Bay County v. Northeastern Michigan Fair Ass'n

296 N.W. 707, 296 Mich. 634

• Court: Michigan Supreme Court
• Decided: March 11, 1941
• Docket: Docket No. 67, Calendar No. 41,344.
• Status: Published

Opinion

McAllister, J.

The county of Bay filed its hill of complaint for an adjudication and determination of rights to the proceeds of fire insurance payable as the result of the destruction by fire of a grandstand erected on fairgrounds owned by plaintiff. Defendants are the Northeastern Michigan Fair Association, which raised the money to build the grandstand by means of a bond issue, the chairman of the bondholders ’ committee, and the Peoples Commercial & Savings Bank, trustee under the bond issue. Plaintiff was awarded a decree, in which it was held entitled to the proceeds of the insurance policies; and defendants appeal.

The grandstand in question was built by the Northeastern Michigan Fair Association on real estate belonging to the county of Bay, and under the terms of a certain agreement whereby it was stipulated that the county would lease the land, upon which the grandstand was erected, to the association for a period of 10 years from and after May 1, 1924; that at the expiration of the lease, the grandstand would be the property of the county; that the county would, during the continuance of the lease, keep the premises insured and, in ease of loss, replace the said structure immediately. No rentals were reserved to the county. The bonds were to be paid by funds raised by 25 per cent, of the gross admittance exhibition revenue. Depleted revenues forced discontinuance of the fair in 1931, three years before the expiration of the lease period; and the secretary of State, in accordance with Act No. 84, part 5, chap. 2, § 7a, Pub. Acts 1921, as amended by Act No. 267, Pub. Acts 1929 , marked the records as showing the fair association out of existence as of September 1, 1931, for failure to file an annual report. Subse- qnent to the 10-year period of the lease, the fire insurance policies were carried, as previously, in the name of the county of Bay, the Northeastern Michigan Fair Association, and the Peoples Commercial & Savings Bank of Bay City, as their interests might appear. The destruction of the grandstand by fire occurred June 4,1935, and the loss was adjusted at the sum of $20,258.14.

After the fire defendants made claim to the insurance, and there was some delay in securing payment of the proceeds from the insurance companies. It was agreed, however, between the various parties that the loss be adjusted in the sum of $20,258.14, and thereafter this amount was paid over by the insurance companies to the county treasurer. The checks to the county treasurer were made payable to the county of Bay, the fair association, and the bank, in accordance with a certain escrow agreement reciting that the various parties to this suit were interested in the proceeds and had consented that the county treasurer act as custodian until agreement regarding the disposition of the funds had been entered into by the said parties. This transaction was reported to the board of supervisors by a combined committee, consisting of the agricultural committee and the board of auditors of the county, which had been designated by the board of supervisors to carry out such agreements. Thereafter a resolution was adopted by which the county treasurer was instructed to indorse the checks received from the insurance company and to pay therefrom certain expenses resulting from the fire, and thereafter to retain for the county the sum of $3,700, and to pay to the bondholders the sum of $15,950.40. It was provided in such resolution that a balance of $15,950.40 be paid over by the county treasurer to the bank for the use and benefit of the bondholders of said grandstand bonds. After numerous conferences and pro posed agreements, it was finally determined that the county treasurer should deposit all of the checks from the insurance company with the bank and issue checks on such bank deposit to the various parties in order to carry out the agreement. On the understanding that they were to receive the proceeds, in accordance with the proposal theretofore agreed to, the representatives of all of the parties indorsed the checks, so that the county treasurer could deposit them to his account in the bank. After the checks had been indorsed by the various parties and deposited in the bank, the county treasurer delayed issuing the checks to the parties in accordance with the understanding entered into when these parties had indorsed the checks. One of the representatives then had a conference with the county clerk, who advised him that he would not indorse, issue, or sign any checks requested by the county treasurer to carry out the transaction, because of advice of the prosecuting attorney. When this situation was called to their attention, the board of supervisors adopted a resolution requiring the county clerk to appear before it and explain the reason for not issuing the check to the bondholders. The result was that the county clerk appeared before the board and stated that his refusal was due to advice from the prosecuting attorney; and thereafter the prosecuting attorney appeared before the board and stated that before any disposition of the funds should be made, an order should be obtained from the circuit court. Thereupon the board adopted a resolution reciting that, because there was a legal question involved, the matter should be submitted to the circuit court for determination; and on February 8, 1936, the county filed its bill of complaint for an adjudication of the question of who was entitled to' the funds.

It is the claim of the county that it was the sole and unconditional owner of the grandstand at the time of its destruction by fire, and that none of the other parties had any interest in the premises at that time and that they were not entitled to share in any proceeds of the fire insurance. It is contended that after the expiration of the 10-year period of the lease on May 1,1934, the grandstand became the sole property of the county; that on said date the lease expired and the rights of the fair association and the bondholders to any interest in the grandstand expired with the expiration of the lease.

On behalf of defendants, it is claimed that, at the time the board of supervisors of the county of Bay agreed upon the disposition of the fire insurance funds, a compromisable controversy existed; that although the lease, by its terms, expired at the end of the 10-year period therein stipulated, there was a holding over and a continuation of the said lease from year to year; and that the county of Bay is bound by the agreement of settlement entered into with regard to the disposition of the funds. If there was no holding over at the expiration of the 10-year period, there was no compromisable controversy existing at the time of the agreement which was entered into between the county of Bay and defendants.

To substantiate the claim that there was a holding over of the 10-year period in the lease, defendants contended that at the expiration of the above period, the caretaker employed by the fair association remained in charge of the premises; that the association continued to pay for his telephone on the fairgrounds up through the month of May, 1935, the telephone rental for June not being yet due at the time of the fire. It appears further that at the expiration of the said period in the lease, there was a discussion of a further lease for a period of eight years; that such a lease was recommended by the agricul tural committee of the board of supervisors to the board in a report which pointed out that there were then three parties interested in the proposition, namely, the fair association which was to be the lessee, the bondholders who hold the bonds issued to build the grandstand, and the county, “to which the grandstand is to revert at the expiration of the lease.” Apparently such a lease was prepared by the prosecuting attorney, embodying provisions for the cost of the caretaker which was to be jointly shared in the future between the association and the county. The lease, however, was never executed between the parties.

We are of the opinion that there was no holding over on the part of defendants after the expiration of the 10-year period stipulated in the lease. The most that could be concluded from the proofs is that defendant fair association was looking forward to the execution of a new lease, and that the parties never got together to make it. A holding over under such circumstances is not a renewal.

Where a party holds over after a lease for a period of years, it may be inferred that he continues as lessee from year to year.

“It is held, however, that a tenancy from year to year cannot be inferred from the mere fact of holding over by the tenant; the landlord must in some manner recognize the tenancy. * * * The presumption of law that a tenant who by permission of his landlord holds over is a tenant from year to year may be rebutted by proof that the holding over is in some other character or for some other purpose.” Faraci v. Fassulo, 212 Mich. 216, 218.

When a tenant under a lease for years holds over, the law implies a contract on his part to renew the tenancy on the same terms for another year. Scott v. Beecher, 91 Mich. 590. Where a tenant holds over, the law implies a continuance of the tenancy on the same terms and subject to the same conditions. See Hoffman v. Willits, 194 Mich. 276. This rule does not, however, apply as to conditions which can be performed only during the first term. 35 C. J. p. 1029.

In Ives v. Williams, 50 Mich. 100, 106, 107, this court said:

“Whether in case a party holds over after the expiration of an express tenancy for years he becomes a tenant by sufferance merely, or a tenant subject to the provisions of the express lease, or a tenant upon still other terms, is not necessarily a pure question of law. It is generally rather a question of evidence and depending upon states of fact which are more or less despotic in their tendency. * *

“But when the case is of such a nature that the facts plainly revolt against material provisions of the old lease; or when according to the evidence there is not only no right to infer the assent of the parties, but positive proof that the landlord unquali-fiedly dissents, there is no authority for holding that the parties are nevertheless subject as matter of law to the old provisions. * * *

“The contrary view would lead to great absurdity - and would enable a tenant by an easy process to’ dictate terms to his landlord. Now in the case before ns the state of the property had undergone very substantial change and many important provisions of the lease had become inappropriate, and the defendant, the lessor, was opposed to the further continuance of the tenancy and objected to its being forced upon him. The plaintiff, the tenant, resolved to hold on. But he could not do so and still bind the defendant to the old and inapplicable provisions.”

In this case the terms of the first lease provided that the fair association should build a grandstand that would become the property of the county at the expiration of the 10-year lease. The association did not contract to pay the county any rentals. ’If the lawonly implies the continuance of a lease from year to year on the same terms, on holding over after a lease for a term of years, how can it be said that the association held over on the same terms as the original lease? The grandstand was already built. To build this structure was the only covenant the association agreed to in the original lease. The association could not have held over on the same terms as the original lease, for the condition therein was performed, and could only have been performed during the period covered by such lease. It could not, thereafter, in any manner, have been performed. The terms; upon which a tenancy could have been continued would, of necessity, have been other than those of the original lease. Under such circumstances the law does not imply a continuance of a tenancy. It must, therefore, be held that the lease expired at the end of the 10-year period and was not thereafter renewed. The county, under the terms of the lease, became the owner of the grandstand before the occurrence of the fire.

There was no compromisable controversy that could have been submitted to the board of supervisors involving a claim of defendants to the fire insurance funds. There was no legal basis for any claim to the insurance money on the part of defendants. In order that a claim may be rightfully said to be doubtful, there must be some reasonable ground for saying that it was legitimate. Such ■ground did not exist in this controversy. There was no consideration for any action on the part of the county to agree to divide the insurance funds with defendants.

Decree affirmed, with costs to plaintiff.

Sharpe, C. J., and Btjshnell, Boyles, Chandler, North, Wiest, and Btjtzel, JJ., concurred.