Mutual Paper Co. v. Hoague-Sprague Corp.
| Decision Date | 25 May 1937 |
| Citation | 297 Mass. 294,8 N.E.2d 802 |
| Parties | MUTUAL PAPER COMPANY v. HOAGUE-SPRAGUE CORPORATION. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
January 7, 1937.
Present: RUGG, C.
Landlord and Tenant, Extension of lease, Construction of lease, Use of leased premises by lessee.
A lease, which contained a provision that upon notice "the Lessee shall have the right to an extension of said term," and an elaborate method of determining the rent to be paid during the extended period, but no statement as to the length of the extended term, was construed to give the lessee a right to an extended term equal in length to the original term.
A lease of a portion of a factory building providing that the leased premises should be occupied only for the lessee's "business of paper," which business, at the commencement of the lease, did not involve the use of machinery, was construed, when considered as a whole, to permit the see to install and operate certain machines for the conversion of paper into boxes.
Statement by PIERCE, J., of general principles of law applicable in the construction of leases.
BILL IN EQUITY filed in the Superior Court on September 23, 1936. The suit was reported by Weed, J., for determination by this court.
R. Wait, for the defendant.
E. O. Proctor, (A.
Kobrin with him,) for the plaintiff.
This is a suit in equity brought by the plaintiff in the Superior Court, under G. L. (Ter. Ed.) c. 213 Section 3 (Tenth A), and Rule 101 of the Superior Court (1932), for the interpretation of a lease where the plaintiff (a corporation) is assignee of the original lessee (a copartnership) and the defendant an assignee of the original lessor. The plaintiff seeks to know whether it is permissible under the lease for it to install in the demised premises machinery for the manufacture of corrugated paper boxes. The defendant seeks to know whether the option for an extension contained in the lease is sufficiently definite to be valid and, if so, whether the lease has been extended and for how long a period. At the trial the case was heard upon statements of material facts made by counsel and the testimony of an officer of the plaintiff corporation. Such statements of facts with the testimony referred to are incorporated by reference in the "Report of Material Facts and Order for Final Decree" by the trial judge.
The material facts in the report of the trial judge, as to which there is no substantial controversy, are as follows: On January 2, 1934 an indenture of lease was entered into between Hilliard & Merrill Company (a corporation) as lessor, and Nathan Schwartz, Joseph Schwartz and one Rabinowitz (copartners doing business under the firm name of Mutual Paper Company) as lessees. This lease was executed by the parties thereto on the agreement and understanding that a corporation to be called the Mutual Paper Company was to be organized and that upon its incorporation said partnership, as lessee, would have the right to assign the said lease to such corporation "irrespective of the clause in said lease restricting its assignability." The corporation (the plaintiff) was formed, and on or about April 1, 1934, all the right, title and interest of said partnership (the lessee in said lease) was duly assigned to the plaintiff. On or about May 21, 1936, Hilliard & Merrill Company, the lessor in said lease, conveyed to the defendant the realty of which the leased premises are a part, and assigned to it the lessor's rights under the lease.
Under the terms of the lease the plaintiff had the right to an extension thereof, provided notice of its desire for such extension was given. The plaintiff has duly given notice of its desire for such extension and contends that the giving of such notice extended the term of said lease to December 31, 1939. On the other hand, the defendant contends that the provision in reference to extension as set forth in the lease is invalid, that the notice of extension given by the plaintiff did not operate to extend the term of said lease, and that therefore the lease terminated by its terms on December 31, 1936.
The plaintiff during its occupancy of the premises has been engaged in the business of a wholesale dealer in, and jobber of, paper, twine and boxes, including corrugated paper boxes. On or about March 28, 1936, the plaintiff decided that it would install and operate certain machinery for the purpose of manufacturing corrugated paper boxes, and accordingly ordered and purchased machinery for such purpose. This machinery consists of one major machine and three smaller ones, and occupies a space on the leased premises of approximately one thousand square feet. It will be operated by about ten persons. The area of the leased premises is approximately seventeen thousand eight hundred square feet. The part not to be occupied by said machinery is to be used in the same manner as the plaintiff has heretofore used it. This machinery is designed only to convert corrugated paper into corrugated boxes of such size as cannot be purchased conveniently and at reasonable cost elsewhere, and its use is intended to be more in the nature of service to customers than an occupation. The plaintiff proposes to continue the purchase of corrugated boxes elsewhere, as heretofore, but it is essential to the plaintiff that in the conduct of its business it be able to convert corrugated paper into paper boxes by means of machinery, for reasons above stated. At the time of execution of said lease, and up to the time of the trial, the plaintiff did not use any machinery in connection with the conduct of its business.
The building in which the leased premises are located is eight stories high. Except for a restaurant and the part used by the plaintiff for the storage of paper, it is used entirely as a manufacturing building. The defendant, the Hoague-Sprague Corporation, itself deals in boxes for packing shoes in shoe factories, and that includes the dealing in corrugated paper boxes incidental to the sale of the shoe boxes themselves. The conversion of corrugated paper into boxes by the plaintiff will not create any nuisance nor will it in any manner depreciate, or create any waste on, the leased premises. At the trial it was agreed that a copy of the lease annexed to the bill of complaint may be considered as the original. The material portions of the lease are printed in the margin. [*]
The controversy in this case centers about two questions: (1) whether under the lease the plaintiff has a right to an extension and, if so, for what period of time; and (2) whether under the terms of the lease the plaintiff has a right to use part of the premises for the purpose of converting corrugated paper into boxes by machinery.
The trial judge found that "the `lessee' purchased three machines and proposed to install them upon the demised premises and operate them in manufacturing corrugated boxes or packing cases from corrugated paper"; that the said machines cost the plaintiff "respectively $2,700, $5,400 and $50"; that the motor for their operation cost $225; "that the parties have never agreed expressly upon any definite period for extension of the term of said lease, nor have they agreed upon the amount of rent to be paid during such extension save so far as such agreement appears in the lease itself, nor did the defendant within ten days after the receipt of said notice `designate the amount of rent to be paid during such extended term'"; and that the "yearly rental of $5,082 and monthly rental of $423.50 mentioned in said notice is ten percent `in addition to the rent hereinbefore (in the lease) referred to for the third year of this lease.'" He ruled "1. . . . that the conversion of corrugated paper into corrugated paper boxes or packing cases, at least to the extent of the installation and operation of the machines hereinbefore described, is within the scope of `their business of paper' as said words are used in the lease, and will not constitute a breach of the `lessee's' covenant"; and "2. . . . that the provision of the lease relating to an extension of the term thereof is not so indefinite as not to be capable of enforcement, and that in the absence of any express agreement upon any definite period for the extension of the term of said lease and in view of the provisions of said lease with respect to the yearly rentals during the existing term and of the written notice by the lessee to the lessor, a copy of which is attached to the answer, agreeing to pay the maximum yearly rental for such extension named in said lease, the term of said lease has been extended thereby for the further period of one year ending December 31, 1937." At the request of the parties the case was reported to this court upon the agreement of the parties that if the "rulings are correct a decree is to be entered in accordance therewith, otherwise such decree as justice and equity require."
As to the question relating to the plaintiff's right to an extension, the defendant maintains "that the provision...
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