Hotel Halcyon Corp. v. Miami Real Estate Co.

A demurrer to a bill of complaint, seeking specific performance of an agreement for a ninety-nine-year lease, was overruled, and the defendants appealed.

This opinion was prepared as a dissent from the last subdivision of the opinion prepared by Mr. Justice ELLIS, the first four subdivisions of which opinion are concurred in, and they with this addition now become the opinion of the court.

Mr. Justice ELLIS states that "the proposition to rent for a definite term of years to begin at a certain time and the rental to be paid had been made and accepted but other essentials were left to settlement by correspondence." "The parties had agreed to the execution of a lease and pursuant to such an agreement the complainant had paid a large sum of money to be applied upon the first year's rental, but the trouble is with the particular covenants which the lease was to contain." It is conceded that the lessee, the description of the property, the rental to be paid, the terms of the lease and the time of its commencement were agreed upon. These are perhaps all of the legal essentials of a short term lease. This being a lease for 99 years the lessor proposed and demanded that specified terms be included in the lease all of which terms and the ultimate agreement thereon appear by the following extracts from the correspondence made a part of the bill of complaint, viz.:

"I am enclosing fourteen points that would need to be included in the lease for my protection which I am willing to have you submit to Mr. Rand for his acceptance or rejection."

"Terms of option. $10,000.00 cash for thirty days with the option to extend fifteen days additional time provided Mr. Rand shows at the expiration of thirty days that this fifteen days is necessary to complete his arrangements.

"1. The lease to be for 99 years.

"2. Price as stated in schedule furnished.

"3. Payment of first year's rent, $75,000.00 cash on signing of lease, all following rents payable annually in advance.

"4. Fifteen days grace to be allowed on each payment of rent mentioned in the lease.

"5. Lessee to pay all insurance and to carry full insurance value on all buildings.

"6. Lessee to pay all taxes and assessments, City, County, State and Federal, together with any other legal assessment against the property.

"7. Lessee to pay income tax or other Government tax in case there is any assessed or charged against lessor on account of improvements or otherwise on the property other than cash paid to lessor on account of this transaction.

"8. In case of future legislation, either City, County, State or Federal affecting the title to this property on account of this lease, it is agreed that this lease will either be forfeited to Lessor immediately or proper steps taken by Lessor that will protect and guarantee title and property to Lessor.

"9. Lessor to retain all right and title to said property with full right to mortgage or sell subject only to this lease.

"10. In case of building or other improvements on the property by Lessee and before starting such building or other improvements a guarantee bond of ample and sufficient amount shall be given to Lessor by Lessee covering possible liens or other obligations against the property on account of labor, material or otherwise.

"11. Prior to any change or alteration or tearing down present buildings or improvements, a good, sufficient bond will be given by Lessee guaranteeing the construction of other buildings and improvements of equal value.

"12. In case of improvements or alterations of any kind being made by Lessee on the property, plans and specifications covering such improvements and alterations or changes are to be submitted to Lessor and approved by him prior to beginning work or such changes, improvements or alterations. It being understood that Lessor's approval will not be unduly withheld.

"13. A Guaranty Bond in the sum of $100,000.00 to be made by the Lessee to Lessor at the time of signing lease to guarantee and insure Lessee's faithful performance of this contract.

"14. All bonds and insurance to be written in old line companies satisfactory to Lessor and mortgagees and placed through the local agents in which Lessor is part owner."

The Lessee replied: "I have carefully considered Mr. Peters' 'Fourteen Points' as expressed in list attached to his letter to you of May 17th.

"While Mr. Peters' conditions are somewhat stringent I can readily see his position in the matter, for it is a large transaction and it is only natural that he should wish to be fully protected.

"I am entirely willing to comply with all of the Points except Points 3, 8, 12, 13 and 14 which I will comment upon and make some suggestions with regard to in the order stated.

"Point 3. I am willing to pay $10,000.00 cash for the option instead of $5,000.00 as I previously offered, but I do not see how I can pay the balance of $65,000.00 in cash on or before forty-five days. I would prefer to pay this rent semi-annually in advance. Can this not be arranged? I can assure you that I am going to go through with the deal whenever I pay $10,000.00 down and until I pay the full amount Mr. Peters can retain all the papers either in his bank or in the hands of his own attorneys. I will if desired give Mr. Peters security guaranteeing that I will go through with the deal and pay the balance of the year's rent, but I cannot well pay it until fall. Could I not pay an additional $5,000.00 on the 1st day of July and $5,000 per month thereafter for the purpose of keeping the option alive until sometime in November, with the understanding that the option money so paid shall apply upon the rent? I will pay interest from July 1st upon the rent until it is fully paid and that when it is fully paid I be credited with such rentals as the property may have earned from subtenants since July 1st. We might execute the lease dating it July 1st and place it in the bank in escrow with instructions to deliver to me on or before sometime in November provided I pay $10,000 cash when the lease is placed in the bank and $5,000.00 per month thereafter, and the full amount on or before sometime in November with eight per cent interest from July 1st. I will also at the same time give Mr. Peters security that I will make these payments as hereafter described in my comment upon Point 13. It seems to me this would absolutely secure Mr. Peters.

"Point 8. I do not quite understand this provision. However I feel sure we can agree upon it as I am ready to consent to any reasonable provisions to guarantee the Lessor's rental.

"Point 12. I will be perfectly ready to submit plans to Mr. Peters provided I am protected and my hands are not tied in the matter of construction of such improvements as I decide upon. It will be to my advantage more than to Mr. Peters to see that the improvements are of a proper character and he can rest assured that they will be a substantial improvement to the property. I would not wish the lease to contain any clause which would have the effect of preventing me from placing substantial improvements on the property of whatever character I thought the property best adapted to.

"Point 13. It would be very difficult for me to give a bond such as referred to, but I am perfectly willing to furnish Mr. Peters with security in lieu of the bond. In order to give such a bond I would practically have to give the Company cash or securities equal to $100,000.00, and this would make it impossible for me to put the building upon the property which I had planned, as I will need the money for that purpose. I suggest that I convey in trust to Mr. Peters or some Trustee named by him other property of mine equal in value to $100,000, guaranteeing the performance of the lease until such time as I place upon the Halcyon property improvements totalling more than $100,000, at which time these improvements will in themselves be sufficient guarantee. I could offer Mr. Peters or the Trustee he may name, a trust deed to say the San Carlos which I think is easily worth $350,000 and the mortgage upon which is only $112,500.00, or else say the Valencia Apartments which are easily worth $225,000.00 and the mortgage upon which is only $80,000.00. In either event the equity would be more than equal to the sum of $100,000.00 which is the amount of protection Mr. Peters desires.

"Point 14. I will be glad to have all insurance and bonds written by Companies in which Mr. Peters is interested, provided that should his Companies not be willing to write such insurance and bonds as I require he would be enabled to place the insurance and bonds elsewhere."

The lessor wrote "I will take up first the question contained in points three and thirteen, inasmuch as these are the financial questions of the lease.

"Point No. 3. Mr. Rand can pay to me $15,000.00 cash on signing of the lease, $10,000.00 to you covering your commission making a total of $25,000.00. In addition to this he can give me ten notes of $5,000.00 each payable on the first of each month with interest at 8%, said notes to be secured by the lease, all of which will be placed in escrow in the bank until the notes are paid.

"Point No. 13. A second mortgage on the San Carlos property, corner Ave. B and 1st Street for $100,000.00 will be satisfactory in place of bond, provided I am allowed to collect and retain the rent on the property in this lease until I have $50,000.00. Both second mortgage and cash to be held until Mr. Rand has completed $100,000.00 worth of building on this property at which time, the second mortgage on the San Carlos to be released and the $50,000.00 to apply as a credit to Lessee on the rent at the rate of $5,000.00 each year, thereafter. It being understood, that any part remaining in the hands of Lessor will be forfeited in case the lease is forfeited.

"Point No. 8. This simply provides for future legislature which would protect me in case we have some fanatic legislation giving title to the property to Lessee on long time leases. I know of no such legislation in prospect but on account of certain legislation during the last few years, it is hard to foretell what may happen in this line and in case such legislation becomes effective this clause provides that Mr. Rand as lessee of this property will take whatever steps that are necessary to protect me in my title against such legislation. It would not effect his lease in any way because conditions arising as stated could be covered.

Point No. 12. I am satisfied it can be mutually arranged and that it is the general practice, on long time leases, that specifications and plans covering alterations or changes or improvements on the property be submitted and approved by lessor.

"Point No. 14. It will be necessary that all bonds and insurance be written on companies which we hold the agency for and I am satisfied that we can write any bond in reason that Mr. Rand will require.

"If these conditions are all satisfactory to Mr. Rand and he wishes the exercise of the option as stated at the beginning of my list, dated May 17th, we can give this matter to the attorney at once for preparation."

The lessee replied "It seems to me all of Mr. Peters' suggestions are satisfactory except Point 13.

"I am perfectly ready to give the $100,000.00 mortgage upon the San Carlos property and which would guarantee Mr. Peters until I spent $100,000.00 in improvements upon the property but I do not see how I could consent to have the rental from the property tied up, as frankly I will need every dollar of this rent and every dollar of rent from my other properties to carry my interest and to meet the notes to Mr. Peters and to help me build a building on the Halcyon Hotel property. I am in earnest about this thing and if Mr. Peters and I get together I am going to put a building on the property that he will be proud of and that will be better security than anything I could give him, but I must not tie my hands before hand in any way which would handicap me, and the taking of these rents from the San Carlos, which amount between thirty and forty thousand dollars per year out of my pocket at this time would make it very difficult for me to carry out my plans. I know if Mr. Peters considers the matter carefully he will see my position.

"I am ready to do this, however, to show Mr. Peters my willingness to protect his interests in every way. I will give the $100,000.00 mortgage as stated to be held by Mr. Peters until I have expended $100,000.00 in improvements upon the property. At that time the mortgage can be released and I will then do one of two things:

"(a) Give a $50,000.00 Fidelity Bond to Mr. Peters.

"(b) Increase the value of the improvements upon the property from $100,000.00 to $150,000.00."

The lessor wrote: "Replying to Mr. Rand's letter dated May 21st, in reply to my letter of same date relative to point No. 13, as set forth relative to deal pending.

"I don't think Mr. Rand could object to the terms mentioned when my letter of the 21st is understood. I did not refer to rents coming from the San Carlos as he states. The $50,000.00 rent that I was to hold was the rent collected from the property I am leasing to him and would not affect his present assets in any way.

"I think this will be agreeable to Mr. Rand, inasmuch as it is the only point on which we have not practically agreed and, inasmuch as, I have not required him to make the first and last payment cash, which as you know, is customary, and have agreed to string out the first payment in such a way that he can make it without inconvenience to himself financially.

"I think this is as much as Mr. Rand could ask in taking over a large deal."

The lessee replied: "I have before me Mr. Peters' letter to you of the 23rd inst. The misunderstanding as to collection of rents was entirely due to my error as I misread Mr. Peters' letter. I now see that he refers to rents upon the Halcyon property and not the San Carlos, but the result so far as I am concerned would really be the same for I had counted upon the rentals of both properties in order to enable me to pay the rental and complete my improvements.

"I am sincere in wanting this property however, and at the same time I can readily see how Mr. Peters looks at the matter and I have this suggestion to offer. If Mr. Peters will extend the time in which for me to build from twelve months to eighteen months I will be willing for him to collect the first $50,000 of rents accruing on the Halcyon Hotel property provided fifty per cent thereof as collected be applied upon my notes which will be left in escrow with the lease, and the remaining fifty per cent amounting in the end to $25,000 be applied as the rate of $5,000.00 per year upon the first five years rent. I would expect to be allowed eight per cent on this $25,000 for the period that it was paid in advance as I would have to borrow money at this rate in lieu of it with which to build my building."

The lessor made the following notation:

"Peters

Guarantee Bond $50,000 I hold out of Halcyon rents $25,000 To be returned in 3 yearly payments of $8,333.33 each beginning after the 100,000 improvements are completed.

5-24-21"

The lessee replied: "I have considered Mr. Peters' pencil notation of May 24th as follows:

'Guaranty bond $50,000.00 Hold out of Halcyon rents 25,000.00 To be returned in three yearly payments of $8,333.33 each beginning after $100,000.00 improvements are completed.'

"My understanding of your explanation of above notation and of your conference with Mr. Peters is that Mr. Peters will collect first $50,000.00 of rents out of Halcyon property after the execution of the lease to me, which he will hold until such time as I complete improvements on the property of the value of $100,000.00 when I shall have the privilege of giving him a guaranty bond for $50,000.00 and he will then return to me $25,000.00 in cash of the $50,000.00 collected by him and apply the remaining $25,000.00 annually in three equal payments of $8,333.33 each upon the quarterly installments of the next three years rental.

The above is satisfactory to me and I think Mr. Peters and I now clearly understand each other and I herewith enclose you check for $15,000.00 being cash payment required by Mr. Peters on account of the lease which you are authorized to deliver to Mr. Peters and to close the transaction.

"There is no hurry about the drafting of the lease. It can be executed whenever Mr. Carson prepares same. I would suggest that it be dated as of June first, but if Mr. Peters prefers it date it today. That is agreeable to me. It will be easier, however, to adjust the rentals, etc., as of June first and will probably simplify the transaction.

"I would like the first $5,000.00 note to be made payable August 1st and thereafter monthly.

"The lease is to be made to my corporation and will be signed by me as President. I will execute the notes at the time of the signing of the lease, and the notes and lease can be placed in escrow, as Mr. Peters suggests.

"I would prefer either the Southern Bank Trust Company or the Bank of Bay Biscayne if either of these institutions are satisfactory to Mr. Peters.

"I know Mr. Peters will be entirely reasonable about the $50,000.00 guaranty bond which I am to give in order to secure the release of the $50,000.00 cash he will have collected, and that he will waive this bond later on if I put additional improvements on the property amounting to $50,000.00.

"I understand from you that the second mortgage on the San Carlos property will not be required on account of retaining the $50,000.00 cash, and that Mr. Peters will consent to extending the time in which to complete the improvements from twelve months to eighteen months if I find that by rushing the work the lease on the hotel property will be jeopardized. I am ready to leave the leasing of the hotel to Mr. Peters."

The lessor wrote May 26, 1921: "I have Mr. Rand's letter to you of even date. The only changes that I can see at this time are as follows:

"When Mr. Rand has made improvements on the property to the value of one hundred thousand dollars, has given me the fifty thousand dollar guarantee bond and I have paid him the first twenty-five thousand dollars return of rents collected, then the first payment of $8,333.33 will become due in twelve months from that date, the second payment of like amount in two years and the third payment of like amount in three years.

"The fifty thousand dollar guarantee bond to remain for twelve years from date of lease or until the twelfth yearly payment of rent has been paid.

"There are no other necessities for delay that I see as I understand Mr. Rand agrees to the other points at issue in this matter."

The lessee replied May 26, 1921: "I hereby accept the conditions with regard to repayment of $50,000.00 rent to be collected by Mr. Peters on the Halcyon property and with regard to the duration of the $50,000.00 guaranty bond, as per Mr. Peters' letter to you of this date, and you are authorized to close the transaction."

Other exhibits are:

"Copy. Taxes on this property to be prorated as of this date.

"Mr. J. W. Wallace, City.

Dear Sir: —

In view of the 99 year lease just closed with Mr. Rand, I will take the South 50 feet of lot 1, block 116-N, City of Miami, joining Townley property on Ave. C, as per pencil memorandum viz: 15,000.00 cash, assume mtge $45,500.00 and credit Hotel Halcyon lease $42,500.00. Ck $1,000.00 enclosed.

(Signed) Thos. J. Peters

"Note. This memo is not dated — delivered May 26th, 1921."

"May 26, 1921.

"RECEIVED of Thomas J. Peters, $1,000.00 as part payment on South 50 feet of Lot 1 Block 116 North of the City of Miami as per memorandum of this date as follows:

"Consideration $103,000.00 to be paid as follows:

"$15,000.00 cash.

"$45,500.00 mortgages on the property to be assumed by you,

"$42,500.00 credited on Hotel Halcyon lease covering the first eight and one-half months of said lease,

"$1,000.00 of said cash payment being acknowledged as received.

"Taxes on the property to be pro rated as of this date.

"F. H. RAND, JR. "By C. L. Huddleton, Atty."

The declaration alleges: "That the terms and conditions of said contract and agreement for said 99 year lease were duly and fully accepted by the complainant and by the defendant, respectively through their duly authorized and empowered officers and agents, and thereupon and in pursuance thereof, as part of same, on the 26th day of May, 1921, the complainant paid to the defendant the sum of Fifteen Thousand Dollars ($15,000.00) as the cash payment stipulated to be made by the complainant lessee to the defendant lessor on account of rental for the first year of said 99 year lease, and said payment was so received by said defendant lessor and the full amount thereof duly, in accordance with contract, applied by the defendant upon the rental for said first years period of said 99 year lease, and said amount is still retained by said defendant."

All the facts that are well pleaded are admitted by the general demurrers to the bill of complaint.

The essential elements of an ordinary short term lease of real estate were definitely agreed upon and in addition thereto the subsidiary covenants that were mentioned by the parties as essential to the long term lease contemplated, were considered and agreed upon; a portion of the first year's rent was paid and another portion of it arranged for to the satisfaction of both parties. These conditions taken with other pertinent circumstances in the negotiations between the parties, afford an equity for an enforced execution of the lease, even though other incidental provisions, such as those contained in the proposed written lease that was offered by the lessor and rejected by the lessee may be expedient for the mutual protection of the parties to a 99 year lease. It is apparent that such other or incidental provisions were not regarded by the parties as being necessary in the negotiations for the 99 year lease, and consequently in enumerating the terms to be agreed on, they were not made essential elements of the contract to lease that is here sought to be enforced. All the terms that the parties themselves considered essential to the contemplated lease having been agreed on, the law requires no more, and the equities appear to be with the complainant lessee, therefore the demurrers to the bill of complaint were properly overruled. Florida Yacht Club v. Renfroe, 67 Fla. 154, 64 South. Rep. 742. This case is essentially different from Daubmyre v. Hunter, 86 Fla. 326, 98 South. Rep. 69.

Affirmed.

TAYLOR, C. J., AND BROWNE, WEST AND TERRELL, J. J., concur.

ELLIS, J., dissents.