Opinion ID: 75799
Heading Depth: 4
Heading Rank: 1

Heading: Whether the County Had Authority to Enter into the Lease

Text: 22 The County's only argument regarding the first prong of the Frankenmuth test is that the County did not have the authority to enter into the Lease because the non-substitution clause in the agreement violated Article VII, § 12 of the Florida Constitution. In other words, the County argues that it could not have ratified the contract because it could not have ratified the non-substitution clause absent a voter referendum as required by Article VII, § 12 of the Florida Constitution. As discussed in Part A, supra, we agree with Frankenmuth that the illegal lease term was a severable or non-essential part of the agreement, and therefore the County could have approved the agreement pursuant to its authority under Fla. Stat. ch. 125.031. We recognize that in Frankenmuth, the Florida Supreme Court indicated that a government entity commits an ultra vires act when it enters into a contract that violates its constitutional obligations, and in this case the Florida Supreme Court concluded that the non-substitution clause conflicted with the constitutional requirement that the County conduct a voter referendum before entering into a contract that would require a levy of taxes to satisfy its obligations. See Frankenmuth, 769 So.2d at 1022 (explaining that a city government may not enter into an agreement that purports to contract away the city's police powers); P.C.B. Partnership v. City of Largo, 549 So.2d 738, 740 (Fla. 2nd Dist.Ct.App.1989) (same). However, unlike P.C.B., where the purpose of the contract was itself unconstitutional, the unconstitutional non-substitution clause here was not a central part of the Lease. Here, the Lease payment terms and schedule were the central parts of the agreement. The non-substitution clause merely served as a supplementary penalty provision that was designed to discourage the County from deciding to cancel the lease before its full term. Therefore, the district court properly ruled that the County's ratification of the agreement was within the County's authority under Fla. Stat. ch. 125.031, and that Frankenmuth had satisfied its burden under the first prong of the ratification test. 23 2. Whether the County Ratified the Agreement in the Same Manner in which the Agreement Would Have Been Initially Approved 24 The district court concluded that the only statutory requirement necessary for the County to lawfully approve the Lease in the first instance was compliance with the Florida Sunshine Law. Because the County reviewed the lease arrangement and agreed to continue using the leased computer systems at public meetings in May and June 1994, the district court concluded that the County had complied with the Sunshine Law. We find no error in this conclusion. 25 Florida law does not require that the County issue a formal resolution to enter into a lease agreement. Conceding that no rule requires that a contract be approved by formal vote or resolution, the County nonetheless argues that common law requires some functional equivalent to establish that the County intended to adopt the lease-purchase agreement. However, the Florida Supreme Court has not articulated any specific requirement for such a functional equivalent. Indeed, in explaining the second prong of the Frankenmuth test, the Florida Supreme Court stated: 26 In its opinion, the federal district court defined approve as to have or express a favorable opinion of or to accept as satisfactory. In addition to the definition adopted by the federal district court, the dictionary definition of approve also includes to give formal or official sanction to. Thus, the dictionary shows that the term approve may consist of either an informal or formal expression of assent. 27 Frankenmuth, 769 So.2d at 1020 (internal citations omitted). The County voted in June 1994 to adopt a computer networking plan that used the leased equipment. Whether deemed to be a formal or informal expression, there is no question that this action signified the County's assent to the use of the leased equipment. 28 The County, however, argues that before it can assent to any contract, either formally or informally, Florida law requires that the specific terms and conditions of the contract be presented to the county commission at its public meeting. We are unable to find support in the cases cited by the County, or in Florida law generally, for such a proposition. For example, the County's reliance on Hoskins v. City of Orlando, 51 F.2d 901 (5th Cir.1931) is misplaced. In Hoskins, the mayor of the city of Orlando had signed a lease for an apartment building. Id. at 902. That lease was later repudiated by the city. Id. The court invalidated the lease because it had not been made for a legitimate municipal purpose and was thus beyond the city's power. Id. at 904-05. Furthermore, unlike the case at bar, the lease at issue in Hoskins involved real property and thus implicated specific statutory requirements, including the unanimous vote of the city council. Id. While the city council had initially approved the lease unanimously, the lease ultimately signed by the mayor was so different from the original lease as to amount to another transaction. Id. at 906. 29 Ramsey v. City of Kissimmee, 139 Fla. 107, 190 So. 474 (1939), is likewise inapplicable. There, the court held that the city had not ratified an engineering contract because the city charter expressly required that all such contracts be evidenced by resolution or ordinance. Id. at 112, 190 So. 474. Thus, ratification under that city charter was not possible absent formal resolution. There is no evidence in this case that Escambia County's Code requires a similar formal resolution to approve or ratify a contract. Frankenmuth, 769 So.2d at 1021. 9 30 We conclude that the district court did not err in determining that the County's ratification of the lease complied with the Florida Sunshine Law and that such compliance was the only statutory requirement necessary for the County to lawfully approve a contract. Since the Board in 1994 initially considered whether to integrate the Unisys system into its new computer network at a public meeting, and ultimately agreed to adopt a technology plan that included this equipment at a public meeting, the approval process satisfied the Sunshine Law's requirements. 10 Thus, the district court did not err in finding that the County had informally or implicitly adopted the lease agreement at these public meetings in the same manner in which the agreement would have been initially approved. 31 3. Whether the County Was Aware of the Material Terms of the Lease 32 The final prong of the Frankenmuth test requires the Board to have been aware of the agreement's material terms at the time it adopted or accepted the lease agreement. Frankenmuth, 769 So.2d at 1022-23 ([w]henever ... [an entity] is sought to be held liable on the ground of ratification, either express or implied, it must be shown that he ratified upon full knowledge of all material facts.). The district court concluded that the County had full knowledge of the material terms of the computer lease because: (1) over a three year period, the County had approved the Comptroller's budget, which consistently included a line item requesting funding for the lease payments; (2) the County had voted to change its technology plan to include the Unisys computer systems; and (3) in two separate audits, an independent auditing company had informed the County that it appeared that an official in its employ had entered into an unauthorized lease, and the County failed to investigate or repudiate the lease. The County argues that it was not aware of all of the material terms of the lease-purchase agreement because: (1) it was unaware of the non-substitution clause; (2) some equipment and pricing terms were added to the agreement after the 1994 meetings; and (3) it voted to use the computer systems without knowledge of the high financing costs associated with the lease agreement. 33 The record reflects that between 1993 and 1994, the County was fully aware of the equipment and costs associated with the lease. Specifically, in August 1993, Flowers sent the Board Chairman and members of the Board a letter informing them about the installation of the Unisys mainframe computer, describing the computer's components, and disclosing his relationship with Unisys. Later, in May 1994, Flowers sent the County Board a letter indicating that the equipment had been updated, and suggesting that the County integrate his computers with the County's other computers to create an area network. By the June 1994 Commission meeting, when the Commission affirmed the plan to integrate the Comptroller's computer system into the County's network, the County Commissioners knew that Flowers had acquired new computer equipment and they knew about the characteristics of that equipment. Moreover, the County approved budget expenditures to pay the Lease for three consecutive years between 1992 and 1994, and therefore generally knew about the Lease's costs. Although the County correctly points out that the costs that Flowers budgeted for computer equipment before Flowers signed the Unisys Lease were substantially similar to the cost budgeted after he signed that particular lease, there is no question that the Commission was aware of the new lease because Flowers informed the County that he had acquired new computer equipment in his letter of August 1993. 34 We are satisfied that the evidence supports the conclusion that the County was aware of the material terms of the Lease, both because of the information specifically presented to the Commission and because the actual Lease was at all times available to the Commission for reference. While Frankenmuth stated that the ratifying body is charged only upon a showing of full knowledge and not because it had information before it that should have prompted an inquiry, it further recognized that sometimes a petitioner can show that a party ratified an agreement because he was willfully ignorant, or purposely refrained from seeking information, or that he intended to adopt the unauthorized act [or agreement] at all events, under whatever circumstances.  Frankenmuth, 769 So.2d at 1022 (emphasis added). The evidence in this case suggests that the County intended to adopt the Lease regardless of its terms, as it made a long term commitment to use the equipment when it integrated the system into its network without inquiring into the Lease's specific financing requirements or penalties. Also, the County consistently granted the Comptroller funds to make the Lease payments for the three years before this dispute, and only challenged the arrangement after discovering that Flowers had committed other errors in running the Comptroller's office and deciding that he should be removed. Approval of the Comptroller's budget alone may not have been enough to prove an intent to ratify the lease agreement, particularly given the similarity of the pre- and post-Unisys lease budget requests. Nevertheless, the budget approval, combined with the facts that the County knew Flowers had acquired a new computer system and agreed to integrate this system into its own computer system, is sufficient to prove intent to ratify. In sum, the evidence clearly supports the conclusion that the County intended to be bound by the agreement. Consequently, the Board's actions show that it made itself aware of the material aspects of the agreement that it believed were of primary concern, and therefore its actions satisfy the third part of the Frankenmuth test.