San Remo Hotel Co. v. Brennan — 46 N.Y. St. Rep. 827

Majority

p. 827

The San Remo Hotel Co., Resp’t, v. Michael Brennan, App’lt.

(Supreme Court, General Term, First Department,

Filed June 3, 1892.)

Headnote

1. Injunction—Summary proceedings—Modification op lease.

In an action to restrain the prosecution of summary proceedings for non-payment of rent under a sealed lease for ten years, it was claimed by plaintiff that the premises were not ready for occupation at the time covenanted in the lease, and that in consideration of a waiver of a claim for such breach defendant consented to a reduction of the rent for the first year. Rent at such reduced rate had been paid, but defendant, relying on the terms of the lease, had commenced summary proceedings for nonpayment of the balance. Held, that the agreement claimed by plaintiff, if proved, was one which could be availed of to modify the lease, and that it was a proper case for the continuance of a temporary injunction until the trial of the action.

3. Same—Bond.

It appearing that the difference between the rent reserved by the lease and the reduced rent for the year would amount to §17,000, a bond in the sum of $20,000 was sufficient.

.3. Same.

As the injunction is only directed and limited to preventing a dispossession for non payment of rent, additional security should not be required for the Croton water, which the lease also required plaintiff to pay.

Appeal from order continuing injunction restraining defendant from dispossessing plaintiff.

William D. Guthrie, for resp’t; James P. Campbell, for app’lt.

This action was brought by the plaintiff as lessor .against the defendant, its landlord, to restrain him from proceeding to dispossess it for the non-payment of rent.

The lease was made under seal on the 21st day of March, 1891, and was to run for the period of ten years from the 1st of October, 1891. The rental during the first five years was to be at the rate of $6,000 per month, and during the remaining five years at the rate of $7,000 per month. In addition to the rent, the tenant agreed to pay the annual Croton water rates on or before August 1st of each year, and also to keep the premises, machinery, etc., in repair and running order at his own expense. The defendant

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never received the full rent reserved in his lease, but on October 10, 1891, took $4,000 for October, and thereafter $3,000 for ¡November rent, and each month subsequently, including February, $3,500. By the terms of the lease, the premises were to be ready for occupation on October 1st.

The plaintiff insists that this covenant was violated, in that a large number of the apartments, hallways and rooms were not completed and ready, and that the steam fitting, electric light apparatus, etc., were unfinished and incomplete. On the other hand, the defendant produces numerous affidavits tending to show that, the hotel was finished and in good condition on the 1st of October, 1891. As the result of such failure to fully complete and have the entire premises ready for occupancy, the plaintiff asserts that, a loss resulted and that it was damaged to the extent of $50,000, for which it would have had a good cause of action against the defendant. As a consideration for waiving this claim, plaintiff states that in December, 1891, an agreement was entered into between it and the defendant, by "which the rent reserved in the lease should be reduced from $6,000 to $3,500 per month, which reduction was to be continued until October, 1892. Plaintiff’s claim, therefore, is that the rent for the first year had been reduced by paroi agreement executed on its part, founded on ample consideration, to $3,500 per month, and that it is ready and willing to pay that, amount.

The defendant, insisting upon his right under the lease to the full rental of $6,000 per month for the balance of the first year, namely, from March to October, 1891, had begun summary proceedings to dispossess the plaintiff at the time of the commencement of this suit. The ground for relief prayed for by the plaintiff is, that as the lease was under seal it could not avail itself in the summary proceedings of the paroi agreement reducing the rent during the balance of the first year, and that consequently it-would be dispossessed and remediless unless a court of equity intervened by injunction.

The court below, until the trial of the action, continued a temporary injunction restraining and suspending the dispossess-proceedings, upon condition of plaintiff’s giving a bond in the sum of $20,000, which latter condition has been complied with; but from the order continuing the injunction this appeal is taken.

In disposing of the motion, the learned justice delivered the-following opinion:

“ After a careful examination of the voluminous papers submitted on this motion, I have reached the following conclusions

“First: The assignment of the lease to the defendant was made with the consent of the defendant, and he cannot now be heard to complain of the same.

“Second: Some portions of the hotel were unfinished and unfit for occupancy on the 1st of October, 1891, and for some time thereafter, and the plaintiff had a valid claim for damages because of such fact, and the waiver of such damages would be a sufficient, consideration for an agreement on the part of the defendant to accept a reduced rent until the 1st of October, 1892.

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“Third: There can be no question that the defendant agreed to accept and did accept a reduced rent for several months in full payment of the rents reserved in the lease. Whether the defendant agreed to accept a reduced rent until the 1st of October, 1892, or whether he declined to make such agreement for any definite-period and only agreed to take a less sum until times should be better, is in dispute, and it is impossible to determine that question upon ex parte affidavits.

“ Upon all the papers, the statement made on behalf of the plaintiff as to the agreement seems to me to be the more probable one, but it is for the trial court to determine what the actual fact was.

“Fourth. If the plaintiff upon the trial shall prove that the agreement was such as it claims the agreement was, I think it probable that it will succeed in the action.

“Fifth. If the injunction is continued until the trial, the defendant can be fully protected from all loss by a proper undertaking; whereas, if the injunction is dissolved, and the lease is terminated by dispossess proceedings, the plaintiff will suffer irreparable injury.

“Sixth. The motion to continue the injunction should be granted on condition that the plaintiff give such undertaking.

“ The order will be settled on notice, and the amount of the undertaking will then be fixed.”

It will thus be seen that upon the disputed question of fact he has reached a conclusion favorable to the view advanced by plaintiff, leaving it, however, for the trial to determine finally the merits of the positions taken respectively by the parties. In the absence of any such preponderance of proof as would justify us in holding that the conclusions reached upon the facts by the learned judge were erroneous, we are not disposed, upon a motion of this kind, to disturb such conclusions.

The serious question presented, however, relates, not to the facts as concluded by the judge, but to the law as applicable thereto. This goes to the very foundation of the right of the plaintiff to maintain this action. The ground for the relief prayed for by plaintiff, as already stated, was the inability to avail itself of the agreement claimed to have been made, by which the rent was reduced, and which in summary proceedings would have been unavailing as a defence, for the reason that the original instrument of lease was under seal, and the effect would be to modify the same by a paroi agreement.

It is insisted by appellant that the contract set forth in the complaint, being an oral one intended to reduce the rent reserved in, and in that respect to modify, a lease for ten years, which by statute must be in writing, and to which the parties had affixed their seals, is void at law and may be repudiated by either party so far as the oral modification remains unexecuted. In support of this proposition we are referred to the cases of Coe v. Hobby, 72 N. Y., 141 ; Smith v. Kerr, 108 id., 31; 13 St. Rep. 115 ; McKenzie v. Harrison, 120 N. Y., 260 ; 30 St. Rep., 934 , and McGreery v. Day, 119 N. Y., 1 ; 28 St. Rep. 597 .

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■ In Coe v. Hobby, it was held that a contract or covenant under seal cannot be modified before breach by a paroi executory contract. In Smith v. Kerr, it was held that a simple executory agreement, without consideration, to alter the terms of an existing unexpired lease in which no breach had occurred, was void. In McKenzie v. Harrison, p. 263, the court said: “We shall not question the rule that a contract or covenant under seal cannot be modified by a paroi unexecuted contract." These cases, however, in no way destroy the force of the rule, maintained by many cases, that after the breach of a sealed agreement it may be modified in any respect, or wholly rescinded by an executed paroi agreement founded upon a sufficient consideration. Dodge v. Crandall, 30 N. Y., 294 , 307. A paroi modification of a sealed instrument, to be enforceable, must be an executed, as distinguished from an executory contract, and it must be a valid binding agreement, founded upon a sufficient consideration. Therefore, if the facts here had-shown that the landlord had performed all the covenants on his part, and that thereafter the tenant, having entered into possession, had made an arrangement with the landlord for an abatement of the rent secured by a sealed instrument with respect to any portion.of the term; notwithstanding such an arrangement an action would be maintainable for the amount stipulated in the sealed lease. This was the question which the court of appeals disposed of in McKenzie v. Harrison, 120 N. Y., 260 ; 30 St. Rep., 984 , where the landlords, after having reduced the rent, and accepted payment of instalments thereof in full “ until times are better,” sued for the balance of the instalment under the lease for which they had receipted in full, and a verdict was directed in their favor. The court therein said : “ We shall not question the rule that a contract or covenant under seal cannot be modified by a paroi unexecuted contract. * * * Neither shall we question the views of the court below, to the effect that the alleged oral agreement was void so far as it remained unexecuted. The lessors had the right to repudiate it at any time, and demand the full amount of rent provided for in the lease; but in so far as the oral ■agreement had been executed, as to the paj'ments which had fallen due and had been paid and receipted in full as per the oral agreement, we think the rule invoked has no application.”

The question here presented is different from that decided in McKenzie v. Harrison, supra, in that, if the facts stated by the plaintiff can be proven upon a trial, that, having a valid claim for damages by reason of the breach of the covenant for occupation and enjoyment on and after October 1st, this claim was waived in ■consideration of the paroi agreement to take a less rent for the first year, such an agreement executed on the part of the plaintiff, ■and partly performed by the defendant by the allowances, made for the months of the year that have passed, we do not think could have been repudiated. And this, we think, will become apparent if for the purpose of disposing of the question we assume the plaintiff’s facts to be sustained by competent pi’oof. Thus assumed, if the premises were not ready for occupancy on the 1st of October, 1891, and the tenant had gone into partial possession, it could

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have successfully defended an action for the rent or have brought a suit in equity for an apportionment. Brown v. Wakeman, 42 St. Rep., 677 ; Kelly v. Miles, 48 Hun, 6 ; 15 St. Rep., 319 .

As said by Mr. Justice Daniels, writing the opinion in the case of Kelly v. Miles, supra: “ The occupancy assured to him ” (the tenant) “.by the lease was the consideration for his covenant to pay, and to the extent that he was deprived of the ability to occupy by the act of the owner under the authority and assent of the defendants, the plaintiff was entitled to an abatement and apportionment of the rent.”

These cases are authority for the position that one who enters-into possession of part of premises, all of which has been hired by him, does not thereby waive his right to equitably set off against the rent reserved in the lease the value of the portion of the premises the possession of which may have been withheld by reason of the failure of the landlord to fulfil the agreement on his part to have them ready for occupancy. They are, also, authority for the-maintenance of an action such as this, wherein it is sought to stay dispossess proceedings against the tenant, where the facts relied upon by the tenant are not available in such proceedings as a defense.

We are therefore of opinion that a paroi agreement, such as is asserted by plaintiff and made the basis of his complaint, is not purely executory, and one that therefore may be repudiated by either party. If upon a trial it can be shown that the premises were unfinished and unfit for occupancy on October 1st, and that thereby the plaintiff had a valid claim for damages as against the defendant, which in consideration of waiving was made the basis of an agreement by the defendant to take a less sum of the year ending October 1, 1892, then is presented within the authorities a care where a paroi agreement, based upon a sufficient consideration after a breach, has been established, which can be availed of to modify a lease under seal, and which cannot be repudiated if shown to have been executed by one of the parties and partially executed by the other. Even though this view should be in seeming conflict with some of the authorities, we think that the questions presented were serious enough to require their disposition in a more deliberate manner than by affidavits upon a motion, and that it was a proper case to continue the injunction until a trial could be had; and this for the reason well expressed by the learned judge that, “if the injunction is continued until the trial, the defendant can be fully protected from all loss by a proper undertaking; whereas, if the injunction is dissolved, and the lease is terminated by dispossess proceedings, the plaintiff will suffer irreparable injury.”

The only other question relates to the amount of the undertaking given by the plaintiff upon the injunction.

The difference between the rent reserved in the lease and the amount payable under the agreement as claimed by plaintiff would, on the 1st of October, 1892, should the defendant be successful, require the payment by plaintiff of the sum of $17,500. A bond, therefore, in the sum of $20,000 we think

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was sufficient. Should the trial not be had within a time that shall fully protect the defendant, or should any facts arise entitling the defendant to additional security, the opportunity is always present to obtain additional security upon application.

In respect to the claim that, in addition to the rent reserved, security should also have been given for the Croton water which the plaintiff had agreed to pay, it is sufficient to say that it is entirely independent of the question involved here as to the amount of rent, and this injunction in no way impairs the defendant’s right to insist upon the performance of this condition in the lease, or any other conditions or obligations on the part of the plaintiff; the injunction itself being directed and limited to preventing the plaintiff being dispossessed by reason of a failure to pay the difference between $3,500 and the $6,000 reserved in the lease. For this difference, as already stated, $20,000 is ample security; and this, with the right which is given to defendant, should the trial of the case be unnecessarily delayed, to move for additional security, will amply protect him.

Upon an examination, therefore, of the record, showing the reasons for the making of the order appealed from, we think the learned judge was right in giving the plaintiff an opportunity to have a trial where it could produce and examine its witnesses and, if able, establish the good faith of its claim that the hotel was not ready for occupancy at the date agreed upon, which resulted in damages to it, and which in consideration of a reduction of the rent for the first year it waived.

We think the order appealed from should be affirmed, with ten dollars costs and disbursements.

Yan Brunt, P. J., and Barrett, J., concur.