Kottler v. New York Bargain House, Inc.

• Decision Date: 12 January 1926
• Citation: 150 N.E. 591,242 N.Y. 28
• Parties: KOTTLER v. NEW YORK BARGAIN HOUSE, Inc.
• Court: New York Court of Appeals Court of Appeals

242 N.Y. 28

150 N.E. 591

KOTTLER

v.NEW YORK BARGAIN HOUSE, Inc.

Court of Appeals of New York.

Jan. 12, 1926.

Action by Harry Kottler against the New York Bargain House, Inc. From a judgment of the Appellate Division (209 N. Y. S. 861, 213 App. Div. 862), modifying, and, as modified, unanimously affirming, judgment of the Trial Term (a jury having been waived) for plaintiff, defendant appeals.

Judgment modified, and, as modified, affirmed.

Appeal from Supreme Court, Appellate Division, First Department.

Alfred B. Nathan, of New Yrok City, for appellant.

David Podell and Louis B. Davidson, both of New York City, for respondent.

CARDOZO, J.

The plaintiff, the lessee of a building in the city of New York, made a sublease, beginning May 1, 1920, and ending January 31, 1925, to S. Kleinman & Co., a partnership. Almost at once S. Kleinman & Co. assigned all their assets, including the lease, to New York Bargain House, Inc., the defendant, which went into possession. There is evidence that the defendant, in consideration of the assignment, assumed the debts and liabilities. There is a finding, unanimously affirmed by the Appellate Division, that it ‘expressly assumed all the obligations' of the lease. Under the rule of Lawrence v. Fox, 20 N. Y. 268, the plaintiff may enforce the promise. Thorp v. Keokuk Coal Co., 48 N. Y. 253;Vrooman v. Turner, 69 N. Y. 280, 285,25 Am. Rep. 195.

The defendant became bankrupt on May 12, 1922, with rent for five months already in arrears. A receiver in bankruptcy took possession, but went out a few days later. In going out, he made a written agreement with the plaintiff, which we shall have occasion to summarize hereafter. The building being vacant, the plaintiff placed upon it a sign ‘to let,’ but did not resume possession otherwise. As agent for the defendant, he relet the premises on August 15, 1922, for a term of years. The reletting was at a lower rental, and, after collections had been credited, there was a deficiency month by month.

In thus diminishing the loss, the plaintiff acted, or assumed to act, in accordance with authority conferred by one of the covenants of the lease. This covenant provides that, ‘if the said premises, or any part thereof, shall become vacant during the said term, the landlord or his representatives may re-enter the same, either by force or otherwise, without being liable to prosecution therefor, and relet the said premises as the agents of the said tenants, and receive the rent thereof; applying the same, first, to the payment of such expenses as they may be put to in reentering, and then to the payment of the rent due by these presents; the balance, if any, to be paid over to the tenants, who shall remain liable for any deficiency.’

Plaintiff, having thus relet, collected rent from the new tenants till December 1, 1923. On December 14, 1923, he surrendered his own lease, and the surrender was accepted. Since then the new tenants have made payment to the owner of the fee. There is no contention by either party that they should have made it to any one else.

This action is for rent at the rate reserved in the defendant's lease from June 1, 1922, to August 15, 1922, the date of the reletting, and thereafter for the monthly deficiency up to March 31, 1924, when the action was begun. The trial judge gave judgment for the full amount claimed, adding by amendment an item of rent accruing later. The item thus added was struck out by the Appellate Division as well as an allowance for expense incurred for commissions to a broker. As so modified, the judgment was unanimously affirmed.

[1] The defendant argues that the action, in so far as it includes a claim for a deficiency upon reletting, was premature when begun, and even when decided (July 15, 1924). The claim for the deficiency, it is said, is in truth a claim for damages, and the damages, it is said, could not be known until January 31, 1925, when the lease to the defendant was to expire by its terms (citing Harding v. Austin, 87 N. Y. S. 887, 93 App. Div. 564, and Darmstadt v. Knickerbocker Chandelier & Electrical Supply Co., 172 N. Y. S. 148, 104 Misc. Rep. 547, reversed 176 N. Y. S. 588, 188 App. Div. 129, and distinguishing Mann v. Ferdinand Munch Brewery, 121 N. E. 746, 225 N. Y. 189). We think the claim for a deficiency under the provisions of this covenant is not for damages, but for rent. There is a distinction between a reletting by a landlord after the expiration of a term, and a reletting as agent for the tenant during the existence of the term. In the one case the tenant, even though chargeable by force of covenant with a subsequent deficiency, is liable for damages. Hall v. Gould, 13 N. Y. 127. The term is at an end. In the other, he is liable for rent; what is received through a reletting being merely a payment on account. The term is still in being. Underhill v. Collins, 30 N. E. 576, 132 N. Y. 269, 272;Jones v. Rushmore, 50 A. 587, 67 N. J. Law, 157; 3 Williston, Contracts, § 1403.

The covenant in this lease does not say that the tenant is to be chargeable with a deficiency after the lease shall be terminated by reentry for condition broken (compare the covenants in Darmstadt v. Knickerbocker Chandelier & Electrical Supply Co. and Hall v. Gould, supra). It covers a single situation. If the premises become vacant ‘during the term,’ the landlord is empowered to re-enter and relet (Fleisher v. Friob, 161 N. Y. S. 940, 97 Misc. Rep. 343, 346, 350; affirmed, 164 N. Y. S. 1092,177 App. Div. 921;Wolf v. Rudinsky, 119 N. Y. S. 1007, 135 App. Div. 172;Chaude v. Shepard, 25 N. E. 358, 122 N. Y. 397, 402, 403. In so doing, he is not forfeiting the lease or putting an end to its existence. There is no provision that vacancy, the mere abandonment of possission, shall be the breach of a condition. He acts when so reletting as agent for the tenant, who is liable for any deficiency, and gets the benefit of any surplus. We are not to confuse a vacancy thus occasioned with a vacancy arising after the term is at an end. Premises do not become vacant ‘during the term’ when they are made vacant because a tenant had been ejected after a forfeiture of the term. The landlord's rights in that contingency are defined in another subdivision. Fleisher v. Friob, supra. If default has been made in the performance of a covenant, he is privileged ‘to re-enter the said premises, and the same to have again, repossess, and enjoy.’ The privilege goes no further. Upon re-entry for condition broken, he is without authority to relet for the account of the lessee. The lease might, of course, have made provision for a reletting even then. We take its covenants as we find them. The lessee is chargeable with a deficiency in one event only, and then the term is kept alive. As long as it remains alive, there is a liability for rent. Underhill v. Collins, supra.

Our decision in Matter of Hevenor, 39 N. E. 393, 144 N. Y. 271, is pressed upon us by counsel to uphold a different ruling. The covenant in that case was ambiguous. The vacancy was described as one arising during the term, and at the same time as a vacancy existing because of nonpayment of rent. Page 272 (39 N. E. 393). There was here the implication of a forfeiture. A vacancy could not exist because rent was overdue unless the term had been ended because of the default. The word ‘term,’ unless qualified, will commonly be taken to mean ‘interest’ or ‘estate’ (Black Comm., bk. 2, c. 9, p. 144), yet the context may show that it is synonymous with ‘time’ (Finkelmeier v. Bates, 92 N. Y. 172, 178; 1 Washburn Real Prop. [6th Ed.] § 609). But, aside from these differences, the Hevenor Case does not exact of us a ruling that the claim is one for damages. What was said in that opinion as to the effect of a reletting was unnecessary to the decision (cf. Gray v. Kaufman Dairy & Ice Cream Co., 41 N. Y. S. 73, 9 App. Div. 115, 118; reversed, but on other grounds, in 56 N. E. 903, 162 N. Y. 388, 49 L. R. A. 580, 76 Am. St. Rep. 327). The controversy was one between a landlord and as assignee for the benefit of creditors. The landlord claimed the right to participate in the assets by reason of a deficiency of rents accruing after the assignment. In such circumstances it was immaterial whether he proved for rent or for damages. His claim must have been rejected whether classified one way or the other. Rent due at the date of the assignment must be paid with other debts and liabilities out of the assets of the estate. Not so, however, of rent falling due thereafter. Matter of Roth & Appel, 181 F. 667, 104 C. C. A. 649, 31 L. R. A. (N. S.) 270;Watson v. Merrill, 136 F. 359, 69 C. C. A. 185, 69 L. R. A. 719; Matter of Link, 14 Daly, 148; Deane v. Caldwell, 127 Mass. 242. Even the actual ruling in Matter of Hevenor, not to speak of the dicta, has been kept within narrow limits. People v. St. Nicholas Bank, 45 N. E. 1129, 151 N. Y. 592. The dicta have not destroyed the authority of Underhill v. Collins.

[2] The question remains whether by force of agreement between the landlord and the bankruptcy receiver the term had been ended before the...