Court Opinion

ID: 8264194
Source: CourtListenerOpinion
Date Created: 2022-10-16 15:58:53.274177+00
Date Added: 2024-06-11T16:43:17.261081
License: Public Domain

GOODE, J.
(after stating the facts). — -Plaintiff was the lessor of the San Antonio Catering Company and was, of course, entitled to be paid the rent said company agreed to pay for the premises leased; that is to say, fifty per cent of the receipts. It follows that *145the fund which the Catering Company paid into court as rent under its contract with plaintiff, should be awarded to the latter unless some one else has shown a superior right to it. The only party contesting plaintiff’s right is the Parkview Realty & Improvement Company, which claims the fund in discharge of the ground rent due it from plaintiff. It appears from the petition in the case that plaintiff himself, at the inception of the litigation recognized the justness of the Parkview Company’s claim; for he alleged as an element of his case, that he was compelled to depend on his portion of the receipts accruing from the operation of the hotel leased to the Catering Company, to enable him to pay the ground rent due under his lease from the Parkview Company, and that by reason of the Catering Company’s having withheld the rent, he had been compelled to permit $650 of the rent he owed the Parkview Company to fall into arrears. The petition further alleged that under the terms of its lease to plaintiff, the Parkview Company, on account of such default, might re-enter and take possession of the premises and forfeit plaintiff’s lease, which it would do if the rent was not paid; thereby inflicting irreparable injury on plaintiff. In his testimony plaintiff swore there was a balance of $1,650 for rent due the Parkview Company at the time of the trial, and that his object in bringing this suit was to get what his undertenant owed him in order that he might pay what he owed the Parkview Company. When asked why he had changed his mind about paying it, plaintiff answered that the Parkview Company had turned against him by bringing in the old lease which they had agreed to cancel. The excuse given is a flimsy one. The conversations in regard to the cancellation of the original lease to Drew occurred anterior to the lease made to plaintiff by the Parkview Company, and the latter lease was made subject to any claims which Drew, or those claiming under him might make by virtue of the lease given by *146the Parkview Company to Drew. Moreover, previous to the date of plaintiff’s lease from the Parkview Company containing the above-mentioned proviso, plaintiff had taken an assignment from Drew of the latter’s leashold interest in the premises, which assignment included the buildings thereon and all rent that had accrued or might accrue to Drew. It is therefore perfectly obvious that plaintiff himself desired to have the Drew lease kept alive; or at least assented to its continuance. Neither did substantial prejudice result to plaintiff after his petition had been filed in this cause, from the fact that the Drew lease was not cancelled. Nor does it appear that a demand ever was made by Kemp for its cancellation and refused by the Parkview Company. And if such demand had been made and there had been an obligation on the Parkview Company to cancel it, the breach of that covenant would not have destroyed the Parkview Company’s right to rent, if Kemp retained possession instead of seeking to rescind the contract and surrender possession on account of the breach. He had, at most, an action for damages for the breach. [Hall v. Ryder, 152 Mass. 528; Milliken v. Thorndyke, 103 Mass. 82; Bell v. Baker, 43 Minn. 86.] The alleged failure of the Parkview Company to cancel the Drew lease in no way affects the merits of this case.
As far as Kemp is concerned, we might hold that, by his own pleadings, he concedes the Parkview Company’s right to be paid its ground rent out of the rent due from the Catering Company. Neither do we find any evidence in the record that Kemp has creditors entitled to dispute the Parkview Company’s right to a preference. And even against his creditors there would be an equity in favor of the Parkview Company as the original lessor. Kemp is insolvent and the Parkview Company will lose its ground rent if it is not paid out of the fund in court, The petition showed a clear equity in the Parkview Company to this fund; for it was alleged that *147unless plaintiff was granted a receivership, the Park-view Company had the fight to, and would, re-enter the premises and forfeit his lease. A receiver was appointed on plaintiff’s petition and the rents ordered paid into court; thereby cutting off the Parkview Company from its right to collect its rent by garnishment proceedings against the undertenant, or any other legal process. A court of equity having thus deprived the Parkview Company of its legal remedy, ought to take care that no harm results to it from the interference. [Balfe v. Blake, 1 Ir. Ch. n. s. 365.] Now, in a case of this kind, when the original lessee is insolvent and the lessor cannot collect from him, and a court has ordered the funds paid to a receiver, thereby preventing an action at law by the original lessor, the court will collect the rents from undertenants for the benefit of the original lessor. Perhaps it will do so when there is no receivership; for equity regards the rent as a trust or charge on the estate, which it will enforce by taking the rent due from the undertenant and turning it over to the owner of the premises in satisfaction of his rent. This is to prevent the profits of the estate from being taken by the lessee or others, without making compensation to the owner for the use of his ground. [Treackle v. Coke, 1 Vernon 165; Goddard v. Keat, 1 Vernon 87; 2 Taylor, L. & T. (9 Ed.), 659; 1 McAdams, L. & T., p. 657; Balfe v. Blake, 1 Ir. Ch. n. s. 365; Riggs v. Whitney, 15 Ab. Pr. 388; 1 Story, Eq. Juris. (13 Ed.), sec. 687; Glassner v. Fredericks, 73 Mo. App. 429.]
The case of Otis v. Conway, 114 N. Y. 13, is undistinguishable from the present one, so far as the immediate point is concerned. The plaintiffs had leased premises in New York and their lessee had sublet part of them. Afterwards the first lessee was , adjudged a lunatic and a committee appointed to take charge of his estate. After this occurrence the undertenant’s rent for a year, by agreement of the parties, was deposited with *148a trust company until it should be judicially determined who was entitled to it. The lunatic’s estate was insolvent and the undertenant’s rent was claimed by the committee for the benefit of his creditors, against the claim of the landlords ’ that it be applied on their demand for rent. In other words, the committee contended that the landlords’ demand for rent should stand simply as any other claim against the estate, and not be accorded a preferential right to the rent due from the undertenant to the original lessors. In disposing of this contention the Court of Appeals of New York said that in equity rent was a charge on the estate and in good conscience the lessee ought not to take the profits thereof without a due discharge of the rent. And, further, that the creditors of an insolvent lessee could have no moral or equitable claim to the profits issuing from leased land until after the landlords’ claim was satisfied. The other authorities we have cited pronounce the same doctrine in substance, and all of them support the demand of the Parkview Company for the fund in controversy as against the demand of Kemp and those claiming under him. We quote a very pertinent passage from the opinion in Riggs v. Whitney, 15 Ab. Pr. 388, 390:
“The rents which come into the hands of a receiver, from undertenants of a judgment-debtor, should not be considered as subject to distribution among creditors, until the claim of the original landlord has been extinguished. The superior equity of the landlord, in such a case, is so obvious, that it ought not to be deemed open for discussion; especially where, by the original letting, the right of the receiver to continue in receipt of rent from the undertenants, must necessarily depend upon his performance of the lessee’s covenant to pay the rent reserved to the landlord. Nor is the form of the present application open to any objection; but on the contrary, it has long ago received judicial sanction. [Dixon v. Smith, 1 Sawn. 457; 1 Dan. Ch. Pr. 644; Noe v. Gib*149son, 7 Paige 513.] Where property in the possession of a receiver is claimed by a third person, the proper course is to apply to the court from whom he derives his appointment, by petition, for an order that he pay or deliver it over to the party to whom it rightfully belongs; and to attempt to deprive an officer of the court of property in his possession, by suit or other adverse proceeding, without first obtaining leave of the court, would be regarded as a willful contempt, for which the party instituting the proceeding would subject himself to punishment by attachment. [Angell v. Smith, 9 Vesey 335; 1 Barb. Ch. 72; Pelham v. Harley, 3 Awan. 291, note.]”
But it is said because the leases given by the Park-view Company recognized the right of the tenants to remove the improvements on the property at the end of the term, the improvements became personal property and the rent to be paid for them did not issue out of the land, but out of personalty. In dealing with this proposition it is to be premised that the contract between Kemp and Earp & Webb, who afterwards organized the San Antonio Catering Company, distinctly recognized that the portion of the gross receipts of the second story which would be paid to Kemp, was to be rendered as rent for the use of the premises. The lease was for the second story of a building designated as being on the northwest corner of DeBaliviere and Waterman avenues; not on a movable building, or one which Kemp might locate where he pleased. The lessees acquired the right to have the building stay where it was; that is, on the Parkview Company’s ground. The business was to be conducted 'bv Earp .& Webb, and Kemp was to receive a portion of the.profits as rent. In our judgment the fact that this building might be removed after the lease expired, has nothing to do with the question for decision. It could not be removed before, without releasing Kemp’s tenants from their obligation to pay rent. Neither could it remain on the ground during the term of the lease except *150on the condition of paying the Parkview Company the rent which would accrue to it under the lease granted to Kemp; for if a default occurred the lease provided for a re-entry and forfeiture. Kemp’s subtenants would not have paid rent to him for the use of the building disconnected from the ground on which it stood, and the rent they paid was as much for the use of the land on which Kemp had a lease as for the second story of the building; which Avould have have been useless Avithout the support of the ground beneath it.
The further contention is made against the Park-view Company’s right to a preference, that it had not rer duced its demand against Kemp for rent to a judgment. To this contention we answer that this is a case of a superior equity which the Parkview Company is enforcing ; and that the proof conclusively shows Kemp is insolvent and a judgment against him would be wholly fruitless. ' This he practically concedes in his petition; and, moreover, he swore himself that $650 of the rent was owing to the Parkview Company. Its claim, therefore, stands practically undisputed. These facts leave no doubt in our minds that a preliminary judgment at law is not essential to the Parkview Company’s getting relief in equity. [Davidson v. Dockery, 179 Mo. 687, 78 S. W. 624; Reyburn v. Mitchell, 106 Mo. 365, 16 S. W. 592; Burnham v. Smith, 80 Mo. App. 35.] Besides the appointment of a receiver at Kemp’s instance made it impossible for the Parkview Company to utilize a judgment by garnishing his undertenant if it had obtained one.
The Parkview Company is entitled to a preference out of this fund and its position is such that a preference ought to be enforced in its favor in the present case.
' The demand of the San Antonio Catering Company to be allowed the expense of interpleading is not contested by the Parkview Company, which we find is en *151titled to the fund; therefore, we need not go into the merits of said claim.
The judgment will be reversed and the cause remanded with directions to enter a decree allowing the San Antonio Catering Company reasonable attorney’s fees and expenses in the matter, and adjudging that the balance of the fund, after paying the court costs, be turned over to the Parkview Company.
All concur.