Case ID: ny-st-rep_26/html/0387-01.html
Source: Caselaw Access Project
Author: {"author": "Brown, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Charles Robinson, App’lt, v. Hugh J. Jewett, Rec’r, Resp't.
    
    
      (Court of Appeals, Second Division,
    
    
      Filed October 8, 1889.)
    
    Promise — Consideration for.
    . Plaintiff, a director and president of the RTationaLStock Yard Association, took a lease of certain yards for the benefit of that and the Union Stock Yard Company, in his own name, without their consent. Seld, that he could not hold it for his own benefit, nor deal with it as his own property, and was bound to transfer it to the corporations upon demand, and that his so transferring it to them was not a valid consideration for a promise by them to pay him five per cent of their income for his so doing.
    Appeal from a .judgment of the general term of the first judicial department, affirming a judgment in favor of the defendant entered upon a report of a referee.
    The action was brought to recover one-fifth of the net profits of the Fortieth Street Stock Yards in New York city during the period from September 1, 1877, to October 1, 1878, and was founded upon the following alleged contract:
    
      Whereas, Charles Robinson has leased from Charles B. Appleby certain lands and premises, situated upon Thirty-ninth, Fortieth and Forty-first streets and Eleventh avenue, in the city of New York, for the term of ten years from May 1, 1875, at the annual rent of $21,370, and taxes, as by reference to said lease will appear; and,
    
      Whereas, On the 28th day of May, 1875, the said Charles Robinson entered into an agreement with the National Stock Yard Company, a corporation duly organized and existing under and by virtue of the laws of the state of New Jersey, for the assignment to said company of said lease; and,
    
      Whereas, the Erie Railway Company, a corporation duly organized under the Laws of the state of New York, has become largely interested in said National Stock Yard Company, and thereby in said lease;
    Now, therefore, it is hereby agreed between said Robinson and said Erie Railway Company as follows:
    
      First. That said Robinson will assign to said National Stock Yard Company, whenever requested by resolution of its board of directors, or upon request of the Erie Railway Company, so to do, the said lease, with proper covenants and conditions, to secure the payment of the rent of said premises, and the security and indemnity of him, said Robinson, by forfeiture of said lease or transfer in the event of failure to pay said rent by said assignee or otherwise.
    
      
      Second. That the Brie Railway Company, or the receiver of said company, guarantees the payment on the part of said National Stock Yard Company of the rent and taxes of said premises us provided for in said lease; and that said company, their successors or assigns, will assume and perform all the obligations assumed by said Robinson in said lease.
    
      Third. That said Erie Railway Company, or said receiver of said company, on its behalf, guarantees' to said Robinson from the date of said transfer the payment by said National Stock Yard Company of one-fifth of the net profits arising from the business to be carried on upon said premises, or from their use or occupancy ; and, to arrive at said amount, it is agreed that accurate books of account shall be kept of the business transacted at or upon said premises and received for their use and occupancy; that balance sheets shall be made up and settlements and payments made in accordance therewith, semi-annually, viz., on the first day of August and the first day of February of each year.
    In witness whereof, the party of the first part hath hereunto set Ms hand and seal, and the party of the second part hath caused its corporate seal to be hereunto affixed, and these presents to be subscribed by its president, and the receiver of the said Brie Railway Company, the party of the second part, hath also set his hand and seal in his capacity as such receiver, the day and year first above written.
    (Seal of Brie Ry. Co.)
    (Signed)
    (Signed)
    In presence of
    (Signed) C. Gr. Barber.
    Attest: A. R. MacDonough, Secretary.
    
    Charles Robinson. [l. s.] H. J. Jewett,
    
      Receiver Erie Railway Company.
    
    The referee found as a fact that there were no profits earned, and ■dismissed the complaint.
    Further facts appear in the opinion.
    
      Joseph H. Choate, for app’lt; William D. Shipman, for resp’t.
    
      
       Affirming 14 N. Y. State Rep., 223.
    
   Brown, J.

If it was necessary to the determination of this •case to decide whether the evidence showed that profits were ■earned at the premises described in the lease to the plaintiff during the period mentioned in the complaint, we should feel constrained to differ with the learned referee upon that question of fact, and hold that the undisputed testimony was that profits were earned.

The guaranty was “ of one-fifth of the net profits arising from the business to be carried on upon said premises, or from their use <and occupation,” and it appears, without dispute, that during the period covered by this action nearly six hundred thousand hogs were unloaded from the cars of the New York Central & Hudson River Railroad Company, at said-premises, and for such use of the property nearly forty-eight thousand dollars was paid by said railroad company to the Union Stock Yard & Market Company. This sum was largely in excess of the expense of the maintenance of the yards, and such excess represented net profits for the use •of the yards.

The guaranty was not limited to the profits earned by the National Company, but included all that accrued from the business carried on on the premises, or from their use and occupation, and therefore embraced in its terms the profits earned by the Union Stock Yard & Market Company, which, during the period in question, used the property jointly with the National Company.

It is of no consequence that the money paid by the railroad company was not paid at the stock yards, nor that the Stock Yard Company, after its receipt from the railroad company, paid it into a pool, with receipts from other railroads, for the use of other stock yards. The fact remains that it.was a receipt for the use of the stock yards in question. And this conclusion is not weakened because the precise relations existing between the New York Central & Hudson River Railroad Company and the Union Stock Yard & Market Company were not shown on the trial. It was shown that a place to unload the stock was a necessity to the proper discharge of this branch of the railroad business, and that the New York Central & Hudson River Railroad Company had no other place in the city of New York to unload the hogs carried upon its road, and used and occupied the premises in question for that purpose. That during the period covered by the suit it paid to the Stock Yard & Market Company a sum equivalent to eight cents a head for every hog discharged at the Fortieth street yards. This evidence was certainly sufficient to make out a prima facie case for the plaintiff, in the absence of any testimony tending to contradict it or destroy its force, and admitted of no inference other than that the money so paid was paid for the use and occupation of the premises in question.

Inasmuch, however, as we think the judgment must be affirmed on other grounds, it is unnecessary to state more fully the reasons for our conclusions as to this branch of the case.

It is claimed by the respondent that the contract upon which the action is founded is without any valid consideration, and this point we think is fatal to any recovery on the part of the plaintiff.

It appears that prior to April 8, 1875, the copartnership of Allerton, Butcher & Moore were the lessees of the premises known as the Fortieth street stock yards and at and prior to that •date the National Stock Yard Company was in the occupation and possession thereof jointly either with said copartnership or with the Union Stock Yard & Market Company.

The evidence does not show when the Union Stock Yard Company was incorporated. It appears, however, to have been in existence in the month of May, 1875, and probably succeeded to the business of Allerton, Butcher & Moore, and its organization, if not completed, was contemplated by the parties at the time of the lease to the plaintiff. The lease to the copartnership expired on May 1, 1875, and on April 8, 1875, the plaintiff took a lease in his own name for the premises from Charles E. Appleby for the term of ten years at an annual rent of $21,370, besides taxes and assessments.

At that time the plaintiff was a large stockholder in the National Stock Yard Company and a director and president thereof, and had been president since January, 1870.

On May 28, 1875, at a meeting of the board of directors of said stock yard company called by order of the plaintiff as president, and at which he was present and presided, the following resolution was adopted:

Whereas, Mr. 'Charles Robinson for the benefit of this company has taken a half (J) interest in the lease of the West Fortieth street yards,

Resolved, therefore, that the same be assumed by the National Stock Yard Company, and that Mr. Robinson assign his interest in the lease to this company.”

On the same day the plaintiff executed an instrument, the parties to which were declared to be the plaintiff, The Union Stock Yard & Market Company, and The National Stock Yard Com-' pony. It recited the lease from Appleby to the plaintiff, and that “ said lease of said premises was taken- by said Robinson for the joint benefit of The Union Stock Yard & Market Company, and The National Stock Yard Company.” It then purported to assign the said lease to the said two companies, ana said companies agreed to pay the rent reserved and perform all the covenants and agreements therein contained to be performed by said Robinson, and to hold said Robinson harmless on all covenants therein.

This instrument was executed by the plaintiff and The National Stock Yard Company, but not by the Union Company.

It was produced on the trial by the defendant who, at that time, was the president of the National Company, and the representative of the majority of the stock, and it is a fair presumption from this fact that it was after its execution delivered to the National Company.

The defendant was appointed receiver of the Erie Railway Company by two orders of the supreme court, dated respectively May 26 and June 15, 1875.

On the 28th day of July, 1875, the defendant presented to the supreme court a petition in which he set forth a series of contracts which had been executed between the Erie Railway Company and the National Stock Yard Company in reference to the stock transported by the railway company, and alleged that said contracts were very prejudicial to the interests of the railway company, and were fraudulent and void, and that legal proceedings had been instituted in New Jersey by the railway company, and were then pending for the purpose of having such contracts set aside. That such proceedings might be continued for a long time, and that the use of the property then in the possession of the Stock Yard Company, leased to it by the railway company, was necessary to the railway company to enable it to carry on the business of transporting stock, which was a large and important branch of the freight business of said railway company. That it was deemed advisable in furthering the best interests of the trust reposed in the petitioner to control the contracts in evidence, and, so far as possible, to get rid of them by purchasing the outstanding stock of the Stock Yard Company, and thus controlling the corporation, and to that end; subject to the approval of the court, two contracts had been entered into with the plaintiff which were annexed ta the petition.

One of these contracts was the one in suit. The other was for the purchase of 3,623 shares of the stock of the Stock Yard Company, for the sum of $53,000.

The petition further set forth that the stock so purchased from the plaintiff, together with 1,822 shares agreed to be purchased from the widow of James Fisk, and that already held by the railway company, would give to the petitioner the absolute control of the Stock Yard Company, enabling it to be managed in harmony with the interests of the railway company. Leave was, therefore, asked to execute and perform the contracts according to the terms thereof.

An order having been granted in accordance with the prayer of the petition, the two contracts were executed. The plaintiff thereupon transferred to the railway company the stock held or controlled by him in the Stock Yard Company, and received payment therefor as provided in the contract

Subsequently he executed and delivered to the Stock Yard Company an assignment of the Appleby lease, and on August 2, 1875, the Stock Yard Company directed them counsel to take no proceedings in the litigation pending between the Erie Railway Company and the National Stock Yard Company without further special directions, “the matters in controversy having been adjusted”

The case contains very little oral testimony as to the contract in question. The plaintiff was not sworn as a witness. The defendant testified as follows:

“ When I became disturbed in regard to the relation of Mr. Robinson to the interests of the Erie railway in the transportation and handling of its stock I proposed to buy out his interest in the Stock Yard Company. My first supposition was as a matter of course that the lease went with it Before we got through, however, after I paid for a large part of the stock, Mr. Robinson developed the fact that he claimed that lease for himself. To avoid any trouble, I agreed to give him, if he would relinquish that claim, a portion of the profits arising from the business in that yard.” Upon this evidence, the question arises whether the assignment of the lease to the National Stock Yard Company was a good consideration to support defendant’s promise to pay to plaintiff one-fifth of the net profits arising from the use and occupation of the leased premises.

It is claimed, on behalf of the plaintiff, that he was under no legal obligation to assign the lease to the National Company, and even if he was, the contract in suit was part of a general compromise, and was, therefore, based on a consideration highly favored in the law.

There were no differences existing between the Erie Railway Company or defendant, as its receiver, and the plaintiff at the time the agreement under consideration was executed. The

gending litigation was between the railway company and the took Yard Company. The two contracts entered into by the receiver left the litigation and all differences between the two-corporations untouched and still existing. The contracts related solely to plaintiff’s property, and by their terfns had no connection with the settlement or compromise of any of the matters in controversy between the corporations.

It is true that the avowed purpose of the purchase of plaintiff’s stock was to place the Stock Yard Company under control of the railway company, and thus end the litigation, but this was to be the result, and was not the subject-matter of the contracts.

The plaintiff did not own or control a majority of the stock of the Stock Yard Company, and the purchase of his stock was but a step toward the final settlement of the litigation.

In the agreements between the parties there was, therefore, no compromise, and no settlement of any litigation.

We come, then, to the question whether the plaintiff was under a legal obligation to assign the lease to the National Company. The referee made no finding upon this question, and none appears to have been asked. As its determination was not necessary to support the judgment rendered, we can presume none; but on the facts before us there can be hut one answer to this inquiry.

Those who are in possession of lands under a lease have an interest therein beyond the subsisting term, usually called the tenant’s right of renewal.

Between the landlord and tenant this interest cannot strictly be denominated a right or estate but is merely a hope or expectation, there being in the absence of contract no way legal or equitable of compelling a renewal. But as between third persons the law recognizes this interest as a valuable property right, and the renewal as a reasonable expectancy of the tenants in possession. Phyfe v. Wardell, 5 Paige, 268; Keech v. Sandford, 1 Leading Cases in Equity, 32 and note; Mitchell v. Reed, 61 N. Y., 123; Armour v. Alexander, 10 Paige, 571; Gibbes v. Jenkins, 3 Sandf. Ch., 130; Moody v. Matthews, 7 Ves. (Sumner ed.), 185 and note; Featherstonhaugh v. Fenwick, 17 Ves., 298.

The authorities are numerous where courts of equity have recognized the right of renewal so far as to decree that new leases granted upon the supposition of a right of renewal should be for those interested in the old lease, and those who had taken the new lease have been decreed to hold it as trustee for the first lessee.

This principle has been frequently applied in partnership cases where one partner, without the knowledge of his co-partner, has taken a renewal lease, for his own benefit, of premises leased by the firm, and in such cases the lease so taken enures to the benefit of the firm. Struthers v. Pearce, 51 N. Y., 357; Mitchell v. Reed, 61 id., 123. The renewal lease is in equity regarded as a continuance of the original lease, so far as concerns the legal and equitable rights of those who had an interest in the old lease. Moody v. Matthews, supra. The rule grows out of the relation of trust and confidence between the parties interested, and falls within the principle that a trustee cannot profit from the estate for which he acts.

It is appropriately o applied to a trustee of a corporation taking in his own name a renewal lease of premises in possession of the corporation.

Every consideration, legal and moral, requires that the trustee should protect the corporation and its property and see that the interests of other stockholders suffer no loss from his default. He cannot speculate with the corporate property, or deal with it as his own. Between the trustee and the corporation the right of renewal of the lease is a property right, and if the lease is renewed in the name of the officer, it enures to the benefit of the corporation. In this case the National Company held contracts with the Erie Railway Company which made it necessary that it should provide a suitable place in the city of New York to unload and care for the stock carried on the railroad. These contracts extended beyond May 1, 1875, when the old lease expired, and it was essential to the execution of these contracts that the lease should be renewed. The duty of procuring the renewal seems to have rested upon the plaintiff, and, having obtained the new lease, he could not hold it for his own benefit, nor deal with it as his own property, but the renewal enured to the benefit of the corporation for which he acted.

Moreover, plaintiff does not appear prior to the date of the agreement in suit to have denied the right of the National-Com-pony to one-half of the lease, but admitted it in assenting to the resolution of the directors at the meeting of May 28, 1875, and in the recitals in the agreement of the same date which I have quoted. It also appears from this resolution and agreement that the other half of the lease was held by the plaintiff for the Union Stock Yard & Market Company. Arrangements similar to those existing between the National Company and the Erie Railway Company existed between the New York Central Railroad and the Union Company, and the latter company was under a like necessity as the National to provide a place in the city of New York to unload the stock from the Central Road.

The National Company had admitted the right of the union to one-half of the lease, and there can be no question on the evidence but that plaintiff took and held the new lease in trust for both corporations, and this conclusion is corroborated by the arrangement between the two stock yard companies made soon after the assignment of the lease for the joint use and occupation of the yard.

Having taken the lease for the benefit of the two corporations in his own name without their assent, the plaintiff was bound to transfer it to them upon demand.

In assigning the whole lease to the National, that company took it subject to the rights of the Union Company, and the legal effect of the transfer was to give to the National Company only such share in the lease as it was entitled to.

In this there was no consideration for defendant’s promise. The plaintiff did that only which he was bound to do, and that which a court of equity would have compelled him to do, and the corporation received only that to which it was legally entitled

The performance of an act which the party is under a legal obligation to perform cannot constitute a consideration for a new contract. Bartlett v. Wyman, 14 Johns., 260; Crosby v. Wood, 6 N. Y., 369; 2 Parsons on Cont., 437; Vanderbilt v. Schreyer, 91 N. Y., 392.

The agreement sued on was, therefore, for the reasons stated,, void, and the judgment must be affirmed, with costs.

All concur.