Case ID: ad_172/html/0096-01.html
Source: Caselaw Access Project
Author: {"author": "Per Curiam:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Henry S. Orr and Mary Louise Orr, as Executors of and Trustees under the Last Will and Testament of John C. Orr, Deceased, Respondents, v. Doubleday, Page & Company, Appellant.
    Second Department,
    March 24, 1916.
    Landlord and tenant — option to renew lease — sufficiency of notice of intention to renew ■—withdrawal of notice of renewal—“ renewal ” and “ extension ” distinguished—real property — trust — equitable conversion — suit by trustee to recover rents — parties plaintiff.
    Where a tenant for years of real property with an option of renewal, gave notice in writing of its intention to renew, with the understanding that such notice was to be withdrawn if the court consented to accept a transfer of the lease to another tenant, and thereafter demanded an acknowledgment of the receipt of such notice, and gave two subleases extending beyond the term of the existing lease, but later asked to withdraw the proposal for the continuation of the lease and vacated the premises, the notice of intention to exercise the option and the demand for an acknowledgment of such notice, especially in view of the execution of the two leases extending beyond the term of the existing lease, effected a definite renewal thereof, which could not be subsequently withdrawn.
    Since the tenant in its attempt to withdraw its notice of an intention to exercise the option, referred to its right as an “ option of extension,” it was effectually bound to a renewal term without the formality of a new lease.
    The distinction between a “renewal” and an “extension” of a lease, to the effect that the former prolongs an existing lease without a new instrument, while the latter is strictly a new lease, is not applicable in this State.
    Where a testator gave property to his executors in trust to collect and convert the same into cash and to sell the property and divide it into several shares and pay a portion of the income to his wife during her life and the remainder to his children, and upon the death of the wife the shares of the trustees were to be paid to them and the shares of the children were to be retained by the trustees and paid upon their attaining certain ages, there was an equitable conversion and the trustees were vested with fuE title to rents of the property, and in an action therefor it was not necessary to make the children parties plaintiff.
    Appeal by the defendant, Doubleday, Page & Company, from a judgment of the County Court of Nassau county, entered in the office of the clerk of said county on the 6th day of July, 1915, upon the verdict of a jury rendered by direction of the court, and also from an order entered in said clerk’s office on the 31st day of July, 1915, denying defendant’s motion for a new trial made upon the minutes.
    
      Dean Emery [Frederic JR. Kellogg and Farle L. Beatty with him on the brief], for the appellant.
    
      Alfred B. Gruikshank, for the respondents.
   Per Curiam:

The chief issue here is whether defendant, which had leased from John 0. Orr a building on East Sixteenth street, Manhattan, for ten years ending November 1, 1914, with an option of renewal, gave notice of intention to renew, by which defendant became liable for rent during the renewal term. Besides denying the averments as to such renewal, the amended answer asserts a defect of parties plaintiff. It alleges that three surviving Orr children, individually, had title on November 1, 1914, and, therefore, should be plaintiffs. Upon defendant’s removal, in October, 1910, from the borough of Manhattan to Garden City, it no longer required this building; but the lease with this privilege of renewal was considered advantageous and profitable. As early as September, 1910, defendant suggested a prospective successor in its leasehold interest, but these suggestions were not consummated. Early in 1911, negotiations were had with a view to assigning to a Mr. Jacob Greenberg the remaining three and a half years of the original term, which would carry over to him this renewal option. It was proposed that he should pay $11,000 yearly rent instead of $10,000 reserved under the lease. If this substitution should receive the court’s sanction, and defendant’s liability be canceled, the executors were to be paid $1,000 cash, and the legal expenses, not exceeding $500, to procure such authority from the court, and further defendant was to guarantee Mr. Green-berg’s rent for the remaining three and a half years. While this proposal remained unaccepted, and on March 24, 1911, Mr. Greenberg in the name of the Irving Place Leasing Company, of which he was president, took from defendant a sublease of the entire premises from May 1, 1911, to November 1, 1914. Should the court authorize the trustees to substitute this subtenant as lessee, then there were further agreements between the subtenant and defendant. With such expectations defendant, on March 29, 1911, sent the first notice of renewal, of which the important parts are:

“We hereby notify you that it is our intention to take advantage of our rights and renew for a period of ten years beginning November 1st, 1914, terminating October 31st, 1924, with the understanding that this notice is to be withdrawn if the Court consents to accept the transfer of the lease now in course of negotiation to the Irving Place Leasing Company, in which event the Estate of John C. Orr is to consent to the assignment of our lease to the Irving Place Leasing Company as per agreements now pending.”

Defendant then looked for a complete disposal of its interest in this lease through this authorized substitution of the subtenant in defendant’s place. Apparently weeks passed without the lessors taking any steps to obtain any such authority. It never was obtained, and apparently not applied for, but it does not appear when this idea of a substitution was definitely given up.

In the meantime the Irving Place Leasing Company was subletting, so that defendant was being asked for authority to make longer terms to subtenants of the Irving Place Company which, in 1912, appeared to be solvent and prosperous. Defendant accordingly, on October 28, 1912, wrote to the Orr Estate:

“ On or about June 1st, 1911 [a clerical error for March], we notified you of our intention to renew the lease for the property at 133 East 16th street for a period of ten years, taking advantage of the option given us in our lease. The second term begins November 1st, 1914. The present tenant of the building, the Irving Place Leasing Company, desire to give to a respective (sic) tenant a five-year lease for the fifth floor of the building, and have requested us to give them the lease for the second term, namely, from November 1st, 1914, to November 1st, 1924. Won’t you please send us communication acknowledging receipt of our notice to you of our intent to take advantage of this option ? ” (The writer alluded to defendant’s yearly profit of $750 by its sublease, and the satisfactory manner the Irving Place Leasing Company was meeting its obligations, but asked the Orr Estate to make defendant a proposition to take over the lease.) It concluded: “Please send at once the acknowledgment of our notice, and let us hear from you in reference to the lease after you have had time to give it careful consideration.”

Neither this letter nor the one of March, 1911, was ever acknowledged.

The five-year lease of the fifth floor was apparently made to the Phoenix Engraving Company by the Irving Place Leasing Company, which latter’s affairs became so involved that, in the spring of 1913, it was dispossessed by defendant. This left the Phoenix Engraving Company in difficulties, as it had made expensive alterations upon the faith of its five-year term. On April 1, 1913, defendant granted the Phoenix Engraving Company a new lease to cover the original five-year term which ran to December 31, 1917, thus overrunning defendant’s original term. While defendant was thus protecting an innocent victim of another’s default, still the granting of such a lease assumed the effect and efficacy of its prior notices of renewal. At this time defendant gave another lease to the American Letter Company which ran two or three months beyond October 31, 1914. However, the situation appears to have changed quite abruptly, as on April 28,1913, defendant wrote to the Orr Estate: “We wish to write and withdraw the tentative proposal for the continuation of our lease on your property at 133-137 East 16th Street. It is our understanding of the lease that we have up to within ninety days of its expiration, as a period in which we can definitely take the option of extension which the lease secures to us.” This was unanswered. On November 1, 1914, defendant vacated the premises. This action for three months’ rent was begun January 28, 1915. ■ The letter of March 29/1911, was a direct notice of intention to renew. If the trustees should be allowed to accept the Irving Place Leasing Company as a tenant, such a notice might stand in the way; hence the understanding stated that in such event the notice is to be withdrawn — a right thus made dependent upon this substitution. Though the representatives of the Orr Estate never obtained such leave, defendant did not withdraw, and by not exercising this reserved right, allowed it to lapse and the notice to become absolute. The October letter confirmed, the defendant as a continuing tenant, then planning to grant five-year terms to its subtenants. Defendant’s counsel cites Poel v. Brunswick-Balke-Collender Co. (216 N. Y. 310) as to the effect of the lessors’ disregard of defendant’s request that its October letter be acknowledged. Defendant in that case embodied in an order for merchandise a condition, which it had a right to annex to its offer, that “in any event you must promptly acknowledge ” the order. In such case a failure to reply was deemed no acceptance. Here an acknowledgment was simply requested and not made an essential condition. Clearly, therefore, the notices through these successive letters, especially in view of defendant’s two leases running into the renewal term, effected a definite renewal of the lease, which its letter of April 28, 1913, was ineffective to withdraw or cancel.

The learned counsel, however, urges the verbal distinction between a “renewal” of a lease and its “ extension” — in that an “extension” prolongs any existing lease without a new instrument, while “ renewal ” is strictly a new lease. Hence that defendant should not be held liable under the old lease, but that, as a condition of its liability, the lessor should have tendered a new lease for ten years from November 1, 1914. Such nicety in distinguishing legal terms, however, is not accepted in New York, where McAdam on Landlord and Tenant (4th ed. § 152) has declared for a wider scope for the word “renewal.” (See Hausauer v. Dahlman, 72 Hun, 607; Underhill Landl. & Ten. § 803.) Indeed defendant itself terms its right as an “option of extension” in its formal letter of April 28, 1913. Hence defendant’s notices effectually bound it upon a renewal term without the formality of a further ten-year lease.-

But the defect of parties is insisted upon. The will of John 0. Orr, who died December 15, 1906, was considered in Orr v. Orr (147 App. Div. 753) in extended opinions by Clarke, J., and Ingraham, P. J., dealing with the alleged suspension of the power of alienation. The statute was held not to be violated because each interest will terminate upon the beneficiary reaching the age in the will (p. 757).

All the testator’s property was given to his executors in trust by the 8th paragraph of the will, “to collect and receive the same and convert the same into cash except as hereinafter stated. ” A trust to séll for the benefit of legatees is one of the allowable purposes for trusts in New York. Save as therein excepted, the property was to be sold and the trust estate divided into six shares, setting apart a portion to each beneficiary and “ to place the same at interest for their benefit and for the benefit of my said wife,” and “to pay over to my said wife, semi-annually, two-fifths of the net income or interest of each of said portions for and during” her life and “during that time to pay the remaining three-fifths of said income ” to or for the children in the manner stated. Upon the widow’s death the share of Henry S. Orr and Mary Louise Orr thus set apart for him and her is to be paid over to them respectively. The shares of each of the other four children are to be retained by the trustees, paying over the net income to such as are of age, with payment of the principal shares when two of the children respectively reach the age of thirty years and to the remaining two children when each is of the age of thirty-five years.

As ancillary to these dispositions, the will in the 13th clause has this power of sale: “ I further authorize my executors and trustees and the survivors of them to sell, convey, mortgage, lease and release any property, real or personal, which I may own at the time of my decease, wherever situated.”

From all of these provisions it cannot be doubted that an equitable conversion was intended. The purpose of the trust is to sell, to invest, and to pay. (Stagg v. Jackson, 1 N. Y. 206; Dodge v. Pond, 23 id. 69; Finley v. Bent, 95 id. 364.)' The direction to pay supports the construction that a conversion was intended. (Chamberlain v. Taylor, 105 N. Y. 185.) The scheme of separation of shares and delivery of shares to the different children calls for conversion of the land into personalty, although the language of the power of sale, taken alone, is not a positive direction for such sale. The trustees here as such are, therefore, vested with full title to these rents, which remains after the children reach the ages provided for payment to them of their separate shares, and this judgment in favor of the plaintiffs is a full protection to defendant against the rights of any heirs of the lessor.

It follows that the verdict for plaintiffs was rightly directed. The judgment entered thereon by the County Court of Nassau county, with its order denying defendant’s motion for a new trial, should be affirmed, with costs.

Jenks, P. J., Thomas, Stapleton, Mills and Putnam, JJ., concurred.

Judgment and order of the County Court of Nassau county affirmed, with costs.