Louis K. Liggett Co. v. Rose

• Decision Date: 21 January 1927
• Docket Number: 76,77.
• Citation: 136 A. 651,152 Md. 146
• Parties: LOUIS K. LIGGETT CO. v. ROSE ET AL. DIENER v. ROSE ET AL.
• Court: Maryland Court of Appeals

136 A. 651

152 Md. 146

LOUIS K. LIGGETT CO. v. ROSE ET AL.

DIENER v. ROSE ET AL.

Nos. 76, 77.

Court of Appeals of Maryland

January 21, 1927

Appeals from Circuit Court of Baltimore City; Eli Frank, Judge.

"To be officially reported."

Bill for specific performance by Henry Rose and another against Theodore H. Diener and the Louis K. Liggett Company. Decree for complainants and defendants prosecute separate appeals. Affirmed in part, reversed in part, and remanded.

Argued before BOND, C.J., and PATTISON, URNER, ADKINS, OFFUTT, and PARKE, JJ.

Robert R. Carman, of Baltimore (R. Bayly Chapman and John B. Deming both of Baltimore, on the brief), for appellant Louis K Liggett Co.

Edward L. Ward, of Baltimore (Richard E. Preece, of Baltimore, on the brief), for appellant Diener.

Emanuel Gorfine and J. Morfit Mullen, both of Baltimore, for appellees.

PARKE J.

The bill of complaint on this appeal was filed in the circuit court of Baltimore city on January 27, 1926, by Henry Rose and Emil Horwitz, appellees, against Theodore H. Diener and Louis K. Liggett Company, a corporaton, appellants. After the bill of complaint had been amended, its final form was sustained by the overruling of the demurrers which had been interposed by the appellants, who then answered the allegations of the bill of complaint, and testimony was taken before the chancellor. The proceedings were designed to have specifically enforced an agreement of Theodore H. Diener whereby, on November 11, 1925, he promised in writing to lease to the appellees a desirable brick store, of three stories, with basement, at the corner of Lexington and Liberty streets, Baltimore, known as 101 West Lexington street, for a period of 10 years from January 1, 1926, with the privilege of renewal for a like term. The agreement to lease was not consummated, but Theodore H. Diener, on January 13, 1926, demised the same premises to the Louis K. Liggett Company, an appellant, for a period of 20 years, beginning on February 1, 1926. The theory upon which the present appellees proceeded was that, without their default, and while the agreement between themselves and the landlord was in effect he negotiated and agreed to make a lease of the same property to the Louis K. Liggett Company, the other appellant, which had knowledge of the prior subsisting agreement. The chancellor decreed specific performance of the agreement of Diener with the appellees, and from his decree the landlord and the company have each prosecuted separate appeals. The record is voluminous, and the oral arguments and briefs have exhaustively and ably presented the case, which, in our judgment, will depend upon whether the Louis K. Liggett Company had notice of the prior contractual rights of the appellees at the time of the execution of its lease. The court will not attempt an analysis of the conflicting testimony, but will state its carefully considered conclusions as the substantive facts established by the preponderance and weight of the testimony.

The premises in question were vacant, except a part occupied by a jeweler, Milton I. Mervis, when the landlord leased to a corporation named Dartley, Inc., another portion of the building from October 1, 1925, to December 31, 1925. The owner of the building was desirous of leasing the premises, and he had employed a real estate agent, the Realty Service, Inc., to secure a tenant. A short time before the renting to Dartley, Inc., Emil Horwitz, one of its officers, and a large stockholder, became interested in securing from the owner a lease on the whole property. The other appellee, Henry Rose, an experienced real estate operator in New York, became associated with Horwitz in this undertaking, and the two met at the owner's place of business on November 11, 1925, where, in the presence of Sidney D. Cohen, the representative of the Realty Service, Inc., the owner himself drew up an agreement to lease the entire property, and the three contracting parties signed and delivered the instrument, which was of this tenor:

"November 11, 1925.

I hereby agree, subject to concluding arrangements with Milton I. Mervis, to lease to Mr. Horwitz and Mr. Rose premises 101 W. Lexington street for a term of ten years beginning January 1, 1926, at an annual rental of $24,000, payable in equal monthly installments of $2,000 in advance on the first day of each and every month. As security $10,000 are to be paid on signing of the lease, of which $2,000 are to be applied to payment of the first month's rent, the balance to be held at 6 per compound interest for three years and then applied proportionately on the monthly rental for the succeeding three years. Lease to be signed by a corporation having $50,000 capital and to be individually guaranteed to satisfaction of landlord. Premises to be accepted in condition as is and tenant to have right to make any alteration or repairs that will improve the property. Two years before expiration of the lease, tenant is to have right to renew for a further term of ten years at a gross rental for the first five years of $27,000 and for the second five years of $30,000.

Theo. H. Diener.

Witness: Sidney D. Cohen.

We hereby agree to lease the premises 101 W. Lexington street under the terms above mentioned, and agree to execute proper lease for same.

Henry Rose.

Emil Horwitz.

Witness: Sidney D. Cohen."

The contract was conditional on the owner obtaining from his tenant, the jeweler, Milton I. Mervis, a release or surrender of his subsisting lease, which had some years to run; and, as will be later more particularly stated, the owner obtained from the jeweler a surrender of his term upon the payment of a large reward.

After the agreement was signed, Rose returned to New York, and Horwitz remained in Baltimore until Saturday, when he left with the understanding that the lease would be sent by Diener to New York for execution. Diener had prepared a lease for all of the property, except the portion occupied by the jeweler, and forwarded it to New York in a letter dated November 14th. As explained by this letter, the form of lease submitted was to cover all of the property except that occupied by the jeweler, for the term of 6 years and 1 month, beginning on the 1st of January, 1926, and ending on the 31st day of January, 1932, which corresponded with the unexpired period of the jeweler's lease. The letter stated that another lease for the same period, with similar provisions, would be drawn for the portion of the property occupied by Mervis, and that this second lease would also cover the entire premises for the residue of the agreed term of 10 years, with the privilege of renewal for 10 years more.

The form of lease submitted contemplated a lease to the corporation to be named by the lessees and Henry Rose as the two tenants. In his letter of December 14th the request was made for the name of the corporation to be furnished, with the suggestion that, if this be then impossible, the lease would be made in the name of Rose, "with permission to transfer same to a corporation, subject to conditions named in lease."

The lease contained a clause that "it is further understood and agreed that the said tenants shall guarantee to the satisfaction of the landlord the payment of the rent stipulated in this lease and the payment of the rent to be paid under the 14-year lease to be hereinafter executed," which evidently was intended to provide for the stipulation in the agreement to lease that the lease was "to be individually guaranteed to the satisfaction of the landlord." The lease as prepared was acceptable in form to the appellees, except with respect to two provisions. The first was that any change in the name of the corporate tenant or of the personnel of its board of directors or any assignment of its shares of stock or assets should "be deemed and considered a violation of this lease and its provisions," and, upon the happening of any of these three contingencies, the landlord would have the right to declare the lease terminated, with the right of re-entry. The second provision was that the premises should not be assigned or sublet. Both of these provisions were not within the purview of the agreement to lease, but the appellees, though protesting, would have accepted the proposed form of lease, if the landlord had been willing to leave out the stipulation against an assignment or subletting of the premises. Tiffany on Landlord and Tenant, § § 150, 151, 152; Carlin v. Harris, 100 Md. 50, 55, 59 A. 122; Schlerf v. Bond, 139 Md. 10, 114 A. 739; Bodman v. Murphy, 35 Md. 155.

The prohibition against assigning or subletting, especially as the proposed renting was to assume the form of distinct leases for separate portions of the same premises, was vital, and the appellees rightfully declined to acquiesce in this modification of the contract. The landlord was peremptory in his position that he would not lease to the appellees without this provision, but the discussion on this point continued until January 6th in interviews and through correspondence, in which other matters were considered in connection with the execution of the lease, but the central and substantial difficulty was the inexorable refusal of the landlord to rent to the appellees, unless they agreed to incorporate the condition against an assignment and sublease.

Meanwhile the landlord had agreed that Dartley, Inc., whose term would expire on December 31st, could remain as a monthly tenant but on January 15th he wrote that, instead of requiring this corporation to vacate on January 31st an arrangement could be made for an extension until February 15th. The landlord having declined to execute a lease in conformity with his agreement, the appellees, who had been acting under the...