Clough v. Cook

10 Del. Ch. 175 | New York Court of Chancery | 1913

The Chancellor.

As the case is heard on the motion for a decree in favor of the complainant notwithstanding the answer, which motion has the effect of a general demurrer, the allegations of the answer are admitted to be true, and so are the allegations of the bill not denied by the answer.

From the facts alleged to support the allegations of fraud and misrepresentation by Clough towards Graham, it is not at all clear that the charges are sustained. But assuming as true that the facts show such fraud and misrepresentation, Cook was not deceived or injured thereby, for he knew all the facts stated in his answer before buying the building, and according to the defendant’s interpretation of the facts, bought at a smaller price by reason of the existence of the lease. In general, fraud can be taken advantage of only by the person deceived.

It is fundamental that a misrepresentation as to a fact, tó be a defense to a suit for specific performance, must have been relied on by the person to whom it was made; and it necessarily follows that it cannot be used as a defense by one who bought the property with knowledge of the misrepresentations respecting it, and who could not, therefore, possibly have relied on the misrepresentations.

“The general rule that a misrepresentation must be relied upon by the party receiving it, in order that it may be sufficient ground for impeaching or defeating a contract, extends to the assignment of an agreement which, as between the original parties, is affected by a misrepresentation. If a contract between A. and B., voidable at the instance of B. on account of A.’s misrepresentations made to him in procuring it, is assigned by B. to a third person, C., who is in no such relations with the original parties that he is affected by the fraud, and to whom no false statements are made in obtaining the transfer, the agreement thus assigned, if otherwise binding upon him, would be valid against C.; at least its enforcement against him would not be hindered by A.’s original misrepresentations, since he had not acted upon their faith and credit.” 2 Pomeroy’s Equity Jurisprudence (3d Ed.) 899; See also Tyson v. Ranney, 89 Wis. 518, 61 N. W. 563, 62 N. W. 931; Lawrence v. Montgomery, 37 Cal. 183.

But is the lease so unfair in its terms as to be oppressive or unconscionable, so that a court of equity will not lend its aid to its enforcement? It is discretionary in the court to withhold its aid to assist one in enforcing his legal rights if it ■' be unfair to help him. In such case the court simply keeps its hands off. Godwin v. Collins, 3 Del. Ch. 189, 201. The only possible elements of unfairness are the perpetual renewability of the lease and the amount of rent. The lease is renewable perpetually at the option of the lessee, and is in fact worse than a perpetual lease, which would require the consent of the lessor for its termination, while the lease in question is terminable by the lessee only. But such a lease is not necessarily so unfair as to shock the conscience of the Chancellor, even if Graham were objecting to an enforcement of it, and beyond question Cook’s objection to it does not have weight because he knew all about the lease when he bought the demised premises.

It is alleged, however, that the rent was “nominal.” But that allegation requires facts to sustain it, and the facts do not so show, but rather the contrary. No allegation is made as to what would be the fair rental value. On the contrary, the allegations of the answer were that the original agreement between Graham and Clough was for $300 rent, while the lease calls for $200. Such disparity does not make the present rent “nominal.” But assuming that $200 is only a nominal rent, the defendant bought with knowledge of that fact. However viewed, there is no merit in equity in the contentions of the defendant. If he made a bad bargain he did it with his eyes open, and it is not so bad a bargain as to shock the court’s sense of fair play.

A court of chancery has jurisdiction to decree specific performance of an agreement to renew a lease. 2 Story’s Equity Jurisprudence, § §722, 729; 2 Tiffany on Landlord & Tenant, 1552, and cases cited; Furnival v. Crew, 3 Atk. 83, 87; Mathes v. Wier, ante p. 63, 84 Atl. 878.

It is probably correct to say that the complainant, by remaining in possession of the premises under the lease and the right to have a renewal of it, holds the term completely and does not need a decree for specific performance. In some cases it was held that a covenant to renew is in effect an agreement to extend the lease, and that no new lease is necessary. 2 Tiffany on Landlord & Tenant, p. 1516. But the reasoning as to the meaning of the word “renew,” as distinguished from “extend,” referred to in Kollock v. Scribner, 98 Wis. 104, 73 N. W. 777, seems more satisfactory and to justify the lessee in requiring a new lease. Still, however this may be, the right to specific performance of a covenant to renew is generally enforced by courts of equity.

In Tritton v. Foote, 2 Bro. C. C. 636, s. c., 2 Cox 171, Lord Thurlow, Chancellor, decreed specific performance of a covenant in a lease to renew under the same covenants exclusive of the covenant of renewal. There is some question whether this is correct. See note to the above case in 29 Eng. Rep. Reprint 353. But however that may be, the lessee is necessarily entitled to have the same kind of a lease, even if it makes it perpetually renewable from year to year, for such was clearly so stated in legal effect in the lease. So also the contract will be enforced against a grantee of the lessor who took title with notice of the lease and its agreement for. renewal. 3 Pomeroy’s Equity Jurisprudence, §1405, note 2; Haughwout v. Murphy, 22 N. J. Eq. 531, 547. In the latter case the court said:

“If the vendor should again sell the estate of which, by reason of the first contract, he is only seized in trust, he will be considered as selling it for the benefit of the person for whom, by the first contract, he became trustee, and therefore liable to account. * * * Or the second purchaser, if he have notice at the time of the purchase of the previous contract, will be compelled to convey the property to the first purchaser.”

It is unnecessary to determine in this case whether a court of equity can enjoin a landlord from proceeding before a justice of the peace against his tenant as a holding over tenant, to recover possession of the demised- premises (a question raised but not decided, in Marvel v. Ortlip, 3 Del. Ch. 9); for the court had taken jurisdiction of the cause before such a proceeding was taken' by the defendant against the complainant; and will retain jurisdiction notwithstanding such proceeding to try the right of the complainant to possession under the lease. As the complainant, before that proceeding, was, under his bill theretofore filed, entitled to an equitable remedy of specific performance of an agreement for a lease, this court is not prevented from proceeding to grant such relief because the defendant, the landlord, has brought an action before the justice of the peace to obtain possession from the tenant and the tenant has a valid defense in that action.

While it is discretionary in the Chancellor to refuse a decree for the complainant on a motion such as was made in this case under the rule, and to allow the case to proceed, yet as the admissions in the defendant’s answer are decisive and their effect cannot be changed by any amendment, there is nothing to be gained by a prolongation of the litigation, and a final decree will be entered now. The complainant may have a decree declaring that he is entitled to a renewal of the lease in question, according to the terms thereof, and requiring the defendant, Cook, to execute, acknowledge and deliver to the complainant the draft of a lease heretofore tendered by the complainant to the defendant, being Exhibit C attached to the original bill, or a similarly drafted lease; and also a decree perpetually restraining the defendant from further prosecuting the proceeding heretofore taken before the justice of the peace against the complainant as a holding over tenant. The costs of the cause will be taxed against the defendant.