Opinion
November 17, 1950.
J. Lewis Hall, Tallahassee, and Francis M. Miller, Miami, for petitioners.
B.R. Cisco, Miami Beach, for respondents.
This is a case of original jurisdiction in prohibition. On December 12, 1949, Honorable Richard W. Ervin, as Attorney General of Florida and in behalf of the State of Florida filed in the Circuit Court of Dade County, Florida, a bill of complaint against the Miami Retreat Foundation, Miami Retreat, Inc., a Florida corporation, Charles A. Reed, Ruth Reed and Alfred E. O'Neill, individually and as directors and trustees of Miami Retreat Foundation. The bill of complaint prayed for an annulment of the corporate franchise of the Miami Retreat Foundation and (a) for appointment of a receiver, (b) liquidation of the assets of the Miami Retreat Foundation, (c) the issuance of a restraining order and (d) for other relief. Charles A. Reed and wife Ruth Reed as partners in 1926 organized a private sanitarium and specialized in the treatment and care of persons addicted to habits of alcohol and drugs and persons suffering with nervous disorders.
The bill of complaint alleged that the business was profitable and by the partners was expanded from year to year. The defendant Charles A. Reed conceived the idea and scheme of forming a corporation for the purpose of procuring the advantages and benefits of Section 617.01, F.S.A. The purpose of organizing the corporation was to evade the payment of Federal and State taxes. Prior to the formation of the Miami Retreat Foundation, the partners operated under the name of Miami Retreat Inc. On January 8th, 1939 a charter for a non profit corporation, as provided by statute issued out of the Circuit Court of Dade County, Florida which authorized the Miami Retreat Foundation to engage in purposes as provided in its charter.
It is further alleged that Charles A. Reed since obtaining the charter of the non profit corporation has managed, dominated and controlled its affairs to the exclusion of other incorporators and the policies and affairs of the Miami Retreat Foundation are now so administered that the corporation is his alter ego and device for avoiding the payment of legitimate taxes due the State and Federal Governments. The management of the affairs of the corporation by Charles A. Reed have been such for the past several years that he has escaped lawful and legitimate taxation upon the theory that it is now engaged in charitable and benevolent pursuits when as a matter of truth and fact it is but an instrumentality or vehicle by the scheming Charles A. Reed to evade and escape lawful and legitimate taxation.
Paragraph 10 of the bill of complaint alleges that the Miami Retreat Foundation is engaged solely in the business or enterprise of operating a private sanitarium for profit. It has no charity ward and no part of its services are offered to the public free. It charges full price for all services rendered and it has amassed a tremendous profit from its operation consisting of approximately $300,000.00 in real estate and in buildings and approximately $200,000.00 in cash which has been accumulated under the control and domination of Charles A. Reed for his personal and private use and purposes and none thereof has been diverted toward charity or benevolent works as to be exempted from State and Federal taxes.
The bill of complaint further alleged that during the year 1949 a divorce decree was entered between Charles A. Reed and wife Ruth Reed in the Circuit Court of Dade County, Florida. An agreement for the payment of alimony to Ruth Reed was entered simultaneously. The agreement to pay the installments of alimony as between the partners became an obligation and undertaking of Miami Retreat Foundation. The obligation of the corporation to pay installments of alimony due the wife by Charles A. Reed was not only contrary to the charter provision of the Miami Retreat Foundation but contrary to the statute authorizing the issuance of non profit charters to corporations. The corporation was being used by Reed to promote his personal and private affairs contrary to statutes of Florida.
Under date of December 12, 1949, Honorable George E. Holt, Circuit Judge by appropriate order assigned the suit to be heard, ruled upon and decided on its merits by the Judge of Division A being the Honorable George E. Holt, Circuit Judge. A suggestion of disqualification of Judge Holt was filed in the court under the provision of Section 38.10, F.S.A. The fear as expressed by Charles A. Reed that he could not obtain a fair trial in the above entitled cause if presided over by Judge Holt was based on statements made by Judge Holt presiding Judge in litigation between Reed and wife Ruth. It is true that the Miami Retreat Foundation was not a party to the litigation recently concluded in 1949 between Charles A. Reed and Ruth Reed.
Judge Holt, as presiding Judge in Reed v. Reed when the attorney for Reed expressed the desire to give the court a summary of the case, replied:
"The Court: I don't need any summary; I know what the testimony is. I will give you my summarization. I think the Miami Retreat, Inc., The Miami Retreat Foundation, Charles A. Reed Corporation, are none other than Charles A. Reed himself personally; that regardless of all the legal technicalities and legerdermain that has been sought to bring this thing about, he is the foundation himself; he owns it; he runs it; he decides its policies; he signs every check. In fact no one does anything except what Mr. Reed says and he is running it now from the state of Nevada as his assistant superintendent here testified. There is a grave doubt in my mind that this corporation, Miami Retreat Foundation, is actually a non-profit corporation. However, that question is not before me but if it were before me properly, I think these facts would readily disclose that this corporation is going under the guise of a non-profit corporation contrary to the laws of this state and if this were true it would be the duty of the court to dissolve it immediately as a non-profit corporation. I do not pass on that question at this time. The man has fled the state; he has flaunted the jurisdiction of this court; he still flaunts this court by filing this answer and I call your attention to certain portions of it which are utterly and absolutely contemptuous."
In the Answer of the defendants Charles A. Reed and the Miami Retreat Foundation, in the aforesaid case referred to by the Court as a companion case to the case now before the Bar, the Defendant had answered as follows:
"7. The Miami Retreat Foundation is a well established eleamosynary charitable non-profit institution for the benefit of the citizens of Florida in need of specialized hospital care. That any payment of the funds of the Miami Retreat Foundation to any other than charitable use would be an unauthorized diversion of trust funds."
In commenting and expressing his opinion of the defendants' pleading in said cause, the said Judge, the said Honorable George E. Holt, said:
"No. 7 is a contemptuous allegation that the Miami Retreat Foundation is a well established eleemosynary charitable non-profit institution for the benefit of the citizens of Florida in need of specialized hospital care — and this is the most contemptious statement in it — that any payment of the funds of the Miami Retreat Foundation to any other than charitable uses would be an unauthorized diversion of trust funds. They are actually his funds."
During the course of said trial in the said case of Ruth H. Reed, Plaintiff, v. Charles A. Reed et al., Defendants, the said Honorable George E. Holt expressed his opinion and conclusions as follows:
"The Court: The corporation and Mr. Reed, one and the same. No difference in my mind between Mr. Reed and the Miami Retreat Foundation, Miami Retreat, Inc., Charles Reed Corporation. They are his alter ego. You are not even entitled to be here and argue. He is not entitled as long as he is in contempt. I determine they are his alter ego. I am so determining now. As a matter of fact this corporation was ordered to do a certain thing in the final decree."
And in the Decree entered by the said judge, Honorable George E. Holt, on the 29th day of July, A.D. 1949, in the aforesaid cause, said Judge further expressed his opinions and conclusions as follows:
"It is further apparent to the Court from the record herein and the testimony so taken before it that the corporate defendants herein, Miami Retreat, Inc., Miami Retreat Foundation and Charles Reed Corporation are none other than the alter ego of the individual defendant, Charles A. Reed, himself, that regardless of all the legal technicalities and legerdemain with which the corporate defendants are surrounded that they are none other than the said individual, Charles A. Reed; that as to the Miami Retreat Foundation, he owns it; he runs it; he decides its policies and signs every check. The testimony shows that no employee of the Foundation does anything except upon orders of the defendant Reed and, according to the testimony of his assistant superintendent, Mr. Reed is operating it by remote control from the State of Nevada.
"There is grave doubt in the mind of the Court that the Miami Retreat Foundation is in fact a non-profit corporation. That question is not determined by the Court at the present time but it is quite possible that further inquiry into the modus operandi of this corporation would disclose that it is operating under the guise of a non-profit corporation contrary to the laws of this state. If this be so, it would be the duty of this court who created this Foundation, to dissolve it forthwith. This question is not passed upon at this time."
Two affidavits and a certificate of counsel as required by Section 38.10, F.S.A., were attached and made a part of the petition of disqualification. The respondent by an appropriate order held the petition legally insufficient and that he was not disqualified because of prejudice to hear and determine the issue of the controversy. On petition filed here on the part of the Miami Retreat Foundation a rule nisi issued out of this Court to the Honorable George E. Holt, Circuit Judge to show cause, and answer the petition filed against him. Separate answer was filed by the respondent Holt and the State of Florida. The petitioners filed here a motion for a writ of prohibition, the answer or answers notwithstanding.
The record presents for adjudication by this Court the following question. Are the suggestion and supporting affidavits for disqualification of the respondent sufficient in form and substance so as to bring the petition within the province of Section 38.10, F.S.A.? It is not strongly contended by the respondent that the supporting affidavits and certificate of counsel are defective in form or substance or otherwise fail to measure up to the statute's requirement, but a fair and just construction of its language set forth in the petition for disqualification, it is contended, fails to establish bias or prejudice to the cause of the petitioners or otherwise fall within the inhibitions of Section 38.10, supra.
We have carefully reviewed the conclusions of the respective parties and find the supporting affidavits of two reliable citizens, as well as the certificate of counsel, attached to the petition in proper form. The inferences drawn from the language used by the respondent indicates fixed views as to the merits of the case which was the subject matter of the law suit. It is our conclusion that the petition presents a case of prejudice prohibited by the provisions of the cited statute and it was the duty of the respondent upon its presentation to him to proceed no further in the cause. See State ex rel. LaRussa v. Himes, 144 Fla. 145, 197 So. 762; State ex rel. Brown v. Dewell, 131 Fla. 566, 179 So. 695; Dickenson v. Parks, 104 Fla. 577, 140 So. 459 and similar cases. It therefore follows that a writ in prohibition should issue as prayed for in the suggestion in prohibition.
ADAMS, C.J., and TERRELL, CHAPMAN, HOBSON and ROBERTS, JJ., concur.
THOMAS, J., dissents.
SEBRING, J., not participating because of illness.