159 N.Y.S. 54 | N.Y. App. Div. | 1916
Lead Opinion
The facts material to this appeal are as follows: The plaintiffs by two prior leases had let the premises to the Plaza Bank for terms of ten and six years respectively, each of which contained a clause requiring the tenants to pay taxes similar to the one contained in the lease in suit, by virtue of which the annual taxes imposed upon the premises for the years from 1893 to 1908, inclusive, were paid by the tenant. On the expiration of the second of these leases, the Plaza Bank, as tenant, entered into possession of the premises, under a lease with the plaintiffs for a term of five years, commencing on the 1st day of May, 1909, at noon, and ending on the 1st day of May, 1914, at noon, at a rent therein reserved payable as therein provided, which lease contained a covenant, which so far as material to the present controversy read as follows: “Provided always, and the lessee hereby covenants to pay said rent punctually, and to pay and discharge all annual taxes as shall during said term be imposed on said' premises hereby demised, as soon as they become due and payable, * * * and to keep said demised premises free, clear, discharged and unencumbered from all such taxes * * * during said term, * *
In pursuance of said covenants the taxes for the years 1909, 1910 and 1911 were paid by said Plaza Bank. On December 22,1911, the Plaza Bank merged under the Banking Law with the Union Trust Company of New York, the defendant herein, which continued in possession under said lease until May 1,1914, at noon, and paid the rent thereunder and also paid the taxes for the years 1912 and 1913. Thus during the five years’ term of the lease five annual taxes were paid‘by the tenant.
On the assessment rolls for the year 1914 there appeared a tax amounting to $10,235 against the premises. The assessment rolls of the city of New York for the year 1914 were deliw ered to the receiver of taxes of the city of New York by the president of the board of aldermen of said city on the 27th day March, 1914, together with the warrant for the collection of the taxes therein specified, signed by the said president and countersigned by the city clerk. The defendant refused to pay any part of the taxes for the year 1914, and after such refusal
At the time the lease in suit was executed, and for fifty or more years prior thereto, the assessment rolls of the city of New York had been delivered to the receiver of taxes of said city, with the warrant for the collection of the taxes therein specified, on or about the fifteenth day of September, and the taxes were payable on the first Monday of October in each year. (See Greater N. Y. Charter [Laws of 1901, chap. 466], § 911; Id. § 914, as amd. by Laws of 1908, chap. 447.) This continued to be the method of levying and collecting the annual taxes until the year 1912. In 1911 (Laws of 1911, chap. 455) the several sections of the Greater New York charter were amended so that the assessment rolls were required to be delivered to the receiver of taxes, together with the warrant for the collection thereof, on or before the twenty-eighth day of March (§ 911), and it was further provided (§ 914) that “ one-half of all taxes upon real estate shall be due and payable on the first day of May and the remaining and final one-half of taxes on real estate shall be due and payable on the first day of November. All taxes shall be and become liens on the real estate affected thereby on the respective days when they become due and payable as hereinbefore provided, and shall remain such liens until paid.”
The appellants contend that the taxes for the year 1914 were imposed on these premises on the 27th day of March, 1914, and as that was during the term of the lease, the tenant, under and by virtue of the covenant hereinbefore set forth, was bound to pay and discharge the taxes for that year. The respondent contends that for the five years’ term of the lease it has paid five annual taxes, which fulfills the terms of the lease according to the intent of the parties, and that it would be a hardship on the tenant to require it to pay six years’ taxes, and asked the Special Term if it should hold otherwise to reform the lease.
There is no ground for a reformation of the lease. There was no mistake or fraud that led to the incorporation of this covenant in the lease, A similar covenant had been in the
There can be no question as to the intention of the parties at the time the lease was executed, and that was, that the annual tax for each year of the term was to be paid by the tenant. This tax had been assessed and was payable in the fall of each year. Under the first two leases, during the sixteen years of their terms, sixteen annual taxes had been paid by the tenant, and it was the expectation of both parties that during the five years of the lease, in the instant case, five annual taxes would be assessed in September and paid in October of each year. Neither party to the lease had any reason to anticipate that the law in regard to the time of assessment and payment of .taxes in New York city, which had been fixed for more than fifty years, would be changed within the terms of the lease. When parties enter into a contract they are presumed to have in mind all the existing laws relating thereto or to the subject-matter thereof. These laws enter into the contract and define and determine it. “ The law of the contract forms its obligation; and if so, the contract is fulfilled and its obligation discharged by complying with whatever the existing law required.” (Ogden v. Saunders, 12 Wheat. 257, 302.) It is because the existing laws enter into and become part óf the contract and form its obligation that it has been held that these laws cannot be changed by any State so that the obligation of the contract is impaired under the prohibition of the Federal Constitution. (U. S. Const, art. 1, § 10, subd. 1. See Edwards v. Kearzey, 96 U. S. 595, and cases cited.) “ One of the tests that a contract has been impaired is that its value has by legislation been diminished. It is not, by the Constitution, to be impaired at all. This is not a question of degree or manner or cause, but of encroaching in any respect on its obligation "* * *. ” (Planters’ Bank v. Sharp, 6 How. [U. S.] 301, 327.) Of course I do not mean to
Chief Justice Jeremiah S. Black speaks of the interference of the Legislature, after the making of a contract, as an
If the removal of a structure, the maintenance of which was contrary to existing law, was not within the covenant, because of the long-continued custom and usage of the municipal authorities to permit such structures, and a possibility of a change of their custom was not within the contemplation, certainly a change by amendment to the existing law advancing the date for the payment of taxes could not be within the covenant in the instant case. In my opinion, therefore, the obligation of the covenant in the lease was satisfied by the tenant paying the five annual taxes assessed during the term, and the tax for the sixth year, by reason of the change in the time of assessing the taxes made by the Legislature subsequent to the making of the lease, did not impose an additional burden upon the tenant. In the case of Ayer v. Bonwit (161 App. Div. 122) a similar result was reached, but the reason given for the decision was based upon language in the lease materially different from that in the instant case. The case of Ogden v. Getty (100 App. Div. 430) is clearly distinguishable from the case at bar. In that case there was no question of a change of law, but merely the enforcement of a covenant in accordance with the law as it existed at the time of the entering into the lease, which was the same at its termination.
We are not concluded by the language used in the opinion upon a former appeal in this case (166 App. Div. 762). We were there discussing the pleadings on the theory advanced by • counsel upon a motion for a separate trial of issues. We are now considering a judgment after a trial of the issue and, with all the facts before us, applying the law as we understand it, although counsel have not presented the theory which we have applied.
For the reasons given the judgment should be affirmed, with costs.
Clarke, P. J., McLaughlin and Laughlin, JJ., concurred; Scott, J., dissented.
Dissenting Opinion
While I concede that the question involved in this appeal is a close and doubtful one, which is not precisely covered by any authority to which our attention has been called, I am disposed to think that under the terms of the lease the tenant should pay the half of the annual taxes for 1914, which by virtue of the amendment of the Greater New York Charter (Laws of 1901, chap. 466, § 914, as amd. by Laws of 1911, chap. 455) became payable on May 1, 1914. The defendant’s lease ran until noon on said May first and the tax became payable on May 1, 1914, that is, on the first hour of that day. So the one-half of the annual tax became payable before the expiration of the lease. The lessee’s covenant was not to pay all the taxes which might be imposed during the term of the lease, as was the covenant considered in Ogden v. Getty (100 App. Div. 430), but to pay so much of the tax imposed during the term as should become payable within the term. The precise agreement was that the lessee would pay all annual taxes as should be imposed during the term “as soon as they become due and payable.” The payment of one-half the tax for the year, therefore, fell within the letter of the covenant.
Of course it is entirely probable that, when the lease was made, neither the lessors nor the lessee anticipated that any change would be made in the law providing for the payment of the annual taxes, but they should have known that such a change was within the power of the Legislature and might, occur, and they took no means to meet the contingency. It is also entirely probable that the lessee expected to be called upon to pay only five years’ taxes for a five-year term, but on the other hand the lessors expected to receive their property back. at the end of the term unincumbered by a tax lien, and provided in plain language that they should so receive it.
I agree that no case has been made for a reformation of the lease, and without a reformation it seems to require payment by the defendant of one-half of the tax for 1914, with interest.
Judgment affirmed, with costs.