Schwartz v. Cahill

• Decision Date: 27 February 1917
• Citation: 220 N.Y. 174,115 N.E. 451
• Parties: SCHWARTZ v. CAHILL.
• Court: New York Court of Appeals Court of Appeals

220 N.Y. 174

115 N.E. 451

SCHWARTZ

v.CAHILL.

Court of Appeals of New York.

Feb. 27, 1917.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Max Schwartz against Santiago P. Cahill, receiver of the Houston Restaurant Company. Judgment for plaintiff in the City Court, affirmed in the Appellate Term, was reversed by the Appellate Division (175 App. Div. 68,161 N. Y. Supp. 750), and plaintiff appeals by permission. Reversed.

Chauncey E. Treadwell, of New York City, for appellant.

John Delahunty, of New York City, for respondent.

CARDOZO, J.

The plaintiff leased a restaurant in the city of New York to the Houston Restaurant Company for a term of years. In September, 1915, the lessee corporation became insolvent; proceedings to dissolve it were begun; and the defendant was appointed receiver. At that time the arrears of rent were $2,711.30. The receiver remained in possession from September 24, 1915, to October 29, 1915, and the rent for the period of his possession is $1,508.67. When this is added to the rent due at the time of his appointment, the total is $4,219.97. On October 29, 1915, the lease, with the fixtures and the good will of the business, was sold by the receiver at public auction. The purchaser was the landlord the present plaintiff. His bid was $1,500, which he paid to the receiver in cash. Summary proceedings to dispossess the tenant were pending at that time. The terms of sale state that the lease is sold ‘subject to the amount of rent,’ $4,219.97, ‘due to the landlord,’ and also to a mortgage to a brewery. The bill of sale, executed some days later, expresses the same thought in slightly different words:

‘Said lease is sold and conveyed by me as temporary receiver, subject to the assignment, heretofore made by the said Houston Restaurant Company, Inc., to the Ferdinand Munch Brewery, as collateral security, for the said loan of six thousand (6,000.00) dollars, made by the said brewery, to the said Houston Restaurant Company, Inc., upon which loan, a balance of five thousand one hundred and ninety (5,190.00) dollars is now due and owing, as above stated, and said lease is also sold and conveyed by me, as temporary receiver, subject to the claim of said Max Schwartz, Esq., as landlord, for rent due and owing him, under and by virtue of the provisions of said lease, up to and including the 29th day of October, 1915, amounting to the sum of four thousand two hundred and nineteen and 97/100 ($4,219.97) dollars.’

[1] This action is brought by the landlord to recover $1,508.67, the value of the use and occupation, at the rate fixed by the lease, during the period of the receiver's possession. The rent due at the time of the receiver's appointment is not included. As to that the landlord must share, proportionately with other creditors, on a distribution of the assets. Rent during the receiver's possession stands, however, on a different basis. Woodruff v. Erie Ry. Co., 93 N. Y. 609, 624;Prince v. Schlesinger, 116 App. Div. 500,101 N. Y. Supp. 1031;Id., 190 N. Y. 546, 83 N. E. 1130. That this is so in the absence of some agreement to the contrary, the receiver concedes. His defense is that the acceptance of a bill of sale subject to the landlord's claim imposed upon the purchaser the duty to pay the rent, and that, since the purchaser is the landlord, the claim has thus been canceled. The City Court and the Appellate Term held the defense untenable, but the Appellate Division sustained it, and dismissed the complaint upon the merits.

[2] In that judgment we find ourselves unable to concur. The Appellate Division concedes in its opinion that its construction of the bill of sale is doubtful, and we think it is unsound. By taking an assignment of the lease, ‘subject’ to the existing claim for rent, the purchaser did not assume the obligation of payment. Belmont v. Coman, 22 N. Y. 438, 78 Am. Dec. 213;Smith v. Cornell, 111 N. Y. 554, 558,19 N. E. 271;Duryea v. Lohrke, 136 App. Div. 555,121 N. Y. Supp. 138; 202 N. Y. 562,95 N. E. 1128. He did not assume the rent any more than he assumed the mortgage. The argument is made that the rent, unlike the mortgage, was not a lien upon the lease, and that there was no reason...