Woodmen of the World Life Insurance Soc. v. Knudsen

• Decision Date: 02 May 1960
• Docket Number: No. 17787.,17787.
• Citation: 275 F.2d 440
• Parties: WOODMEN OF THE WORLD LIFE INSURANCE SOCIETY, Appellant-Appellee, v. Nelse S. KNUDSEN, As Trustee for Ludman Corporation, Debtor, Appellee-Appellant. Nelse S. KNUDSEN, As Trustee for Ludman Corporation, Debtor, Appellee-Appellant, v. WOODMEN OF THE WORLD LIFE INSURANCE SOCIETY, Appellant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

275 F.2d 440 (1960)

WOODMEN OF THE WORLD LIFE INSURANCE SOCIETY, Appellant-Appellee, v. Nelse S. KNUDSEN, As Trustee for Ludman Corporation, Debtor, Appellee-Appellant.

Nelse S. KNUDSEN, As Trustee for Ludman Corporation, Debtor, Appellee-Appellant, v. WOODMEN OF THE WORLD LIFE INSURANCE SOCIETY, Appellant-Appellee.

No. 17787.

United States Court of Appeals Fifth Circuit.

February 25, 1960.

Rehearing Denied May 2, 1960.

George F. Meister, Miami, Fla., Smathers, Thompson & Dyer, Miami, Fla., of counsel, for appellant.

W. G. Ward, Miami, Fla., Ward & Ward, Miami, Fla., of counsel, for appellee.

Before RIVES, Chief Judge, and HUTCHESON and CAMERON, Circuit Judges.

CAMERON, Circuit Judge.

Before us are three appeals from orders entered by the court below in proceedings under Chapter 10 of the Acts of Congress relating to bankruptcy.¹ Woodmen of the World Life Insurance Society appealed separately from the court's order of December 15, 1958 and its order of June 30, 1959. The appeal of Nelse S. Knudsen, as Trustee for Ludman Corporation, the debtor, was taken from the order of June 30. The same questions of law and fact are involved, and the three appeals were consolidated by order of this Court and were presented to us as one case. Decision of the appeals will rest upon whether or not the court below correctly decided the following issues:

Whether the sale and lease-back agreement entered into between Ludman and Woodmen vested title to the property involved in Woodmen so that the lease agreements between Woodmen and Ludman created a landlord-tenant relationship; and, if so, whether Ludman defaulted in performance of the lease so as to terminate its rights under it and whether Woodmen waived its right to rely upon such termination.

The court below made its findings of fact and conclusions of law in the form of a memorandum opinion holding that Woodmen was the owner of the property, that Ludman had, before the institution of the Chapter 10 proceedings, defaulted in performance of the lease, giving Woodmen absolute right to possession, but that Woodmen had waived its right to enforce the termination of the lease. That opinion sets forth the facts succinctly and correctly and is reproduced in the margin² and we shall make no further statement of the facts, except as may be necessary in developing the points presented by these appeals.

The order of June 30, 1959 based upon the memorandum opinion merely denied the petition of Woodmen for an order directing the Trustee of the debtor to surrender the premises occupied by it as its main office and manufacturing plant and its amended petition asking compensation for the use of the premises by the Trustee. This order, entered after full hearing, supplemented and, in effect, confirmed that entered by the court December 15, 1958 wherein the court below had tentatively rejected Woodmen's petition that the premises be turned over to it with compensation; and granted the Trustee authority, subject to court confirmation, to enter into a year's lease with Airtek Dynamics, Inc., or some other person or corporation which would put the plant into operation. Woodmen's appeal attacks the validity of those orders.

The Trustee's appeal is from the findings of the trial court in its memorandum opinion rejecting the Trustee's contention that the relationship between Woodmen and Ludman had been merely one of mortgagor and mortgagee; and its holding that Woodmen was the owner of the property and that the lease had been in actual default prior to the institution of the bankruptcy proceedings

The Trustee makes an extensive argument that, as a matter of law, the dealings between Woodmen and Ludman required the holding by the court below that, under Florida Statutes,³ nothing more than a mortgagor-mortgagee relationship was established. A large number of authorities are cited to support this contention.⁴ All of the authorities cited recognize that the duty of a court is to discover the intention of the parties from the writings they executed supplemented by such extraneous testimony as might be proper.⁵ The trial court considered the writings and heard a number of witnesses testify, and we think that the evidence under all of the authorities amply sustains its findings and its reasoning set forth in the opinion, Footnote 2 supra, and we approve and adopt them and hold that Woodmen was, and is, the owner of the property with which the court was dealing, and that the lease agreements between it and Ludman were valid and binding according to their terms and created a landlord-tenant relationship between the parties to said leases. We agree also with the sentence with which the court concluded this portion of its opinion:

"It appears from the evidence that on September 12, 1958, the date of expiration of the grace period to pay up the delinquent taxes, Woodmen had an absolute right to take affirmative steps to remove the Lessee from the premises in accordance with the terms of the lease."

We do not agree with the immediately following conclusion stated by the court in its opinion, and think that it committed an error of law in holding that Woodmen had waived its right to rely upon said termination, which became absolute on September 12, 1958, or was estopped to assert and maintain the rights spelled out in the foregoing quotation.⁶ The court below based its conclusion that Woodmen had waived upon two grounds: by depositing two rent checks on Sept. 29, 1958 in its bank in Omaha,⁷ and by reason of admissions made by John F. Futcher, an official of Woodmen, "when questioned at the hearing held on Sept. 29th before this Court as to whether Woodmen considered the lease forfeited * * *." Neither of the grounds, in our opinion, has validity.

It appears, therefore, from examination of the court's findings that Ludman failed to pay taxes due for the year 1957 and payable in July, 1958; and that on July 10, 1958, Woodmen sent a written notice to Ludman, which it received July 14th, stating that unless the taxes were paid and the outstanding tax certificate redeemed within sixty days after receipt of the notice, the lease would be immediately forfeited. Ludman's failure to pay the taxes made the forfeiture complete on September 12, 1958, and it was this termination which led the court to state the conclusion quoted above to the effect that Woodmen had then an absolute right to take possession. In the meantime Ludman had failed to pay the rent for August, due August 1st, and the rent for September, due September 1st, and Woodmen sent out additional notices that the lease would be forfeited unless these rental payments were made within thirty days.

This procedure was entirely sound under the terms of the lease and could not, in our opinion, vitiate or modify the prior notice concerning default in the payment of the taxes. This tax notice would not accomplish the termination, under the terms of the lease, until September 12th, and the two demands the court referred to covered rent due before the forfeiture was complete and at a time when Ludman's occupancy of the premises was regular and a matter of right. The July 10th tax notice did not have the effect of absolving Ludman from the obligation of paying August and September rent. These facts are undisputed and we think that the court reached an erroneous conclusion as to their legal effect.

The same is true as to the testimony of Futcher, which was given under these circumstances. The petitioning creditors had filed the Chapter 10, proceedings on September 18th, six days after the forfeiture had become complete, and the court was, on September 29, 1958, hearing their petition and objections thereto. The creditors called Futcher, who was under subpoena, as their witness. Woodmen had filed no pleading, no trustee had been appointed, and nothing was on file except the petition of three creditors praying that the court proceed with reorganization, as provided by said Chapter 10. Futcher was not in Miami, where court was being held, for the purpose of testifying.

He testified that he had that morning been advised by Woodmen's home office in Omaha, Nebraska that two rent checks had been received. He was asked if he knew whether Woodmen would cancel in view of the receipt of the checks and he replied that if the checks were paid, there would be no default with respect to the two months' rent covered by them. He stated positively that the notice of nonpayment of taxes had been served in July, and then the examination was plunged into the confusion attendant upon the fact that questions were asked concerning more than one piece of property. Thereupon the witness was further cross examined by Ludman's attorney and made the answers which are reproduced in the margin,⁸ upon which the Trustee places greatest reliance and which the court below presumably used as the basis of its findings.

We find nothing in the testimony of this witness tending to support the charge that he was stating that Woodmen was withdrawing the notice concerning nonpayment of taxes or was in fact withdrawing or waiving anything. The whole colloquy had reference to the two checks about which the witness had learned that morning. He correctly answered that if the checks were paid, Woodmen had no alternative except to accept the payment of the rent, which would cancel the two notices of default in rent payment. That rent was due even though the default arising from nonpayment of taxes should become effective September 12th.⁹ Even, therefore, if the witness in this summary and informal examination had any authority to waive any of Woodmen's rights, we find nothing in his testimony to support the conclusion of the court below that the forfeiture resulting from nonpayment of taxes and the sixty day notice was waived or in any degree modified or relinquished.

The fact is that Woodmen's every action showed quite the contrary. October 17th, three days after the Trustee qualified, it...