# Petition for Writ of Certiorari — Coral Gables First National Bank v. Constructors of Florida, Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385601_0113%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1962 - **Citation:** 369 U.S. 810 ## Text et No. 652] | IN THE’ DEC 21 i - SUPREME COURT OF THE UNITED] STATES..: cs OCTOBER TERM, 196) THE CORAL GABLES FIRST NATIONAL BANK, 3. banking institution organized under the laws of the United States of America, having its principal place- of business i. the City of Coral Gables, Florida, and ¥ PAN AMERICAN BANK OF MIAMI, a banking institution organized and existing under the iaws of .he State of Florida. having its principal place 9; business in the City of Miami. Dade County, Florida, ahd a member of ihe Federal Reserve System >f the United States, _ Petitioners, « ue See ; : ‘ —— vs. CONSTRUCTORS OF FLORIDA, INC., a Florida corporation having its principal place of business in ithe City of Coral Gables, Dade County, Florida, and JOHN NICHOLAS, as Trustee under Chapter X, Federal Bankruptcy Reorganization Proceedings now pending in the United Stgtes District Court, Southern District ‘of Florida, CITY OF WEST, PALM BEACH, FLORIDA, a municipal corporation organized and existing “under the laws of the State of Florida, AMERICAN SURETY COMPANY OF NEW YORK, a Mew York‘corporation authorized to-do business in the a State of Florida, TOM MAXEY, RUSSELL A. ORTMAYER, RICHARD R. : REYNOLDS, JIM M. LANCASTER, JR., EARL L. GOODWIN, ISLAND CONSTRUCTION COMPANY, a corporation organized under the laws of Puerto Rico and having its principal piace of business in Dade County, Florida. H. S. FLAGG and UNITED STATES OF AMERICA, Respondents. / PETITION FOR WRIT OF CERTIORARI TO THE DISTRICT COURT OF APPEAL OF FLORIDA, A ° THIRD DISTRICT. ° W. G. WARD, Alfred |. duPont Building, Miami, Florida; Atforney for Petitioner, The Coral Gables First Natianal Bank WILLIAM B. ROMAN, Pan American Bank Building, Miami, Florida LEO L. FOSTER. Brock Building, Tallahassee, Florida, — ‘Attorneys for Petitioner, Pan American Bank of Miami. WARD & WARD,. , duPont Building, Miami, Florida, Of Counsel: . \ ‘ . ad ; . ° ° z ° es ” ’ ¢> s a - . * ¢ * he ; - 27 to pass upon any of the points raised, including the Fed- eral questions raised bythe assignments of error concern- ing the improper construction of the penalty features per- mitted under US.C.A.. Title 12. Sections 85 and 86. ' The same Federal questions’ were presented in the lengthy petition for-certiorari: filed with the Supreme Court ofthe State of Florida on the 8th day of June, 1961. copy of which was required.to be filed with the District Court of Appeal of Florida, Third District. as a condition for the application to the Supreme Court of the State of | Florida. This is a voluminous petition and is attached as a, part of the record in this case (Tr. 231-300). However. the Supreme Court of Florida, without taking jurisdic- tion, denied the petition for certiorari as reflected by its final orders of July 24, 1961, rehearing denied September 26, 1961 (132 So.2d 806; 133 So.2d 319: Tr. 301-302. Ap- pendix A49-A50). As reflected by the aboye references, the Federal! question was raised in every stage of the proceedings. G. REASONS FOR GRANTING THE WRIT. ‘The District Court of Appeal of Florida, Third District. has decided’an important and a novel Federal question in ‘the construction of Title 12, U.S.C.A., Paragraphs 85 and 86 (which limits the right of a State Court to impose pen- alties for alleged usurious contract upon a‘ National Bank © doing business within the State), which +s in direct con- flict with the plain and unambiguous provisions of that statute, as construed by this Court in the case of McCollum’ «Vv. Hamilton National Bank of Chattanooga, 58 S. Ct. 568. 303 U.S, 245, 82 L. Ed. Si8. and many prior cpinions cited * therein. 28 As established by the’doctrines of this Court in said | opinion and in prior opinions referred to, a National Bank operating within the State of Florida, even if guilty of vio-* lating the Florida State Usury Laws (which is not con- ceded by the petitioners in this case), could only. be denied in a foreclosure action in equity in the State Cougt the right to recovery of the amount of interest contracted for but not paid, leaving the principal sum intact and subject to foreclosure ard judgment. In the event any interest is paid which is found to be usurious or in violation of the State Usury Statutes, then under the provisions of Title 12, US.C.A., Paragraph 86. the statute makes this clear and unambiguous provision: “In case the greater cate of interest has been paid, the person by whom it has been paid, or his legal representatives, may recover back, in an action in the na of 4n action of debt, twice the amount of the in thus paid from the association taking or re- ceiving the same.” In the case at bar, the highest court of Florida having - jurisdiction over this subject matter has by its ruling per- mitted affirmative relief against the National Bank bv way of set-off and counterclaim in the foreclosure action | in the equity courts of Florida; not simply a denial of the right t6 recover the interest contracted for but unpaid. but a discharge of the principal amounts involved, together with a penalty forfeiture of the taking of security away — from the Nationa! Bank on other mortgages not involved in the usury claim in excess of a value of $110,000.00. As further grounds for granting the certiorarj. the record in this tase discloses that the National Bank held two chattel mortgages given by Constructors of Florida. one on the 24th of July, 1956, and one on July 25, 1956, ’ securing separate notes. and upon which separate mort- Ein ~~ . 29 gages were given on separate personal property and equip- ment. Both of these mortgages calling for approximately $7,000.00 per month total payments were in default on September 20. 1957, when this foreclosure action was in- stituted on the third loan of November 14, 1956.. As part of the security for this third loan transaction, in addition to other collateral, Constructors of Florida had given a second mortgage in the nature of a blanket -moitgage upon the same equipment that had been covered by the first two mortgages of July, 1956. Under the re- quirements 6f the Florida law, the plaintiff is required to foreclose all of his mortgages against the same security at the same time and in the same action. and thus these lwo mortgages about which there-was no question of usury ever raised. were sought to be foreclosed inthe same equity action. During the progress of the foreclosure, Construc- tors of Flerida became a bankrupt, and a trustee in bank- ruptcy was appointed in December, 1957. ¥, No issues were raised in the pleadings concerning the validity of the first two mortgages or the first priority lien which those mortgages created on the personal property and equipment. The opinions of the Lower Court, affirmed by the District Court of Appeal of Florida. sought to be reviewed, imposed a collateral penalty upon the National _ Bank by cancelling the first mortgage lien which the National Bank held against the persenal property, ma- chinery and equipment of the two July mortgages, citing _ as the only reason therefor that the National Bank had’ come into equity with unclean hands. This resulted in a loss to the Bank of its first mortgage on equipment which was worth the amount of the unpaid balances on the first two mortgages. and deprived the National Bank of its opportunity and contractual right to be satisfied as to those first two mortgages out of the collateral security at a time 30 . -when the maker of,the note was in bankruptcy and totally insolvent as far as the general creditors’ claims were con- cerned. This amounted to depriving the petitioners -of a valuable property right without due cheng of law or combensation. . ’ These actions collectively, not only violated the “pro- visions of the 5th and 14th Amendments cf the Constitu- tién of the United States for protection of the petitioners '. under those amendments, but were a clear and clean-cut violation of Title 12, U.S.C.A.. Paragraph 86, The case of McCollum. v. Hamilton National Bank of Chattanooga, 303 U.S. 245, 58 S. Ct. 568, 82 L. Ed. 819, de- cided in 1938, was the last expression by this Court upon the issues involved in this case. That- decision has been the recognized authority, controlling the operation and ; management .of National Banks ever since. This decision of the Supreme Court of the United States has since been recognized by the Court of Appeals of the Sixth Circuit in the case of “Schumacher v. Lawrence, 108 F.2d 576, a 1940 decision, in which that Court reiterated and applied to a similar case the principles laid down by this ge e- in ‘the McCollum decision, Under the Schumacher cision and construing this Court’s opinion in the McCollum case, the Court of Appeals for the Sixth Circuit again. applied the Federal doctrine holding that under the Fed- © eral Stattite 12, U.S.C.A., 86, usurious interest which. has been paid to a National Bank must be recovered back in an .@ependent action, which remedy is exclusive since the Federal Statute controls. and again nasa: from the | McC ollum case as holding (577): ‘‘One paying @ national bank usurious interest and — sated to enforce the penalty may not recover it by way of set-off in a suit brought. upon his note to the - bank.” os ol It was also held in the Schumacher case that where a National Bank brought a foreclosure action.in a State Court (in Michigan), any ciaim for interest paid under a usurious loan could not be set off ir the mortgage foreclosure suit. The usury penalty invoked in this case in the defense _ and counterclaim was not réstricted as against the National Bank to double the ammount of the interest ‘actually ‘paid, | which would have been only a nominal amount and-was not restricted to a denial to the Bank Bank of ¢ of its right to collect interest contracted for, but not t paid, bu but concluded in a judgment against the National Bank forfeiting an amount in excess of the principal of the note, together with col- . lateral damages of over $110, ,000.00 penalty on other issues and other securities held by the Bank, purely as punitive ' - penalties. This decision by the District Court of Appeal of Florida flaunts the Federal Statute, flaunts the long series of opinions by this Court, and if allowed to stand, would create a precedent that would be disastrous to National Banking interests throughout the United States, and particularly in the, State of Florida. H. ARGUMENT. POINT 1. . Has the District Court of Appeal of Florida, Third Dis- trict, in Its Opinion of March 22, 1960, Effective Septem- ber 19, 1960, As Interpreted and Finalized by the Order on the Mandate Entered on April 14, 1961, and As Re- Construed by the District Court of Appeal of Florida, Third District, by Its Opinion Quashing the Interlocutory Appeal Dated May 25, 1961, Petition for Certiorari and Rehearing Thereon Denied by the Supreme Court of Florida September 26, 1961, Violated the Specific Pro- ~ visions of United States Statute, Title 12, U.S.C.A., Para- graph 86, in Allowing Excessive Counterclaims and Set- "Offs and Penalties Not Authorized under Said Statute? — ‘The United States Statute reflected in Title 12, Para- graph 86, must be read in relationship to Paragraph 85 which just precedes it. Paragraph 85 in general provides | that any National Bank may: “take, receive, reserve, and charge on any loan or discount made * * * interest at the rate allowed by the laws of the State. Territory. or District where the bank is located. or ah 2 rate of I per centum in excess of the discount rate on ninety-day commercial paper in effect at the Federal Reserve Bank in the federal Reserve Distriet where the bank is located. which ever may be the greater. and:no more, ex- cept that where by the laws of any State a different rate is limited’ for banks organized under. State laws. ihe rate so limited shall be allowed for .associations organized or existing in anv such State under this mene Se In Florida. the rate of interest fixed on loans to cor- porations is covered in Section 687.03. as shown in the 1955 Florida Statute. 33 Prior to 1953, a corporation under the Florida law was prohibited from pleading usury. This law was amended, effective October 1, 1953, and that law was ip— Nevember, 1956, as follows: “Section 687.03. Uniawful rates of interest defined; -proviso.—It shall be ‘usury and uglawful for any per- son, or for any agent. officer or. other representative of any person, to reserve, charge or take for any loan, or for any advance of money. or for forbearance to enforce the collection of any sum of money, except upon an obligation of a corporation, a rate ‘of interest greater than ten per cent per annum, either directly or indirectly. by- way of commission for advances, discounts, exchange. or by any contract, contrivance or device whatever, whereby the debtor is required or obligated to pay a sum of money greater than the actual principal sum received. together. with interest at the rate of ten per cent; and such transactions with a corporation shall, whereby the corporation pays in- terest, be usury and unlawful if for a rate of interest ereater than fifteen per cent per.annum, The pro- risions of this section shall not apply to sales of bonds in excess of one hundred dollars and mortgages secur- ing the same, or money loaned on bonds.” The penalty for one class of usury under the Florida law is set forth in Section 687.04, as follows: “Penalty for usury: not to apply: to transferee of ne- gotiable paper unless usury appears on face——Any person. or any agent. officer or other representative of any person, willfully violating the - provisions of Section 687.93 shall forfeit the entire interest sp charged, or contracted to be charged or reserved, and only the actual principal sum of such usurious con- tract can be enforced in any court in this state, either at law or in equity: and when said usurious: interest — is taken or reserved. or has been paid, then and in that event the person. who has taken or reserved, or ‘ 34 has been paid. either directly or. indirectly, such usurious interest, shell forfeit to the party from whom such usurious ‘interest has been reserved, taken or exacted in any way. double the amount of interest so reserved, taken.or exacted; * * *.” ‘Where the interest is alleged to be in excess of 25‘, then Section 687.07 applies, which is as follows: “Forfeiture and penalty in case ‘of excessive interest or charges.—Any person, or the agent, officer or other representative of any person.“lending money in this _State who shall willfully and knowingly charge or. ac- cept any sum of money greater than the sum of money loaned, and an additional sum of money equal to twenty-five per cent per annum upon the principal - sum loaned, by any contract, contrivance or device whatever. directly or indirectly. by way of commis- sions, discount, exchange. interest. pretended sale of any article. assignment of salarv or wages. inspection fees or other. fees or otherwise. or for forbearing to. enforce the collection of such moneys or otherwise. shall forfeit the entire sum, both the principal and interest, to the party charged such, usurious interest. and shall be deemed guilty. of a misdemeanor, and on conviction, be fined not .more than’ one hundred dollars, or be imprisoned in the county jail not more - than ninety davs:" Under the Florida law as above set forth, if,there is usury in a normal loan transaction in Florida, or where a State Bank is directly involved and is a primary lender, there are three classifications: (1) If the usury is above the. legal rate as far as a corporation is concerned of 15% per annum and under 25. the interest contracted for shall be forfeited arid only the principal amount may be collected. (2) If the interest has been paid or reserved in such 2 way as to he the equivalent of payment. then that amount pee a . 35 so paid may be recovered back in a sum double the-amount, that is to say, the actual interest paid and a one time penalty. If $1,000 has been paid, then the total recovery would be $2,000. with the principal intact. -(3) If, on the other hand, the interest. is computed and found to be in excess of 25°;. then Section 687.07 ap- plies, and if it shall be established that the lender has. wil- fully and knowingly charged’ or accepted any sum of money greater than the sum of money loaned, and an ad- ditional sum of money equal to 25°’ per annum, etc.. the lender shall forfeit to the party charged such usurious jn- terest, the entire sum, both principal and interest. In that event, even though interest has been paid, the amount paid — . is not doubled. See Rosenblum v.-Hart, 95 So.2d 18. Interest which is simply contracted for in advance, such as the discount involved in this case, is not under the | Florida law interest paid or reserved.. See Wenck v. In- surance Agents Finance Corporation, 99 So.2d, 883. and. as interpreted also by a recent decision of the United States Court of Appeals, Fifth Circuit, Case No. 18071, Conner Air Lines, Inc., and F. A. Conner, Appellants, v. Aviation Credit Corporation et al., Appellees, Opinion rendered June 30, 1960, 280 F.2d 895, petition for certiorari denied. 81 S. Ct. 274. a * This case involved other: issues. but in, the aie of that opinion as printed and issued by the United States Court of Appeals, Fifth Circuit, in construing the two .. Florida Statutes, 687.03 and 687.04, that Court said: ; “If there was not any payment, or any taking or re- serving of usurious interest,-then the full amount of the principal. without interest, may be recovered.” quoting Wilson v. Conner, 106 Fla. 6. 142 So. 606; Ross v. Atlas Finance Corporation, 113 Fla. 793. 152 So. 410; Mc- Gillick v. Chapman, 134 Fla. 220. 184 So. 26. 36 “Then. further quoting from said opinie , that Court said “The provision for the forfeiture of double the amount of the interest exists only if the usurious interest has been paid or has been taken or reserved. Certainly Conner did not pay the so-called’ bonus to Aviation Credit. Was it otherwise paid. taken or reserved? It was not, unless it can be said that a paving, taking or reserving resulted from the transfer of the amount of the bonus frem Aviation Credit to Smith Aircraft. The undertaking of Conner to pay Aviation Credit the $33,310.18 constituted usury, but only because of the relationship between the two Smith corporations. By reason of that same relationship we are precluded from saying that the transfer by one of them to the other is the paying. taking or reserving of the usurious bonus.” The doctrine of that case. quoting the Supreme Court of Florida decisions, is exactly the same doctrine as laid down by the District Court of Appeal! of Flor ida. Third Dis- trict. in the case of Wenck vy. Insurance Aaents Finance Corp., 29 So.2d 883, above mentioned. So that in the case at bar. there was no taking of pav- ment of anv interest up te March 7. 1957. except $5615.44 Thereafter by the contract.of March 20. 19°57. a new note ‘ was entered into on a straight 15° rate on unpaid prin-| cipal balances. Even under that concept. there was an additional interest’ paid on the new note of March 20, 1957: of $5,370.35 (119 So.2d 741, 745). So that from the begin- ‘ning of the loan of November 14, 1956, until all parties ceased making payments in June of 1957, the total amount of interest actually paid either under the November 14, 1956 arrangement or the March 20. 1957, arrangement. was $10.985.79. a If a separate suit had been filed by Constructors of Florida or its Trustee in Bankruptcy. and if all issues o- eed ° had been determined against the Coral-Gables First National Bank, the total recovery would tave been twice that amount of money. In addition to that. of course if there was any. . unpaid interest contracted for but not paid, that amount and that amount only. coyld have been offset in the fore- closure action The computations contained in the opinion of the Dis- trict Court of Appeal.of Florida. Third District (119 So.2d 745). are utterly confused and provide for at least three times the amount of interest that-could be charged under any concept of the Florida law. ° In the case of Mel “ollum v. Hamilton National Bunk of Chattanooga, 303 US "245, 58 S: Ct. 568. a very similar situation -was involved. This case. was heard on writ of certiorari to the Sapreme Court of the State of Tennessee McCollum was the Trustee in Bankruptey of Lookout Plan- inig Mills. He brought a suit in the’ chancery court of Hamilton County. Tennessee. to recover from the Hamilton National Bank .of Chattanooga. but he confined his suit to a claim under Federal Statute. 12 U.S.C.A.. Paragraphs 85 — and 85. The State Court followed that statute but after finding that the bank had received $5,235.55 in interest which was usurious under the Tennessee iaw. gave a judg- ment against the bank for double that amount. At that . time there was still $25.4923.70 left on notes. and the State Court permitted a set-off. simply crediting twice $5,225.55 | as against the total claim for approximately $25.000 This Court reversed the Low er Court on the question of set-off, but in the body of the opinion this Court laid down certain definite rules in which it said (570) “The penalts is to be enforced aecording to the terms of the statute. Guilt being established. the law itself fixes the punishment at precisely twice the usurious exac tion paid, it may not be enhanced or me ated he- G) 38 cause of aggravating circumstances or equitable con- siderations. As the surn demanded is certain, recovery in an action of debt is authorized. though the claim arises not in contract but in tort. * * * The liability can oniv be enforced in am action ‘brought specially and exclusively for that purpose—where the sole issue’ is the guilt or innocence of the accused, without the presence of any extraneous facts which might confuse ‘ the case. Barnet v. National Bank, 98 U.S. 555, 559. 25 L. Ed. 212.° One paying a national bank usurious interest ana entitled to enforce the penalty may not re- - cover it by way of set-off in a suit brought upon his ~~ ‘ note to the bank. Haseltine v. Central Bank of Spring- | field. 183 U:S. 152. 137. 22 S. Ct. 50. 46 L. Ed. 118: Then the Court said (570). “The right of set-off here involved does not at all de- rend upon the Tennessee statute upon which, at. least in part, the state supreme court rested its ruling.” . Then the Court said (5713: “Liability for the penalty, does not arise in contract but is laid in invitum as a disciplinary measure. * * * As ‘the penalty may be enforced only in a suit brought ex- clusively for that purpose so that the trial, of guilt or innocencé may not be embarrassed by any other ques- tion, it is plain that the payment of any debt owed by the plaintiff to the bank may not-be held a condition precedent to the determination of that’ issue. Punish- ment for usury does not depend upon pay ment of the ‘borrower's debt.” . The case was reverse”. Prior thereto, in a long line of decisions. this Court has established the doctrine that while the Federal law permits certain suits affécting National Banks to be tried in the co- ordinating State Courts, yet that power is restricted to the right of the State Court to enforce the provisions of ag ° ' the Federal Statute, irrespective of any State laws. See Farmers & Mechanics National Bank v. Dearing, 91 US. 29. “23 L. Ed. 196, in which this Court said: “The rational banks organized under *the Act are in- struments designed to be used to aid the government in the administration of an important branch of the public _ service. They are means appropriate to that end. Of the degree of the necessity which existed for creating them. Congress is the sole judge. . Being such means. brought into existence for this pur- _ pose. and intended to be so employed. the States can ‘exercise no contro! over them, nor in anywise affect their operation. except in so far as°Congress may see proper to permit. Anything beyond this is ‘an abuse, because it is the usurpation of power which a single State cannot give.’ Against the national will ‘the States have no power, by taxation or otherwise, to retard, im- . ‘pede, burthen or in any manner control the operation of the constitutional laws enacted by Congress to carry into execution the powers vested in the General Gov- ernment.’ ” In many other cases which we will simply’mention. this | - Court.has taken jurisdiction either by writ of error under the old-procedure, or by writ of certiorari under the general procedure to review and to reverse the decisions of State Courts when the State Courts have gone beyond the restric- tions in the Federal Statute. See Brown v. Marion National Bank of Lebanon, Kentucky, 169 U.S. 416, 18 S. Ct. 390. First National Bank of Jacksboro v. Lasater, 196 U.S. 115, 25S. Ct. 206. Talbot v. First National Bank of Sioux City, lowa. 22S. Ct. 612, 185 U.S..172. © There is-one statement from this opinion which is per- tinent, in which the Court said: “The denial by a state court of a right of action ex- presslv based on an‘act of Congress presents a Federal question which gives the Supreme Court of the United States jurisdiction to review a decision of such state court.” Further in the body of the opinion. this Court said (p. 616): . “Two cases are provided for (1) where illegal inferest has been taken, received, or charged; (2) where illegal intérest has been paid. In the first case the entire interest which the ‘evidence of debt carries with it’ shall be deemed forfeited. In the second case’the person who has paid ‘the greater rate of interest may recover twice the amount of interest thus paid.’ ” In a later case, this Court passed upon the same sub- ject in reversing the Supreme Court of South Dakota—Pa- _ trick B. McCarthy v. First National Bank of Rapid City. South Dakota, 32 S. Ct. 240. 222 U.S. 493. POINT 2. Has the District Court of Appeal of Florida, Third Dis- trict, in Its Opinion and Mandate of March 22, 1960, Ef- fective September 19, 1960¢ As Interpreted and Finalized ‘by the Order on the Mandate Entered on April 14, 1961, and As Reconstructed by the District Court of Appeal of Florida, Third District, by Its Opinion Quashing the Inter- locutory Appeal Dated May 25, 1961, Petition for Certiorari and Rehearing Thereon Denied by the Supreme Court of Florida, September 26, 1961, So Construed the Effect - and Operation of the United States Statute, U.S.C.A., Title 12, Paragraphs 85 and 86, Limiting the Amount of Allow- . ance of Usury Penalty Against a National Bank, in Such a Way As to Make It Void and Inoperative for All __ Practical Purposes? In the statement of the case we have clearly pointed out that the Florida Courts. as set forth in the opinion ‘ ‘by the District Court of Appeal of Florida. Third District. , 41 while recognizing that a Federal Statute exists, completely ignored the effect of that statute by attempting to say that when the National Bank loaned $442,400 on Novem- ber 14, 1956. and charged as advance interest $44,240, that that was interest paid. That was in violation of the Fed- eral Statute. If the State Court had simply denied thé right of the National Bank to collect the $44,240. or denied it the right to collect an additional 5% for the period of time the loan was in force and effect, this case would have presented a different question. But the Court attempted to double that amount, claiming that there had been $99,710.88 penalty and double the interest collected subsequent to March 20, 1957. of $10,740.70, making a total of double the interest paid of $110,451.78. ‘ The schedule as shown ‘in the reported opinion (119 S6.2d 741, 745) contdins a figure as’ the liability of. the Coral Gables First National Bank. Then the Court ye a eredit termed: “Less” arnount. credited to "principal on , renegotiation ' . $35,584.06,” or a total of alleged recovery. for interest paid, or double the amount of the interest paid, less credits, of $74,867.52. This claim was not based simply upon forbearance, be- cause admitting $35,584.06 credit as against the original $44.240 interest taken in advance, tnere could only have -been an amount of interest of the difference, or about $9,- 000."which would come under the classification of interest contracted for. but not paid. Applying the Federal Statute, and if there was usury, - the State Court might have been within its rights to have * permitted the National Bank to collect some $400,000 of 42 principal, but denied its ‘right to collect the contractual balance of some “9,000. That is the only result that could havé been reacHed by the State Court consistent with the Fejeral Statute. During that interim, taking an over-al: figure of an additional $11,000 interest actually paid, that amount could only have been collected, not by offset or counterclaim in the equity foreclosure action. but must -be the subject matter of a separate and distinct action’ under the McCollum decision. - In addition to this glaring error in conflict with the Federal Statute. we have heretofore pointed out in the * | ’ Statement of the case that the State Court caused a for- ‘feiture of approximately $110,000 in’ value of collateral to the two mortgages of July 24 and 25, 1956, respectively. and decreed that the National Bank would forfeit or lose all of its principal claim, balance due of $151,802.46, with the exception of 7% thereof, or an eres — penalty of approximately $140,000. . in addition to those penalties, the State Bank, which only had a trust interest participation of $243,000, ap- proximately. out of the $442,400, was decreed to be sean For the return of principal and interest eis paid to March 20, 1957 © $194,156.11. For principal paid subsequent to March | 20. 1957 66,472.81 Interest paid subsequent to March 20, 1957 5,370.35 | * Or a total of $265,999.27, 43 apparently upon the theory that the Pan Américan Bank's subsequent participation amounted to 92%° of $263,000, which figure was drawn out of the thin air. These payments are duplications, because there was never any money paid by Constructors of Florida to the Pan American Bank. All payments were: paid to’ and handled in the name of and by the Coral Gables First National Bank. These items are double charses of er- roneous figures from the inception. We can only demonstrate the complete error by point- ‘ng out by reference to the computations in 119 So.2d 745, that counting the item of liability to Pan American Bank of principal and interest paid to March 20, 1957, as $194,- 156.11. and deducting therefrom the gross interest paid-on the whole contract of $5,615.44, that.would be a net yield of principal repayment to Pan American Bank of $188,- 540.67, Adding the next item of principal alleged to have - been paid to Pan American Bank after March 20, 1957— $66,472.81, to the item of $188,540.67, would result in a total of $255,013.48 principal repaid to the Pan American _ Bank, when they did not advance on the interim certificate ‘of November 28, 1956, but $243,000. In addition to these erratic figures, the Court then cancelled the balance of $151,802.46 principal and interest iri addition thereto, making a total of-$172,585.29 cancelled. 44 POINT 3. Where the Federal Statute Covering Allowable Usury Pen- alties Against a National Bank under the Provisions of _ US.C.A., Title 12, Paragraph 86, Is Restricted to a Defense un an Action to Enforce the Debt, to a Forfeiture of the Interest Unpaid but Contracted for, Without Any Invasion of the Principal Amount Pue, or Where in the Event Any Usurious Interest Is Actually Paid, toa Separate Suit by the One Making the Payment for Double the Amount of - ‘the Interest Actually Paid, May a State Court upon Al- - leged Equitable Greunds by Way of Renal or Compensatory — Damages, Impose Collateral Damages and Penalties Against | a National Bank in Excess of the Total Amount of the Principal Involved in the Transaction? There are -certain portions of. the argument directed to the first two points which are directly applicable to -questions raised under: Point 3. We will not. reiterate all of those arguments, but we will adopt that portion in Points 1 and { which is applicable to the first phase of ~ Point .3. . The specific difference in Point 3 is the fact'that the State Court in the opinions ‘appealed from has adorted some new and unheard of doctrine of granting punish- ment against a National Bank unheard of in the State prac- tice. not applicable to State Banks, or. other lenders of moneys in the State of Florida. We have covered the tech- «nical phases of the ‘Usury Statutes of Florida, and 4 casua! examination of the provisions of Title 12. US.C.. Section 86, will demonstrate that even under that statute the com- putation of penalties is exorbitant and clearly violative of the spirit and letter of that’ Federa! Statute. ° Other phases, however. which are Wot so apparent on the surface. upon analysis have an effect that is even more shocking. 2 ? 45°: _ ‘ 4 - : . The National Bank, as demonstrated from this record, had had a long period of dealing with Constructors of Florida. In July, 1956, the National Bank had financed | Constructors of Florida on the two mortgages which we ‘have heretofore described. Chattel mortgages granting ad- mitted first lien upon the equipment were given‘to secure that debt, as evidenced, by. the two mortgages. The con- tract with the City of West Palm Beach was not even in existence in July, 1956.. The contract performance bond, wherein ‘the American Surety Company bonded Con- structors of Florida on the West Palm Beach Sewer Job, was dated: August 29, 1956 (Tr. ). This was well over one month after the chattel mortgages ‘of July, 24 and 25, - 1956, respectively. had been executed and recorded in the - Public Records of Dade County, Florida. After that bond had been executed by the American Surety Company on behalf of Constructors of Florida, Con- structors borrowed $60,000 in the first part of October, 1956, from the National Bank, and an agreement was - worked out whereby the City of West Palm Beach, in order to secure the National Bank on that loan, agreed to send all the checks which would be due to Constructors ‘of _ Florida, to the Coral Gables First Natienal Bank. This “was pursuant to a resolution of the board of directors of Constructors of Florida (Tr. ° |. In these prior transactions, running over a pertiod of months, Pan American Bank of Miami was not a party in privity with Constructors of Florida or with the American Surety Company. We do not question that over a period of years these banks. as well as many other banks. had, interchanged trust receipts or certificates in the nature of participation certificates, but these were matters solely controlled by contracts between the parties, that is to say, the banks involved. and these inter-company : transactions v ad 46 had nothing to do with the primary handling of these deals by the National Bank: ‘ When the loan of November 14, 1956. the one now In question, was made, copies of these papers were all sent to the Surety Company. Their attorney-in-fact. Mr. Har- . old S. Flagg. with full knowledge of all the transactions, subordinated the claim of ‘the Surety Company. The Surety Company at.that time had ro mortgage and had no type of assignment oF contract from Constructors of orida, which could have in any way been deemed to have been prior to the mortgages held by the ‘National Bank executed and recorded in July. 1956. -Withouf, how- ever, waiting for the consent of the Surety, or even the ‘ consent of the: City of West Palm Beach, the National Bank in good faith made the loan of November 14. 1956, took the agreement of Constructors of Florida as to the as- signment of the proceeds of the West Palm Beach contract, > and advanced some $400,000. out of which the $60,000 loan was repaid. | % - The Coral Gables First National Bank did not attempt to participate the Pan American Bank until it had received the letter of Novembet 27. 1956, from the Surety Company (Tr. 26-29). It continued to make payments out of Con- structors of Florida Coltateral Account, No. 1 until over half of that account had been disbursed at the request of * Constructors of Florida. When the final formal consent to the assignment was received on January » 1957, from the City of West Palm Beach, the balance of that account,’ totaling as we have before set forth, $135.597.62 over-all. was finally distributed by January 77,1957. | On November 14. 1956. there was no certainty as to the time when payment of funds would be forthcoming from . the City of West Palm Beach contract. Those checks 47 which were subsequently received prior to January 2, 1957. were represented by checks payable to Constructors of Florida and simply deposited with their knowledge arid ronsent in their bank aecount,at the Coral Gables. First National Bank. called Constructors of Florida. Inc.. Col- lateral Account No. . & As we have heretofore pointed out, some substitution of collatetal was permitted by agreement. and under the terms of the note and mortgage contract itself of Novem- ber 14, 1956. Constructors had the right to substitute ac- ceptable collateral’ in lieu of the cash payments coming in. The Bank could not have used that money. _ The title to that money was in Constructors of Florida, simply with 4 hold’ order requiring the approval of a bank officer be; - fore those funds could be converted to otner collateral. . On March 4, 1957, when Constructors of Florida was in financial difficulty, not on the West Palm Beach job, but on other of its contracts, the President of that corpora- tien, as we have heretofore pointed cut. directed a letter in which for the first time they asked for a distribution of $50,000 from the funds on hand in the controlled account. At that time the National Bank still holding the first two mortgages of July. 1956. found that those mortgages were in default for failure to make the February payments, and the National Bank called the loan. as it had a right to do. - It could have immediately foreclosed for the balance after the application of approximately $179.000. The Surety Company. which was then involved under its commitments on other contracts. as well as commit- ments on the West Palm Beach contract, joined with Con- structors of Florida in arranging a new program which . would vield a possibility of some current funds for their ‘operations. The American Surety Company could not - 48 claim usury in the contract and did not at that time make any contention as to USUTY. Neither did Constructors of Florida. Under these circumstances, the contract of March 90. 1957, was renegotiated, in which the Surety Company, | as well as Constructors of Florida, confirmed the prior position of the National Bank on all of its mfortgages, being three in number. — ‘Fhe Appellate Court decision affirmed the findings of the Lower Court that while that contract had beer made, it was void. This was the first time in Florida that anv court has ever held that a contract itself was void because - of a usury implication. Certainly the ‘parties had a right ‘to contract. Certainly the American Surety Company had ‘ a right to enter into that contract and confirm its inferior position. Certainly all the parties had a right to contract with reference to the handling of the proceeds from the West Palm Beach contract. 7 ‘Whether that contract clarified the former alleged us- ury is not the question. The Florida Court voided, the contract, which was a clear violation not enly of the .pro- tection of the United States Constitution on the right of parties to contract, but the voiding of that contract in favor of the American Surety Company and ‘its subordi- nating of its alleged lien protection. was the taking of a valuable property. right of the National Bank and was the collateral infliction of an additional penalty for usury prohibited by the Federal Statute. | If the Florida Court had upheld the validity of the ° contract and simply held that the usury penalties of the. State law would still be applicable to that contract, then we would have a different situation. The ‘Florida Court was not content with doing that. Sut it voided the contract in its entirety. even though the original note of November 49. 14, 1956, was cancelled and an entirely new note in the. amount of $218,000:approximately was issued under dif- _ ferent terms, different security arrangements and with different parties involved in the contract. That was a collateral penalty not authorized or permitted under the Federal Statutes or even under the State Statutes. In ‘addition to that forfeiture, and in addition to the complete cancellation of the National Bank’s position as a first mortgagee under the notes and mortgages of July, 1956, the Appellate Court decision completely ignored the fact that the $135,597.62 represented by the funds which were originally deposited in Collateral Account No. 1 on November 14, 1956, had actually been paid to and used-by © Constructors of Florida. That money has been lost. It is obvious.that the National Bank did not make avail- _able to or for the use and benefit of Constructors of Florida, $263,000. It actually, from its funds, gave to Constructors of Florida $400,000. If the Florida Court had given rec- ognition to the fact that the principal: amount of $400,000 had been given to Constructors of Florida instead of $263,- . 000, then there would have been no usury in the contract of November 14, 1956, even under the admitted decision of the: Appellate Court applying other Florida decisions. What ‘happened to the $135.597.62? The “Appellate Court of Florida simply wiped that amount out of any consideration, and this is a clear-cut penalty violation in ~ which the Florida Court must have forfeited that money also. How could the Florida Court forfeit $135.597.62, for- feit $110,000 worth of prime prior security on the two mortgages of July, 1956. and also voidethe.contract of March 20, 1957. in relationship to the American Surety Company and .its subordination? These are all penalties in the nature of equitable punishment against the National Bank which find no precedent in the Federal decisions or , a) - in the State Court decisions. If the Florida Court in ‘this computation had given consideration to that sum of $135.- . 597.62. then there would have been no usury in the first place. How, then, can such a procedure be justified in the face ef decisions of this Court and the clear mandates pro- ~ vided by the Federal Statute; i2 U.S.C.A. 86” We have heretofore pointed out that under the Florida decisions of Shorr vy. Skafte, Florida Supreme Court de- cision, 90 So.2d 604, Clark v. Grey. 132 So. 832 and Carter "yy. Leon Loan & Finance Company, 146 So. 664, the new contract under the Florida law was free of usury, if there had been any usury in the first place. The Lower Court had based its conclusion as to usury in the initial contract ’ by recognizing that sorne $400,000 had been advanced by the National Bank in the first instance. but attempted to create a usury violation by the fact that the Bank had called the loan before its maturity date. In doing this. the Lower Court utterly ignored the contractual provisions contained in the note of November 14, 1956. which re- quired, by contract. that the National Bank would refund or rebate or prorate any interest paid in advance in such event.” So that there was never any contract by which the National Bank could have sued for or collected any usurious interest in the event of acceleration, nor was there any interest paid which was in violation of the Usury Statutes. : The higher court. District Court of Appeal of Florida, - Third District. not basing its opinion on the same theory . upon which the Lower Court opinion was based, simply ignored the fact that $400,000 had been paid by the -National Bank, and reconverted the loan to $263,000. Then it held that since the State Bank by its subsequent trust participation had on or after November 28, 1956, paid to the National Bank $243.000, that they became the actual own- . >» 5] ers of 93° of the total loan and that the ‘National Bank only had 7%, or the difference between $243,000 and $263,000. : Again we able, what happened to the $135,597.62?+ This sum cannot be found in the computation and final con- clusions and orders of the Appellate Court. Not only is this a violation of the fundamental constitutional protec- tion, but it is an additional penalty str ictly in Violation of the Federal Statute. Title 12, US.C.A. 86. POINT 4. May a State Court, in Addition to AHowing Interest Penal- ties and Forfeiture of the Amount of the Principal (All in Excess of the Original Amount of the Loan from the Na- tional Bank), Impose Additional Penalties by Way of Puni- tive or Exemplary Damages by Forfeiting Other Collateral Which the Bank Holds, Because It Is Claimed That the National Bank Came into a State Court of Equity Without Clean Hands? In our-arguments in support of Point 3. we have covered most of the issues presented in Point 4, with one exception. That lies in.the fact that after the March 20. 1957. tri-party agreement in which the Surety Company ~ had jvined, the National Bank changed its position, waived its right to foreclose for then existing breaches in the first’ two mortgages, changed its distribution of the collateral to be received from the West Palm Beach contract. and operated under that new. arrangement for approximately two months.- In that two months period approxin.utelv $100,000 additional funds had been received from the City of West Palm Beach from March 20 up until the early part of June, 1957. and distribution had been made in ac- cordance with the March 20. 1957, agreement , 52 Then the American Surety Company, Constructors of Florida and City of West Palm Beach, directly in viola- tion of the conditions of the March 20, 1957, agreement, diverted all funds coming due from that contract, which. funds would have been more than sufficient to ‘thave paid off and discharged the National. Bank’s claims against Constructors of Florida. The Surety Company was re- sponsible for the completion of the. West Palm Beach con- tracts. It had subordinated its position to that of the National Bank, and yet the Appellate Court, in voiding . the agreement of March 20, 1957, held that the Bank’s | priority position, as far as the American Surety Company was concerned, was ineffective, and p!acéd its $tamp of _ approval upon the assignment or diversion of the Bank’s trust fund securities from the West Palm Beach contract. ‘to the direct benefit of the American Surety Company. The Appellate Court, in additidn to all of the other penalties which had been inflicted upon the National Bank, as we. have heretofore pointed out, in conflict. with Title ‘12, U.S.C., Paragraph 86, approved the confiscation of val- @ uable trust and security rights of the Bank. — - So that as the opinion now stands, even though this Court would reverse the statutory usury penalties, as’ fixed by the Florida Appellate Court, and grant to the National Bank its full right to recover its principal of some $400,000, we find that Constructors of Florida is hopelessly insolvent. in bankruptcy, and there is no fund ‘now in existence out of which the Bank could satisfy its claim. That is a further so-called equitable punishment which results in defrauding the National Bank and its depositors and stockholders. for the benefit of the American Surety Company. ; That phase results in one of the most drastic penalties that could be’conceived. The entire National Bank system a in the State of Florida would be wrecked, and the con- trol by Congress of a National Bank under its protective . Statutes would be flaunted, ignored and reduced to, ab- _ surdity. The Lower Court and the Appellate’ Court cited no authorities for such a drastic forfeiture, and there are no authorities in the State of Florida or within the realm of the decisions of this Court which support such a for- feiture. , POINT 5. . Where, After a Loan Has Been Consummated by a National Bank to a Corporation, and Where the Privity of Contract Is Solely Between the National Bank and the Corporate Borrower, and Where Several Weeks After the Loan Is Consummated the National Bank, Pursuant to Its General Banking Practice under the Federal Resetve System. Grants a Simple Trust Receipt or Participation for a Part of This Loan on a Straight Simple 5% Interest Participa- - tion, Does That Subsequent Transaction with the State Bank Relate the Whole Transaction from the Inception As a Co-Adventure or Joint Adventure or Agency Contract So As to Av id the Direct Application of the Federal Statute on Usury, and Bring into Play the State Penalties Applica- * ble Only to a State Bank? This point necessarily inyolves some of the same fac- tors discussed in the argument on the previous points. But in addition, it raises one specific point upon. which we will comment. That is the effect upon the Federal Statute where a National Bank, after a loan has been consummated with a borrower, grants a irust certificate either to a State or Federal Bank. or even to some in- ' dividual. The National Bank in making this loan of November 14, 1956.. was subject to the rules of the Federal Reserve ? ere - Act and the rules of the Comptroller of Currency under the National Banking Act. . Under the rules‘ of the Na- tional Banking Act reflected in Title 12, U.S.C.A., Sections 1 and 21, there was vested in the Comptroller of Currency the power to make rules and regulations Under -this authority. the Comptroiler had issued his- opinion +9530, which ‘was in force and effect at the time this loan was made on November 14. 1956. in which it was provided as follows: ao . “There is no legal prohibition against a national bank making a loan in periodic installments instead of in a single lump sum, although the latter is the usual practice. Likewise, it is not illegal to accomplish the same end by placing the entire amount of a loan in a special account out of which the borrower may make limited periodic withdrawals. ; However, under the latter arrangement the bank must be careful that the total charges imposed upon the horrower (whether such charges are described as ‘in- terest,’ ‘service charges’,’or otherwise) do not exceed the legal rate of interest. * * *” When the National Bank made this loan on November . 14, 1956, it was acting solely and clearly within the pur- view of the Federal Banking Statutes and the Comptroller's rulings. Some $263.000 was immediately given “to the -eredit of the borrower. Simultaneously, $135.597.62 was placed in the name of Constructors of Florida, Inc.. the _ borrower. The title to the money ‘was in the borrower, . and there was simply a control provision for disbursement .. of that sum awaiting ‘the receipt of the formal assign- ment documents. However, without waiting for this as- " signment document, which did not reach the Bank until - January 2, 1957, the Bank had in good faith, at the request of the borrower, advanced approximately 50‘; of that _ amount. and on January 7. 1957. paid out the entire bal- . ance. Whether interest was charged by the Bank on those additional] sums or not would make no difference in the usury computation. If the Bank had the right to charge interest on the funds in Collateral Account No. 1, interest computed over the life of the loan of two years was only 11.2%. If it would not be perinitted to charge interest until all the funds had actually been paid out, then, tak- ing into consideration that there were two installment payments made out of that account in November and December, 1956, and interest only computed from the date the money actua'ly left the account, the Bénk would have charged unauthorized interest amounting to less than one-half of 1% on the over-all loan. So, whether ‘the interest charged was 12, or 12%, ‘or some figure in hetween, would have no bearing upon . the question of usury, since the Florida Usury Statute permitted an over-all interest charge against a corpora- tion loangf i5“ per annum. ° Participations, either whole or in part, are a standard practice of all members of the Federal Reserve System. These participations are in the nature of-a re-discouint. totally or partially. except that the holder of the Pparticipa- tion certificate does not take any legal title to the ... standings between the Pan American Bank, .as “a “State . Bank, and the Coral Gables. First seein ore Bank, on No- ° a 58 vember 14. 1956, at the time the loan was consummated ‘ - between the National Bank and the borrower: ‘These two Banks were free to deal with- themselves . and between themselves. The Coral Gables First National Bank under the Federal Regulations: -could have participated the balance of the 45% to other banks, ‘either State or National, have paid those participants whatever interest it agreed to pay; and could have kept the benefit of any overage interest. That was a matter with which the maker . of the note had no concern. It-is a standard live of bank- _ ing practice, and to apply the rule of equitable penalties. . equitable damages, such as applied by the Appellate Court ’ of- Florida in this case would ‘shatter the method of _— . ¥ business under the Federal Banking System. | The ruling, therefore, of the Appellate Court of Flor- ida, under the doctrine of usury, npt: only shatters the concept of Title 12, U.S.C’A., Paragraph 86, but shatters and holds to be null and void the acts of a National. Bank when it is acting solely and well within the purview and directions of the Comptroller of Currency who was in ‘charge of the operation of National Banks.. If the actions of the National Bank were in full accordance with the rules and regulations governing’ National Banks or State Banks which were under the Federal Reserve System. then it is no concern of the State of Florida and its Courts. © to hold for naught and to void or to place extraneous | constructions. upen the control factors of the National Banks. 3 The Appéilate Co 2 of Florida in its opinion (119 So.2d 747, first colunin) referred to subsequent cases col-— lected at 12 U.S.C“A. 343. The only case referred ta under that heading is Federal Reserve Bank of Richmond, Va., v. Duffy et al., 188 S.E. 82, 210 North Carolina 598: The ‘ ease does not support the statements made by the Ap- no pellate Court in its opinion, but the effect of the case is to hold just to the contrary. In this case there was an action brought by.the Federal _ Reserve Bank of Richmond, Virginia, in the State Court of North Carolina. F. S.. Duffy had executed a note pavy- able to-the First National Bank of New Bern, North Carolina, and that bank thereafter transferred the note by endorsement to the Federal Reserve Bank of Richmond. * This note was secured by a mortgage on real estate. The note was dated September 12, 1929. and was assigned for ‘discount to the Federal Reserve Bank of Richmond gn September 14, 1929. The credit: was extended from the ‘Federal Reserve Bank to the New Bern Bank as of’ the date September -14, 1929. About six. weeks later, on Oc- tober 26, 1929, the First National Bank of New Bern closed its doors. The makers of ‘the note above referred to had: on’ deposit - with that bank certain sums which they claimed they had a right to set off against any in- debtedness due to the bank, including the indebtedness » represented by the note of September 12, 1929, which had been assigned and discounted to the Federal Reserve Bank. The Federal Reserve Bank then brought suit, and the defendants contended that the Federal Reserve Bank acted in bad faith when it took this note for discount. They con- ~~tended that the note was ineligible for discount, and that therefore-the Federal Reserve Bank, the plaintiff, was not entitled to the position of a holder-in due course so as to deprive the defendants of the right of set-off to the amount " of their deposit in the closed bank. | " The Supreme Court ef North Carolina held that even if the plaintiff had accepted for discount paper declared il- legal by the act or by the rules under federal procedure, the defendant who owed the debt could not complain’. They relied upon a' decision by Circuit Judge Parker jn Lucas vy. ie de Federal Reserve Bank, 59 F.2d 617, 620. In this case; which was quoted in detail in the opinion of the North Carolina Court, the fundamental rule was laid down that the ex- ercise of powers or incidental powers under the Federal Re- serve Act was solely a matter for federal determination, and held that’even though there were technical rules in ‘the discounting of paper that might have caused the Comp- -troller of Currency or the Federal Banking Examiners to question the validity of the transaction, yet the borrower had no position ‘to question it, stating (p. 84, column 2): , “It is equally clear that whatever the power of the Federal Reserve Bank with respect to taking as col- lateral paper not eligible for discount, no one can com- plain of such action except the government, the sov- ereign which created = limited its powers. * * *” Then the Court said: “Defendants contend further that the relationship be- tween the Federal Reserve Bank of Richmond, Va., and member bdnks was such as to constitute the latter: _the agent of the former, and thus impute notice to the principal of all facts known to the member bank. * * *” | But the Supteine Court of North Carolina rejected that doctrine, stating: “Where the agent is dealing in his own behalf, or has personal interest to serve, the knowledge of agent is not imputable to the principal. * * * Here the First National Bank of New Bern, seek- ing to secure additional funds. to continue a failing business, negotiates a valid paper, which, on its- face, is entirely proper and eligible for discount by the plain- - _ tiff, but fails to disclose facts which might have pre- vented its discount, and thereby obtains advances from the plaintiff for its own purposes. The New Bern bank was acting in its own interest, adversely to the - plaintiff, in selling to the plaintiff the’ New Bern bank’s 61 property,’and hence knowledge of bad faith, if any, on its part-cannot in law be imputed to the —, Re- serve Bank.” — ys : : pers ing that nero of ae expressed in said opin- ion and supported by Federal authorities, how could it be ~ said that the Pan’ American Bank of Miami had constituted - - The Coral Gables First National Bank its agent, ‘when it~ did not evén come into the loan transaction until two weeks after the National Bank had already consummated the loan and had made advances of $400,000 in principal sum to the borrower. The State Bank had nothing to do with the original loan and nothing to do with the securing of the collateral, and had nothing’ to do with the interest rate fixed between the borrower and the National Bank. How could that subsequent transaction relate back to establish the two essential points found by the State Court— 1. That the subsequent participation of the State Bank by a retroactive measure constituted the National Bank its agent, or a . “How couid that subsequent participation créate a pre net where the National Bank was used as a sub- terfuge or as a conduit by which the State Bank sought to” iénd its money at a usurious rate of interest under the _ guise of protection of the: National Bank, and Title 12, U.S.C.A.. Paragraph 86. / . These are simply imaginary and fictitious conclusions” drawn by the Appellate Court of Florida, not based upon any facts, but asserted as a flimsy and unsupported founda- tion for assessing collateral punitive damages against the National Bank. ; While not definitely pointed out. there seems to be a “trend running through the theory of both the lower court 62 : and the Appellate Court of Florida that if The Coral Gables First National Bank, as a National Bank, had handled this _ deal by itself, then the Federal Act would apply. How- ever, it seems to be intimated, if not actually held, that where the National Bank, after the loan was made, subse- ~ quently-participated some of that loan,as_it-had-a right to do, to any member of the Federal Reserve System, and the ‘actual participation was made to a Florida State Bank, that then the National Bank lost alli of its rights or protection, as it may ‘be called, under the Federal Statute. A very similar case, at least similar in principle, has © been decided by this Court since the filing of the petition in this‘cause. On December 5, 1960, which was several days after this petition was filed, this Court -rendgred_ its opinion in the case of Small Business Administration, Petitioner v._ G. M. McClellan, Trustee, 81 S. Ct. 191 (Supreme Court Rep. Advance Sheet, December 15. 1960). In this case, the © Supreme Court of the United States reversed the decision of the United States Court sal Appeals for the Tenth Cir- cuit (272 F.2d 143). ne Referring to the facts set forth in the Court of Ap- peals opinion, it appears that one Byquist had made an application on a Small Business Administration form, en- titled “Limited Loan Participation Application for Loan”, .to the Brookville State Bank of Brookville, Kansas, for a $20,000 Ican. On October 30, 1956, the Bank endorsed the application to show that it was willing to make the loan upon the participation of SBA therein to the extent of 75°7. On November 19. 1956. SBA agreed and entered into a participation agreement with the Bank. It was agreed that upon request by the Bank. SBA would purchase a 75% interest; that the. Bank would hold the note and on 5 days written demand would transfer it to SBA: that the holder of the note. whoever it might be. would service it and ‘re- 63 mit promptly to the other party its pro rata’share. SBA and the Bank were to bear any loss’ incurred ratably accord- ing to their respective interests in the loan. On Nov ember.21, 1956, SBA sent the Bank its check in ‘the amount of $15,000 for the e sole purpose of purchasing a —75°% interest in the loan. The State Bank then loaned $20,000 to Byquist who executed and delivered a note payable to the Bank. This loan was on the form authorized by SBA. On September 5. ae Byquist was adjudicated a bank- . rupt and subsequent to the date of bankruptcy the Bank assigned the note to SBA. SBA then filed its claim on Oc- - tober 15, 1957, for the entire unpaid _balance-on the note ithe sum of $16,788.42, and claimed priority therefor. The. Referee and: the United States District Court, as well as the United States Court of Appeals, Tenth Circuit. _ held that the State Bank was the primary creditor. and thatthe United States in its participation through SBA was ~ ‘only a beneficial owner of a part of the debt. The opinion of the United States Court.of Appeals, Tenth Circuit. pointed out .(p. 145) that the United States, through SBA, was bound by its written contract to account to the State Bank for 25 of any coHections made under the note, and that therefore the Bank would share to tiiait extent in any proceeds resulting from the award of a priority to the United States. That Court pointed out that no such priority . to a private creditor is provided for. That Court.ended its opinion as follows (146): “The United States has engaged in a commercial enterprise and made no effort to safeguard its rights under £3466. In a contract made on its own forms it: has agreed to share ratably proceeds and losses. It may not assert a priority which will produce a re- c 64 covery that by contract must be divided with a private. entity.” However, the Supreme Court of the United States re- -.versed that decision, and. the question ‘was squarely put in _ the opinion by Mr. Justice Black (83 S: Ct. 193): “The basic question this case presents is whether, ‘when the Administration has joined a private bank ~ in a loan and the borrower becomes -a bankrupt, the Administration’s interest in the unpaid balance of the loan is entitled. to the priority provided for ‘debts due to the United States’ in R.S. £3466 and $64 of the Bank-- * ruptcy Act, even though the Administration has agreed to share any money collected on the loan with ‘ the private bank.” ‘ The-Court in its opinion vstenial out that the District ‘Cet had concluded that since the bankrupt’s note evi- dencing the loan was not assigned by the Bank +o the Ad- ministration until after the commentement of the bank- ruptcy proceedings, the debt was not entitled to priority. Then the Court in its opinion pointed out that the Court of Appeals upheld that general order, holding that the Ad- ministration having contracted to pay to the participating. private bank one-fourth of any distribution received, it could not assert its priority and thus have a private party benefit from the priority. But this Court overruled those - contentions ‘and said that where the debt was sought to be ' collected by a Federal Agency, the fact that the Admin- _ istration had ‘contracted to pay to the participating private . bank one-fourth of any mone} it later collects on the loan, does not mean that the Government must lose its eeaemy. the Court stating (195): \. “Respondent's argument to the contrary seems to ’ rest upon the assumption that the Government is de- "prived of its priority by making a contract to pay a part of its funds to another cmubitine of the bankrupt who has no priority.” at ‘Then, further, this Court said (196). MO “The purpose of these sections is simply to protect __ the interest of the Government in collecting money ” due to it. Once-that money is collected. and placed in the Government’ Treasury, the end sought: to be achieved by £3466 and £64-of the- Bankruptcy Act is - completely satisfied. At that peint, there is no dif- ference between the money so received and money re- ceived from any other source and, like other money, jt may be disbursed in any way the Government sees fit, including the satisfacti { obligations already incurred, so long as the purpose is lawful. The Small - _ Business Administration ‘is authorized to enter into contracts calculated to induce private banks’ to make loans to small businesses. The contract involved in | this case, by providing- additional securj y to the pri- vate. bank at the Government's experise. is well adapted tq-that ‘end. Indeed, in many cases such a contract may be the only way the .Administration could induce private bank participation in a necessary _loan. In ‘those cases, acceptance of respondent’s argu- . - ment would make it more difficult for the Administra-- tion to perform its statutory duties. Clearly Congress did not intend, by the very act of imposing duties upon the Administration, to take away a privilege necessary - - to the effective performance of those duties. _ * * * Respondent's argument from the policy of equality of distribution for similar creditors expressed in the Bankruptcy Act is no more convincing. It is © true that the allowance of the priority asserted here will place the bank, a private unsecured creditor, in a better position than other. private unsecured ¢red- _itors. But this position is a resuJt, not of any” in- equality of distribution on the part of the bankruptcy court, but of the bank’s valid contract with the Small Business Administration.” — - - g ‘ 6s Applying the theory of that case to the situation now at hand, we find thatthe position of a National Bank under Sections 89 and 866f Title 12, U.S.C.A., is stronger than the facts presented in the Small Business Administration case. Here the N&tional Bank made the initial loan. It expended. out of the National Bank’s assets $400,000 approximately for advances on the $442,400 loan. At that point the Na- Ational Bank was the only party in privity with Construc- _ tors of Florida, Inc., the borrower. The,-note was in its . name and the security pledged was in the name of the . ‘National Bank. It was then no concern of the borrower ._ what disposition the National Bank made of that loan. It could have assigned that loan either to a National Bank or any other member of the Federal Reserve. It could have’ sold it outright to third parties or it could hold the note and grant participations which were allowed under the Federal Reserve Act to either State or Federal Banks in whole or in part under the doctrine. of participations. It had the right to make any terms as to the participation and interest return that it saw fit. This did not render any of the holders of the: participation certificates in privity with the original borrower. Admittedly, some two weeks after the loan had been consummated, on November 14th, a State Bank, also a member of the Federal Reserve System, took a participa- tion for 55%., but at a restricted 5 interest agreement. - This was a matter solely between the National Bank as the holder of the -note and the collateral,. and its- par- ticipant. This did not amount to an assignment of the loan or any transfer of any legal title to the note or to the security. Whatever protection the National Bank had at the time the loan was consummated on November 14th, . 1956, was not lost or waived by the National Bank. When a the National Bank, pursuant to the terms of its note con- 67 tract, c this loan, it was acting pursuant to its con- tractudl \rights, and the State Bank ‘had nothing to say’ ‘about the action which the National Bank took. The . State Bank was not even a party to the so-called rene- gotiated loan or the new loan of March 20, 1957. The State Bank did take a small participation in that loan, but that was by. separate contract. After Constructors of Florida, Ine:, became insolvent and thé foreclosure was instituted by the National Bank jp the fall of 1957, the National Bank was thepei plaintiff in that foreclosure. The only reason State Bank wag required to be joined as.a proper, but not a necessary, jarty plaintiff was because of the rulings of the ComptrgHer of Currency, Ruling 1135A, which in simple“and concise language, as we interpret it, provides that where there are defaults of interest or prin- cipal payments under the loan which is held by the Na- tional Bank, then the participating banks shall share in all subsequent loan payments. and collections in propor- tion to the percentage of participation held by each bank at the time of the default’ the appointment of a receiver or bankruptcy. This rule applied to loans secured by personal property as distinct from real! estate loans. Applying these same principles as laid down by this Court in the Small Business Administration case, supta, the total claim of the Coral Gables First National Bank came squarely under the provisions of Sections 85 and 86 of Title 12, U.S.C.A.* The opinion of the Courts of Florida attempting ‘to strip the National Bank of its pro- tection is clearly violative of the Federal law. “c CONCLUSION: ,1n a preliminary part of this petition for certiorari we’ emphasized that we were submitting this question to the Supreme Court of the United States solely on the point that, assuming but not admitting that usury was found to _ have been“exacted by the National Bank by the State. Court decision, and that approximately $11,000 of interest. was paid by’ Constructors to the ‘Cora] Gables. First Na- tional Bank, did the Federal Statute, Title 12, U.S.C.A., Par. 86, restrict the’ penalty of recovery against the Na- tional Bank to twice the amountzpf the interest fos cata paid, which would have approximated $22,000? * _ If that is the limit of the penalty, then the National Bank was entitled to recaver approximately $110,000 of principal, which was the balance due on the undisputed mortgages of July, 1956, plus interest and attorneys’ fees. The National Bank would be éntitled to recover approxi- — $151,000, which was the balance of the principal ar, 4 the re-negotiated mortgage note of November 14, Pe take as revised by the note” of March 20. 1957, plus at- torneys’ fees, less the credit of approximately $22,000, which is double the amount of the interest,actually paid . “by Constructors of Florida to the Coral Gables First Na- tional Benk. If this Court holds that the Federal Statute iimits the penalties to that amount since the title to all of the mort- . - gages and, notes was in ‘the Coral Gabies First National. Bank. then the Coral Gables First National Bank could *. pecover, and the Pan American Bank of Miami as the par- * ticipanf would then have its percentage of the participa- tion. aa ‘ In this event that part of the decrees and opinions of the Florida Courts extinguishing the lien and priority of | ~- the National Bank’s mortgages as a penalty for coming into equity with unclean hands, would be automatically ‘- avoided: Thus also would be- avoided the’ affirmative judgment against the Pan. American Bank which was not even in privity with Constructors of Florida, and the off- . set: judgment against the National Bank would be reduced from some $74,000 down to approximately $22,000. Réspectfully submitted, W. G. War, _ Alfred I. duPont Building, © Miami, Florida. " Attorney for Petitioner, The~ Coral Gables First National Bank. WILLIAM B. Roman, Pan. American Bank Building, Miami. Florida, Ree ast. FOSTER, Brock Building, - Tallahassee, Florida. Attorneys for Petitioner, ‘on American Bank of Miami. , By joven | 3 ieee as W. G. Warp Warp & Warp,. duPont Building, ~ ' Miami, Florida, Of Counsel. INDEX TO APPENDIX Partial Final ‘ens of the Circuit Court of the Elev- enth Judicial Circuit, Dade County, Florida, Dated June 26, 1958 Al-Al4 Order Amending Partial Final Decrée, Dated July 2, 1958 . A15-A19 - Opinion of District: Court of Appeal of Florida. ‘Third District, Filed March 22, 1960. A19-A34 Mandate from District-Court of Appeal of Florida, ‘Third District, of May 4, 1960. a A35-A36 | _ Order and Judgment on Mandate, April 14, 1961 A37-A41 Notice of Interlocutory Appeal Filed April 17. 1961 A42-A43 Assignments of Error Filed April 17. 1961 ' “A44-A47 | Order of District Court of Appeal of Florida, Third District, May 25, 1961 «AB Order of Supreme Court of. Florida July’ 24. 1961. Denying Petition for Writ of Certiorari A49 Order -of Supreme Court of Florida oar. 26, 1961, Denving Petition for Rehearing A56 Al i, IN THE CIRCUIT COURT OF THE ELEVENTH JUDICIAL CIRCUIT, IN AND’FOR DADE COUNTY, FLORIDA. : IN CHANCERY No. 205613-E. = (Judge Crawford. ) THE CORAL GABLES FIRST NATIONAL BANK, etc., ‘and PAN AMERICAN BANK OF ° MIAMI, etc., — VS. CONSTRUCTORS OF FLORIDA, INC.:; et al., ° ‘ Defendants. PARTIAL FINAL DECREE. : THIS CAUSE coming on to be tried before the Court and The Coral Gables First National Bank, the Pan Ameri- can Bank of Miami, Constructors of Florida, Inc., City of West Palm Béach, American Surety Company of New York, Richard R. Reynolds, James M: Lancaster, Jr., Earl L. Goodwin, Russell A. Ortmayer, Harold S. Flagg and Tom Maxey having presented their testimony together with that of their witnesses and presented the docu- mentary exhibits to be considered by the Court, and after consideration of the matter, the briefs-of counsel, the Court FINDS: On September 20, 1957, the Coral Gables First Na- tional Bank, and the Pan American Bank of Miami, as Plaintiffs, filed their Bill of Complaint against Construc- A2 tors of Flérida, Inc., City of West Palm Beach, American | Surety Company of New York, Richard R. Reynolds, Jim M. Lancaster, Jr., Earl L. Goodwin, Island Construction er ere Pecon~-Construction Company, J. C. Biedsde, Rissell A. Ortmayer, Harold S.: Flagg, Tom Maxey, and the United States of America, as Defendants, seeking to foreclose three (3) chattel mortgages, in the amount of $13,888.95, $92,690.85 and $151,802.46, and to impose liabil- ity for any deficiency on ‘American Surety Company of New York and the City of West Palm Beach. All defendants who were served with process filed . their answers denying liability; and, in addition, setting up counterclaims against the Banks. Constructors of Florida, Inc. and Messrs. Reynvlds, Lancaster, Goodwin, by their counterclaim,: alleged that the larger. of the three (3) loans sought to be foreclosed, in the original principal amount of $442, 400. 00 was in fact usurious; that the Banks breached their contract to- loan “money to Constructors of Florida, Inc. by withholding from Constructors of Florida, Inc. the major portion of — the proceeds’ of said larger loan; and that- by said breach the Banks impaired the working capital of Constructors of Florida, Inc., thus. ruining Constructors of Florida, Inc. and causing substantial damages; moreover, that the ’ Banks, as a part of their conspiracy and scheme to collect .usurious interest, caused Messrs. Reynolds,’ Lancaster, and ‘* Goodwin to. decline a bona fide offer to purchase forty (40° ) percent of the stock of Constructors of Florida, Inc. for thé sum of $400,000.00, all to the damage of Construc- tors of Florida, Inc., and its principals, in the amount of $3,674,480.76 as to the corporation, and $2,342,379.19 as to its principals. , * _ American Surety Company of New York, in elites: to adopting the allegations of the counterctaim’ filed by @. t ~ A3_ ry ; sd ' Constructors of Florida, Inc., and its principals, also by its counterclaim, alleged fraud and deceit on the part of the Banks, in’ that the Banks gave to American Surety Com- © pany of New York false and fraudulent information con- cerning the financial conditipn of Constructors: of Florida, Inc., which information American ° Surety Company of ‘New York believed and acted upon, thus causing American Surety Company of New York to refrain from taking action to prevent losses on its then outstanding bonds, and, further causing American Surety Company of New York to write additional bonds on the strength of the credit and quick assets of Constructors of Florida, Inc., all to the damage of American Surety Company of New York in the amount of $1.367.379.19. The City of West Palm Beach, in its counterclaim. adopted the factual allegations of the counterclaims ‘filed by the other defendants and counterclaimants, and alleged that the actions of the Banks were the direct and proxi- mate cause of the City’s being forced to take over the con- tracts held by Constructors of Florida, Inc. with the City of West Palm Beach, all to the damage of the City of West Palm Beach in the amount of $279,423.58. John Nicholas, as Receiver in Bankruptcy of Construc- tors of Florida, Inc. was allowed to intervene by the Court and filed his answer and counterclaim against the Plaintiffs and adopted the pleadings, answer and counterclaim filed _ inthe cause’ on behalf of Constructors of ‘Florida, Inc. to- gether with answer and counterclaim slirected against ‘the other Defendants. Pecon Construction Company and J. C. Bledsoe were - never served with .process. The trial of the first phase of the suit was limited to ‘the “primary” issues between the principal parties: , A4 Constructors of Florida, Inc.,‘a Florida corporation was organized in 1955 with Richard R. Reynolds. Jim M. Lan-- caster, Jr. and Earl L..Goodwin as principals. The Corpo- ration was very busy and in October 1956 it was engaged _ in the completion of some eighteen (18) municipal, state and federal governmental contracts throughout the State of Florida. having a total value of about $3.800,000.00. The Corporation needed a large amount of working capital. . In negotiations between the Corporation and The Coral Gables First National Bank, a loan was entered into on November 14, 1956, in-the principal amount of $442,400.00. repayable at $3,000.00 per month principal, plus interest at 5% per annum for twenty-three (23) months with a balloon or final payment on the twenty-fourth month of $373,406.00, plus interest at 5% per annum. This loan was Secured by chattel mortgage on all motors and equipment of the Cor- - poration and by “assignment” of payments due: from the City of West Palm Beach to the Corporation on sewer con-. tracts 7 and 9. At that time the Corporation was in- debted to The Coral: Gables First National Bank on ac- fount of the remaining principal balance of two equipment payment consolidating loans made in July 1956, in the amounts of $19,444.53 and $129.767.19 or a total of $149.- 211.72. Preliminary to the large loan of November 14. 1956, the Banks also granted a $60. 000.00 interim Ioan to the Corporation on October 5. 1956. This interim loan was secured by a corporate resoiution directing the City of West Palm Beach to mail checks pavable to Constructors of Florida, Inc. for work done .on contracts 7 and 9 to The Coral’ Gables First National Bank. This resolution plus agreement to so mail said checks by the City of West Palm ' Beach constituted the “assignment” refepted to above. The Coral Gables First National Bank in making the loan of $442.400.00 actually paid to Constructors of Florida. Inc. $202,562.38. since thev paid to themselves from the A5 | proceeds of the loan the existing $60,000.00 indebtedness of the Corporation. . In addition,. the Banks deducted _ $44,240.00 as a commitment fee and $44.854.44 as disepunt or interest paid in advance. ‘ Furthermore $90,743.18 was pesto in’ a new account called “Collateral Account No. " which was a controlled account requiring the signature 2 a Vice-President of the Banks-and-an-officer of Con- * structors of ‘Florida. Inc. Upon the Corporation’s asking the Banks for an explanation of these charges, it was ex- | plained that there was an error in making the commitment fee charge of $44,854.44 and that this afount would be paid into. Collateral Account No. 1. This was done increasing this account to a total balance of $135.597.62. The Banks further stated that the charge of $44,240.00 would be treated as pre-paid interest, i. e.,5% per year for two years | or a total of 1077. The face of the $442,400.09 note provided only for interest at the rate of 5% per annum, payable monthly for twenty-three months with the small $3,000.00 — per month principal pavment with the balance of interest and principal due on the twenty -fourth month. The dis-" count interest charge was in addition to the ‘interest rate shown on the face of the note. The Coral Gables First National Bank also created “Collateral Account No. 2” which was a controlled account requiring the joint signature of an officer of ‘the Banks and of the Corporation, and into this account was paid on ' November , 29," 1956, $36.488.11: Decemiger 24. 1956. » $42,750.32; January 24, 1957, $53.247.39: February 26, 1957, $24,168.04: and on March 1, 1957, $37.502.25, making a total of $194.156.11, all as payments made to Constructors of © Florida, Inc. by the City of West Palm Beach. The under- stood terms of the loan ‘at the time of its making did not ° contemplate such‘ controlled accounts and there was. no” such provisions set forth in any contract documents. e _ ori over to _No. 1, the Ban would be A6 During the months of December 1956 and January 1957, the affairs of Constructors of Florida, Inc. appeared to progress well. From time to time. the Corporation called ‘upon the Banks to release to their.use certain of the funds held by the Banks in Collateral Account No. 1. These requests were granted and the entire amount withheld in Collateral Account No. 1 was paid structors of Florida, Inc. by January 7, 1957. e of these advances from Collateral Account During the Account No. 2, the sum of $122,749.34, and by the end of Februaty 1957, 4 net balance of $179,540.67; the Banks receiving in Collateral Account No. 2 more money than disbursed from Collateral Account No. 1. About this time the Corporation requested the Banks to advance $100,000.00 of the amount held \in Collateral.Account No. 2, which the Banks claimed was being held as additional security. and which the Corporation thought was capital available for its use. Through/ continuous negotiations between the Corporation ard the Banks, the request was reduced to $50,000.00 and indications were made by the Banks that it ted. On March 4, 1957, an officer of the Corporation left a signed check, in blank and undated, with the Banks so that funds in the amount of $50,000.00 ’ could be deposited in the corporate account and withdrawn by the Corporation on the following day. The Banks, how- ever, completed | the check for the total amount remaining — in Collateral Account No. 2 of $179,540.67 and without the. knowledge or consent of the Corporation applied the same to the reduction of the face amount of the $442,400.00 loan. The Banks had, up to this time, apparently thought that the Corporation loans were joel 4 by guarantee of the . American Surety Company of New York and on March 4, 1957, realized that this was not true in fact. had: received and deposited in Collateral A7 When the $442,400.00 loan was made, it was beyond the legal lending limits of The Coral Gables First National As of November 14, 1956, Constructors of Florida, Inc. was indebted to Coral Gables First National Bank in the amounts of $19.444.53 and $129.767.19, the unpaid balance then due on the equipment notes dated July of 1956, and © in the amount of $60,000.00 on the interim.loan. $202,562.38 was actually paid to Constructors of Florida, Inc. on ac- _ count of the $442.400.00 lonn of November 14, 1956, so that the actual net cash which had been paid over to Construc- ~ tors of Florida, Inc. by Coral Gables First National Bank, as of November 14, 1956, was $411,774.10. However, Pan American Bank of Miami, as participant in‘each of, these three (3) — was debited by Coral Gables First National Bank with 320.00, or a total of $392.531.72. Actually. therefore. Coral Gables First National, Bank was merely a conduit, and _ agent; the new loan of $442,400.00.did not, according to the books and records of Coral Gables First National Bank. increase the net amount of the indebtedness of Constructors of Florida, Inc.: rather the net amount of indebtedness to Coral Gables First National Bank, after the new loan of $442,400.00, actually decreased from $209,211.62 to $19.- 242.38. a net decrease of $188,969.24. In other words, im- mediately prior to the consummation of the alleged $442,- 400.00 loan on November 14, 1956, Constructors of Florida, © Inc. wes indebted to Coral Gables First National Bank in the amount of $209,211.62: immediately after the consum- _mation of the alleged $442,400.00 loan. Constructors of - FloridaInc. was indebted to Coral Gables First National Bank only -in' the small amount of $19,242.38. By loan- ing $393.531.72. of the money of Pan American Bank of Miami, Coral Gables First National Bank decreased its outstanding loans by $188,969.24 the sum of $19,444.53, $129.767.19, and $243,- — ‘A8 In early March of 1957, Constructors of Florida, Inc. was in financial difficulty finding itself eaahas to meet the current payroll. After- The Coral Gables First Nationa! Bank had applied °$179,540.67, the balance of Collateral Account. No. 2, to the payment of the outstanding loan, a meeting was held by the officials of The Coral Gables First National Bank, Pan American Bank of Miami, Con- structors: of Florida, Inc. and American Surety Company of New York. Mr. Eduardo Morales of Pan American Bank, Mr. Riley and Mr. McGoogan of The Coral Gables First National Bank, Messrs. Reynolds, Lancaster and Goodwin for the Corporation and Mr. Harold S: Flagg for . the Surety Company participated in a general discussion of. the financial position of the various parties at that time. It was then agreed. that out of the remaining amounts to . be collected on the City of West Palm Beach sewer con- tracts 7 and 9, approximately 65% thereof would | go to _ the indebtedness to the Banks and approximately . thereof would be deposited into a- controlled trust pees to be’ used by Constructors of Florida, “Inc. The loan repayment agreement of March 20, 1957 was executed together with the renewal contract note of that date in the amount of $218.275.25 provid.ng for a straight 15% inter- est per annum. A usury release was executed together with personal guarantees by the three officers of Construc- tors of Florida, Inc. These documents wéte executed un- | der compulsion and force of the precarious financial cir- cumstances then existing due to the wrongful manner in which the loan accounts had been handled by the Plain- tiff-Banks. are void and without consideration. The Corporation never recovered from this point. on and shortly thereafter complete default occurred on con- tracts and corporate business. . ~ | The Plaintiff-Banks, on account 6f the loan of $442.- 400.00 of November 14, 1956. had actually charged Con- AQ / > : F ceuees of Florida, Inc., total interest in the amount of $49,855.44, which is fifty-six and 27/100ths (56.27% ) per- ‘ cent per annum on the actual moneys disbursed to Con- _sructors of Florida. Inc. on account of said loan, ‘based on ‘a 365 day year, or fifty-five aid 5/10ths (55.5% ) percent “per annum based on a 360 da: year. The total interest reseived on the face of the note. when edded to the $44,240.00 retained by the Banks as » interest taken in advance, discount,-or commitment fee. amounted’ to a total of $85,029.92 actually. reserved, charged, or taken by the Banks. The transfer of $135,597.62 by the Banks on November 14, 1956 to Collateral Account No. 1, a controlled account requiring the signature of an officer of the Banks, was not a payment to the account of the Corporation for which "interest could be charged. Title to the funds did not be-. long to the Corporation until delivered to them free of con- ‘trol. The payments by the City of West Palm Beach in periodical installments between November 29, 1956 and ‘March 1, 1957 of $194,156.11 into Collateral Account No. 2 a controlled account requiring the- signature of an officer of the Banks. did amount to payments to the Banks of-cash collateral requiring a rebate of narent charged, on like ; amounts outstanding. It appears that under any lawful and Heieiaibihe con- tention the Banks charged Constructors of Florida, Inc. at least thirty-eight and.40 100ths (38.40% ) percent interest on the $442,400.00 loan and fifty-six and 27/100ths (56.27% | percent if you use only the actual amount of the said lean which was made available to the uncontrolled account of . Constructors of “Florida,.Inc: It seems without questian Al0 that the interest charged and reserved exceeds twenty- five (25%) percent per annum. It therefore follows that under Sec. 687.04 and 687.07, Florida Statutes 1957 the notes and mortgages sued upon by the Plaintiff-Banks are void and of no force and effect. The Plaintiff-Banks are liable to Constructors of Flor- ida, Inc. as follows: (a) Fer double the amount of discount, commit- ment fee or interest paid in advance, in the amount of $44,240.00 $88,480.00 (b) For double the interest reserved on the face of the note, in the amount of $40,789.92, as shown by Schedule 2, Column 1 of Pentland, Purvis, meller & Co. audit, Plaintiffs’ Exhibit No. 47 = , 81,479.84 {c) For cancellation of the principal amount al- legedly remaining due thereon 151,802.46 (d) For recovery of al] amounts previously paid . - thereon, as follows: Amount of note $442,400.00 Less balance 151,802.46 . Principal paid ~— $290,597.54 Interest paid per Schedule 1, Plaintiffs’ Exhibit No. 47 . ' 14,271.38 Total previous paid : $304,868.92 ’ Total Usury Damages _ / $626,731.22 Inasmuch as the Plaintiffs were joint adventurers, and agent and principal each for the. other, each is liable for _the total amount of such damage, and the Federal Banking Code has no application to prevent imposition of the stat-. utes ‘of the State of Florida as to usury penalties. At the time the Banks wrongfully applied the balance of $179,540.67 remaining in Collateral Account No. 2 to the reduction of the face amount due of the $442.400.00 . _ All = ' loan, neither of the notes of July 25, 1956 and July 24, 1956 held by the Banks and secured by chattel equipment mort- gages, were due or in default. The action of the Banks helped bring about the subsequent defaults in these loans ind the amount seized by the Banks from Collateral Ac- count No. 2 was more than enough to pay said loans in full cr keep them current and in good standing. The debts -are still due on said notes by the Corporation to the Banks — in the amounts of $14,326.77 and $95,636.77 principal and interest included to May 1, 1958, respectively, but the notes _and mortgages are not in default and not subject to fore- closure in this action. They may be paid in accordance with their respective terms with principal payments held to be in abeyance from time of alleged default to time of the entry of complete Final Decree in this case. The lien of the mortgages securing said debts are unenforceable as the Banks are not in equity with clean hands. The lien of the City of West Palm Beach and American Surety Com- pany of New York against such chattel and equipment of the Corporation are superior to any claims of the Banks asserted in this proceeding. The evidence is not sufficient. to prove to the satis- faction of this Court by a preponderance that the Plaintiff- Counter-Defendant Banks are solely responsible or liable for all damages suffered by Censtructors of Florida, Inc., ‘resulting from the collapse of its business and forfeiture of its contracts. The evidence is not sufficient to prove to the satis- faction of this Court by a preponderance that the Plaintiff- Counter-Defendants Banks are solely -responsible or liable for all damages suffered by Richard R. Reynolds, Jim M... Lancaster, Jr. and Ear] L. Goodwin resulting ffam the loss . of value of the stock of Constructors of Florida, Inc., loss > A - Al2 of profits, or liability on personal guarantees other than those giv en to said Banks. The evidence is not sufficient to prove to the satis- faction of this Court by a preponderance that the Plain- tiffs-Counter-Defendants Banks are - solely responsible or liable for all damages suffered by: the City of West Palm Beach in connection with the completion of sewer con- tracts 7 and 9: | The evidence does show that the City of West Palm Beach did not agree in any way to guarantee. any part of the loan made by the Banks to Constructors of Florida, Inc. There is no basis whatever for any equitable subrogation in favor of the cia: and against the City of West Palm Beach. © ~The evidence is show that the City of West Palm Be.ch is protected in the amounts expended to complete sewer contracts 7°and 9 by ‘bonds written by the American Surety Company of New York. As secondary security, in case the American Surety Company of New York did not make good on said bonds. the City of West Palm Beach has ‘ an equitable lien, superior in right and dignity to any othe lien or mortgages held by the Banks herein (except that of American .Surety Company of New York after having made good on said bonds) covering all machinery and equipment of Constructors of Florida, Inc. located at West Palm Beach as of August 26, 1957. The evidence is not sufficient to prove to the satisfac- tion of this Court: by a preponderance that the Plaintiff- Counter-Defendant Banks are solely responsible or liable for all damages suffered by the American Surety Com,any *. of New York on account of the various. bonds written and continued for Constructors of Florida..Inc.. and Island Con- . struction Co. Al3 The ‘evidence does show that the American Surety Company of New York did not agree in any way to guaran- tee any part of the loans made by the Banks to Constructors - of Florida, Inc. There is no basis whatéver for any equit- able subrogation in favor of the Banks and against Ameri- can Surety Company of New York. The evidence further shows that Constructors of Flor- ida, Inc. are indebted to American Surety Company, of _ New York in the amount of $1,367,379.19 on account of the - various bonds written and continued for said Corporation or guaranteed by said Corporation. This amount is se- cured by the General Indemnity Agreement held by ‘the Surety Company: The evidencé further shows that the General Indem- nity Agreement (marked Defendant's Exhibit B) provides. that Constructors of Florida, Inc. pay to American Surety Company of New York all reasonable. attorneys’ fees, costs and expenses incurred by, American Surety Company of Néw York in defénse, of any action brought on or in con- nection with any of the bonds written on behalf of Con- structors of Florida, Inc. As a part of the consequential | damages which proximately and naturally flow from the Banks usurious charges and the improper manner in which the loan accounts were -handled by them, such attorneys’ . fees are found to be a part of the damages which Construc- /tors of Florida: Inc. should recover against the Banks’ in ‘ that Constructors of Florida, Inc. has obligated itself to pay such attornevs’ fees to American Surety Company of New York. “A reasonabie fee is hereby fixed in the _-—“Amount of $45,000.00. The evidence further shows that under the terms and - provisions of the mortgage. which American Surety Com- pany of New York is foreclosing by this action against Con- structors of Florida, Inc. in the principal amount of ap- Al4 proximately $1,367,379.19, Constructors ‘of Florida, Inc. is obligated to pay American Surety Company of New York such reasonable attorneys’ fees as may be fixed by this Court for the. foreclosure of said mortgage. The amount of these attorneys’ fees are found to be a part of the conse- quential damages which proximately and naturally flow from the Banks usurious charges and the improper man- . ner in which the loan accounts were handled by them, and - such attorneys’ fees should be recovered by Constructors of Florida, Inc. from said Banks. A reasonable fee is hereby fixed in the amount of. $27.3 347.58 (2% of amount fore- closed ). ; The charges and actions of the Banks in the handling of the loan ‘accoupts contributed materially to the collapse’ of Constructors of Florida, Inc. anid the attorneys’ fees fixed | herein together with the costs of this proceeding should be and are taxed against said .Banks. The motions of the various parties made throughout the proceedings upon which ruling was reserved by the Court in two prior orders are al] hereby denied. This Partial Final Decree is subject to the undeter- mined claims and counterclaims of the “secondary issues’ and parties not herein decided: A°“Final Decree” will be issued by the Court at the conclusion of the ‘entire matter implementing ‘the findings made herein and disposing of all issues between all parties. . DONE AND ORDERED at Miami. Dade County, Flor- ida, this 26th day of June, 1958. s GRADY L. CRAWFORD ° Circuit Judge Ald IN THE CIRCUIT COURT OF THE 11TH JUDICIAL CIRCUIT IN AND FOR DADE COUNTY, FLORIDA. IN CHANCERY. 5 Case No. 205613-E. (Judge Crawford) CORAL GABLES FIRST NATIONAL BANK, etc.. and PAN AMERICAN BANK OF MIAMI. etc.. Plaintiffs, VS. CONSTRUCTORS OF FLORIDA, INC.. et al. _ Defendants: © ‘ORDER AMENDING PARTIAL FINAL DECREE. THIS COURT having. again consf@ered the case. of . Rosenblum v. Hart, (Supreme Court of Florida, May 8. 1957) 95-So.2d 18, hereby amends that Partial Final De- cree entered herein on the 26th day of June. 1958, by sub- stituting new pages 9 and 9-a attached hereto and made a part hereof for and in lieu of page 9 which is contained in the said Partial Final Decree. and herépy orders and decrees, That except as provided herein the said Partial Firial Decree as entered by this Court be and the same shal! re- main in full force_and-effect, and this Court hereby rati- fies and approves in all respects the said Partial Final De- . cree as amended by the attached new pages 9 and 9-a ‘which shall be considered as a part of the said Partial Final Decree just as if they had been inserted therein in the first _ instance. : AIG DONE and ORDERED at Miami, Dade County, Florida, this 2nd day of July, 1958. » $ Grady L. Crawford Circuit Judge Inasmuch as the plaintiffs were joint adventurers, and agent and principal each for the other, each is liable for the total amount of such damage, and the Federal Banking Code has no application to prevent imposition of the Stat- utes of the State of Florida as to usury penalties. Accord- ingly, . plaintiff, CORAL GABLES FIRST NATIONAL’ _ BANK, is liable either to CONSTRUCTORS OF FLORIDA, INC. or to its Receiver, under the terms of the Federal Banking Code (12 U.S.C.A. Sec. 86. and plaintiff, PAN AMERICAN BANK OF MIAMI, is liable either to CON-. ' SFRUCTORS OF FLORIDA, INC. or to its Receiver, un- der the terms of Sec. 687.07, Florida Statutes, 1957. as fal- lows: (a) Liability of -Coral Gebles First National Bank . _(1) For double the interest collected prior to March 20, 1957, in the amount of $49,855.44, as per Schedule 1, Pentland, -Purvis,. Keller & Co. audit, Plaintiffs’ Exhibit No. 47 $ 99.710.88 (2) For double the interest collected subse- - quent to March 20, 1957, in fhe amount of $5,370.35, per note jackets. covering the cenewal contract note. Defendants’ _ Exhibits Lane. J need 10,740.70 i : $110.451.58 Less amount credited to | principal on : re-negetiation —_ 35,584.06 $ 74.867 52. (b) Liability of Pan American Bank of. Miami ¢1) For the principal and interest paid prior to March 20. 1957.:as per Schedule 1, - ‘Pentland, Purvis, Keller & Co. audit, Plaintiffs’ Exhibit Ng. 47 $194.156.11 Al? ; (2) For the principal. paid subscguent to March 20, 1957, as per note jackets (De- fendants’ Exhibits I and J) covering the portions of the renewal contract note~ ostensibly held by each of the Plaintiffs and proved by the following computa- tion: ; | Balance due as of March, , . 20, 1957 ~ $218,275.27 Less, balance remaining due 151,802.46: $ 66,472.81 (3) For the interest paid subsequent to March 20, 1957, as per the same note jackets (Defendants Exhibits I and J) 5,370.35 Totat principal and interest due by Pan American Bank of Miami (as per the above and as per testimony of Esten A. Ulmer. C_P.A., ending at. ' Tr. 774) $265.999 27 tc) Liability of both Plaintiff-Banks ‘For cancellation of principal and interest al- legedly remaining due, as per note jacket (Defendants Exhibits I and J) and -testi- mony of Frank W. Colton, at Tr. 627, Tr., 650) P Principal Interest Tota! Jacket I $136,622.22 $18:733.34 $155,355.56 Jacket J . 15,180.24 2,049.49 17,229.73 Total $151.802.46 $20.782.83 $172,585.29 . é $172,585.29 Total Usury Damages , $513.452 08 At the time the Banks wrongfully applied the balance _ of $179,540.67 remaining in Collateral Account No. 2 to the reduction of the face amount due of the $442,400 loan. neither ‘of the notes of July 25. 1956 and July 24. 1956 held by the Banks and secured by ‘chattel equipment mortgages. were due‘or_in default. The action of the Banks helped bring about the subsequent defaults in these. loans and the amount seized by the Banks from Collateral Account No. 2 was more than enough to pay said loans in _ AB full or keep them current and in good standing. The debts are still due on said notes by the Corporation to the Banks in the amounts of AI9 ogy IN THE DISTRICT COURT OF APPEAL OF FLORIDA. THIRD DISTRICT JANUARY TERM, A.D. 1960. . THE CORAL “GABLES FIRST * NATIONAL ) BANK, ete. and PAN / AMERICAN ; BANK OF: MIAMI, etc., Appellants. vs. > Case No. 58-526. CONSTRUCTORS OF FLORIDA, INC., etc., et al, 2 er Appellees. 7 CONSTRUCTORS OF FLORIDA, -INC., ) etc.. et al., Appellants, vs. THE CORAL GABLES FIRST-NAT ONAL BANK, etc.. and PAN AMERICAN BANK OF MIAMI, etc., Appellees. ; AMERICAN SURETY COMPANY OF } NEW YORK, etc., Appellant. i . THE CORAL GABLES FIRST NATIONAL BANK, etc. and PAN —— BANK OF ‘MIAMI, etc., > Case No. 58-543. llees. CITY OF WEST PALM BEACH, FLORIDA, 2 etc... « Appellant, vs. THE CORAL GABLES FIRST ‘NATIONAL BANK, etc, and PAN _AMERICAN > Case No. 58-544, BANK OF MIAMI, etc., ! _Appellees. Opinion filed March 22, 1960. Appeals from the Circuit Court for Dade County, Grady Le Crawford, Judge. . Ward & Ward and Salley & Roman, for Coral Gables First National Bank and Pan American Bank of Miami. A20 Fuller Warren, for Constructors of Florida, Richard R. Reynolds, Jim M. Lancaster, Jr., and Earl L. Goodwin. Q ‘John H. Gunn. and Thomas. A. “Horkan, Jr. for John Nicholas. “Egbert Beall. of West Palm Beach, for City of West Palm Beach. ‘Blackwell, Walker & Gray, for American Surety Com- pany of New York. - x Maxey, in propria persona. HORTON, Chief Judge. In the main appeal, (258-526) the appellants Coral Gables First Natinal Bank and Pan American Bank of © Miami, hereinafter referred to as Banks, seek review of a partial final decree, as amended, which adjudicated that a - certain ‘loan transaction between appellants and appellee Surety of sums due it under the general indemnity agreement ‘as ‘A383 claimed in Surety's counterclaim against Constructors. We think the award of attorney's’ fees against the Banks was erroneous, first because attorney's fees as such cannot be awarded in the absence of statute or contract. See Hoff- man v. Barlly; Fla. App. 1957. 97 So.2d 355. and cases cited therein. Secondly, the award would appear* to be incon- sistent with the chancellor's finding that the evidence was insufficient to establish that the Banks were solely re- sponsible for all damage suffered by Constructors resulting from the collapse of its business. In either event, we see no basis for the award of attornevs’ fees here against the . Banks. : z ; The Banks have urged other points for reversal and they have been duly considered, but found to be without merit. ; ES rt Upon the appeal of Constructors and Individua)s ( =58- 542) they claim error in the failure of the chancellor to ‘award them damages jn the form of losses suffered by each as a consequence of the Banks’ tortious breach of contfact including the act of charging a usurious rate of interest This may be the rule as applied to torts generally. but these appellants have not cited any authority. and our :e- search has failed to uncover any. that permits an award of _ gonsequential damages resulting from a yiolation’ of the usury statute in addition to the penalties prescribed by that statute. The Supreme Court of Florida long ago in ' Matlack Properties v. Citizens and Southern Nat. Bank. ‘120 Fla. 77. 162 So. 148. held that but for the statute usurv was not forbidden. indicating that the subject of usury was -one entirely of statutory regulations and prohibition. See Yaffee v. International Company. Fla. 1955. 89 So.2d 910 . See also Sodi. Inc. v. Salitan. Fla. 1953. 68 So.2d 882. Fur- ther, the Supreme Court of Florida, in Rosenblum v. Hart, Fia. 1957. 95 So.2d 18. held that the.penalties provided for A34 | i under SS 68704 and 687.07, Fla. Stat.. F.S.A., are not cu- mulative but must be applied separately to the degrees of usury defined by the statutes. Nevertheless, from our re- view of the record, we conclude. as did the able chancellor. that appellants failed to prove. by a preponderance of the \ evidence, that Banks were solely responsible or liable for all damages suffered by appellants. ~ _. The contentions of Surety and City, as evidenced by ~ . their appeals, (58-543 and +58-544. respectively) and as- signments of error therein, simply take issue with the chancellor's conclusions based upon the evidence. We have carefully considered the points raised by each appellant but are constrained to conclude that there was competent sub- _Stantial evidence in the record to support .the — and conclusions of the chancellor. . The record in this case included approximately | 2.000 pages of testimony and more than 100 exhibits. Able ° counsel for the parties.on both sides are to be commended for clarity as well as brevity in the presentatiqn = a compli- cated and voluminous factual case. ae In the light of the views expressed. we comtade that the chancellor, in imposing against the National’ bank as a penalty, the forfeiture of a portion of the unpaid principal of $151,802.46 not participated to the State bank. committed error; that upon a remand of this cause, he should ascer- tain and determine this amount. and enter an appropriate decree reserving the same to the National bank. We fur- ther conclude that the decree, insofar as it awards against Banks attorneys’ fees to Constructors, is in error and the . game is hereby reversed. In all other respects. the decree appealed is affirmed Affirmed in part. reversed in part ‘ond remanded with directions. - a PEARSON and CARROLL. CHAS.. JJ.. concur. A35 MANDATE FROM DISTRICT COURT OF APPEAL OF“ oF ° FLORIDA, THIRD DISTRICT. To the Honorable, the Judges of the CIRCUIT oe for the ELEVENTH JUDICIAL CIRCUIT of Florida, Greet- ing: WHEREAS, Lately in the CIRCUIT Court of THE “EVENTH-JUDICIAL CIRCUIT IN AND for the County f DADE in a cause wherein THE CORAL GABLES FIRST ‘NATIONAL BANK, etc., and PAN AMERICAN BANK OF eres etc., plaintiffs and CONSTRUCTORS OF FLORIDA. INC. et al.. defendants . (Chancery No. 205613. ) " the decree ot said Circuit Court was rendered June 30, 1958 as by the inspection of the transcript of the record of the | _said Circuit Court which was brought into the District Court of Appeal, Third District of the State of Florida, by virtue of appeals agreeably to the laws of said State in such case made and provided, fully and at large appears. as AND WHEREAS, at the JANUARY-Term of said Dis: trict Court. of Appeal holden at Miamj, A.D., 1960, the said cause came on to be heard before the said District Court of Appeal on the said record of March, A. D., 1960, the said District Court of Appeal rendered its opinion and judgment in said cause as per copy thereof hereto attached and made a part hereof. In Consideration Whereof, It is Ordered by the Court that the appellants do have and recover of and from the . - A386 appel! ees costs. in this behalf expended herein taxed at Twenty-five Dollars, and that all other costs shall be: taxed in.the court in which the appeal was entered, therefore YOU ARE HEREBY -COMMANDED, That such fur- ther pr oceedings be had in said cause as according to right, . justice, the judgment of said District Court of Appeal and . the laws of the State of Florida, ought to be had, the said decree of the Circuit Court notwithstanding. WITNESS, The Honorable MALLORY HORTON, Chief Judge of said District Court of Appeal, and the seal of said Court at Miami, this 4th day of May, 1960. s’ WILLIAM P. CARTER, Clerk District Court of Ap- peal of Florida,,Third Dis- i Se GS A True Copy _ . . ° ATTEST: : . William P. Carter, Clerk District Court of Appeal, ‘Third District. ° A387 IN THE CIRCUIT COURT OF THE ITH JUDICIAL _ CIRCUIT IN AND FOR DADE COUNTY, FLORIDA. , cae CHANCERY. Case No. 205613-E (Crawford). THE CORAL GABLES FIRST NATIONAL BANK and PAN AMERICAN BANK OF MIAMI. Wee Plaintiffs, VS. _CONSTRUCTORS OF FLORIDA, INC., ete. et al., Defendants. : ORDER AND JUDGMENT ON MANDATE. THIS CAUSE came on to be heard’ pursuant to notice ‘ on the motion of plaintiffs for findings and decree on man- date; on the response tnereto of defendants: and: on the motion of defend2nts for judgment or decree on mandate. The Court having considered said motions and response, as well as the exhibits thereto, annexed, and having heard ‘argument of counsel thereon, and having considered the » Opinion and Mandate of the District Court of Appeal of ~ Florida, Third District, filed herein on May 5, 1960. is of the opinion that the various proceedings for the re-organi- zation of defendant, CONSTRUCTORS OF FLORIDA, INC.. in no way stjpersede the jurisdiction of this Court to comply with said Opinion and Mandate, and that the ‘Motion for Ordér on Mandate filed herein by plaintiffs should be, and it is hereby denied. It appearing that the directions of said District Court of Appeal require this Court to make certain additional findings of fact, and to modify this Court’s Partial Final Decree entered herein on June 26, 1958, as amended July’, .2, 1958, and upon’ consideration of the evidence hereto- A38 fore adduced before this Court, the Court makes the follow- ’ ing additional findings of fact: (a) The borrower, CONSTRUCTORS OF FI ORIDA., INC., received on November 14, 1956, out of the proceeds . of the loan of the same date. the sum of $262.562.38. (b} Of the aforesaid amount actually received by the borrower, and by reason of the participation of the State Bank therein to the extent of $243,320.00, the National Bank advanced only $19,242.38, or 7. 337 of the funds actually re- ceived by the borrower! © (c) That the principal amount due on the said note » of November 74, 1956. as of the institution of this action. . ‘was $151,802.46; ‘and that 7.33°7 of $151,802.46 is $11,271.20. It is, therefore, ORDERED, ADJUDGED and DE- _ CREED that this Court’s Partial Final-Decree of June 26. 1958, as amended July 2, 1958; is modified in the following respects: ° 1. The sum of $11,271.20. being the portion of the un- paid principal not participated by the National Bank to the State Bank on the loan of November 14. 1956. is reserved to the National Bank; but the mortgage securing said obli- gation is void and unenforceable in these proceedings. as said Bank is not in equity with clean hands. : 2. So much of said Partial Final Decree as awards to . CONSTRUCTORS against Banks consequential damages based upon attorney's fées awarded to SURETY against ' _ CONSTRUCTORS in the amounts of $45,009 and $27,347.50. is vacated, set aside and quashed only as to Banks. ‘OTHERWISE, said Partial Final Decree of June 26. 1958, as amended July 2, 1958, is hereby re-affirmed and re-adopted, and remains in full force and effect. : A39 And ‘it is further ORDERED, ADJUDGED and DE- CREED: I. That JOHN NICHOLAS, as Trustee for CONSTRUC- TORS OF FLORIDA, INC., on his counterclaim, have and take from the plaintiff CORAL GABLES FIRST NA-. TIONAL BANK. the principal sum of SEVENTY-FOUR THOUSAND EIGHT HUNDRED SIXTY-SEVEN DOL- LARS AND FIFTY-TWO CENTS (3$74.867.52), with inter- est as provided by law from July 2. 1958, for which sums let execution immediately issue. - II. That JOHN NICHOLAS. as Trustee for CON- STRUCTORS OF FLORIDA. INC., on hiv counterclaim, ° have and take from the plaintiff. PAN AMERICAN BANK’ OF MIAMI. the principal sum of TWO HUNDRED SIXTY- FIVE THOUSAND NINE HUNDRED NINETY-NINE DOLLARS AND TWENTY-SEVEN CENTS ($265,999.27). with interest as provided by Jaw from July 2. 1958. for which sums let execution immediately issue III. That CONSTRUCTORS OF FLORIDA. INC. is in- debted to CORAL GABLES FIRST NATIONAL BANK and PAN AMERICAN BANK OF MIAMI in the amounts of FOURTEEN THOUSAND THREE HUNDRED TWENTY- ‘SIX DOLLARS AND SEVENTY-SEVEN CENTS $14.226 - 77). and NINETY-FIVE THOUSAND SIX HUNDRED THIRTY-SIX DOLLARS AND SEVENTY-SEVEN CENTS ($95,636.77). principal and interest included to Mav 1. 1954 ‘respectively. on the loans of July 25, 1956. and July 24. 1956: but the mortgages allegediv securing said loans are not enforceable as said Banks are not’ in equity with clean - Hands. -Said loans were not in default as of the commence- ment of this action. The Court does not determine whethe: or not said loans are now in default inasmuch as the- United States District Court for the Southern District of Florida, in the proceedings for the re-organization of CON- A4n STRUCTORS OF FLORIDA. INC. has ae jurisdiction of said claims. IV. That CONSTRUCTORS OF FLORIDA, INC. is . indebted to CORAL GABLES FIRST NATIONAL BANK in the amount of ELEVEN THOUSAND TWO HUNDRED ‘SEVFNTY-ONE DOLLARS AND TWENTY CENTS : ($11,271.20) on the loan of November 14, 1956; but’ the mortgages allegedly securing said loan are not enforce-: able as said Banks are not in equity with clean hands. Said loan ‘was not in default as of the commencement of this | action. The Court does not determine whether or not said loan is now in default inasmuch as the United States Dis- . trict Court for the South District of Florida, in the pro- ’ ceedings for the re-organization of CONSTRUCTORS OF. FLORIDA, INC, has assumed jurisdiction of said élaims. V. That the amounts awarded JOHN NICHOL: AS as Trustee for CONSTRUCTORS OF FLORIDA. INC. bv Paragraphs I and II hereof are not subject to offset bv reason of the claims of Banks against CONSTRUCTORS OF FLORIDA, INC. as set forth in Paragraphs III and IV here- of. VI. That plaintiff. PAN AMERICAN: BANK .OF MI- AMI, and plaintiff, CORAL GABLES FIRST NATIONAL BANK, take nothing on account of their claims against the defendants, AMERICAN SURETY: COMPANY. OF NEW YORK, City of West Palm Beach. RICHARD R. REYN- © OLDS. JIM M. LANCASTER, Jr. and EARL L. GOODWIN. VII. That counterclaimants, RICHARD R. REYN- OLDS, JIM M. LANCASTER, Jr. and EARL L. GOODWIN. take nothing on their counterclaims against Plaintiff-Banks. VIII. That counterclaimant,, AMERICAN SURETY COMPANY OF NEW YORK. take nothing on its counter- claim against Plaintiff- Banks. A4l IX. That the lien of AMERICAN SURETY COM PANY OF, NEW YORK on the chattels and equipment of CONSTRUCTORS OF FLORIDA, INC. on account of the- Chattel Mortgage sought to be foreclosed herein, in the prisicipal amount of ONE MILLION THREE HUN- DRED SIXTY-SEVEN THOUSAND THREE HUNDRED. SEVENTY-NINE DOLLARS AND NINETEEN CENTS ($1,367,379.19). and interest thereon. plus attorney’s fees in the amount of SEVENTY-TWO THOUSAND THREE HUNDRED FORTY-SEVEN DOLLARS AND FIFTY- EIGHT CENTS ($72,347.58). is superior to any claim of . Banks asserted herein; but the Court reserves decision as to the various claims. and counterclaims asserted between the Trustee and AMERICAN SURETY COMPANY OF NEW YORK, pending the outcome of the second — of this action. | - X. Costs of this iaiinidaiade are hereby taxed agairist the Banks in an amount to be hereafter determined on mo- tion of the defendants. DONE and ORDERED at Miami. Florida this 14th day _of April 1961. a s GRADY L. CRAWFORD CIRCUIT JUDGE. Bar 5! sli “IN THE CIRCUIT COURT OF THE ELEVENTH JUDICIAL CIRCUIT OF FLORIDA. IN AND FOR DADE COUNTY. IN CHANCERY... NO. 205613-E (Crawford). THE CORAL GABLES FIRST NATIONAL BANK and PAN AMERICAN- BANK OF MIAMI. Plaintiffs, Vs. CONSTRUCTORS OF FLORIDA. INC:, etc:. et al., Defendants. — _ (Filed April 17. 1961.) NOTICE OF INTERLOCUTORY APPEAL. COME NOW the Plaintiffs. CORAL GABLES FIRST NATIONAL BANK, a United States Banking corporation, and PAN AMERICAN BANK OF MIAMI, a State Banking corporation, organized under the laws of the State of Flor- ida, by and through their attorneys of record, and take and enter their Interlocutory Appeal to the District Court of Appeal in Florida. Third District, to review the Order. and - see san on Mandate entered on the 14th day of April, 1961, in the above entitled cause, recorded in Chancery Order Book 1511 at Page 8, and the Order of said Court dated the 17th day of April. 1961, striking the Petition for Re-Hearing, which said Order was entered on the 17th day - of April. 1961, and recorded in Chance: vy Order Book at Page : This is an Interlocutory Appeal under the provisions - of Florida Appellate Rules 4.2. being an Order or Dec [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385601_0113%3A2. Public record. Not legal advice.