Gunn Plumbing, Inc. v. Dania Bank

• Citation: 252 So.2d 1
• Decision Date: 28 July 1971
• Docket Number: No. 40331,40331
• Parties: GUNN PLUMBING, INC., a Florida corporation et al., Petitioners, v. The DANIA BANK, a Florida banking corporation, Respondent.
• Court: United States State Supreme Court of Florida

Page 1

252 So.2d 1

GUNN PLUMBING, INC., a Florida corporation et al., Petitioners, v. The DANIA BANK, a Florida banking corporation, Respondent.

No. 40331.

Supreme Court of Florida.

July 28, 1971.

Rehearing Denied Sept. 17, 1971.

Milton A. Fried, Miami, for petitioners.

Robert E. Dubow, of Walden & Dubow, Dania, for respondent.

ADKINS, Justice.

By petition for certiorari, we have for review a decision of the District Court of Appeal, Fourth District (239 So.2d 88) on grounds of direct conflict with a prior decision of this Court (Coral Gables First National Bank v. Constructors of Florida, Inc., 119 So.2d 741) on the same point of law. Fla.Const., art. V, § 4, F.S.A.

For clarity, the Petitioners will be referred to as 'Defendants,' and Respondent as 'Plaintiff.'

On April 16, 1965, Defendant, Gunn Plumbing, Inc., made, executed and delivered a promissory note in the original principal amount of $75,000 to Plaintiff. Rayment of the note was guaranteed by Defendant, W. W. Gunn, Sr., President and principal stockholder of Defendant, Gunn Plumbing, Inc.

Defendants allege that at the time of the loan the sum of $73,400 was deposited to the account of Defendant, Gunn Plumbing, Inc., (being the net proceeds of the loan) and Plaintiff was paid the sum of $25,000 for making the loan.

The note was not paid at maturity and the Plaintiff accepted a renewal promissory note. When the renewal note was not paid at maturity, the Bank instituted suit against the marker, Gunn Plumbing, Inc., and the guarantor, W. W. Gunn, Sr. Defendants interposed the defense of usury. This suit was settled by the parties under the provisions of a written stipulation entered into by Plaintiff and the Defendants. The stipulation contained the following provisions:

'I. The defendants, and each of them, hereby Withdraw the several defenses which they have raised in their answer and such defendants do hereby Irrevocably admit each and every allegation in the plaintiff's complaint. (Emphasis supplied)

'II. The defendants, and each of them, hereby admit that the total amount due the plaintiff in this cause as of April 19, 1966, is $82,732.32, * * *. The defendants, and each of them, irrevocably acknowledge and admit that the plaintiff is entitled to a final judgment in this cause for said total amount of $82,732.32. Further, these defendants, and each of them, jointly and severally admit that they have no defenses, counterclaims or set-offs to the right of the plaintiff for the entry of an immediate final judgment in said total sum of $82,732.32.

'III. Notwithstanding the admissions contained in Paragraph I and II herein, the plaintiff is willing and does hereby agree to compromise said total indebtedness of $82,732.32 to a lesser indebtedness of $80,607.33, * * *.

'VI. The defendant, W. W. Gunn, Sr., hereby agrees to guarantee, absolutely and unconditionally, the payment of the renewal note for $70,000.00 and the payment of the note for $2,500.00 for attorney fees, the forms of which are attached hereto. The form of guaranty agreement shall be substantially similar to the form of guaranty agreement attached to the original complaint in this cause. Further, the defendant, W. W. Gunn, Sr., agrees to cause his wife, Evelyn I. Gunn, to join in the execution of such guaranty agreement so that she will also unconditionally and absolutely guarantee the payment of the said notes. The defendant, W. W. Gunn, Sr., hereby acknowledges that a substantial consideration for his agreement to give such guaranty is the willingness of the plaintiff to accept the renewal note * * *.

'VIII. The defendants, and each of them, agree that a certified copy of this stipulation may be entered into evidence, without objection on their part, in any future cause of action involving the said renewal note for $70,000.00 * * *.'

Pursuant to the terms of the stipulation, a promissory note and personal guarantee were executed and delivered to Plaintiff by Defendants. This note was not paid and Plaintiff again instituted suit. Defendants filed their answer and attempted to raise the affirmative defense of usury. A motion for summary judgment on behalf of Plaintiff was granted and judgment was entered in favor of the Plaintiff Bank.

Upon appeal, the judgment of the trial court was affirmed.

Defendants say that the affirmance is in conflict with the well-settled principle that the usurious character of a loan is determined in its inception and, if usurious, no subsequent transaction will cure it. As stated in Coral Gables First National Bank v. Constructors of Florida, Inc., Supra:

'The general rule followed in this state is that the usurious character of a contract must be determined as of the date of its inception, and if usurious at that time, no subsequent transactions will purge it. When such contracts are Renewed by a new or substituted contract, usury follows and becomes a part of the latter contract, making it vulnerable to the defense of usury in like manner as the original contract. This is not true, however, When the old contract is abandoned and a new one is entered into free from the vice of the old.' (pp. 746--747)

If every element of usury charged to exist in the first loan contract is abandoned in a new agreement and the borrower voluntarily agrees to carry out the latter, the new contract will be enforceable. As stated in Carter v. Leon Loan & Finance Co., 108 Fla. 567, 146 So. 664 (1933):

'If the usurious factor in the first contract is carried into the new contract in any form, it is not purged of usury. The old obligation must be given up and abandoned, but, when this is done, and the borrower assents to a new or substituted contract in which he voluntarily agrees to pay the obligation with lawful interest, it is an act of justice forbidden by no principle of public policy, and will be enforced.' (pp. 664--665)

In the case Sub judice, it was necessary for the District Court to determine whether or not every element of usury charged to exist in the original promissory note was abandoned by the subsequent contract of the parties. The issue before the District Court in the case Sub judice was whether the affirmative defense of usury could be waived and, if so, whether such defense was waived or, in the alternative, whether Defendants were estopped from asserting the defense of usury by virtue of the written stipulation. The question before this Court is whether the decision of the District Court is in conflict with Coral Gables First National Bank v. Constructors of Florida, Inc., Supra.

This Court has followed the general rule that usury is purely a personal defense created by statute for the protection of borrowers and, therefore, any borrower may waive his right to claim the benefit of such statute. See 13 F.L.P., Interest and Usury, § 31; 33 Fla.Jur., Usury, § 54. In Mackey v. Thompson, 153 Fla. 210, 14 So.2d 571 (1943), relied upon by the District Court, this Court indicated its acceptance of the general rule in saying:

'Moreover, usury being a purely personal defense which may be availed of, or waived, at the election of the party aggrieved, it has no especial claims upon the indulgence and favor of the court, but must be disposed of upon the same principles and in the same manner as other defenses.' (p. 573) See also Shaffran v. Holness, 102 So.2d 35 (Fla.App.2d, 1958).

A stipulation properly entered into and relating to a matter upon which it is appropriate to stipulate is binding upon the parties and upon the Court. Also, a stipulation entered into during the course of one action may, unless expressly limited by its terms, be recognized in another action or proceeding. 22 F.L.P., Stipulations, § 12, and cases cited therein.

The usury statute in this State does not have the effect of invalidating contracts for interest at a rate higher than the statutory maximum, but only accords to the obligor the privilege of setting up, or waiving, affirmative defenses of usury in respect to such contracts. Yaffee v. International Company, Inc., 80 So.2d 910 (Fla.1955), relied upon by the District Court.

The Defendants accepted the benefits of the stipulation and are not in a position to assert a defense to the new obligation which necessarily arose prior to the execution of the stipulation and the creation of the new obligation. Defendants were represented by counsel in the prior suit which resulted in the stipulation. It was supported by a good and valuable consideration, was acted upon and performed by the parties and gave rise to an estoppel which would prevent Defendants from asserting any defense, counterclaim, or setoff which arose prior to its execution.

Defendants took no affirmative action to rescind, reform or void the terms of the stipulation. In Dunscombe v. Smith, 139 Fla. 497, 190 So. 796 (1939), this Court commented on the effect of a stipulation entered into in a prior action which was introduced as evidence in a subsequent action:

'This Court is committed to the rule that it not only approves but favors stipulations and agreements on the part of litigants and counsel designed to simplify, shorten or settle litigation and save costs to the parties, and the time of the Court, and when such stipulations or agreements are entered into between parties litigant or their counsel, the same should be enforced by the court, unless good cause is shown to the contrary. In order to obtain relief against stipulations, the regular course is not to ignore or attempt to evade it, but to...