267 F. 90 | 2d Cir. | 1920
Lead Opinion
November 28, 1916, the Sanitary Company entered into a lease of its garbage plant and equipment of boats, tools, horses, mules, wagons, etc., at Barron Island; Kings county, N. Y., to the Metropolitan By-Products Company, Incorporated, for a term of two years from January 1, 1917, for an aggregate rent of $500,000; $62,500 payable quarterly in advance on the 1st days of January, April, July, and October. The material provisions are:
“Third. The lessee agrees to keep all buildings, machinery, boats, and other appliances, including all personal property leased hereunder, in good and proper condition during the continuance of this lease, and further to properly feed, care for, and protect the animals covered by this lease. All to the end that at the termination of this lease, whether by expiration of the term thereof or otherwise, the plant, its equipment, and all other personal property herein referred to shall be returned to the lessor in good efficient working condition, considering the general character of the plant and the work to be carried on therein under said contract, reasonable wear and tear excepted.
“Seventh. The lessee further agrees that, if default be made in any of the covenants and agreements herein contained, this said hiring and relation of landlord and tenant, shall wholly cease and determine; and the lessor shall and may, by summary proceedings or otherwise, re-enter said premises and remove all persons therefrom, and retake possession of any and all personal property leased hereunder, and the lessee hereby waives any notice in writing of intention to re-enter or to institute summary proceedings: Provided, however, that such termination and re-entering or institution and carrying on to completion of summary proceedings for the recovery of the possession of llio property shall not absolve the lessee from liability for damages resulting from*92 such default nor from liability for payments to be made under this lease to the date of termination thereof, nor from liabilities then accrued and whether then payable or payable in the future, with the same effect as if the said lease had not been terminated: And provided, further, that anything herein to the contrary notwithstanding, the lessor shall not be entitled to enter said premises for any breach of covenant or condition nor to institute summary proceedings for the recovery of the said'property, except the covenant to pay rent, water rates, and taxes, without first having given the lessee 60 days’ notice of the alleged breach of covenant or condition and an opportunity of making good such breach within said period of 60 days: And provided, further, that in ease the lessee shall be advised that any rule, order, ordinance, or regulation in respect of the leased plant and equipment or the management thereof shall be invalid or unenforceable and shall contest the same in the courts, the lessee shall not be in default hereunder for its failure to comply with the contested rule, order, ordinance, or regulation until a final determination of the courts upholding the same and after the expiration of a reasonable time thereafter for compliance therewith: And provided, further, that the said lessee shall duly notify in writing the lessor of its intention to contest such rule, order, ordinance or regulation..
“Twelfth. If in the discretion of the lessee it sees fit to discontinue at any time prior to the 31st day of December, 1916, the use of the property leased hereunder, or any substantial portion thereof, in the reduction and final disposition of the said garbage of the boroughs of Manhattan, the Bronx, and Brooklyn, the lessee shall have the option either of maintaining, protecting and keeping in good and proper condition at its own expense the property leased hereunder in accordance with the provisions herein, or of paying to the lessor, when the rental installment payments provided for herein are paid, sums'pro rata to the aggregate sum of ten thousand dollars ($10,000) for the unexpired' term of the lease and thereafter be relieved and discharged from any further obligations to maintain, protect, and keep in good and proper condition the said property pursuant to the requirements herein, or such portion thereof as to which the said use may have been discontinued; it being understood and agreed, howevez-, that nothing in this paragraph herein contained shall relieve the lessee from any of its obligations as set forth in paragraph third hereof up to and until such time as there shall be'any discontinuance of the use of the property leased hereunder as provided for in this paragraph.
“Thirteenth. Inasmuch as it is contemplated that the leased property herein-above described will be taken over at midnight on the 31st day of December, 1916, as a going concern and as the said plant is now being operated by the New York Disposal Company, a New York corporation, under an agreement with the city of New York to dispose of the garbage of the boroughs of Manhattan, the Bronx, and Brooklyn, an adjustment will be made between the lessor or the New York Disposal Company and the lessee in respect of all supplies on hand, such as coal, oil, naptha, and other supplies, which are consumed in the operation of said plant. The lessee is to pay the lessor or the New York Disposal Company the value of such materials at the time they are taken over, and the said New York Disposal Company is also to be given a reasonable opportunity to store and dispose of all finished products which may be on hand at said plant when this lease shall go into effect; but in any event the lessor shall cause all storage products to be removed fast enough to make room for the lessee’s products as manufactured. The lessee is to have a similar privilege and there is to be a similar adjustment between the lessor and the lessee upon the expiration of this lease.”
On the same day the Metropolitan Company executed a bond to the Sanitaiy Company in the sum of $200,000 for the faithful performance by it of the covenants of the lease, and also an agreement .reciting that it had deposited with the Central Trust Company the sum of $200,000 to be invested in securities as collateral for collection by the Sanitary
November 19, the American Engineering Company filed a creditors’ bill alleging that the Metropolitan Company, though solvent, was unable to meet current obligations, and praying for the appointment of receivers. The Metropolitan Company filed an answer, admitting all the allegations of the bill, and was put into the hands of receivers in order to keep it a going concern until its debts were paid; the decree enjoining all persons from bringing any proceedings at law or in equity, or from continuing any pending suits against the company, until after application to the court. The same day the receivers took possession of the plant and continued in possession, paying rent to March 31, 1918, when they were ordered by the court to return the premises to the Sanitary Company. The Sanitary Company re-entered thereafter. February 10, 1919, the Sanitary Company filed proofs of claim with the special master as follows:
First. The sum of 8187,500 for rent, payable in advance in three several installments, of $62,500, on the 1st day of April, 1918, on the 1st day of July, 1918, and on the 1st day of October, 1918, together with interest at the rate of 6 per cent, per annum on said several installments from the dates when they respectively became due.
Second. The sum of 810,000, in three installments of §3,333.37 each on April 1, 1918, July 1, 1918, and October 1, 1918, with interest at the rate of 6 per cent, per annum, pursuant to article 12 of the lease.
Third. The sum of $56,556.81 as the purchase price of materials and supplies left on hand on December 81,1916, by the outgoing tenant, and purchased by the Metropolitan Company under article 13.
Fourth. The sum of §200,000 as damages for the breach of the covenant to return the property in “good, efficient, working condition” under article 3 of the lease.
The District Judge confirmed the report of the special master without opinion.
If is important to discriminate throughout between the rights of the Metropolitan Company and of the receivers of the Metropolitan Company, respectively. The special master held that the Sanitary Company’s first claim against the $200,000 fund for rent was good up to October 5, 1918, because, though in possession of the property at least on April 2, it was not using the same for its own benefit until it entered into negotiations with the city of New York for use of the plant. The bond contained the following condition:
“Provided, however, that this obligation is executed upon the express condition that no suit, action, or proceeding at law or in equity shall be had or maintained hereunder or hereon, unless the same be commenced and process served within three months after any claim or cause of action arises to the obligee hereunder or hereon, and in no event later than three months after the termination or other expiration of this lease.”
The only inference we can draw from the conduct of the parties is that the Sanitary Company availed itself of its option to re-enter and exclude the tenant for nonpayment of rent and therehy terminated the lease. This must also have been the understanding of the Metropolitan Company, the tenant, because it ma.de no objection whatever to the Sanitary Company’s re-entry, nor any demand for possession of the premises, nor any tender of rent. Thereafter no rent was due, but only a right upon the part of the Sanitary Company to recover damages as provided in article 7. No damages have been'proved. If the abandonment of the premises by the Metropolitan Company and the re-entry by the Sanitary Company are to be regarded as a surrender and acceptance, the legal consequences are exactly the same.
Rents have been made apportionable between several persons claiming through the landlord (section 2674, New York Code of Civil Procedure), but the tenant remains liable for the whole of it. Moreover, there is ground for saying that the quarter’s rent due April 1 in advance falls within thé provision of .article 7:
“Provided, however, that such termination and re-entry * * * shall not absolve the lessee * * * from liabilities then accrued and whether then payable or payable in the future.”
A controversy between the Sanitary Company and the outgoing tenant as to what repairs and replacements should be made by it having
“On the termination of this lease, whether by expiration of the term or otherwise, the lessee shall return to the lessor all the property leased hereunder as the same may be altered or improved in as good condition as when the same was received by the lessee, reasonable wear and tear excepted.” >-
The Special Master was right in disallowing this claim.
The only assignment of error as to priority argued before us is that of the Title Guarantee & Trust Company, trustee of the first mortgage of the Metropolitan Company, that its lien is superior to the lien of the second mortgage to the' Columbia Trust Company, as trustee upon the interest of the Metropolitan Company in the $200,000 fund after payment of the Sanitary Company’s claim. The special master so held, but as these mortgages do not appear in the record we do not dispose of the question, but simply direct that any claim of the Sanitary Company that has been allowed be first, paid out of the fund, making no disposition of the balance.
The decree is reversed, and the court below directed to enter a decree in conformity with this opinion.
Rehearing
On Petition for Rehearing
The special master held that the provisions of article 7 were intended for the benefit of the landlord and might be waived, and that the Sanitary Company had not availed themselves of it. He found that the company had accepted a surrender of the lease by entering into negotiations with the city of New York for a lease of the property in October, 1918. We have held, on the contrary, that there never was any surrender and acceptance of the lease, and that the only inference from the conduct of the parties was that the Sanitary Company re-entered peaceably, in accordance with the provisions of article 7, for nonpayment of rent April 2, 1918, and so terminated the lease and all obligation to pay rent thereunder.
The petition is denied.