151 A. 879 | Pa. | 1930
Lead Opinion
The trustees for the parties beneficially interested in a certain property, demised the same, on November 28, 1921, by a writing under seal, to the Realty Associates, Inc., for the period of 99 years. The lessee agreed to pay the taxes assessed, and a fixed rental for the first five years, at the expiration of which time, and at like *240 succeeding intervals, the amount should be determined by a revaluation of the premises. The right to assign or sublet was given, and the contract bound the lessee, its successors and assigns. On January 22, 1922, it did assign to an admittedly straw man, Samuel Gross, the entire term, reserving, however, for 21 years the payment of an annual sum of $7,500, in addition to the taxes and rent payable to the lessor, which the assignee covenanted to liquidate, and to this obligation also bound his representatives and assigns. To secure faithful performance, the original lease was deposited with the Greenfield Co., who were given entire charge of the property, with right to collect the rentals, paying, first, the lessors, second, the compensation for 21 years reserved by the Realty Associates, Inc., and the balance to the assignee or his assigns.
The transfer by the first lessee named was in terms an assignment, and not a sublease, and the writing is so designated in the statement of claim under consideration, and likewise defined in the affidavits of defense raising questions of law in the present case. Rentals fixed were paid the lessor until a revaluation was had, in which proceeding, it is averred, Greenfield Co., acting as agent for the defendants, undisclosed principals, took part, resulting in an increased annual charge. The sum agreed on was paid until 1928, when it was discovered that those having the beneficial enjoyment of the property were in default in satisfaction of taxes, whereupon demand was made of their representative for payment of the sums due. This obligation was not complied with, though the advancement of the rent accruing continued until May 13th of that year. Thereafter, this action of assumpsit was brought, against those having the use of the property, to recover overdue installments of rent, and for the amount of unpaid taxes as well. Affidavits of defense were filed raising questions of law, liability being denied on the ground that those named as defendants were undisclosed principals, as to whom *241 there was no privity of estate with plaintiff, and contending that the assignee named in the written agreement could alone be proceeded against. Approving this legal position, the court below entered judgment for defendants.
It is admitted that if the writing in question was a simple contract, though under seal, an action would lie against the undisclosed principals of the assignee (Lancaster v. Knickerbocker Ice Co.,
The statute of frauds has no application to the present situation, for it was only necessary that the owners of the reversion, those to be bound, should comply with its requirements to make the obligation an enforceable one: Carnegie Natural Gas Co. v. Phila. Co.,
We are not unmindful of the interpretations of the early-recognized rule that, where a demise under seal is in question, an action against an undisclosed principal does not lie, since the relation between the owner of the land and the one who occupies is of a purely legal character. *242
Many decisions upholding this proposition, some of which have been cited by appellee, are found in an annotation to 32 A.L.R. 162, of which the leading one, particularly relied on, is Borcherling v. Katz,
If the transaction had been in the form of a sublease, then the lessor could not maintain its action (Drake v. Lacoe,
We withhold our views of the controlling principles of law, since their application will depend on the facts found. It must be kept in mind that judgment was here entered summarily for want of a sufficient statement. If the agency on behalf of the undisclosed principals averred in the statement is proved, then an assumption of liability on their part may result. A mere statement of a conclusion that such relation exists is not enough: Price, Inc., v. Robbins,
The question is not therefore whether the statement of claim is so clear in both form and specification as to entitle plaintiffs to proceed to trial without amending it, but whether, upon the facts averred, it shows with certainty that the law will not permit a recovery by plaintiffs. If a doubt exists this should be resolved in favor of refusing to enter it: Davis v. Investment Land Co.,
The judgment is reversed with a procedendo.
Dissenting Opinion
Whether Gross be considered an assignee or a subtenant, I cannot agree that the court below erred in entering judgment for defendants on the record in this case. In the first place, the statement of claim contains no averment or recital of facts to show that defendants either had the actual use of the property in controversy or were entitled to its beneficial enjoyment. Plaintiffs satisfy themselves with the mere statement of their conclusion that "Gross, in accepting the assignment of the said lease and in executing the said articles of agreement dated January 26, 1922, acted as agent for defendants . . . . . . as undisclosed principals." Jules E. Mastbaum, the decedent of the first three defendants, like the last named defendant, Greenfield Co., was a real estate broker and agent; for all that appears in the present statement of claim, their connection with this property may have been merely as agents of someone else entitled to its beneficial enjoyment. While I find no averment in the statement of claim which indicates what Mastbaum's real relation to this property was, and the *245 averment as to Greenfield Co. would be entirely consistent with the performance of its duties as a real estate agent, yet my chief difficulty with the majority opinion is that, treating, as it does, Gross as a mere straw man, I cannot agree that his undisclosed principals may be held equally liable with him. The transactions here involved are not simple contracts, but writings, properly under seal, creating relationships which have to do with real property, a field in which straw men have long been used for the purpose of avoiding personal responsibility under the strict rules of law relating to ownership of that class of property.
In Coyle v. Dreyfous,
Read in the light of the Coyle Case and bearing in mind the trust relationship occupied by straw men, as there brought out, it seems to me that Hartley v. Phillips,
The effort of the law should always be to keep pace with the customs of the people, and this is particularly so in the realm of trade. Of recent years, the attempt has been to make the buying, selling and ownership of real estate as easy and uncomplicated as that of other classes of property; the right use of straw men facilitates this commendable end, and has been sanctioned by us. Owners who create long-term leases, as did the present plaintiffs, can readily protect themselves against the use, by their lessees and the latter's assignees, of irresponsible *246 straw men (though plaintiffs make no averment that Gross is such), in subsequent dealings with the demised property, by stipulating that no assignment or sublease shall be entered into without the written consent of the original lessor, a provision ordinarily found in real estate leases but significantly absent from the present instrument, which simply provides that the lessee may either assign the lease or sublet the premises, continuing personally liable to lessors, and that all subtenants or assignees shall, at the option of the lessors, likewise be liable to them. The general rule is that, where "a lessee takes a lease for an unnamed principal, but in his own name, [the law] will not render the unnamed principal liable for rent": 36 C. J. 370; see also cases from various jurisdictions, supporting this principle, cited in a note to 32 A.L.R. 164. Had the original lease in this case been made to Gross and if it were subsequently proved he was acting for an unnamed principal, the latter would not be liable to make payments under the covenants of the lease. It seems to me the same principle should apply here, if Gross be considered an assignee of the original lessee.
On the record before us, I think the court below properly held that, even if Gross be viewed as a straw man assignee, acting for defendants as undisclosed principals of some sort, there is nothing in the law which fixes these defendants with personal financial responsibility to plaintiffs; therefore I dissent from the contrary opinion expressed by the majority of this court, which in effect will greatly impede, if not abolish, the use, in real estate transactions, of straw men, a most serviceable institution, long recognized in our law.
Mr. Justice KEPHART joins in this dissent. *247