Douglas Properties v. Stix

• Decision Date: 30 January 1935
• Citation: 159 So. 1,118 Fla. 354
• Parties: DOUGLAS PROPERTIES et al. v. STIX.
• Court: Florida Supreme Court

159 So. 1

118 Fla. 354

DOUGLAS PROPERTIES et al. v. STIX.

Florida Supreme Court, Division B.

January 30, 1935

Suit by Charles H. Stix, as trustee, against Douglas Properties, a corporation, the E. B. Douglas Company, a corporation, M. A Smith, as liquidator of the Biscayne Trust Company and of the Bank of Bay Biscayne, and others. From orders appointing a receiver and denying motions to dismiss the bill or to strike certain parts thereof, defendants named appeal.

Affirmed. Appeal from Circuit Court, Dade County; Paul D Barns, Judge.

COUNSEL

Hudson & Cason and S. J. Barco, all of Miami, for appellants.

Shutts & Bowen and E. S. Quick, all of Miami, for appellee.

OPINION

ELLIS Presiding Justice.

The Douglas Properties, a Florida corporation, was the owner in March, 1925, of certain lots of land in the city of Miami described as lots 3, 4, 17, and 18 of block 122 north according to a plat thereof made by Knowlton, and had the right to the use of an alley 10 feet in width running along the east side of lot 16. It executed a 99-year lease upon that property to Flagler Street Company, a Florida corporation, in March, 1925, which lease was duly recorded. The annual rental agreed to be paid was $75,000, payable quarterly.

The lease contained a covenant to the effect that if the tenant should decide to erect a building upon the premises, and it became necessary to borrow money on a mortgage or deed of trust for the 'purpose of financing the building,' then in such event the owner would unite with the tenant in the execution of a mortgage to encumber the fee.

After the execution of the lease, the Flagler Street Company constructed a building on the leased premises, and it became necessary to obtain money to pay for the same. The Douglas Properties Corporation, on September 25, 1925, joined with Flagler Street Company and the Venetian Arcade Company, the lessee of Flagler Street Company, in the execution of a mortgage upon the described premises to secure an indebtedness of $300,000, which mortgage was recorded in the public records of Dade county.

The Douglas Properties Corporation was prganized for the purpose of engaging in the business of owning, holding, operating, and dealing in real estate. The mortgage was executed for the purpose of raising funds with which to finance the construction of the building, which was of a substantial and permanent character, and increased the value of the premises and of the interests of the Douglas Properties therein.

In August, 1927, nearly two years after the execution of the mortgage of September, 1925, the Flagler Street Company, the holder of the 99-year lease, became indebted to St. Louis Union Trust Company, a Missouri corporation, and Charles H. Stix, as trustees, in the sum of $300,000. That debt was evidenced by 338 first mortgage 6 1/2 per cent. bonds, dated August 1, 1927, which bonds were delivered to the named trustees; 282 of the bonds were in denominations of $1,000 each; 31 in denominations of $500 each; and 25 in denominations of $100 each. The first 15 bonds were payable August 1,1929; 15 were payable one year later; 16 were payable on August 1, 1931. All the bonds of $1,000 denomination were payable in blocks of 17, 18, and 19 on the first day of each recurring year successively, up to and including August, 1936; 147 of the thousand dollar bonds were payable in August, 1937. The five hundred and one hundred dollar bonds were also payable August 1, 1937.

The bonds were payable to bearer or to the registered holder thereof. The accumulating interest was payable semiannually on the 1st days of February and August of each year.

To secure the payment of the principal and interest on the bonds, the Flagler Street Company and the Douglas Properties executed and delivered to St. Louis Union Trust Company and Charles H. Stix, as trustees, a mortgage dated August 1, 1927, upon the leasehold estate of Flagler Street Company and the fee-simple estate held by the Douglas Properties.

The mortgage deed was duly recorded. On May 8, 1933, Charles H. Stix, as trustee, exhibited his bill in chancery in the circuit court for Dade county for the enforcement of the mortgage lien of August 1, 1927. He joined as defendants Douglas Properties, Flagler Street Company, Venetian Arcade Company, a corporation, Venetian Securities & Investment Company, a corporation, E. B. Douglas Company, a corporation, M. A. Smith, as liquidator of Biscayne Trust Company, a corporation, M. A. Smith, as liquidator of Bank of Bay Biscayne, R. M. Price, as receiver, and United States of America.

By an amendment to the bill, filed May 17, 1933, John C. Knight was added as a defendant, and another paragraph was added, numbered III-A, in which it was alleged that the Douglas Properties agreed, as part of the consideration for the lease executed to Flagler Street Company, that, if the lessee decided to erect a building on the premises, and it became necessary to borrow money on a mortgage or deed of trust to enable the lessee to finance the building, the Douglas Properties would join in the execution of the mortgage to secure the payment of the debt incurred for that purpose; that the lessee decided to erect the building and the two corporations executed the mortgage of September, 1925; that prior to the execution of the mortgage of August 1, 1927, sought to be foreclosed in these proceedings, Douglas Properties, as an inducement to the making of the loan, represented that the funds obtained would be used in paying off and satisfying the indebtedness secured by the mortgage of September, 1925, that the complainant relied upon such representations, and that the mortgage was satisfied and canceled of record on December 6, 1927.

Another amendment was made in July, 1933, designed to make clearer the Douglas Properties interest in and to the alley on the east side of lot 16.

The bill alleged that 46 of the bonds which matured on or prior to August 1, 1931, were paid, and all interest on the indebtedness was paid to and including February 1, 1932; that the mortgagors failed to pay the bonds numbered 47 to 63, inclusive, which became due August 1, 1932, and they also failed to pay the interest falling due on bonds numbered 47 to 338, inclusive, which interest became due August 1, 1932, and February 1, 1933.

It is alleged that upon such occurring the trustees gave written notice to both mortgagors of such default by depositing such notices in the United States mails, postage prepaid, addressed to the parties at Miami.

Copies of the notices were attached to the bill and made a part of it. After notifying the parties of the default, the notices contained the following clause:

'This notice of default is given you in accordance with the terms and provisions of said mortgage deed of trust, and in particular in accordance with the terms and provisions of Section 4 of Article V of said mortgage deed of trust, in order to enable the undersigned, as such trustees, in the event that said default shall not be cured in accordance with the terms of said mortgage deed of trust, to take such action with respect thereto as may be permitted to, or required of the undersigned trustees by law and by the terms of said mortgage deed of trust.'

A copy of the mortgage was attached to the bill and made a part of it. It contained a provision that, if and when the leasehold owner shall make default in payment of any principal money of any of the bonds or fail to deposit the amount of money required to be paid, or make default in the payment of interest upon the bonds or in making the deposit of the amounts required to pay the same, or shall make default in the performance or observance of any condition or obligation of the bonds, or by the mortgage imposed upon the leasehold owner, and such default shall continue for the period of thirty days after written notice to the leasehold owner of such default, then in such case the 'trustees may, either through a Receiver, to the appointment of which by any court of competent jurisdiction the parties of the First Part hereby consent, or by their attorneys or agents, enter into and upon and take and possess the properties hereby conveyed by both said Leasehold Owner and said Fee Owner, or any part thereof, and may exclude the Leasehold Owner, and the Fee Owner, their agents and servants wholly therefrom from having and holding the same, and may use, operate, manage and control said premises and property,' etc.

The mortgage also contained the following provision:

'Section 4. In case the Leasehold Owner shall make default as in Section 1 of this Article V provided, and such default shall continue for the period of time therein mentioned, if any, the Trustees may and upon written request of the holders of one-fourth (1/4 ) in amount of the bonds outstanding at the time, being first indemnified by them to its satisfaction against loss or liability in the premises, shall proceed to protect and enforce its rights and the rights of the bondholders under this Indenture by a suit or suits in equity or at law, whether for specific performance of any covenant or agreement contained herein or in aid of the execution of any power herein granted or for any foreclosure hereunder; or for the enforcement of any proper, legal or equitable remedy as the Trustees, being advised by counsel learned in law, shall deem most effectual to protect and enforce the rights aforesaid.'

The bill alleged that the St. Louis Union Trust Company, as trustee, resigned its trust under the mortgage on March 1 1933, and gave notice of such resignation to both the Flagler Street Company and the Douglas Properties, notice of such resignation being in writing; that, pursuant to that resignation, the trust...