Opinion
Argued November 19, 1879
Decided December 2, 1879
Edmund Randolph Robinson, for appellant. William P. Chambers, for respondent.
The defendant claims that the lease from William and James Hume to Clark, dated May 1, 1858, and the agreement between these parties, dated August 2, 1858, are in pari materia and should be construed together. It is in this aspect that the defendant's case is the strongest, and while we are not satisfied that it could be sustained upon the evidence or by any just inference from the contents of the papers, we shall, in our examination of the question presented on this appeal, regard the claim as established. At the time of the execution of those instruments, James and William H. Hume were liable upon their bond to Rhinelander, dated December 4, 1855, in the sum of $20,000, payable December 4, 1862, and the premises in question were mortgaged to secure its payment. Under the lease of May 1, 1858, from James and William H. Hume, Clark acquired the right to the use of the mortgaged premises for the term of seventeen years and six months from the 1st of August, 1858, "paying therefor the yearly rent of $4,000," and subject to the provisions of a lease executed by the Humes to Roder and others (the terms of which do not appear), and subject, also, to all the provisions, covenants and conditions contained in the lease of the premises, bearing date May 1, 1855, executed by Rhinelander and wife to the Humes, and as to the performance of the stipulations and covenants in these two instruments, Clark was to stand in their place. It is also provided therein that the lease is subject to the mortgage above referred to, and Clark covenants and agrees to pay off and discharge the same with interest from the 1st day of May, 1858. The lease contains these covenants and is signed by Clark. We have, therefore, an express and formal covenant on his part for the payment of the mortgage, and it was apparently as much the inducement or consideration for the letting by the Messrs. Hume as was his promise to pay the annual rent. No provision is made for its re-payment or any contingency suggested upon the happening of which he shall be relieved. His position in regard to it is in no sense different, so far as the instrument of May first is concerned than it would have been if he had paid the sum of $20,000 in cash at the time of its execution as a bonus or premium for the lease. As it was, he became bound at that moment to discharge the mortgage; the interest as it accrued from time to time and the principal sum when the mortgage came to maturity; and there is not, in the instrument by which this obligation was assumed, any provision for the return to him of any benefit of any kind, save in the enjoyment of the premises. Nor do we understand that the learned counsel for the respondent or the learned court whose judgment is under review, claim otherwise; but the judgment and contention here, in its support is put upon the ground that the agreement of August 2, 1858, warrants and requires a very different construction. So far as the question in hand is concerned, we discover no such necessity, nor do we find in it any term or provision material to the case and affecting the point in dispute. The conclusion reached upon the lease of May first is that the obligation on the part of Clark in respect to the mortgage was absolute and unconditional. It does not seem to have been modified by the agreement of the second of August. Under that instrument he would, at the expiration of the term granted in May, be entitled to a renewal of the lease at the same rate of rent for the further term of eighty-five days, and an assignment of all the equitable interests of the Messrs. Hume under the covenants contained in the lease from Rhinelander to them of May 1, 1855, for a renewal of said lease from Rhinelander, and an authority or power to receive to his own use all moneys that might be awarded and become payable to the Messrs. Hume under the lease from Rhinelander, for the value of the buildings and improvements upon the premises. There is here no reference to the mortgage, or to the liability of Clark to pay it; and incorporating these provisions into the lease of May 1, 1858, would not affect its terms. It would add to the undertaking of the Messrs. Hume, but would not diminish their right to have the mortgage paid by Clark. Nor was Clark to derive any benefit from this fresh undertaking on the part of the Messrs. Hume, unless he concluded to take a renewal of the lease and applied therefor. Some action on his part was necessary and to be taken a reasonable time before the renewal could be required. (Leake on Con., 678; M'Nitt v. Clark, 7 J.R., 465; Maxwell v. Ward, 13 Price, 674.) It must be conceded that in this respect there was not only an entire omission on Clark's part, but by his own act he put it out of his power to make the election. The mortgage became due December 4, 1862. It had not been paid, and in the meantime Clark, on the 1st of February, 1860, for a valuable consideration, sold and transferred the two instruments above referred to of May first and August second to the Excelsior Fire Insurance Company, and in terms assigned to them all his right of renewal of said lease "or payment for buildings and improvements as therein provided, with all the premises therein mentioned and described, and the buildings thereon with the appurtenances," subject to the covenants and conditions contained therein, and all of which the insurance company undertook to perform; and subject also to the mortgage above mentioned. Afterwards through several mesne assignments similar in form to the one just referred to, the instruments of May first and August second, and the rights and privileges thereunder, became vested in one Lewis, and he, on the 20th of January, 1876, gave notice to the Messrs. Hume that he should not avail himself of the privilege of renewal given by the papers referred to, and on the 1st day of February, 1876, he surrendered the premises to them. There was not only then an omission on the part of Clark or his assigns to avail themselves of the privilege of renewal, — and on this depended the other rights, — but there was an absolute refusal to accept a renewal of the lease and it is difficult to see how, after that, any right, legal or equitable, under either of the instruments referred to, remained in Clark or his assigns. The Messrs. Hume were then at liberty to deal with the property and the interests conferred by the lease from Rhinelander to them as they should choose. Under this lease it was optional with Rhinelander at the expiration of the term granted by it (twenty-one years from the 1st day of May, 1855) to pay for the building erected by the Messrs. Hume on the premises, at a valuation ascertained as therein provided, or grant to them a new lease for the further term of twenty-one years at a rent fixed by certain persons to be selected for that purpose. On proceedings had for these purposes as provided in the lease the buildings were appraised at $25,000, and the rent at which a new lease might be granted was fixed at $5,000. Rhinelander elected to give a new lease, but in the meantime, the mortgage remaining unpaid, he had, in December, 1875, begun proceedings for its foreclosure. Prior to the 14th of April, 1876, James Hume transferred his interest in the lease from Rhinelander to William H. Hume and Alexander W. Hume, and they, on the nineteenth of April, sold the building erected by James and William Hume to Rhinelander for $20,000, which he paid, and they, (William H. and Alexander W. Hume), at the same time paid up the mortgage and costs of foreclosure, and took a lease of the premises from Rhinelander for twenty-one years at the annual rent of $6,400. In these events we are unable to discover any defense against the plaintiff's claim. The undertaking on the part of Clark, absolute in the first instance was not subsequently cut down or qualified. His liability was not for such deficiency as might remain due after the mortgaged premises had been sold and the proceeds applied upon the mortgage, but for the payment of the whole. Nor was it to save the Messrs. Hume harmless, — if that had been its purpose, very different language would have been employed, — but to pay the mortgage; and Hume's right of action was complete and perfect the moment the mortgage became due and remained unpaid. ( Port v. Jackson, 17 J.R., 239; affirmed id., 479; Thomas v. Allen, 1 Hill, 145; Gilbert v. Wiman, 1 N.Y., 550; Rector v. Higgins 48 id., 532; Belloni v. Freeborn, 63 id., 383.)
Nor am I able to see how the course pursued by Alexander and William Hume is open to the objection that it was legally prejudicial to Mr. Clark or his estate. None of the conditions undertaken by Clark were performed, and the Humes were bound to pay their bond and mortgage. There was nothing in the relations of the parties or in the various reciprocal obligations covered by the agreements in question which prevented them or their assigns from dealing with the property to their own advantage. The most favorable view of Clark's position is, that under the agreement of August 2d, he acquired an option which if he had retained and exercised would — as we now see — have entitled him to a further lease for the term of twenty-one years at the increased rent of $5,000. He would still have been bound to pay the Hume mortgage, and would not have received anything for the value of the buildings; for Rhinelander having elected, as he lawfully might, to give the lease, was thus relieved from the other alternative and could not have been compelled to pay for the improvements. ( Rutgers v. Hunter, 6 John. Ch., 215.) It is not unlikely that Lewis had in view this result when he surrendered the premises and refused to go further in the matter. At least he did not choose to be burdened with it. However that may be, he exercised the option which he had bought of Clark and declined the renewal, and this was binding and irrevocable. The plaintiff acted upon this refusal and made, as the defendant now claims, a good bargain; but if so (although the answer alleges the contrary), this was done without fraud or misbehavior towards Clark or his assigns. Nor does the defendant even now offer to relieve William H. and Alexander Hume from the burden of this bargain; they stand as lessees of the premises for the term of twenty-one years, at an annual rent of $6,400, and if the defendant should succeed in this action, they would remain liable and the defendant free from the obligation assumed by his testator upon a full consideration. Such a result would be most unjust.
As these views lead to the conclusion that the defendant established no defense, it is unnecessary to consider other questions presented by the learned counsel for the respondent; for however answered they fail to disclose any ground on which the order of the General Term can stand. It should therefore be reversed, and the judgment entered on the report of the referee affirmed, with costs.
All concur.
Order reversed and judgment affirmed.