Bates v. Johnson — 35 N.Y. St. Rep. 801

Majority

p. 801

Hester Bates et al., App’lts, v. William H. Johnson et al., Resp’ts.

(Supreme Court, General Term, First Department,

Filed December 29, 1890.)

Headnote

Lease—Covenant to pat for buildings.

A lease for twenty-one years contained covenants that on the expiration of the lease the value of the buildings erected by the lessees should be appraised and either one-half of such value paid to them or a new lease granted. It was also covenanted that in case of default in payment of rent the lessor might re-enter and remove all persons from the premises and enjoy as in their first and former estate. After twelve years the lessees defaulted and were dispossessed by summary proceedings. Held, that the condition on which the lessees were to he in a position to claim payment for the buildings was a compliance with th’e covenants in the lease, and that having made default they were not entitled to claim such payment.

Appeal from a judgment entered upon a decision at special term dismissing the plaintiffs’ complaint upon the merits, and awarding judgment against the plaintiffs for costs.

Action to establish and foreclose an equitable lien upon the pro

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perty mentioned in the complaint for the payment of one-half of the value of the building erected on the premises.

The opinion delivered at special term is as follows :

Patterson, J. The principal question involved in this action,, and that which appears to me to be the one on which the cause' must be determined, is whether or not the covenant on the part of the lessor to pay to the lessee or his assigns one-half of the value of the buildings at the expiration of the term of twenty-one years, or to grant a renewal for an additional term,was dependent upon the covenant made by the lessee to pay the rent and taxes as provided for in the lease. The contention of the plaintiff is that the covenants are independent and separable, and that the lease is, in effect, a contract providing for two distinct subjects. Whether covenants are dependent or independent, or whether performance of one is a condition precedent to the right to enforce the other, does not rest on technical words, “ nor does it depend on the position of words, but it rests on the good sense and plain understanding of the contract, and the acts to be performed by the parties respectively,” Barruso v. Madan, 2 Johns., 145 ; ana such is the statement of the rule by Sergeant Williams, in his note to Pordage v. Cole, 1 Saund., 319, where the subject was discussed on a question of pleading arising on demurrer. The instrument in this action is the ordinary lease made by a land owner, who demises premises-for a fixed term to a lessee who obligates himself to erect buildings and pay rent for the premises, and also the taxes or other burdens imposed on the property, and gives the lessor the right to-terminate the lease on default in the payment of rent, or failure to perform any other covenant binding on him (the lessee). In consideration of the covenants of the lessee, the lessor agrees, at the expiration of the term, to pay half the value of the improvements, or to grant a further term. The nature of the obligation assumed by the lessor shows that his covenant was dependent upon performance by the lessee of those incumbent upon him. The lessor did not positively undertake to pay for improvements. He had an option to do so, or grant a new term; ana that option could not be exercised in the latter way if the lessee had no interest or estate in the land to be continued or extended at the time the first term would expire. The lease gave the lessor the power to terminate it for non-performance by the lessee of his covenants; and he having failed to perform them, and the lessor having reentered, the lessee destroyed the lessor’s ability to exercise that option. His default gave to the lessor the clear right to repossess himself of the land, and necessarily of the buildings erected upon it, and thus caused to be terminated the relations existing between the parties under the lease.

This view is supported by Bank v. Mitchell, 73 N. Y., 406 . In that case the lessee covenanted to pay rent, taxes, and assessments, and in default thereof the lessor was entitled to re-enter. If the lessee erected buildings and performed the other covenants, then the lessor agreed, on expiration of the term, either. to grant a renewal or pay for the buildings. The lessee failed to pay the taxes for the year prior to that in which the term expired. It was held

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that the payment of the taxes was a condition precedent, and the lessor was not bound to pay for the improvements. It is sought to distinguish that case from this because of an express provision in the lease there under consideration that if the lessee performed the covenants, etc., and if the buildings were standing at the end of the term, the lessor’s covenant should apply. But, as has been stated, no form of words and no express provision is necessary. The ground of decision appropriate in this case, however, has been announced in Kutter v. Smith, 2 Wall, 491 , where substantially similar covenants were considered by the supreme court - of the United States. There, land was leased for a term of years, and the lessee erected a house upon it. The lease was terminated, as here, for the non-payment of rent, according to authority contained in the instrument, which also provided that at the expiration of the term the lessor should pay for the building at an appraised value, or renew the lease. The court says: “ The agreement to purchase means nothing more than that, in a certain event, the lessor will pay the lessee the value of the building;” that is, in case the lease is not renewed at the expiration of the term. “ This contingency has not occurred, and that it can never occur is the fault of the plaintiff and his assignor. This observation is also applicable to the supposed hardship of taking the building, the product of the plaintiff’s labor and money, without compensation. It is from the plaintiff’s own default that the right to do so arises. He had his option to pay the rent due the defendant, and retain the right of payment for his building when the time should arrive, or give up his building, and with its loss relieve himself of the burden of paying the rent. He chose the latter, with full knowledge, and there is no injustice in holding him to the consequence of his choice.” The complaint is dismissed upon the merits, with costs to the defendants, except the defendant Bingham.

James M. Bishop, for pl’ff, app’lt; L. Sanders, for def’t Bingham, app’lt; Thompson & Koss, for resp’ts.

This action was brought to recover one-half of the value of buildings now standing on certain lots in the city of Hew York which the plaintiffs claim to be due to them and the appellant Bingham from the defendants Johnson, the lessors, pursuant to the provisions of a lease of said property for twenty-one years from the 1st of May, 1867.

This lease contained covenants for the payment of rent, taxes, etc., upon the part of the lessees, and a grant in consideration of the covenants contained in the lease for the period of twenty-one years. It also contained a provision that in case of the non-payment of rent, or default should be made in any of the covenants contained in the lease on behalf of the lessees, that the plaintiffs should have the right wholly to re-enter on said- premises and remove all persons therefrom, and the same to have again, repossess and enjoy, as in their first and former estate, anvthing therein contained to the contrary in anywise notwithstanding. The lessees covenanted to erect a building upon the premises, of certain descriptions and dimensions, and the lease contained a mutual

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covenant by the parties that at the expiration of the aforesaid term the buildings upon the premises should be appraised, and either one-half of such appraised value paid to the lessees, or the parties of the first part would give a renewal lease.

The lessees defaulted in the payment of rent and taxes, and in December, 1879, were dispossessed by summary proceedings. The term of the original lease having expired in May, 1888, the successors of the lessees brought this action to have the value of the buildings appraised and the sum due and payable to the plaintiffs and the defendant Bingham under the provisions of the lease ascertained and determined, etc.

It might not be necessary to add anything to the opinion rendered by the learned judge who tried the cause in the court below; but in view of the claim which is made of the result of the decision in the case of Finkelmeier v. Bates, 92 N. Y., 172 , it may not be improper to add one or two suggestions to the views which in said opinion were expressed.

It is undoubtedly true that in the case cited, where the covenants of this identical lease were under consideration, the court may have used language which might be construed into an affirmance of the claim of the appellants that the covenant to pay one-half the value of the building is an independent one, but no such question was before the court at that time, and the language used by the court was simply an answer to the question which was then before the court for its decision, and in no way was it attempted to forestall or to decide upon a claim such as is presented in the ca'sc at bar. All that was decided in that case was that the time fixed in the covenant to pay for the building was the expiration of the term and that that phrase related to time and not to the estate of the lessee.

The provision of the lease in regard to re-entry was to' the effect that in case of a default upon the part of the lessees the lossors might re-enter, re-possess and enjoy the premises in question as in their first and former estate. How, if the lessors were under an obligation to pay for these buildings at the expiration of the term mentioned in the lease, and' such obligation was a lien upon these premises, how was it possible for them to re-enter, have again, re-possess, and enjoy as in their first and former estate ? Here is a clear intention shown by the contract itself that in case of a default upon the part of these tenants the whole estate shall revert, unincumbered by anything that the lessees may have done, to the lessors, who shall hold the premises thereafter as in their first and former estate. This seems to be a clear definition of the rights of these parties; and it seems to us that these covenants were considered by the parties to be dependent, and not independent. The lessees were to enjoy the premises and to have a right to payment for the building or a renewal of the lease upon ■ condition of their performing the covenants contained in the lease. This necessarily followed from the fact that continued enjoyment of the premises by the lessees was undoubtedly contemplated, becáuse the covenant for the payment for the buildings is coupled with a covenant to renew

p. 805

the lease, which would be impossible if the lease had ceased to exist years before the time to claim such a renewal had arrived. All these circumstances show clearly that the condition upon which the tenants were to be in a position to claim payment for the buildings was a compliance with the covenants in the lease.

The grant is made in consideration of the rents, covenants and agreements mentioned in the lease. They were the consideration for the grant, and to say that the lessee may repudiate the consideration which he has to pay, and then claim performance of the covenants on the part of the lessor does not seem to be equitable or just, and we do not think is the law.

We think, therefore, that the judgment should be affirmed, with costs.

Daniels and Beady, JJ., concur.