Court Opinion

ID: 3596312
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:43:37.716383+00
Date Added: 2024-06-11T13:57:11.316510
License: Public Domain

On January 1, 1907, the plaintiff and defendant's assignor executed a lease, for a term of twenty-one years, of premises in New York city. The plaintiff will be hereinafter referred to as the landlord, and the defendant as the tenant. The lease contained a provision to the effect that 120 days before the end of the term the parties would select appraisers in the usual way, who should appraise the value of the building placed upon the premises by the tenant, and also the fair rental value of the premises for another term, and that the landlord would "at the end and expiration of the term" either pay the tenant the value of the building as appraised, or at its option grant a new lease for a term of twenty-one years.
At the expiration of the term on December 31, 1927, the appraisers, without fault of either the landlord or *Page 472 
tenant, had failed to compute the valuation of the building, or determine a fair rental for another term. They were still engaged in the performance of their duties as appraisers and had not determined that they differed in judgment, or that they would be unable to agree. The landlord could not, therefore, pay the ascertained value of the building, as the value had not been ascertained, neither could it tender to the tenant a lease for another term, as a "fair rental" had not been fixed. The tenant remained in possession of the premises and on January 12, 1928, twelve days after the expiration of the term, served notice on the landlord that its failure to elect prior to the expiration of the term operated as a renewal of the lease, and that he would pay the rent for a second term of twenty-one years. Thereafter, the landlord commenced this action for a declaratory judgment, praying that it be adjudged that its option still exists. The defendant counterclaimed and asked that it be adjudged that he has a lease for another term of twenty-one years. Upon a motion for judgment upon the pleadings the tenant succeeded, and it was adjudged that the tenant is entitled to a new lease for a term of twenty-one years at a rental to be determined by the appraisers, and that the landlord has lost its option to purchase the building at its appraised value. Did the landlord's option survive the expiration of the term? If so, it was in existence when the tenant served the notice in an attempt to end it and the judgment must be reversed.
The provision for an appraisal contained in the lease is a condition upon which the agreement by the landlord to choose depends. There is also a promise, to wit, that the landlord will choose either to renew the lease at the rental fixed by the appraisers or purchase the buildings at a valuation fixed by them. Each of those terms is vital in the interpretation of the lease. Neither can be deleted without destroying the spirit and intent expressed in the lease. The discussion of the question of the right to *Page 473 
elect having passed to the tenant is beside the mark. That right, if such a right exists, does not come into operation until the landlord is in default. (Hood v. Hartshorne, 100 Mass. 117.) Here the landlord is not in default because the condition of the lease to be fulfilled before its obligation to choose will come into effect has not been carried out. The appraisal has not been completed. The value of the building has not been determined. The rental for the new term has not been fixed. Until the condition of the lease requiring an appraisal is carried out, the dependent obligation of the landlord to choose will not become operative. The landlord's obligation to choose is conditional upon the fixing of the values by the appraisers. Until such values are fixed by the appraisers, the obligation of the landlord to choose is pending and its obligation to choose remains conditional, but nevertheless remains, to be exercised when the condition of an appraisal has been fulfilled. There can be no breach of the landlord's obligation to choose until the time for the performance of that obligation has arrived, to wit, the completion of the appraisal. The failure of the appraisers to make their report relates to a particular obligation in the lease but not to the contract as a whole. That remains in full force and effect. The failure to report simply extends the landlord's time to choose and excuses its failure to choose before.
It is a general rule, subject to exceptions, that where a contract requires successive acts to be performed by the parties, the covenants which relate to those proceedings are dependent, and neither party can maintain an action against the other without proving performance of such dependent covenants.
At the expiration of the lease the tenant remained in possession. He had a right to do so until the completion of the appraisal and the choice by the landlord under its option to grant a new lease or pay for the building on the premises. For the use of the premises during such period *Page 474 
he is liable to the landlord for an amount equivalent to the rental reserved in the lease, and not for the amount fixed by the appraisers as a fair rental. (Van Beuren v. Wotherspoon,164 N.Y. 368; Doyle v. Fish Corp., 144 App. Div. 131; affd.,214 N.Y. 633; opinion on motion for reargument, 216 N.Y. 627; Paine
v. Rector, etc., 7 Hun, 89.)
If the landlord violates its implied obligation of good faith by preventing an appraisal, the tenant may continue in possession, being liable to pay for the use of the premises the amount reserved as rent in the lease or vacate the premises and maintain an action to recover his damages. Upon the completion of the appraisal, if the landlord fails and neglects to make a choice, it may be compelled to do so in an action by the tenant. (Smith v. Rector, etc., 107 N.Y. 610.)
The fact that the appraisal had not been completed at the end of the term was not the fault of the landlord and the tenant cannot, therefore, put it in default by the service of a notice.
"He must continue to act till he puts the lessor in the wrong, or else makes it manifest that no suitable persons can be obtained to do the service [act as appraisers] within a reasonable time." (Hood v. Hartshorne, supra.)
As in the case of Zorkowski v. Astor (156 N.Y. 393) there is no covenant in the lease on the part of the tenant to accept a tender by the landlord of the value of the building, or a new lease. In that case (at p. 397) Judge VANN wrote: "The lessor was bound, after a valid appraisal, to elect to purchase or to renew, but when he had made his election the lessee was not bound to accept the offer on his part in either form because she had not agreed to If he elected to purchase, self-interest would, doubtless, induce her to accept the money, but if he elected to renew the lease she might prefer to decline it, as the rent might be so high that she would rather lose her building than agree to pay it for the long period named." *Page 475 
When the landlord expresses its choice the only right left n the tenant, under the terms of the lease, is to accept or reject the offer. If the landlord offers a renewal and the tenant rejects it he loses the building and cannot compel the landlord to pay the value of the building as fixed by the appraisal. If that were not so the landlord would not have an option but the option would be with the tenant, and he could elect in any event to compel the landlord to purchase the building. Clearly that was not the intent of the parties.
In each action the judgment of the Appellate Division and that of the Special Term should be reversed and judgment directed in favor of the plaintiff, declaring plaintiff's option still in force, with costs in all courts.