Dennistoun v. Hubbell — 23 N.Y. Super. Ct. 155

Majority

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Thomas Dennistoun, Plaintiff and Appellant, v. Gaylord B. Hubbell, Defendant and Respondent.

Headnote

1. Where lessees, having an unexpired term, assign all their property in trust for the benefit of creditors, and the assignment does not disclose the existence of the lease, and the assignee, at the time of accepting the assignment, is not aware that the assignors owned such a lease, and does not accept the lease or enter on the practises, he is not made liable for rent subsequently accruing upon the lease, by the mere fact that he collected from sub-tenants, of a small portion.of the demised premises, moneys specified in the assignment and schedules as due from them upon open account, but which, in fact, were due as rent of such portions of the premises, and which had not accrued at the time the assignment was madS.

(Before Bosworth, Ch. J., and Robertson and Barbour, J. J.)

Heard, December 3, 1862;

decided, January 17, 1863.

Appeal from a judgment in favor of the defendant, entered upon the report of Livingston Livingston, Esq., the Referee before whom the issues in the action were tried.

The plaintiff sued to recover one-quarter’s rent, which fell due on the first of August, 1861, under a lease made by him to Erastus Z. Wright and Theodore Mace, of a store in Beekman street, in the City of New York. The lease was made in May, 1859, and Wright and Mace occupied the lower portions and basement of the building in their business, and sub-let one portion of the lofts to the firm of B. J. Eyre & Co., at the rent of $350, payable quarterly, and another portion to H. H. Taylor & Brother, at the rent of $200, payable quarterly, during the year, from the first of May, 1861, to the first of May, 3862

On the 18th day of July, 1863, Wright & Mace having become insolvent, (and having previously sold to the firm of Pattee, Yale and MacFarlane all their stock of goods, fixtures and visible property, and which, except the

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fixtures, had been removed by Pattee, Tale & MacFarlane, the purchasers,) made to the defendant a general assignment, for the benefit of their creditors, of all tlioir property, real and personal, of every name and nature, save such as was exempt from execution. Ho mention was made in the assignment of the lease from the plaintiff, or of the leases from Wright & Mace to B. J. Eyre & Co., .and to H. H. Taylor & Brother.

On the 7th day of August, 1861, Wright & Mace made and executed the inventory and schedule of their assets and effects and indebtedness, required in the case of such assignments, by the act of April 13th, 1860, and the same were afterwards filed on the 11th day of August, 1861. This inventory and schedule mentioned in the list of indebtedness $1,750 as rent due to the plaintiff. That sum was, in fact, the rent from February 1st, 1861, to August 1st, 1861. It also mentioned one sum of $87.50, as due to Wright & Macé from B. J. Eyre & Co. on open account, and one sum of $50, as due to Wright & Mace from H. H. Taylor & Brother, on open account.

On. the 15th and 20th days of August, respectively, the defendant, by an agent, collected these sums. The finding of the Referee, in reference to the circumstances under which these sums were collected, was as follows:

“ 24. That .said sum of $50 was collected by said defendant of H. H. Taylor & Bro., by a young man named Brown; t^at said Brown called and demanded the rent; that one of said firm said to Brown, that if he paid the rent he must have Mr. Hubbell’s receipt for it; that Brown went away and brought the receipt inserted in the case, upon which the check for $50, payable to Gaylord B. Hubbell, assignee, was delivered to said Brown.

“ 23. That Brown was the agent of said defendant in collecting said $50, and having demanded it as.rent, and being told that if it was paid, the receipt of Mr. Hubbell must be given for it,- and Brown returning for the rent, with the receipt in question, and delivering it, and receiving the amount in question, and the defendant having

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been examined as a witness in his own behalf, and not denying that said Brown was his agent, and authorized to give the receipt in question, the legal inference is that Hubbell, when he received the money, knew that the $50 was for rent of part of the premises in question, up to 1st August, 1861, and I therefore find that the defendant, when he received said sum of $50, knew that said sum was for rent of part of said premises up to 1st August, 1861.”

The Referee further found that the defendant did not enter upon the premises; that it would not have been for the interest of the creditors for him to assume the lease; that he did not elect to assume it, nor do any act to make him liable for it; and found, as a final conclusion of law, that the defendant was entitled to judgment.

The other details of his report, so far as material to the questions decided by the Court, are fully stated in the opinion of Bosworth, Ch. J.

JR. Grosman, for plaintiff, appellant.

I. The burden of proof that the assignee had rejected the term, rested on the assignee, and there being no proof of such rejection, he is liable on the covenants of the lease for the rent in question. (Muir v. Glinsman, N. Y. Superior Court, January Term, 1856.)

A. When a lease or term is specifically mentioned in an assignment, the delivery of the assignment, and acceptance by the assignee thereof, passes the estate, and renders the assignee liable on the covenants of the lease, without reference to whether he has taken possession or not. (Walker v. Reeves, 2 Dougl., 461; Webb v. Russell, 3 T. R., 400; Brett v. Cumberland, Cro. J., 521; Parker v. Webb, 3 Salk., 5 ; Palmer v. Edwards, 1 Dougl., 187; Williams v. Bosanquet, 1 Brod. & B., 238, [5 Com. L. R.;] Walton v. Cronley, 14 Wend., 63 ; Provost v. Calder, 2 Id., 517.)

The delivery and acceptance of a general assignment is equally effective, according to its purport, and if the granting clause is fairly sufficiently comprehensive to embrace term for years, the term passes, and as against the assignors

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the delivery is conclusive. The only difference is as to the assignees’ acceptance. In the first case, the assignment being specific, the acceptance is specific and conclusive In the last case, the assignment not being specific, "the acceptance by the assignee is not specific, and, therefore, not conclusive, but grima facie or presumptive merely, and subject to his rejection or disclaimer.

B. The case of Journeay v. Brackley, in the New York Common Pleas, (1 Hilt., 447,) is not well considered in so far as it holds that the term remains in the assignor. The cases cited by the learned Justice to sustain this position arose under the English Bankruptcy Acts, and the authority of those cases, as applicable to a voluntary general assignment for the benefit of creditors, is expressly repudiated and discarded by the English Courts. (How v. Kennett, 3 Adolph. & Ellis, 659.)

II. The receipt of rents from the sub-tenants is conclusive evidence of possession and acceptance on the part of the assignee as assignee. (Matter of Galloway, 21 Wend., 32 .)

III. The fact that the defendant did not personally take possession, and occupy, is not of any weight as evidence of an intention not to take the term. Our case does not claim to rest on actual possession by the assignee, but solely on the execution, delivery, and acceptance of the assignment, and the receipt of the rents accruing August 1st, 1861, from the sub-tenants by the assignee.

IV. The attempt to make out a specific assignment of the, rents to accrue from the sub-tenants August 1st, 1861, to the defendant, by means of the schedule required by the act of April 13th, 1860, is wholly untenable.

A. There is no specific mention of those rents in the inventory or schedule.

B. The assignment was complete and perfect, as regards its effect in the transfer of property, at its execution and delivery. The schedules and inventory are not required to be, and in this case were not, made, and executed until the lapse of twenty days after the assignment, It would

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certainly be fraught with liability to abuse, and the perpetration of fraud, to hold that for this length of' time the assignors can alter and vary the effect of the assignment, as to transfer of property, by means of the schedules.

Joseph Nelson, for defendant, respondent.

I. An assignment for the benefit of creditors is not intended to convey what would be injurious to their interests; and it does not follow that, because Wright & Mace assigned their property, they transferred this lease. (Carter v. Hammett, 12 Barb., 253 ; Martin v. Black, 9 Paige, 641; Bagley v. Freeman, 1 Hilt., 196; Journeay v. Brackley, 1 Id., 447.)

II. But, apart from the question of intent, the lease was not, in fact, assigned to the respondent. Under our statute, the inventory is part and parcel of the assignment and the lease is not specified in it, and was not brought to the assignee’s knowledge.

III. The assignee was bound to collect this money of Byre and Taylor- as the claims were specifically assigned, and were not described as for rent, and their collection was expressly directed.

IV. The assignee does not appear to have known that Eyre & Go., and Taylor & Go-, were tenants, or that the sums due from them were for rent. The 25th finding is erroneous, for Brown was a mere collector, not an agen*, in the sense put by the Referee; and while the legal rule stated might be correctly applied for the protection of Taylor, if need be, no such principle obtains as between these parties.

By receiving the cheek for $50, the assignee ratified the mere act of collection, nothing more.

To have extended the ratification beyond that, plaintiff should have proved affirmatively that the assignee knew all the facts. (Nixon v. Palmer, 4 Seld., 398; Seymour v. Wyckoff, 6 Id., 213; Hays v. Stone, 7 Hill, 132 .)

V. An assignee in trust has an election to take such a lease or not, (see cases cited to the first point,) and is entitled to reasonable time to consider the question.

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VI. The assignee cannot sell or dispose of any of the property until the security is given, (Act of 1860, ch. 348, § 3;) and to have disavowed this lease, or rejected the term, or made any election to that effect by the first of August, the time when this rent accrued, would have been disposing of the lease contrary to the statute.

Premature action on the part of the assignee, in such cases, is not to be favored.

VII. As the assignee had no knowledge or notice of the existence of the lease or rent in question, he was not in a condition to make any election to accept or reject the lease. (2 Story Eq. Jur., §§ 1097, 1098 ; the cases in 4 and 6 Selden, and 7 Hill, supra.)

The plaintiff should have put the assignee to his election before suit.

The assignment to the defendant was made on the 18th of July, 1861. This suit is brought to recover a quarter’s rent, falling due August 1st, 1861. The inventory and schedules required by the statute of April 13,1860, (Laws of 1860, p. 594,) were completed, executed and filed.

The defendant was not in said store (the demised premises) “ after the execution of the said assignment, and did not use, occupy or interfere with the use or occupation thereof, or exercise control over the same.”

“ The defendant, as assignee, did not at any time'enter into possession of said premises.”

He did not, as such assignee, elect to become the assignee of said lease.

The lease is not mentioned in the assignment, nor in the schedules annexed to it.

. Assuming that an assignee of all the property of a debtor, may reject a lease owned by the debtor, where the lease is not, in terms assigned, and thus avoid personal liability for subsequently accruing rent, this is-a clear case of exemption from liability, unless two other facts found by the Referee have the effect to impose such liability. It

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is found, that on the 15th of August, 1861, the defendant, as assignee, collected from B. J. Eyre & Co., $87.50, being a quarter’s rent, falling due August 1, 1861, for parts of the demised premises, occupied by them under a hiring from the assignors. On the same day, he collected from H. H. Taylor & Bro. the sum of $50, one quarter’s rent falling due August 1,1861, for other parts of the demised premises, occupied by them under a hiring from the assignors. It is also found that the defendant knew, when he received the $50, “ that said sum was for rent of part of said premises up to August 1,1861,” but such knowledge as to the $87.50 is not found.

The schedules annexed to the assignment, state that “H. H. Taylor & Bro.” and “B. J. Eyre & Co.” are debtors of the assignors, on “ Open ac.,” the former for $50, and the latter for $87rtro-

It is also found, that the defendant did not know, until the commencement of this action, of the existence of the lease from the plaintiff to his assignors, or what the rent of the store was, but knew that the assignors “ had occupied said store for several years and he had heard various accounts (quere amounts ?) stated as the rent.”

And it is found also, that the assignors, prior to the assignment, had sold all of their stock of goods, and the same had been removed, but they were possessed of goods belonging to others which they were selling on commission, and these remained on the demised premises, until after the inventory or schedules were completed and filed.

In the schedule of creditors annexed to the assignment, the plaintiffs are named as creditors on “ Open ac.” in the sum of $1,750, (which is the amount of two quarters’ rent,) but it is not found or proved that it was in part for the quarter in question ; but the schedule states that the “cause or consideration of indebtedness” is “for rent.”

The practical question is whether the collection of the two items of rent is to be regarded as an item of evidence upon the question whether the assignee accepted the lease, or as an estoppel which concludes him.

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The Referee has evidently treated it as a question of mere evidence, and held that, on a just view of the whole evidence, the assignee.must be deemed to have elected to reject the lease, and the residue of the term thereby created.

The plaintiffs counsel insists, that the collection of these two items of rent, “ is conclusive evidence of possession and acceptance on the part of the assignee as assignee,” and cites as an authority, Matter of Galloway, ( 21 Wend., 32 .)

In that case, John Galloway (the younger) was proceeded against, as administrator of his deceased father, (John Galloway, senior.) Letters of administration were granted in February, 1833, and the proceedings against the administrator were commenced April 13, 1837. During all the intermediate time, he had “ received the rents, issues and profits of the demised premises.”- Being a non-resident, he was proceeded against as such, to recover $2,632, a sum imposed for assessment, on the demised premises, for opening and continuing the Bedford road, and which sum the lessor had been compelled to pay; the lessee covenanted for himself, his executors, administrators and assigns to pay all taxes, duties and assessments, which should, during the term, be imposed on the demised premises.

The Court held, that an administrator who enters upon leasehold property, which belonged to the intestate at the time of his death, or who receives the rents and profits thereof, is chargeable in the debet and detinet, or directly on the covenant as an assignee, and need not be named as executor or administrator.

The legal estate of a deceased person, must rest somewhere, and is devolved upon his legal representative by operation of law, and he cannot reject the term, so as to avoid liability, so far as he has assets. (2 Williams on Ex’rs, [5th Am. from last Lond. Edit.,] 1558, 1559; 2 Rob. Pr., 99, 100 ; Rubery v. Stevens, 4 Barn. & Ad., 241.)

Where he has no assets, and the land is worth less than the rent, or sum due,, this must be shown by way of defense.. Prima facie,, the land is worth more.

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Covenant against an executor, is a remedy given by statute. (1 R. S., 747, § 24.)

The Court say, in the matter of Galloway, that receiving" the rents and profits, is the same thing as entering into possession of the premises. But- this is said iu a case where the rents and profits of the whole premises had been received for years, and of an assignee who is compelled to take the term, and is at all events liable to the extent of the rents received, and to the extent of the assets that may come to his hands applicable to the payment of the sum due.

If the position of the present defendant is like that of an executor, it would seem that he would be liable to the extent of the rents received, on the ground that the term is cast upon him, and the rents received, or profits of the land, are appropriated by law to the lessor, and create a personal debt for the sum received, they being less than the sum reserved, for rent.

In Hargrave’s Case, (5 Coke, 31 b.,) it was adjudged that “when an executor takes the profits, nothing shall be assets but the profits above the rent, as if the land be worth £10 per annum and £o is reserved, in that case nothing shall be assets but the £5 above the rent.”

This proposition is discussed and other cases are cited in Rubery v. Stevens, (supra.) See Pugsley v. Aikin, (1 Kern., 494.)

Whether this rule is applicable to such an assignee as the present defendant, is a different question. He may reject the term absolutely, and thus avoid all personal liability. An executor cannot do this. And if the assignee rejects the term, and never enters into possession, but nevertheless, receives the rents of part of the premises for one quarter, it is illogical to say that he can be charged as assignee of the term. If he is to be deemed an assignee of the term, under an assignment not made by operation of law, but by a coutract to which he is a party, he would be liable for the whole rent payable by the lease, however small the sum received by him, and although he may not

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have received anything. By 2 R. S., 82, § 6, sub. 1, leases for years are declared to be assets, to be applied and distributed, as part of the personal estate of the testator or intestate. 2 R. S., 87, § 27, declares the preferences to be observed in paying debts. And by § 30, Id., power is given to the Surrogate to order rents due or accruing, to be paid in preference to debts of the 4th class, whenever it shall be made to appear to his satisfaction, that such preference will benefit the estate of such testator or intestate. These provisions import that, as between the lessor and the lessee’s executor, the former has no equitable exclusive rights to the rents.

However this may be, yet, in a case where it can properly be said, that such an assignee as this defendant rejected the term and never entered into possession, it cannot be held that he is assignee of the part of the premises for which he received rent, and is chargeable as such. And where, in such a case, the assignee, from some misapprehension of his rights, receives rent from a, sub-ten ant, of only a small part of the premises, which, in equity, may possibly belong to the lessor, he is to be charged, if at all, in an action presenting grounds for equitable relief, and not as assignee of a term, the title to which was never vested in him, and into the possession of which he never entered. (Story Eq., vol. 1, <§ 687.)

If, in such a case, the assignee is liable as assignee of the term, it is because he is, in judgment of law, made assignee of the term, by such reception of rent, against his determination not to take the term, and notwithstanding he was ignorant of the existence of the lease, and never entered into possession of the demised premises.

I am inclined to think that the facts found as to receiving the two items of rent, and the circumstances under which they were received, do not raise the conclusion of law, that the further facts found, viz.: that the defendant, as assignee, did not, at any time, enter into the possession of the demised premises, and did not elect to become assignee of the said lease, are untrue.

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It is well settled, that a sub-tenant, who occupies part of the demised premises under a hiring thereof from, the lessee, cannot be charged at the suit of the lessor as assignee pro tanto. The sum which such sub-tenant contracts to pay, the lessor cannot reach upon the facts found, or proved in this case; nor can he maintain any action against the sub-tenant to charge him personally with the payment of that sum.

•Such being the rule in that respect, such an assignee of the lessee as the present defendant, by receiving the sum due from such a sub-tenant, merely collects a debt to which the lessor had no right; and under the circumstances proved in the present case, collects it as a debt due to his assignor, and does not take it a% assignee of the term, and as rents or profits of part of the demised premises.

I am, therefore, of the opinion, that the Beferee, having found upon sufficient evidence that the defendant, as assignee, did not at any time enter into the possession of the demised premises, and did not elect to become assignee of the demised premises, the conclusion that the defendant is entitled to judgment, is correct.

The judgment should be affirmed with costs.

The defendant was clearly not liable as assignee unless he accepted the possession of the premises as such. Collection of the rents and profits as such knowingly, which fell due after the assignment, would be, as laid down in Galloway's Case, ( 21 Wend., 32 ,) equivalent to possession.

There is not sufficient evidence in this case to show that the defendant, in procuring the cash for the check of Eyre & Co., knew it was for rent falling due after he became assignee. The schedules annexed to the assignment, informed him that such sum was due, but not on what account. Even if it had been for rent due before he became assignee, his collection of it would not be an acceptance of the lease, as it would be a mere chose in action. (Demarest v. Willard, 8 Cow., 206 .) The receipt by

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him of the check is no evidence of the authority of the agent to give a receipt for it as rent, or of notice to him as principal that it was so. A party bound to make an election is entitled to be apprised of the facts which create a necessity for it. Acts done by mistake and in ignorance of a party’s rights do not constitute an election, unless they could only be done by virtue of one then made or are ratified after discovery of the mistake. If the defendant received the money from the tenants, knowing it to be rent, but having reason to believe and believing it was due before the assignment, he did not thereby elect to accept the assignment of the lease. The judgment given by the Referee was correct, notwithstanding the fact found by him that th» defendant actually collected rent due after he became assignee. There is evidence to show he did not knowingly collect it as such, and we have, therefore, a right to infer that the Referee so found, in fact, although not expressed, in order to sustain his report.

I concur with my brethren in thinking the judgment should be affirmed.

In this case the plaintiff seeks to recover from the defendant, as general assignee for the payment of debts, one quarter’s rent of certain premises leased by the plaintiff to the defendant’s assignors, and in their possession at the time of the assignment, upon the alleged ground that the defendant accepted the assignment, epteredinto the possession of the premises, and received rents from some of the under-tenants of the assignor for the quarter in question.

The testimony shows that the lease was not specifically mentioned in the assignment, nor in the schedule subsequently annexed thereto; that the defendant did not take actual possession of, nor occupy, any portion of the premises upon or after the assignment; and that he had no knowledge of the existence of the lease in question. The proofs show, however, that a claim of $50, against H. H. Taylor & Brother, and another against B.

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the assignors; although it did not appear upon the schedule what the nature of such indebtedness was. But, upon the trial, it appeared that those sums were really for rents of portions of the premises for the then current quarter, which, at the time of the assignment, had not yet accrued; that a man who had formerly acted as a clerk for the assignors, called upon Taylor & Brothers, after their rent became due, and received payment, giving a receipt therefor, in the name of the defendant, expressing that such payment was for rent; and that the check received for such rent came to the defendant’s hands, and was used by him. But there was no evidence tending to prove that the defendant authorized the giving of such receipt, or knew that it had been given, or that he had any knowledge that the check was, in fact, received for rent, beyond what may be inferred from the tact, that when examined as a witness he did not voluntarily deny such knowledge.

The Referee decided, that the defendant was entitled to a judgment in his favor; but, as he has also found as a fact, that the defendant knew the $50 was for the rent of the premises, when he received it, the Referee’s ultimate decision would seem to be in conflict with the general doctrine laid down in Galloway's Case, ( 21 Wend., 32 .) This finding of fact, however, is based, as the Referee very clearly states, wholly upon the failure of the defendant to deny, when examined as a witness in the case, that he knew that the $50 was for the rent of a part of the premises; although he was not examined at all touching that matter.

The finding in question was, certainly, erroneous. There is no evidence in the case tending to prove the defendant knew the money was for rent; and nothing can be inferred to his prejudice from his omission to testify, uninterrogated, as to a collateral matter, not specifically charged in the complaint; more particularly, where, as in this case, the main fact thus sought to be inferentially established, is denied, under oath, in the answer.

The judgment should be affirmed, with costs.