Ghoti Estates v. Freda's Capri Restaurant

• Decision Date: 13 December 1954
• Citation: 123 N.E.2d 232,332 Mass. 17
• Parties: GHOTI ESTATES, Inc. v. FREDA'S CAPRI RESTAURANT, Inc.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 232

123 N.E.2d 232

332 Mass. 17

GHOTI ESTATES, Inc. v. FREDA'S CAPRI RESTAURANT, Inc.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Nov. 4, 1953.

Decided Dec. 13, 1954.

Stuart Macmillan, Boston, Samuel F. Clapp, Boston, for plaintiff.

Meyer H. Goldman, Boston, John Bernstein, Chelsea, and M. James Zelman, Boston, for defendant.

Before QUA, C. J., and WILKINS, SPALDING, WILLIAMS and COUNIHAN, JJ.

COUNIHAN, Justice.

This is an action of contract whereby the plaintiff, hereinafter called Ghoti, seeks to recover from the defendant, hereinafter called Freda, for use and occupation of premises 130-132 Boylston Street and 1 and 2 Boylston Place, Boston, for a period from September 12, 1952, to November 3, 1952, and for water used on said premises during part of that time. Freda's answer was a general denial, payment, eviction, and surrender by Freda and acceptance by Ghoti of possession of the premises occupied by Freda under a written lease, the material parts of which are hereinafter set forth. By way of further answer Freda set up matters contained in a declaration in set-off.

By the declaration in set-off Freda sought to recover the sum of $10,000 under a 'Security Agreement' which is hereinafter set forth. This claim was based upon a wrongful termination of the lease, eviction, and Ghoti's acceptance of Freda's surrender of possession under said lease.

Ghoti in answer to the declaration in set-off set up a general denial, and further alleged that Freda filed a petition for an arrangement under c. 11 of the Bankruptcy Act, 11 U.S.C.A. § 701 et seq. (parts of this petition will be hereinafter referred to) in which petition Freda rejected the lease as an executory contract. Ghoti further alleged that the filing of this petition and the confirmation of it by the referee in bankruptcy constituted a breach of the lease, so that thereafter Freda became and continued to be a tenant at sufferance. It further alleged that no accounting under the 'Security Agreement' was due until after December 31, 1961, the date of the termination of the lease, when all damages including loss of rent provided for in the lease could for the first time be fully and accurately determined.

The original action with the declaration in set-off was tried before a judge and jury. At the close of the evidence upon motions filed by the parties ¹ the judge directed a verdict for Ghoti for the full amount claimed by it in its declaration and directed a verdict for Ghoti on Freda's declaration in set-off. He denied the motion of Freda for a directed verdict on its declaration in set-off. The judge took no action upon a request for ruling filed by Freda. ²

The action comes here upon Freda's exceptions to the action of the judge upon the motions and to the denial of Freda's request for a ruling. Freda also claimed exceptions to the action of the judge on evidential matters.

Certain material facts appear to be established from exhibits which are before us. One exhibit was a lease by one Goggin to Freda dated November 15, 1951, for a term of ten years beginning January 1, 1952. ³

Accompanying the lease and attached to it was a 'Security Agreement' executed by Goggin and Freda whereby Freda deposited with Goggin the sum of $10,000 for the faithful performance of the lease. ⁴

It was not disputed that Ghoti acquired the reversionary interest in the premises, together with an assignment of the lease, on June 6, 1952, and that at the same time the sum of $10,000 was paid over to Ghoti by Goggin by way of an adjustment on the purchase price of the premises.

A copy of the original petition for an arrangement by Freda dated June 9, 1952, filed in the United States District Court for the District of Massachusetts in proceedings under c. 11 of the Bankruptcy Act was in evidence. It appears from this petition that Freda alleged that it 'is unable to pay * * * [its] debts as they mature, and proposes the following arrangement with * * * [its] unsecured creditors'. (Emphasis supplied.) It recited an executory contract for said premises made on November 15, 1951, between Goggin as lessor and Freda as lessee which 'is hereby rejected.' The petition was subsequently amended in a manner not here material. On September 11, 1952, the referee in bankruptcy entered an order that 'said arrangement be, and it hereby is, confirmed.'

It appears that Ghoti on June 30, 1952, filed in the bankruptcy court in the arrangement proceedings a petition for payment of what was due for use and occupation in which it was recited that Irving Widett was appointed receiver for the debtor on June 11, 1952. On this petition the referee found that the 'fair rental value of the premises designated in said petition, and occupied by the debtor, as debtor in possession, is the rent reserved under the lease referred to in said petition, namely $1,083.33 per month,' and he ordered that the receiver, Irving Widett, pay to Ghoti out of nonbankruptcy funds in his possession the sum of $794.42, said sum representing the fair rental value of the premises from June 9, 1952, to June 30, 1952, inclusive. The receiver paid Ghoti the fair rental value of the premises at this rate up to and including September 11, 1952, when the petition for an arrangement was confirmed.

It is clear that Freda paid nothing for use and occupation of the premises from September 12, 1952, to November 3, 1952, and nothing for use of water during part of that period. It is both of these claims on which Ghoti seeks to recover in this action which was begun in the Municipal Court of the City of Boston by writ dated November 3, 1952, and later removed to the Superior Court by Freda.

On November 3, 1952, Ghoti also instituted an action of summary process in the Municipal Court of the City of Boston against Freda to recover possession of the premises. No notice to vacate the premises was given to Freda by Ghoti as required by G.L. (Ter.Ed.) c. 186, § 11, or § 12, as amended. There was likewise no evidence of an entry by Ghoti for breach of the conditions of the lease. In this action of summary process an agreement was entered into between the parties, dated November 21, 1952, and filed in court. ⁵

Freda continued to occupy the premises until January 21, 1953, when it vacated them and turned the keys over to an attorney for Ghoti. It was undisputed that nothing was due from Freda for the period from November 4, 1952, to January 21, 1953.

It is apparent from certain letters which were in evidence that Freda was to pay the rent of the premises for June, 1952, to one Heller for whom Goggin was a straw, and that from July 1, 1952, it was to pay the rent to Ghoti. Heller, called as a witness by Ghoti, testified that he received no rent for June, 1952. In cross-examination, however, he testified that he received rent from June 9 to June 30 from the receiver but that he received no rent from June 1 to June 9.

There was evidence of many talks and some correspondence between representatives of Ghoti and representatives of Freda relative to a continuance of the tenancy of Freda as a tenant at will, but there was no evidence that any definite agreement in this respect was arrived at.

Ghoti's Case.

The questions before us on Ghoti's declaration are: (1) Upon the pleadings and the evidence is Ghoti entitled to recover from Freda the sum of $1,877.77 for use and occupation of the premises hereinbefore described for the period from September 12, 1952, to November 3, 1952? (2) Is Ghoti entitled to recover from Freda the sum of $133 for use of water by Freda on said premises during part of the same period? We are of opinion that the answer to these questions must be 'Yes.'

As we have already pointed out, Freda acquired possession of these premises on January 1, 1952, by virtue of a written lease the material parts of which have been hereinbefore recited. Ghoti asserts that there was a breach of this lease by reason of the filing in the bankruptcy court of the petition for an arrangement hereinbefore described.

We emphasize these parts of the lease which appear to us to be decisive. Paragraph VIII provides, '* * * this Lease is upon the condition, that * * * if a petition in bankruptcy is filed by the Lessee * * * or if a receiver * * * shall be appointed * * * by a court of competent jurisdiction * * * the Lessor lawfully may * * * enter into and upon the demised premises * * * and upon entry * * * this Lease shall determine; and the Lessee covenants that in case of such termination * * * the Lessee will indemnify the Lessor against all loss of rent which the Lessor may incur by reason of such termination during the residue of said term'. (Emphasis supplied.) Paragraph IX reads in part, 'And for the more effectual securing to the Lessor of the rent and other payments herein provided, it is agreed as a further condition of this lease that the filing of any petition in bankruptcy or insolvency by the Lessee shall be deemed to constitute a breach of this lease, and thereupon, ipso facto and without entry of [or?] other action by the Lessors, this Lease shall become and be terminated and * * * the Lessor shall forthwith upon such termination be entitled to recover of the Lessee damages for such breach in an amount equal to the amount of rent reserved in this lease for the residue of the term hereof, less the fair rental value of the leased premises for the residue of said term * * *.' (Emphasis supplied.)

It is plain from the language of paragraphs VIII and Ix of the lease that they must be read together and that Ghoti was entitled to avail itself of the provisions of either or both of these paragraphs. The words in paragraph IX, 'And for the more effectual securing to the Lessor of the rent and other payments,' significantly bear this out.

The filing of the petition for an arrangement was an act of insolvency in the equity or business sense for in it Freda alleged that it 'is unable to pay * * * [its]...