Court Opinion

ID: 8195077
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:18:19.017287+00
Date Added: 2024-06-11T16:40:44.509303
License: Public Domain

Doeefler, J.
(dissenting). In its decision the county court, in speaking of the Polinsky lease, says:
“This lease is well drawn in other respects to carefully describe the interests of the lessors and beneficiaries of the trust, anticipating as it does every emergency, and the reservations and powers under it are ample to enforce and protect their rights, and, under the evidence submitted, it seems to be considered a profitable transaction in the end for the *303estate, and therefore no criticism could be made on that ground against it.”
Long-term leases of valuable real estate in the larger cities of the country, and especially where the property by reason of its advantageous location is in the ordinary course of events destined to increase in value, have become quite common, and the advantages both to lessors and lessees in such an undertaking have generally been recognized. This attitude toward such leases existed not only in the year 1908, when the will of the testator was executed, but for a considerable period of time prior thereto.
The testator at the time of. his death was the .owner oí some of the most valuable real estate situated in the principal retail district in the city of Duluth, which city, on account of its advantageous location (being at the head of the Great Lakes), and owing to the large northwestern territory tributary thereto, had become a leading commercial and manufacturing center. It is a growing, prosperous, and progressive city, and possesses many of the aspects so noticeable in larger cities like Chicago and New York. The enterprise of its inhabitants and their civic pride are manifested by the many beautiful business structures erected, and by their determination to maintain the local prestige of the city, notwithstanding the great obstacles with which they are confronted, owing to the natural elevation of the land upon which the city is built.
It has been the experience of all large cities that retail as well as wholesale districts are subject to great changes; the retail districts are oftentimes converted into- wholesale districts, and vice versa; that residence districts are in the course of growth and development transformed into industrial districts; and that such changes are productive of fluctuations in value and affect the market value of prop.erties. It has also been a common observation that the ad*304vancement or retrogression of values is largely dependent upon the enterprise or lack of enterprise of the owners of property in either building or failing to build modern structures in localities desirable for business purposes.
When, therefore, the testator, who was a resident of the city of Superior, in the year 1908 executed his will, it must be assumed that he had in mind all of the things heretofore referred to, and that it was his desire to perpetuate the prestige of his property, from the standpoint of value, to a degree commensurate with the possibilities that were inherent in his holdings. Two of the buildings upon the leased property at the time of the making of the long-term leases were no longer new or modern buildings. One was twenty-four years old and one was thirty years old. In the rapid growth and development of cities in this country, buildings standing over a quarter of a century are considered antiquated. New modes of construction, resulting from the ingenuity of man, are constantly employed, and it is the tendency of mercantile establishments to flock towards the more modern and attractive structures. When, therefore, the testator made his will he realized the advantageous location of his property on Superior street in the city of Duluth and expressly prohibited the sale of such property, in order that his vision of enhancement and development might materialize for the benefit of those who succeeded him. That the testator was a successful business man is evidenced by the large holdings left by him and the judgment he exercised in becoming the owner of the properties in Duluth referred to.
But, while he prohibited a sale, he did expressly authorize a long-term lease, not to exceed fifty years. Any lease of property beyond a ten-year period is considered a long-term lease. We are familiar with the usual and ordinary terms of short-term leases, and all of us have a greater or lesser degree of knowledge of the usual and ordinary pro-' *305visions contained in long-term leases. One has but to casually read the outlines of a long-term lease as it is set forth in the standard form books to appreciate that such a lease involves innumerable considerations for the mutual protection of the parties. Every conceivable situation that may arise during such a term is carefully considered and dealt with, and protective features are inserted in contemplation of the many changes that may transpire during the period covered by such a lease.
I have carefully read the leases herein involved, and I heartily agree with what the learned county judge has said upon the subject of this lease. In brief, the able counsel who drew the lease has incorporated therein every conceivable and available advantage to his clients that he could command.
One of the principal objections advanced by the respondent’s counsel to this lease is aimed at the term of the lease, it being his contention that in effect the lease is for a period in excess of fifty years, and that therefore it violates the express provisions of the will and is void. For instance, the Polinsky lease contains a provision as follows:
“To have and to hold the said demised premises with the appurtenances thereunto belonging unto said lessees, their heirs, representatives, and assigns, for the term of forty-nine (49) years, commencing on the 1st day of December, 1922, and terminating on the 30th day of November, 1971.”
The lease further provides:
“It is hereby understood and agreed that if the lessees fully and completely carry out and fulfil the obligations by them undertaken hereunder for the full term of forty-nine (49) years, then the lessors will pay to the lessees for and on account of the building or buildings and improvements then on said leased premises owned by the lessees an amount equal to the full value thereof, to be determined by appraisers who shall be selected and appointed with power to act in the manner hereinbefore provided for the determi*306nation of the value of the land, the time for appointment of appraisers to commence April 1, 1971; provided, however, that the amount to be paid for and on account of the building or buildings and improvements shall in no event exceed the replacement cost thereof at the time of said appraisal, less a proper depreciation, under the circumstances, for physical deterioration, age, style, and obsolescence, it being hereby agreed that said sum shall be the maximum value.”
The lease then contains an option whereby the lessors may offer the lessees an extension of the lease for forty-nine years, and if such option is not accepted the lessors are relieved from paying for the improvements; but if it is accepted the lessors are required to pay one half of the value of the improvements at the end of the extended term, such value to be determined also by appraisal in the manner and form heretofore indicated.
This lease was drawn not many years before the expiration of the trust created under the will; therefore at the time of the expiration of the forty-nine-year term the trustees will be relieved of their trust and the property will be held by the beneficiaries and their successors in interest under the will. The lease in question primarily runs for a period of forty-nine years, and at the end of this time it terminates unless the then owners conclude to exercise the option therein provided; so that it leaves the beneficiaries to act entirely in accordance with their volition. If they deem it advisable, when the proper time comes, to exercise their option, the result will be that they will either get the building on the premises free from any charge therefor, or they will obtain a valuable extension of the lease for an additional term of forty-nine years. This option contained in the lease is not only of great value, from a practical business standpoint, to the beneficiaries, but also permits them to declare the lease at an end at the end of forty-nine years, to the same effect as though no provision whatsoever for an option or extension were contained therein. It is there*307fore merely a forty-nine-year lease, and is strictly within the limitations contained in the will.
By agreement between the parties to the lease the value of the buildings involved in the Polinsky lease was fixed at $85,000. The lease contained a provision which authorized the lessees to purchase this building for the sum of $85,000, the appraised valuation, by the payment of the sum of $30,000, and by paying the balance in annual instal-ments thereafter at the rate of $4,000. The value of the real estate by the appraisal was fixed at $200,000, and under' the terms of the lease the lessees are obligated to pay by way of rental a sum equivalent to five per cent, upon this valuation and five per cent, upon the valuations determined at subsequent appraisals, it being agreed that the valuations at no time shall be less than $200,000. Until the purchase of the building the owners will receive by way of rentals an amount equivalent to six per cent, of the appraised value of the building. If a new building be constructed in place of the old building, the same shall cost not less than $85,000. The amounts to be paid to the lessors are net, all tax burdens, insurance charges, etc., being payable by the lessees. Further, under the terms of the lease the lessors are fully protected by a first lien upon the building and by the moneys derived from the sale of the old building. The transfer of the building to the lessees enables them to remodel the same or to raze it and erect in its place a new building, which, however, can be done only when the new building shall be constructed at a cost of not less than $85,000. The reconstructed or new building, together with the leasehold interest, becomes of advantage to the lessees and constitutes an asset, upon the strength of which they can raise money by mortgage or otherwise.
While it is true that long-term leases differ in their terms, such leases contain certain standard provisions, and among such provisions is one which requires the lessor at the end *308of the term to pay to the lessee the appraised valuation of the building at the end of the term. The lease involved in the case of Upham v. Plankinton, reported in 152 Wis. 275, 140 N. W. 5, provided for the payment by the lessors to the lessees of the appraised valuation of the new buildings erected, at the end of the term, the lessors being credited upon the amount of the valuation for the agreed amount of the value of the old buildings. In the instant case the appraised value of the buildings is paid to the lessors during the term of the lease, and the only vital distinction upon this subject existing between the two cases is referable only to the time of payment. In that respect it requires no persuasion to conclude that the terms of the instant case are more favorable to the lessors than those that were contained in the Upham Case.
But it is further argued that it was not the intention of the testator to create a situation whereby his beneficiaries would at the end of the term be burdened with such an extensive obligation as is involved in the raising of a fund sufficient to pay the appraised valuation of the building on the • property at the end of the term. If, however, the testator did not contemplate such a result, it would have been easy for him to have expressly and definitely provided otherwise in his will; and not having so provided, we must assume that he had in mind the execution of the lease which in form contained the ordinary standard provisions of long-term leases.
In the Upham Case it was contended that the will did not authorize a long-term lease. This court, however, decided that while such a lease was not expressly authorized, in view of all the surrounding facts and circumstances it was authorized by implication. So that the instant case is stronger than the Upham Case, for in the instant case the testator expressly authorized a lease during a term not to exceed fifty years. The Upham Case, therefore, is decisive of the instant case.
*309When the question of a long-term lease was first advanced by the trustees a careful investigation was made of the subject. Men of large experience in business matters of this kind were consulted. The question was also submitted to eminent counsel, who approved of the lease. Both the trustees and the counsel took a broad view of the subject, and they endeavored to discharge their duty in accordance with a conscientious desire not only to further the interests of the trust estate, but to act in accordance with the wishes and desires of the testator. In brief, the trustees endeavored to perform their duties in a manner which in their opinion would meet with the approval of the testator were he alive. Under these circumstances, the conclusions arrived at by the learned judge of the trial court would result in manifest injustice. The only criticism to which the trustees can rightfully be subjected consists in their failure to appeal to the proper court having jurisdiction of the matter for advice and guidance. But barring this consideration, I am of the opinion that they acted wisely and fully within their rights. Undoubtedly they depended upon the advice of their counsel, whose opinion was based upon the decision of this court in the Uphctm Case. They therefore did not proceed blindly or unadvisedly, but relied upon the decision in the Upham Case, and evidently concluded that a submission of the matter to the lower court would amount to a mere waste of time and an idle ceremony.
What has heretofore been said is directed principally to the Polinsky lease. It is with equal force applicable to the Kris lease. The Kelley lease has been approved by this court, and in approving this lease it took cognizance of the usual provisions of long-time leases. The only point raised against the Kelley lease is the claim made by respondent’s counsel that in authorizing an insurance trustee to collect the insurance in the event of a fire it unlawfully delegates part of the powers of the trustee to a third person. This objection is obviated, in the opinion of the majority, *310by a recognition of a standard provision in long-time leases. If we can recognize one standard provision in a long-time lease, why can we not with equal force and logic recognize other standard provisions?
I therefore respectfully dissent from the opinion of the majority.
Mr. Justice Rosenberry joins with me in this dissent.
A motion for a rehearing was denied, with $25 costs, on June 21, 1926.