Sexton v. Chicago Storage Co.

• Decision Date: 15 June 1889
• Citation: 21 N.E. 920,129 Ill. 318
• Parties: SEXTON v. CHICAGO STORAGE CO. et al.
• Court: Illinois Supreme Court

129 Ill. 318

21 N.E. 920

SEXTON

v.CHICAGO STORAGE CO. et al.¹

Supreme Court of Illinois.

June 15, 1889.

Appeal from appellate court, First district.

Bill brought, in the superior court of Cook county, by Patrick J. Sexton, in his own behalf, as well as in behalf of such other of the creditors of the Chicago Storage Company as should come in and make themselves parties and contribute towards the costs of suit, against the Chicago Storage Company, a corporation, and Charles N. Chipman, Alfred Willford, James B. Craney, John C. Magee, Charles G. Barth, W. R. Parks, David Cole, and Kenneth R. Smoot, its stockholders, to dissolve the corporation, on the ground that it had ceased doing business, leaving debts unpaid; and to enforce the payment of its debts against the stockholders. Complainant's claim against the corporation arose as follows: May 1, 1885, he leased to Frank F. Cole, by two separate leases for different parts of the building, a certain building in the city of Chicago, for the term of three years, at a monthly rental of $466.66. May 9, 1885, Cole leased the same premises to the Chicago Storage Company, for the whole unexpired term, at a rental of $300 per month for the first year, $500 per month for the second year, and $650 per month for the third year. This lease reserved a right of forfeiture and re-entry for non-payment of rent or other breach of its conditions, and contained a covenant to surrender the premises to Cole at the expiration of the term, or sooner determination of the lease. Complainant's suit was based upon the theory that this instrument was, in effect, an assignment of the leases from himself to Cole, making the corporation liable to him for the rent reserved in these leases. The superior court held that the instrument was a sublease, and that the corporation was therefore not indebted to complainant, and accordingly dismissed the bill for want of equity. The appellate court affirmed the decree. Complainant appeals.

Alexander S. Bradley, (John N. Jewett and Jewett Bros., of counsel,) for appellant.

Kenneth R. Smoot and Monk & Elliott, for appellees.

SCHOLFIELD, J.

The evidence sufficiently proves that ‘the Chicago Storage Company has ceased doing business.’ This is not contested by counsel for appellees, though they seek to avoid its effect by the circumstance which they claim to be proved, that such failure is solely because of the seizure and appropriation of its property for the payment of rent due from Frank F. Cole alone to appellant. It is therefore manifest that in determining whether the corporation has left debts unpaid, so as to bring the case within section 25, c. 32, Rev. St. 1874, as amended by the act of May 22, 1877, in relation to corporations, (Laws 1877, p. 66,) the first and most important question is whether the storage company is an assignee of the term of Frank F. Cole, or only a sublessee under him, for, if it is an assignee of the term of Frank F. Cole, it stands in his shoes as respects his covenant to pay rent, and its property is liable to be seized and appropriated to the payment of the rent by distress, as was done. If, however, it is but a sublessee under Frank F. Cole, it is liable only on its covenants to him.

The leases to Frank F. Cole are ‘for and during’ the terms named, ‘and until the 1st day of May, 1888.’ The lease executed by Frank F. Cole to the Chicago Storage Company is of precisely the same premises included by the leases to him, and it is in the identical language of those leases, ‘for and during’ the term named, ‘and until the 1st day of May, 1888;’ so that the terms all end at the same instant of time. No space of time, however minute, therefore, can by any possibility remain after the term of the storage company has ended before the expiration of the term of Cole, in which he could enter upon or accept a surrender of the premises. The general principle as held by all the authorities is that, where the lessee assigns his whole estate, without reserving to himself a reversion therein, a privity of estate is at once created between his assignee and the original lessor, and the latter then has a right of action directly against the assignee on the covenants running with the land, one of which is that to pay rent; but if the lessee sublets the premises, reserving or retaining any reversion, however small, the privity of estate between the sublessee and the original landlord is not established,and the latter has no right of action against the former, there being neither privity of contract nor privity of estate between them. The chief difficulty has been in determining what constitutes such reservation of a reversion. The more recent English decisions, and all of the text-books treating of the question which have been accessible to us, hold that, where all of the lessee's estate is transferred, the instrument will operate as an assignment notwithstanding that words of demise instead of assignment are used, and notwithstanding the reservation of a rent to the grantor, and a right of re-entry on the non-payment of rent or the non-performance of the other covenants contained in it. 1 Platt, Leases, 1-9, 102; Woodf. Landl. & Ten. (7th Ed.) 211; Wood, Landl. & Ten. p. 131, § 93; Tayl. Landl. & Ten. (8th Ed.) 16, note 3; Bac. Abr. tit. ‘Leases,’ H 3; 2 Prest. Conv. 124, 125; Beardman v. Wilson, L. R. 4 C. P. 57; Doe v. Bateman, 2 Barn. & Ald. 168; Wollaston v. Hakewill, 3 Scott, N. R. 616. Undoubtedly many cases may be found wherein the lessee has granted to another party his entire term, retaining no reversionary interest in himself; and it has been held that the relation, as between the parties, was that of landlord and tenant, or, perhaps more correctly, lessee and sublessee, because such was clearly the intention of the parties; but this was the result of contract only, and not conclusive upon the original landlord, since he was not a party to it. The relation of landlord and assignee of a term, however, it has been seen, does not result from contract, but from privity of estate, and therefore, when the original lessee has divested himself of his entire term, and thus ceased to be in privity of estate with the original landlord, the person to whom he has transferred that entire term must necessarily be in privity of estate with his original landlord, and hence liable as assignee of the term. See Wood, Landl. & Ten. 132, and authorities cited in note 1; Van Rensselaer v. Hays, 19 N. Y. 68; Pluck v. Digges, 5 Bligh, (N. S.) [129 Ill. 328]31; Thorn v. Woollcombe, 3 Barn. & Adol. 586; Carpenters' Union v. Railway Co., 45 Ind. 281;Smiley v. Van Winkle, 6 Cal. 605;Blumenberg v Myres, 32 Cal. 93;Schilling v. Holmes, 23 Cal. 230.

Counsel for appellees contend, and the courts below ruled accordingly, that the reservation of a new and different rent, or the reservation to the lessor of the right to declare the lease void for the non-performance of its covenants, and to re-enter for such breach, or at the end of the term, coupled with the covenant of the lessee to surrender at the end of the term or upon forfeiture of the term for breach of covenant, make the letting by the lessee a subletting and not an assignment of the term, notwithstanding the lessee has retained in himself no part of the term; and they rely upon Collins v. Hasbrouck, 56 N. Y. 157;Ganson v. Tifft, 71 N. Y. 48;McNeil v. Kendall, 128 Mass. 245; and Dunlap v. Bullard, 131 Mass. 161,-as sustaining this contention. There is general language in Collins v. Hasbrouck quite as broad as claimed; but no question therein presented called for its use, and its meaning ought to be limited by the facts to which it was applied. There the first original lease was for the term of 10 years from the 1st of April, 1864; the second was for the term of 9 years from the 1st of April, 1865. Thus both expired April 1, 1874. The sublease was for the term of two years and seven months from the 1st of September, 1867,-that is to say, until the 1st of April, 1870,-with the privilege, however, to the lessee to extend the term four years, or until April 1, 1874, by giving two months' notice, etc. The plaintiff claimed that the leases were forfeited by the subletting, and the court so held. No distinction was taken, in the opinion of the court, between an absolute demise until the end of the term and a mere privilege to have the demise extended four years, which was until the end of the term. We have held that a similar clause in a lease is not a present demise, but a mere covenant, which may be specifically enforced in chancery, or upon which an action at law may be maintained for a breach of covenant. Hunter v. Silvers, 15 Ill. 174;Sutherland v. Good 108 Ill. 528. And it would seem quite evident that in no view could the reversion have passed until after the grantee elected to have the term for four years longer; and so, when the lease was executed, there was still a reversionary interest in the sublessor of four years, subject, though it may have been, to be thereafter divested by the election of the sublessee. In Ganson v. Tifft, the sublease provided that at the expiration of the term, or other sooner determination of the demise, the lessee should surrender the demised premises to the lessors, and the court said: ‘This constitutes a sublease of the premises, and not an assignment of the term.’ In Stewart v. Railroad Co., 102 N. Y. 601, 8 N. E. Rep. 200, there was a demise by the lessee to the Long Island Railroad Company for a term longer than that held by the lessee. There was also a different rent to be paid than that provided to be paid by the original lease, and there was a reservation of the right to re-enter for non-payment of rent, etc. It was held that, as to the original landlord, this amounted to an assignment of the lease, and that its character was not destroyed by the reservation therein of a new rent to the assignor with a power of re-entering for non-payment of rent, or by...