City, CRA File 12-Count Lawsuit Against Dixie Walesbilt LLC

The fate of the storied Walesbilt Hotel has been placed in the hands of the courts after the City of Lake Wales and the Community Redevelopment Agency filed a twelve-count lawsuit in Circuit Court. The lawsuit effectively deters any immediate work to rehabilitate the structure, which has been the focus of interest by a team of developers working with current owner Ray Brown.

The lawsuit alleges that Brown, through his corporation Dixie Walesbilt LLC, defrauded the City and CRA to induce them to grant him the title to the eleven-story building a decade ago. The suit seeks to have that grant of title overturned and the property returned to city control.

Brown had won a six month "licensing agreement" on July 15, 2009, after proposing to create condominium apartments in the building. Brown was the only one of three proposers to suggest the building could become condos. He was chosen by a committee consisting principally of downtown businesspeople.

That agreement gave Brown's company "an exclusive opportunity to conduct pre-construction investigations, environmental assessments, and geotechnical reviews of the Hotel, all to inform DWL's consideration whether to enter into a redevelopment contract with the City of Lake Wales and the CRA."

At the end of period, in early 2010, Dixie Walesbilt LLC presented a detailed proposal which the city relied upon as the basis of the contract that eventually gave him title to the building. The city now alleges that statements in that proposal were false and therefore fraudulent.

"The complaint contains the detailed basis for six counts of Fraud in the Inducement and eight counts of Breach of Contract," said CRA Chairman Robin Gibson. The CRA is represented by Kevin Ashley, and attorney with Peterson Myers.

"When false statements on important matters are knowingly made to induce another to act, the law says those acts were based on fraud," Gibson said. "The remedy for fraud is to rescind the transaction and put the parties back where they were before the fraud occurred."

The documents filed with the courts draw heavily upon the original contract. Among the cited instances alleging fraud are Brown's representations that individual living in Toronto and New Delhi were participating in the project and had "sound experience" in redeveloping such buildings and were investors in the project.

The proposal also stated that Brown "has an extensive construction background," which the city now says is false, alleging that Brown's experience was limited to "working as a teenager on building demolition projects with his father" and "working as a college student on a fraternity house water damage project." Other properties once owned by Brown in Winter Haven were not renovated during his time of ownership, according to the suit.

The contract required Brown's company to create "up to 40" condominium units, a health club, and 17,000 square feet of retail space. The hotel remains vacant, as it has been since 1995.

The city and CRA action was taken just before the ten-year limit of the Statute of Repose would have elapsed, leaving the plaintiffs with no legal recourse. In the final weeks as that clock ticked down Brown came forward with a development group poised to launch a redevelopment project.

The city negotiated, but a "novation" agreement, which would have restarted the clock, could not be reached. Placing the title in escrow was a city demand in the negotiations but was considered a "poison pill" according to representative of that team.

"There is no fluff," Gibson said of the lawsuit, filed with the Tenth Judicial Circuit. "Each count is solid. A reading of the complaint is self-explanatory."

The hotel was completed in January 1926, months after a major Hurricane devastated south Florida, killing thousands, and deflating the real estate bubble that had driven outsized expectations of a permanent land boom in Florida. It marked the pinnacle of that boom, which soon faded into the Great Depression.