Smith v. Rector of St. Philip's Church — 12 N.Y. St. Rep. 783

Majority

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Andrew Smith, Resp’t, v. The Rector, etc., of St. Philip’s Church, in the city of New York, App’lts.

(Court of Appeals,

Filed January 17, 1888.)

Headnote

1. Lease—Covenants in—Release—Construction op.

The defendant executed and delivered to plaintiff’s assignor, a lease which contained a covenant by the lessee, whereby himself and his assigns agreed to erect within six years a house of a description specified, and it provided in case of failure to erect such house within the time named the lease should be void, etc. There was also an agreement that if the lessee performed all his covenants, the lessors would at the expiration of the term “at their option," either grant a new lease for a further term or then pay the value of the house, to be ascertained as provided in the lease. The lease, with the consent of the lessor, was assigned to the plaintiff. The defendants thereafter executed to the plaintiff a release under seal which, after reciting in totidem verbis, the covenant of the lessee to build and the provision that the lease should be forfeited in case the house was not erected within the time specified, released the plaintiff “ from the said covenant and agreement to build in said lease contained." It declared that, “ the lease in all its parts shall hereafter be acted upon.

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by the respective parties the same as if the covenant had not been inserted therein,” and by the final clause it declared that the purpose of the release is to exonerate the said Smith, his heirs and assigns, from all obligations arising from or growing out of said agreement in said lease contained. Held, that the release wholly discharged the plaintiff from any obligation to build, and that thereafter the lease stood as though no covenant to build had been inserted. But that the right to build during the term was preserved and the plaintiff having built became entitled to the exercise by the defendant of the option provided by the lease.

8 Same—Covenant against sub-letting—When receipt op rent by ESSOR CONSTITUTES A LICENSE TO SUB-LET.

The lease contained a covenant by the lessee that neither he nor his assigns would lease, let or assign all or any part of the premises, etc. It was shown on the trial that the house erected by the plaintiff was an apartment house, and that the plaintiff occupied one range of rooms and let the other appartments to tenants by the month. That the defendant knew that it was built_ for such purposes, and bad been so occupied. That the plaintiff, during the eight years that it was so occupied, had paid to defendant the rent due under the lease. Held, that the conduct of the defendant in receiving for a series of years without objection, the rent due on the lease with knowledge of the actual situation, should, if necessary, be construed as a license to use and occupy the building as an apartment house and not as a mere waiver from time to time of a particular antecedent breach of the covenant.

8. Same—Covenant against assigning—Effect of consent to one assignment—Authorizes sub-letting.

The defendant having consented in writing that the original lessee might assign the lease to the plaintiff upon the condition that the assignee should perform the covenants in the lease, quaere, whether this dispensed with the condition against assignment altogether under Bumpor’s Case (2 Coke, 119). Quaere, whether a consent to an assignment of a lease comprehends and authorizes an under-letting.

4. Contract—Consideration for.

If one person agrees to do a particular thing, provided another shall do a certain other thing, performance by the latter supplies the lack of a previous promise to do the thing and entitles him to enforce the agreement of which his act was the consideration. Citing Beckwith v. Brackett (97 N. Y„ 52).

Appeal from, a judgment of the general term of the court of common pleas of New York affirming a judgment entered at special term directing the defendants to execute to plaintiff a lease of the premises described in the complaint and also directing defendants to appoint an arbitrator to make valuation of the building erected by the plaintiff on the demised premises.

Sidney S. Harris, for app’lts; Emile Beneville, for resp’t.

The true construction of the release executed by the defendants to' the plaintiff July 22, 1864, as bearing upon the covenant of renewal contained in the lease from the defendant to Thomas Kiernan, assignor of the plaintiff, dated July 1, 1862, constitutes one of the material questions in this case. The lease contained among other covenants by the lessee, a covenant for himself, his administrators and assigns, to erect and build, or cause to be erected, and built on the demised premises, “within six

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years from the date of the lease, a good and substantial brick dwelling house of at least four stories in height above the basement,” and the covenant was followed by the provision that “in default of the erection of such dwelling house these presents and the estate hereby granted shall thenceforth cease and be void.” The lease then further declares in substance that it is mutually agreed between the parties that if the lessee, his executors, administrators or assigns, shall, “within the time aforesaid,” erect such dwelling house, and the same shall be standing on the premises at the expiration of the time, and the lessee shall faithfully fulfill and perform all his other covenants in the lease, the lessors shall and will at the expiration of the term, “at their option,” either grant a new lease for the further term of twenty years at such annual rent as shall be agreed upon by the parties, or otherwise settled and ascertained as provided in the lease, but not less than the rent reserved therein, or then pay the just and fair value of the dwelling house, to be ascertained as provided.

The lease further provides for the appointment of appraisers “to value such dwelling house in its then actual condition (i. e., at the time of the arbitration), and also to determine what would be a reasonable yearly rent for said lot during the next ensuing term of twenty years,” each party to nominate one and to signify such nomination to the other at least one year before the expiration of the then current term, and in default of such nomination by either party for thirty days after the time so limited, the nominee of the other party was authorized to associate with himself another person for the purpose of the valuation, and in case of disagreement of the appraisers, they to appoint an umpire, the decision of the majority to be final and conclusive.

The lease also prescribed that for the purpose of fixing the rent for the renewal term the lot should be considered and valued as vacant and unoccupied, and that five per cent, on such estimated value should be the annual rent in case of renewal. The lessee, on the 14th of December, 1863, with the consent of the lessor, assigned the lease to the plaintiff. On the 22dof July, 1864, the defendant executed to the plaintiff a release under seal, which, after reciting in totidem verbis the covenant of the lessee to build on. the demised premises contained in the lease, and also the provision that the lease should be forfeited in case the house was not erected and, built within the time specified, proceeds as follows : ‘ ‘ Now this agreement witnesseth that the said parties of the first part in consideration of the premises and of the sum of one dollar to them in hand paid, the receipt whereof

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is hereby acknowledged, hereby release and discharge the said Smith, his heirs and assigns, of and from the said covenant and agreement to build in said lease contained, and the said lease in all its parts shall hereafter be acted upon by the respective parties, the same as though such covenant had not been inserted therein, and all other parts of said lease shall be interpreted accordingly, this release being given to exonerate Smith, his heirs and assigns of and from all obligations arising from or growing out of the said agreement in said lease contained. In witness whereof, etc. Thereafter, in 1876, the plaintiff erected on the demised premises a four story brick dwelling house, of the description mentioned in the lease, and in April, 1884, appointed an arbitrator under the provisions of the lease and notified the defendant thereof, but the defendant declined to appoint an arbitrator or to renew the lease on the grounds, first, that the release of July 22, 1864, by its true construction abrogated and annulled the covenant for renewal, and also the alternative and dependent obligation to pay for any building erected on the premises, and second, that the plaintiff by underletting the premises without the consent of the lessor; in violation of a covenant in the lease, had thereby incurred a forfeiture.

The learned trial judge construed the release as operating merely to release the plaintiff from the obligation to build within six years from the date of the lease, and as extending the time so as to give to the plaintiff the entire remainder of the term of twenty-three years within which to perform the covenant, but held that it did not otherwise discharge or affect the covenant and that the plaintiff remained bound to build at some time within the term. The language of the release does not we think justify this restrictive interpretation. The operative words of the instrument are in the most general and comprehensive language. The plaintiff is released from the said covenant and agreement, to build in the said lease contained.

It declares that “the lease in all its parts shall hereafter be acted upon by the respective parties the same as if the covenant had not been inserted therein,” and by the final clause it declares that the purpose of the release is “to exonerate the said Smith, his heirs and assigns from all obligations arising from or growing out of the said agreement in said lease contained.” The recital refers to the time within which, by the lease, the building was to be erected, but only as a part of the covenant, the whole of which is embraced in the recital.

We think the release wholly discharged the plaintiff from any obligation to build, and that thereafter the lease stood as though no covenant to build had been inserted. We

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concur in the proposition of the learned counsel for the defendant that the main consideration for the conditional covenant of renewal by the lessee, was the enhancement of the value of the demised premises by the erection of the building mentioned in the lease, and also in the proposition that if no building was standing on the demised premises at the expiration of the term, or if a building was standing thereon at that time, but one not erected under the provisions of the lease, that in either case the plaintiff would be remediless and that the defendant would not be bound either to renew the lease or to payvthe value of the building. The covenant to build contained in the lease at the time of its execution, imposed upon the lessee the burden of making a valuable erection upon the demised premises for the expense of which he was to be reimbursed at the end of the term, either by receiving its value or by a renewal of the lease for a long term, during which the rental value of the property above the ground rent, would, as he manifestly contemplated would be the case, repay him for the expenditure.

On the other hand, if the defendant elected to renew the lease at a small ground rent, it would receive the premises at the end of the renewal term increased in value by the building erected by the lessee, free from any obligation to pay its value. • We are of opinion that if the effect of the release of July 22, 1864, was not only to discharge the plaintiff from any obligation to build, but also to deprive him of any right under the lease to build during the term, the further result would follow that the covenant on the part of the defendant to renew the lease or to pay the value of the building at the expiration of the term, would also fall with the failure of the consideration upon which it was based. The erection of a building by the plaintiff,, not authorized by the lease, would be a mere voluntary act which would furnish no consideration for, and give no right to, a renewal.

The obligation to build was discharged by the release. But the right to build during the term was, we think, preserved, and the plaintiff having built became entitled to the exercise by the defendant of the option provided by the lease. Striking out of the lease the covenant of the lessee to build, there remains the agreement that if the lessee shall build, and the building shall be standing on the demised premises at the end of the term, the defendant would either pay the appraised value or renew the lease. This construction gives full effect to the release, and is the practical construction put upon it by the parties.

The plaintiff erected a building in 1876, and the defendant in 1884, before any question had arisen, applied to the

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plaintiff to be informed whether he intended to renew the lease. It is familiar law that if one person agrees to do a particular thing, provided another shall do a certain other thing, performance by the.latter supplies the lack of a previous promise to do the thing, and entitles him to enforce the agreement of which his act was the consideration. Beckwith v. Brackett, 97 N. Y., 52 .

We are of opinion, therefore, that in the absence of any other defense, the plaintiff is entitled to the exercise of the option reserved to the defendant.

The lease contained a covenant by the lessee, his executors, administrators or assigns, that he or any of them “shall not, or wilTnot at any time or times thereafter, during the term hereby granted, lease, let or demise all or any part of the said premises, nor assign, transfer or make over_ the same or the present lease, or any of the renewals of his or their term, to any person or persons whomsoever without the consent of the parties of the first part, their successors or assigns, in writing under their seal, for that purpose first had and obtained.” It was shown on the trial that the house erected by the plaintiff was an apartment house, and that the plaintiff occupied one range of rooms and let the other apartments to tenants by the month, by verbal lease, the rent being exacted each month in advance. It further appeared that the house had been occupied in this manner from the time it was built in 1876, and that in November of each year down and including November, 1884, the plaintiff paid to defendant the rent due under the lease, which was at all times received without objection, and the evidence justifies the conclusion that it was received by the defendant with full knowledge of the character of the house, and that it was occupied as an apartment house. Subsequent to the commencement of this action, rent fell due, which was not received, and it is claimed by the defendant that it is entitled to insist that the lease was forfeited by the under-letting of apartments in the house after November 1, 1884, and that the receipt of rent up to that time did not operate to waive a subsequent breach of the condition.

Forfeitures are not favored, and Dumpor's Case (2 Coke, 119) is a notable instance of the strong leaning of courts against enforcing them. Following the principle of that case, it was held in Brummell v. Macpherson (14 Ves., 173) that a condition against assignment in a lease was determined forever by the consent of the lessor to an assignment, although “to one particular person subject to the covenants in the original lease.”

The defendant on the 14th of December, 1863, consented in writing that Kiernan, the original lessee might assign

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the lease to the plaintiff upon the condition that the assignee should perform the covenants in the lease. Did this dispense with the condition against assignment altogether, under Dumpor’s Case, and does a consent to an assigment of a lease comprehend and authorize an under-letting ? But passing this question, we are of opinion that the conduct of the defendant in receiving for a series of years without objection, the rent due on the lease, with knowledge of the actual situation, should, if necessary, be construed as a license to use and occupy the building as an apartment house, and not as a mere waiver from time to time of a particular antecedent breach of the covenant. The construction of the house indicated that it was designed for permanent use as an apartment house. It is consistent with the circumstances and with fair dealing to construe the acts and silence of the defendant as an assent that the somewhat peculiar interest created by the letting of apartments from time to time for brief periods, was not an under-letting or parting with any interest in the demised premises, within the meaning of the covenant. The interest of an occupier of an apartment is peculiar. He has simply the right to occupy designated rooms during tho time specified, but a destruction of the building ends the right (Kerr v. Merchants’ Exchange Co., 3 Edward’s Ch., 315; Graves v. Berdan, 29 Barb., 100 ), and thereafter he would retain no interest in the lot. Letting rooms to lodgers is held not to be a breach of a covenant against under-letting. Doe v. Laming, 4 Camp., 73. See, also, Wilson v. Martin, 1 Den., 602 ; White v. Maynard, 111 Mass., 250 .

The plaintiff at all times occupied a part of the premises and the defendant had the protection which his personal oversight would afford. It would be inequitable to permit the defendant to insist upon a forfeiture, when by its conduct it had sanctioned the construction which the plaintiff had placed upon the covenant.

The final question relates to the right of the plaintiff to the relief given by the judgment, which, in substance, authorized the defendant to, appoint an appraiser within a specified time, to act in conjunction with the appraiser appointed by the plaintiff in fixing the values specified in the lease, and in case the defendant neglects to make such appointment, the judgment provides that the appraiser named by the plaintiff may associate with himself another appraiser to fix the valuations, and that when the valuations are determined, the defendant is required either to pay the value of the building as ascertained, or execute a new lease, in accordance with the provisions of the covenant of renewal in the original lease. It is insisted that the plaintiff

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cannot maintain an action for specific performance until after he has procured the valuation to be made in the manner pointed out by the lease. This objection, in substance, is that the action is premature. But this objection was not taken on the trial, and it seems that the action was brought on the invitation of the counsel for the defendant “ to facilitate the settlement of the points of difference ” between the parties. It is further insisted that a court of equity will not entertain a bill for the specific performance of an agreement for arbitration.

The judgment does not compel the defendant to appoint an arbitrator. It permits the defendant to name an appraiser, and if he fails to do so, provides for an appointment in behalf of the plaintiff in the manner provided in the lease. The appraisers, when appointed, will be the appraisers selected by the parties in precise accordance with their agreement. It is further insisted that the defendant having refused to renew the lease, the only remedy of the plaintiff is an action to recover the value of the building. The contract binds the defendant either to pay such value, or execute a new lease. It is bound to perform its contract by availing itself of one or the other of these alternatives. It cannot refuse to give a new lease and turn the plaintiff out of possession, leaving him for his remedy to an action at law on the covenant.

We think this was not a case for a statutory allowance under section 3252 of the Code. See Gray v. Robjohn, 1 Bos., 618.

The judgment should be modified in this respect, and also by incorporating therein the provision for the appointment of an umpire in the contingency mentioned in the lease, and as so modified it should be affirmed with costs.

All concur.