Mandell v. Fortenberry

• Decision Date: 16 January 1974
• Docket Number: No. 42891,42891
• Citation: 290 So.2d 3
• Parties: Lester N. MANDELL et al., Petitioners, v. C. R. FORTENBERRY et al., Respondents.
• Court: Florida Supreme Court

Page 3

290 So.2d 3

Lester N. MANDELL et al., Petitioners, v. C. R. FORTENBERRY et al., Respondents.

No. 42891.

Supreme Court of Florida.

Jan. 16, 1974.

Rehearing Denied March 11, 1974.

John M. Robertson of Robertson, Williams & Duane, Orlando, for petitioners.

William E. Weller of Rose & Weller, Cocoa Beach, and Walter C. Shepard of Shepard, Shepard & Minot, Cocoa, for respondents.

BOYD, Justice.

This cause is before us on petition for writ of certiorari to review the decision of the District Court of Appeal, Fourth District, reported at 271 So.2d 170.

The facts, as found by the District Court, are as follows:

'This is an appeal from a final judgment of the Circuit Court for Orange County, Florida, in a case tried without a jury. On 26 November 1968 the plaintiffs filed an amended complaint which alleged that on 14 June 1963 the defendant Rockett Builders, Inc., executed a note and mortgage to American Federal Savings and Loan Association for $43,300.00. The other named defendants were alleged to have endorsed the note before it was delivered to American Federal. A copy of the mortgage is attached to the complaint. The plaintiffs joined in the execution of the mortgage, but did not assume the obligation to pay the note which it secured. Plaintiffs executed the mortgage solely for the purpose of imposing the mortgage lien on the plaintiffs' interest in the real property described in the mortgage. The complaint avers that the defendants defaulted on the note which the plaintiffs thereafter paid. The relief sought was a declaration that the plaintiffs were entitled to sue the defendants on the promissory note and a judgment thereon for the amount paid on the note, together with interest, costs, and attorneys fees.

'The evidence and the factual stipulations of the parties indicate that the plaintiffs as owners of a tract of land in Brevard County, Florida, executed a ninety-nine year lease to the defendant Rockett Builders, Inc., on 15 November 1962. The lease term commenced 1 January 1963. The lease provided that any building or permanent improvement erected on the premises would immediately become the property of the lessors. The lease also provided that in the event the lessee desired to mortgage the leased property, the lessors, without assuming any liability for the repayment of the debt, would join in the execution of the mortgage. On 14 June 1963 the defendant Rockett Builders, Inc., executed a note to American Federal Savings and Loan Association in the amount of $53,300.00 payable in monthly installments. The note was endorsed by the other defendants as accommodation endorsers. The note was secured by a mortgage of even date executed by Rockett Builders, Inc., to American Federal Savings and Loan Association. The mortgage encumbered the real property subject to the ninety-nine year lease, and the plaintiffs joined in the mortgage in accordance with the requirements of the lease.

'The note went into default on 1 March 1965 and was paid off by plaintiffs on 3 June 1968. The amount paid to extinguish the principal and interest due on the note was $58,142.87. Additionally, defendant Rockett Builders, Inc., went into default on the ninety-nine year lease. As a consequence the plaintiffs retook possession of the leased premises either by voluntary relinquishment by the lessee or by a judicial eviction. It is expressly admitted by the defendants that there was no foreclosure of the mortgage.

'At the completion of all the evidence, the trial court entered a final judment in favor of the defendants which found:

'. . . that Plaintiffs failed to sustain the burden of proof required of them in showing that they are entitled to any relief, and further failed to show by the greater weight of the evidence the extent of damages to Plaintiffs, if any. . . . " ¹

Upon the basis of the foregoing facts, the District Court held as follows:

'The trial judge apparently found for the defendants on the ground that the plaintiffs had not shown the value of the improvements placed on the land by the defaulting lessee, Rockett Builders, Inc., in order that such might be set off against the amount of the subrogation claim. In support of the trial judge, the defendants suggest that the plaintiffs' position was analogous to that of a mortgagee who, after having acquired title to the mortgaged realty by foreclosure, seeks a deficiency judgment. Such a creditor, according to defendants, would be required to credit against the debt the value of the security reduced to possession by foreclosure. We think this analogy is not appropriate. It ignores the fact that the plaintiffs were the owners of the security (subject to a leasehold estate) at the time it was mortgaged and acquired possession thereof not by foreclosure, but by termination of the lease. If the contention of the plaintiffs and the position of the trial court is correct, the equitable remedy of subrogation would be effectively destroyed for anyone who permits his own property to be used as security for the debt of another.

'Under the facts of this case, we fail to see how the plaintiffs would be unjustly enriched by receiving both the improvements and reimbursement for the monies paid to American Federal. Unjust enrichment involves receipt of more than one is due, as where a debt is paid twice. The plaintiffs had a legal right to the improvements by virtue of their lease with Rockett Builders, Inc. They had a separate and additional right to enforce American Federal's note by virtue of their payment of the same to protect their real estate from foreclosure. Furthermore, if unjust enrichment were a factor to be considered in this case, it would have been an affirmative defense or an avoidance as to which the burden of proof would rest on defendants. Our scan of the record--which of necessity was directed by the briefs of the parties--indicates that there was no competent substantial evidence of unjust enrichment in that there appears no substantial evidence as to the value of the improvements to the plaintiffs. Compare Woodhull v. Rosenthal, 1875, 61 N.Y. 382, 31 N.Y.App. 120.' ²

In their petition, petitioners allege that:

'The foregoing ruling of the District Court is in conflict with other decisions in this State for the following reasons:

'(a) Under the doctrine of equitable subrogation, the Plaintiffs stood in the shoes of the mortgage creditor, American Federal. Furlong v. Leybourne, 171 So.2d 1 (Fla.1964). Thus, the Plaintiffs could acquire no greater rights than the rights of the creditor. Bradford v. Marvin and Martin, 2 Fla. 463 (Fla.1849).

'(b) The creditor would not be allowed to take possession of the property which the debt was created to pay for and also sue for the full amount of the debt. Romarch (Romanach) v. A. J. Armstrong, 172 So.2d 444 (Fla.1965); American Process Co. v. Florida White Pressed Brick Co. (56 Fla. 116), 47 So. 942 (Fla.1908); Helton v. Sinclair (93 Fla. 1121), 113 So. 568 (Fla.1927); Voges v. Ward (98 Fla. 304), 123 So. 785 (Fla.1929); Kaufman (Kauffman) v. International Harvester Co. (153 Fla. 188), 14 So.2d 387 (Fla.1943); Baer v. General Motors Acceptance Corp., (101 Fla. 913), 132 So. 817 (Fla.1931). By allowing the plaintiffs to exercise their full individual rights to possess the encumbered property that the debt was created to acquire in addition to the rights of the Mortgagee, American Federal, the Plaintiffs are being allowed to acquire much greater rights than the creditor possessed. The rights of American Federal were to sue on the note, or to apply the security to satisfaction of the debt and sue for any deficiency between the fair market value of the security received and the amount of the debt. Grace v. Hendricks (103 Fla. 1158), 140 So. 790 (Fla.1932)."

The District Court found that the improvements made by the tenant did not substantially increase the value of the property. The record shows that the buildings cost $71,179.04, and development of a miniature golf course cost approximately $15,000.00. These improvements were strictly for use by the tenant, and the District Court found 'no competent substantial evidence of unjust enrichment in that there appears no substantial evidence as to the value of the improvements to the plaintiffs.'

Although the lease provided that all improvements added to the land would belong to the lessors upon being placed thereon, we are of the opinion that if, in a similar situation, the lessors were to receive substantial unjust enrichment, a court of equity could consider same, and reduce the damages payable to the lessors accordingly. As the District Court properly observed, the duty to plead and prove such unjust enrichment is on the defendants, since 'it would have been an affirmative defense or an avoidance as to which the burden of proof would rest on defendants'.

This Court is aware that some buildings would add to, and others would diminish, the actual value of the real property. For example, an automobile 'dealership', with its necessary showroom, inventory, and service areas, could not be easily converted to other uses, while a 'standard' retail merchandise store could generally be converted to a wide variety of uses. If it had been demonstrated, in this instance, that the lessors sold their property for a greater price, Because of the new buildings and golf course, than they could have received from the naked land, the chancellor could have properly considered that fact. No such proof appears here.

There is a presumption that the parties signing legal documents are competent, that they mean what they say, and that they should be bound by their covenants. This being so, it is only in those cases in which the unjust enrichment is substantial, and obviously inequitable, that courts should grant relief to those who break their valid contracts.

The foregoing petition for writ of certiorari reflected apparent jurisdiction in this Court. We issued the writ and have heard...