Case Name: THE KENILWORTH COMPANY v. THE UNITED STATES
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1924-01-21
Citations: 59 Ct. Cl. 156
Docket Number: No. C-762
Parties: THE KENILWORTH COMPANY v. THE UNITED STATES
Judges: Graham, Judge; Hat, Judge; DowNet, Judge; and Campbell, Ghief Justice, concur.
Reporter: United States Court of Claims Reports
Volume: 59
Pages: 156–176

Head Matter:
THE KENILWORTH COMPANY v. THE UNITED STATES
[No. C-762.
Decided January 21, 1924]
On the Proofs
Contract; change of proposal; effect of change. — Where a hotel company proposes to the Government to rent its hotel building for a hospital upon conditions that “ no part of the property shall be used for the purpose of treating or housing any person suffering from tuberculosis in any form, or from smallpox or any other like contagious or obnoxious disease, provided, however, that this shall not ai>ply to a person suffering from tuberculosis housed temporarily in said premises for an operation or the like,” but the Government refuses to lease said building until the clause is changed so as to read, “ no part of the property shall be used for the purpose of receiving for treatment any person suffering from tuberculosis in any form,” etc., the reception by the Government of persons for treatment for other diseases or for observation, who on diagnosis show also one of the prohibited diseases, is not a breach of the contract.
The Reporter's statement of the case:
Messrs. II. W. Kinder, Benjamin Garter, and Junius G. Adams for the plaintiff.
Mr. Herman, J. Galloway, with -whom was Mr. Assistant Attorney General Robert II. Lovett, for the defendant. Mr. Alexander II. McCormick was on the brief.
The following are the facts of the case as found by the court:
I. The plaintiff is, and was during the different transactions hereinafter set forth in these findings, a corporation duly incorporated as a stock company under the laivs of the State of North Carolina for the purpose of carrying on the hotel business in said State, and as such was the owner of a tract of land located at Biltmore railroad station in the village of Kenilworth, one and a half miles from Asheville, North Carolina, on which a hotel, known as “ The Kenil-worth Inn,” was constructed for the accommodation of 450 guests, at a cost of $815,000, of which $710,000 was borrowed on bonds maturing in 17 years.
II. On December 11, 1917, plaintiff proposed to the War Department to enter into a lease with the Government for the rent of the Kenilworth Inn and about four acres of ground for the duration of the present war and to terminate one year after the signing of a treaty of peace between the United States and Germany, the hotel to be completed in accordance w’ith the plans submitted with said proposal, with certain indicated omissions of partitions, and the Government to pay a rent of $125,000 a year for the first year of said lease, and $75,000 a year for each additional year of said lease, payable semiannually in advance. The proposal contained the following restriction upon the use of said building-:
“(2) The building and property are to be leased to the Government for the purpose of a convalescent hospital for disabled officers or soldiers, but it is especially understood, and the lease shall so provide, that no part of the property shall be used for the purpose of treating or housing any person suffering from tuberculosis in any form, or from smallpox, or any other like contagious or obnoxious disease, provided, however, that this shall not apply to a person suffering from tuberculosis housed temporarily in said premises for an operation or the like.”
The plaintiff was informed by the proper officer of the Quartermaster Corps that the law in force prohibited the making of any lease by the Government extending beyond June 30, the end of the fiscal year, but that such lease might provide for extensions for an indefinite period, and in the present instance to one year after the making of a treaty of peace between the United States and Germany; that payment of rent in advance was also prohibited by law, and that the Government would not pay over $115,000 rent for the first year’s use of the building; that the Government also objected to the use of the words “ of treating ” in the restriction upon the use of the building and suggested in lieu thereof the words “ of receiving for treatment.” The plaintiff was asked to restate its lease in accordance with the above suggestions. Accordingly the plaintiff finally restated its proposal in the above particulars as follows:
“(2) The building and property are to be leased to the Government for the purpose of a convalescent hospital for disabled officers and soldiers, but it is especially understood, and the lease shall so provide, that no part of the property shall be used for the purpose of receiving for treatment any person suffering from tuberculosis in any form, or from smallpox, or any other like contagious or obnoxious disease, provided, however, that this shall not apply to a person suffering from tuberculosis housed temporarily in said premises for the purpose of an operation or the like.”
“(4) The Government shall pay to this company for the use of said property a monthly rental of $9,583.33 for each month of the term thereof, and should the Government desire to renew said lease, it shall pay a monthly rental of $9,583.33 for the first seven months of said renewed term and a monthly rental of $6,250 for each month thereafter of said renewed term, the rent to be paid monthly on the first day of each month covering the rent for the calendar month just passed.
“(5) The term of the lease proposed to be executed shall commence ón the first day of February, 1918, and end on the 30th day of June, 1918; but the Government shall have the right and privilege under the contract of .renewing the lease from year to year, for and during the continuation of the present war with Germany, and for one year after a treaty of peace has been signed between the United States and the German Government. It is desired, but not insisted upon by this company, that the contract of lease contain a clause while not binding on the Government in specific terms to continue the lease in force for the duration of the war and one year, but at the same time stating that this Is the spirit or understanding between the contracting parties.”
The proposal to rent said hotel, amendments suggested by the Government, and restated proposal are embraced in Appendix A to these findings and are made part of this finding by reference thereto.
The original proposal of December 11, 1917, was accompanied by a letter to the Surgeon General containing the following extract:
Eestrictions against tuberculosis
“ The restrictions in the use of the property against housing or treatment of patients suffering from tuberculosis is, from our standpoint as the ownér and the future operators of the hotel, necessary, as such a use would forever destroy the property for the purpose for which it was constructed. The question of our ability, under proper medical advice, to renovate and disinfect the premises and thereby remove all danger of infection does not arise — danger of infection could no doubt be altogether removed, but it would cost us a fortune in advertising to convince the travelling' public of the fact, and even with such an expenditure there would be no assurance of success in the undertaking. The same applies with equal and even more force to other contagious diseases of the character of smallpox.”
III. On January 21, 1918, the plaintiff entered into an agreement with an authorized officer of the Quartermaster Corps for the lease of the Kenilworth Inn and about four acres of land described by metes and bounds, the said lease to begin on February 1, 1918, and to end on June 30, 1918, with the stipulation, “That the building and property are leased to the Government for the purpose of a convalescent hospital for disabled officers and soldiers, but it is especially understood that no part of the property shall be used for the purpose of receiving for treatment any person suffering from tuberculosis in any form, or from smallpox, or any other like contagious or obnoxious disease, provided, however, that this shall not apply to a person suffering from tuberculosis housed temporarily in said premises for the purpose of an operation or the like,” and “ That the Government shall pay to the aforementioned Kenilworth Company for the use of the aforementioned property a monthly rental of nine thousand five hundred eighty-three dollars and thirty-three cents ($9,583.33) for each month of the term hereof, and should the Government desire to renew the lease as provided for under article 9. hereof it shall pay a monthly rental of nine thousand live hundred eighty-three dollars and thirty-three cents ($9,583.33) for the first seven months of said renewed term and a monthly rental of six thousand two hundred fifty dollars ($6,250) for each month thereafter for said renewed term. * *. * Payment shall be made at the end of each calendar month, or as soon thereafter as is practicable. * * * Should the premises be relinquished before the close of the monthly period, the rental for the last period shall be only the pro rata part of the monthly rental, depending upon the time of occupancy.”
The contract also provided that the. Government at the termination of the lease should deliver all buildings, equipment, and machinery to plaintiff “ in as good condition and repair as when leased, usual wear and tear and acts of God excepted,” and that the said lease might be extended at the option of the Government yearly, beginning at the end of the fiscal year for each renewal, but not to extend beyond one year after the signing of a treaty of peace between the United States and Germany. The hotel at the date of this contract was in an unfinished condition.
The building was completed on April 9, 1918, at which time the Medical Corps of the Army first occupied the same as a hospital, designated as No. 12. The plaintiff at the date of the lease Avas in need of funds, and the Govern ment in order to hasten the completion of the building paid the rent for February and March, 1918. This rent the plaintiff afterwards refunded to the Government in the autumn of 1918. The builder, working on a cost-plus contract, had become financially involved, and the plaintiff had to complete the hotel. The Quartermaster Corps, by proper authority, renewed the said lease of January 21, 1918, to run from July 1, 1918, to June 30, 1919, and from July 1, 1919, to June 30,1920.
Major William H. Smith, Medical Corps, was assigned to the command of said hospital some time in February, 1918, and was succeeded on October 20, 1918, by Major John B. McCreary, Medical Reserve Corps, who appears to have remained in command until the hospital was transferred to the Public Health Service.
IV. On November 1, 1919, the plaintiff addressed a communication to the Secretary of the Treasury proposing to lease for five years, beginning on November 8,1919, the Ken-ilworth Inn, and the tract on which it was located, and certain other lots owned by the Kenilworth Development, with the residences, buildings, and other improvements thereon, for the sum of $444,000 as rental therefor, payable in 60 equal installments of $7,400 each, with an option on the part of the Government to purchase said property at any time during said term of five years for the sum of $888,000, with a provision that the Government should maintain said buildings, machinery, equipment, fixtures, and appurtenances in good condition and repair, usual wear and tear and acts of God excepted.
On the same date, November 1, 1919, the plaintiff wrote another letter to the Secretary of the Treasury proposing to lease for a term of five years, beginning November 8, 1919, certain lots, blocks, and parcels of land in the town of Kenil-worth, and certain others upon which buildings and residences had been built, belonging to the Kenilworth Home Company and private persons, for the sum of $86,000 as rental therefor, payable in 60 equal installments of $1,435 each, with an option on the part of the Government to purchase said property at any time during said term of five years. There was a stipulation that on failure of the Government to exercise the option, all buildings or improvements placed on said land by the Government should become the property of the owners of the land.
Neither of the above proposals contained any restriction upon the use of said hotel in the reception for treatment of tubercular patients, or those suffering- from contagious or obnoxious diseases, as was done by the agreement of January 21, 1918.
Pursuant to section 2 of the act of March 3,1919, 40 Stat. 1302, the War Department on November 8, 1919, transferred to the Public Health Service, Treasury Department, among other parcels of land, the Kenilworth Inn and hotel site.
On November 19,1919, the two proposals of plaintiff dated November 1, 1919, were accepted, and a lease agreement dated November 19, 1919, demising the lots and parcels of land described in said proposals, embracing the Kenilworth Inn and site, was entered into between the Treasury Department and plaintiff for a term of five years, from November 8, 1919, to November 8, 1924.
For the lots and buildings described in proposal (a) the Government agreed to pay to plaintiff as rental for the term of five years the sum of $86,000, and for the Kenilworth Hotel and site and the other lots and building described in proposal (b) the Government agreed to pay to the plaintiff as rental for the term of five years the sum of $444,000, each of said sums to be paid in 60 equal installments. The contract also gave the Government the option of purchasing at any time, within said term of five years, the property described in proposal (a) for $287,000 and the property described in proposal (b) for $888,000.
The Government agreed at the end of said lease to give up said premises in the same condition as when it took possession, ordinary wear and tear, fire, elements, and acts of the public enemy excepted. The said contract contained no provision restricting the use of said hotel by the Government in the reception for treatment of tubercular patients, or patients suffering from contagious or obnoxious diseases.
The hotel after November 8,1919, was designated hospital No. 45 of the Public Health Service.
On July 26, 1920, the plaintiff and the Treasury Department entered into a' contract supplemental to the contract of November 19,1919, for the erection of two cottages in 50 and 65 days, respectively, for rental by the Government until November 8, 1924, at $100 per month each, with an option to purchase the same during the period of occupancy hereunder at $10,000 each.
The proposals (2) dated November 1,1919, and the supplemental agreement of July 26, 1920, are attached to these findings as Appendix B and are made part of this finding by reference thereto. The material part of the agreement of November 19, 1919, is attached to plaintiff’s petition as Exhibit B, and is made a part of this finding by reference thereto.
V. During the period from February 1, 1918, to November 8, 1919, when the contract with the War Department was in force, the “Disease index, medical cards,” Form No. 52, Medical Department, as classified by the hospital authorities of the United States Army general hospital No. 12, Biltmore, N. C., show the admission of 119 patients on whose cards the word “tuberculosis” is mentioned. None of these patients was received in said hospital for treatment of tuberculosis. Sixty were discovered after observation and diagnosis to be free from tuberculosis, the others being received for operations, the treatment of concurrent diseases or both, or for observation. Those discovered to be suffering from tuberculosis were transferred to a tubercular hospital as soon as practicable. It was not the purpose or practice of the authorities of the Medical Corps having said hospital in charge to house tubercular patients therein otherwise than temporarily.
After the Public Health Service took charge of said hotel as hospital No. 45, on November 8, 1919, patients suffering from pulmonary tuberculosis were housed and treated therein.
VI. The disease index medical cards of the United States general hospital No. 12, Biltmore, N. C., mention 55 cases of syphilis or gonorrhea treated during the period the hotel was under the control of the War Department, from February 1, 1918, to November 8, 1919. Of these, 19 cases were discovered on diagnosis to have no venereal disease. 15 required an operation or the treatment of a concomitant disease requiring admission to the hospital, 3 were admitted for other than venereal diseases and the venereal disease developed after some time in the hospital. Of the whole number, only 17 showed venereal conditions not requiring operations and not accompanied by other diseases. Of this 17, 7 were members of the organization at hospital No,12, officers or enlisted men, 3 were members of a labor organization working in a near-by forest who walked from there to the hospital, 4 were taken sick near the hospital and presented themselves for admission, and 3 were transferred to hospital No. 12 without authority under the regulations. A venereal ward was maintained in the hospital during the period it was under the control of the War Department. A large prox^ortion of those in the venereal ward were negroes. The patients affected with venereal diseases were coming to and going from the hospital all the time.
Syphilis is a contagious disease, and in the secondary and tertiary stage where open lesions or sores appear on face or body, it is obnoxious. Its contagion is practically limited to sexual contact. It ma.y be communicated otherwise if abrasions of the skin should come in contact in any way with matter from an open sore or lesion on a person affected with syphilis, but the probability of this is decreased by the fact that the organisms of syphilis, if taken from the body and allowed to dry, die within twenty-four hours, and, unlike tuberculosis, leave no traces on the floor or walls of the ropm.
VII. In the latter part of the summer of 1918 one hundred and ninety interned Germans, principally sailors from merchant marine vessels caught in American ports when the war with Germany was declared, suffering with typhoid fever in an acute stage, were transferred from Hot Springs, North Carolina, to hospital No. 12, four of whom died en route and seven died at different times after their arrival. These prisoners were sent to the hospital and kept there under the direct- supervision of the Surgeon Generals office. Special officers were placed in charge of them, and a most elaborate study of typhoid fever was made in connection with the treatment of ijhese patients, and special records were kept, and a special report made that constitutes one of tlie volumes of the medical and surgical history of the war.
Typhoid fever is a communicable disease. It is not contagious in the ordinary acception of the word. It is usually contracted by drinking- water which has become contaminated by the organisms of typhoid from discharges from the intestines, through the feces or through the urine, finding their way into the water supply. It is also contracted by eating food prepared or handled by a person who has typhoid fever or is recovering from it, or who is what is termed a carrier of the disease. The organisms of typhoid die very quickly and, like the organisms of syphilis, leave no traces on the floor or walls of the room. Wren a typhoid patient leaves a room and it is exposed to clry air and sunlight, all danger of contracting the disease from that room disappears.
VIII. Smallpox is regarded by the medical profession as the most contagious of diseases, with the exception of measles. It is also an obnoxious disease, and during the pustular stage is a revolting sight, disagreeable to the eye, to the sense of smell, and most objectionable in every way. Typhoid and syphilis are both communicable diseases, but are not contagious like smallpox, which may be contracted by coming within a few feet of persons suffering from' it. The average case of typhoid is not obnoxious. Syphilis, except in the advanced stages where sores appear on the face and body, is not an obnoxious disease.
IX. The occupancy of the Kenilworth Inn by the Government as a general hospital, excluding therefrom patients with tuberculosis and other contagious or obnoxious diseases, would have reduced the rental value of the property as a hotel after its surrender by $50,000 per annum. What further reduction, if any, in rental value was caused by the housing and treatment of patients suffering from tuberculosis, typhoid, or venereal diseases does not satisfactorily appear from the evidence.
X. During the period the Kenilworth Inn was leased to the Public Health Service the plaintiff received $70,000 per annum from the Government for the. hotel property and paid out $80,000 per annum for insurance, taxes, payments on bonds, and upkeep.
XI. During the period the Kenilworth Inn was held as hospital No. 12 by the War Department under the contract of January 21,1918, repeated protests were made by plaintiff to the proper officials of the War Department against the housing and treatment of tubercular and syphilitic patients.
XII. On August 2, 1921, the plaintiff presented a petition to the Secretary of War (1) for damages to its hotel property by the Government during the period it was under the control of the War Department from February 1, 1918, to November 8, 1919, in the sum of $158,121.32; (2) damages for breach of its contract of January 21, 1918, by receiving, housing permanently, and treating in its hotel building soldiers afflicted with tuberculosis and other contagious and obnoxious diseases in the sum of $500,000.
The claim was investigated and considered by the War Department Claims Board, appraisal section, which on October 26, 1921, made an award .to the plaintiff on item 1 as full, final, and complete satisfaction of all present and future claims for damages to said hotel property growing out of its use by the War Department in the sum of $70,359.54.
Plaintiff’s claim (item 2) for breach of contract alleged to have been caused by receiving, housing, and treating cases of tuberculosis, typhoid, and syphilis was denied without prejudice to its right to pursue its claim in the proper forum.
The plaintiff, on October 27, 1921, received the award of $70,359.54 as payment in full for all damages to its hotel building, but specifically excepted from the receipt its-claim for breach of contract.
The total amount found to be due was $81,066.28, but the Public Plealth Service agreed to pay $10,707.28.
The amount of $70,359.54 was paid by Treasury warrant dated November 1, 1921. When or how, if at all, the $10,-707.28 was paid by the Public Health Service does not appear from the evidence.
XIII. On November 10, 1922, supplemental articles of agreement were entered into between plaintiff and the Government, through the Director of the United States Vet erans’ Bureau, by which it was stipulated that the plaintiff, in consideration of its agreement that the contracts of November 19, 1919, and July 26, 1920, for the term of the leases of the Public Health Service, instead of running up to June 30, 1923, should terminate on December 31, 1922, should be paid the sum of $72,128.70 in two equal monthly installments in arrears as rental under said contracts from November 1, 1919, to December 31, 1922. Of this amount the plaintiff received $27,188.88 as rental for the two months from November 1, 1919, to December 31, 1922, for the hotel property and the balance as two months’ rent for other property included in said leases and for repairs to the hotel and such other properties.
XIY. After an expenditure for furniture and equipment of $161,875.21 the Kenilworth Inn was opened on March 10, 1923, for the reception of guests. During March the average number of regular guests was 30; April, 35; and May, 22, and for June, up to the 20th, the number was 18. From March 10 to March 16, 1923, the hotel entertained the national insurance convention, with a daily average of 90, the highest number any day being 194. The North Carolina Medical Society was entertained at the hotel from April 12 to 17,1923; the average count per day was 92 and the highest number registered any day was 180. The full guest capacity of the hotel was 450. The spring trade at Asheville is the highest, grade; the rates shown by the hotel records were from $9 to $15 per day, depending on the number of rooms per person. There may be a crowded house run from July to September and 90 per cent in September, 75 per cent in October, and 66 per cent to January; during the latter month 50 per cent. In February trade begins to pick up, and in March, April, and the first 10 days in May there should be a good house. During the summer months of June, July, August, and September the rates are 10 per cent less than for the other months of the year. The room used for a venereal ward during Government occupation was used by the hotel management after it was opened as a hotel for a ladies’ parlor.
The business of the Battery Park Hotel, an old hotel in Asheville, during March and April, 1923, fell off $3,500, and in May a great deal more than that, owing to the noise of excavation near it for the erection of a new hotel. About the 20th of April, 1923, all Asheville hotel business dropped off more quickly than usual. The period from- March 10, 1923, to June 1, 1923, was taken by plaintiff to indicate the amount of business done by the Kenilworth Inn because the witnesses testifying in relation thereto were examined on June 21, 1923. During that period, two and two-thirds months, if the rent should be fixed at the rate paid by the Public Health Service for two and two-thirds months, $15,555.55, and miscellaneous expenses of $4,301.02, advertising $8,236.83, and advances made to guests, $7,566.07, none of which is satisfactorily established as legitimate expenses of operation for that period, should be eliminated from the expenses charged, the net loss in operating the hotel for that period would amount to- $9,714.72.
Appealed.

Opinion:
Booth, Judge,
delivered the opinion of the court:
The Kenilworth Company is a North Carolina corporation, incorporated to build and operate a hotel. The company had in process of construction and near to completion a hotel building designed to accommodate 450 guests, which it had designated the Kenilworth Inn. The enterprise was an important one and involved the expenditure of $815,000. The building itself had so far progressed toward completion that on December 11, 1917, the company proposed to the defendant a lease of the entire building and grounds for a convalescent hospital for disabled officers or soldiers. It is not important at present to enter into details respecting various items of rental and other terms and conditions of the lease, -which was finally executed on January 21, 1918, except the one and only covenant of the same which the plaintiff company now alleges the defendant not only failed to observe but positively breached.
The plaintiff company in its proposal set forth in paragraph two the following restriction upon the use of the building:
"(2) The building and property are to be leased to the Government for the purpose of a convalescent hospital for disabled officers or soldiers, but it is especially understood, and the lease shall so provide, that no part of' the property shall be used for the purpose of treating or1 housing any person suffering from tuberculosis in any form, or from smallpox or any other like contagious or obnoxious disease, provided, however, that this shall not apply to a person suffering from tuberculosis housed temporarily in said premises for an operation or the like."
The defendant refused to accept the restriction as proposed, and offered in its stead the following proposal:
i;(2) The building and property are to be leased to the Government for the purpose of a convalescent hospital for disabled officers and soldiers, but it is especially understood, and the lease shall so provide, that no part of the property shall be used for the purpose of receiving for treatment any person suffering from tuberculosis in any form, or from smallpox, or any other like contagious or obnoxious disease, provided, however, that this shall not apply to a person suffering from tuberculosis housed temporarily in said premises for the purpose of an operation or the like."
The plaintiff accepted the modification of its proposal, and as thus worded by the defendant's officerthe restriction as to use was inserted in the contract. The plaintiff company alleges and seeks to prove that in positive violation of the agreed restrictive use of its hotel building the defendant did receive and house for prolonged treatment in said building, and did keep and maintain therein for prolonged periods, a great number of persons suffering from tuberculosis, contagious, and like obnoxious diseases over the protest of the company, and during the entire time of its occupancy; that in addition to receiving for treatment officers and soldiers of the United States afflicted as aforesaid, a large number of interned German prisoners of war suffering from a malignant type of typhoid fever were received and treated at the hospital, many of whom died, resulting from the causes enumerated in a claimed damage to the reputation of the hotel whereby it has, for the time, being at least, lost its attractive force as a public inn, and its use and income as such impaired to the extent of $865,000.
The argument advanced, to sustain the above contention is predicated primarily upon the peculiar climatic conditions obtaining at Asheville, North Carolina, and vicinity. The city of Asheville itself possesses a most alluring aspect, dual in character, and because of its location and climate attracts thereto, a large transient population seeking rest and recreation, and also a considerable number of patients seeking a cure for tuberculosis. Because of this situation and to1 avoid a conflict between the two elements, which would manifestly tend to injure the city's tourist population, most stringent local laws and regulations have been adopted by the municipality looking towards the complete isolation of tubercular patients from the remaining population, both permanent and transient. The reputation of the town, generally known throughout the country, is such that the course thus pursued is indispensable to its maintenance, and any deviation therefrom is sufficient, especially if premises are let for tubercular patients, to practically destroy a building so demised for use for any other purpose, at least for a long term of years when such use may perhaps be forgotton.
The claim is likened to an injury to the reversion by a tenant in possession under a lease; not the commission of waste, etc., but breach of contract, violation of an express contract. The measure of damages is concededly the extent of injury, not to the freehold itself, this having been satisfactorily adjusted, but to the contemplated use in the future, of the premises demised, it being alleged that it will require years to outlive the fact that patients of the kind proscribed in the lease were treated in the inn. Emphasis is put upon two cases decided by the Supreme Court of Massachusetts— Hersey v. Chapin, 162 Mass. 176, and Delano v. Smith, 206 Mass. 365. This case, in point of fact, is so directly opposed to the situation adjudicated in the cases cited that it is difficult to perceive their applicability. A tenant in possession of a dwelling house under a lease is assuredly obligated, as these cases hold, to refrain from subletting the premises for use as a smallpox hospital — a pesthouse — to the injury of tlie reversion. Tlie distinction, a very important one, between tlie cases cited and tbe issue here is that the owner of the premises, the owner of the reversion, let the premises as an original proposition for use as a hospital. By its own lease the plaintiif contemplated the incidental injury to the reversion arising from mere use and occupation, if any such occurred, and is presumed to compensate itself therefor in the fixed rental. The issue here is a direct contractual relationship between the owner of the premises and the tenant, and an allegation of breach of the same. The mere fact that the plaintiff intended to use the building as a hotel is without significance. The owner was in nowise constrained to elect to rent it as a hospital instead. What the plaintiff did was to rent the building as a hospital, with a restrictive clause in the lease, and it is the violation of this clause, if any, for which recovery may be had. If the owner of a dwelling voluntarily demises the same as a hospital, may he recover damages because its use as a hospital prejudiced its future occupation as a dwelling? Manifestly not. The question we must meet is the ascertainment of a breach of the contract and the damages accruing from the breach.
The difficulty which confronts the coui't, granting argu-endo the facts and the law as contended for, is the ascertainment of a basis for assessing damages. We may well surmise, and it is doubtless true, that the class of patrons the Kenilworth Inn was designed to entertain and accommodate would be positively deterred from going there if made acquainted with the use of the building during the war; nevertheless, it was in the beginning the voluntary act of the plaintiff company itself which changed the character of the inn, at least temporarily, from a hotel building to a Government hospital. The Government did not commandeer it, and so far as this record discloses, did not seek the lease. Need we augment this observation with the obvious fact that such a lease, irrespective of its restrictive terms and conditions, 'known alone to the parties thereto, was sufficient in Ashe-ville to jeopardize the reputation of the inn as a high-class tourist resort ? The witnesses in the record testifying as to damages, fix tlie. amount upon the damages incident to a well-known and distinct lease of premises for a tubercular hospital, without considering that the lease of a hotel for a Government hospital during the Avar or any other time, is ipso• facto sufficient to induce a prospective guest to seek accommodations in another hotel never so used. To Avliat extent the receipt and treatment of a limited number of tubercular patients might increase the damages is not demonstrated. The hypothesis upon which the proof proceeds is the assertion of the fact that a hotel converted into a tubercular hospital is practically destroyed as a hotel for years thereafter, without considering the proposition that a conversion of the property by tlie voluntary act of the OAvners into a hospital of any character Avould necessarily encounter a reputation, at least to some extent, injurious to the same as a high-class inn, when it again comes into open competition with others not so used. So that it seems to us that the mere fact of housing tubercular patients, and others with like obnoxious diseases, was not altogether the direct and proximate cause of the damages suffered, especially so when the express terms of the lease conceded their admission for a particular purpose.
Tubercular and all other patients, irrespective of their affliction, were to be received in surgical cases. While tlieir continuance in the hospital may have been temporary, may we conclude that knowledge of their reception, even for this single purpose, was not sufficient in Asheville, where the situation in this respect is decidedly acute, to Avork a measure of injury to the reputation of the inn? In addition to this, the situation becomes more confused by the fact that the inn itself had never been opened to the public as a hotel and had never been operated as such. No guests had registered and none invited until long after the expiration of this particular lease. Manifestly, without some evidence of the success of the enterprise and some basis upon which to rest a judgment as to impairment of income, it would be no more than mere speculation to hold that the property in question would have been a profit-yielding venture. The defendant did not prevent the company from resuming the enterprise as a hotel proposition upon the expiration of the lease complained of. The plaintiff company, on the contrary, voluntarily entered into two additional leases, extending the use of the building as a hospital, and submitted to the elimination therefrom of the very restrictive clause of which it now complains, and thereafter tubercular patients were received therein and treated for the disease. Up until December 31, 1922, the inn was continuously used and occupied by the Government as a hospital. If, then, the plaintiff company for a period of practically five years demised its premises for use as a hospital, part of the time with a limited restrictive clause and for much the greater portion of the time without any restriction, how may we estimate with any degree of certainty an alleged damage to its reputation or use as an inn when, as a matter of fact, it had never attained any reputation or been used as such? The company had no more than a pretentious building, inviting surroundings, and possibly a successful future. The value of its use as an inn was in the making. No clearer demonstration of this need be cited than the fact that the company itself granted an option of purchase for $888,000, a sum but little in excess of what it now demands as damages. That there may be a recoverable injury to the reversion by a tenant in possession under a written lease, is, of course, not controverted, but the present difficulty has to do with the measure of damages; nothing else.
The plaintiff uses the building as an inn, guests have been received and entertained, and there is nothing in the record to show that any have departed or others failed to come because of the previous use of the building as a hospital. As a matter of- fact, the plaintiff opened the inn on March 10, 1923, some three months after resuming possession of the same, and between that date and the 16th of the same month entertained a daily average of 90 people, there being 194 guests at one time quartered in'the inn. In the following month of April the North Carolina Medical Society was entertained at the inn, a notable incident, there being as high as 180 guests, probably doctors, registered in one day. While this was below the full capacity of the inn, it is of probative value in disclosing a lack of the existence of a discreditable force, sufficient in extent to publicly condemn the inn for use as such. Indeed, it is not in anywise a discouraging showing for the beginning of the enterprise.
Of still greater significance, however, is the apparently indisputable fact that the defendant did not violate the lease. When the plaintiff sought to induce the defendant to lease the inn the restrictive clause proposed would have precluded the use of the same for the treating or housing of tubercular patients except in surgical cases. This clause, " that no part of the property shall be used for the purpose of treating or housing any person suffering from tuberculosis in any form, or from smallpox or any other like contagious or obnoxious disease," was, indeed, highly restrictive. Under its terms the excepted patients were excluded. The defendant was unwilling to assent to the restriction. It was known — experience had so demonstrated — that a patient might possibly obtain admission to the hospital apparently free from the excepted diseases and subsequently develop one of the banned' afflictions. In order to meet this emergency, and at the same time recognize as far as possible the desire of the plaintiff in this respect, the defendant changed this stipulation so as to read "that no part of the property shall be used for the purpose of receiving for treatment any person suffering," etc. The plaintiff, as before observed, agreed to the substitution. Therefore the obligation arising out of this most significant clause extended no further than its expressed terms, not to receive for treatment patients falling without the restricted class. What do the words " receiving for treatment " mean ? It is not asserted that they import absolute exclusion. Their ordinary and usual meaning indicates a clear intent to impose upon the defendant the positive obligation to refrain from knowingly receiving a patient within the restricted class and thereafter treating him for the disease. In other words, in so far as it was possible, by every known medical means, the defendant would not receive for treatment a patient known at the time to fall within the restriction. Manifestly, though such a patient might be received temporarily he could not be immediately and ruth lessly cast aside, and if immediately thereafter he was transferred to a regular tubercular hospital for treatment no promises were broken. As a matter of fact, that is precisely what happened. Of a total number of-119 patients on whose cards the word "tuberculosis" is written, 60 were found after observation and diagnosis to be free from the disease, some were received for operations, some were treated for concurrent diseases, and others were under observation. Not one of the total number was received or treated as a tubercular patient, and, when tuberculosis developed, in each instance as soon as it was practicable the patient was transferred to a tubercular hospital. The record unmistakably discloses that it was the purpose of the authorities in charge of the hospital to observe this restriction to its fullest extent.
A venereal ward was maintained in the hospital and patients were treated for venereal diseases. The facts appear in Finding VI. Typhoid patients were received and treated, and this is set forth in Finding VII. The restrictive clause is limited to the reception for treatment of any person suffering from tuberculosis, smallpox, or any like contagious or obnoxious disease. The expert medical testimony in the record removes these diseases from the category of " like contagious and obnoxious disease." Under the well-known rule of ejusdem generis they are not to be classified as germinating that degree of contagion and obnoxiousness inherently attached to tuberculosis and smallpox. In its popular sense a venereal disease is odious, but the parties to this demise were not so considering it. The premises demised were to be used as a hospital, an institution of disease, a scientific refuge for its treatment, and the plaintiff was intent on excluding tubercular patients, smallpox patients, and others of like affliction. Surely it was not within the contemplation of the parties that all contagious diseases should fall within the restriction. If so, under modern diagnosis and authority patients suffering from bad colds might be excluded.
Applying to this clause the ordinary rules of construction, it seems obvious that the intent of the parties was to limit the restriction to patients whose disease would fall within the scope of contagion and objection attached to tuberculosis and smallpox. The weight of expert testimony in the record establishes this fact that the diseases complained of are not to be classified as such. The degree of danger from contagion is incomparable and the diseases themselves, while loathsome and repulsive, are not obnoxious in the technical sense nor to the same extent as tuberculosis and smallpox, which may spread by innocent contact and endanger an entii'e locality and its population.
The case, then, in whatever aspect it may be considered, seems devoid of merit. The petition will be dismissed, and it is so ordered.
Graham, Judge; Hat, Judge; DowNet, Judge; and Campbell, Ghief Justice, concur.