero Associates, L.L.C., a Florida limited liability company, Appellees.

         Not final until disposition of any timely and authorized motion under Fla. R. App. P. 9.330 or 9.331.

          On appeal from the Circuit Court for Clay County. Don H. Lester, Judge.

          David L. Worthy, Donald A. Niesen, and Christopher W. Lewis of Niesen, Price, Worthy, Campo, P.A., Gainesville, for Appellants.

          James J. Taylor Jr. and Katelyn T. Hardwick of the Taylor Law Firm, P.A., Keystone Heights, for Appellees.

          PER CURIAM.

         Pipeline Contractors, Inc., (Pipeline) and The Hanover Insurance Company (Hanover) challenge the trial court's determination that Keystone Airpark Authority (KAA) had capacity to contract, to sue, and to be sued. We agree with the trial court that estoppel applies to preclude this argument and affirm the final judgment in favor of KAA.

         In 2008, Pipeline and KAA entered into a contract for the construction of new airport facilities at the Keystone Airpark. Pipeline's performance was guaranteed by a bond issued by Hanover. KAA did not pay everything that Pipeline asserted it was entitled to under the construction contract, and in 2010, Pipeline sued KAA for breach of contract. KAA counterclaimed for breach of contract based on defects in the work, and KAA filed a third-party complaint against Hanover seeking relief under the performance bond.

         Little happened in the litigation for some six years. Then Pipeline and Hanover amended their answer and moved for summary judgment on KAA's claims, asserting for the first time that KAA's lawsuit should be dismissed because KAA was not a legal entity and did not have the capacity to contract, sue, or be sued. In short, the argument was that under the Uniform Special District Accountability Act of 1989 (Chapter 189, Fla. Stat. (1991)), any special district comprising more than one county required the Legislature's authorization. All of the KAA district was within the city limits of Keystone Heights, but the KAA district extended from Clay County west into Bradford County.[1] Nonetheless, when the KAA was formed in 1991, only the City of Keystone Heights, and not the Legislature, acted in establishing it.

         In 1992, the Legislature amended the law to provide that legislative approval is not required for special districts comprising more than one county, so long as the entire district is within a single municipality. See § 189.403(3), Fla. Stat. (1992); cf. Forsythe v. Longboat Key Beach Erosion Control Dist., 604 So.2d 452, 455-56 (Fla. 1992) (holding that the pre-amendment version's plain text provided that a special district with territory in multiple counties was an independent special district requiring legislative authorization). Pipeline and Hanover contended that the legislative change did not cure the defect in KAA's earlier formation.[2]

         The trial court rejected the lack of capacity defense, concluding that the court could deny Pipeline and Hanover's summary judgment motion without resolving whether KAA was validly created or whether it later had the right to contract, sue, or be sued. Instead, the court decided, because there was "no question that Pipeline and Hanover [had] received the benefits of the questioned contracts," Pipeline and Hanover were estopped from "challenging KAA's capacity to contract." After a seven-day bench trial, the trial court entered a final judgment in favor of KAA.[3]

         Pipeline and Hanover now appeal the trial court's denial of summary judgment. Arguing that the trial court's application of estoppel was in error, Pipeline and Hanover contend that the court should have reached the merits of their argument regarding KAA's capacity and ruled in their favor. Pipeline and Hanover ask us to reverse the trial court on the issue of estoppel and remand the case with directions to vacate the final judgment and dismiss all claims between the parties.

         The trial court relied on Booske v. Gulf Ice Co., 5 So. 247 (Fla. 1888), in determining that estoppel applied. At issue in Booske was a contract between individuals and a corporation. Id. at 248. There was also a surety bond guaranteeing performance. Id. After litigation ensued, the principal and obligor on the bond cited Gulf Ice Company's improper corporate creation in arguing that they should be immune from liability on the contract. Id. at 250-51. In rejecting this argument, the Florida Supreme Court held:

A person who has contracted with an association assuming to be incorporated and acting in a corporate capacity cannot, after having received the benefit of the contract, set up as a defense to an action brought by such company that the latter was not legally incorporated, or ...

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