Opinion
January 22, 1952. Rehearing Denied February 19, 1952.
Appeal from the Circuit Court, Orange County, Frank A. Smith, J.
George B. Carter, R.F. Maguire, J.R. Wells, and Maguire, Voorhis Wells, Orlando, for appellants.
Hugh Akerman, William H. Dial and Akerman, Dial Akerman, Orlando, for appellee Citizens Nat. Bank of Atlanta.
Wilson Sanders, O.B. McEwan, Wm. McHardy Berson and Sanders, McEwan Berson, Orlando, for appellee Richard J. Reynolds, Jr.
Johnson Williams, Orlando, for appellee Joseph L. Dyer, J.B. Dyer, M.J. Brown, Haldane J. Huckel, E.L. Lowe, William I. Coddington and G.W. Hilton.
Charles O. Andrews, Jr., Orlando, for appellee Orange Buick Co.
This is an appeal from the final decree dismissing the bill of complaint, which sought to set aside certain absolute transfers of securities pledged for some loans and in connection with an accommodation endorsement on the ground of fraud, duress and over-reaching.
Thomas E. Gordon of Orlando operated three businesses, Economy Cab Company, a Florida corporation, Florida Aeronautical and Supply Company, a Florida corporation, and Orlando Airlines. He owned a majority of the stock in each of the corporations and owned outright Orlando Airlines, which was simply a firm name. He later formed a corporation known as Florida Airways, Inc. and was the majority stockholder in that corporation.
Gordon, individually, applied for a certificate of public convenience and necessity to operate Orlando Airlines. A certificate was issued to Gordon on March 28, 1946, and in due course application was made for a transfer of this certificate to Florida Airways, Inc.
Gordon had been successful in the operation of a cab company and of an airport and he, apparently, was very ambitious to organize and operate an airline, and in order to do this, he was apparently willing to pledge or put up all of the property of the cab company and of the airport.
He first approached his local bank and ascertained that this bank was not in a position to finance him to the extent necessary to develop Florida Airways, Inc., as contemplated. Through the officers of the local bank he was put in touch with Mills B. Lane, Jr., Vice-President of The Citizens and Southern National Bank of Atlanta. He first obtained a commitment for $65,000, which was shortly thereafter increased to $75,000, and then to $95,000. Eventually the loans to Gordon, or to his companies, amounted to $170,000. Later the bank loaned Florida Airways, Inc. an additional $209,000 to purchase new airplanes, secured by chattel mortgages on the planes.
In January, 1947, the loans were in default and the financial situation was critical. Payrolls were not being met and telephone bills were not being paid. As a part of the whole transaction and in an attempt to keep things going, Gordon negotiated with the bank for the advance of an additional $20,000. Before making this loan, the bank required the personal endorsement of Gordon and the pledge of Gordon's shares of capital stock of Florida Airways, Inc., and other securities. Matters went from bad to worse and in April Gordon called a meeting of local creditors to discuss the situation. The cab company had not been sold as contemplated, and although a transfer of the certificate of public convenience and necessity was made and approved on or about January 8, 1947, due to conditions beyond the control of anyone, the stock in Florida Airways, Inc. could not be sold. The company was losing money daily.
As a result of this meeting of creditors and further negotiations and discussions with the officials of the bank, the directors and creditors of the corporation, at a meeting of the Board of Directors on May 2nd, at which Gordon was present, an agreement was reached, executed, duly witnessed and acknowledged whereby Gordon was released of his obligations on the $20,000 note of the Florida Airways, Inc., and the bank agreed to re-transfer to Gordon 59 shares of the common stock of the Florida Aeronautical and Supply company, and Gordon transferred to the bank absolutely his shares of capital stock of Florida Airways, Inc., and a credit of $25,000 due and owing to Gordon by Florida Airways, Inc., and was to deed to the bank some real estate which had been mortgaged in connection with the pledge. This deed, however, was never executed. It was agreed by all parties that the $20,000 note was eventually paid, but the mortgage given to secure this note had not been satisfied at the time of the institution of suit, or at the time of the perfection of this appeal and filing of a brief on behalf of appellants. This agreement of May 2nd was executed in the presence of the entire Board of Directors. Immediately after this agreement was executed and after the meeting of the Board of Directors, on Saturday, May 3, 1947, there appeared in the Orlando Morning Sentinel a news release, reading as follows:
"Orlando, Florida, Saturday, May 3, 1947
"Gordon Quits as President of Airways.
"Thomas E. Gordon resigned as president and director of Florida Airways, Inc., following a meeting of the board of directors.
"Gordon said he was `stepping down' as president to enable the company to revamp its financial structure and make it possible for additional capital to be secured, which will strengthen the company's future position. He is also returning all of his holdings to the company's treasury.
"Gordon emphasized that he was not selling out his investment in the company, but turning it back, without remuneration, for the benefit of stockholders, creditors and employees.
"`I realize the importance of Florida Airways to Orlando and Central Florida and it is my wish that the company carry on,' Gordon declared. `It should be one of the main nucleuses in building Orlando into the air center which it is destined to be. I stand ready to help the company in any way.'"
"M.D. Holman, vice-president, will act as president of the company until the next meeting of the board of directors.
"Holman reaffirmed the company's previous policies of continuing on the highest level air transportation along Florida Airway's present routes, which first became operative on Jan. 10, 1947.
"Gordon said he would devote all of his time to the management of Cannon Mills Airport and the Florida Aeronautical Supply Corp.
"`I hope to build the best training school in Central Florida at Cannon Mills,' Gordon stated, `As soon as I can revamp the airport and get it into the proper financial condition.'"
"The board of directors, in accepting Gordon's resignation, expressed its appreciation for his contribution to the organization and operation of the company. Present personnel will be retained."
As agreed the bank transferred the stock which it had received from Gordon to Florida Airways, Inc. and it was thereafter treated as treasury stock. Later a plan of re-organization as contemplated was approved whereby it was sought to raise $300,000 for operating capital. Stock was offered with one share of bonus stock being issued with each two shares of regular stock. Many of the appellees acquired stock under this re-organization plan and they are made parties to this suit on the theory that the transfer of the stock to the bank and by the bank to the corporation was the result of fraud, over-reaching and duress, and that the purchasers of this stock were not bona fide purchasers for value and without notice.
The news release above referred to appeared on May 3, 1947, and according to the record Gordon never repudiated the same or complained about it until the filing of this suit on February 16, 1948.
The assignments of error may be grouped as follows: (1) Was there sufficient evidence to show fraud, over-reaching or duress to justify the Chancellor in granting the relief prayed for in the bill of complaint? (2) Did the Chancellor abuse his discretion in refusing to grant further time for the taking of testimony on behalf of the plaintiffs below, the appellants here? and (3) Should the mortgage given to secure the endorsement of a note, which had been paid, have been satisfied?
The transcript of the record proper in this case constitutes 260 pages, the transcript of testimony is approximately 855 pages, and the briefs filed by the respective parties constitute 215 pages.
No Master or Examiner was appointed in this case. The Chancellor decided to hear the testimony himself. He announced in the beginning that all parties should be prepared to offer their testimony continuously and without interruption in the same manner they would be required to do in a common law action.
This is a typical case where a businessman had been successful in two operations of considerable size and was ambitious to expand into a new field. In order to do so it is apparent that he was willing to put up practically all of the property he had acquired during his lifetime. There is nothing unusual about such an undertaking.
In order to carry out his plan, he sought other banking connections and the bank finally advanced many times as much money as it originally expected to advance. The new operation was not successful. The bank had a duty to perform to its depositors. Money which banks loan is not their money but it is the money of their depositors. Banks operate under rather strict rules and regulations for the protection of their depositors. Should it be fraud, over-reaching or duress on the part of a bank every time it took steps to enforce the collection of obligations in default, and should such steps be grounds for cancellation of contracts and agreements openly arrived at and solemnly executed and acknowledged in the presence of witnesses, it would be necessary for banks to go out of business.
As heretofore pointed out, the transcript of testimony in this case is voluminous. It has been thoroughly read and studied. It was heard by the Chancellor himself. He saw the witnesses. By dismissing the bill, with prejudice, he necessarily found that the agreement reached on May 2, 1947, was not the result of fraud, over-reaching or duress. The testimony was more than sufficient to justify this conclusion, and this Court will not disturb the findings of the Chancellor. See Sandlin v. Hunter Co., 70 Fla. 514, 70 So. 553; Travis v. Travis, 81 Fla. 309, 87 So. 762; Gables Racing Association v. Persky, 148 Fla. 627, 6 So.2d 257; Moorer v. Putnam Lumber Co., 152 Fla. 520, 12 So.2d 370.
Having reached this conclusion with reference to fraud, over-reaching and duress, it is unnecessary to discuss the contention that the purchasers and holders of the stock of the Florida Airways, Inc. issued pursuant to the plan of re-organization were not bona fide purchasers for value.
Appellants strongly urged that the Chancellor committed error in denying their motion and amended motion for further time to take testimony of certain named prospective witnesses. There was much argument on this motion and the record shows the statements of counsel and of the Court. At one place in the record we find that an attorney for one of the appellees stated: "We have been ready and willing and able to go on with this case for the last year and a half". After this statement, the Court made the following observation: "The parties have not shown a good and sufficient reason in law for a postponement or further delay of the case, that I remember. And I certainly think that they have not been diligent in procuring the evidence that they want to have before this court and in having the witnesses here to offer the testimony and I don't think that it is fair to the defendants to have the case further delayed. They have been waiting here for a day or two for the plaintiff to close its case so they could offer their testimony. And the defendants have just as much right in court to have their case progress and to have their witnesses heard and determined as have the plaintiffs. And while I am sympathetic with the plaintiff by reason of losses that he has suffered and that even conceding that he may somewhat on the poverty side like the rest of us, and not in as good a financial position as some of the defendants, yet the Court must have a regard for the rights of the defendants to have the litigation move forward and terminated. And the Court will have to deny your request for postponement in taking of testimony of the plaintiff at a later date."
The appellants cite the case of O'Gara v. Hancock, 76 Fla. 1, 79 So. 167, 168, as authority that the Chancellor abused his discretion in denying the motion and amended motion for an extension of time.
In that case the Court made an order granting an extension of time and stated that he had carefully examined the record, the motion and briefs therein, and stated: "It seems proper to recite above that delay be not chargeable to defendants". The rule about abuse of discretion in granting or denying motions for an extension of time to take testimony works both ways, and in that case this Court upheld the order of the Chancellor in granting further time. In this case a review of the record shows that the Chancellor was very lenient in attempting to accommodate all parties, and the delay in having witnesses present could not be chargeable to the defendants, but was chargeable to the plaintiffs in the court below, the appellants here. The Chancellor did not abuse his discretion and we find no merit in this assignment.
The notes for which the mortgage was given by Thomas E. Gordon and his wife to The Citizens and Southern National Bank of Atlanta as security have been paid in full and the mortgage should have been satisfied. In the bill of complaint as amended, the plaintiffs below, appellants here, prayed for the satisfaction of this mortgage. For some reason unexplained by the record, the Chancellor did not order a satisfaction of this mortgage. This was relief to which the plaintiffs were entitled. Although the record does not show that this mortgage was ever satisfied, the briefs filed show that after the appeal was perfected, and the main brief of the appellants was filed in this court, a satisfaction was tendered by the attorneys for The Citizens and Southern National Bank of Atlanta to the attorneys for Thomas E. Gordon and wife. This was also admitted at the time of the oral arguments at the bar of this Court. The fact that such a satisfaction has been duly executed and delivered at this late date does not take away the right of the appellants to complain that it had not been satisfied at the time of the entry of the final decree, or at the time of the perfection of the appeal, or at the time of the filing of the briefs.
This case is affirmed, with directions to the Chancellor to take such further proceedings as may be necessary to effectuate a satisfaction of the mortgage complained of, and to assess a fair part of the costs against the appellee, The Citizens and Southern National Bank of Atlanta.
SEBRING, C.J., and CHAPMAN and ROBERTS, JJ., concur.