McArthur v. Rosenbaum Co. of Pittsburgh, Civ. A. No. 7583.

• Decision Date: 25 July 1949
• Docket Number: Civ. A. No. 7583.
• Citation: 85 F. Supp. 5
• Parties: McARTHUR et al. v. ROSENBAUM CO. OF PITTSBURGH.
• Court: U.S. District Court — Eastern District of Pennsylvania

85 F. Supp. 5

McARTHUR et al. v. ROSENBAUM CO. OF PITTSBURGH.

Civ. A. No. 7583.

United States District Court W. D. Pennsylvania.

July 25, 1949.

Mahlon E. Lewis, Pittsburgh, Pa., for plaintiffs.

Joseph M. Hartfield (of White & Case) New York City, Charles E. Kenworthey, Frederick E. Milligan, Reed, Smith, Shaw & McClay, Pittsburgh, Pa., for defendant.

FOLLMER, District Judge.

This is an action for a declaratory judgment under Section 274d of the Judicial Code, 28 U.S.C.A. § 2201.

On plaintiffs' motion for judgment on the pleadings, by order dated March 30, 1949, as amended on March 31, 1949, D.C., 9 F.R.D. 1, Judge McVicar held, inter alia:

1. The Declaratory Judgment Act provides a remedy for the rights asserted by plaintiffs in their petition or complaint and the complaint states a claim against the defendant upon which relief can be granted.

2. The pleadings show an actual controversy exists between the parties.

3. The complaint does not show that plaintiff has failed to join an indispensable party or parties plaintiff.

The above findings constitute, pro tanto, the law of the case.¹

At this point, the case proceeded to trial.

Findings of Fact

1. Plaintiff, L. L. McArthur, Jr., is an individual whose residence is in Chicago, Illinois.

2. Plaintiff, Northern Trust Company, is a corporation organized and existing under and by virtue of the laws of the State of Illinois, having its principal office and place of business in the City of Chicago, Cook County, in said State.

3. Defendant, Rosenbaum Company of Pittsburgh, is a corporation organized and existing under and by virtue of the laws of the Commonwealth of Pennsylvania, having its principal office and place of business in the City of Pittsburgh, Allegheny County, in said Commonwealth.

4. On or about the 2nd day of December, 1912, an agreement of lease was entered into by and between William Stanton, as lessor, and Rosenbaum Company, a Pennsylvania corporation (not the defendant herein), as lessee, covering lands and tenements involved in this proceeding.

5. On or about the 6th day of December, 1912, an agreement of lease was entered into by and between William Stanton et al., as lessors, and Rosenbaum Company, a Pennsylvania corporation (not the defendant herein), as lessee. The terms of this lease, except for the names of the lessors, the description of the leased property and the rents payable thereunder, are identical with the terms of the lease between William Stanton and Rosenbaum Company, which lease is referred to in paragraph 4 above.

6. Contemporaneously with the execution of the said leases the lessors executed a consent to the assignment of the said lease to The Rosenbaum Company (not the defendant herein), a company then formed and about to be incorporated under the laws of the Commonwealth of Pennsylvania.

7. On or about the 12th day of April, 1913, The Rosenbaum Company (not the defendant herein) agreed to the terms of the assignment referred to above, and assumed the obligations of the lessee under the lease.

8. Between the 23rd day of January, 1923, and the 2nd day of February, 1923, the said leases were assigned to National Department Stores, Inc., with the knowledge and consent of the lessors.

9. Subsequently the lease was assigned first to Tech Corporation, then to National Department Stores, Inc., and finally to Rosenbaum Company of Pittsburgh, the present lessee and defendant herein.

10. On the 14th day of February, 1933, receivers were appointed for the said Tech Corporation to No. 18101 in Bankruptcy in the United States District Court for the Western District of Pennsylvania. On the 14th day of June, 1934, the said bankruptcy proceedings were changed to proceedings for corporate reorganization under Chapter X of the Bankruptcy Act, 11 U.S.C.A. § 501 et seq., after which the said proceedings went on to completion and the discharge of the trustees on the 7th day of February, 1936.

11. On the 6th day of February, 1933, receivers were appointed for said National Department Stores, Inc., to No. 966 in Bankruptcy in the United States District Court for the District of Delaware, and on the 11th day of April, 1933, said corporation was adjudicated bankrupt by said court.

12. Before and during the pendency of bankruptcy proceedings the lessee defaulted in payment of rent and by virtue of said bankruptcy proceedings the lessors were awarded amounts for use and occupancy of the property until the 18th day of January, 1936, which amounts were substantially less than the stipulated rental.

13. Under date of January 18, 1936, the lessors, plaintiffs herein, and National Department Stores, Inc., entered into an agreement modifying, changing and amending the terms of the original leases.²

14. Rosenbaum Company of Pittsburgh, defendant herein, became the assignee of the lease by assignment of National Department Stores, Inc., dated January 30, 1936.

15. The leases were further modified by an agreement between the lessors and present lessee under date of April 22, 1936, in which rent for a short period was waived, decreased for a further period, provision made for payment of certain flood damage by lessor, and payment of a portion of future rents deferred.

16. In accordance with the provisions of the agreement of January 18, 1936, upon the failure of parties to agree upon the rental after the ninth year from the effective date of the agreement, to wit, February 1, 1936, arbitrators were selected who determined the reasonable rental value of the property and made their award May 8, 1946.

17. Defendant, by a notice in writing dated July 19, 1946,³ made an election under the provisions⁴ of the agreement of January 18, 1936, by which election defendant rejected the right to cancel the said leases prior to the end of the term, to wit, April 1, 1950.

18. Defendant, by same notice dated July 19, 1946, made an election under the provisions⁵ of the agreement of January 18, 1936, by which election defendant, in effect, rejected the option to extend the term of said lease for an additional five years, to wit, from April 1, 1950, to March 31, 1955.

Further findings of fact appear hereinbelow in the discussion.

Discussion

The material issues involved in the pleadings in this case are but two, namely:

1. Is the first refusal clause in the lease agreement of December 2, 1912, and December 6, 1912, sufficiently definite to be enforced?

2. Is the first refusal clause superseded by the agreement of January 18, 1936?

The first refusal clause reads as follows:

"It is further agreed that the Lessee shall have the first refusal to make a new lease from the first of April, 1950, upon the herein described property and the building erected thereon."

Considering the issues above posed, in their reverse order:

In 1936 the parties entered into the agreement, hereinbefore referred to, amending the 1912 contracts providing, inter alia,

1. That "In addition to said term as provided in the original leases, the Lessors hereby grant to the Lessee an option to extend said term for an additional five years, to-wit, from April 1, 1950 to March 31, 1955."

2. That all of the terms, covenants and conditions of the original leases should remain in full force and effect except as specifically modified, changed and amended by the agreement.

3. That the rent, which had theretofore been a fixed annual sum, was changed to a percentage of gross sales, which was to continue for a period of ten years from the effective date of the agreement.

4. That if the parties at the end of the ten year period had failed to agree upon the rental for the balance of the term, arbitrators should be selected to determine the reasonable value for the balance of the term after the ten year period.

5. That on or before sixty days after the rent for the balance of the term had been determined, either by agreement or by arbitration, the lessee had the right to elect whether it would continue the leases for the balance of the term at the rent determined by the arbitrators or whether it would cancel the leases. That the lessee was given the right to cancel the leases upon giving one year's written notice to the lessor, without any obligation to pay rent to the end of the term of the original leases beyond the period of one year after the date of notice of cancellation.

6. That in making its election whether to continue the leases until the end of the term, namely, March 31, 1950, or to cancel the leases upon one year's notice, if the lessee elected not to cancel the leases, it was required at the same time to elect to exercise or reject the option which it had been given (paragraph 1 above) for an additional term of five years at the rent fixed either by the parties or by the arbitrators.

The parties having failed to agree upon a rental which would be applicable from the expiration of the ten year period to the end of the term, arbitrators were appointed who, on May 8, 1946, fixed the rental in accordance with the 1936 agreement, which was the rent to be paid from 1946 until the end of the term and the amount of rent to be paid under the option.

At this posture the tenant had the right within sixty days to

(a) Cancel the leases by giving one year's written notice to the lessors;

(b) Elect to continue the leases until the expiration of the term, namely, March 31, 1950, upon payment of the rent fixed by the arbitrators; or

(c) Elect to continue to occupy the premises until the end of the term (paying, as rent, the amount fixed by the arbitrators) and to exercise the option afforded it under the 1936 agreement for an additional term of five years from the expiration of the term, namely, from April 1, 1950, to March 31, 1955, at the rental fixed by the arbitrators.

In the event of its election to continue the leases until the expiration of the term it was required to elect to exercise or reject the option covering the five year additional period from April 1, 1950.

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