Fox Realty Co. v. Montgomery Ward & Co., 7702.

• Decision Date: 03 February 1942
• Docket Number: No. 7702.,7702.
• Citation: 124 F.2d 710
• Parties: FOX REALTY CO. v. MONTGOMERY WARD & CO.
• Court: U.S. Court of Appeals — Seventh Circuit

124 F.2d 710 (1941)

FOX REALTY CO. v. MONTGOMERY WARD & CO.

No. 7702.

Circuit Court of Appeals, Seventh Circuit.

November 19, 1941.

Rehearing Denied February 3, 1942.

John A. Barr, Stuart S. Ball, Fred T. Barrett, and Francis H. Monek, all of Chicago, Ill. (Ora L. Wildermuth, of Gary, Ind., of counsel), for appellant.

Guy Colerick, Frank E. Corbett, and James P. Murphy, all of Ft. Wayne, Ind. (Louis F. Niezer, of Fort Wayne, Ind., of counsel), for appellee.

Before SPARKS and MAJOR, Circuit Judges, and LINDLEY, District Judge.

LINDLEY, District Judge.

Defendant appeals from a judgment declaring a lease between plaintiff as lessor and defendant as lessee in full force and effect. The facts are without substantial dispute; the controversy between the parties has to do largely with the legal effect of certain definite events, plaintiff contending that the lease remains in full force and effect and defendant that it has been rightfully cancelled because of default of the lessor.

By the original agreement dated December 17, 1936, and a supplement dated February 25, 1937, plaintiff leased to defendant certain premises for twenty years commencing July 1, 1937. Both contracts were actually executed April 27, 1937. The property, a three-story building and basement, leased for retail store purposes, was not reasonably available for such use until substantial alterations and improvements should be made. The estimated cost of these was $147,000; of this plaintiff was to supply $100,000 and defendant $47,000.

The lease provided that the landlord should deliver exclusive possession on or before July 1, 1937, but that if delay should occur, beyond the landlord's control, in obtaining possession from tenants or otherwise, the effective commencement date of the lease should be postponed until the landlord should give "exclusive possession" to the lessee, provided, however, that if the lessor should not deliver such possession on or before February 15, 1938, then the tenant might either cancel the lease or extend further time to the landlord within which to deliver possession but that the tenant's right to cancel should continue during any such extended time.

By another paragraph, actual and exclusive possession was not to be deemed delivered to the lessee until fifteen days after evidence of title, plat, and certain consent agreements, "all satisfactory to the tenant," should have been delivered to the latter. The parties, at liberty to define exclusive possession as they might see fit, by this language in their formal contract, prescribed that it should include not only physical possession but also delivery of satisfactory title and consent agreements.

Paragraph 15 of the contract provided that the lessor would furnish within thirty days, or such other time as the tenant might request, an abstract of title extended to date and showing merchantable title, the lease of record and a condition of title such as represented by the lessor; an engineer's survey of the premises and improvements, and properly executed written consents satisfactory to the lessee, wherein the holders of any liens against the premises consented to the lease and agreed that the tenant should "not be disturbed in its possession of the premises for any reason other than a default by the tenant which would entitle the landlord to terminate this lease." The engineer's survey was supplied.

Of essential importance is the question whether plaintiff did furnish an abstract and consent agreements by lienholders as required. The negotiations between the parties were by letter. Consequently there is little cause for dispute as to what happened. The abstract of title was not supplied within thirty days, but defendant continued to insist upon its delivery after that date. On August 10, 1937, it received for the first time an abstract, extended only to August 18, 1927. On January 12, 1938, it received an abstract continued to January 28, 1937. Plaintiff did not at any time prior to the alleged cancellation on March 15, 1938, deliver an abstract brought down to the proper date or including a showing of the lease or one to which defendant had not seen fit to interpose objections, which on their face appear to be reasonable, though, perhaps, not of vital importance.

At the time of the execution of the contracts the property was encumbered with a mortgage for $500,000 in favor of the Prudential Insurance Company which, after September 1, 1937, was in default. Plaintiff had instituted negotiations with the Northwestern Mutual Life Insurance Company to refinance this mortgage with a new one aggregating $758,000. The Northwestern made a commitment for the loan, but this commitment was never carried into execution and the refinancing never occurred. Plaintiff at no time secured a consent agreement from the lienholder as it was bound to do under the agreement.

Letters concerning the abstract were written by defendant in the months of May, July, August, September and December, 1937, and as late as January 11, 1938, defendant wrote plaintiff requesting the document and directing attention to the necessity of plaintiff's supplying the same in order to comply with its contract. It received an abstract on the following day and on January 24, returned it with objections and requested its continuation. On February 9, 1938, it again wrote plaintiff requesting that it supply title evidence as contracted and on March 4 made a final formal demand that plaintiff comply with its contractual obligations in this respect. Following this, on March 15, 1938, no further title evidence having been submitted, defendant wrote plaintiff: "As you have not delivered to us satisfactory title evidence, consent agreements and actual and exclusive possession of the above designated premises as provided by the lease between yourself as landlord and this company as tenant, dated December 17, 1936, and amended by a supplemental agreement dated February 25, 1937, we hereby cancel said lease, as amended."

After expiration of some two weeks, plaintiff tendered an abstract with documents claimed to cure the objections but not showing the lease or extended to date. It also tendered a consent agreement from the Northwestern. The District Court concluded that under these facts plaintiff had substantially complied with its contract and with the requirement that it deliver exclusive possession. In view of the stipulation of the parties and the self-speaking contents of the correspondence, it seems clear that the legal effect placed by the court upon the events was unjustified. The parties, by their voluntary contract, had fixed their obligations and rights. They had defined exclusive possession as including physical possession, delivery of merchantable evidence of title, extended to date and including the lease, and consent agreements,...