Case Name: MUDGE v. WEST END BREWING CO.
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1911-05-16
Citations: 130 N.Y.S. 350
Docket Number: 
Parties: MUDGE v. WEST END BREWING CO.
Judges: 
Reporter: West's New York Supplement
Volume: 130
Pages: 350–354

Head Matter:
MUDGE v. WEST END BREWING CO.
(Supreme Court, Appellate Division, Third Department.
May 16, 1911.)
1. Landlord and Tenant (§ 160 )—Covenant to Surrender—Effect.
A lessee’s covenant to surrender the property in good condition at the expiration of the lease relates to the physical condition of repair, and did not include liability for future rent lost because of the lessor’s inability to rent the premises for a saloon, for which alone they were adapted, because of the tenant’s breach of the liquor tax law during the term.
[Ed. Note.—For other cases, see Landlord and Tenant, Cent. Dig. §§ 612-626; Dec. Dig. § 160. ]
2. Landlord and Tenant (§ 134 )—Covenants—Indemnity.
Plaintiff leased certain premises, only adapted for saloon purposes, to defendant prior to the adoption of Liquor Tax Law (Consol. Laws 1909, c. 34) § 39, providing that no new liquor tax certificate shall be issued for the carrying on of liquor business on premises, the occupant of which, a prior certificate holder, has been convicted of violating the liquor law during one year from the date of conviction. The lease contained a covenant to indemnify plaintiff from any liability that might occur on account of the sale of intoxicating liquors on the premises, or because of any violation of any provision of the liquor tax law, etc. Held, that such covenants did not cover a loss of rents by plaintiff after the term, because of his inability to rent the premises for a saloon, owing to a conviction of the prior occupant under defendant’s lease of a violation of the liquor tax law.
[Bd. Note.—For other cases, see Landlord and Tenant, Cent. Dig. §§ 482-486; Dec. Dig. § 134. ]
Smith, P. J., and Kellogg, J., dissenting.
Appeal from Trial Term, Schenectady County.
Action by William H. Mudge against the West End Brewing Company. Judgment for defendant (68 Mise. Rep. 362, 125 N. Y. Supp. 15), and plaintiff appeals.
Affirmed.
Argued before SMITH, P. J., and KELLOGG, SEWELL, HOUGHTON, and BETTS, JJ.
W. W. Wemple, for appellant.
Henry V. Borst, for respondent.
For other cases see same topic & § number in Dec. & Am. Digs. 1907 to date, & Rep’r Indexes
For other cases see same topic & § number in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes

Opinion:
HOUGHTON, J.
The defendant is owner of premises in the city of- Schenectady, which the court has found were adapted only for saloon purposes. He leased them with the furniture and fixtures to the defendant for one year from May 1, 1906, with the privilege of two years more, which privilege the defendant exercised, and paid the full rent up to the time of the expiration of the lease on April 30, 1909. The lease contained a provision that the defendant might sublet, and it did sublet to one Kuhl; the defendant, however, paying the rent. Shortly before the expiration of the lease, and in March, 1909, Kuhl was convicted of permitting gambling on the premises and his license certificate was canceled. In May, 1908, a law was enacted, which went into effect immediately, providing, among other things, that no new certificate should be issued for the carrying on of the liquor business upon premises the occupant of which had been so convicted during the term of one year from the date of conviction of the former certificate holder. The effect of this law upon the premises was that no liquor tax certificate could be issued to any occupant until April 1, 1910. The premises being only suitable for a saloon, the plaintiff was unable to rent them as such, and brought this action against the defendant for the loss of his rent from the time of the expiration of the lease of defendant to said period when the premises were again free to be rented for saloon purposes. The lease contained the usual covenant that the tenant would at the expiration of the term surrender the premises in good condition, necessary wear and tear by the elements excepted, and also that the tenant would replace or pay for any articles or property belonging to the landlord, if the same were destroyed or damaged except through reasonable use.
In addition, the lease contained a covenant that the defendant would indemnify and save the plaintiff harmless from any liability that might occur on account of renting the premises for the sale of intoxicating liquors, and for any liability that might arise by virtue of any civil damages because of the sale of intoxicating liquors to any person ; and further provided as follows:
"And for protecting said first party against any liability that may occur on account of the provisions of the statute, section 39 of the liquor tax law or any violation that may occur on account of any requirement or provision of said liquor tax law, or otherwise, and in case of any liability on account of any illegal sales of intoxicating liquors, or any liability for damages suffered under and by virtue of such law, or any law rendering said first party liable for damages under the civil damage act or otherwise, then and in that case said second party hereby will save said first party harmless as landlord."
The trial resulted in a dismissal of plaintiff's complaint so far as damages for loss of rent were concerned, and the plaintiff appeals.
We are of opinion the learned trial court properly denied damages for loss of rent because the premises could not be rented for saloon purposes to which they were alone adapted.
The covenant to surrender the property in good condition at the expiration of the lease manifestly can relate only to the physical condition of repair. The rule of damages applicable to such covenant precludes the idea that loss of rent is included in it. The rule without variation is that under such a covenant the damages are what it would cost to put the premises in the required state of repair. Appleton v. Marx, 191 N. Y. 81, 83 N. E. 563, 16 L. R. A. (N. S.) 210. It was contended in Lehmaier v. Jones, 100 App. Div. 495, 91 N. Y. Supp. 687, that the rule of damages under such a covenant ought to be the difference in fee value, but the contention was repudiated as manifestly unsound.
If such a covenant does not cover the difference in fee value, it certainly cannot cover the difference in rental value as damages for the nonrentability of the premises.
The other covenants of the lease referring to the liquor tax law are manifestly covenants of indemnity against liability. The language of these various covenants is broad, and, if the law disqualifying the premises from carrying on the liquor business within one year after an occupant had been convicted of permitting gambling on the premises had been in existence at the time the lease was executed, a very plausible argument could be maintained that the defendant had agreed to allow no disqualification of the premises to occur which would prohibit an occupant of the premises from obtaining a liquor tax certificate. Almost everything which might happen to a landlord because he had rented his premises for the sale of intoxicating liquors is provided against except what actually occurred, and doubtless what did occur was not provided against because the law was not in existence or contemplated by the parties. A statute relating to the subject-matter of a contract is deemed to be read into-the contract and the parties are deemed to have contracted with reference to it, but they cannot be deemed to have done so when the statute does not exist. The lease was made in 1906. The law disqualifying the premises for one year after an occupant had been convicted of permitting gambling upon the premises was not enacted until 1908. The parties, therefore, cannot be deemed to have contracted with reference to such a law, and hence the defendant was not responsible because the premises had become unrentable for saloon purposes.
We are of opinion that the judgment was proper, and should be affirmed.
Judgment affirmed, with costs. All concur, except SMITH, P. J., and KELLOGG, J., who dissent each in memorandum.