Robert C. Roy Agency, Inc. v. Sun First Nat. Bank of Palm Beach

• Decision Date: 24 April 1985
• Docket Number: No. 84-917,84-917
• Citation: 468 So.2d 399,10 Fla. L. Weekly 1064
• Parties: 10 Fla. L. Weekly 1064 ROBERT C. ROY AGENCY, INC., Robert C. Roy and Joyce S. Roy, his wife, Appellants, v. SUN FIRST NATIONAL BANK OF PALM BEACH, Appellee.
• Court: Florida District Court of Appeals

Page 399

468 So.2d 399

10 Fla. L. Weekly 1064

ROBERT C. ROY AGENCY, INC., Robert C. Roy and Joyce S. Roy, his wife, Appellants, v. SUN FIRST NATIONAL BANK OF PALM BEACH, Appellee.

No. 84-917.

District Court of Appeal of Florida Fourth District.

April 24, 1985.

Rehearing Denied May 28, 1985.

James M. Tuthill of Christiansen, Jacknin & Tuthill, West Palm Beach, for appellants.

Peter J. Aldrich of Gunster, Yoakley, Criser & Stewart, P.A., Palm Beach, for appellee.

GLICKSTEIN, Judge.

This is an appeal from an adverse final judgment in a replevin action entered against the owner of a coin collection who had claimed in the trial court that the bank to which the collection had been pledged did not have any right to possession. We affirm.

In doing so we uphold the "dragnet" clause involved, and conclude the trial court was correct in enforcing it against a preexisting, contingent liability. We reject appellant's position that such clause was enforceable only as to those obligations incurred at the time the security was pledged or incurred thereafter.

The facts reflect a series of financial transactions involving the appellee bank on the one hand and, on the other, Robert C. Roy and Joyce S. Roy, appellants, as well as Robert C. Roy Agency, Inc. The ongoing series began in 1978 when the agency executed a guaranty agreement in favor of the bank to induce extension of credit to appellants, who thereafter borrowed $225,000 in 1980 on the security of their home. In 1981, when appellants' loan matured, it was extended for an additional fourteen months.

During the extension period of appellants' residential loan, the agency pledged appellants' coin collection at the time it obtained a loan of $37,500 and executed a note therefor. The printed portion of the note provides in one sentence that the security is pledged for the payment of the particular note. It then adds a subsequent sentence, stating:

The collateral is also pledged as security for all other liabilities (primary, secondary, direct, contingent, sole, joint or several) due or to become due or which may be hereafter contracted or acquired of each maker (including each maker and any other person) to Bank.

Appellants executed a guaranty contemporaneous with the agency's note. One year later the agency and the bank repeated the process, on this occasion the loan being in the sum of $11,665.42. The same printed note form was used, expressly pledging the coin collection--not only for the new note, in one sentence, but also for all other liabilities, in another sentence. Appellants' argument ignores the existence of two sentences. Appellants executed a guaranty as they had in the earlier instance.

At the time the agency pledged the coin collection, its guaranty of appellants' debts was still outstanding. Accordingly, when appellants defaulted in their residential loan and the bank successfully foreclosed the outstanding mortgage which secured the loan, it retained possession of appellants' coin collection.

Appellants claim foul, in that there was no intention to subject their coin collection to their liability for the residential loan which they made and which the agency had guaranteed. Interestingly enough, however, aside from the clear and unambiguous language of the second sentence of the two notes which tie the security to "all other liabilities ... due or to become due," the notes also specifically mention the residential mortgage.

The main point is that the trial court correctly concluded the clear, unambiguous language of the note included the preexisting obligations made or guaranteed.

The only Florida case upon which appellants rely gives them no assistance. In St. Lucie County Bank & Trust Company v. Aylin, 94 Fla. 528, 114 So. 438 (1927), the defendant had executed a note to the Bank, depositing with the Bank certain other notes as collateral security. The pertinent clause in Aylin's note stated the collateral security was "for payment of this note, and any note given in extension or renewal thereof, and as security for the payment of any other liability or liabilities of the undersigned to said Bank whether now existing, or hereafter arising ...." Id. 94 Fla. at 530, 114 So. at 438 (emphasis added).

Whether by purchase or assignment, before the subject note was executed the Bank had come to own two notes of Aylin to a third party, one Braswell. One of these notes was already in default when acquired by the Bank, and payment of the other became accelerated, by terms of the securing mortgage, because of the default on the first note. The Bank sought to apply the security Aylin gave as collateral for the new note to payment of the Braswell notes, as the proceeds from the property mortgaged to secure the Braswell notes would not satisfy the entire debt.

The Supreme Court, presuming that the dragnet clause language was furnished by the Bank and that the borrower had no choice but to accept it in order to procure the loan, said any alleged uncertainty and ambiguity of the language was the Bank's responsibility, and the language would be construed against the Bank. Id. at 535, 114 So. at 440. The Court held the dragnet clause language, following, as it did, the statement that the security was for the payment of the particular note or an extension or renewal thereof, must apply only to "things of the same kind as those specifically enumerated." Id. at 537, 114 So. at 441.

The Court continued:

Certainly it is not clear that the pledger intended the collateral pledged to stand as security for the two Braswell notes. Neither is it reasonable to suppose or to assume from the allegations of the bill that it was the intention of the pledger to secure the payment of the Braswell notes with this collateral. It is unreasonable to assume that one would deposit collateral to secure the payment of a past due obligation without any agreement as to the renewal of such obligation or without any agreement as to an extension of time in which to meet such past due obligation. The contract not being clear that it was the intention of both parties that the collateral was pledged to secure the payment of the Braswell notes and it being unreasonable to assume from the allegations of the bill of complaint that such was a fact, the complainant in the court below must suffer the result of having the contract construed against its contention in this regard.

Id. at 537-38, 114 So. at 441.

After citing case law to the effect that where doubt exists as to the meaning and intent of language employed in a contract, resort may be had to the surrounding facts and circumstances, the Court concluded:

From a consideration of all the allegations of the bill of complaint with the contents of the exhibits thereto attached, we are of the opinion that the liabilities to the bank which were contemplated by the parties were those which arose or which might thereafter arise out of transactions between the bank and the plaintiff in error and did not include the liability arising out of a purchase by the bank or assignment to the bank from third parties.

Id. at 539, 114 So. at 441 (citations omitted).

We think Aylin is inapposite to the present case for several reasons. First, the dragnet clause here, unlike that in Aylin, rather explicitly includes every conceivable type of liability of the appellants to the Bank, past, present or future and whether contracted or acquired. Second, the preexisting obligation in the instant case to which the Bank sought to apply the security had been extended and thus was not in default when the security was given as collateral for a new loan and the parties agreed to the dragnet clause. Third, when a third loan was obtained, the appellants again pledged the same coin collection as security for the new loan, as well as for any and all other liabilities. Fourth, the liabilities pertinent here were always to the Bank and not acquired by the Bank from a third party as in Aylin (though the dragnet clause that applies here covers such a contingency as well). In sum, as the language of the promissory notes in the present case is clear and unambiguous, the intention of the parties is derived therefrom, rather than from surrounding facts and circumstances. Gendzier v. Bielecki, 97 So.2d 604 (Fla.1957).

For the benefit of bench and bar, we relate our research on the general subject of enforcing dragnet clauses.

Hancock County Bank v. American Fletcher National Bank and Trust, 150 Ind.App. 513, 276 N.E.2d 580 (1971), was factually similar to the present case, with one major difference. Hancock County concerned three promissory notes, the first and third of which were unsecured, and the second of which was secured by a coin collection. This second note had a dragnet clause subjecting the coins to other liabilities due or to become due to the bank. The second note was paid off by the maker's estate after he died, which then sought return of the collection. The bank refused, saying that the collateral would be held for repayment of the other two debts by virtue of the dragnet clause. The appellate court found that the agreement was valid and that it could be validly applied to the other two notes, but agreed with the trial court that the coins must be returned to the estate. Vital to this conclusion was the existence of evidence, which was introduced without objection, that the parties did not intend for the coin collection to serve as security for the other notes. The case does not therefore answer the question with which we are faced here, for we have only the stipulated fact that there was no extrinsic ¹ evidence that the parties did intend for the collateral to carry over. This is quite different from affirmative evidence of negative intent, and does not answer the question as to whether evidence of intent should be introduced over objection.

A survey of cases from other states indicates general acceptance of dragnet clauses but varied reasons for their...