Cummington Realty Assocs. v. Whitten

• Citation: 239 Mass. 313,132 N.E. 53
• Parties: CUMMINGTON REALTY ASSOCIATES v. WHITTEN.
• Decision Date: 05 July 1921
• Court: United States State Supreme Judicial Court of Massachusetts

239 Mass. 313

132 N.E. 53

CUMMINGTON REALTY ASSOCIATES

v.WHITTEN.

Supreme Judicial Court of Massachusetts, Suffolk.

July 5, 1921.

Report from Superior Court, Suffolk County; Cushing Wait, Judge.

Arbitration proceeding between the Cummington Realty Associates and Charles E.Whitten. Reported from the superior court for the determination of the Supreme Judicial Court. Judgment for defendant.

The controversy submitted to arbitration involved the rights under a lease to the Whitten-Gilmore Company by an owner who subsequently conveyed the reversion to the Realty Associates. The Whitten-Gilmore Company was dissolved by the Legislature on February 21, 1916, and the Realty Associates claimed that the lease was thereby canceled, and that they were authorized to make a new lease. Without prejudice, the parties agreed to the making of a new lease at an increased rental, and the dispute was over the right to such increase.Henry H. Fuller and Dana T. Gallup, both of Boston, for plaintiffs.

George L. Mayberry and Arthur P. Teele, both of Boston, for defendant.

BRALEY, J.

The arbitrator having stated ‘that his rulings of law shall not be final and that they shall all be subject to review on appeal or other proceedings by either party,’ his rulings are presented by the report of the trial court, which, having accepted the award, reported the case to this court at the request of the parties. Ellicott v. Coffin, 106 Mass. 365;Carter v. Carter, 109 Mass. 306, 309;Rogers v. Mayer, 151 Mass. 279, 280, 23 N. E. 836; R. L. c. 194, § 12; R. L. c. 173, § 105, as amended by St. 1910, c. 555, § 5, St. 1917, c. 345, now G. L. c. 231, § 111. The material questions are:

‘First. Did the expiration of the three-year period after the dissolution by statute of the Whitten-Gilmore Company end all the rights of this tenant corporation and those claiming under it to make any claims whatever under the lease itself?’

‘Second. If not, has Mr. Whitten, representing all the stockholders of the Whitten-Gilmore Company, and by the arbitration agreement holding all the rights of a receiver of the Chalmers Motor Company of Massachusetts might have secured for him, succeeded to those rights?’

‘Third. If he has, may he enforce them in these proceedings?’

[2] The arbitrator under the first question ruled:

‘That the expiration of the three years after the dissolution of the corporation terminated the lease, and that the trustees were therefore free to make a new one with a new tenant and retain the proceeds.’

We are of opinion that the ruling was wrong. The rent secured by the lease has been punctually paid, after as well as before dissolution, and accepted by the plaintiff, who succeeded to the reversion. It is expressly found that before dissolution the lessee, hereafter called the corporation, sought to be relieved from further liability by cancellation of the lease; but the plaintiff declined to cancel, and ‘intended at all times' to hold the lessee. The plaintiff's ignorance of the dissolution until some months had elapsed, when it contended that the lease had been abrogated by operation of law, and it was entitled to relet the premises, is of no consequence. If the lease had thus been terminated, the subsequent payment and acceptance of rent without knowledge of the dissolution could not deprive the plaintiff of its legal rights. The lessee was a domestic corporation, and although dissolved by Sp. Acts 1916, c. 112, all debts had been paid and its only asset was the lease in question, the unexpired term of which of over three years was valuable, because the lessee could sublet at a large advance over the rent reserved.

[3] The arbitrator having reported that he is ‘unable to find that the conduct of the parties constituted a surrender of the lease,’ and ‘I find no agreement on the part of the tenant to abandon, and on the part of the landlord to resume, possession of the demised premises,’ these findings of fact are conclusive. The plaintiff's principal argument, however, is that, upon dissolution, the leasehold estate at once reverted. The arbitrator rested his decision on Hastings Corporation v. Letton, [1908] 1 K. B. 378, which is strongly relied on by the plaintiff. It was there held that a lease to a corporation for a term of years terminated if the corporation was dissolved without having assigned the lease, and the reversion accordingly was accelerated and the premises reverted to the lessor. It does not appear that the equitable rights of the stockholders were raised or considered. The question determined was whether under the circumstances, the corporation and lessee having ceased to exist, its rights went to the crown or to the lessor.

We are unable to assume that the lease in the case at bar contained an implied condition that it should determine if the corporation did not survive the term. It was said in Folger v. Columbian Ins. Co., 99 Mass. 267, 276, 277,96 Am. Dec. 747:

‘The dissolution of a corporation cannot deprive its creditors or stockholders of their rights in its property, and if the common law affords them no adequate remedy, they may obtain relief in equity. Bacon v. Robertson, 18 How. 485, 487, and cases cited; Lunn v. Robertson, 6 Wallace, 277.’

The governing principle is also well stated in Morman Church v. United States, 136 U. S. 1, 47, 10 Sup. Ct. 792, 34 L. Ed. 478:

‘When a business corporation, instituted for the purpose of gain or private interest, is dissolved, the modern doctrine is that its property, after payment of its debts, equitably belongs to the stockholders.’

If the charter had been repealed, the obligation of its contracts during its existence would not have been impaired, nor the stockholders estopped from asserting their rights against its property in accordance with the general principles and practice in equity. Thornton v. Marginal Freight Railway, 123 Mass. 32, 34, and cases cited. The result is the same upon dissolution. Allen-Foster-Willett Co., Petr., 227 Mass. 551, 556, 116 N. E. 875.

[4] It is settled that upon dissolution, all debts having been paid and discharged and no receiver having been appointed, the corporation's property of every description then belongs to the different stockholders as tenants or owners in common. It is a trust fund, which equity will protect for their benefit. Folger v. Columbian Ins. Co., supra; Thornton v. Marginal Freight Railway, supra; Allen-Foster-Willett Co., Petr., supra; ...