214 F. 867 | D.N.J. | 1914
This matter is before the court on an intervening petition filed in the bankruptcy proceedings. The petitioners, Jacob Konner and Gustav Mikola, pray that certain premises, belonging to them and leased to the alleged bankrupts, be ordered surrendered, because of alleged breaches of a covenant in the lease. The original lease, which is dated the 9th of August, 1911, contains the following provision:
“That if the lessees shall at any time during the term hereby demised become insolvent, or if proceedings in bankruptcy shall be instituted by or against the lessees, or if the lessees shall- compound the lessees’ debts or assign over the lessees’ estate or effects for payment thereof, or if any execution or attachment shall issue against the lessees, or any of the lessees or any of the lessees’ effects whatsoever, whereupon the said demised premises shall be taken or attempted to be taken, or if a receiver or trustee shall be appointed of the lessees’ property or if this lease shall, by operation of law, devolve upon or pass to any person or persons other than the said lessees, then, and in each of said cases, it shall and may be lawful for the lessors at the lessors’ election, into and upon the said demised premises or property, or any part thereof, in the name of the whole, to enter and the same to have, hold, possess and enjoy, as of the lessors’ former estate discharged from these presents and the demise intended to be hereby made as aforesaid, anything herein contained to the contrary thereof in any wise notwithstanding.”
Subsequently, by an instrument dated the 20th of August, 1912, the landlords consented that the lessees might sublet the premises “subject to all of the covenants and provisions of the said lease” (the original lease). Thereupon the lessees (the alleged bankrupts), by an instrument dated the 21st day of August, 1912, sublet the premises for the balance of the term of the original lease to- the respondent, Samuel Feinstein, who shortly thereafter entered, and has since continued in possession of the same. The sublease contained the same provisions as the original lease, and the same rent was reserved. It is entirely clear from the evidence that the landlords knew, before they consented to the sublease, who the subtenant was to be, and that they approved of him and of the purpose for which he was to use the premises. On the 20th of December, 1913, an involuntary petition in bankruptcy was filed against the original lessees, and a receiver was appointed. Almost immediately thereafter the landlords filed the petition, upon which these proceedings are based. In it they expressed their election to reenter the premises because of two alleged breaches of the covenant. They pray:
“That an order may be made authorizing and directing the said-, as receiver in bankruptcy of the said bankrupts, and the said alleged bankrupts, and the said Samuel Feinstein, trading as the Hudson Cloak & Suit Store, to surrender up the demised premises.”
“The court had possession of the property and jurisdiction to hear and determine the interests of those claiming a lien therein or ownership thereof "
The case, therefore, may be considered on the- merits. Two breaches of the covenant in question are alleged, by virtue of either of which,. it is urged, the leasehold has, upon the election of the landlords, become, forfeited, namely: (1) That proceedings in bankruptcy have been instituted against the lessees; and (2) that a receiver has been appointed.
It was said by Mr. Justice Brewer in Hurley v. Atchison, Topeka & Santa Fé R. R., 213 U. S. 132, 29 Sup. Ct. 468, 53 D. Ed. 729 (quoting from In re Chase, 124 Fed. 753, 59 C. C. A. 629):
“Bankruptcy proceeds on equitable principles so broad that it will order a repayment when such principles require it, notwithstanding .* * * the trustee may have received the fund without such compulsion or protest as is ordinarily required for recovery in the courts either of common law or chancery.”
I cannot perceive why any different rule should be applied to persons other than the trustee.
In Re Chambers, Calder & Co. (D. C.) 98 Fed. 865, a proceeding in ejectment to recover possession of leased premises was enjoined, although there was a strict legal right in the landlords to re-enter. Judge Brown, in the course of his opinion, said:
“The jurisdiction of this court having attached to the exclusion of jurisdiction at law, the right of the landlord can be enforced only upon equitable terms.”
I think the clear effect of these decisions is that the bankruptcy court may dispose of matters which come before it, upon equitable
It is a fundamental principle of equity that it will not lend its aid to the enforcement of a forfeiture where it would be equitable or harsh to do so. Pomeroy’s Equity Juris. (3d Ed.) § 409; Brewster v. Lanyon Zinc Co., 140 Fed. 801, 819, 72 C. C. A. 213. In that case Mr. Justice Van Devanter (then a Circuit Judge) exhaustively examines and discusses the authorities in the federal courts and elsewhere. He states the correct rule to be:
“That in cases, otherwise properly cognizable in equity, there is no insuperable objection to the enforcement of a forfeiture when that is more consonant with the principles of right, justice, and morality than to withhold equitable relief.”
The present application does not conform in any degree to this standard, but, on the other hand, the granting of the relief prayed for would be inequitable and harsh. The enforcement of the forfeiture would cast an undue hardship upon the respondent Feinstein. If there has been a breach of the covenant, it is one which in no way has injured or can injure the landlords. They are in exactly the same position as they would have been had there been no breach. The premises are occupied by a tenant who was acceptable to them, and who is carrying on a business, the nature of which they expressly consented to. No question of the financial ability of the subtenant to continue to pay the rent appears. In fact, he has offered to give satisfactory security. The title to the leasehold estate has never passed from the original lessees, and the bankruptcy proceedings are virtually at an end. The only conceivable benefit which a forfeiture would confer upon the •landlords is that they might, if relieved of the present tenants, be able to lease their premises at a larger rental. But such a consideration should not commend itself to a court of equity.
I feel, therefore, that the matter is one that calls for the application of equitable principles, and a denial of the relief prayed for.
The rule to show cause will therefore be discharged, and the prayer of the petition denied, with costs to the respondent, Feinstein.