Sexton v. Chicago Storage Co.

21 N.E. 920, 129 Ill. 318

• Court: Illinois Supreme Court
• Decided: June 15, 1889
• Status: Published

Opinion

Mr. Justice Scholfield

delivered the opinion of the Court:

The evidence sufficiently proves that the Chicago Storage Company has “ceased doing business.” This is not contested by counsel for appellees, though they seek to avoid its effect by the circumstance, which they claim to be proved, that such failure is solely because of the seizure and appropriation of its property for the payment of rent due from Frank F. Cole alone, to appellant. It is therefore manifest, that in determining whether the corporation has left debts unpaid, so as to bring the case within section 25, chapter 66, of the Revised Statutes of 1874, as amended by the act of May 22, 1877, in relation to corporations, (Laws of 1877, p. 66,) the first and most important question is whether the storage company is an assignee of the term of Frank F. Cole, or only a sub-lessee under him, for if it is an assignee of the term of Frank F. Cole, it stands in his shoes as respects his covenant to pay rent, and its property is liable to be seized and appropriated to the payment of the rent, by distress, as was done. If, however, it is but a sub-lessee under Frank F. Cole, it is liable only on its covenants to him.

The leases to Frank F. Cole are “for and during” the terms named, “and until the 1st day of May, 1888.” The lease executed by Frank F. Cole to the Chicago Storage Company is of precisely the same premises included by the leases to him, and it is in the identical language of those leases, “for and during” the term named, “and until the 1st day of May, 1888,” so that the terms all end at the same instant of time. No space of time, however minute, therefore can, by any possibility, remain after the term of the storage company has ended, before the expiration of the terms of Cole, in which he could enter upon or accept a surrender of the premises.

The general principle, as held by all the authorities, is, that where the lessee assigns his whole estate, without reserving to himself a reversion therein, a privity of estate is at once created between his assignee and the original lessor, and the latter then has a right of action directly against the assignee . on the covenants running with the land, one of which is that to pay rent; but if the lessee sub-lets the premises, reserving or retaining any reversion, however small, the privity of estate ; between the sub-lessee and the original landlord is not established, and the latter has no right of action against the former, there being neither privity of contract nor privity of estate between them. The chief difficulty has been in determining what constitutes such reservation of a reversion. The more .recent English decisions, and all of the text books treating of the question which have been accessible to us, hold that where ■all of the lessee’s estate is transferred, the instrument will operate as an assignment, notwithstanding that words of demise instead of assignment are used, and notwithstanding the reservation of a rent to the grantor, and a right of re-entry on the non-payment of rent or the non-performance of the other covenants contained in it. 1 Platt on Leases, pp. 1-9,102; "Woodfall on Landlord and Tenant, (7th ed.) 211; Wood on Landlord and Tenant, p. 131, sec. 93; Taylor on Landlord and Tenant, (8th ed.) 16, note; 5 Bacon’s Abridgment, title "’‘Leases,” sec. 3; 2 Preston on Covenants, 124, 125; Boardman v. Wilson, L. R. (4 C. P.) 57; Doe v. Bateman, 2 B. & A. 168; Wollaston v. Hakewell, 3 Scott, (N. C.) 616. Undoubtedly many cases may be found wherein the lessee has granted to another party his entire term, retaining no reversionary -interest in himself, and it has been held the relation as between the parties was that of landlord and tenant,—or, perhaps more correctly, lessee and sub-lessee,—because such was ■clearly the intention of the parties; but this was the result of ■contract, only, and not conclusive upon the original landlord, .since he was not a party to it. The relations of landlord and as■signee of a term, however, it has been seen, do not result from ■contract, but from privity of estate, and, therefore, -when the ■original lessee has divested himself of his entire term, and thus -ceased to be in privity of estate with the original landlord, the person to whom he has transferred that entire term must nec■assarily be in privity of estate with his original landlord, and hence liable as assignee of the term. See Wood on Landlord ■and Tenant, p. 132, and authorities cited in note 1; Van Renseller v. Hays, 19 N. Y. 601; Pluck v. Diggs et al. 5 Bligh, (N. S.) 31; Thorne v. Woolcome, 5 B. & A. 586; Ind. Manf. Co. v. C. C. C. I. Ry. Co. 45 Ind. 281; Smiley v. Fare Winkle, 6 Cal. 605; Blumenberg v. Myers, 32 id. 93; Schilling v. Holmes, 23 id. 230.

Counsel for appellees contend, and the courts below ruled accordingly, that the reservation of a new and different rent, or the reservation to the lessor of the right to declare the lease-void for the non-performance of its covenants, and to re-enter for such breach, or at the end of the term, coupled with the covenant of the lessee to surrender at the end of the term or upon forfeiture of the term for breach of covenant, make the letting by the lessee a sub-letting, and not an assignment of' the term, notwithstanding the lessee has retained in himself no part of the.term,—and they rely upon Collins v. Hasbrouck, 56 N. Y. 157, Ganson v. Tifft, 71 id. 48, Neil v. Kendall, 128 Mass. 245, and Dunlap v. Bullard, 131 id. 161, as sustaining, this contention.

There is general language in Collins v. Hasbrouck quite as broad as claimed. But no question therein presented called for its use, and its meaning ought to be limited by the facts-to which it was applied. There, the first original lease was-for the term of ten years, from the 1st of April, 1864; the-second was for the term of nine years, from the 1st of April, 1865. Thus, both expired April 1,1874. The sub-lease was for the term of two years and seven months, from the 1st of' September, 1867,—that is to say, until the 1st of April, 1870,, —with the privilege, however, to the lessee to extend the term four years, or until April 1, 1874, by giving two months’ notice, etc. The plaintiffs claimed that the leases were forfeited by the sub-letting, and the court so held. No distinction was-taken, in the opinion of the court, between an absolute demise-until the end of the term and a mere privilege to have the demise extended four years, which was until the end of the term.. We have held that a similar clause in a lease is not a present demise, but a mere covenant, which may be specifically enforced in chancery, or upon which an action at law may be maintained for a breach of covenant. (Hunter v. Silvers, 15 Ill. 174; Sutherland v. Goodnow, 108 id. 528.) And it would seem quite evident, that in no view could the reversion have passed until after the grantee elected to have the term for four years longer, and so, when the lease was executed, there was still a. reversionary interest in the sub-lessor, of four years, subject, though it may have been, to be thereafter divested by the election of the sub-lessee.

In Ganson v. Tifft, the sub-lease provided that at the expiration of the term, or other sooner determination of the demise, the lessee should surrender the demised premises to the lessor, and the court said: “This constitutes a sub-lease of the premises, and not an assignment of the term.”

In Stewart v. Long Island Railroad Co. 102 N. Y. 601, (55 Am. Rep. 844,) there was a demise by the lessee to the Long Island Railroad Company for a term longer than that held by the lessee. There was also a different rent to be paid than that provided to be paid by the original lease, and there was a reservation of the right to re-enter for non-payment of rent, etc. It was. held, that as to the original landlord this amounted to an assignment of the lease, and that its character was not destroyed by the reservation therein of a new rent to the assignor, with a power of re-entering for non-payment of rent, or by its assumption of the character of a sub-lease. The court, after laying down the rule substantially as we have heretofore stated it to be recognized by the text-books and recent English decisions, said: “The effect, therefore, of a demise, by a lessee, for a period equal to or exceeding his whole term, is to divest him of any reversionary right, and render his lessee liable, as assignee, to the original lessor; but, at the same time, the relation of landlord and tenant is created between the parties to’ the second demise, if they so intended,”—citing Taylor on Landlord and Tenant, (7th ed.) 109, note s, 16, n. 5; 1 Washburn on Real Estate, (4th ed.) 515, n. 6; Adams v. Beach, 1 Phil. 99; Ind., etc., Railroad Co. v. Cleveland, etc., Railroad Co. 45 Ind. 281; Lee v. Payn, 4 Mich. 106; Lloyd v. Cosens, 1 Ashm. 138; Wood on Landlord and Tenant, (Bank’s ed.) 347,—and then adding: “These rules are fully recognized in this State. Prescott v. Deforest, 16 Johns. 159; Bedford v. Terhune, 30 N. Y. 457; Davis v. Morris, 36 id. 569; Woodhull v. Rosenthal, 382, 391, 392.”

In speaking of the ruling in Collins v. Hasbrouck, supra, after stating the facts, the court said: “In the opinion, the question is discussed whether the sub-lease amounted to an assignment of the term of the original lease, or a mere subletting or re-letting of part of the demised premises. This question, in view of the result reached on the question of waiver, ceased to be controlling; but, in discussing it, the learned judge delivering the opinion made some remarks touching the effect of reserving a new rent in the sub-lease, and of reserving to the original lessee a right of re-entry for a breach of condition by his lessee, which have given rise to some confusion. The features of the instrument which are above referred to would be proper subjects of consideration for the purpose of determining whether the relation of landlord and .tenant was created between the original lessee and his lessor, and bore upon the question then before the court, viz., whether the second lease was a sub-letting or re-letting of part of the demised premises, which constituted a breach of the covenant not to sub-let or re-let. But the question of privity of estate between the original lessor and the lessee of- his lessee, was not in the case. The determination of the question depends upon whether the whole of the term of the original lessee became vested in his lessee, and the circumstances that the second lease reserves a different rent or a right to entry for breach of ■condition, are immaterial.” And, after quoting many authorities to sustain that position, the opinion proceeds: “The, ■cases which hold that where a lessee sub-leases the demised' premises for the whole of his term, but his lessee covenants to surrender to him at the end of the term, the sub-lease does not operate as an assignment, proceed upon the theory that by reason of this covenant to surrender, some fragment of the term remains in the original lessor [lessee.] In most of the cases, and in the earlier cases in which this doctrine was broached, the language of the covenant was, that the sub-lessee would surrender the demised premises on the last day of the term.”

It is true that in this case, as has been before stated, the lessee demised for a number of years beyond the term for which he held; but it is impossible that, upon principle, there can be any difference between a demise of an entire term, which can leave no possible space of time remaining in the lessor, and a demise for any additional time beyond the term, for since no one can demise what he does not have, all that can pass by the demise, in the latter instance, is the entire term of the lessor. If, here, the demise of Frank F. Cole vests his entire interest in the property, as it professes to do, “for and during” the remainder of his term, “and until the 1st day of May, 1888,” it can not be that any portion, however short in duration, of the term granted him by the leases of appellant, remained in him, because they are limited by the same words precisely,—namely, “for and during” the term, “and until the 1st day of May, 1888.”

In McNeil v. Kendall, supra, there were easements reserved from the effect of the lease. In Bullard v. Dunlap, supra, however, the facts are analogous in principle to those here involved, and it was held that the demise of the entire term of the lessee was a sub-lease, and not an assignment, because of the right reserved in the lease for the lessor to re-enter and resume possession for a breach of the covenants. But this is held upon the ground, that under the decisions of that court the right to re-enter and forfeit the lease is a contingent reversionary estate in the property, the court having previously held, in Austin v. Cambridgeport Parish, 21 Pick. 215, Brattle Square Church v. Grant, 3 Gray, 142, that where an estate is conveyed, to be held by the grantee upon a condition subsequent, there is left in the grantor a contingent reversionary interest, which is an estate capable of devise. It has been suggested that these decisions are predicated upon a local statute; (see Tiedeman on Eeal Prop, note 1 to sec. 277, and note 1, on p. 904, 6 Am. & Eng. Ency. of Law;) but whether this be true or not, the decisions are plainly contrary to the principles of the common law.

The right to enter for breach of condition subsequent could not be alienated, as it could have been had it been an estate, and Coke says: “The reason hereof is for avoiding of maintenance, suppression of right and stirring up of suits, and therefore nothing in action entrie or re-entrie can be granted over.” See, also, 1 Comyn’s Digest, title “Assignment,” chap. 2, p. 688; 3 id. title “Condition,” (O. 1,) p. 129; 4 Kent’s Com. (8th ed.) 126, *123; 1 Preston on Estates,. 20, *21; Shepherd’s Touchstone, 117, *121.

It is said in 1 Washburn on Eeal Prop. (2d ed.) 474, *451: “Such a right” (i. e., to enter for breach of condition subsequent,) “is not a reversion, nor is it an estate in land. It is a mere chose in action, and, when enforced, the grantor is in by the forfeiture of the condition, and not by the reverter.” To like effect is, also, Tiedeman on Eeal Prop. sec. 277; 6 Am. & Eng. Ency. of Law, p. 903; Taylor on Landlord and Tenant, (8th ed.) sec. 293; Southard v. C. R. R. Co. 26 N. J. L. (2 Dutch.) 21; Webster v. Cooper, 14 How. 501; Schulenberg v. Harman, 21 Wall. 63; Nicoll v. N. Y. and E. Railroad Co. 12 N. Y. (2 Kern.) 121.

It is true, that by section 14 of our statute in relation to landlord and tenant, (Eev. Stat. 1874, p. 659,) “the grantees of any demised lands, tenements, rents or other hereditaments, or of the reversion thereof, the assignee of the lessor of any demise, • and the heirs and personal representatives of the lessor, grantee or assignee, shall have the same remedies, by entry, action or otherwise, for the non-performance of any agreement in the lease, or for the recovery of any rent, or for the doing of any waste, or other cause of forfeiture, as their grantor or lessor might have had if such reversion had remained in such lessor or grantor,” But this does not make what was before but a chose in action, an estate. The right to enter for breach of covenant is still but a remedy for enforcing performance of a contract, which may be defeated by tender. Taylor on Landlord and Tenant (8th ed.) 302. As is said by the court in DePeyster v. Michael, 6 N. Y. (2 Seld.) 507, in speaking of the effect of a like statute of New York: “The statute only authorized the transfer of the right, and did not convert it into a reversionary interest, nor into any other estate.” See, also, Nicoll v. N. Y. and E. Railroad Co. 12 N. Y. (2 Seld.) 139.

It follows that, in our opinion, the rule assumed to be followed in Collins v. Hasbrouck, Ganson v. Tifft, and Dunlap v. Bullard, supra, is not in conformity with the common law, and that it can not, therefore, be applied here.

The objection that the written assent of appellant was not obtained to the assignment, can not be urged by appellees. The clause in the leases, in that respect, is for the benefit of, and can be set up by, appellant alone. He may waive it if he will, and if he does not choose to set it up no one else can, Webster et al. v. Nichols et al. 104 Ill. 160; Willoughby et al. v. Lawrence et al. 116 id. 11; Arnsby v. Woodward, 6 B. & C. 519; Rale v. Farrar, 6 M. & S. 121.

But counsel insist that appellant is estopped by his conduct to now allege that the instrument executed by Frank F. Cole is an assignment. We have carefully considered the evidence bearing upon this question, and we are unable to concur in this view. Appellant did refuse to acquiesce in the construction placed by appellees upon the lease of Frank F. Cole, and to settle with them upon that basis. He refused to release Frank F. Cole and accept the storage company alone, and he refused to accept the amount of rent which the storage company obligated itself to pay Frank F. Cole, as a satisfaction of Frank F. Cole’s covenant to pay rent to him, but he was all the time willing that the storage company should remain in possession, provided the rent due him by his lease to Frank F. Cole was paid to him. He knew the terms of the lease of Frank F. Cole to the storage company, and he afterwards received rent from it, and permitted it to remain in possession. The lessee continues, notwithstanding the assignment, liable upon his express covenant to pay rent, and the assignee becomes liable upon the same covenant by reason of his privity of estate, because that covenant runs with the land. Taylor on Landlord and Tenant (8th ed.) sec. 438; 2 Platt on Leases, 356; Walton v. Cranley, 14 Wend. 63; Bailey v. Wells, 8 Wis. 141.

Since appellant might sue Cole on his express covenant to pay rent, and, he having fled the State, take out an attachment in aid thereof, we perceive no reason why he might not, at the same time, take garnishee process against the storage company and recover any debt which it owed him. There is certainly nothing in this inconsistent with his ultimately enforcing his liability against that company as assignee of Cole’s term. It is not shown that the storage company has been, by anything done or said by appellant, induced to do, to its prejudice, anything that it would not otherwise have done. No judgment has been recovered against it, as garnishee of Frank F. Cole, for rent due from it to Frank F. Cole, nor does it appear otherwise to have been compelled to pay money or incur liability by reason of any act or word of appellant proceeding upon the recognition of its being liable to Frank F. Cole, as sub-lessee, only.

For the reasons given, the decree of the Superior Court and the judgment of the Appellate Court are reversed, and the cause.is remanded to the Superior Court for further proceedings consistent with this opinion.

Judgment reversed.