Judgment time for Denton Cove
- December 27, 2019
- / David Adlerstein
- / Media Coverage,Litigation & Trial Practice
By: David Adlerstein
Within the next several weeks, Circuit Judge Charles Dodson will rule on what is likely to be the most significant civil case during his time on the bench here, one that will affect the schools, an Apalachicola neighborhood and the availability of affordable rental housing for low-income Franklin County residents.
Following a two-day bench trial in early November, Dodson earlier this month received the closing arguments and proposed orders from the three parties involved in the case – the school district, the developer and a group of Apalachicola residents opposed to the creation of Denton Cove.
He will have to decide whether to compel the school district to sell an entire 3.66-acre site, on the grounds of the former Apalachicola High School complex, to an Orlando-area affordable housing developer.
For the past seven years, Denton Cove, Ltd, a wholly owned subsidiary of Wendover Housing Partners out of Altamonte Springs, has fought for the right to buy the entire parcel, for about $405,000 total, and then to construct 52 low-income housing units on the land at 17th Street and Avenue L.
The project is to be funded through the sale of roughly $9.4 million in federal low-income housing tax credits ($940,000 annually for 10 years) that the Florida Housing Finance Corporation first allocated Denton Cove in 2015, and has extended ever since.
Back in Dec. 2014, the deal, arranged by long-time Apalachicola resident and real estate broker Leon Bloodworth, was agreed to by both the school board, and the city of Apalachicola, who at the time were believed to each own a portion of the land.
The high school had closed back in 2007, and the 2.04 acres where it sat was without question the district’s, dating back to 1944, when Wallace and Augusta Quinn deeded it over for creation of the African-American Quinn High School, which closed down 25 years later, giving way to the building of a new integrated school on the site.
But about 1.62 acres earmarked for Denton Cove - the streets and alleys the city gave over to the district back in 1944 for Quinn to be built – was to revert to the city, since it was no longer being used for education purposes.
And this is where the whole thing gets complicated, and what Dodson has to untangle.
Do the schools have to sell the whole thing?
At issue at the current trial, in which the schools as plaintiffs are asking for a declaratory judgment, is whether the judge should order the district to sell Denton Cove the entire 3.66 acres. If all the land were bound up in a single, clear, well-defined contract between the developer and the district, then Dodson’s ruling would be predictable – a deal is a deal, the schools agreed to sell it back in 2014 and it’s time to move forward.
But in fact, there were two such contracts, one with the schools for 2.04 acres for the “lots and blocks,” for about $223,000. Since the original signing, the district has received $35,000 from Denton Cove for extending that contract up through the present-day, and there is no dispute the schools are obligated to sell the developer that land.
The other contract initially agreed upon was with the city for $177,000, for the other 1.66 acres that were once streets and alleys, referred to in court filings as “unconstructed roadways,” and which were to be vacated in order for the sale to be completed.
The complication here is that not long after the Van Johnson administration inked the deal with Denton Cove, a group of neighbors rose in opposition, stressing that the income thresholds governing the future rental units were too low for teachers, policemen, nurses and others to qualify for, standing in contrast with what many had understood to be the entire reason for the community’s backing.
After several well-attended and vocal meetings, the city commission decided not to meet a key condition of the contract, to vacate these unconstructed roadways, thereby thwarting the ability of Denton Cove to put up the entirety of its proposed 52 units.
Furious, the developer took the city to federal court, alleging a violation of fair housing laws. Senior U.S. District Judge Robert Hinkle did not find any such discrimination inherent in the city’s decision not to vacate the land, but as part of the case, the city abandoned any claim to these 1.62 acres, ensuring the schools would now hold title to the entire parcel.
Following mediation, the school board appeared to have settled with Denton Cove to sell the entire parcel, but board members did not approve it, and voted to have their outside counsel, Rumberger, Kirk and Caldwell out of Tallahassee, go to court for a determination as to whether they were compelled to sell Denton Cove this additional acreage.
The decision to litigate the matter has so far cost the district, through October, prior to the start of the Nov. 6 and 7 trial, a little more than $193,00, according to Shannon Venable, the district’s director of financial services. She noted that at the Feb. 11 school board meeting, when the decision was made not to accept Denton Cove’s settlement offer, “there were comments from public speakers regarding making personal donations to assist the school board with the legal fees. However, the board has not yet received any personal donations for this purpose.”
Legal arguments differ over how to interpret deal
At trial, Denton Cove had hoped to call school board chairman Jimmy Gander, and perhaps other school board members to the witness stand, but lawyers prevented that. School Board Attorney Barbara Sanders spent several hours testifying on behalf of the district, with other testimony coming from Denton Cove attorney Dwayne Gray, and Bloodworth, all three of whom had been instrumental in drawing up the original and subsequent contracts.
In addition to the two attorneys who argued the case, David Willis on behalf of the schools, and Richard Dellinger, from the Orlando firm of Lowndes Drosdick, on behalf of Denton Cove, a third attorney, Kent Safriet, from the Tallahassee firm of Hopping, Green and Sams, represented a core group of neighbors who formed HAPPI, (Historic Apalachicola Plat Preservation, Inc.), which entered the case as intervenors, enabling them to file briefs and contribute to the voluminous exhibits each side submitted.
As expected, the case involves an analysis of the jots and tittles of real estate and contract law, but it can be summed up by a look at key portions of the litigants’ closing arguments.
“After the city refused to close on its contract, Denton Cove’s principals became aware that the city did not own the 1.62 acres, something they should have known years earlier, and realized that Denton Cove should have negotiated different business terms with the school board,” wrote Willis.
“Denton Cove is now inviting this court to relieve (it) of the consequences of its original business arrangement and re-write the contract to the one that (it) wishes that it had negotiated instead of enforcing the terms of the actual contract between the school board and Denton Cove,” he wrote.
“Denton Cove was repeatedly provided with definitive documentation showing that the school board owned fee simple title to the 1.62 acres, in advance of entering into the final Dec. 2014 school board agreement,” Willis wrote. “Notwithstanding, Denton Cove made a conscious business decision to enter into the city purchase and sale agreement requiring the city to convey by a general warranty fee simple title to the 1.62 acres, streets and alleys.
“As a well-experienced real estate developer, Denton Cove knew better, and now wants the court to correct the error in its business judgment,” Willis wrote.
Denton Cove, of course, takes a different position, contending that all parties understood what was happening from the outset, and now must be compelled to complete the deal they first intended, since the law says these “unconstructed roadways” should now be considered to have merged with the core 2.04 acres.
“Unfortunately, local politics turned a simple transaction into a complicated one. V/hat should have resulted in Denton Cove providing much needed affordable housing to the families of Franklin County has resulted in a long and drawn out litigation (that) provides neither closure nor support for the most vulnerable citizens of Franklin County,” Dellinger wrote. “Over the course of this trial, the court has seen how politics have negatively affected the School Board’s willingness to uphold its end of the bargain.
“Despite the intent of the parties, the school board has attempted to ‘back out of the contract,’ arguing any technical argument it can muster at trial,” he wrote. “The evidence has clearly shown that all parties involved were aware of Denton Cove’s plan to obtain the entire property and that the school board agreement was executed to ensure that plan would come to fruition.”
While the school board wants Dodson to rule that it is compelled only to sell Denton Cove the 2.04 acres, a decision that would effectively nullify Denton Cove’s plans, the developer is asking him to “reform” the school board agreement to incorporate the 1.62 acres. Both the school board and HAPPI are arguing that can’t be done, because that smaller parcel was never offered for public bid. And they reject Denton Cove’s contention that this 1.62 acres should be considered an “appurtenance,” which is for such things as drainage structures, and subterranean components which are frequently not specified in contracts.
The closing argument noted that Jonathan Wolf, Denton Cove’s president had testified that the developers are willing to pay the schools a purchase price of $405,000, which is the combination of the original purchase price for the 2.04 acres, as well as for the unconstructed roadways.
“As the school board agreement allows the award of attorneys’ fees to the prevailing party, a reformation order could also result in neither party being liable for attorneys’ fees or costs,” Dellinger’s argument notes.
HAPPI focuses on the original plat
For its part, HAPPI submitted a proposed final order in keeping with the school board’s position and in doing so outlined a well-fined analysis with the purpose of breaking down what it calls Denton Cove’s “evasions” in its arguments.
“For all its protestations of affordable housing piety and eleemosynary purposes, Denton Cove is a vigorously for-profit, and extremely sophisticated, business that has engaged in a long succession of complex tax-credit-financed real estate developments throughout Florida,” wrote Safriet. “By its own testimony, it has developed an understanding of the regulations promulgated by, and a close relationship with, the Florida Housing Finance Corporation. It has created processes, forms, and transactional practices to deal with the complexities of its business environment. And it employs a sizable staff of professionals, and, obviously, a sufficiency of lawyers, to advance its interests.
“The record is devoid of any evidence that the school board intended to convey more than 2.04 acres for the price agreed for those 2.04 acres. Mr. (Jonathan) Wolf repeatedly criticized all the lawyers for not sorting out what he would have the court characterize as mere contractual detail, when, in fact, Mr. (Dwayne) Gray was in sole possession of the title commitments, and he alone failed to alert the other parties to the contract, not to mention his own client that there might be an issue,” he wrote.
“To remedy its lapses, Denton Cove has offered up a barrage of specious arguments and evasions to deflect blame,” Safriet wrote, noting what he called the “Blame the Lawyers Evasion.,” “The 3.66 Acre Evasion,” “The ‘Business Deal’ Evasion,” “The Breach of Warranties Evasion,” The Federal Lawsuit Evasion,” and “The Affordable Housing Evasion.”
“All the parties here acknowledge the need for housing in Franklin County,” Safriet wrote. “But the nature of the real estate development is simply not relevant to the contractual question before the court.”
HAPPI also provided much information regarding the 19th century origins, dating back to April 1836, and evolution of the city’s plat, much of which was destroyed in an 1874 fire. “Though the original 1836 Plat was subsequently lost in approximately 1930, the city had obtained a copy of what is believed to be a lithographic version of the original plat, made in 1837, which is today preserved in the University of Florida Library Archives,” Safriet wrote.
Denton Cove rejected the inclusion of this evidence, and asserted throughout the litigation that a map dated 1906 “Greater Apalachicola” affects the outcome of this case because of a dedication granting a public easement to the streets and alleys contained on the map.