193 N.E. 164 | NY | 1934
Plaintiff leased real property to Truly Warner, Inc., which assigned the lease to Truly Warner Co., Inc. A portion of the premises has been sublet by the first lessee to defendant-appellant. The assignee-lessee of the lease on July 16, 1933, and during the term of the lease, was adjudicated a voluntary bankrupt. This action is for rent for the months of August-November prior to the disaffirmance of the lease by the receiver and trustee in bankruptcy. The lease contains certain covenants by the lessee as part consideration for the letting. After them follows these words: "that an adjudication that the lessee is bankrupt shall ipso facto *334 end and terminate this lease, and any rights thereunder." The lease contains a further provision which reads as follows: "The lessor at its option may rescind and terminate this agreement upon * * * the breach of any of its conditions, or any of the covenants or agreements of said lessee."
The Special Term held that a conditional limitation was created by the bankruptcy clause above cited and that the bankruptcyipso facto, i.e., by the mere fact itself, terminated the lease.
The Appellate Division held that the clause meant only that an adjudication that the lessee is bankrupt shall of itself be sufficient cause for the lessor to exercise an option to terminate the lease; that the lessee could not take advantage of the clause to terminate the lease.
The question of proper construction is not free from doubt. L. HAND, Circuit Judge, in Matter of Outfitters' Operating RealtyCo. (
In Schneider v. Springmann (
Cogent as such reasoning may be, bankruptcy of the tenant may be made a special limitation upon the term of a lease. The question must be determined by the language of the lease. As LEHMAN, J., said in Janes v. Paddell (
It is easy for the draughtsman of a lease to provide that an adjudication in voluntary bankruptcy shall terminate the lease only if the landlord shall so elect. That is not the language of the lease before us. By a process of judicial construction plain words — "ipso facto end and terminate" — are made to read as if they were a lessor's covenant merely. We are constrained to accept the construction of the trial justice and say that the clause under consideration is a conditional limitation by reason of which the lease expired upon an adjudication that the lessee is bankrupt. Bankruptcy constitutes a breach of the lease. It thereupon ends and terminates, ipso facto.
The judgment of the Appellate Division should be reversed and that of Trial Term affirmed, with costs in this court and in the Appellate Division.
LEHMAN, O'BRIEN and HUBBS, JJ., concur; CRANE, CROUCH and LOUGHRAN, JJ., dissent.
Judgment accordingly. *336