Mut. Life Ins. Co. v. Stephens

• Citation: 108 N.E. 856,214 N.Y. 488
• Parties: MUTUAL LIFE INS. CO. v. STEPHENS et al.
• Decision Date: 13 April 1915
• Court: New York Court of Appeals

214 N.Y. 488

108 N.E. 856

MUTUAL LIFE INS. CO.

v.STEPHENS et al.

Court of Appeals of New York.

April 13, 1915.

Appeal from Supreme Court, Appellate Division, First Department.

Suit by the Mutual Life Insurance Company of New York against Melvin Stephens and others. Judgment for plaintiff on the pleadings was affirmed by the Appellate Division (164 App. Div. 942,149 N. Y. Supp. 1098), and defendants appeal on questions certified. Reversed. See, also, 165 App. Div. 915,150 N. Y. Supp. 1098.

The action is brought to compel specific performance of a provision of a lease for the appraisal of the leased premises. On the 28th of February, 1896, Anson P. Stephens, the life tenant, and all persons having any interest in the remainder, vested or contingent, executed a lease of 71 William street to Helen L. Phelps Stokes for a term of 40 years from the 1st day of May, 1897, at an annual rental of $8,000. The lessee was to be permitted ‘to alter, enlarge, improve, remove, destroy or rebuild said premises in such manner and to such an extent as she may desire,’ and was to pay the Croton water rent, all regular taxes, and one-half of any assessment that might be imposed on the premises, and was to keep the building on the premises insured, make needful ordinary repairs, and comply with all laws and ordinances relating to the premises, and all orders and regulations of the building or other municipal departments. The lease also provided, as far as material, that within one year after the receipt of notice by the lessee of the death of the life tenant the value of the demised premises, together with whatever improvements may then exist thereon, exclusive of any improvements made by the lessee, should, if the lessee desired, be appraised by two appraisers, one to be appointed by a majority of the then owners of the property, and the other by the lessee, with power to appoint a third in case they could not agree, and that the lessee should, for six months after such appraisal, have the option of purchasing the premises at the appraised value. By mesne assignments the plaintiff, a domestic life insurance corporation, on the 31st day of December, 1901, became, and has since remained, the owner of the lease, all the terms of which were complied with by the lessee and her assignees down to the time of the commencement of this action. The life tenant died on the 13th day of December, 1912, and on the 17th of October, 1913, the plaintiff notified the defendants, the remaindermen, that it elected to have the value of the premises appraised, together with whatever improvements might exist thereon exclusive of any improvements made by the said Stokes or her successors or assigns, but the defendants refused to appoint an appraiser. The answer alleges, as a defense, that the plaintiff is the owner in fee of all the other property in the block in which said premises are situated; that it maintains its principal office in a part or portion of one of the buildings standing upon the premises so owned and leases the remainder to lessees who are disconnected from it in business; that the premises in question are not occupied by the plaintiff, and are not requisite for its convenient accommodation in the transaction of its business. Two questions are certified, viz.: 1. Does the complaint state facts sufficient to constitute a cause of a action? 2. Is the defense consisting of new matter contained in the answer sufficient in law upon the face thereof?

Eugene D. Boyer, of New York City, for appellants.

Murray Downs, of New York City, for respondent.

MILLER, J. (after stating the facts as above)

[1] We shall assume for the purposes of this appeal that the statute (Insurance Law [Consol. Laws, c. 28] § 20) does not authorize the plaintiff to acquire and hold the said real property. It now has an estate for years in the property, and the question arises whether a court of equity will aid it to acquire the fee. If the agreement were wholly executory, the answer to that question would not be doubtful. Chamberlain v. Chamberlain, 43 N. Y. 424;Matter of McGraw, 111 N. Y. 66, 19 N. E. 233,2 L. R. A. 387;Case v. Kelly, 133 U. S. 21, 10 Sup. Ct. 216, 33 L. Ed. 513. But it has been so far executed that it is impossible to restore the parties to their original situation. Improvements have been made on the faith of the agreement, and presumably the plaintiff will lose the value of its investment in whole or in part unless the agreement is carried out. The defendants have recognized the plaintiff as their tenant, and have accepted performance of the contract from it. They should not now be permitted to plead its ultra vires act to avoid performing their part of the agreement, certainly not without first paying or offering to pay the value of the improvements. Appleton v. Citizens' Central National Bank, 190 N. Y. 417, 83 N. E. 470,32 L. R. A. (N. S.) 543.

The record does not disclose under what circumstances or for what purpose the plaintiff acquired the lease. We assume that it exceeded its corporate powers. But the act was not malum in se, nor does the statute expressly prohibit the acquisition of real property by insurance corporation for any purpose. On the contrary, it authorizes such corporations to purchase, hold, and convey real property, but only for certain enumerated purposes. The acquisition of the lease by the plaintiff, assuming that it was not acquired for one of the enumerated purposes, was unlawful only in the sense that it was ultra vires. As the Insurance Law stood when the plaintiff acquired the lease, it could hold such real property indefinitely ‘as shall have been acquired for the accommodation of its business.’ Laws of 1892, c. 690, § 20. But as the act was amended by chapter 326 of the Laws of 1906, it is required to sell and dispose of such property within five years after acquiring title, unless it shall be necessary for its accommodation in the convenient transaction of its business, or unless it shall procure a certificate from the superintendent of insurance extending the time during which it may hold the same. If the property is not necessary for the plaintiff's accommodation in the convenient transaction of its business, it will be for the superintendent of insurance to see that the statute is complied with precisely as would be the case if, instead of acquiring a lease, it had taken a mortgage which it had to...