James v. Cooper — 49 N.Y. St. Rep. 792

Majority

p. 792

James C. Matthews, App’lt, v. Melville W. Cooper et al., Resp’ts.

(Supreme Court, General Term, First Department,

Filed November 18, 1892.)

Headnote

Lease—Covenants—Breach cannot be determined on affidavits.

A receiver was appointed pendente lite to. take charge of an hotel and conduct the business in an action by the lessee of the hotel to reform certain chattel mortgages on the furniture and a deed of trust, both made to secure the rent. Thereafter the holder of a prior chattel mortgage asked leave to enforce his rights, whereupon the lessor alleged that the lessee had forfeited his rights under the lease by a breach of a covenant, that he was ready to pay such mortgage, and asked for possession of the property. Held, that it was proper for the special term to allow the lessor to foreclose his mortgages, but error to allow him to re-enter for breach of covenant, even though he indemnified the receiver from any liability for his acts, as the question of forfeiture could only be tried by a regular action, and could not be determined on mere affidavits.

• Appeal from an order authorizing the receiver appointed by an order of this court to permit the defendant Sturtevant to reenter and enjoy as in his first • and former estate in the Sturtevant House, and to take possession of and retain the goods and chattels mentioned in two certain chattel mortgages referred to in the complaint.

Durnin & Hendrick, for app’lt; Elihu Root and S. B. Clarke, for resp’t Sturtevant; George H. Adams, for receiver.

The action was brought by the appellant to procure a reformation of two chattel mortgages executed by him to the respondent Sturtevant, and also to reform a certain trust

p. 793

agreement executed by him to the respondents Cooper and Wad-dell simultaneously with the execution of the chattel mortgages. The plaintiff had, up to the time of the execution of the instruments in question, been engaged in conducting and carrying on an hotel business in the premises in the city of New York known as the “ Sturtevant House,” and those instruments related to the business, furniture and fixtures ot said hotel.

The plaintiff alleged in his coinplaut that the chattel mortgages should have contained a provision making them payable within one year, instead of on demand, and that there should be inserted in the trust agreement a provision that upon demand the property therein mentioned should be given back, and the management of the business turned over to him. He prayed that an injunction be granted restraining the respondent Sturtevant from selling the said property under the chattel mortgages, and Cooper and Wad-dell from conducting and carrying on said business, and that a receiver be appointed to take possession of the property and business, and manage and conduct the same during the pendency of the action. It was alleged in the complaint that the plaintiff at the time of the execution of the instruments referred to was ill and incapacitated from the transaction of business, and that he did not know that the provisions in respect to which a reformation of the instruments was sought had been omitted therefrom, but that he supposed that such provisions had been inserted therein. The answer of the defendant, Sturtevant, denies the allegations of the plaintiff in respect to the mistake in the provisions of the chattel mortgages and the trust agreement, and as to the plaintiff’s incapacity from illness, and generally all the equities in the complaint. Subsequently, on the motion of the plaintiff, on the 30th day of December, 1891, the defendant, Erhardt, was appointed receiver of the furniture and chattels in said hotel, and of the lease thereof, and of the business carried on therein, with directions to conduct and carry on said business. The defendants, Cooper and Waddell, were also directed to deliver to the receiver the property of the hotel then in their possession, and the defendants herein were enjoined and restrained, pending the action, from selling or disposing of the furniture and chattels in said hotel. On a subsequent motion to vacate and set aside said order it was ordered, on the 16th of February, 1892, by the special term of this court, that said injunction be vacated, unless the appellant, within 10 days, file a new undertaking, with good and sufficient sureties, in the sum of $10,000, to indemnify the defendant, Sturtevant, for the damages that he might sustain by reason of said injunction. The appellant has never given the additional security provided for by this order. Erhardt, the receiver, on or about the 11th of May, 1892, presented his petition to this court, in which, after stating that, after paying the rent of the premises, but a small balance remained in his hands from the assets turned over to him by Cooper and Waddell, and that during the period from June to August 15th the receipts will be insufficient to meet the obligations for rent, etc., he goes on to state:

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“Fifth. Your petitioner respectfully shows to the court that he has received notice of a certain petition and motion of Jos. E. Janvrin, verified April 3, 1892, for an order requiring your petitioner, as the receiver of the furniture and chattels now in the Sturtevant House, to forthwith pay Jos. E. Janvrin, the petitioner in the said petition, the amount of a certain mortgage set forth in said petition, amounting to $5,000 and interest thereon since January 26, 1891, together with the costs of the said proceeding ; or, in default thereof, that your petitioner deliver possession of all the furniture and chattels now in his possession or under his control, and referred to in and covered by the said mortgage, to the said petitioner, Janvrin; and that he, the said Janvrin, be allowed to take possession of all of said furniture and chattels, and foreclose the said mortgage according to the terms thereof. “ Sixth. That your petitioner, as such receiver, is wholly unable to make payment of the principal and interest of the said mortgage; and that, if the furniture, fixtures and chattels described in and covered by the said mortgage shall be removed from the possession and control of your petitioner, your petitioner will be unable to continue to administer the trust in his hands, namely, the hotel business now conducted by the Sturtevant House.”

The defendant Sturtevant also presented his petition, dated May 4, 1892, in which he states in great detail the transactions between him and Matthews, and alleges that the appellant, as lessee, was ■in default for nonpayment of Croton water rates or rents accruing in the years 1891 and 1892, and claims that under the covenant in the lease he is entitled to reenter upon the premises by reason of such default. He also alleges that the appellant has made default in payment of certain promissory notes mentioned in the chattel mortgages, and that, under the terms thereof, he is authorized and empowered to take possession of the property covered by them, and desires to do so. He further averred that one Janvrin, claiming to be a creditor of the appellant for a debt secured by a chattel mortgage, executed prior to the mortgages to the petitioner, had by judicial proceedings attempted to remove the property covered by the mortgages held by the petitioner; that Janvrin had served notice of motion on the receiver for an order directing said receiver to forthwith pay the amount of his mortgage, or, in default, deliver possession of the property to him; that, said motion coming on to be heard, it was directed that a ■copy of Janvrin’s petition and notice be served on all the parties to this suit; that this had been done, and that said application was pending and waiting a hearing. He further averred that he elects that it is for his best interest to take possession of the property covered by said two chattel mortgages mentioned in the complaint, and that, under and by virtue of the terms of said chattel mortgages, he is, upon such election, entitled to take and retain possession thereof, and he is desirous to do so. He further averred that the said Matthews did not claim in his complaint in this action that the said two chattel mortgages in the complaint mentioned are erroneous in respect of any of the provisions thereof which give to your petitioner the right to take possession of the

p. 795

goods and chattels covered thereby upon an election by your petitioner that it is for his best interests so to do, or in case of an attempt on the part of any person, under the direction of said Matthews, or on his behalf, to take possession thereof. He further averred that he did not know whether the said Janvrin mortgage' is valid or not, but that, if the same be valid, he is ready and willing to redeem the property covered by all three of said chattel mortgages from the lien of the said Janvrin mortgage; and, if he should do so, as he hopes, that he may be subrogated to all the-rights of the said mortgagee under said Janvrin mortgage. Matthews, the appellant, when the hearing of the application of Sturtevant and of the receiver came on, opposed the same in an affidavit in which he denied that there had been a forfeiture by reason of the failure to pay the water rates, but he does not, in. that affidavit, in any way attack the validity of Janvrin’s mortgage, nor his right to take possession of the furniture and fixtures of the hotel thereunder. All the parties were served with notice of these applications, and, upon the hearing, the order from which, this appeal is taken was made.

We think that the order was right. Janvrin was confessedly entitled to be paid the amount due upon his mortgage, or to take possession of the property, and sell it, to obtain payment of his debt. The property was in possession of a receiver, who had been appointed by the court in another action, to which he was not a party. There was no money in the hands of the receiver, out of which Janvrin’s claim could be paid. Whether the mortgage to Sturtevant and the trust deed recited all the terms agreed upon between the parties or not, the fact is also conceded that Matthews was largely indebted to Sturtevant, and that the latter was vitally interested in preventing a sacrifice of the property upon a sale under the Janvrin mortgage. Matthews does not claim, in his affidavit in opposition to the motion, that he is able to protect the property or to pay Janvrin’s debt. To deny the application of Sturtevant might lead to a sacrifice of the property, and result in irreparable injury, not only to him, but to the plaintiff, if it should eventually be determined that he is entitled to relief at the hands-of this court. The order below must be affirmed, with costs and disbursements.

While concurring with the opinion of Mr. Justice Lawrence in so far as it affirms the order of the court appealed from, which allowed the defendant Sturtevant to proceed with the foreclosure of the mortgages, we cannot concur in his conclusion to affirm that part of the order which embodied a judgment in an action of forfeiture. The question as to whether the covenants of the lease by which the plaintiff, Matthews, held the premises in question was one which he had a right to have tried in a regular action, so that his rights and those of the defendant Sturtevant, could be determined therein. This court had no power to deprive him of that right of trial, and to determine the question upon affidavits. The defendant Sturtevant claimed a right to re-enter because of a breach of the covenants contained.

p. 796

in the lease. The plaintiff, Matthews, among other things, claimed .a waiver of the forfeiture, if any had taken place; and it is a well-settled rule that covenants of this description, which work a forfeiture of the term, unless such forfeiture is acquiesced in, •can only be enforced in the manner prescribed by law. Therefore, in order to obtain possession of these premises by reason of the alleged forfeiture, it was necessary for Sturtevant to establish the same in an action; but, by the order of this court upon affidavits, without giving Matthews an opportunity for the trial to which he was entitled upon the issues which would have been raised in respect to the question of forfeiture, this court decrees that its officer permit Sturtevant into and upon the premises demised in the lease wholly to re-enter, and to have the same again, to repossess and enjoy as his first and former estate. Our attention has been called to no process by which a forfeiture can be •enforced in this summary way, nor have we knowledge of any •authority for such a procedure. We think, therefore, that that portion of the order should be reversed, and the order limited solely to the right of said Sturtevant to enter upon these premises in order to take possession of and remove the property mortgaged for the purpose of foreclosure.

The order, as so modified, should be affirmed, without costs. '

O’Bbien, J., concurs.