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Attorney(S)

Thomas H. Anderson, and Herbert L. Nadeau, for petitioner. Meyer, Weiss Rosen, for respondent.

Judges

William Glenn Terrell

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Smart Summary

Shore Investment Company v. Hotel Trinidad, Inc., Supreme Court of Florida (April 1, 1947)

Factual and Procedural Background

Shore Investment Company (lessor) executed a ninety-nine year lease to Hotel Trinidad, Inc. (lessee) covering certain real property in Miami Beach. The lease authorized the lessee to demolish existing buildings on the premises for the purpose of erecting either apartment or hotel buildings. If a hotel was to be erected, completion was required within six months from commencement of demolition. The lease also required the lessee, prior to demolition, to execute a "good and valid contract" in favor of the lessor to erect the apartment or hotel buildings.

The lessee demolished the old building without first making the required contract, and no new structures were commenced. Petitioner (the lessor) instituted an action at law to regain possession of the premises, asserting a violation of the lease. The respondent (lessee) filed a suit in equity alleging the failure to perform was due to inability to obtain permits from the Civilian Production Authority for necessary materials. A chancery injunction issued restraining petitioner from prosecuting the action at law. The Supreme Court of Florida granted certiorari to review that decree.

Legal Issues Presented

Whether the chancellor erred in issuing an injunction restraining further prosecution of the action at law to recover possession of the leased premises.

Arguments of the Parties

Petitioner's Arguments

Petitioner asserted that respondent violated the lease by demolishing the buildings without complying with the lease provisions (notably, without executing the required construction contract beforehand and without completing any new construction).
Based on that violation, petitioner sought to regain possession of the premises through an action at law.

Respondent's Arguments

Respondent contended that its failure to perform the lease obligations was caused by inability to secure permits for materials from the Civilian Production Authority, a governmental agency, over which it had no control.
Respondent urged that equity should intervene to relieve it from the strict legal consequences because frustration of performance was caused by forces beyond its control, and that denying relief would be harsh and inequitable.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Elwood et al v. Nutex Oil Co. (Tex. Civ. App.), 148 S.W.2d 862	Supports principle that where performance becomes impossible after contract execution, or where facts making performance impossible were available to the promisor, such circumstances cannot be invoked as a defense.	Used to support the proposition that respondent could not rely on unavailability of materials as a defense because knowledge of the situation was or could have been obtained by casual inquiry.
Otto v. Orange Screen Co., 57 F. Supp. 134	Same general rule regarding impossibility or availability of knowledge about impediments to performance.	Relied upon to reinforce the court's conclusion that respondent's defense was unavailable.
17 C.J.S. 953	Treatise authority cited for the legal principle about impossibility/available knowledge as a defense to performance.	Cited as supporting authority for the rule that a promisor cannot invoke post-contract impossibility (or readily ascertainable impediments) as a defense.
John Soley Sons, Inc. v. Jones, 208 Mass. 561, 95 N.E. 94	Additional case law supporting the rule limiting the defense of impossibility where knowledge was available.	Applied to illustrate the established nature of the rule relied upon by the court.
United Societies Committee v. Madison Square Garden, 59 N.Y.S.2d 475	Authority for the equitable principle that equity will not relieve a party from the consequences of his own wrong.	Used to support the court's rejection of appellee's plea to invoke equity to avoid consequences of its own wrongful conduct (demolishing without required contract).
J. C. Lysle Milling Co. v. Sharp (Mo.), 207 S.W. 72	Same equitable principle: equity will not relieve one against his own wrong.	Relied upon to reinforce the court's view that appellee could not obtain equitable relief after causing its own predicament.
Spur Distributing Co. v. Husbands, 276 Ky. 521, 124 S.W.2d 463	Same equitable principle concerning relief against one's own wrong.	Applied to support the court's denial of equitable relief to respondent.

Court's Reasoning and Analysis

The court began by construing the lease provisions: the lessee held an option to erect either hotel or apartment buildings but was not required to do so. If the lessee elected to erect, certain conditions were mandatory — specifically, completion of a hotel (if chosen) within six months of starting demolition, and execution of a valid construction contract with a responsible contractor in favor of the lessor prior to commencement of demolition.

The court observed that none of these preconditions had been met by the respondent: demolition was undertaken without first procuring the required contract, and no new structures were initiated. Thus the lessee did not comply with express lease requirements before undertaking demolition.

In addressing respondent's defense that inability to obtain material permits from the Civilian Production Authority excused nonperformance, the court applied the established rule that where performance becomes impossible after contract execution, or where the promisor had, or could readily have had, knowledge of facts making performance impossible, such circumstances cannot be invoked as a defense. The court concluded that knowledge of the permit situation "was well known or could have been known by casual inquiry" and therefore the defense was unavailable.

The court further considered respondent's plea for equitable relief on grounds of frustration beyond its control. It rejected this equitable plea because the respondent had directly caused its predicament by demolishing without fulfilling lease conditions. The court invoked the equitable maxim that equity will not relieve one against his own wrong, relying on cited authorities to support that principle.

On this basis the court determined the chancellor erred in issuing an injunction restraining the prosecution of the action at law to recover possession.

Holding and Implications

The court granted certiorari and quashed the judgment granting the injunction that restrained prosecution of the action to recover possession of the leased premises.

Consequences and implications:

The direct effect declared in the opinion is that the judgment (the injunction restraining prosecution of the action at law) is quashed; the court concluded the chancellor erred in restraining further prosecution.
The opinion applies and reaffirms existing principles limiting the defense of impossibility where the promisor had or could have had knowledge of impediments, and reinforces the equitable principle that one will not be relieved in equity for consequences of his own wrongful acts.
The opinion does not purport to create new precedent beyond application of those established rules; it disposes of the specific injunction at issue by quashing the decree under review.

Opinion by Terrell, J.; concurrence by Thomas, C.J., Chapman, J., and Millard B. Smith, Associate Justice. Certiorari to the Circuit Court for Dade County (Ross Williams, Judge).

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SHORE INVESTMENT COMPANY, a Florida Corporation, v. HOTEL TRINIDAD, INC., a Florida Corporation.

TERRELL, J.:

Shore Investment Company executed a ninety-nine year lease to Hotel Trinidad, Inc., describing certain real property in Miami Beach. The lease authorized respondent to demolish the buildings on the premises for the purpose of erecting apartment or hotel buildings thereon, the latter to be completed within six months from the commencement of demolition. Prior to demolition the lessee was required to execute a good and valid contract in favor of the lessor to erect the apartment or hotel buildings. The lessee demolished the old building without making this contract and the new structures have never been started.

Petitioner instituted an action at law to regain possession of the premises, based on violation of the lease. Respondent countered with a suit in equity alleging that the violation of its contract resulted from inability to secure permit from the Civilian Production Authority to secure necessary materials. Injunction was issued restraining petitioner from prosecuting the suit at law. We are confronted with certiorari to review to the latter decree.

The question for determination is whether or not the chancellor committed error in restraining further prosecution of the action to recover possession of the leased premises.

We think that this question must be answered in the affirmative. By the terms of the lease the leasee had the option to erect the hotel or apartment, it was not required that he do so. If attempted the hotel or apartments must be completed within six months from date of starting demolition and contract for their construction was required to be with a responsible contractor prior to commencement of demolition. None of these provisions was complied with and in fact was not attempted till after demolition.

Respondent plants its defense primarily on the theory that his failure to perform resulted from refusal of the Civilian Production Authority, a governmental agency, to grant the necessary permit for materials to erect the hotel or apartment building.

We do not think such a defense was available to him. Knowledge of the situation was well known or could have been known by casual inquiry and the dominant rule seems to be that where performance of a contract becomes impossible after it is executed, or if knowledge of the facts making performance impossible were available to the promisor, he cannot invoke them as a defense to performance. The facts offered as a defense here were easily available to respondent. Elwood et al v. Nutex Oil Co. (Tex. Civ. App.) 148 S.W. (2) 862; Otto v. Orange Screen Co., 57 F. Supp. 134; 17 C.J.S. 953; John Soley Sons, Inc. v. Jones, 208 Mass. 561, 95 N.E. 94.

Appellee urges that since it was frustrated in the performance of its agreement by means over which it had no control, equity should now intervene and grant it relief from the rigid rule of the law. Any other rule it is contended, would be harsh and inequitable.

There would be much to this contention if appellee had not been directly responsible for the predicament in which it finds itself, but equity cannot be invoked to relieve one against his own wrong. United Societies Committee v. Madison Square Garden, 59 N.Y.S. (2) 475; J. C. Lysle Milling Co. v. Sharp (Mo.) 207 S.W. 72; Spur Distributing Co. v. Husbands, 276 Ky. 521, 124 S.W. (2) 463.

Certiorari is granted and the judgment appealed from is quashed.

It is so ordered.

THOMAS, C.J., CHAPMAN, J. and MILLARD B. SMITH, Associate Justice, concur.

SHORE INVESTMENT CO. v. HOTEL TRINIDAD, INC