Newfield Bldg. Co. v. Mohican Co.

• Decision Date: 28 January 1927
• Citation: 136 A. 78
• Court: Connecticut Supreme Court
• Parties: NEWFIELD BLDG. CO. v. MOHICAN CO.

136 A. 78

NEWFIELD BLDG. CO.

v. MOHICAN CO.

Supreme Court of Errors of Connecticut.

Jan. 28, 1927.

Appeal from Superior Court, Fairfield County; Arthur F. Ells and John R. Booth, Judges.

Action by the Newfield Building Company against the Mohican Company for forfeiture of a lease and cancellation of subleases with accounting, and for declaratory judgment defining rights of parties. From judgment for plaintiff for money damages with possession of premises, and that lease be canceled and surrendered, defendant appeals. Error, and judgment reversed, with directions.

Frank L. McGuire and C. Hadlai Hull, both of New London, for appellant.

Sanford Stoddard, of Bridgeport, and Benjamin Slade, of New Haven, for appellee.

HAINES, J. The finding shows that the property involved in this action is on the northeast corner of Main and Golden Hill streets in Bridgeport, known as the Newfield Building; and that from January 1, 1909, to his death, November 14, 1920, it was own-id by Samuel H. Wheeler. On February 24, 1909, he leased the ground floor with the basement storeroom and the rear portion on the second floor to the defendant for 20 years, by written indenture, referred to in the record as Exhibit A. On this date extensive repairs to the building were being made by the owner, which were completed before April 24, 1909, at which date the defendant, by oral agreement with the owner, took possession of the leased premises, although its term did not begin till May 1, 1909. Before entering into possession, the defendant expended $17,430.89 for furniture and fixtures, and $5,268.25 for construction work, to adapt the premises to the business it desired to conduct therein. In the first year of its tenancy the defendant lost about $12,000, and this fact was stated by its general manager to Mr. Wheeler, in a conference with him. The defendant thereupon offered to surrender the lease. Mr. Wheeler was not willing to accept a surrender. He considered it was an advantage to the premises and to his other property in the vicinity to retain the defendant as a tenant, and he believed the presence of the defendant there would attract business to that part of the city. Under these circumstances, Mr. Wheeler made a proposition to the defendant that it occupy only a portion of the premises it had leased, and, at its own expense, subdivide the remainder in accordance with plans which he himself suggested, and then sublet such portions to tenants, and thus be able to operate at a profit, He further advised the defendant to make the subleases for short terms only, so it might be able to take advantage of increased values in the location, "from time to time during the remainder of its lease." The defendant accepted the proposition, and made the necessary changes in the property to adapt it for subletting, at an expense of more than $17,500, and with a necessary resulting loss in value of a considerable portion of the original installation. While these changes were being made, Mr. Wheeler visited the premises frequently, and, in several instances, suggested further changes, which suggestions the defendant adopted. The defendant then proceeded to make subleases to various parties for various periods; these subleases and their renewals continuing to the death of Mr. Wheeler in 1920, a period of about ten years. Two of the subleases made during this period were to Mintz and to Schulte, Inc., respectively, and the subleases now complained of are renewals of such original subleases. In February, 1917, Mintz had asked, and obtained, the consent of Mr. Wheeler to make certain changes which he desired, and this was granted on his promise to later restore the premises to the condition in which they had been put by the defendant. The will of Mr. Wheeler was admitted to probate in November, 1920. He therein gave his entire estate to his widow, Dora R. Wheeler, who was also named as executrix. A certificate of devise to her was issued August 31, 1923, and on the same day she conveyed the premises in question by warranty deed to the Wheeler Company, two of the seven directors of which were herself and her son, Nathaniel Wheeler. On September 24, 1923, the Wheeler Company conveyed by warranty deed to Samuel N. Schnee and Abraham C. Schnee, who executed a purchase-money mortgage on that date to the Wheeler Company, for $250,000, subject to a prior mortgage for $100,000 to the Bridgeport Savings Bank. Schnee & Schnee and one Resnick organized the plaintiff corporation, and on October 5, 1923, executed a warranty deed to the corporation of the premises in question. This deed was not recorded till January 18, 1924, for the reason that Schnee & Schnee desired to increase the first mortgage to the Bridgeport Savings Bank to $150,000, after paying $100,000 on the purchase price, and this new mortgage was given November 6th, 1923, The original lease to the defendant contained the following:

"Par. 4. The lessee shall have the right to sublet the said premises or to assign said lease to parties conducting a business not detrimental to the advantageous use of the remainder of the building. The lessee shall, however, in no event, have any right to sublet the demised premises or to assign this lease, if at the time, the lessor or his heirs, executors, administrators or assigns, is or are willing to accept a surrender of the lease."

No notice of a willingness to accept a surrender of the lease was ever given to the defendant by Samuel H. Wheeler to the time of his death, November 14, 1920, but, on March 28, 1921, the following letter was sent to the defendant:

"You will recall that under the terms of your lease made with Samuel H. Wheeler, of your store in Bridgeport, dated February 24, 1909, your right to sublet the premises exists only if the lessor is not at the time willing to accept a surrender of the lease. On account of the constantly increasing expense of operation of the building and of the amount of taxes collected therefrom, the estate feels that it must take every step which may contribute to produce an adequate return from the building. It therefore advises you that it is willing to accept a surrender of your lease at the present time, or at any time hereafter during its term. Yours truly. Estate Samuel H. Wheeler, per Nathaniel Wheeler."

This was the only notice which has ever been received by the defendant corporation from any one expressing a willingness to accept a surrender of the lease in question. No corporate action was ever taken by the Wheeler Company or by the plaintiff company to signify its willingness to accept a surrender or to declare a forfeiture because of a violation of the terms of the lease by the defendant, and no attempt was ever made by any one to enter and take possession of the premises because of such claimed breach. Notwithstanding the notice of March 28, 1921, the defendant company, on April 4, 1923, sublet a portion of the premises to Mintz, and another portion to Schulte, Inc., both of which subleases expire April 20, 1929, and continue a possession which each subtenant had had under prior leases then expiring. These two subleases covered about 25 per cent. of the entire premises described in the lease in question. The plaintiff, by this action, is seeking to force a forfeiture of the defendant's lease in order to avail itself of the increased rental and other value which the property has acquired since 1910. Its complaint rests upon the claim that, while the subleases made during the lifetime of Mr. Wheeler were authorized by paragraph 4 of the lease, the making of the subleases of 1923, after the notice sent to the defendant in 1921, was a violation of the terms of paragraph 4. In its answer to this, the defendant says, in effect, that, after the execution and delivery of the lease, and while the defendant was occupying the premises as lessee thereunder, it made an agreement with Mr. Wheeler, the lessor, which gave it the unrestricted legal right to make subleases at any time during the remainder of the term; that this right to sublet during the remainder of the term was granted to it by Mr. Wheeler in consideration of the expenditure of large sums of money by the defendant to modify and change portions of the premises and adapt them to subletting; that these were permanent improvements, and greatly enhanced the value of Mr. Wheeler's property. The burden rested ultimately upon the plaintiff to establish its contention that the subleases of 1923 were a violation of the provisions of paragraph 4 of the defendant's lease.

The trial court held that the plaintiff had sustained that burden, the following conclusions appearing in the finding:

"(4) On October 1, 1923, the defendant broke said lease by then putting his sublessees into possession of part of the premises under subleases made April 24, 1923.

"(5) Neither the plaintiff nor any predecessor in title has expressly or impliedly waived the provisions in said lease in respect of subletting, nor the right to terminate said lease for breach of said provisions."

"(17) Samuel H. Wheeler made no agreement, express or implied with the defendant, changing the terms of the lease, Exhibit A, in respect of subletting, and made no statement or representation not in accordance with the terms of said lease in respect of subletting."

All these conclusions, both of law and fact, are challenged by this appeal, and are here presented for review. Our inquiry requires a consideration of the true scope, meaning, and legal effect of both paragraph 4 of the lease and of the so-called agreement of the parties in 1910.

Forfeitures of leaseholds for condition broken, and restrictions upon the right to sublet, are both looked upon with disfavor, and a construction of a contract which leads to either of these results will be avoided, if reasonably possible. Camp v. Scott, 47 Conn 366, 375; Chamberlain v. Brown, 141 Iowa, 540, 120 N. W. 334; Conneaut Co. v. Quigley, 225 Pa. 605, ...