Blanke Bro. Realty Company v. American Surety Company of New York

• Decision Date: 02 February 1923
• Citation: 247 S.W. 797,297 Mo. 41
• Parties: BLANKE BRO. REALTY COMPANY v. AMERICAN SURETY COMPANY OF NEW YORK, Appellant
• Court: Missouri Supreme Court

247 S.W. 797

297 Mo. 41

BLANKE BRO. REALTY COMPANY v. AMERICAN SURETY COMPANY OF NEW YORK, Appellant

Supreme Court of Missouri

February 2, 1923

Appeal from St. Louis City Circuit Court. -- Hon. Benjamin J. Klene Judge.

Reversed.

J. D Johnson for appellant.

(1) The 99-year lease in suit was duly forfeited and terminated October 14, 1914. Baxter v. Heimann, 134 Mo.App 264; Knight v. Orchard, 92 Mo.App. 466; Land Co. v. Manning, 98 Mo.App. 248; Realty Co. v. Kelly, 278 Mo. 450. (2) It conclusively appears from the evidence that plaintiff failed to keep and perform the covenants and conditions of the contract of lease and bond required to be kept and performed by it. Therefore plaintiff was not entitled to maintain said action against either of the defendants for the alleged breach thereof. Kreitz v. Eglehoff, 231 Mo. 702; Maratta v. Dry Goods Co., 190 Mo. 425; Iola Cement Co. v. Ullman, 159 Mo.App. 235; McCrary v. Thompson, 123 Mo.App. 596; Phillips v. Todd, 180 S.W. 1041. (3) One of the conclusive inferences to be drawn from the evidence in the case is that by agreement between them, the lessee abandoned and the lessor resumed possession of the demised premises under said 99-year lease; that said lease was thereby terminated long before the 15th day of June, 1917, and defendants were released from liability on the bond in suit. Mullaney v. McReynolds, 170 Mo.App. 414; Mining Co. v. Hodge, 185 Mo.App. 147; Herboth v. Radiator Co., 145 Mo.App. 484; American Bonding Co. v. Investment Co., 150 F. 17; People v. Title Guaranty Co., 237 U.S. 382, 57 L.Ed. 561; Sharon v. Fidelity Co., 172 Mo.App. 313.

Geo. B. Webster for respondent.

(1) Upon the undisputed facts in this case the respondent, as plaintiff below, is entitled to recover. Sharon v. American Fidelity Co., 172 Mo.App. 309. By the terms of the bond the lease was made a part of the bond so that the appellant was charged with notice of the contents of both documents. It thus knew that a forfeiture might occur before the expiration of the time for building, and it contracted by its bond in the light of that contingency. It knew that in order to perform the covenant for building within the required time its principal must keep the lease alive and to do that must pay the rent and taxes. The proximate cause of the forfeiture of the lease was the default of the appellant's principal, and not the wrongful act of the respondent. The election of the respondent to declare a forfeiture of the lease for non-payment of the rent and taxes was not a breach or repudiation of the lease, but an act in enforcement of its provisions. O'Brien v. Illinois Surety Co., 203 F. 436. (2) The lease and bond are one instrument and the taking of possession by the lessor for the nonpayment of rent and taxes was within the contemplation of the parties; it was an act of enforcement of the provisions of the lease and consequently the lessor is entitled to recover damages from the surety for failure to erect the building, because the entire lease was a part of the bond and the surety contracted in the light of the contingency of default in the payment of rent and taxes. (a) If the lease is not a part of the bond, then the surety must perform regardless of the lease. Sharon v. American Fidelity Co., 172 Mo.App. 309; Rock v. Monarch Building Co., 87 Ohio St. 244; O'Brien v. Illinois Surety Co., 203 F. 436, 440; Illinois Surety Co. v. O'Brien, 223 F. 933, 940; Anvil Mining Co. v. Humble, 153 U.S. 540, 551; Hayes v. City of Nashville, 80 F. 641, 645; American Bonding Co. v. Pueblo Inv. Co., 150 F. 17, 22; Halpern v. Manhattan Avenue Theatre Co., 173 App.Div. N.Y. 610; Roehm v. Horst, 178 U.S. 1.

DAVID E. BLAIR, J. White, J., dubitante.

OPINION

In Banc.

DAVID E. BLAIR, J.

The action is on an indemnifying bond. From a judgment in favor of respondent (plaintiff below), in the sum of $ 50,000, defendant has appealed.

Respondent was the owner of a certain described lot of ground in block 132 in the city of St. Louis, and on May 16, 1912, leased the same for a period of ninety-nine years to the Marsix Realty & Construction Company. Among other provisions said lease provided for the payment to the Blanke Company by the Marsix Company of an annual rental in the sum of $ 16,000, payable quarterly in advance, and that the Marsix Company should pay all general and special taxes. It also provided that the Marsix Company on or before June 15, 1917, should erect upon the leased premises an entirely new, modern building of fire-proof construction, adapted to business, commercial office, hotel or realty purposes, costing not less than $ 200,000. Said lease also provided that the Marsix Company should make, execute and deliver to the Blanke Company a surety bond in the sum of $ 50,000, conditioned that the Marsix Company "shall erect, construct, complete and pay for the new building herein provided for within the time hereinbefore limited."

On May 16, 1912, the Marsix Company executed and delivered to the Blanke Company said bond in the sum of $ 50,000, signed by itself as principal, and by defendant, American Surety Company of New York, as surety. The condition of said bond, eliminating portions thereof not now important, is as follows:

"Whereas, the obligee has agreed to lease to the said Marsix Realty & Construction Company, . . . the following parcel or lot of ground situated in city block number one hundred and thirty-two (132) in the city of St. Louis, Missouri [describing same]; and

"Whereas, the principal herein in accordance with the terms of said lease agrees that on or before the 15th day of June, 1917, the lessee shall have . . . constructed, built and completed on the demised premises . . . and paid for in full an entirely new modern building . . . at a cost to said lessee of not less than two hundred thousand dollars ($ 200,000), in accordance with the terms of that portion of the lease referring to the construction of said building, which said lease is herewith referred to and made a part hereof as though set out in full herein.

"Now, therefore, if the said principal shall construct, build and complete . . . on the above described and demised premises an entirely new modern building . . . at a cost to said lessee of not less than two hundred thousand dollars ($ 200,000), within the time limit as in said lease specified, . . . then this obligation to be void, otherwise to be and remain in full force and effect."

The lease contained the following provisions:

"Section 15. It is further agreed and covenanted by and between the lessor and the lessee that any and every failure: First, to pay the rent above reserved, or any part thereof, when the same shall become due and payable, whether demand shall have been made therefor or not; or Second, to pay the said taxes, rates, charges and assessments, or any part thereof, . . . shall, at the option of the lessor, make and create a forfeiture of this lease, and a termination of the time for which said premises are hereby let, and thereupon all the estate hereby conveyed shall be absolutely at an end, if so determined, . . . and upon such forfeiture of this lease and termination of the time for which said premises are hereby let, all the improvements then on said leased premises shall be and remain the absolute property of the lessor, wholly free and discharged of and from all rights, claims and demands of the lessee and any and all persons claiming by, through or under the lessee."

After the execution and delivery of said lease and said indemnifying bond the Marsix Company entered into possession of the premises, and paid the rent due under the lease until it made default in such payments as to the quarterly installment of $ 4000 due on June 15, 1914, and also failed to pay the taxes for 1912 and 1913. On July 30, 1914, the Blanke Company served notice of forfeiture of said lease upon the Marsix Company. At the time the lease was forfeited the Marsix Company had taken no steps toward the erection of the building provided for in the lease. The forfeiture and re-entry of the premises by the Blanke Company was fully consummated on October 10, 1914, or more than two years and eight months prior to June 15, 1917, the date fixed in the lease for the completion of the said building.

There was evidence tending to show that the Blanke Company had been damaged by the failure of the Marsix Company to construct said building in a sum largely in excess of the indemnity provided for in said bond. Trial before a jury resulted in a verdict for the Blanke Company against both defendants in the sum of $ 50,000, the same being the full amount of indemnity provided for in the bond. The Marsix Company made default, and the appeal was taken by the surety company. The evidence was documentary, except the proof going to the damages and payment of rent.

The first contention made by appellant is that the Blanke Company failed to perform its part of the contract of lease and bond; that by agreement between them the lessee abandoned and the lessor resumed possession of the leased premises and said lease terminated long before June 15, 1917. There is no direct evidence of any agreement between the two companies that the Marsix Company should abandon the premises and the Blanke Company resume possession thereof. The lease required the Marsix Company to pay the rent quarterly and also the taxes. It failed to do this and, in accordance with the provisions of the lease, the Blanke Company forfeited the lease and resumed possession. There is no evidence whatever that the Blanke Company connived at or agreed to the nonpayment of rent or taxes. The suit was filed after June 15, 1917.

The question is whether this forfeiture of the lease and resumption of the...