Court Opinion

ID: 6998663
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:37:58.764659+00
Date Added: 2024-06-11T16:09:51.332114
License: Public Domain

Mr. Justice Sears, dissenting. I do not concur in the conclusion reached by a majority of the court. That the receiver here should be permitted to “ elect ” to retain the premises under the lease and occupy them for more than one-half of the term remaining unexpired when he took possession as receiver, and then to “ elect ” to abandon the tenancy, seems to me to be inequitable in principle, nor do I think it supported by authority. There can be no question as to the well established general rule that the receiver may not incur obligations, and thereby bind the estate, without the consent of the court which has made him its officer. Neither can the rule be questioned which gives to the receiver—acting, of course and always, under the direction of the court—a reasonable time, during which he may retain premises formerly held by the insolvent under lease, without making himself, as receiver, privy to the lease or obligated under the terms of the tenancy, for the purpose of electing, within such reasonable time, whether it will be of benefit to the estate to accept the tenancy and treat the leasehold as an- asset of the estate, either for sale as an asset, or for use in carrying on the business of the estate. This rule is announced in Morrison v. Blackall, 68 Ill. App. 504, in the following terms: “We regard the rule to be that a receiver or an assignee of an insolvent may accept the trust conferred upon him without becoming the assignee of any lease held by the insolvent. Whether such assignee or receiver will become the assignee of or bound to pay rent provided in a lease • held by the insolvent, is for the assignee or receiver to determine. He has a right to elect what he will do in this regard, and, if the landlord takes no. action, a reasonable time within which to make such election. If he continue .to remain in occupancy of the demised premises beyond such reasonable time, he will be presumed to have elected to accept the lease, and will be bound to pay the rent provided thereby.” In Smith v. Goodman, 149 Ill. 75, the court, in commenting upon this rule, say: “ It is undoubtedly the rule that the assignee must make his election within a reasonable time, and will not be permitted to continue in the occupation of the premises unreasonably.” In Spencer v. Columbian Ex., 163 Ill. 127, the court say : “ The general principle contended for by appellant that a receiver has, subject to the order of the court, the right to elect whether he will perform the contract or not, and is entitled to a reasonable time after taking possession in which to make such election, is not denied. It is so laid down by many authorities. (Citing cases.) But we have been .referred to no case holding that when the lease or contract is of itself a thing of value to the creditors, and the receiver, under the order of the court, takes possession of the premises and conducts the business which the' insolvent has been unable to continue, and, without any act of disaffirmance or notice that he would not be bound by the contract, completes the time and receives the profits and all the benefits from such possession and continuance of the business, the receiver may then repudiate the contract, and pay only on the basis of a qucmbum meruit.” * * * And the court continues, quoting from Smith v. Goodman, supra: “ ‘ There is not entire uniformity of decisions as to when the assignee will be held to have accepted the lease and bound himself to perform its covenants, and no general rule can be laid down as to the effect of specific acts of the assignee in determining whether there has been an election to take the leasehold as a part of the assigned property. An examination of the adjudged cases is valuable only as fixing the general principle by which the case is to be governed, which would seem to be that the assignee will not be held to have accepted the lease unless it be shown that he has done so expressly, or, by unequivocal acts inconsistent with the right of entry by the landlord, had indicated an election to appropriate the leasehold estate.’ No reason is presented Avliy the receiver may not either expressly elect, or, by unequivocal, acts inconsistent Avith the right of entry by the landlord, indicating an election to appropriate the leasehold estate, be held to have done so impliedly, without any act on the part of the landlord putting the court or the receiver to an election.” Nothing inconsistent with this announcement of the rule by our Supreme Court is found in Sparhawk v. Yerkes, 142 U. S. 1; Sunflower Oil Co. v. Wilson, 142 U. S. 313; Quincy, etc., R. R. Co. v. Humphreys, 145 U. S. 82. In U. S. T. Co. v. Wabash W. Ry. Co., 150 U. S. 287, the court say: “ The general rule applicable to this class of cases is undisputed, that an assignee or receiver is not bound to adopt the contracts, accept the leases, or otherwise step into the shoes of his assignor, if in his opinion it would be unprofitable or undesirable to do so; and he is entitled to a reasonable time to elect whether to adopt or repudiate such contracts. If he elect to adopt a lease, the receiver becomes vested with the title to the leasehold interest, and a privity of estate is thereby created between the lessor and the receiver, by which the latter becomes liable upon the covenant to pay rent.” From these decisions it is apparent that the rule as established contains these well defined propositions: 1st. That the protected occupancy of the receiver during a reasonable time is for the purpose only of enabling him to elect whether the leasehold will be of benefit to the estate. 2d. That such occupancy ends and privity of contract under the lease begins the moment such election is made, if it be an election to retain. 3d. If without any express election the receiver remain in occupancy beyond a time reasonable for the purpose of election, he thereby impliedly elects to retain, and becomes obligated as receiver under the terms of the lease. 4th. Such implied election by occupancy is presumed to be with consent and by direction of the court, if the receiver remains in occupancy to carry on the business of the estate under direction of the court. In the case here under consideration, we have a stipulation as to facts, a part of which is as follows: “ That the receiver has paid to the intervening petitioner the rent, as per the terms of said lease, from the said time it took possession of said premises up to February 1, A. D. 1897, since which time no rent has been paid for said premises; that the said leasehold estate was at the various times herein mentioned, valuable to and available for the benefit of the creditors of said estate, and that the said receiver, at the time of its appointment herein, elected to take possession of said premises, and occupy the same under the orders and direction of the court.” At the time when the receiver took possession of the premises, covered by the lease from petitioners to insolvent, there remained of the unexpired term less than six months. The receiver occupied and paid rent according to the terms of the lease for more than three months, i. e., for more than one-half of the unexpired term. It is obvious from this stipulation that the receiver occupied, not alone by his right to hold for a reasonable time, and upon a quantum meruit without regard to the terms of the lease, but that he occupied and paid rent upon the terms of the lease. Having so occupied, and for more than half of the unexpired term of the lease, he should be held to have impliedly elected to take the place of the insolvent-under the lease. Morrison v. Blackall, supra; Spencer v. Columbian Ex., supra. But aside from this implied election we have here the stipulation stating plainly that he did expressly so elect, and stating further that it, “ the said leasehold estate ” (not a fractional part of it), was, at the various times herein mentioned, “ valuable to and available for the benefit of the creditors of said estate.” I am unable to find any case holding that the receiver may occupy at caprice the leasehold property beyond such reasonable time, or beyond the making of such election.. The reasoning of all the cases clearly is, that the holding without assuming any liability under the lease is for one purpose only, viz., to determine whether the leasehold will be of benefit to the estate as an asset or for occupancy, and can never be beyond the making of such determination by election or the expiration of a reasonable time therefor. That occupancy for the purpose of carrying on the business of the insolvent, such business being carried on by permission of the court, creates a presumption that the court approved the election, seems too clear to be controverted. Unless this were so, none of the cases cited could hold an implied election possible. The rule surely gives no power to the receiver, whether acting under a specific order of court, or by its implied permission, to play fast and loose with the lessor, by electing to treat the leasehold as of value to the estate, remaining in occupancy under the lease for a part of the term, thereby becoming party to the lease, and then capriciously to elect again to nullify the contract and leave the lessor without remedy. The giving of the eight-day notice by the receiver to petitioner, the landlord, could in no event affect the legal status of the parties. If no privity under the lease had been created it was entirely unnecessary; and if such privity was created it could affect nothing. Aor was it necessary after an election by the receiver that the landlord should demand an election, nor could such demand by the landlord be of any importance as affecting an implied election by the receiver by holding beyond a reasonable time. Smith v. Goodman, supra. I am of opinion that the order of the Oircuit Court should have been reversed and the cause remanded with directions to allow the prayer of the intervening petitioner upon the stipulated facts.