Case ID: ad_163/html/0489-01.html
Source: Caselaw Access Project
Author: {"author": "Hotchkiss, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

George O. Glendening, Respondent, Appellant, v. The Western Union Telegraph Company, Appellant, Respondent.
    First Department,
    July 10, 1914.
    Landlord and tenant — assignment of lease, what constitutes — violation of covenant against assignment without consent of lessor.
    An assignment of a lease need not be in any particular form. It is sufficient if by it the entire interest of the lessee in the term passes without reversion.
    Hence, where the lessee of a building for restaurant purposes after selling a one-half interest in the business to O. executes powers of attorney by which he irrevocably authorizes 0. to carry on the business and appoints him his attorney ‘ to hold, sell, assign or surrender ” his interest in the lease and thereafter ceases to take any actual part in conducting the business, he will be deemed to have made an assignment of his lease and to have violated a covenant thereof against assigning or subletting without the written consent of the lessor.
    Dowiiixu. J., dissented.
    
      Appeal by the defendant, The Western Union Telegraph Company, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 21st day of April, 1914, upon the decision of the court after a trial at the New York Special Term.
    Appeal by the plaintiff, George 0. Glendening, from so much of said judgment as decrees that plaintiff is entitled to recover compensatory damages only in this action.
    The judgment restrained the defendant from interfering with plaintiff’s possession of the store 8, 10 and 12 Dey street, and the storeroom in the basement thereunder, in the city of New York.
    
      George Gordon Battle, for the plaintiff;
    
      Rush Taggart, for the defendant.
   Hotchkiss, J.:

On April 28, 1908, defendant leased to plaintiff, doing business as the Interborough Dairy Lunch Company, the premises in question for the term of ten years from the 1st day of May, 1908, the same to be used for restaurant purposes only. The lease contained a covenant by the plaintiff against assigning, letting or subletting all or any part of the premises without the defendant’s written consent to each and every such assignment or subletting, and for a violation of this covenant it was agreed that, at the option of the defendant, the lease should become void and the defendant might re-enter without notice. Plaintiff entered into possession of the premises, equipped them for restaurant purposes and conducted a restaurant therein until about March 1, 1911, when he sold the business to the Guilford Dairy Lunch Company, and, with the consent of the defendant, sublet the premises to that company, which remained in possession until about October 1, 1911, when, being unable to continue the business, it surrendered to plaintiff, who thereupon reassumed possession of the premises, which remained closed for about two months, during which time one O’Brien advanced to the plaintiff about $4,000, which was used in refitting and rehabilitating the restaurant, which, in December, 1911, was reopened and the business continued for the joint account of plaintiff and O’Brien. On January 24, 1912, plaintiff and O’Brien executed an agreement wMch recited that O’Brien had advanced $4,000 for the purposes of the business, one-half of which plaintiff had agreed to repay, and had given plaintiff a note for some $1,741, representing arrears of rent left unpaid by the Guilford Company, which note had been paid by plaintiff. By this agreement plaintiff sold to O’Brien a half interest in the equipment of the restaurant, in the business itself and the profits thereof, and a “ one-half interest in and to all sums that may be realized from the sale, surrender or cancellation of ” the lease. This agreement also provided that the first available profits of the business were to be applied to the payment of plaintiff’s debt to defendant for one-half of his (defendant’s) said advances. In the same agreement it is recited that “this is not to be taken as' such an assignment of such lease as to give the party of the second part [O’Brien], the right to enter and take possession of the said premises.” Plaintiff and O’Brien continued to jointly conduct the business until August 28, 1912, when they entered into an agreement which recites that plaintiff “ has been conducting a restaurant at No. 10 Dey Street in the City of New York, for which the party of the second part [plaintiff] has contributed large sums of money and has devoted his personal attention thereto during the past five months; and whereas said business is carried on * * * under a lease, which provides, amongst other things, that the lessee shall neither sublet the premises nor assign the lease without the consent of the lessor, which has consented to a sub-letting to the Guilford Dairy Lunch Company, a corporation; and whereas the party of the second part desires to use certain sums of money, which the party of the first part [O’Brien] is willing to pay or to procure for him.”

After providing for certain moneys to be paid by O’Brien to plaintiff, and for certain other moneys which O’Brien agrees to procure for plaintiff on the security of a mortgage to be executed by plaintiff on certain* real property belonging to him, and which latter moneys are to be used in paying certain debts of plaintiff, the agreement continues:

Second. The party of the second part [plaintiff] shall forthwith * * * execute and deliver to him [O’Brien] an irrevocable power of attorney to conduct said business at No. 10 Dey Street, and a separate power of attorney to sell, assign, sub-let or in any other way dispose of any right which the party of the second part may have in and to the said lease from the Western Union Telegraph Company to me except in accordance with the terms of said lease; but this is upon the express condition that upon the disposition of said lease, if to the Western Union Telegraph Company itself, the party of the first part shall pay to the party of the second part fifteen per cent (15%) of the amount received; and, if to any one else, an accounting shall be had and fifteen per cent (15%) of the net profits, if any, of the entire business shall be paid to the party of the second part, the same in full settlement of the claims of the respective parties.”

On the same day plaintiff executed two powers of attorney which were recorded December 4, 1912. The first appointed O’Brien plaintiff’s “ attorney irrevocable for me [plaintiff] and in my name to carry on the business now conducted in my name at No. 10 Dey Street, * * * and to do and perform all necessary acts in the execution and prosecution of the aforesaid business in as full and ample a manner as I might do if I were personally present,” etc. By the second power, plaintiff appointed O’Brien “my true and lawful attorney irrevocable for me and in my name in accordance with the terms of the following lease to hold, sell, assign or surrender any interest that I may have in any lease made to me by The Western Union Telegraph Company of the store No. 10 Dey Street, New York City, * * * and to execute in my name any instrument necessary to effectuate any such agreement. ”

After the delivery of these instruments plaintiff ceased to take any actual part in conducting the business, which thereafter was conducted by O’Brien, the proceeds being received by him alone,, and he paying the expenses. During the same period O’Brien was in actual possession of the premises. The court found a variety of evidentiary facts, some leading to the inference that defendant knew of certain of the transactions between plaintiff and O’Brien, and expressed no objection thereto, and others negativing such a conclusion, but there is no finding that defendant ever waived or by any act estopped itself to enforce the covenant against assigning; nor did the evidence justify any such finding. On June 26, 1913, defendant served plaintiff with notice that, having discovered, as it claimed, that plaintiff had violated his covenant not to assign, defendant elected to declare the lease void, and to repossess itself of the premises, and thereupon it proceeded to cut off the supply of water, steam and electricity, with which under an agreement collateral to the lease defendant had supplied the premises, thus compelling the closing of the restaurant, which was then in full operation, whereupon this action was begun to restrain defendant from canceling the lease and for other relief.

There is no finding and no evidence to justify a finding that the transaction evidenced by the instruments of August 28, 1912, involved any loan of money by O’Brien to plaintiff, or that such instruments were intended as a mortgage. There is nothing from which it could be inferred that any moneys, except a percentage of the proceeds of the lease, if the same should be sold, the business, or the possession of the premises, were ever to revert to plaintiff. It does appear that defendant on several prior occasions was asked to consent to an assignment of the lease to O’Brien, which it refused to do. Uo fact is found to negative the fair import of the transaction regarded as a whole, which is that plaintiff sold his half interest in the business, and all of his interest in the lease, to O’Brien, and that he executed the several instruments for the purpose of transferring to and investing O’Brien with the ownership of both. The act of recording of the powers of attorney was of no significance unless they, or the one particularly affecting the lease, were to be read as an assignment. The care taken to recite in the agreement by virtue of which the powers were executed, that the lease was not assignable, is not, under the circumstances, to be accepted as evidence of any actual intent or purpose not so to assign, because a failure so to assign is inconsistent with the evident purpose of the parties. To my mind this recital is greater evidence of a cunning attempt on the part of the draftsman to conceal his real object than of an honest purpose to protect a bona fide interest against what might otherwise be urged for its defeat. But, by the instruments passing between them, did the parties actually succeed in assigning the lease ? By the first power O’Brien is irrevocably empowered to carry on the business, and by the second he is appointed plaintiff’s attorney irrevocable “ to hold, sell, assign or surrender ” plaintiff’s interest in the lease. An assignment of lease need not be in any particular form. It is sufficient if by it the entire interest of the lessee in the term passes, without reversion. (Herzig v. Blumenkrohn, 122 App. Div. 756.) Under the power O’Brien was not only authorized to sell and assign the lease, but “to hold” plaintiff’s interest therein, arid this irrevocably, and possession was surrendered to him. I cannot see that this left any reversion in plaintiff. It is urged that the power was not one coupled with an interest and would have been revoked by plaintiff’s death. The power was executed in pursuance of the previous agreement and for the consideration therein expressed. It was, therefore, not only irrevocable, but inasmuch as it included a power “to hold,” and possession was taken thereunder, it was a power coupled with an interest and would have survived plaintiff’s death. (Terwilliger v. Ontario, C. & S. R. R. Co., 149 N. Y. 86; Hutchins v. Hebbard, 34 id. 24; Hunt v. Rousmanier, 8 Wheat. 174.) Under these circumstances, O’Brien in plaintiff’s lifetime or thereafter could have made conveyance of the lease in his own name. (Hunt v. Rousmanier, supra, 204, 205.) The record justifies our finding that this power was in fact intended to be, as it was in law, an assignment.

The 36th and 38th findings of fact of the trial court should be reversed, and a finding made that the possession of the premises by O’Brien after August 28, 1912, was exclusive and in his own right as assignee of the whole remaining term of the lease, by virtue of an assignment thereof from the plaintiff evidenced by the paper hereinbefore referred to.

The judgment should be reversed, with costs and disbursements to appellant, and the complaint dismissed, with costs. Settle order on notice. -

Ingraham, P. J., McLaughlin and Scott, JJ., concurred; Dowling, J., dissented.

Judgment reversed, with costs, and complaint dismissed, with costs. Order to be settled on notice.