American Engineering Co. v. Metropolitan By-Products Co., Inc.

• Decision Date: 28 June 1920
• Docket Number: 238.
• Citation: 267 F. 90
• Parties: AMERICAN ENGINEERING CO. v. METROPOLITAN BY-PRODUCTS CO., Inc.
• Court: U.S. Court of Appeals — Second Circuit

267 F. 90

AMERICAN ENGINEERING CO. v. METROPOLITAN BY-PRODUCTS CO., Inc.

No. 238.

United States Court of Appeals, Second Circuit.

June 28, 1920

On Petition for Rehearing, July 27, 1920.

Lewis &amp Kelsey, of New York City (Frederick T. Kelsey and Wallace T Stock, both of New York City, of counsel), for receiver of Metropolitan By-Products Co., Inc.

Oscar A. Lewis, of Brooklyn, N.Y. (A. B. Reed, of Brooklyn, N.Y of counsel), for Title Guarantee & Trust Co.

Cullen & Dykman, of Brooklyn, N.Y. (Edgar M. Cullen and Arthur E. Goddard, both of Brooklyn, N.Y., of counsel), for Bailey and others.

Davison & Underhill, of Brooklyn, N.Y. (Harold C. McCollom and Alfred T. Davison, both of New York City, of counsel), for Columbia Trust Co.

Gilbert & Wessel, of New York City (Harry N. Wessel and Carl J. Austrian, both of New York City, of counsel), for R. S. Kuh & Valk Co.

Nicoll, Anable, Fuller & Sullivan, of New York City (Outerbridge Horsey, of New York City, of counsel), for Sanitary Co.

Before WARD, HOUGH and MANTON, Circuit Judges.

WARD Circuit Judge.

November 28, 1916, the Sanitary Company entered into a lease of its garbage plant and equipment of boats, tools, horses, mules, wagons, etc., at Barron Island, Kings county, N.Y., to the Metropolitan By-Products Company, Incorporated, for a term of two years from January 1, 1917, for an aggregate rent of $500,000; $62,500 payable quarterly in advance on the 1st days of January, April, July, and October. The material provisions are:

'Third. The lessee agrees to keep all buildings, machinery, boats, and other appliances, including all personal property leased hereunder, in good and proper condition during the continuance of this lease, and further to properly feed, care for, and protect the animals covered by this lease. All to the end that at the termination of this lease, whether by expiration of the term thereof or otherwise, the plant, its equipment, and all other personal property herein referred to shall be returned to the lessor in good efficient working condition, considering the general character of the plant and the work to be carried on therein under said contract, reasonable wear and tear excepted.

'Seventh. The lessee further agrees that, if default be made in any of the covenants and agreements herein contained, this said hiring and relation of landlord and tenant, shall wholly cease and determine; and the lessor shall and may, by summary proceedings or otherwise, re-enter said premises and remove all persons therefrom, and retake possession of any and all personal property leased hereunder, and the lessee hereby waives any notice in writing of intention to re-enter or to institute summary proceedings: Provided, however, that such termination and re-entering or institution and carrying on to completion of summary proceedings for the recovery of the possession of the property shall not absolve the lessee from liability for damages resulting from such default nor from liability for payments to be made under this lease to the date of termination thereof, nor from liabilities then accrued and whether then payable or payable in the future, with the same effect as if the said lease had not been terminated: And provided, further, that anything herein to the contrary notwithstanding, the lessor shall not be entitled to enter said premises for any breach of covenant or condition nor to institute summary proceedings for the recovery of the said property, except the covenant to pay rent, water rates, and taxes, without first having given the lessee 60 days' notice of the alleged breach of covenant or condition and an opportunity of making good such breach within said period of 60 days: And provided, further, that in case the lessee shall be advised that any rule, order, ordinance, or regulation in respect of the leased plant and equipment or the management thereof shall be invalid or unenforceable and shall contest the same in the courts, the lessee shall not be in default hereunder for its failure to comply with the contested rule, order, ordinance, or regulation until a final determination of the courts upholding the same and after the expiration of a reasonable time thereafter for compliance therewith: And provided, further, that the said lessee shall duly notify in writing the lessor of its intention to contest such rule, order, ordinance or regulation.

'Twelfth. If in the discretion of the lessee it sees fit to discontinue at any time prior to the 31st day of December, 1916, the use of the property leased hereunder, or any substantial portion thereof, in the reduction and final disposition of the said garbage of the boroughs of Manhattan, the Bronx, and Brooklyn, the lessee shall have the option either of maintaining, protecting and keeping in good and proper condition at its own expense the property leased hereunder in accordance with the provisions herein, or of paying to the lessor, when the rental installment payments provided for herein are paid, sums pro rata to the aggregate sum of ten thousand dollars ($10,000) for the unexpired term of the lease and thereafter be relieved and discharged from any further obligations to maintain, protect, and keep in good and proper condition the said property pursuant to the requirements herein, or such portion thereof as to which the said use may have been discontinued; it being understood and agreed, however, that nothing in this paragraph herein contained shall relieve the lessee from any of its obligations as set forth in paragraph third hereof up to and until such time as there shall be any discontinuance of the use of the property leased hereunder as provided for in this paragraph.

'Thirteenth. Inasmuch as it is contemplated that the leased property hereinabove described will be taken over at midnight on the 31st day of December, 1916, as a going concern and as the said plant is now being operated by the New York Disposal Company, a New York corporation, under an agreement with the city of New York to dispose of the garbage of the boroughs of Manhattan, the Bronx, and Brooklyn, an adjustment will be made between the lessor or the New York Disposal Company and the lessee in respect of all supplies on hand, such as coal, oil, naptha, and other supplies, which are consumed in the operation of said plant. The lessee is to pay the lessor or the New York Disposal Company the value of such materials at the time they are taken over, and the said New York Disposal Company is also to be given a reasonable opportunity to store and dispose of all finished products which may be on hand at said plant when this lease shall go into effect; but in any event the lessor shall cause all storage products to be removed fast enough to make room for the lessee's products as manufactured. The lessee is to have a similar privilege and there is to be a similar adjustment between the lessor and the lessee upon the expiration of this lease.'

On the same day the Metropolitan Company executed a bond to the Sanitary Company in the sum of $200,000 for the faithful performance by it of the covenants of the lease, and also an agreement reciting that it had deposited with the Central Trust Company the sum of $200,000 to be invested in securities as collateral for collection by the Sanitary Company of any sums adjudged or conceded by the Metropolitan Company to be due to the Sanitary Company under the bond. November 15, 1917, the Sanitary Company brought suit in the United States District Court for the Southern District of New York to recover $56,556.81, the value of supplies taken over by the Metropolitan Company when it entered into possession of the Barron Island plant January 1, 1917.

November 19, the American Engineering Company filed a creditors' bill alleging that the Metropolitan Company, though solvent was unable to meet current obligations, and praying for the appointment of receivers. The Metropolitan Company filed an answer, admitting all the allegations of the bill, and was put into the hands of receivers in order to keep it a going concern until its debts were paid; the decree enjoining all persons from bringing any proceedings at law or in equity, or from continuing any pending suits against the company, until after application to the court. The same day the receivers took possession of the plant and continued in possession, paying rent to March 31, 1918, when they were ordered by the court to return the premises to the Sanitary Company. The Sanitary Company re-entered thereafter. February 10, 1919, the Sanitary Company filed proofs of claim with the special...