Tollius v. Dutch Inns of America, Inc.

• Decision Date: 17 November 1970
• Docket Number: No. 69--1011,69--1011
• Citation: 244 So.2d 467
• Court: Florida District Court of Appeals
• Parties: Gosta TOLLIUS, Appellant, v. DUTCH INNS OF AMERICA, INC., Alan B. Kessler, Jerome H. Weinkle and Liveco, Inc., Appellees.

Page 467

244 So.2d 467

Gosta TOLLIUS, Appellant, v. DUTCH INNS OF AMERICA, INC., Alan B. Kessler, Jerome H. Weinkle and Liveco, Inc., Appellees.

No. 69--1011.

District Court of Appeal of Florida, Third District.

Nov. 17, 1970.

Rehearing Denied Dec. 14, 1970.

Hall & Hedrick, Miami, and Michael D. Martin, Lakeland, for appellant.

Shutts & Bowen, and Herbert L. Nadeau, McCarthy, Steel, Hector & Davis, and William B. Killian, Miami, for appellees.

Before CHARLES CARROLL, BARKDULL and HENDRY, JJ.

PER CURIAM.

Some time prior to 1960, the appellant was the owner of an unimproved parcel of land in Dade County, Florida. On September 20, 1960, he leased same to Causeway, Inc., for 99 years. He advanced money to the corporation and received 20% Of the capital stock thereof, the balance of the stock being owned by the appellees, Weinkle and Kessler. Thereafter, he loaned the lessee corporation an additional $25,000.00. A construction mortgage was arranged from a local financial institution and a motel was erected on the property, affiliated with the Holiday Inns of America.

The parties had numerous difficulties and Tollius ultimately sold his capital stock interest in Causeway, Inc. to Weinkle and Kessler, and cancelled his $25,000.00 obligation in exchange for a raise in rent from $6,500.00 per year, as originally provided, to $16,000.00 per year. Subsequently, the 99-year lease was assigned to Weinkle and Kessler, individually. They sought approval of the assignment, in accordance with the terms of the lease. ¹ On June 4, 1964, Tollius declared the assignment invalid ² because of the failure of Weinkle and Kessler to execute an assumption agreement as assignors of the 99-year lease, in accordance with the provisions of the agreement. ³ It is noted that no default or declaration of the end of the term was declared by the lessor and he began (or continued) accepting rent from Weinkle and Kessler. ⁴

In May of 1967, Weinkle and Kessler assigned the 99-year lease to Dutch Inns of America. At this time, they sent a copy of the assignment and a copy of an assumption agreement from Dutch Inns of America to Tollius. With all rental payments being current under the terms of the basic lease at this time Tollius, through his counsel, indicated acceptance of the assignment by Weinkle and Kessler to Dutch Inns of America subject to satisfactory evidence of the financial condition of Dutch Inns of America. ⁵ Thereafter, between June of 1967 and April 10, 1968, Dutch Inns attempted to satisfy Tollius as to the financial stability of Dutch Inns. During this period, rental checks were forwarded to Tollius in the form of cashiers' checks by attorneys representing Weinkle and Kessler and Dutch Inns, this being the method of payment agreed to between the parties pending the determination by Tollius as to the financial stability of Dutch Inns. Following receipt of a certified audit in the spring of 1968, Tollius served a written notice of default, declaring the basic lease terminated allegedly for failure to supply assumption agreements upon assignment, and not because of any alleged lack of financial responsibility of Dutch Inns (the only objection given in the summer of 1967 to this assignment).

During this same spring, representatives of Dutch Inns and Weinkle and Kessler negotiated with the appellee, Liveco, Inc., for the execution of a sub-lease of the property for a period of twenty years to Liveco (an experienced operator in the motel field, possessed of five other Holiday Inn operations). Tollius participated or, at least, was aware that these negotiations were going on. At this time, the property had been substantially improved over the period of the lease; had an operating motel with Holiday Inn franchise, a restaurant, cocktail lounge, and the motel consisted of 50 rooms with a value of $950,000.00, and its rental value had substantially increased as evidenced by the terms of the sub-lease to Liveco, which provided for an annual rental of $130,000.00. It also provided that Liveco was to make a substantial investment and further improvements.

Following delivery of the notice of default, Tollius refused to accept any further rent and, on May 17, 1968, Tollius filed an unlawful detainer action in the civil court of record. On the same day, Weinkle and Kessler, et al., filed a suit in the Circuit Court of the Eleventh Judicial Circuit in and for Dade County, Florida, seeking a declaration of rights under the lease. Subsequently, a temporary injunction was issued in the circuit court staying the proceedings in the civil court of record. This injunction was affirmed by this court in an interlocutory appeal. Tollius v. Dutch Inns of America, Inc., Fla.App.1969, 218 So.2d 504. Issues having been joined in the circuit court upon the plaintiff's original complaint, Tollius answered and counterclaimed seeking a declaration of rights, accounting, receivership, cancellation of the basic 99-year lease, and cancellation of the sub-lease to Liveco. The cause came on for final hearing, wherein the circuit judge found adverse to Tollius in the following particulars:

'There has been no default in the payment of rent and the greater weight of the evidence fails to establish the financial irresponsibility of Dutch Inns.

'The acts and conduct on the part of defendant, Gosta Tollius, have been such as to give rise to a waiver of any right he may have or has had under said lease to declare a default thereunder by reason of any assignments of said lease without his written consent, and is therefore estopped to declare such termination and forfeiture.

'Under the circumstances, it would be an arbitrary and unreasonable act on the part of Tollius to withhold consent to the sublease to Liveco.

'The Court finds that the equities are with the Plaintiffs and the subleasee, Liveco, Inc., and against the Defendant, and that a forfeiture and termination of the Lease and Sub-lease would result in an unconscionable financial loss to the Plaintiffs and to Liveco, Inc., and an unconscionable gain to the Defendant.'

Following the above findings, the circuit judge held that the basic 99-year lease and all assignments, including the sub-lease to Liveco, were valid. Tollius has appealed and assigned numerous errors.

The material facts were not in dispute. Weinkle and Kessler admitted the receipt of their assignment and their refusal to execute the assumption agreement. The 1964 notice of invalid assignment was in writing. Tollius admitted that he continued to receive rent subsequent to giving the notice, and this legally constituted a waiver of the provisions of the lease relative to the assignment and assumption agreement. Farmers' Bank and Trust Company v. Palms Publishing Company, 86 Fla. 371, 98 So. 143; Steen v. Scott, 144 Fla. 702, 198 So. 489; U.S. Properties, Inc. v. Marwin Corp., Fla.App.1960, 123 So.2d 371; Tropical Attractions, Inc. v. Coppinger, Fla.App.1966, 187 So.2d 395; 49 Am.Jur.2d, Landlord & Tenant, §§ 421, 1067. Further evidence of his approval of the assignment to Weinkle and Kessler was his letter of June 27, 1967 when, admittedly, he received a written assignment from Weinkle and Kessler to Dutch Inns of America, Inc., and a written assumption agreement by Dutch Inns of the terms of the underlying basic lease. And, his reason for withholding approval of the assignment was until he determined the financial condition of Dutch Inns of America, Inc. At this time, it was incumbent upon Tollius, as the lessor, to declare any other defaults which might have existed. ⁶ Failing to do so, as a matter of law he waived all objections except that indicated in his letter of transmittal. Wing, Incorporated v. Arnold, Fla.App.1959, 107 So.2d 765; Independence Flying Service, Inc. v. Abitz, S.Ct.Mo.1965, 386 S.W.2d 399; 49 Am.Jur.2d, Landlord and Tenant, § 1065; 51C C.J.S. Landlord and Tenant §§ 117(2), 117(3).

Subsequently, in the spring of 1968, when he rejected Dutch Inns as an assignee, the trial court found that he wrongfully withheld approval of this assignment; that, in fact, Dutch Inns of America, Inc. was financially stable and in fact the record reveals was in a better financial condition than the original lessee. The evidence shows that the original lessee had a nebulous net worth at the time of the execution of the basic lease; whereas, at the time of the assignment to Dutch Inns, Dutch Inns had a net worth in excess of $3,500,000.00. Therefore, there being substantial competent evidence in the record to support the trial court's determination (that the proposed assignee was financially stable), Tollius' refusal to approve the assignment was an arbitrary action, and no error has been demonstrated in the trial court's ruling on this point. Seiff v. Presto Brick Machine Corp., Fla.App.1964, 168 So.2d 700; Miami Beach First National Bank v. Shalleck, Fla.App.1966, 182 So.2d 649; Bankers Life and Casualty Company v. Pinkerton-Hays Lumber Company, Fla.App.1966, 186 So.2d 551; Daniels v. Lake Pleasant Land Company, Fla.App.1967, 193 So.2d 679.

The lease to Liveco, Inc. was, in fact, a sub-lease, it being for less than the balance of the term of the basic lease. Johnson v. Thompson, 185 Ala. 666, 64 So. 554; Cities Service Oil Co. v. Taylor, 242 Ky. 157, 45 S.W.2d 1039; Marcelle, Inc. v. Sol & S. Marcus Co., 274 Mass. 469, 175 N.E. 83; 20 Fla.Jur., Landlord and Tenant, § 64; 49 Am.Jur.2d, Landlord and Tenant, § 480. The sub-tenant has not atoned to the lessor and no attempt was made to substitute the sub-tenant for Dutch Inns and, in fact, all rental payments have been made by Dutch Inns. Even if, in the giving of the assignment to the sub-tenant, it was necessary to secure the approval of the lessor before the lease could be terminated, it would be necessary for the lessor to serve a notice of default in accordance with the terms of the lease ⁷ and advise the subtenant. This has not been done. The only basis for the refusal to approve...