Alexander/Davis Properties, Inc. v. Graham, s. 77-2168

• Decision Date: 04 March 1981
• Docket Number: Nos. 77-2168,77-2193 and 77-2223,s. 77-2168
• Citation: 397 So.2d 699
• Court: Florida District Court of Appeals
• Parties: ALEXANDER/DAVIS PROPERTIES, INC., Dorothy Pearigen, Sally Alexander, Shade Murray, Jr. d/b/a C. D. Joint Venture, First & Mid South Advisory Co., Willie K. Davis, Franklin G. Clark, Michael G. Shears, John A. Thweatt, Richard H. Botts, David F. Clark, Dennis E. Clowers, David K. Ward, O. William Long & Glenn Eubanks d/b/a C. D. Joint Venture, whom among others are named as members of C. D. Joint Venture, Appellants, v. David E. GRAHAM and Roberta Jane Graham, his wife, Appellees. FIRST & MID SOUTH ADVISORY COMPANY, Willie K. Davis, Franklin G. Clark, MichaelG. Shears, John A. Thweatt, Richard H. Botts, David F. Clark, Dennis F.Clowers, David K. Ward, O. William Long, Glenn Eubanks, who among others arenamed as membersof C. D. Joint Venture, and Alexander/Davis Properties, Inc., Appellants, v. David E. GRAHAM and Roberta Jane Graham, his wife, Appellees.

Page 699

397 So.2d 699

ALEXANDER/DAVIS PROPERTIES, INC., Dorothy Pearigen, Sally Alexander, Shade Murray, Jr. d/b/a C. D. Joint Venture, First & Mid South Advisory Co., Willie K. Davis, Franklin G. Clark, Michael G. Shears, John A. Thweatt, Richard H. Botts, David F. Clark, Dennis E. Clowers, David K. Ward, O. William Long & Glenn Eubanks d/b/a C. D. Joint Venture, whom among others are named as members of C. D. Joint Venture, Appellants, v. David E. GRAHAM and Roberta Jane Graham, his wife, Appellees.

FIRST & MID SOUTH ADVISORY COMPANY, Willie K. Davis, Franklin G. Clark, MichaelG. Shears, John A. Thweatt, Richard H. Botts, David F. Clark, Dennis F.Clowers, David K. Ward, O. William Long, Glenn Eubanks, who among others arenamed as membersof C. D. Joint Venture, and Alexander/Davis Properties, Inc., Appellants, v. David E. GRAHAM and Roberta Jane Graham, his wife, Appellees.

Nos. 77-2168, 77-2193 and 77-2223.

District Court of Appeal of Florida, Fourth District.

March 4, 1981.

Rehearing Denied May 21, 1981.

Davis W. Duke, Jr., of McCune, Hiaasen, Crum, Ferris & Gardner, Fort Lauderdale, for appellants First & Mid South Advisory Co., Willie K. Davis, Franklin G. Clark Michael G. Shears, John A. Thweatt, Richard H. Botts, David F. Clark, Dennis F. Clowers, David K. Ward, O. William Long and Glenn Eubanks, who among others are named as members of the C. D. Joint Venture.

Terrence J. Russell and Steven J. Gutter of Ruden, Barnett, McClosky, Schuster & Schmerer, Fort Lauderdale, for appellants C. D. Joint Venture, Alexander/Davis Properties, Inc., Dorothy Pearigen, as Executrix of the Estate of James Pearigen, Deceased, and Sally Alexander, as Executrix of the Estate of Charles F. Alexander, Deceased, whom among others are named as members of C. D. Joint Venture.

William Robert Leonard of Coleman, Leonard & Morrison, Fort Lauderdale, as additional counsel for appellant Shade Murray, Jr.

Gerald Mager of Abrams, Anton, Robbins, Resnick, Schneider & Mager, Hollywood, and Louis N. Scholnik of Graham, Hodge, Larson & Hume, P.A., Fort Lauderdale, for appellees.

PER CURIAM.

These are consolidated appeals by members of a joint real estate development venture from a final judgment entered against them and in favor of another partner. The principal contention raised on appeal is that the trial court erred in determining that appellants, hereafter referred to as the Mid-South group, were guilty of fraud in inducing the appellee, David Graham, to forebear from meeting certain obligations of the venture. We reverse.

The appellee, David E. Graham, an attorney, entered into a contract to purchase one hundred and twenty (120) acres of farm land from Virgil Green for $1,620,000.00 to be paid $405,000.00 in cash and $1,215,000.00 to be paid in the form of a promissory note securded by a purchase money mortgage. The first payment on the note, in the amount of $121,500.00, principal plus accrued interest, was due on October 1, 1974, with a similar payment due each year for nine years thereafter. Twenty acres of the property was to be released free and clear of the mortgage at the time of closing.

On September 6, 1973, Graham and the Mid-South group entered into an agreement by which Graham agreed to sell a substantial interest in the Green contract. This agreement was superseded by a second agreement executed on November 19, 1973. Finally, the parties executed a joint venture agreement on November 20, 1973.

In the November 19th agreement, Graham agreed to assign seventy percent (70%) of his interest in the Green contract to the Mid-South group for $1,500,000.00 to be paid by a note to be executed by the joint venture and secured by a second mortgage against the property, title to which was to be taken in the name of a trustee for the benefit of the joint venture. The parties agreed to enter into a joint venture for the purposes of owning, developing, financing, and selling the subject property, with Graham to contribute his 30% interest in the Green contract to the venture, and Mid-South, its 70% interest. Mid-South agreed to loan $605,000.00 to the venture to secure the purchase of the property pursuant to the Graham-Green contract. ¹ Of that sum $405,000.00 was to be used to purchase the property from Green, $150,000.00 was to be loaned by the venture to Graham, and $50,000.00 was to be used as working capital for the venture. In the agreement, Graham warranted that the property was presently being rezoned to planned unit development status and that water and sewer facilities would be available on the property by June of 1974.

The joint venture agreement of November 20th expressly provided that one of its purposes was to borrow or raise monies to pay the Green mortgage. Shade Murray, Jr., one of the appellants, was designated to be the managing partner of the venture, and was granted "exclusive power to manage, operate and determine the policy of the Venture." Graham was to have no control of the venture business except to act as attorney for the venture. The $605,000.00 loaned by the Mid-South group was to be repaid in full prior to the payment of the Graham mortgage, and Graham was to subordinate his mortgage to that loan and to any other loans secured by the venture. With respect to the responsibilities of the partners, the joint venture agreement provided in part:

6. LIABILITIES OF PARTNERS. While all members of the Venture are partners in said Venture, it is specifically understood and agreed that various members of the venture have specific responsibilities.

Graham shall personally guarantee and be fully responsible for the payments on the Green Purchase Money Mortgage and all other members of the venture shall have no responsibility for said liability except that their interest in the land purchased from the Greens shall be liable for said debt.

All other expenses, liabilities and debts necessary for the carrying out of the purposes of this Venture shall be the responsibility of the Mid-South Group, and Graham shall not be required to assume liability for these said debts, and if a lender does require that he sign any evidence of such debts, he shall be fully indemnified by the other members of the Venture; provided, however, that Graham shall subordinate his interest in the land to development lenders or loans superior to Grahma's (sic) interest as specified herein or in other documents which relate to this venture's business.

Subsequently, Graham was given a note for $1,520,000.00, ² secured by a purchase money mortgage which expressly provided, as did the Green mortgage, that twenty acres of land would be released from all liens at the time of closing. Thereafter, the transaction closed as agreed, the venture received title to the property, and the venture executed a note to Mr. and Mrs. Green for $1,215,000.00. Liability of the venture and the Mid-South group on both the Graham and Green notes was expressly limited to the value of the property. However, the Grahams personally guaranteed payment of the venture's note to the Greens.

Subsequently, attempts were made to secure water and sewage facilities for the property and to arrange financing of the contemplated development of a multi-unit condominium project on the property. Because of deteriorating market conditions, it was later decided that the project should consist of single family homes. Although it was undisputed at trial that a development loan could not be secured unless water and sewage facilities were available, each side contended that the other was responsible for the failure to secure such facilities. In any case, no facilities were available by June of 1974, as warranted by Graham in the November 19th agreement, and no development loan was ever secured.

In January of 1974, Graham assigned the mortgage he received from the joint venture to the Pan American Bank as security for a personal loan. Subsequently, he assigned the mortgage to the Miami National Bank as security for a personal loan of $600,000.00.

In the summer of 1974, the Mid-South group repeatedly advised Graham of their concerns about going forward or investing more money in the project because of the rapid decline of the real estate and development market in South Florida. The group also expressed concern about the lack of water and sewage facilities and the difficulty in securing financing. They asked for Graham's help in securing a lender or investor to help bail out the project. Because Graham was concerned about his partners' reluctance to continue with the project, a meeting was arranged for August 29, 1974, between Graham and the principal members of the Mid-South group. At the meeting, Graham was advised that no arrangements had been made to make the Green mortgage payment, since his partners were unsure that such payments should be made. However, after a lengthy discussion Graham prevailed upon the partners present to go forward with the project, and it was agreed that the joint venture should make the Green mortgage payment as it became due on October 1, 1974, as well as the initial payment of accrued interest due on the Graham mortgage on November 20, 1974. There was no specific discussion as to where the money would come from to make the two payments, which amounted to over $250,000.00. At the end of the meeting, Graham also requested and received what he described as a "comfort letter" to reassure his bank, which held the Graham mortgage as collateral, that the venture would meet its obligations. ³

Shortly thereafter, on September 25, 1974, Graham was advised by a local law firm that the venture had retained it to secure releases from the Greens and Grahams on twenty acres of the property as originally agreed. The releases had not been secured at the time of closing in 1973. The joint venture did not make the Green mortgage payment due on October 1, 1974, and Graham was immediately so advised by the Greens. On October 2, 1974, Charles Alexander advised...