In re the Assignment of Whitney

144 A.D. 117, 128 N.Y.S. 1034, 1911 N.Y. App. Div. LEXIS 1638

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: April 21, 1911
• Status: Published

Opinions

•The following is the opinion of the referee:

John L. Wilkie, Referee:

On October 20, 19.06, Girard N. Whitney leased from Dudley S. Harde and Herbert Si Harde certain premises in the city of New York for a period of four years and eleven months commencing November 1, 1906, and ending September 30, 1911. The rent reserved was $3,000 a year payable in monthly installments on the. first day I of each month. The lease contained the usual clause permitting the lessors to re-enter upon the premises in. the event of the tenant’s non-payment of rent, to lease them, and to hold me lessee for the balance of the rent, but this right was never ¡exercised by the lessórs. On the contrary, the premises have j been continually in the possession of the lessee or his undertenants under sub-leases made with the knowledge and consejnt of the lessors. •

In January, 1908, the lessee, Mr. Whitnéy, made an assignment for the benefit, of his creditors to Bayard L.. Peck. The. assignment was made byj him individually and as á member of the copartnership of Wnitney & Kitchen, and directed the assignee, after the payment' of the expenses of the trust and his commissions, “to pay and discharge in full, if the residue of said proceeds is sufficient for that purpose, all the debts and liabilities now due or to grow due from the said copartnership of Whitney '& Kitchen and from the aforesaid party of the first part * * Thereafter the assignee duly qualified and entered upon the discharge of his duties. No rent was unpaid at the time of the assignment, the rent for January, 1908, having been paid by the lessee on or about January 2, 1908.

On or about June 22, 1908, the lessors presented to and filed with the assignee a proof of claim against their lessee, the assignor, for rent claimed to be then due and owing for the months of March, April, May and June, 1908, amounting to $1,000, and for rent which it was claimed would thereafter grow due during the remainder of the term of the lease, amounting to $9,750. This claim was rejected by the assignee on or about June 23, 1908.

On December 20, 1909, an order was made on the petition of the assignee referring the aforesaid claim to me “as sole referee to hear and determine,” and a hearing was had on December 1, 1910, at which testimony- was given establishing the following facts: That no rent was paid for the months of March to September, inclusive, of the year 1908, leaving a balance due for the year ending September 30, 1908, of $1,750; that during the year commencing October 1, 1908, and ending September 30, 1909, the lessors received from the assignor on account of rent the sum of $1,500 only, leaving a balance due for that year of $1,500; that during the year commencing October 1, 1909, and ending September 30, 1910, the lessors received from the assignor on account of rent the sum of $1,500 only, leaving a balance due for that year of $1,500; that the only other payment made to the lessors was a payment of $250, made on or about November 16, 1910; and that on or about November 16, 1910, the lessors, the claimants here, conveyed the premises to some third party and ceased to be the owners thereof.

Apparently no payment was made on account of the October, 1910, rent, amounting to $250, the payment made about November 16, 1910, being applied to November.

The rent due and unpaid at the time the claimants ceased to be the owners of the-premises was, therefore, $5,000, and the amount to grow due was $2,625, on account of which $125 has been paid, leaving a balance to grow due of $2,500.

Two questions were presented for determination, viz.: (1) Were the claimants entitled to file and prove a claim against the assigned estate for rent growing due after the assignment, and (2) assuming that they were, should the claimants be allowed to prove their claim to the extent of . the rent to grow due after the j conveyance of the premises by. them? I am of the opinion thajt the first question should be answered in the affirmative and the second in the negative. ■

The assignee’s claim is that the unpaid rent. accruing after the assignment is not a ¡claim properly allowable by him under the deed of assignment by reason of the fact that he has never elected to treat the lease as an asset and has never by his own act taken any benefit therefrom to himself or the estate. That such is the fact is not disputed by the claimants, but it is their contention that under the terms of the deed of assignment the claim made by them is ¡one that is properly allowable by the assignee1 irrespective of his failure to act, and, as it were, despite the same. ¡ ■

•Matter of Link (14 Daly, 148),' decided by the old Court of Common Pleas in 188Y,.. is a case directly supporting the assignee’s contention. (The language of the deed' of assignment there under consideration seems to be'identical with the language of the ássignnLent in the present case, and the facts upon which the claim was based are directly analogous, It was held that a claim fo|r the rent accruing subsequently tó the assignment was not provable against the assigned -estate^ There is no discussion ini the opinion of the rules of law applicable, the learned court evidently considering itself bound to decide as it did on the principle stare decisis under the cases .of Matter of Risley (10 ¡Daly, 44); Matter of Adams (15 ■ Abb. N. C. 61); Matter of May <& Berwin (4Y How. Pr. 3Y), and Johnston v. Merritt (10 Daly, 308). Its decision' seems also to have been actuated largely by the consideration that the lessor' was not left without a remedy by a refusal of his claim, having still an action against his lessee for damages for breach of contract. !

So far as this latter argument is concerned it- does not seem to me at all applicable. ¡ The assignment.itself “is to be followed strictly by the assignee in his disposition of the property. It is his guide, and furnishes the measure of hiS duty.” (Matter of Hevenor, 144 N. Y. 271.) No discretion is vested in him-with respect to the distribution of the estate in his hands, and he must follow closely in so doing the terms of the assignment. The question, therefore, as to the propriety of any claim presented to him for allowance depends solely upon the terms of the assignment, and any arguments as to the general equities of the allowance or rejection of any particular claims would seem tó have no bearing. If the claim under consideration is one that is embraced by the assignment it does not matter, nor does it militate against the claim that the lessor has another remedy against the assignor, such as an action for breach of. contract.

The cases cited by the learned justice who wrote the opinion in the Link Case (supra) do not to my mind constitute authorities to the effect claimed for them. In Matter of Risley (10 Daly, 44) a claim was made by a surety for rent paid by him as guarantor upon a lease subsequent to the assignment which did not provide for the payment or indemnification of persons who subsequently incurred liabilities or made advances for the assignor. The court held the claim to be a debt created after the assignment and hence not provable. In Matter of Adams (15 Abb. N. C. 61) it was héld simply that a claim for damages against an assignor for his breach of contract occurring after the assignment was nof provable against the assigned estate. Matter of May & Berwin (47 How. Pr. 37) was a case arising under the Bankruptcy Law of the United States and involving a construction of the Bankruptcy Act. Johnston v. Merritt (10 Daly, 308) was in effect an action for' rent against an assignee for the benefit of creditors who had entered into possession for the purpose of removing the assignor’s property, and who had tendered payment for use and occupation but who denied any obligation under the lease.

Despite the foregoing I should, however, feel constrained to follow the ruling in the Link case were it not for the fact that it has to my mind been overruled by more recent decisions of both the Appellate Division, First Department, and the Court of Appeals. (Matter of Ludeke, 33 App. Div. 397; Matter of Hevenor, 144 N. Y. 271; People v. St. Nicholas Bank, 151 id. 592.)

In Matter of Ludeke (decided in 1898) an assignment was made directing the assignee to discharge in full “all the debts and liabilities now due ior to grow due.” A claim was made-under a lease to'the assignor for rent to grow due subsequent to the date of the assignment. This claim the assignee compromised by the payment to the claimant of a sum less than the face value of the claiim. On an application to confirm the assignee’s accounts the assignor objected to this payment and his objection was Sustained by the referee in the first instance and by the court at Special Term. (22 Misc. Rep. 676.) On appeal this ruling wasj reversed by the Appellate Division. While the precise question here involved was not the primary question before the courts in that case, nevertheless a decision as to the propriety of the jclaim for rent “to grow due” was a necessary part of the court’s ruling, else how could it have sustained the assignee’s action in compromising it? That the matter was considered and. ruled upon seems clear from the language of the court when it said: “The assignor’s liability under the lease was cerijainly not. a new debt created after the execution of the assignment. The contract and the entire liability of the assignor ¡thereunder existed upon the day when the assignment was delivered. The assignor (sic) was. directed to pay debts due and toi grow due, in other words, sums payable under existing contracts, whether due in preesmti or payable in futuro. So long as the landlord did not avail himself of the option contained! in the 3d paragraph of the lease, he undoubtedly ‘ had a valid and certain claim against the assigned estate for the rent reserved in the lease.’ (Matter of Hevenor, 144 N. Y. 271.) ”

Such language seems to me absolutely irreconcilable with the claim here made bylthe assignee and must be regarded as ■ overruling the decision in the Link case. •

In Matter of Hevenor (supra) a claim was made for a deficiency in rent under á lease made by the assignor where the lessor acting •under a clause in the lease had re-entered upon the demised premises and relet the same át á rent less than that reserved in the original lease. The Assignment provided for the payment of “the debts and liabilities of the assignor, then due or to grow due ” The claim was dejected. On appeal to the Court of Appeals the action of the assignee in rejecting the claim was sustained but only upon the theory that the lessor by re-entering and reletting the premises had put an end to the fixed obligation of the lessee and the only obligation thereafter was for a possible deficiency which could not have existed at the time of the assignment and consequently was not covered thereby.

The language of the opinion shows clearly, however, that had the lessor not re-entered and relet the premises he could have proved his claim for rent “to grow due” under the lease after the assignment.

In People v. St. Nicholas Bank (supra) the same court gave judicial construction to the decision in the Hevenor case, Judge Gray, who wrote the opinions in both cases, saying (at p. 595): “ The question was whether the assignee of Hevenor could approve and pay the claim of Hevenor’s lessor; and that turned upon the terms of the authority conferred by the deed of assignment. That, undoubtedly, directed the assignee to pay all the debts and liabilities of the assignor, then due or to grow due; but, as we endeavored to point out in the opinion, that language did not mean to include a liability thereafter to be created and contingent upon after-occurring events. It meant, and the will of the assignor was, that whatever was a debt at the time of his assignment, or whatever he had rendered himself liable to pay, although the liability had not yet matured into an actual debt, his assignee should meet by the apphcation of the assets in his hands.”

It seems clear that the rent to grow due under the lease was something which prior to his assignment the assignor “had rendered himself liable to pay.” True this liability “had not yet 'matured into an actual debt,” but under the foregoing decisions this latter fact is immaterial. Nor may it be said that simply by consenting to the lessee’s sub-letting the premises, the lessors have availed themselves of the option to re-enter contained in the lease so as to bring the case within the purview of the rule laid down in the Hevenor case.

It must be held, therefore, that the claim filed by the lessors on or about June 22, 1908, was a proper one and that the action of the assignee in rejecting it was unwarranted'. Quite obviously the claim as filed should be reduced to the extent of the payments subsequently made. The further question is whether it should be still further reduced as it were to the extent of the after November 16, 1910, the date on which the claimants ceased to be the owners of the property.

There is some doujbt in my mind as to the exact question referred to me for determination, that is to say, whether I am to decide simply as to] the propriety of the assignee’s action in rejecting the claim filed with him on or about Junó 22,. 1908," in which event,- of course, it would not be incumbent on me to consider the questions just suggested as to the amount of the claim which might (be proved,- or whether I am to decide further if the claim |was improperly rejected, to what extent it should be allowed, j The order of reference provides “ that the above entitled claim and the issues herein ” be referred to the referee to hear and determine. It seems to me that “the issues herein ” embrace not only the question as to the propriety of .the rejection but tike further question as the amount' of the claim to be allowed if the rejection was improper. Upon this latter question the fajct of the transfer of ownership seems to have a material bearing, and as that fáct appears in evidencé before me, I feel constrained under.the order of reference to -decide what the legal jeífect of that fact is. •

There seems' to be no case in which this precise question was ever raised or passed upon. I can, however, conceive of no rulé of law or principle Of equity which would permit these claimants to prove against the assigned estate as a debt or hability due or to grow due to them, a claim for rent to grow due in futuro under a lease of premises of which they had ceased to be the owners and* which they had conveyed to some third party.

Had the claimants qoriveyed the. property prior to filing their claim with the assignee, they surely would not have been entitled to prove any ¡claim for rent growing due. or to grow due after the date of phe conveyance. The ownership or right to make such a claim would rest with the then owners of the property,.and not jwith the original lessors, unless, perhaps, there had been some assignment of the claim to them, which fact does not' appear here. It seems equally clear that although their claim was properly presented and filed in 1908, the claimants should not ike permitted to prove such claim to the extent of the rent “to grow due” after their transfer of the property. ■

It may perhaps be that some arrangement was made at the time of the sale of the property whereby the original lessors were to retain the right to' collect or recover rent from the assignor under his lease. Such a situation is somewhat unusual, and the court will not indulge in a presumption that the same exists. There is no evidence as to any limitations or reservations attending the transfer of the property, and if the court should indulge in any presumption it is only a presumption that the transfer was of the ordinary kind, by virtue of which the vendee or grantee would have the right to collect or recover the rent growing due after the transfer.

I, therefore, hold that the claim filed with the assignee on" or about June 22, 1908, was a proper claim, and that its rejection by the assignee was unwarranted; but I hold further that the claim as filed should be reduced to the extent of the payments made on account of rent and the rent to grow due after the conveyance of the property by the claimants. As so reduced, the claim may be proved and the claimants should be permitted to share in the assigned estate to the extent thereof.