Palm Beach Polo Holdings, Inc. v. Wellington Acquisition, LLC and Ethrensa Family Trust Company
2022-3003
Fla. Dist. Ct. App.Nov 29, 2023Background
- Palm Beach Polo Holdings (seller) sold a lot to Ethrensa Family Trust Co. (purchaser) in 2014; purchaser agreed to begin home construction within 24 months.
- Contract contained two post-closing restraints: (1) Section 5 — seller had a repurchase option if purchaser failed to commence construction (option price = lesser of buyer's sale price or 90% of original price); (2) Section 6 — purchaser could not sell before construction; breach of either invoked the right/option. 90% of original $800,000 = $720,000. 2021 assessed value exceeded that amount.
- Ethrensa entered a 2021 vacant-land sale for $1.2M requiring release of the right/option; Polo Holdings asserted the right and served notice exercising it for $720,000.
- Ethrensa sued for a declaratory judgment that the right/option was an unreasonable restraint on alienation (indefinite duration; fixed below-market price); Polo Holdings counterclaimed for specific performance.
- Trial court granted summary judgment for Ethrensa, holding the option invalid under Iglehart v. Phillips (fixed-price, unlimited-duration option unreasonable) and alternatively that the construction-based option was time-barred. Appellate court affirmed in part and reversed in part.
Issues
| Issue | Plaintiff's Argument (Polo Holdings) | Defendant's Argument (Ethrensa) | Held |
|---|---|---|---|
| Whether the repurchase right/option is an unreasonable restraint on alienation | Option is a material, legitimate contract term that encourages construction and discourages speculation; thus enforceable | Option is unlimited (as to sale-triggered repurchase), fixes a low repurchase price and therefore unreasonably restricts marketability | Court: Not an unreasonable restraint — provisions promote improvement and marketability; Iglehart distinguished |
| Whether the construction-triggered option (Section 5) is time-barred | Enforcement arises on vendor’s timely exercise after default; should be enforceable | Specific performance claim accrued after failure to commence construction; statute of limitations bars it | Court: Enforcement of the construction-triggered option is barred by the statute of limitations |
| Whether the sale-triggered option (Section 6) is time-barred | Accrual occurs when purchaser contracts to sell without a residence; Polo sued within limitations | Option is longstanding but claim accrued earlier, so barred | Court: Sale-triggered option accrued when Ethrensa entered sale contract; Polo’s suit was timely as to that option |
Key Cases Cited
- Iglehart v. Phillips, 383 So. 2d 610 (Fla. 1980) (adopts a reasonableness test for restraints on alienation; fixed-price unlimited-duration options generally unreasonable)
- Wing, Inc. v. Arnold, 107 So. 2d 765 (Fla. 3d DCA 1958) (lease-dependent purchase options tied to improvements can be reasonable)
- Sandpiper Dev. & Constr., Inc. v. Rosemary Beach Land Co., 907 So. 2d 684 (Fla. 1st DCA 2005) (limited-duration fixed-price repurchase option not an unreasonable restraint where it controls pace of development)
- Smurfit-Stone Container Enters., Inc. v. Zion Jacksonville Ltd. P’ship, 52 So. 3d 55 (Fla. 1st DCA 2010) (reasonableness inquiry focuses on whether restraint undermines marketability or discourages improvement)