Link Belt Machinery Co. v. Hughes

51 N.E. 179, 174 Ill. 155

• Court: Illinois Supreme Court
• Decided: June 23, 1898
• Status: Published

Opinion

Mr. Justice Phillips

delivered the opinion of the court:

One of the reasons urged by appellant in this cause why the judgment of the Appellate Court affirming the decree of the Superior Court of Cook county should be reversed, is, that a receiver, by taking possession of leased premises, does not elect to adopt the lease of the individual, firm or corporation of which he is receiver, nor does he become bound by the terms of the lease.

There can be no denial of the proposition that a receiver has, subject to the order of the court, the right to elect whether he will perform or comply with the provisions of the lease held by the party for whom he is acting, and that he is entitled to a reasonable time after taking possession in which to make the election whether he will continue such lease. (Railroad Co. v. Humphreys, 145 U. S. 82; Park v. Railroad Co. 57 Fed. Rep. 799; Railroad Co. v. Railroad Co. 58 id. 268; United States Trust Co. v. Wabash Railway Co. 150 U. S. 287; Central Trust Co. v. Wabash Railway Co. 34 Fed. Rep. 259; Express Co. v. Railroad Co. 99 U. S. 191; Ellis v. Railroad Co. 107 Mass. 1; In re Metz, 6 Ben. 571; In re Hamburgher, 12 Nat. Bank Reg. 277; In re Lynch, 7 Ben. 26; Spencer v. World’s Columbian Exposition, 163 Ill. 117.) But in a case where the lease or contract is of itself a thing of value, and the receiver, under the order of the court, takes possession of the premises and conducts the business which the insolvent had been unable to continue, and, without any act of disaffirmance or notice to the owner of the premises indicating that he would not be bound by the contract or terms of the lease, continues to hold the premises and conduct the business under the order of the court, receiving all the benefits of the possession of such premises, he has no right to repudiate the contract and pay rent for the premises only on the basis of quantum meruit.

Where a receiver has continued the business of the insolvent for a reasonable time, paying to the owner of the premises the rent specified in the lease held by the insolvent, and has raised no question as to the terms or conditions of the lease, it will be considered as an adoption by him of the terms of the lease during the time he was occupying such premises, under the order of the court, for the continuance of the business of the insolvent. As held by this court in Spencer v. World’s Columbian Exposition, supra, (on p. 128): “No reason is perceived why the receiver may not either expressly elect, or, by unequivocal acts inconsistent with 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 whatever putting the court or the receiver to an election.”

No express declaration by the receiver to the landlord of his intention or election to abide by or carry out the terms of the lease or contract of his insolvent is necessary. It may be done by acts, by continuing in possession of the premises and for a time paying the rent provided for in the lease, by making no request to the court which has appointed him to order whether or not the rent shall be continued, or by a failure to make other and different arrangements with the landlord on the question of amount or terms of the lease. Where none of these circumstances exist indicating an intention on the part of the receiver to hold the premises under other or different terms from those named in the lease, it would be unjust to permit a receiver to say he intended to hold such premises under a quantum meruit, and not under the terms of the lease.

In Blackall v. Morrison, 170 Ill. 152, where a question in some respects similar was presented to this court, we said (p. 161): “It would be highly unjust to allow the receiver to occupy the premises under an order providing for the payment of a fixed sum per month as rent, and after such occupancy had continued for nearly a year, while the parties were contending as to whom the monthly sum was to be paid, to insist that payment of rent should not be made according to the provisions of the order, but that the party entitled to the rent should be required to show by proof the reasonable rental value thereof.” In this case, appellant had filed its bill asking for the appointment of a receiver for the Standard Eggette Coal Company, and in such bill it was alleged that the eggette company had spent large sums of money in erecting its plant and machinery on the premises in question, and that it had reached a point where appellant was informed and believed its business could be successfully and profitably continued. Appellant especially asked and prayed that the receiver be ordered to continue such business, and represented to the court that the lease in question was one of the valuable properties of the insolvent company. At its instance the court ordered the receiver to continue the business in which the insolvent company was engaged, employ suitable persons to conduct such business and purchase materials, and that he pay the rent and other charges, to the end that the property of the insolvent should be preserved and conserved pending the further order of the court. There can be no question under such circumstances the receiver was put to no election, but by continuing in possession of the leased premises, which were represented to be one of the valuable properties of the insolvent, he became bound to pay the rent named in the lease.

It is urged by appellant that where the receiver had in his hands only the sum of about $2138, and the rent, together with money borrowed by the receiver to continue the business, the receiver’s fees and other expenses were largely in excess of that amount, the same should have been ordered to be prorated. We are not called upon to determine that question in this case. The lease in question expressly gave to appellee a lien upon all the property of the lessee for rent which should remain due and unpaid. The parties had a right to enter into a contract of this nature, and it was binding between the lessor and the lessee. When the receiver took possession under the order of the court the lease was not changed. The court having ordered the receiver to occupy the leased premises under the lease, the receiver took the property subject to the same terms and conditions as it was held by his insolvent. If appellee had a lien against the property for rent he also had a lien against the property after it thus passed into the hands of the receiver. In the case of Hooven, Owens & Rentschler Co. v. Burdette, 153 Ill. 672, which was a case where an assignee of an insolvent debtor had taken possession of property which had been sold to the insolvent under a contract not recorded, retaining a lien until the purchase money had been paid, we held the rule was well settled that an assignee of a failing debtor takes the property assigned subject to the equities, liens or encumbrances which existed against the same in the hands of the insolvent, and cited in support of this rule, Willis v. Henderson, 4 Scam. 13, Hardin v. Osborne, 94 Ill. 571, Jenkins v. Pierce, 98 id. 646, Jack v. Weiennett, 115 id. 105, and Union Trust Co. v. Trumbull, 137 id. 146. We held also in that case, such lien was transferred to the purchase money arising from the sale of such property. In this case, where the property was sold by the receiver under an order of the court, preserving whatever rights existed in favor of appellee, Hughes, his lien continued and was transferred to the proceeds arising from the sale of such property, and was prior to the claims of other creditors or other costs. In the absence of such a lien reserved upon the property in the lease for the payment of unpaid rent, a different question might arise as to the prorating of the purchase money between a landlord and those entitled to the costs of administration.

Appellee having the right to his lien upon the purchase money arising from the sale of the property upon which he had reserved a lien for unpaid rent, and also to receive from the receiver the same rent provided for in the lease, it is unnecessary to discuss the other questions raised by appellant.

The judgment of the Appellate Court for the First District affirming the decree of the Superior Court of Cook county is affirmed.

T , , „ , Judgment affirmed.