190 Mich. 212 | Mich. | 1916
These are proceedings brought before a circuit court commissioner to obtain possession of certain real estate in the city of Grand Rapids known as the Addis Block. In 1906, Maria Addis, then owner of the property, made a lease thereof in writing to the Walter K. Schmidt Company, a corporation, for a term of five years from the 1st day of February, 1911. The lease contained a covenant that the lessee should not assign nor transfer the same, nor sublet the premises, or any part thereof, without the written assent of the lessor; and it was further 'provided that upon default in any of the covenants of the lease the lessor might re-enter and'repossess herself of the premises. Upon the death of Maria Addis, which occurred before the transfer of the lease as hereinafter mentioned, the-complainants, as tenants in common, succeeded to the ownership of the property. The Walter K. Schmidt Company remained in possession until in December, 1913, when it transferred all of its property, including its rights undei^the lease, to the defendant corporation. It is claimed by the complainants, as the grounds for these proceedings, that such transfer was in violation of the condition against assignment, and that all rights under the lease were thereby forfeited. On the other hand, the defendant insists that such transfer did not amount, in substance, to an assignment of the lease, because, it says, the defendant company was but a reorganization of, and is identical with, the Walter K. Schmidt Company, and took a transfer of the lease as successor to that company. It also insists that Mrs.
The case is brought here by complainants; and the questions before this court are: First, whether the transfer of its rights under the lease by the Walter K. Schmidt Company to defendant was, in substance and in fact, an assignment of the lease; and, second, whether Mrs. Panting, by signing the option, consented to an assignment of the lease. These questions will be considered in their order.
First. “A covenant not to assign or underlet the leased premises without the assent of the lessor is frequently inserted in a lease, and is regarded ás a fair and reasonable covenant.” Wertheimer v. Circuit Judge, 83 Mich. 56, 61 (47 N. W. 47).
See, also, Marvin v. Hartz, 130 Mich. 26 (89 N. W. 557).
The purpose of such a stipulation is to reserve to the lessor the right to say who shall occupy the premises; and where the right is clearly reserved to the lessor, he may insist upon it, if he wishes to, without regard to the qualifications of the proposed assignee; that is, it is not for the court to determine whether the proposed assignee would, or would not, make as good and acceptable p, tenant as the lessee himself.
It has been said, however, that covenants against assignment or underletting are not favorably regarded by the courts and are liberally construed in favor of
The Walter K. Schmidt Company, which for convenience will be referred to as the old company, in December, 1913, had become insolvent. It then had capital stock issued and outstanding to the par value of $30,090, which was held by 24 stockholders. Its president, Henry Huber, Sr., was the largest holder of its stock, but his holdings fell far short of a majority. Mr. Huber had loaned considerable money to the company and had also guaranteed much of its other indebtedness, so that, directly and indirectly, he was its heaviest creditor. Under these circumstances it was decided by Mr. Huber and his friends that he ought to secure absolute control of the company, and of its assets, so as to save himself, as far as possible, from loss. Two ways of doing this seem to have occurred to Mr. Huber and his legal advisers, one of which was to get the other stockholders to assign their stock in the existing company to him, while the other was to organize a new company, of which he should hold practically all of the stock, and then to obtain a transfer by the old company of its assets to the new company.
These facts, in our judgment, instead of showing an identity between the new company and the old one, show the reverse. It is true that the reorganization of a corporation is sometimes authorized by statute, and the statute may provide that the new corporation shall succeed to all the rights and assets of the old corporation. First Commercial Bank v. Talbert, 103 Mich. 625 (61 N. W. 888, 50 Am. St. Rep. 385), and Hicks v. Steel, 142 Mich. 292 (105 N. W. 767, 4 L. R. A. [N. S.] 279), are cases of this kind. In each of these cases a national bank had reorganized as a State bank under an express provision of law authorizing it to do so.
And there are instances where, without the aid of the statute, a corporation has reorganized under such circumstances that the new company has been held to succeed to the assets of the old company as a matter of right. Reynolds v. Meyers, 51 Vt. 444, was a case of this kind. There the entire body of stockholders of a Massachusetts corporation reincorporated under the laws of Vermont, and the new corporation was held to have succeeded to a nonassignable contract of the old company.
In New York Bank-Note Co. v. Engraving & Printing Co., 28 App. Div. 411 (50 N. Y. Supp. 1093), Judge O’Brien said:
“The stock of the new company was distributed ratably among the stockholders of the old. Technically the new company was a distinct legal entity from the old, but to all intents and purposes it was the same concern. * * * The new company had the same assets as the old, the same business, and, so far as appears, the same charter rights. * * In the absence of special circumstances, there should, we think, be no hesitation in holding that the reorganization of a corporation does not prevent the new company from succeeding to all the rights and liabilities arising under contracts of the old.”
In that case the stockholders of a New Jersey corpo
The fact that one company purchases the assets and assumes the liability of another company does not make the two companies identical. Nor does the further fact that the purchasing company continues the business purchased at the old location make them identical. Any four'men not interested in the old company might have organized a corporation for the purpose of purchasing the assets and assuming the liabilities of the Walter K. Schmidt Company; yet it would hardly be suggested that such organization thereby became •identical with the Walter K. Schmidt Company. The fact that the new company was organized by 4 out of the 24 stockholders of the old company can make no difference in principle. The very purpose of organizing the new company in this case was to get rid of the old company and its stockholders. When the new company took over the assets of the old company it did so purely as a purchaser and not otherwise; and there at once ensued a radical change, not only as to the legal title to the assets, but also as to the equitable title of the stockholders. And the transfer of the lease by the bill of sale was therefore an assignment in the strictest sense.
The condition against assignment in a lease to a partnership was held to have been violated where the
“if one firm is dissolved and another one formed, and the lease is assigned to the new partnership by the original one, this has been held a breach of a condition -against assignment.” Jones on Landlord & Tenant, | 469.
Second. As to the claim, made by the defendant, that Mrs. Panting, by signing a certain option, had waived her right to insist upon the condition in the lease against assignment. Before the organization of the new company, that is, in January, 1913, an agreement in writing had been submitted to the complainants by which the old company, “its successors and assigns,” were to have the right to a renewal of the lease at their -option. This agreement had been signed by Mrs. Panting, but not by Mrs. White. And it is the theory of the defendant that, by signing this option, which contained the words “successors and assigns,” Mrs. Panting had thereby impliedly consented to an assignment of the lease by the old company.
We do not think that this is so. To operate as a waiver by implication the terms of the option must have been inconsistent with the condition in the lease, and they were not, in fact, inconsistent. The lease did not prohibit an assignment absolutely and at all events, but only when made without the written assent of the lessor. Furthermore, it is usually held that such a ■condition does not prohibit an assignment by operation of law, unless expressly so stated. Jones on Landlord & Tenant, § 466.- And it must necessarily be held that -the words “successors and assigns” in the option referred only to such successors and assigns as the complainant should consent to, or as should become such by
“As we have seen, the lease contained a covenant against assignment without the consent of the lessor, with a provision for re-entry in the event of a breach thereof. These provisions were in no way rescinded or affected by the provisions of the supplemental agreements. The provision in the latter agreements that ‘this agreement shall inure to and * * * bind the heirs, executors, administrators, successors and assigns of the several parties’ were not effectual to make any change in this regard. Consent of the lessor was still essential to any assignment which would be binding upon the lessor, and there could not be any ‘assign’ of the lessee in whose favor the provision would operate, except one who had become such by consent of or waiver of the lessor.”
We think the circuit judge was in error in holding that the transfer of the lease by the old company was not in violation of the condition against assignment,’ and the judgment must be reversed.
Judgment is reversed, and a new trial granted.