In Ackerman v. Loforese, 111 Conn. 700, 151 A. 159 (1930), a tenant attempted to renew pursuant to a renewal clause, but did not succeed in obtaining a new lease.Summary of this case from Tinaco Plaza, LLC v. Freebob's, Inc.
It is the general rule that no new lease is necessary upon exercising an option for the extension of the term of a lease for a further specified period. Though it is sometimes held that a stipulation for the renewal of a lease does not, like a covenant to extend, of itself and alone continue the tenancy for the renewal period, it is recognized that this difference may be controlled by the intention of the parties as manifested by the entire lease or by their practical construction of it, whereby the privilege may be construed as one for an extension of term, though the language employed may signify renewal. In the present case a lease for a five-year term gave the lessee an option to renew it for a further like term, on the same terms and conditions, one of which was an option to purchase the property. The plaintiff lessee gave notice of election to renew, and offered to execute a new lease if the lessor desired, but no demand was made for this, and the lessor and his successors acquiesced in the plaintiff's continued occupancy and accepted rent until the end of the renewal term. Held:
1. That the acquiescence and conduct of the lessor and his successors was consistent only with a construction that the word "renewed" was used in the lease as synonymous with "extended" or with an admission that the exercise by the plaintiff of his election to renew was such an affirmative act as to create the renewal. 2. That having led the lessee into relying upon that construction as the correct one, they may not now be heard to assert the contrary, and the plaintiff possessed the option to purchase during the renewal term, at least as against the original lessor. The bona fides of several conveyances which were made of the property to the defendants subsequent to the renewal of the lease and the nature and extent of notice which they had of the facts and its adequacy to charge them with liability to respond to the plaintiff's option to purchase become, by reason of this decision, material issues upon retrial of the case.
Argued June 10th, 1930
Decided July 9th, 1930.
ACTION for specific performance of an option to purchase real estate, or other equitable relief, or damages, brought to the Superior Court in Fairfield County and tried to the court, Yeomans, J.; judgment for the defendants and appeal by the plaintiff. Error and new trial ordered.
On August 11th, 1919, Angelo Roina was the owner of certain premises in Greenwich which on that date he leased to the plaintiff for five years from September 15th, 1919, at an annual rent of $2400, payable $200 monthly. The lease contained the following provisions relative to renewal and option of purchase: "It is further agreed that this lease may be renewed at the option of the party of the second part for a further period of five years after the expiration hereof, upon the same terms and conditions as in the lease contained. It is further agreed that the party of the second part may have the option to purchase the premises hereby leased at any time during the term of this lease or any renewal thereof for the sum of twenty-six thousand five hundred (26,500) dollars."
On or about September 23d 1920, Roina and the plaintiff executed a supplemental agreement whereby the rent was increased, beginning September 15th, 1920, from $200 per month to $215, all of the other provisions of the lease being ratified and confirmed. Both the lease and the agreement were recorded.
The plaintiff entered into possession about September 15th, 1919, and during the original five-year period paid rent as provided for in the lease and performed all the other terms and conditions thereof on his part. On or about August 12th, 1924, he notified Angelo Roina as follows: "I hereby notify you that I renew said lease for a further period of five years upon the same terms and conditions as in the lease contained. Should you desire a renewal lease executed in accordance with the option in said lease, I shall be prepared to sign the same, otherwise this letter may be considered by you as obligating me to such renewal." Correspondence ensued between the attorneys for the lessor and lessee, the nature of which will be stated hereafter. No new lease was executed. The plaintiff, by a subtenant, remained in possession, and caused to be forwarded to Roina, on or about September 15th, October 15th, and November 15th, 1924, checks for $215 each, but Roina refused to accept them. Shortly after November 15th, 1924, the plaintiff tendered Roina a check for $645, being the three months rent, which he accepted and cashed, and thereafter, until September 15th, 1929, the plaintiff paid, and Roina and his successors as record owners accepted, rent at the rate ($215 per month) provided by the original lease as amended.
On or about September 12th, 1929, the plaintiff notified the defendants that he claimed under the option to purchase and of his desire to exercise it and tendered them the agreed purchase price, but they have not conveyed or offered to convey the premises to him.
Joseph L. Melvin, for the appellant (plaintiff).
Matthew H. Kenealy and Jackson Palmer, with whom, on the brief, were C. Milton Fessenden and Daniel E. Ryan, for the appellees (defendants).
The trial court's conclusion, from the facts found, was that the provision, in the lease of August 11th, 1919, that it might be renewed for a further term of five years at the option of the lessee, required the execution and recording of another lease in order to make it binding upon a subsequent purchaser, and that the continued occupancy by the plaintiff after giving notice of election to renew, and the acceptance of rent by the lessor and his successor, did not operate as a renewal but created a tenancy from year to year, only, carrying no option of purchase.
The key question on this appeal is whether that conclusion is sound or, as the appellant contends, the nature of his option under the lease was such as to entitle him to a further term of five years, with all privileges under the lease, without the execution and recording of a new indenture, and that this result was effectuated by the facts as found.
It is the general rule that no new lease is necessary upon exercising an option for the extension of the term of the lease for a further specified period after the expiration of the original term, and many courts apply the same rule in the case of options for renewal. Note, L.R.A. 1916E, pp. 1238, 1240; Orr v. Doubleday, Page Co., 223 N.Y. 334, 340, 119 N.E. 1064; Meadow Heights Country Club v. Hinckley, 229 Mich. 291, 201 N.W. 190; Donovan Motor Car Co. v. Niles, 246 Mass. 106, 140 N.E. 304. "The view has been taken that a lease for a specified term with the privilege of a renewal on the same terms is equivalent, where such privilege is exercised, to a demise for the full period of the two terms, without any necessity for the execution of a new lease, and this would seem to be the view which a court of equity would take in case the rights of the lessee under the privilege of renewal is there called in question, as equity regards that as done which ought to be done." 16 R. C. L. p. 889.
A technical difference is frequently recognized, however, between the effect of a covenant for renewal and one for extension, especially as to the effect of retention of possession after the original term, it being held that a stipulation for renewal does not, like a covenant to extend, of itself and alone continue the tenancy for the renewal period, but calls for a new lease, a formal extension of the existing lease or something equivalent thereto, performance by the lessee of everything required of him to entitle him to a new lease, or, at least, some affirmative act by way of creation of an additional term. Freiheit v. Broch, 98 Conn. 166, 171, 118 A. 828; City Coal Co. v. Marcus, 95 Conn. 454, 111 A. 857; Andrews v. Marshall Creamery Co., 118 Iowa 595, 598, 92 N.W. 706; Kaufmann v. Liggett, 20 9 Pa. 87, 58 A. 129; Klein v. Auto Parcel Delivery Co., 192 Ky. 583, 234 S.W. 213; 35 Corpus Juris, p. 1025. But it is recognized that the technical difference may be controlled by the intention of the parties as manifested by the entire lease or by their practical construction of their contract, as by conduct before the controversy arose, whereby the privilege may be construed as one for an extension of term, though the language employed, in a strict technical sense, may signify renewal. The mere fact that the privilege is called one to renew is not conclusive. Freiheit v. Broch, supra, p. 169; Klein v. Auto Parcel Delivery Co., supra; 35 Corpus Juris, p. 1025.
The practical construction accorded the lease in the present case is to that effect. The lessee (plaintiff) gave seasonable notice of his exercise of his option, stating that he thereby renewed the lease for the further period of five years, but offering — in case the lessor construed the contract as requiring a new lease — to accede and execute it. So far as appears, the only definite response made by the lessor, Angelo Roina, to this communication is the letter written by his attorney on August 27th (Exhibit I). This contained no mention or suggestion of a necessity or desire for execution of a new lease. It recognized the lessee's right to the additional term, but claimed that he had no right to sublet and stated that Ackerman himself must occupy the premises or, as a condition of subletting, pay an increased rent of $240 per month. To this the plaintiff's attorney replied (Exhibit J) asserting a right to sublet, under the lease, and to reimbursement for a claimed overpayment on account of rent. After having refused for three months to accept checks for the monthly rent, Roina then (about November 15th, 1924) accepted the rent for these three months and constantly thereafter up to September 15th, 1929, the expiration of the second five-year period, he and his successors in title accepted payments of the monthly rent, from the plaintiff — who during that time occupied the premises either personally or by a subtenant, without protest or molestation, so far as appears, from the lessor or his successors, or further objection to subletting or demand for increased rent. The sublessee — Dutee Wilcox Flint, Inc. — in possession at the time Exhibit I was written (August 27th, 1924) remained until April, 1926, under a sublease and oral extension thereof. Apparently it was not until this action was brought to enforce the lessee's option of purchase that the defendants made claim that a new lease was necessary.
It is fair to assume that if Angelo Roina, instead of acquiescing in the plaintiff's attitude and claims, had asserted that a new lease was necessary or continued to refuse to accept rent, or moved to prevent subletting, or otherwise persisted in an attitude contrary to or inconsistent with the rights of the plaintiff under an extended term of the lease upon the same conditions, the plaintiff thereupon would have sought judicial relief by way of specific performance or other available remedy to which, under a technical covenant to renew, he manifestly would have been entitled. Freiheit v. Broch, supra. Roina's acquiescence and conduct and that of his successors was consistent only with a construction that the word "renewed" was used in the lease as synonymous with "extended" or with an admission that the exercise by the plaintiff of his election to renew was such an affirmative act as to create the renewal. Andrews v. Marshall Creamery Co., supra. Having led the lessee into relying upon that construction as the correct one, or that his act was sufficient to effectuate a renewal, they may not now be heard to assert the contrary. Kentucky Lumber Co. v. Newell, 32 Ky. L. R. 396, 105 S.W. 972.
The trial court's conclusion, in effect that nothing short of the execution and recording of another lease would suffice to effectuate the plaintiff's right to the further term and the accompanying option to purchase, was not justified by the facts found and the applicable legal principles. These required that the plaintiff be held to possess the option to purchase upon which this action is based, at least as against the original lessor, Angelo Roina.
The finding shows that on January 12th, 1926, Angelo conveyed by quitclaim deed through a third party, these and other premises to the defendant Annunziata Roina, his wife, and on February 16th, 1927, she conveyed these premises to the defendants Thomas and Josephine Loforese, the latter being a daughter of Angelo and Annunziata Roina. Under our view as to the legal situation of the plaintiff, the question of the notice, actual or constructive, with which the defendants are chargeable, as to the plaintiff's rights in and concerning the premises, attains an importance which it did not have under the trial court's view that such rights were merely those of a tenant from year to year, and therefore that inquiry by the defendants would only have disclosed such a tenancy. The bona fides of the several conveyances and the nature and extent of notice which the defendants had of the facts and resulting rights, and its adequacy to charge them with liability to respond to the plaintiff's option to purchase become material issues upon retrial of the case. On the issue of notice the sublease from the plaintiff to Dutee Wilcox Flint, Inc. (Exhibit M for identification) and that to the Greenwich Motors Corporation (Exhibit L for identification), both recorded in Greenwich, which were offered in evidence and excluded, were admissible.