Court Opinion

ID: 6831772
Source: CourtListenerOpinion
Date Created: 2022-07-23 19:55:00.89022+00
Date Added: 2024-06-11T16:04:35.037109
License: Public Domain

HOUGH, Circuit Judge
(after stating the facts as above).  This is a question of New York law, of which, however, the latest restatement known to us is our own decision in Thorley v. Pabst, 179 F. 338, 102 C. C. A. 522. Noyes, J., there concluded (page 345 [102 C. C. A. 529]) that the general rule is that a “tenant who has not paid in advance can, upon eviction by superior title, recover only nominal damages, and can recover nothing for the value of his lease or for improvements.” There are certain exceptions duly enumerated, but the court below treated the claim at bar as if it were one for improvements, made not under the compulsion of a contract, but voluntarily, as is usual.
If nothing had been said in the lease about improvements, and they had been lawfully added to- the land, only because the tenant was not contractually restrained from improving, the order under review would have been right; the case being on all fours with Matter of Strasburger, 132 N. Y. 128, 30 N. E. 379, because Sanitary Company did not “advance” any rent, and it is certainly liable for no mesne profits. But the agreed statement at bar presents facts not, so far as we know, exhibited in any New York report, and therefore, we think, requiring some investigation into the origin or basis of a rule confessedly prevailing in few jurisdictions, though not peculiar to New York. Thorley Case, supra, at page 345 (102 C. C. A. 522), quoting Reeves’ Real Property.
An explanation of the New York rule given by Mr. Reeves, supra, is that the termination of the tenant’s duty to pay rent is thought sufficiently to compensate him for the loss of his term; i. e., for a breach of the covenant of quiet enjoyment, which is always implied in the usual lease. Mack v. Patchin, 42 N. Y. 167, 1 Am. Rep. 506. But this cannot even yet be called legal reasoning; a priori it would be certain that a rule originating in the early days of American law was once justified by considerations far more formal than the business result above stated.
We think the origin of the New York rule is to be found in two decisions by Chancellor Kent, then Chief Justice — Staats v. Executors of Ten Eyck, 3 Caines, 112, 2 Am. Dec. 254, and Pitcher v. Livingston, 4 Johns. 1, 4 Am. Dec. 229. Both these eases grew out of sales of land, wherein the vendor had given warranty both of seizin and quiet enjoyment, and the vendee had been ejected by title paramount to that of the vendor.
It was shown by abundant citation of ancient law that upon a warrantia chart® demandant could recover only the value of the land at the time the warranty was given, and this was applied to a warranty of seizin in the Staats Case, with the additional holding that, while the ejected vendee could not recover any increment in the value of the loss, he could recover, not only the consideration by him paid, but interest thereupon.
In the Pitcher Case the effort of an evicted vendee was to rely upon the covenant for or warranty of quiet enjoyment, and to recover the value of beneficial improvements placed upon the land during occupancy. This attempt to distinguish between the covenants for seizin and quiet enjoyment was disapproved; Kent, C. J., saying: “The covenant for quiet enjoyment respects the possession merely, and it would seem to be unreasonable and very inconsistent, for the plaintiff to recover under one covenant the, whole value of the estate, as it was intended to be conveyed, and under another covenant in the same deed distinct and increased damages, because he was not permitted to enjoy that estate.”
Consequently, although an evicted vendee might recover upon either of the two covenants, he could not recover substantial damages on both; and since under the covenant of seizin he could recover no more than the consideration paid — i. e., the agreed value *30of the land at the time of attempted sale — a reason was found for saying that he could recover no more than that under the covenant for quiet enjoyment.
In respect of improvements, the Chief Justice said: “The subject of the contract [of sale] was the land as it existed and was worth when the contract was made. The purchaser may have made the purchase under the expectation of a great rise in the value of the land, or of great improvements to be made by the application of his wealth or his labor. But such expectations must have been •confined to one party only, and not have entered as an ingredient into the bargain.”
It was declared repugnant “to the genius of our law” to oblige the seller, on the buyer’s eviction, to refund, not only the price agreed upon, but “the expense of the meliorations made.” ■ Therefore, since “a seller may ■ be presumed at all times able to return the consideration which he actually received,” and since that return is enough to satisfy the covenant of seizin, it must also be enough to satisfy the covenant for quiet enjoyment.
But since the covenant for quiet enjoy- • ment goes to the possession only, and except in the rare cases of rent paid in advance a tenant enjoys a possession measured by the rent he has paid, and is almost never evicted when the landlord has advance rent in his pocket, the rule can be practically explained as Mr. Beeves has done it, although Kent, C. J., assuredly did not use such language in justifying it. The rule was applied to leases in Kinney v. Watts, 14 Wend. 38, and that a lease contains by implication a covenant of quiet enjoyment is admitted.
It is observable that, in formulating the rule as to damages for loss of improvements, the Chancellor used as the very basis thereof the assumption, perfectly sound in all but the exceptional case, that the expectation of gain -through meliorations to be made by the tenant was “confined to one party only, and (could not) have entered into the bargain.”
This is the exceptional ease, it was a part of the bargain enforced against tenant by landlord that the former should expend “at least $19,000” on improvements, for which the landlord agreed to compensate the tenant at lease end, subject to deterioration agreed upon as amounting to 100 per cent, in 42 years, or 2.3 per cent, per annum. But such compensation could never exceed $19,-000, because everything beyond that sum was a voluntary expenditure, and for improvements so produced there can be no recovery on eviction. Matter of Strasburger, supra.
The improvements as made at much greater cost than the obligatory $19,000 deteriorated, as agreed, less than 6 per cent, before eviction, wherefore appellant’s loss was more than the amount which “entered into the bargain,” and we perceive no reason, even under the New York rule, why that amount is not a proper unsecured claim against the insolvent defendant’s estate.
Appellant would be entitled, also, to interest from date of eviction, were it not for the insolvency of the landlord; but, as we gather from the record that the appointment of receivers preceded eviction, the claim cannot bear interest as against the funds in the hands of the court.'
Order reversed, and cause remanded, with directions to enter an order in accord, with this opinion. Appellant will recover the costs of this appeal.