Soper v. Littlejohn

4Nov. 10.

JAMES E.

JOSEPH CRAWFORD VAUGHAN

RESPONDENTS. (PLAINTIFFS)...................

...........

AND

THOMAS FANE AND CHARLES F.

LAVENDER...............................

EFENDANTS. ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO. THE CHIEF to January, 1898, Fane and Lavender, two of the defendants in this action, had carried on business for the manufacture of bicycles in partnership. On the tenth of January, 1898, a joint stock company was formed under the provincial statutes of Ontario in which Fane and Lavender became shareholders.

The name adopted as the designation of this company was that of " The Comet Cycle Company."

On the eleventh of January, 1898, Fane and Lavender made a lease of the premises on which they had previously carried on their partnership business, to the company. This lease was made by indenture and was for a term of five years to be computed from the first of October, 1897, at a yearly rental of three thousand dollars, and it contained the following clause:

On the twenty-fifth of February, 1899, the company made by indenture a sub-lease to the respondents, Littlejohn and Vaughan, (the plaintiffs in the action and respondents in this appeal,) of a portion of the premises contained in the first mentioned lease, for a term of two years from the fifteenth of March, 1899, with an option to the lessees of renewal for a further term of three years at a rental of thirty dollars per month. This sub-lease contained the usual covenant soPER for quiet enjoyment and also a covenant in the following words:

On the twenty-ninth of April, 1899, the company made an assignment pursuant to the statute to James Langley as assignee for the benefit of creditors. Fane and Lavender, as creditors, assented to and executed the deed of assignment in the character creditors of the company.

The assignee took possession of that part of the premises comprised in the original lease to the company which were not included in the sub-lease to Littlejohn and Vaughan and remained in such possession until the twenty-sixth of April, 1899.

The assignee gave no notice to the lessors within one month of the assignment, or at any time, declaring his election to retain the premises as provided by R. 0. ch. 34, sub-section the 0th of May, 1899, Fane and Lavender filed with the assignee a claim verified by the affidavit of Fane for rent, including six months rent in advance amounting to $1,500, from the date of the assignment under the provisions in that behalf contained in the lease and before set forth.

From the evidence contained in the depositions of witnesses examined at the trial it appears to me to be plain that immediately after the assignment Fane and Lavender in addition to the claim for rent gave verbal notice to the assignee that they would insist on the forfeiture under the terms of the lease. The finding of the trial judge is to this effect and I adopt his V* finding as being a proper conclusion from the evidence. Certain mortgagees of the premises having given Juadee.

notice to Littlejohn and Vaughan to pay the rent reserved by the sub-lease to them, an arrangement was made by which, on the twenty-sixth of June, 1899, the assignee paid over to the mortgagees a sum of seven hundred and fifty dollars in satisfaction of their demand and thereupon the latter withdrew their claim to rent. This payment was charged against the claim of Fane and Lavender and was paid with their assent.

On the twenty-seventh of July, 1899, the assignee gave up possession of the company's part of the premises to Fane and Lavender and made no further claim to rent from Littlejohn and Vaughan who had, whilst the assignee remained in possession, paid the rent under the sub-lease, including that for the power, to him.

This payment was insisted upon by the assignee.

It is no- found that Fane and Lavender assented to these payments.

On the fifteenth of August, 1899, Fane and Lavender sold the premises to the appellant Soper, and a written agreement having been entered into, it was registered on the sixteenth of August.

On the twenty-second of August, 1899, a deed was executed by Fane and Lavender conveying the premises to the appellant. Fane and Lavender supplied steam and power in accordance with the terms of the sub-lease and were paid by the respondents rent therefor up to the first of September, 1899.

On the thirty-first of August the appellant demanded possession of the respondents, which was refused. On November, 1899, the respondents brought this action against the present appellant and Fane and Lavender for breach of the covenant for quiet enjoyment, and for refusing to supply steam and power.

The defendants insisted on the forfeiture of the respondent's lease, and the present appellant counterclaimed for the delivery of possession.

The action was tried before Mr. Justice Meredith who gave judgment dismissing the plaintiff's action with costs, and directing that upon the counter-claims, the appellant Soper should recover possession and mesre profits up to the first of January, 1900, and that Fane and Lavender should recover $72.50 for mesne profits and services up to the thirtieth of October,

This judgment was reversed by the Court of Appeal, the ground of reversal being that the forfeiture was waived and that there was, by operation of law, a surrender of the original term to Fane and Lavender which under the statute made them liable upon the covenants of the company contained in the sub-lease;

that the appellant Soper, as assignee of the reversion was also bound by these covenants, which together with the sub-lease were valid and subsisting against him; and that the respondents were entitled to recover certain damages to be ascertained by a reference

I may say at once that I have great doubts as to whether the covenant to supply steam and power to the respondents was anything more than a personal covenant by the company.

I doubt if it would, the assumption of a surrender by operation of law, have bound Fane and Lavender under the statute and whether the burthen of it would have run with the reversion so as to bind the appellant Soper. I assume, however, for the purposes of the judgment, that Fane and Lavender as well as Soper would have been so bound.

Then, it is as well to point out here that there is SOPER nothing in the pretence that Fane and Lavender having been shareholders in the company, they must, as e regards their individual interests as lessors, be affected The Chief

Justice.

by the acts of the company. Fane and Lavender and the company were undoubtedly distinct legal persons, and the acts and conduct of one cannot have any effect on the other. This appears from the case of Salomon v. Salomon 4 Co. (1).

Any objection founded on the connection of Fane and Lavender with the company resolves into a criticism of the law which permits the establishment of companies with such consequences and is not a ground for any judicial action.

Then the first proposition of the appellants is that there was a forfeiture of the lease.

As concluding this point, I cannot do better than quote from the judgment of Meredith J. who says:

It is contended that there was no forfeiture, because the assignee did not go out of possession until three months after the making of the assignment, and because, after that the lessors accepted from him and from the sub-lessees the amount of the rent under the lease and the sub-lease, the former for the three months during which the assignee was in possession, and the latter for the month of August, that is, the month following the going out of possession by the assignee.

That the term ended is not denied.

There is no contention, no suggestion on either side, that it still subsists in either the company or the assignee.

Now, there was the forfeiture clause contained in the lease, coupled with the provision for payment of the six months' unearned rent. There is the probability that the lessors would avail themselves of the provisions of this clause.

Why would they not? It was altogether in their interests to do so.

There was a claim made for the six months' rent unearned, showing a determination to have the benefit of this clause, to act under it; and there is the positive testimony of the lessor, Fane, in support of the election to forfeit, not denied by the (1) [1897] A.

Then the learned judge further finds that on the conflicting testimony as to the acquiescence of Fane and Lavender in the assignee's claim to hold possession. under the statute and to keep the sub-lease subsisting there was no acquiescence on the part of the lessors.

Upon the evidence and upon the findings of the trial judge, who was in a better position than an appellate court to determine, upon the credit of witnesses, and the weight of evidence, that there was a forfeiture which the lessors Fane and Lavender declared their election to insist upon immediately after the assignment was executed, we are bound to hold that the forfeiture took effect.

I think too little weight has been attached to the statutory rights of the assignee and the line of conduct pursued by him in exercise of those rights. Had the assignee not had a paramount right under the statute to retain possession, including therein the receipt rent from the sub-lessee and, notwithstanding the forfeiture clause, for the three months following the assignment, the case would have been very different Then, it might have been difficult to account for the omission to enforce delivery up of possession and the receipt of rent, upon any hypothesis consistent with an election to forfeit. The effect of the statute, however, was to compel the lessors to await the termination of the statutory three months during which the assignee thought fit to keep things in uncertainty. I am of opinion, therefore, that there was a completed forfeiture communicated to the parties. How anything ex post facto could do away with the effect this forfeiture I am at a loss to see; therefore, on this point of law, the appellant's case is conclusively established. But, even if the evidence and the finding of The

Justice.

the learned judge had been different, I should have difficulty in attributing waiver to any of the acts relied on as proving it.

The payment to the mortgagee has no bearing; he had a right over-riding that of the parties and all the lessors did was to let the assignee pay him off, charging the amount paid against the rent coming to them. The receipt of the three months rent from the assignee is obviously no waiver sufficient to do away with a forfeiture already consummated, and is explained .moreover as having been based on a compromise with the assignee and was the only payment in full which the assignee was bound to make, whatever rights the lessors may have had to prove against the insolvent estate for the balance of six months rent.

The receipt of the August rent from the respondents was manifestly by way of compensation for use and occupation permitted, for the accommodation of the sub-tenants and which they did not treat in any other way.

It is impossible to say that by this the lessors intended to renounce the absolute title they had acquired under their election to forfeit, even if in law it could have had that effect. The receipt of this August rent, moreover, could not have effected the appellant since his equitable title under the agreement preceded the receipt by the lessors.

On the whole the judgment of Mr. Justice Meredith appears to be right and should be restored.

It may be a very hard case but that cannot affect the decision. It is much to be regretted that the fair and liberal offer of the appellant, Soper, was rejected.

The judgment of the Court of Appeal must be reversed and that of the Divisional Court restored.

The record must be remitted to the High Court with directions to carry on the account of mesne profits up to the time the appellant shall recover possession and to enforce payment of the same.

The appellant Soper and the defendants Fane and

Lavender must have their costs in all the courts below as well as in this court.

Appeal allowed with costs.

4 Kerr.

4 Bell.