Opinion
November 21, 1952.
Appeal from the Circuit Court, Dade County, George E. Holt, J.
Sherburt S. Weiss, Miami, for appellants.
Benjamin E. Carey, Miami, for appellee.
Appellee filed a complaint on the equity side of the court below in which she alleged she was entitled to, and sought the rescission and cancellation of, a consummated transaction wherein and whereby she and one Frederich Rathert had purchased ten shares (five shares each) of common stock of Old Heidelberg, Inc., a Florida corporation, from Ed Rapp and the equity which the latter owned in certain real property situate in the City of Miami, Florida. The agreed purchase price was the sum of $5,000. The transaction was closed on March 7, 1950. Appellee gave her check for $2,500 bearing date March 9, 1950, which represented the cash payment that was to be made by appellee and Rathert. The latter parties then executed a promissory note for $2,500 due on or before March 7, 1951, with interest at 6% per annum. Said note was made payable to Marian Hilker who thereafter endorsed the note without recourse and delivered it to Ed Rapp. In passing it might be noted that Marian Hilker is the wife of Rapp's attorney and, because of marital difficulties, Rapp took title to nothing in his own name. Consequently, Rapp, in the eyes of equity, which looks to substance and not to form, stands in the position of original payee as far as the note involved herein is concerned.
Ed Rapp, one of the appellants herein, filed his answer in which he denied the material allegations of the complaint and set forth his version of the transaction. Thereafter, on April 16, 1951, Rapp filed his cross complaint against Katharina Demmerle and sought a judgment upon the $2,500 note which had become due on March 7, 1951. Subsequently, appellee replied to the cross complaint and denied liability on the note because of the matters and things alleged in her complaint as a basis for cancellation and rescission.
The special master filed his report in which he found that Katharina Demmerle had failed to establish by her proof that she was entitled to rescission of the transaction between her and appellant Rapp. In other words, she failed to prove that Rapp had made any misrepresentations concerning the subject matter of the transaction between them as to any existing material fact or that he perpetrated a fraud upon her in any other manner. The master reached the following conclusions on the question of the right of Katharina Demmerle to a decree of cancellation and rescission:
"It is my opinion that the plaintiff has failed to prove that she is entitled to a rescission of the transaction between her and the defendant Rapp. There was no fiduciary relationship between her and any of the defendants. She failed to prove that the relation of attorney and client existed between her and Robert H. Hilker. A representation that the thing purchased is a good investment is not ground for rescission. Correct information in regard to the status of the lease for the restaurant and the mortgages encumbering the house at 1701 S.W. 11th Street, Miami, Florida, was easily obtainable, if the plaintiff had requested it. A court of equity cannot protect a person who is sui juris against her own carelessness or improvidence. The plaintiff did not promptly repudiate the transaction and seek rescission after learning that both the first and second mortgages were in default, or after learning definitely the financial condition of Old Heidelberg, Inc. Because of the foreclosure of the mortgage on the property at 1701 S.W. 11th Street, Miami, Florida, and because Frederick Rathert is not a party to this action, she is not in a position to restore the defendant Ed Rapp to the position that he occupied before the transaction. Frederick Rathert is an indispensable party to this action. Neither Robert H. Hilker nor Marian Hilker ever had any beneficial interest in the subject matter of this suit. As to the bill of complaint, the equities in this cause are with the defendants and against the plaintiff."
Surprisingly, the special master after reaching the foregoing conclusions further concluded that appellee was not liable on the $2,500 note. His exact language in this regard is:
"If the cross complaint is to be considered, even though it was not timely filed, my conclusions are that this transaction was not a technical joint venture of the plaintiff and Frederick Rathert, that there was no consideration for the execution of the promissory note by the plaintiff and that she is not liable on said note. As to the cross complaint, the equities are against Ed Rapp and with Katharina Demmerle."
Had the master found that Katharina Demmerle had established that a fraud had been perpetrated upon her but that an equity court could not grant rescission and cancellation because of appellee's inability to place Rapp in statu quo and because Rathert, an indispensable party, was not before the court, we could understand his recommendation that the prayer of the cross bill be denied. However, since he found that appellee failed to establish that she was a victim of fraud, we are compelled to disagree with the conclusion reached by him and confirmed by the Chancellor, to the effect that Katharina Demmerle is not liable on the note.
Appellee in her bill of complaint alleged that she signed the note "merely as an accommodation for the said Frederich Rathers * * *." She further averred that there was no consideration whatever moving to her for the execution of said note. Consequently, it is clear that she was at least an accommodation maker and as such is liable under the express provisions of Section 674.32, F.S.A. to a holder for value, regardless of the fact that the holder at the time of taking the instrument knew that she was only an accommodation party.
This Court held in the case of Fannin v. Fritter, 127 Fla. 97, 172 So. 691, 693, "If it was an accommodation indorsement, as he contends, it did not have to be supported by consideration in favor of the indorser." We cited Section 6789, C.G.L. 1927, which is word for word like Section 674.32, F.S.A.
It is true that in the case of Scott v. National City Bank of Tampa, 107 Fla. 810, 139 So. 367, we held that one who signs as an accommodation party, although he does so without consideration, becomes a surety. However, since we also held in that case that a surety may be sued as a promisor, the fact that we injected the law of suretyship does not alter the situation. Under the facts and circumstances evidenced by the transcript of record herein Katharina Demmerle must be held liable as an accommodation maker or, under the theory of the case of Scott v. National City Bank of Tampa, supra, as a surety, if such status be of any advantage to her in the future.
After a careful study of this record and particularly the report filed by the special master, we are somewhat at a loss to understand the theory upon which he decided, recommended as a proper holding, and the Chancellor determined that Katharine Demmerle should not be held liable on the note unless they misconstrued or failed to consider Section 674.32 F.S.A. and the cases hereinbefore cited; in other words, unless they both misconceived the legal effect of the evidence. As best we can glean, the special master's, as well as the Chancellor's, reasoning is predicated upon the thought that this transaction was not a joint undertaking of any kind or character and that it were as though Katharina Demmerle had agreed to buy just one-half of the shares of stock and one-half of the equity in the real property and that her obligation was discharged when she gave her check in the sum of $2,500 as the cash payment required by the agreement of purchase and sale. We certainly have a naturally sympathetic attitude toward appellee because of the dilemma in which she placed herself or, possibly more accurately speaking, into which she was led by Rathert — not Rapp. However, we can find no equitable or legal basis for a determination that she should be relieved of her obligation to pay the note. Appellant Rapp must be considered a holder for value because it was his property that was purchased by Demmerle and Rathert. Rapp delivered this property to said parties and the lower court refused to decree rescission and cancellation. Consequently, we can find no sound foundation upon which we can bottom an affirmation of that part of the final decree which denied the prayer of appellant Rapp's cross complaint.
It is clear that Katharina Demmerle was at least an accommodation maker but such status does not relieve her from liability on the note in the hands of a holder for value, regardless of the fact that such holder at the time of taking the instrument knew she was only an accommodation party. Certainly, a payee, which in effect Rapp was, is a holder for value unless the contrary be asserted and shown. He parted with a valuable consideration before receiving the note.
Frankly, we have sought earnestly and diligently, but in vain, to find some equitable principle or rule of law upon which we might affirm the final decree in toto. Appellee failed to establish her right to rescission and cancellation which means that no fraud was perpetrated upon her by Rapp. Under such circumstances, even an equity court cannot lend her its aid and assuredly the law will not and cannot do so, because of the impact of Section 674.32, F.S.A. and our decisions with reference to liability of an accommodation maker. We are forced to reverse that part of the final decree which denied the relief prayed for in the cross bill and dismissed said cross bill with prejudice.
Reversed with directions that a judgment be entered in favor of appellant Ed Rapp on his cross complaint against the appellee Katharina Demmerle.
Reversed.
SEBRING, C.J., and TERRELL, THOMAS, MATHEWS and DREW, JJ., concur.
ROBERTS, J., dissents.