Opinion
No. J-229.
February 17, 1930.
Suit by Edward J. Kelly, trustee in bankruptcy of Thayer-West Point Hotel Corporation, against the United States. Judgment for defendant.
This case having been heard by the Court of Claims, the court, upon the evidence adduced, makes the following special findings of fact:
1. On October 17, 1924, the defendant executed a lease to one Herbert Williams, by which certain land described therein, a part of the military reservation at West Point, was leased for a term of 50 years, and the lessee covenanted to erect upon said premises a hotel in accordance with plans and specifications thereafter to be submitted. This lease contained, among others, a provision "* * * that when said lease shall come to an end, * * * by reason of the voiding of the same by the party of the first part and the cancellation or annulment thereof by the Secretary of War herein provided, the title to said building, or buildings, and the appurtenances and equipments shall pass at once to the United States, subject to the provisions herein contained for the payment by the United States of America to the party of the second part of just compensation therefor"; and also the further provision: "It is further agreed and understood that this lease may be annulled at any time by the Secretary of War should the party of the second part fail to observe all of the covenants and conditions of the lease or any of the rules and regulations promulgated by the superintendent under said lease."
This lease, on March 23, 1925, with the approval of the Secretary of War, was duly assigned to the Thayer-West Point Hotel Corporation, which, in the years 1925 and 1926, erected and equipped a hotel on the land so leased, and on June 3, 1926, opened the hotel and commenced the operation thereof, which was continued until January 3, 1927, when the hotel was closed by the hotel corporation. It was reopened by said corporation about May 3, 1927, and the operation thereof continued until August 12, 1927. At that date possession and custody of the hotel was taken by receivers appointed in an action brought by the American Trust Company in the Supreme Court of New York for Orange County against the Thayer-West Point Hotel Corporation to foreclose a second mortgage made upon the hotel premises by the hotel corporation to secure the sum of $500,000. These receivers and their agents continued the operation of the hotel until November 2, 1927, when it was closed by the receivers who, however, kept a watchman in charge of the building and its contents until possession was taken by the receivers appointed in a suit brought in the Supreme Court of New York for Orange County to foreclose a first mortgage made by the hotel corporation upon the hotel premises to secure the sum of $1,000,000. The receivers in the foreclosure proceedings on the first mortgage reopened the hotel in May, 1928, and have ever since continued the operation of the hotel.
2. On August 16, 1927, the hotel corporation being indebted to unsecured creditors for a large amount, a petition in involuntary bankruptcy was filed in the United States District Court for the Southern District of New York against the said corporation, which was duly adjudicated a bankrupt, and receivers in bankruptcy appointed for the property of said hotel corporation. Prior to the rendition of the report of the receivers in bankruptcy, the plaintiff herein, on September 8, 1927, was appointed trustee in bankruptcy, qualified as such, and is still acting as trustee in that capacity for the hotel corporation.
3. The West Point Military Reservation contains approximately 2,523 acres in Orange County, N.Y., and within its bounds are the academic buildings, drill and parade grounds, and other appurtenances of the Military Academy. The reservation is traversed by one continuous roadway, which is referred to in the lease as the main roadway leading through the reservation, with several short lateral and paralleling roadways. The hotel is approached by means of the main roadway and the lateral. The main roadway above referred to connects with the state road at a short distance north and also a short distance south of the military reservation. The main entrance to the hotel is approximately 138 feet from the center of the main roadway.
4. For many years preceding the use of automobiles, travelers had availed themselves of the use of the main roadway leading through the military reservation, but with the advent of the automobile traffic through the reservation increased until it became a serious problem, and on Sundays and holidays it was sometimes necessary for the superintendent to assign 150 men to traffic duty. The noise attendant upon the night traffic became annoying and vexatious to both officers and cadets, and interfered with the operations of the academy to some extent. One-way traffic became necessary, and traffic had to be halted to prevent interference with the formation of the cadets moving from one point to another. From May 1 to July 1, 1927, from 6 a.m. to 6 p.m. on Saturdays and Sundays, the cars averaged slightly over 6,000 a day, and, on the 4th and 5th of July of the same year, 13,800 cars were diverted past the north gate by direction of a sentry. On July 10, 1927, a traffic regulation was put in force whereby through traffic (that is, cars of persons not having some business at the reservation or desiring to stop at one of the hotels thereon) was refused entrance to the reservation, and traffic through the reservation past the Thayer Hotel was reduced by approximately 80 per cent.
5. Some patronage was received from passengers in automobiles over the road adjoining the hotel, and it is a matter of common knowledge that a reduction of that traffic would, to some extent, affect the business of the hotel, but there is nothing in the evidence to determine the extent to which it was affected. The hotel is a large and attractive building and has been conducted as a transient hotel of the better class and was to a considerable extent dependent upon persons traveling by automobile for its patronage. By reason of notices having been posted that through traffic would be diverted from the reservation, many people believed that access to the hotel would be denied. The sentries or gatemen, however, were directed and did inform persons seeking to enter that they could go to the hotel if they desired. The first six months of the hotel's operations resulted in a deficit, and the closing of the hotel on January 3, 1927, was necessitated by reason of the financial inability of the hotel corporation to continue its operations at a loss. The evidence, however, shows that the first 3 years of the operation of a new hotel are generally unprofitable. The hotel corporation, through its attorney, protested against the order diverting the traffic, and sought to have it rescinded, without avail.
In the negotiations which preceded the execution of the lease, the superintendent of the academy wrote to Herbert Williams with reference to the number of guests that might be expected if the hotel was constructed, and referred to the large number of automobile tourists who passed through West Point, especially on Sundays and holidays, and said that, "Heretofore, these visitors have not stopped overnight because there have been no suitable accommodations." And at no time during the negotiations was there any intimation on the part of the government officials that through traffic might be excluded from the reservation.
6. The cost of the construction of the hotel, together with all expense properly attributable thereto, was $1,219,838.57. The building could have been reproduced in July, 1927, for $1,150,000. The total cost of the hotel, including furniture and equipment which is still in the hotel and being used, was $1,702,276.86. The depreciation of the hotel from the time of its completion to July, 1927, was negligible, and the depreciation of the hotel equipment, furniture, and fixtures during the same period was slight.
Benjamin B. Pettus, of Washington, D.C., and Walter E. Ernst, of New York City (H.C. McCollom, of New York City, and Colladay, Clifford Pettus, of Washington, D.C., on the brief), for plaintiff.
Dan M. Jackson and Wm. P. Montgomery, both of Washington, D.C., and Herman J. Galloway, Asst. Atty. Gen., for the United States.
Before BOOTH, Chief Justice, and GREEN, WILLIAMS, LITTLETON, and GRAHAM, Judges.
Plaintiff in this case brings suit to recover $2,200,000, being damages alleged to have been sustained by reason of an eviction from premises leased from the government on the West Point Military Reservation.
It appears from the evidence in the case that the Thayer-West Point Hotel Corporation is the assignee of a lease obtained in 1924 from the government for the site of a hotel upon the reservation above referred to, and that this lease provided that the lessee should construct a hotel thereon. The lease recited that the lessee "* * * agrees to observe, and cause to be observed, all rules and regulations now established or which may hereafter be established by the Superintendent of the Military Academy at West Point so far as the same apply to or affect the leased premises."
The lease also provided that, when it should come to an end, either by the expiration of the term reserved, or the cancellation or annulment thereof by the Secretary of War, the United States bound itself to pay "just compensation * * * for the construction of said hotel, appurtenances, and equipments" thereof. Under this lease in 1925 and 1926, the Thayer-West Point Hotel Corporation constructed on the reservation a hotel adapted to receive a high-class patronage. The government reservation upon which the West Point Military Academy is located comprises over 2,000 acres. Access is afforded to it by state roads leading to both the north and south entrances thereof, as well as one toward the western side. A main roadway passes through the reservation from the south gate along the eastern side of the reservation, and on the north part thereof, turning to the west, connects again with the highway on the western part of the reservation which passes out through the north gate thereof. A short distance from the south gate this main roadway passes the site where the hotel was constructed, 138 feet therefrom. The West Point Academy is visited by large numbers of people interested in the cadets or the institution itself, and after the advent of the automobile a very great number of people traveling either north or south passed through the reservation on their journeys. All of this traffic became a source of much trouble to the officials of the academy and interfered to a greater or less extent with its operations. Consequently, an order was promulgated by the superintendent that through traffic should be diverted. Notice was, however, given that all visitors to the academy and all those who desired to go to the hotel would be admitted. There was some misunderstanding of this order, and, for various reasons that need not be recited here, some people supposed that access to the hotel was denied; but, on the contrary, sentries and gatekeepers were specially instructed to inform people who desired to enter that they could go to the hotel if they wished. As a result of the order, traffic on the main roadway in front of the hotel was decreased about 80 per cent., but there is no direct evidence as to how this affected the business at the hotel. It may, however, be presumed that it had some effect in decreasing it. The hotel corporation opened the hotel on June 3, 1926, and operated it at a loss until January 3, 1927, when it was closed by the hotel corporation. The principal cause of this operating loss was the fact that the hotel was new. The corporation again commenced the operation of the hotel May 3, 1927, and continued the operation thereof until August 12, 1927, when possession of the hotel and its appurtenances was taken by receivers appointed in an action begun to foreclose a second mortgage on the hotel premises, and the receivers commenced the operation of the hotel. These receivers discontinued the operation of the hotel on November 2, 1927, but a watchman was left in charge of the building and its contents. In May, 1928, an action having been brought to foreclose a first mortgage on the hotel, the court appointed receivers therein who were directed to, and did, take possession, reopened, and commenced the operation of the hotel, and are now operating it. On August 16, 1927, the hotel corporation was adjudicated to be a bankrupt through proceedings in involuntary bankruptcy against it, and later the plaintiff herein was appointed trustee in bankruptcy. Receivers were also appointed for the hotel property. These receivers never took possession of the hotel, but did take possession of some property which they were subsequently ordered to pay over to the receivers appointed by the state court. This property was turned over to the plaintiff, and the receivers in bankruptcy were discharged.
Upon these facts, which are alleged in the petition and found by the court, the plaintiff alleges that the hotel corporation for which he is a trustee in bankruptcy was ousted from the hotel property by a constructive eviction on the part of the defendant, and that, being deprived of the use of the hotel property, is entitled to recover damages in the amount of its cost.
This evidence we think furnishes many reasons for holding that there was no constructive eviction. The defendant's agents in no way obstructed the means of access to the hotel when they diverted through traffic from the roadway which passed in front of it. Counsel for plaintiff cite about 20 cases holding that an obstruction of a substantial character to the means of access of the lessee to the leased premises constitutes such breach of the express or implied covenants of the lease as to render the lessor liable therefor. The limitations of an opinion forbid a separate discussion of these cases, but in general it may be said that the obstructions under consideration therein were direct and interfered with the opportunity for access to the leased premises. Moreover, there are many acts which will constitute a breach of the covenants of the lease which do not constitute an eviction, constructive or otherwise.
Tallman v. Murphy, 120 N.Y. 345, 24 N.E. 716, 718, is cited on behalf of plaintiff, in which it was said: "`An "eviction" is defined to be where there has been an obstruction to the beneficial enjoyment of the premises, and a diminution of the consideration of the contract by the acts of the landlord.' McAdam, Landl. Ten. 478, 479." But we do not think it was intended therein to hold that anything which the lessor did which might lessen the profits which the lessee could make from the leased premises constitutes a constructive eviction, for there are an abundance of authorities to the contrary when the act complained of does not interfere in any way with the use and enjoyment of the premises. It will be observed in this case that what the plaintiff complained of is not an act which interfered in any way with the hotel corporation using the premises. What the defendant did was to restrict the right of third parties to pass by the hotel on their way through the reservation, and thereby it is claimed the patronage of the hotel corporation was lessened, although there is no evidence as to the extent that this interfered with the hotel's business and some dispute in the evidence as to whether excluding the through traffic might not ultimately be of benefit to a high-class hotel, such as the one involved in this case. In 36 C.J. 262, § 988, it is said: "It is necessary, however, in order to constitute a constructive eviction, that the landlord, by some intentional act or omission, materially and permanently interferes with the beneficial enjoyment or use of the demised premises or a material part thereof."
We think it quite clear that the evidence does not bring the acts of the defendant within this definition. The exclusion of the through traffic from the road passing in front of the hotel did not "materially interfere with the beneficial enjoyment or use of the demised premises." All we can conclude from the evidence is that as a matter of common knowledge the revenues of the hotel were probably somewhat decreased, but there is no evidence that any act on the part of defendant's agents interfered with the enjoyment of the leased premises. The evidence shows that defendant's agents took special pains to inform parties who approached the reservation for the purpose of entering it that if they desired to go to the hotel they could do so; and it seems to be well settled that, in order to constitute a constructive eviction, acts or omissions of a landlord in interference with his tenant's use and enjoyment must indicate an intention on his part that the tenant shall no longer continue to hold and enjoy the demised premises. See authorities cited in 36 C.J. 263, § 989, note 57. This, we think, is one of the points which distinguishes the acts which constitute a constructive eviction from those which are merely a breach of some of the covenants of the lease, either expressed or implied, and which might afford a foundation for a suit in damages.
There is still another and, as we think, equally conclusive reason why there was no constructive eviction in this case. Ordinarily, there can be no constructive eviction unless the premises are abandoned within a reasonable time, and this abandonment must be complete. It has even been held in some cases that the fact that the tenant actually does leave the property is not sufficient, but it must be shown that his abandonment of the premises was because of the circumstances alleged to constitute the constructive eviction. See 36 C.J. 264, § 990, and cases cited under notes 70 and 71. It is quite clear that in this case there was no abandonment of the premises in any proper sense, much less an abandonment on account of the matters stated as the grounds for claiming a constructive eviction. Ever since the construction of the hotel and up to the present time, the lessee of the hotel — namely, the hotel corporation or some person claiming under a right granted by it — has been in possession of the hotel premises. A portion of the time the hotel has not been operated, but some one either representing the hotel corporation, or some one claiming through or under it, was in charge thereof. The second mortgagee first took possession from the hotel corporation through receivers appointed in the foreclosure action, and the second mortgagee was in turn obliged to surrender possession to receivers appointed in a foreclosure proceeding upon the first mortgage, and these receivers are still in possession and operating the hotel. We must presume that these proceedings were regular and in accordance with the provisions of the mortgages and the laws of the state. It would be a strange rule indeed that would hold that a constructive eviction had taken place when the tenant's grantees still remained in possession of the premises, and the lease still remained in force and effect. We think it obvious there can be no constructive eviction under such circumstances. To hold otherwise would make the lessor liable in damages for ousting the tenant when the lessor was not able to obtain possession of the premises leased. The possession of plaintiff's grantees cannot be reconciled with a constructive eviction upon any logical principles.
It follows that the plaintiff's petition must be dismissed, and it is so ordered.
BOOTH, Chief Justice, and WILLIAMS, LITTLETON, and GRAHAM, Judges, concur.