Consolidated Development & Engineering Corporation v. Ortega Co.

• Decision Date: 26 September 1933
• Citation: 117 Fla. 438,158 So. 94
• Parties: CONSOLIDATED DEVELOPMENT & ENGINEERING CORPORATION v. ORTEGA CO.
• Court: Florida Supreme Court

158 So. 94

117 Fla. 438

CONSOLIDATED DEVELOPMENT & ENGINEERING CORPORATION v. ORTEGA CO.

Florida Supreme Court

September 26, 1933

On Rehearing July 27, 1934.

Further Rehearing November 21, 1934.

En Banc.

Suit by the Ortega Company, a corporation, against the Consolidated Development & Engineering Corporation and others. From a decree foreclosing a mortgage, defendants appeal.

Modified and affirmed as modified.

ELLIS and BROWN, JJ., dissenting in part.

On Petition for Further Rehearing and Motion to Modify Decree. Appeal from Circuit Court, Duval County; D. T Gray, Judge.

COUNSEL

Milam McIlvaine & Milam and Knight, Adair, Cooper & Osborne, all of Jacksonville, for appellants.

W. T. Stockton, Blount & Jones, and Stockton, Ulmer & Murchison, all of Jacksonville, for appellee.

OPINION

PER CURIAM.

In this cause the court finds itself equally and permanently divided as to whether the decree appealed from should be affirmed or reversed. Mr. Chief Justice DAVIS, Mr. Justice WHITFIELD, and Mr. Justice BUFORD are of the opinion that the decree appealed from should be reversed and the cause remanded for the entry of an appropriate decree in accordance with the views entertained by them as to the applicable law of the case. Mr. Justice ELLIS, Mr. Justice TERRELL, and Mr. Justice BROWN are of the opinion that there is no error in said decree, and that it should be affirmed as entered.

Accordingly, the final decree appealed from is affirmed, because of an equally divided appellate court, on the authority of State ex rel. Hampton v. McClung, 47 Fla. 224, 37 So. 51.

DAVIS, C.J., and WHITFIELD, ELLIS, TERRELL, BROWN, and BUFORD, JJ., concur.

On Rehearing.

DAVIS Chief Justice.

This was an appeal from a final decree of foreclosure which was affirmed by an even division of this court under date of September 26, 1933. A rehearing having been granted, the case is now before us for final disposition on rehearing.

On March 2, 1925, the complainant, Ortega Company, as vendor, and the defendant, Consolidated Development & Engineering Corporation, as purchaser, entered into a contract for the sale by the former and the purchase by the latter of the lands foreclosed upon in this suit. The contract shows on its face that the mortgagee had sold the property for development into a subdivision, and that it anticipated that the purchasers from the subdividers would acquire an interest therein. The subdivision was subsequently brought into being, developed and put upon the market under the name of 'Venetia,' but remained subject to the lien of the base mortgage, which, by agreement between the parties at interest, had superseded the contract of purchase and sale.

There was no contest in the court below between the Ortega Company, as mortgagee, and Consolidated Development & Engineering Corporation, as mortgagor. The contest below and on this appeal is between the Ortega Company, as mortgagee, and certain lot purchasers who claim title to or equities in certain of the lots into which the lands were subdivided, through Consolidated Development & Engineering Corporation. Their claim accrued subsequent to the recording of the base mortgage, but subject to certain clauses therein which provided for partial releases. It is upon special provisions of the mortgage that the appellants base their asserted equities.

One of the clauses of the mortgage provided that: 'In the event the mortgagor loses its rights hereunder through the foreclosure of this mortgage * * * the mortgagee will release to any bona fide purchaser from the mortgagor a lot or lots so purchased by such purchaser prior to such loss, upon the purchaser paying over to the mortgagee herein all sums remaining unpaid under his contract of purchase, provided, that sum shall not be less than the release value of such lot as herein fixed and that at least as much as such release value as herein fixed shall be paid to the mortgagee within one (1) year from such event; and provided further that such purchaser shall otherwise fully comply with his contract of purchase.'

Another paragraph of the mortgage authorized the mortgagor (when not in default 'hereunder') to procure from the mortgagee a partial release from the mortgage upon particularly stated terms and conditions as to certain specified payments.

It was the successful contention of the mortgagee in the court below, and such is its contention in this court, that under the particular terms of paragraph 12 of the mortgage, bona fide grantees of lots in the mortgaged subdivisions after default of the mortgagor are precluded from obtaining partial releases of their own lots from the mortgage at the price specified in the base mortgage to be applicable to the original mortgagor, notwithstanding the fact that for months after the undisclosed default on the original mortgagor's part in paying one of the installments called for in the base mortgage, the mortgagee declared no default, nor elected to bring about any acceleration of the maturity of the mortgage notes, nor otherwise gave any indication that it was going to use the original mortgagor's default as a predicate for forfeiting not only the original mortgagor's rights, but the rights of the original mortgagor's bona fide grantees of lots in the subdivision. It is not denied that the mortgagee continued for a long time after the mortgagor's default, which so far as the record shows was never disclosed to the lot purchasers in any formal way, to receive payments of principal and interest on the mortgage and otherwise to treat the mortgage as still in good standing.

The contention is likewise made by the mortgagee that, notwithstanding the effect of clause 13 in the mortgage which was apparently incorporated therein to provide against any such contingency, the base mortgage may be now unconditionally foreclosed as against bona fide lot purchaser grantees of the mortgagor, except where the contracts are still executory, in which event it is admitted that their lots would be subject to the partial release provision of said paragraph 13.

That the land was sold in the first instance by the mortgagee with the intent and purpose that it should be developed by the mortgagor for the mutual advantage of both mortgagor and mortgagee, into a subdivision of residential lots for sale to the general public, is obvious from the terms of both the antecedent contract of sale and the subsequently given purchase-money mortgage which superseded the sales contract.

This court has held that, in cases involving the attempted foreclosure of real estate mortgages between the parties themselves, a mortgagee may, by his conduct inducing his mortgagors to believe and act upon the belief that he will not enforce his mortgage, be estopped as to them, in the absence of some notice of his intention to declare the whole debt payable unless installments are paid. Jaudon v. Equitable Life Assurance Society, 102 Fla. 782, 136 So. 517; Gus Bath, Inc., v. Lightbown, 101 Fla. 1205, 133 So. 85, 135 So. 300; Kreiss Potassium Phosphate Co. v. Knight, 98 Fla. 1004, 124 So. 751.

This court has likewise held in cases involving personal property that anysecret reservation of title in the vendor will not be allowed to prevail as against the equitable claim of a bona fide purchaser of the subjectmatter of the sale from the vendee, when it appears that the vendor has expressly or impliedly given to his vendee the right to sell the property to bona fide purchasers, although the property would otherwise be clearly subject to a reservation of title right secured by a contract retained by the vendor. Glass v. Continental Guaranty Corp., 81 Fla. 687, 88 So. 876, 25 A. L. R. 312.

Applying the foregoing principles of equity to the facts presented in the present case, a majority of the court have reached the conclusion on rehearing that, so long as lot purchasers from the mortgagor and developer of the subdivision were uninformed of any default by the mortgagor, and the mortgagee permitted lots to be marketed, such lot purchasers were entitled to assume that the mortgagor remained in good standing with his mortgagee, or if not in good standing, that the mortgagee had elected to so hold him out to the buying public with respect to the sale of lots to purchasers, as a means of enabling the mortgagor to raise some of the money with which to pay for the land and increase its value by developing it through sales of parcels of the mortgaged subdivision to the general public, especially in view of the fact that the mortgagee had provided in the mortgage for precisely such method of development.

Both the release clauses under consideration in this case were inserted in the mortgage presumptively prepared at the direction of the mortgagee, whose security against the mortgaged land it was. But whether such clauses were inserted at the express direction of the mortgagee or not, the rule is that, because they appear in an instrument which was prepared for the mortgagee's benefit, any ambiguity in language, or doubt as to the meaning of such release clauses, must be construed most strongly against the mortgagee. Capital City Bank v. Hilson, 59 Fla. 215, 51 So. 853.

A majority of the court are of the opinion that under the foregoing rule the release clauses, when referring to the term 'Bona fide purchasers' of lots, must not be regarded as having so used it in the narrow and limited sense attributed to it by the construction contended for by the mortgagee, but, on the contrary, should be regarded as implying what the law usually comprehends when the designation 'bona fide purchasers' is used in an ordinary instrument of writing.

A majority of the court are further of the opinion that those who stand in total...