Case ID: so2d_141/html/0335-01.html
Source: Caselaw Access Project
Author: {"author": "PER CURIAM. \n      SHANNON, C. J. PER CURIAM.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

MABRY CORPORATION, a Florida corporation, James F. Magurno, and Elsie A. Magurno, Appellants, v. Meredith E. DOBRY, individually, and as Executor of the Estate of Mabel J. Dobry, Deceased, Appellee.
    No. 2236.
    District Court of Appeal of Florida. Second District.
    May 4, 1962.
    Rehearing Denied June 1, 1962.
    
      James M. McEwen of Rood, Dixon & McEwen, Tampa, and Phillips & McFarland, Clearwater, for appellants.
    Ralph Richards of Richards, Nodine & Gilkey, Clearwater, for appellee.
   PER CURIAM.

The appellants as plaintiffs filed their suit for declaratory decree and the appellee answered and counterclaimed. The chancellor made detailed findings of fact, dissolved the corporation, ordered distribution of its assets to the stockholders by division of one-third thereof to Mr. and Mrs. Magurno, one-third to Mr. Dobry, and one-third to Mr. Dobry as Executor of his wife’s estate. The plaintiffs appealed, and the defendant cross-appealed.

It was the plaintiffs’ position that the title to the approximate 6500 acres of land involved in the suit was vested in the corporation; that the stock of the corporation was equally divided between the Magurnos and the Dobrys; and that upon dissolution of the corporation, its assets should be so divided. It was the defendant’s position that they initially owned all of the lands; that they conveyed the lands to the corporation under an agreement with the Magurnos to develop the land; and that the land was not developed and, therefore, there was a failure of consideration. In addition, the defendant contended that there was fraud and overwhelming influence exercised by the Mag-urnos; that the transaction between the parties was really a loan of money by the Magurnos to the Dobrys; or, that there was a frustrated joint venture.

The land was acquired by the Dobrys over a period of time by various purchases and trades in which they had a cash investment of $62,000.00. They desired to build a home at an approximate cost of $30,000.00. Seeking funds to accomplish this purpose, they contacted the Magurnos and at this point the testimony of the parties vary greatly as to the exact promises. At any rate, the result was that the Dobrys conveyed all of the land to the corporation, receiving as cash consideration the sum of $31,078.00. The corporation was organized with an authorized capital stock of 100 shares of common stock of no-par value, and in the Articles of Incorporation, each of the Magurnos subscribed to twenty-five shares and each of the Dobrys subscribed to twenty-five shares. No minutes of the corporation were kept, and it appears that there were no further proceedings in perfecting the organization of the corporation, and the stock was never actually issued.

Irrespective of the conflicts between the parties, the record clearly establishes the fact that none of the parties ever intended, nor do they now maintain, that the sum of $31,078.00 was the fair market value of the property at the time of the conveyance to the corporation, and all of the testimony shows that the value of the land far exceeded that sum, the conflict being only to what extent. The record further establishes, without controversy, that the parties had grandiose ideas with respect to the development and sale of the property, the conflict being only to the extent of the development and whether the Magurnos were to furnish all of the development expenses or whether the land was to be mortgaged to furnish the development expenses. The record is also clear that the plans for development and sale of the property were frustrated. The Dobrys say by Magurnos refusal to furnish the money, and the Magurnos say by the Dobrys refusal to mortgage the land to raise the money.

On this record, the Chancellor’s decree neither awarded one-half of the lands to the Magurnos to sustain their theory that the lands were owned by the corporation and that the stock of the corporation was equally divided between the two families, and neither did the decree award all of the lands to the Dobrys under any of their theories. In his unusual division, the Chancellor arrived at a fair market value of the land at the time of the decree, credited the Magurnos with the sum of $31,078.00, plus $19,000.00, as their half of the expenses paid in maintaining the land, which total was approximately one-third of the Chancellor’s opinion of the fair market value of the land, and thus made the division accordingly. For the reasons hereinafter set forth in detail, the decree must be reversed. The first obvious and apparent error is one of mathematics because the decree recites that the Magurnos paid $19,-000.00 as their half of the expenses in maintaining the land, but the decree failed to follow through to credit the Dobrys with a like sum for the other half of the expenses paid by the Dobrys in maintaining the land.

There is substantial, competent testimony, although in conflict, to sustain the Chancellors’ finding that the arrangement between the parties was not that of a loan of money by the Magurnos to the Dobrys and that there was no fraud or overwhelming influence exercised by the Magurnos. On these findings, the decree will not be disturbed.

The Magurnos testified, and the Chancellor found that the parties agreed, to use the corporate form as a medium for carrying out their plans to develop the land. A material and substantial part of the consideration for the conveyance of the land by the Dobrys to the corporation was the agreement by the Magurnos to develop and sell the land and the record clearly establishes a breach of that dependent covenant, which amounted to a breach of the entire contract, and gives the Do-brys the right to rescind:

“A covenant is dependent where it goes to the whole consideration of the contract; where it is such an essential part of the bargain that the failure of it must be considered as destroying the entire contract; or where it is such an indispensable part of what both parties intended that the contract would not have been made with the covenant omitted. Black on Rescission and Cancellation, 2nd ed., Vol. I, pp. SSS, 601. A breach of such a covenant amounts to a breach of the entire contract; it gives to the injured party the right to sue at law for damages, or courts of equity may grant rescission in such instances if the remedy at law will not be full and adequate. Savage v. Horne, 159 Fla. 301, 31 So. 2d 477; 6 Pomeroy, Eq.Juris., Sec. 685.” Steak House, Inc. v. Barnett, Fla.1953, 65 So.2d 736.

The record here clearly establishes that the Dobrys entrusted their valuable lands to the corporation upon the representations of the Magurnos; that they did conceive a development for the great advantage of both parties; and that nothing substantial was done by the Magurnos to accomplish this objective. The circumstances here are similar to those detailed in International Aluminum Window Corp. v. Ferri, Fla.1954, 72 So.2d 31, and Mease v. Warm Mineral Springs, Inc., Fla.App. 1961, 128 So.2d 174.

It is also apparent that even if there was no decree of rescission that the ultimate effect of the transaction was that the parties were engaged in a joint venture that failed.

“A joint adventure has been defined as an agreement among two or more persons to purchase specific property for speculation or resale at a profit, the only distinction between such an agreement and one of partnership being the limited and specific object in view. Drew v. Hobbs, 104 Fla. 427, 140 So. 211, 141 So. 596. The fact that joint adventurers may determine to carry out the purpose of the agreement through the medium of a corporation does not change the essential nature of a relationship. Mendelsohn v. Leather Mfg. Corp., 326 Mass. 226, 93 N.E.2d 537. Compare Fancher v. Rumsey, 121 Fla. 631, 164 So. 688.” Donahue v. Davis, Fla.1953, 68 So.2d 163.

The Chancellor found that the Magurnos subsequently gave an agreement to the Dobrys, whereby the Magurnos agreed to purchase the interest of the Dobrys in the land for $75,000.00. The Chancellor then concluded that this agreement eliminated the essential element of agreement to share losses which is necessary to a joint venture. The effect of this subsequent agreement was nothing more than to establish a method whereby the Dobrys could minimize their loss and it did not eliminate sharing of losses in the joint venture.

In addition to the obvious mathematical error in computing the basis for division of the land, there is no basis in the record for the court’s procedure in establishing its own fair market value to the land and thereby arriving at a division of interest. Since the court chose to ignore the fiction of a separate corporate existence (the record sustains such a conclusion), then the court should have followed through from this finding by decreeing that the Dobrys were, and continued to be, the owners of the land. In compelling equity between the parties, the decree should order the Do-brys to reimburse the Magurnos for all of their expenditures totaling $50,078.00.

The decree is reversed with directions to enter a decree in accordance with this opinion.

ALLEN and SMITH, JJ., concur.

SHANNON, C. J., concurs in judgment of reversal but not in opinion.

SHANNON, C. J.

(concurring in judgment of reversal but not in majority opinion).

I respectfully dissent from the majority opinion in this case.

The problem in connection with this suit was to ascertain the true ownership of some 6500 acres of land in Pasco County registered in the name of Mabry Corporation. Title to this land was acquired by Meredith E. Dobry and Mabel J. Dobry under a contract entered into by them with Dunham Livestock, Inc., in February, 1954. The Dobrys had purchased all of the assets that they traded for the approximately 6500 acres of land at various prices during a course of time so that their actual cash investment in it did not exceed $62,000. Having acquired this approximately 6500 acres, the Dobrys decided to build a new home on some 6 acres, which they estimated would cost them $25,000 to $30,000. Magurno had an office in Clearwater, and Dobry, while driving from St. Petersburg to Clearwater, happened to see Magurno’s name on a sign. He alleges that he assumed that Magurno was in a highly liquid financial condition in view of the fact that he had just sold the Bahamas Shore and Yacht Club in St. Petersburg. So, his testimony is to the effect that the purpose in seeing Magurno was to determine the possibility of borrowing from him the money necessary to enable Dobry to build his house. Irrespective of whether he wanted to borrow money, he, in company with his wife, and Magurno finally decided to develop the entire tract of land, and for that purpose Magurno caused to be organized a corporation known as Mabry Corporation. The Dobrys deeded their land to the corporation and Magurno paid to the Dobrys the sum of $31,000, followed by payments totaling approximately $19,000 for taxes, expenses, etc. In the testimony it is Magurno’s position that the $31,000 paid to the Dobrys was exactly one-half of the amount of money that the Dobrys had invested and entitled him to a one-half interest in the land which they were going to develop. Dobry, on the other hand, takes the position that there had been a failure of consideration for the reason that Magurno had breached his agreement to develop the land. Dobry additionally charges Magurno with fraud and asserts that the transaction amounted to a loan of money by the Magurnos to the Dobrys. The stock of the corporation was divided equally between the Dobrys and the Ma-gurnos and Magurno was named as president, Elsie A. Magurno as vice president and Mabel J. Dobry as secretary-treasurer. The two Dobrys and the two Magurnos were named as directors. The charter of the corporation bore date of October 18, 1954, and stated that each of the Magurnos held 25 shares and each of the Dobrys ■held 25 shares, but no certificates were ever issued and no minutes were kept.

A portion of Dobry’s testimony is aptly condensed in his brief, as follows:

“Magurno told Dobry they would have to have a railroad extended to the property before development could begin, and asked Dobry to see about obtaining such a railroad. Although Magurno had promised to attend to all of the development details, Dobry was glad to cooperate in any way he could and set forth as requested in quest of having a railroad extended to the property. He soon learned — which Magurno doubtless knew all along— that such a project was absurd in the extreme and utterly impossible, without prohibitive expense and so reported to Magurno. After stalling and delaying for several months, Magurno announced to Dobry that the property couldn’t be developed without a railroad, and that they might as well sell it. * * * No sale of the property was made, and Magurno soon suggested that the property be divided up, one-half to be conveyed to Dobry and one-half to Magurno. Dobry still thought he was powerless to do anything except -follow Magurno’s wishes, so a survey was started to divide the property into two equal portions. However, as time went on Dobry finally became aware of the fact that he was being- defrauded and decided to consult an attorney. The attorney advised him not to go through with the proposed division of the property, and this litigation resulted.”

In his final decree, the chancellor found from all of the testimony:

“1. That the shares of stock of the MABRY CORPORATION, a Florida corporation and one of the Plaintiffs herein, are evenly divided into two independent interest, i. e., SO percent in JAMES F. MAGURNO and ELSIE A. MAGURNO, his wife, and SO percent in MEREDITH E. DOBRY, individually, and MEREDITH E. DO-BRY as Executor of the Estate of MABEL J. DOBRY, deceased, and that the number of directors of said corporation is uneven, and the two halves of the ownership are unable to agree on successor directors and on the management of the corporation; and said corporation should be dissolved;
“2. That as the corporation has no debts, and no assets except those herein described and ordered distributed, it is unnecessary to appoint a received [sic] or trustee of the corporation for the prupose [sic] of dissolution, or for the settlement of the unfinished business of the corporation;”

And in the decretal portion thereof the chancellor ordered that the assets of the Mabry Corporation be distributed among the stockholders as follows:

“(b) To the Plaintiffs, JAMES F. MAGURNO and ELSIE A. MAGUR-NO, his wife, an undivided one-third (i/j) interest in all of the balance of the real estate owned by said corporation as above described, they being hereby declared the legal owners in fee simple of said undivided one-third (1/3) interest;
“(c) To the Defendant, MEREDITH E. DOBRY, individually, and [sic] undivided one-third (1/3) interest in all of the balance of the real estate owned by said corporation as above described, he being hereby declared the legal owner in fee simple of said undivided one-third (]/$) interest;
“(d) To the Defendant MEREDITH E. DOBRY, as Executor of the Estate of MABEL J. DOBRY, Deceased, an undivided one-third ((4) interest in all of the balance of the real estate owned by said corporation as above described, he being hereby declared the legal owner in fee simple of said undivided one-third (1/3) interest;”

From the conflicting testimony, the chancellor found that the Magurnos should have a one-third interest and the Dobrys a two-thirds interest in the real property involved in the litigation. Still, the chancellor found that the ownership of the Mabry Corporation was evenly divided into two independent interests between the Magurnos and the Dobrys. There was no finding or explanation by the chancellor as to this inconsistency regarding the corporate ownership on the one hand and the division of the corporate assets, upon dissolution, on the other hand. Since the evidence is in conflict as to the intentions of the parties, I do not believe that the portion of the decree finding the Magurnos to be entitled to a division of the land should be disturbed because the record contains ample evidence to support this finding. The record, however, does not, in my view, support the proportions used by the chancellor in his division of the real property and I would reverse that portion of the final decree and remand with directions that the chancellor enter an order dividing the land fifty per cent to the Magurnos; twenty-five per cent to Dobry, individually; and twenty-five per cent to Dobry, as executor of his late wife’s estate.

ON PETITION FOR REHEARING

PER CURIAM.

On Petition for Rehearing the appellants state (the appellee concurs) that in order to preserve and protect the property the parties did, subsequent to the entry of the decree, jointly and equally expend further sums of money in maintaining the property. Therefore, the expenditures of the Magurnos now exceed the sum stated in the Opinion. We, therefore, direct the Court, in compelling equity between the parties, to order the Dobrys to reimburse the Magurnos for all of their expenditures as shall be determined by the Court.

As so modified, the opinion and judgment of this Court is adhered to and the Petition for Rehearing is denied.

SHANNON, C. J., and ALLEN and SMITH JJ., concur.