Case ID: dc_8/html/0509-01.html
Source: Caselaw Access Project
Author: {"author": "Mr. Justice Humphreys", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

WHITE ET AL. vs. FREEDMAN’S BANK.
    Equity.
    No. 2779.
    I. Leased premises were used as a hotel, and the lessee executed trust-deeds on the furniture to secure the parties from whom he purchased and to other creditors. Subsequently the landlord accepted in lien of the lessee another tenant, who bought out the lessee and assumed the payment of all rent in arrear, and of all liens upon the furniture. Upon the faith of this agreement the tenant paid all the back rent, and the rent accruing for some time afterward, to the landlord. He also paid off a large portion of the claims secured by the deeds of trust. Held, that the balance due upon such trust-deeds had priority over the landlord’s lien for rent, and that there was a change of tenantry as well as of property in the furniture.
    II. A landlord will lose his lien by conduct which misleads bona-fide purchasers for valuable consideration.
    III. Where trustees have moneys in their hands claimed by a landlord upon his lien for rent, and by creditors having trust-deeds on the furniture on the rented premises, a bill of interpleader will be sustained when the fund is not sufficient to pay both.
    STATEMENT OE THE CASE.
    The plaintiffs in this cause filed their bill against the-Freedman’s Savings and Trust Company, and Beall & Baker, and alleged that, by virtue of several deeds of trust and a written agreement of the tenant, they sold on the 15th, 16th, and 17th days of April, 1872, the goods, chattels, and personal property in the “ St. James Hotel, ” in the city of' Washington, for the gross sum of $5,713.80; that the defendants Beall & Baker, and the Freedman’s Savings and Trust Company, each demand the money; that there is not sufficient to pay both parties; and they pray that the defendants may be compelled to interplead.
    The defendants answered, and from the admissions in the pleadings, and the evidence, the following facts appear, to wit:
    On the 30th day of March, 1867, Alpheus Middleton and John Hyatt, executors of the last will of Benjamin F. Middleton, deceased, and Benjamin Beall, one of the defendants,. made a lease under seal to George W. Bunker and William H. Crosby, whereby they demised to the lessees, for the term of five years from April 1, 1867, the hotel on the corner of Sixth street and Pennsylvania avenue then called the "Clarendon House,” now known as the "St. James Hotel,” reserving a yearly rent of $4,000, payable in equal monthly installments on the last day of every month. The lease contained covenants for the payment of the rent, for quiet enjoyment, that the tenants should not sublet without the written consent of the lessors, and to renew the lease on a specified prior notice.
    On the 6th day of April, 1867, Bunker & Crosby, the lessees, being indebted to A. T. C. Dodge for the purchase-money for the goods, chattels, and personal property in the said “Clarendon House,” in the sum of $2,500, gave their two promissory notes of that date for $1,250 each, payable to the order of said Dodge in nine and twelve months respectively, with interest; and to secure the payment of the said notes executed and delivered to the plaintiff Orestes B. Dodge a deed of trust on the goods, chattels, and personal property in the said house.
    On the 2d day of October, 1868, Crosby, with the consent of the landlords, sold out his entire interest in the said lease and personal property to George W. Bunker and Thomas M. Plowman, and retired from the concern; and on the same day Bunker & Plowman gave Crosby their two promissory notes of $3,500 each,being forthe purchase-price of Crosby’s interest; and to secure the payment thereof, made and delivered to the complainant Phillips a deed of trust on the leasehold estate, all the goods, chattels, household and kitchen furniture in the said hotel, then called “ Bunker’s Avenue Hotel,” and also on all other goods and chattels, &c., which might be put into the premises in substitution or renewal of, or in addition to, those then contained therein, and, also, on all the goods, chattels, &c., which might be put into the addition to said hotel then being erected, andón the leasehold interest in said addition. On the — day of December, 1868, an addition to the hotel was completed by the defendant Beall, which -was rented to Bunker & Plowman at the rate of $1,300 per annum, payable monthly in equal installments, and such addition was incorporated into, and thenceforward formed a part of, the “ St. James Hotel, ” tut was the exclusive property of Beall.
    On the 17th of April, 18C9, Bunker & Plowman executed a deed of trust on the leasehold interest, furniture, &c., in the St. James Hotel, to the complainant Phillips, to secure to the defendants Beall & Baker the payment of an account for groceries for $5,000, and on the 20th of December, 1809, they executed and delivered to the complainant White a deed of trust on the same property to secure to the same parties the payment of $3,044,77.
    On the 12th day of March, 1870, one of the notes for $3,500 given to Crosby (the other being paid) was duly transferred to the Freedman’s Savings and Trust Company by the holder thereof, and on the 2d day of May, 1871, one of the aforesaid notes for $1,250 given to the said A. T. C. Dodge was trans ferred to said company by the holder thereof.
    On or about the 10th day of April, 1871, Bunker & Plowman sold all their interest in the hotel-lease, personal property, &c., to John Spicer, who, in pursuance of his purchase, entered and took possession of the house and personal property about the 28th day of April following. Spicer so purchased the lease of the hotel, the furniture, fixtures, &c., for the sum of $3,500 in cash, and in addition agreed and assumed to pay the rent then in arrear, and the liens upon the personal property hereinbefore mentioned, amounting altogether to about the sum of $19,250. The $3,500 was paid in cash to Bunker & Plowman, and a large sum for arrears of rent was paid to Beall by Spicer. This sale to Spicer was made after frequent consultations about it with Beall, who acted for himself and as the agent of the other owners of the realty, and with Beall’s assent andapprobatiou.
    Upon the faith of this agreement, Spicer parted with his money, (about thirteen thousand dollars,) Bunker & Plowman parted with their property, and Beall received all the money he could get, and availed himself of all the advantages of the exchange. Before the attachment suits hereinafter mentioned, Spicer had paid all the rents due from Bunker & Plowman at the time of the sale to Spicer.
    
      On the 30th day of August, 1871, a suit at law (No. 8849) was commenced in this court, in the name of Benjamin Beall, Alpheus Middleton, and Jesse Middleton, against Bunker & Plowman, for rent in arrear, upon which an attachment was issued and served on the personal property in the St. James Hotel. The defendants in this suit did not appear or plead, and a judgment by default was entered against them for the sum of $925, and on the 18th of January, 1872, an execution was issued thereon and levied on the property. And on the same day a suit was commenced by Benjamin Beall agaiust the same parties for rent in arrear, with like proceedings, and a judgment for 383.31 was entered for plaintiff. On the 30th of December, 1871, two more suits, like the others, were begun, and judgments were entered and levies made as before. These suits were begun and prosecuted to judgment, and executions were entered, as if the plaintiffs were the landlords and Bunker & Plowman the tenants of the hotel and the owners of the property, entirely ignoring the sale to Spicer and his possession. On the 15tb, 16th, and 17th days of April, 1872, the complainants made sale of the goods, and this suit was brought to settle the respective right of the claimants to the fund.
    The Freedman’s Savings and Trust Company claim under the trust-deeds of April 6, 1867, and October 2,1868, and the other parties claim by virtue of the statute creating liens in favor of landlords, and the judgments above mentioned.
    W. D. Davidge for complainants.
    
      Enoch Totten for Freedman’s Bank:
    1. The sale to Spicer, made by Bunker & Plowman, with the consent of the landlords, followed by the continued possession of Spicer, terminated the relation of landlord and tenant previously existing between Bunker & Plowman and the landlords. Taylor’s Landlord and Tenant, § 514; Phipps vs. Soulthorpe, 1 Barn. & Alderson, 50; Phene vs. Popplewell, 12 C. B., (N. S.,) 334; Nicholls vs. Atherstine, 59 E. C. L., 943; Hammerton vs. Stead., 10 E. C. L., 159; Dodd vs. Acklorn, 46 E. C. L., 670; Stone vs. Whiting, 3 E. C. L., 331; Randall vs. Rich, 11 Mass., 493; McKinney vs. Reeder, 7 Watts, 123; Grinder’s Appeal, 5 Barr, 422.
    2. The tenancy having changed, the lien of the landlord, which otherwise might have been continuing, was interrupted, and the liens of the creditors by virtue of the deeds of trust attached and became prior liens. (See 14 Stat., 404.) Even if the suits at law for arrears of rent had been brought against Spicer, the trust-deed would have precedence over the landlord’s lien.
    3. The attachment suits against Bunker & Plowmam cannot affect the property. They were not brought to recover rent for the property before the sale, but for rent claimed to have accrued against Bunker & Plowman after their tenancy had terminated.
    4. These suits were not brought in the name of the proper persons, even if Bunker & Plowman had continued to be tenants.
    5. The statute lien had expired as to a large part of the claims sued on, and a large part of the rent sued for was not due, at the time of the commencement of the respective suits.
   Mr. Justice Humphreys

delivered the opinion of the court:

The trustees have in their hands moneys claimed by different parties, and this bill asks that those parties shall inter-plead. They have done so, and each claims priority. The contest is between a landlord’s lien for rent and mortgage-creditors, on the furniture on the rented premises.

Attachments were levied to enforce the landlord’s lien, but by the consent of all parties the property was sold by the trustees, the payment of which to creditors was to be postponed till this litigation should determine whether the proceeds should be handed to the landlord or the mortgagees. The questions arising are to be determined in general term in the first instance. The statute giving the landlord a lien is very explicit, and we think is somewhat plain in its terms.

After the premises were rented and taken possession of, the tenants gave a deed of trust to secure creditors, and in the due course of trade the notes, to secure which the trust had been executed, were transferred for value to the Freedman’s Bank. The evidence shows that the money loaned by the bank on the faith of the mortgages was used by the parties in different ways in and about the affairs and business of the hotel, or in transactions connected therewith. We think the evidence further shows a knowledge on the part of the landlord that the moneys obtained on the faith of the notes and trusts did go to enable the tenants to keep up the hotel and pay the rents for one or two years. We think the evidence further shows an assent to a sale and change of tenancy on the part of the landlord; that the rents were all paid for a considerable period of time after the execution of the trust-deeds, and that there was an assent on the part of the landlord to the change of the property in the furniture, subject to the mortgages; and we think the evidence fully establishes the priority of. the deeds for rents accruing after the execution and recording of the deeds; and that the proofs establish an acquiescence on the part of the landlord to the security of the trusts, whereby the lender of money would be lulled into reposing upon such security.

The statute giving landlords a lien was never intended to be used for such purpose. A landlord, like any other creditor, will lose his lien by conduct which misleads bona-fide purchasers for a valuable consideration.

A decree will be drawn establishing the priority of the deeds of trust in favor of the Freedman’s Savings and Trust Company, a reference to the auditor and master to report to the special term as to the amounts of the trustees’ accounts, and distribute the funds in hand according to the dates of the deeds, and the surplus, if any, to the landlord.

Mr. Justice Wylie dissenting.