165 Broadway Building v. City Investing Co.

• Decision Date: 02 June 1941
• Docket Number: No. 291.,291.
• Citation: 120 F.2d 813
• Parties: 165 BROADWAY BUILDING, Inc., v. CITY INVESTING CO. et al.
• Court: U.S. Court of Appeals — Second Circuit

120 F.2d 813 (1941)

165 BROADWAY BUILDING, Inc., v. CITY INVESTING CO. et al.

No. 291.

Circuit Court of Appeals, Second Circuit.

June 2, 1941.

David Barnett, of New York City (Newman & Bisco, of New York City, on the brief), for appellant.

Edward F. Clark, of New York City (Clark & Reynolds and Leonard J. Reynolds, all of New York City, on the brief), for appellee City Investing Co.

Before SWAN, CHASE, and CLARK, Circuit Judges.

CLARK, Circuit Judge.

On December 3, 1907, the Interborough Rapid Transit Company, operator of the Sixth Avenue Elevated Railroad in New York City, entered into a formal covenant, which is the subject matter of the controversy herein, with Broadway-Cortlandt Company, the owner of a building then in process of construction, at the southeast corner of Church and Cortlandt Streets and extending through to Broadway, now known as the 165 Broadway Building, in that city. The covenant stated that the owner desired the Railway Company to construct and maintain certain bridges, passageways, and structures as shown on an attached engineers' plan or drawing, providing for a connection between the building and the Company's elevated station on Church Street at Cortlandt Street, and that the company was willing to construct and maintain the same upon the terms and conditions thereinafter set forth. The plan as disclosed called for a corridor or arcade through the building to its west side fronting on Church Street, an opening there with a bridge to the easterly or northbound station platform of the elevated, and an overhead bridge therefrom to the westerly or southbound station platform. The covenanting parties gave easements of use of the premises covering the station and arcade approach for ingress to and egress from the station platforms, and then entered into various agreements concerning upkeep and repair of the structures which necessarily, as all concede, run with the land. The question herein concerns certain promises only, covering refunds of payments made by the owner to the company and to be returned in the event of discontinuance of the structures. Since the City of New York has condemned and removed the elevated railroad, the refunds are due and the question is whether they are personal rights, as contended by appellee (claiming in the right of the original owner) and found by the special master and the court below, or are benefits which run with the land, as claimed by appellant, 165 Broadway Building, Inc., the present owner of the building.

The covenant, signed, sealed, and acknowledged by the parties thereto, contains, in addition to its recitative sections, sixteen formal paragraphs of agreement. The first two provide for the building of the platforms, bridges, and passageways referred to above, with the owner to pay one-half the cost of the overhead bridge and stairways to the southbound platform and the full cost of the other structures. After several paragraphs of agreement that the owner will procure such grants and licenses as may be necessary from others, that it will construct and maintain a suitable opening in its building, with a corridor or arcade through it as an approach, that it will erect and maintain a ticket office, that the right to maintain the elevated railroad is granted forever, that the company will maintain the structures outside the outer face of the westerly wall of the building and the owner will maintain the part within the building in good condition, and that the company may be excused from performance in the event of court injunction or public prohibition of maintenance of the structures (the owner nevertheless to pay the expenses of construction), we find the paragraphs most important on the issue herein.

Paragraph ninth states that the company "shall be under no obligation, under any circumstances, to restore or rebuild any wall or other structure of the Owner, or to pay for such restoration or rebuilding" unless the damage was caused by its own negligence. Paragraph tenth gives the company a right of termination of the agreement and removal of the bridges and passageways "upon repayment to the Owner, its successors or assigns," of all amounts paid by the owner "for construction hereunder."¹ And paragraph eleventh provides that the owner shall furnish a ticket agent and ticket office for the sale of tickets, while the company will provide at least one ticket chopper to take the tickets of the elevated patrons; and the owner agrees to pay the sum of $10,000 in cash as and for the cost of providing each ticket chopper required, such amount to be repaid "by the Railway Company to the Owner" upon discontinuance of the railway structure.²

Of the remaining provisions, paragraph twelfth states the times when the owner is to make payment of the construction costs, viz., one-half the cost of the overhead bridge and stairways, and the entire cost of all other bridges, passageways, and structures. Thirteen grants the company all necessary rights of access to the ticket office and its maintenance without charge to the company, with the owner agreeing at its own expense to keep the ticket office and corridor in good order and condition and in a good state of repair. Fourteen provides for discontinuance of the connection at the owner's option on twelve months' notice, procurement of releases and grants for a wider stairway and an additional stairway to the street, and payment by the owner to the company of the expense of removal of the connecting bridge and of restoration of the station platform. Fifteen provides that on discontinuance "as herein provided," the owner need no longer maintain the corridor or arcade, or the ticket office, agent, or ticket choppers, but that no other rights "acquired hereunder by" the company or its lessor, "or their successors or assigns," shall be affected by the discontinuance except as therein provided. And the sixteenth or final paragraph states as "agreed by and between the parties hereto that this agreement shall apply to and bind their respective assigns and successors in interest, and all subsequent owners and persons interested in the land affected thereby."

Pursuant to this agreement the owner paid the Railway Company a sum or sums found to be $13,557.15 for construction costs, and also the further sum of $10,000 for one ticket chopper. No other ticket chopper was ever required, and hence no other payments were made. Before the special master the Railway Company claimed that it was excused from making the refund by reason of the owner's default, chiefly in maintaining a ticket office and ticket agent; but the master ruled that it had agreed to or acquiesced in the substitution of McBride's ticket agency, a lessee of corridor space, for a separate office, and it has not appealed. Hence we are concerned only with the transfer of the benefit of the covenant, and not of its burden. It does appear that the City of New York, under the so-called unification agreement, will pay this claim in full for $23,557.15 as soon as the proper payee is determined; but that is under its agreement to assume all liabilities of the company on its purchase of all the assets.

In what is now the leading New York case on this subject, Neponsit Property Owners' Ass'n v. Emigrant Industrial Sav. Bank, 278 N.Y. 248, 254, 255, 15 N.E. 2d 793, 795, 118 A.L.R. 973, the present distinguished Chief Judge of the Court of Appeals has stated "the age-old essentials of a real covenant," aside from its form, as intent of the parties that it should run, that it "touches" or "concerns" the land with which it runs, and that there is "privity of estate" between the parties, citing therefor Clark on Covenants and Interests Running with Land, p. 74. It is perhaps a commentary upon the confused state of real covenant law, even as substantially clarified by the Neponsit case, that, while we consider the interesting and substantial question herein as limited to the issue of "touching" and "concerning," nevertheless the master also found a lack of "privity of estate" and appellee urges vigorously that the requisite intent is absent. Since at least on these two latter points we think the result quite clear, we shall consider them first.

It is now well settled that no particular formula is necessary for the expression of intent that a covenant shall "run with land" and pass with the conveyance of an estate therein, so long as the parties have made their desires clear. Denman v. Prince, 40 Barb., N.Y., 213, 217; Murphy v. Kerr, 8 Cir., 5 F.2d 908, 910, 41 A.L.R. 1359; Fowler v. Kent, 71 N.H. 388, 52 A. 554.³ The parties here made their intent clearly manifest — in paragraph tenth, as to the benefit of repayment of construction costs to the owner, "its successors or assigns"; in paragraph fifteenth, for benefits to the Railway Company or its lessor, or "their successors or assigns"; and finally the complete statement in paragraph sixteenth, covering both benefits and burdens ("apply to and bind"), and with substantially a definition of assigns and successors in interest as "all subsequent owners and persons interested in the land affected thereby." Moreover, the whole tenor of the complete document, with its provisions for maintenance of the arrangement therein provided for inextricably interwoven to make one complete plan or scheme only possible through the running of benefits and burdens, shows an intent for the transfer of such rights and obligations, and no hint of an intent to separate certain promises only for a more limited effect.

As to the requirement of "privity of estate," the master thought that it was lacking because of no conveyance of an interest in the premises between the parties at the time of the making of the covenant. This particular requirement is probably the greatest source of confusion in the subject, because an understandable policy against title encumbrances (carried, however, to an unreal extreme in these days of modern community...