Cincinnati-Louisville Theater Co. v. Masonic Widows' & Orphans' Home & Infirmary

272 F. 637 | 6th Cir. | 1921

DENISON, Circuit Judge

(after stating the facts as above). There are three substantial contentions made by the plaintiff in error: The first is that the right to cancel did not pass to the lessor’s grantee, but was personal to the lessor; the second is that the covenant for cancellation, if broken, only gave rise to an action for damages; the third is the contract with Flexner was not the “bona fide sale” which would justify cancellation.

[1] 1. Does the covenant for cancellation run with the land so as to avail the lessor’s grantees ? It does not seem very material whether the statute of 32 'Hen. VIII, c. 34, forms a part of the law of Kentucky by virtue of the Kentucky statute of 1792, which adopted all existing laws of Virginia, and the Virginia statute of 1776 (9 Hening’s St. at Large p. 127), which adopted all'the appropriate English common law and statutes in force in 1607. Adams v. Clark, 189 Ky. 279, 282, 224 S. W. 1046. The statute, in spite of its general terms, does not reach merely personal covenants, and it was not necessary as to those which at common law ran with the land. The question how a covenant should be classified is in every case 'a question dependent on the intent to be inferred from the language of the instrument with the aid of settled rules of construction, and this covenant is clearly, in our judgment, of the class which has no invariable character, but is to be judged by its attendant circumstances.

[2] There are provisions in this same leasing contract which strongly imply a dependence upon the personality of the original party to the contracts, as, for example, the agreement not to use the theater for performances objectionable to the lessor, and the agreement to let the lessor use it a certain number of days in the year for Masonic meetings ; but it does not follow that all the provisions have this character. We see no reason for assuming any intent that the right of cancellation is exhausted whenever one conveyance of the fee has been made. An outstanding lease is an incumbrance. Every time the question of sale successively arises, the proposed purchaser may buy or not according as he ma.y or may not be able to get possession; the provision that, in that event, the lease may be canceled upon the payment of-an agreed consideration is one in derogation of that restraint of alienation which is created by the lease, and therefore operates in aid of free alienation; the first purchaser and each successive purchaser may very likely be induced to buy by the provision that, whenever he decides to sell, he can free himself from the lease. The cancellation clause is in substance an agreement by the lessee that he will sell his leasehold rights at any time during the possible ten-year period, and for a sliding scale price, carefully and fairly fixed according to the extent of the term which he is selling. A construction which would destroy this contract of sale as soon as there had been one transfer of the fee would be unnatural, and could be justified only by plain words. It is quite apparent that personal confidence is not reposed in the original lessor on this subject, because, if it should come to a sale of the fee, the cancellation of the lease would not depend upon tlje lessor’s wishes, hut upon those of his vendee, and who this might be the lessee could have no idea. We have no doubt that this covenant was one of which any grantee, succeeding to the title of the lessor, could take advantage, and there is substantial authority to that effect. Hadley v. Bernero, 97 Mo. App. 314, 322, 71 S. W. 451; Roberts v. McPherson, 62 N. J. Law, 165, 40 Atl. 630; McClung v. McPhersop, 47 Or. 73, 81, 81 Pac. 567, 82 Pac. 13; Bambord v. Hayley, 12 East, 464, 468.

We find no case in Kentucky precisely in point, but our conclusion is inferentially supported by Ventura Co. v. Pabst Co. (Ky.) 109 S. W. 354. A generally contrary conclusion is reached in McClintock v. Loveless, 5 Pa. Dist. R. 417, and in Bruder v. Crafts Co., 79 Misc. Rep. 88, 139 N. Y. Supp. 307. In each of these cases, the right of the landlord to cancel was arbitrary. In the McClintock Case, he could cancel at his pleasure and without paying anything; in the Binder Case, he could cancel if he made a sale, but he paid nothing except to return one month’s rent. In the present case, if he cancels, he must repay the agreed value of the unexpired term, running from $10,000, for the longest cancellation, down to $2,000, for the shortest period. It is plain that we may well draw an inference of personal confidence in the existing landlord, when we find him given the power of canceling without paying for the privilege, which we could not draw in a case where the landlord exercising the privilege is required to pay a substantial sum; and these two cases could well be distinguished for this reason, even if they should not be regarded running counter to the prevailing rule.

[3] 2. Did the covenant contemplate money damages only? We have thought it the proper inference from the facts of such a situation that the intent was to m,ake sure that a purchaser who wanted immediate possession could get it; and, plainly, mere money damages would not satisfy this theory of intent. It seems clear to us that the covenant must be construed as a contingent limitation of the term. In Dennison v. Read, 3 Dana (Ky.) 586, as in the other Kentucky cases cited to the same effect, the holding that the covenants were not such that a breach would limit the term was because no right of re-entry was given; but, where the covenant expressly provides for the ending of the term, no provision for re-entry is now necessary. The Kentucky forcible detainer statute supplies its place. Section 2295, Ky. St.; section 452, subd. 3, Civ. Code Ky.

[4] 3. Was the Flexner contract a “bona fide sale”? It is contended that the contract was no more than an option given to Flexner, and that, if this dispossession proceeding is successful, Flexner may then forfeit his deposit and go free. It is not to be doubted that, if the contract is of this character, it does not constitute such a sale as the cancellation clause contemplated. On the other side, it is contended that the deposit of the forfeit check was only by way of security, and that,, whenever the Home becomes assured of getting free of the lease, it is entitled to specific performance against Flexner. The express provision that the vendee in a land contract will pay damages, if he does not keep his bargain, is only an express statement of what the law.implies;. and it could only be in a clear case of intent to give the vendee the choice between paying damages and taking of property that specific performance would be denied. Kettering v. Eastlack, 130 Iowa, 498, 107 N. W. 177, 8 Ann. Cas. 357.

[5] We do not think it necessary to follow the opposing views of counsel in their discussion of authorities as to this matter of construction, and we assume — only for the purposes of -the opinion — that the contract should be classified as an option given'to Flexner; but that assumption will not help the Theater Company. If Flexner originally had an option either to take the property or to refuse, he has exercised it by his conduct in this proceeding. Indeed, it is difficult to see how the provisions of the contract which require him to proceed at his expense to get possession could be reconciled with any supposed intent that he could choose between taking the property and rejecting it. However that might be, he has followed out the contract on this subject. He has joined with the Home, as plaintiff, in bringing this dispossession action, and he has joined in conducting these proceedings— in the court below and in this court — and, presumptively, has controlled them. Surely this course of conduct is inconsistent with any reserved right to abandon the property, thereby upsetting everything that he has done and is doing. The facts present the typical case of election between inconsistent remedies. No court would permit him, in an action brought against him under the contract, to stultify himself by saying that he was not bound to take the property. The theory that he is bound, and that, because he is bound, there has been a bona fide sale, lies at the basis of this dispossession proceeding, and that theory Flex-ner has been and is propounding as the basis of relief which he joins in seeking. We have no hesitation in holding that, whatever the original obligation of Flexner may have been, he became at once, on beginning and prosecuting this proceeding, absolutely bound to take the property and pay for it, and cannot deny his liability to specific performance.

Nor do we think the provision of the contract, that Flexner’s ultimate liability should be contingent on his getting possession, gave the contract any character inconsistent with that of sale. It was a natural and reasonable provision. No purchaser who wanted possession would buy, excepting under some such arrangement, and to permit the Theater Company to say that it need not give possession unless there is a sale, and that there is no sale because it will not give possession, is to defeat the purpose of the contract.

4. The final order of the court below was that the writ of possession issue upon the payment into court of $8,000 for the use and benefit of the Theater Company, “if it shall finally be adjudged to be entitled thereto.” The Theater Company asks that this direction for payment should be made absolute, leaving nothing open for litigation. The plaintiff tendered this sum and the tender should be kept good. No uncertainty as to the payment of this money to the Theater Company should remain. The order should be that if, within some short time to be fixed by the court, this sum of money be paid into court for the use and benefit of the Theater Company, the writ of possession issue, and the money be paid over to the Theater Company, and that, in default of such payment within the time fixed as limited or as extended, the proceeding be dismissed. The final order below is vacated, but only for the purpose of being rtí-entered as modified in the particular specified.

Since there is nothing to indicate any serious danger of prejudice to the Theater Company by the form of the order as entered below, the costs of this court will be awarded as if on affirmance.