United Nat. Bank of Miami v. Airport Plaza Ltd. Partnership

• Decision Date: 29 November 1988
• Docket Number: 86-1840,Nos. 86-1602,s. 86-1602
• Citation: 13 Fla. L. Weekly 2601,537 So.2d 608
• Parties: 13 Fla. L. Weekly 2601, 7 UCC Rep.Serv.2d 488 UNITED NATIONAL BANK OF MIAMI, Appellant, v. AIRPORT PLAZA LIMITED PARTNERSHIP, Appellee. MILAM DAIRY WAREHOUSE ASSOCIATES, Appellant, v. AIRPORT PLAZA LIMITED PARTNERSHIP, Appellee.
• Court: Florida District Court of Appeals

Page 608

537 So.2d 608

13 Fla. L. Weekly 2601, 7 UCC Rep.Serv.2d 488

UNITED NATIONAL BANK OF MIAMI, Appellant, v. AIRPORT PLAZA LIMITED PARTNERSHIP, Appellee.

MILAM DAIRY WAREHOUSE ASSOCIATES, Appellant, v. AIRPORT PLAZA LIMITED PARTNERSHIP, Appellee.

Nos. 86-1602, 86-1840.

District Court of Appeal of Florida,

Third District.

Nov. 29, 1988.

Rehearing Denied Feb. 15, 1989.

Fowler, White, Burnett, Hurley, Banick & Strickroot and A. Rodger Traynor, Jr., Miami, for appellants.

Kreeger & Kreeger and Julian Kreeger, Miami, for appellee.

Before HUBBART, FERGUSON and JORGENSON, JJ.

OPINION ON MOTION FOR REHEARING OF OPINION ENTERED ON MOTION FOR CLARIFICATION

PER CURIAM.

United National Bank, a mortgagee, appeals from a summary final judgment in favor of Airport Plaza, the mortgagor, on a complaint to foreclose a mortgage. Milam Dairy Warehouse, a third-party defendant in the same action, appeals from a partial summary judgment entered in favor of Airport Plaza based on the latter's complaint for fraudulent inducement, securities violations, and a violation of chapter 475, Florida Statutes (1985).

As a defense to United National Bank's complaint to foreclose a real estate mortgage after a default in payments, the defendant, Airport Plaza, claimed that Milam Dairy Warehouse, the assignor of the note and mortgage to United National, had committed acts of fraud which Airport Plaza could assert against United National because the latter was not a holder in due course. Contending that the note lacks the negotiable character necessary to make United National a holder in due course as defined by section 673.302, Florida Statutes (1985), Airport Plaza relies principally on a clause in the note which provides:

It is expressly understood and agreed by each original and successive owner or holder of this Note that nothing herein contained shall be construed as creating any personal liability on Borrower, or any Shareholders therein, to pay this Note or any interest that may accrue hereunder, all such liability, if any, being expressly waived.

Airport Plaza argues that this nonrecourse clause, which insulates the maker from personal liability on the note, destroys the negotiability of the note thereby depriving United National of its holder-in-due-course status. We agree.

In order to qualify as a negotiable instrument a promissory note must contain an unconditional covenant to pay a sum certain in money. § 673.104(1)(b), Florida Statute (1985). Section 673.105(2)(b) provides further that a promise is conditional if the instrument "[s]tates that it is to be paid only out of a particular fund or source except as provided in this section." ¹ Because the note made by Airport Plaza specifically provides that the borrower shall have no personal liability, recourse for payment in the event of a default is limited to foreclosure against the secured property. The promissory note is thus rendered conditional. A conditional instrument is not negotiable. Hinckley v. Eggers, 587 S.W.2d 448 (Tex.Civ.App.1979); See generally Anderson, Uniform Commercial Code § 3-105 (1984). Since under this analysis the note is not negotiable, the bank is not a holder in due course and took the note subject to Airport Plaza's defense of fraud.

After correctly determining that Airport Plaza was entitled to raise the defense of fraud against the bank, the trial court granted summary judgment in favor of Airport Plaza on three alternative grounds: 1) Milam Dairy Warehouse fraudulently induced Airport Plaza to purchase the property; 2) the seller, Milam Dairy Warehouse, violated Florida's Securities and Investor Protection Act, chapter 517, Florida Statutes (1985); and 3) the note and second mortgage were unenforceable because the management contract violated chapter 475, Florida Statutes (1985). Subsequently, the court rescinded the note and mortgage and entered a final judgment against United National and a partial summary judgment against Milam Dairy Warehouse.

A partial summary judgment was improper on two points because there are material issues of fact as to: (1) whether Milam Dairy Warehouse, in its agreement with Airport Plaza, structured a management agreement designed to fail or otherwise perpetrated a fraud; and (2) whether the "common enterprise" requirement of a security was met by the presence of more than one investor. See Brown v. Rairigh, 363 So.2d 590 (Fla. 4th DCA 1978); Blacker v. Shearson Hayden Stone, Inc., 358 So.2d 1147 (Fla. 3d DCA 1978), cert. denied, 367 So.2d 1122 (Fla.1979).

The third alternative basis for rescission, however, may be disposed of as a matter of law. The trial court had concluded that because the Warehouse Management Agreement required brokerage services to...