Stewart v. Long Island R. Co.

• Decision Date: 15 June 1886
• Citation: 8 N.E. 200,102 N.Y. 601
• Parties: STEWART v. LONG ISLAND R. CO.
• Court: New York Court of Appeals Court of Appeals

102 N.Y. 601

8 N.E. 200

STEWART

v.LONG ISLAND R. CO.

Court of Appeals of New York.

June 15, 1886.

FINCH, J., dissenting.

Saml. Hand, for appellant, Cornelia M. Stewart.

E. B. Hinsdale, for respondent, Long Island R. Co.

RAPALLO, J.

The only question in this case is whether the defendant, by entering into the contract of May, 1876, with the Flushing, North Shore & Central Railroad Company, came into such a relation with the original lessor of the railroad in question, represented by the plaintiff, as to subject it to liability directly to her for the rent reserved by the original lease of January, 1873, from her devisor, Alexander T. Stewart, to the Central Railroad Company of Long Island. The facts are so fully stated in the opinion of my learned brother, FINCH, J., that it is not necessary to repeat them in detail.

That the contract of A. T. Stewart with the Central Railroad Company of Long Island, dated January, 1873, was a lease of the road for the term of 50 years, cannot, I think, be disputed, and thus far in the discussions in this court it has been conceded. The annual rent reserved was a percentage upon the agreed cost of the road liable to be augmented by a percentage upon such further expenditures as might be made by the landlord during the term. If this had been all of the contract, there would have been no difference of opinion between us; but it contained further provisions which have given rise to the present discussion.

The ordinary covenant to surrender the demised premises on the last day of the term was made, subject to the further provisions of the contract, which were that the lessee covenanted, at the expiration of the said term of 50 years from January 7, 1873, to pay to the lessor the principal sum by him expended on the road, and that upon such payment, but not before, the payment of rent should thereafter cease; such rent, however, to be paid up to such time, and that, upon such payment of such principal sum, the lessee, its successors or assigns, should not surrender the said demised premises, but should be vested with the fee-simple of the right of way, and all the property appurtenant thereto owned by the lessor, and that the contract should thereupon, and upon such payment, be deemed a sufficient grant or deed of conveyance, and that the lessor should then execute such further deed as might be necessary, etc. Until the payment of the principal sum, however, the rent was to continue, and the lease contained the usual provisions for re-entry for non-payment of rent, or the breach of the other covenants in the instrument, which were numerous.

In June, 1874, the entire interest of the Central Company, under this lease and contract, became vested in the Flushing, North Shore & Central Railroad Company, to whom the contract was assigned, and in May, 1876, the latter company entered into the agreement with the defendant, which is set forth in the opinion of FINCH, J., and the effect of which is now in question. The main feature of that agreement, to which it is necessary, for the purposes of this discussion, to refer, is that the last-named company leased to the defendant the whole of the property which was demised by Stewart to the Central Railroad Company, and for a term longer than that of the original lease, viz., for the term of 99 years. It thus transferred to the defendant the entire term during which the Central Railroad Company was to hold the demised premises as lessee of Alexander T. Stewart, and left no particle of that term in the original lessee, or in its first assignee, the Flushing, North Shore & Central Railroad Company; and the question now before us is whether it operated, as between the original lessor, Stewart, or his devisee, and the defendant, as an assignment of that entire term, and thus established a privity of estate between them which rendered the defendant liable to the original lessor, or whether it was, as between those parties, a mere sublease, under which the defendant was liable only to its immediate lessor.

The rules relating to the effect of an assignment of a lease are so well settled that it is hardly necessary to do more than refer to them. Where a lessee assigns his whole estate, without reserving any reversion therein in himself, a privity of estate is at once created between his assignee and the original lessor, and the latter has a right of action, directly against the assignee, on the covenant to pay rent, or any other covenant in the lease which runs with the land; but if the lessee sublets the premises, reserving or retaining any such reversion, however small, the privity of the estate is not established, and the original landlord has no right of action against the sublessee, there being neither privity of contract nor of estate between them. Where a lessee of land leases the same land to a third party, the question has often arisen whether the second lease is in legal effect an assignment of the original lease, or a mere sublease. The question has frequently, and probably most generally, arisen between the lessee and his transferee, and much confusion will be avoided by observing the distinction between those cases and cases where the question has been between the transferee and the original landlord. In the latter class of cases the rule is well settled that if the lessee parts with his whole term or interest as lessee, or makes a lease for a period exceeding his whole term, it will, as to the landlord, amount to an assignment of the lease; and the essence of the instrument as an assignment, so far as the original lessor is concerned, will not be destroyed by its reserving a new rent to the assignor, with a power of re-entry for non-payment, nor by its assuming, by the use of the word ‘demise’ or otherwise, the character of a sublease; and the assignee, so long as he continues to hold the estate, is liable directly to the original lessor on all covenants in the original lease which run with the land, including the covenant to pay rent. Tayl. Landl. & Ten. (7th Ed.) 109; Hicks v. Downing, 1 Ld. Raym. 99; Palmer v. Edwards, 1 Doug. 187;Smith v. Mapleback, 1 Term R. 441; Porter v. French, 9 Ir. Law R. 514; Parmenter v. Webber, 8 Taunt. 593; Doe v. Bateman, 2 Barn. & Ald. 168; Wollaston v. Hakewill, 3 Scott, N. R. 616; Pluck v. Digges, 5 Bligh, (N. S.) 31; Beaumont v. Marquis of Salisbury, 19 Beav. 198; Thorn v. Woollcombe, 3 Barn. & Adol. 586. But, as between the original lessee and his lessee or transferee, even though the original lessee demises his whole term, if the parties intend a lease, the relation of landlord and tenant, as to all but strict reversionary rights, will arise between them.

The effect, therefore, of a demise by a lessee for a period equal to or exceeding his whole term, is to divest him of any reversionary right, and render his lessee liable, as assignee, to the original lessor; but at the same time the relation of landlord and tenant is created between the parties to the second demise if they so intended. Tayl. Landl. & Ten. (7th Ed.) 109, note s, 16, a, 5; 1 Washb. Real Prop. (4th Ed.) 515, note 6; Adams v. Beach, 1 Phila. 99, 178; Indianapolis, etc., Union v. Cleveland, etc., Ry. Co., 45 Ind. 281;Lee v. Payne, 4 Mich. 106;Lloyd v. Cozens, 2 Ashm. 138; Wood, Landl. & Ten. (Bank's Ed.) § 347. These rules are fully recognized in this state. Prescott v. De Forest, 16 Johns. 159;Bedford v. Terhune, 30 N. Y. 453, 457;Davis v. Morris, 36 N. Y. 569;Woodhull v. Rosenthal, 61 N. Y. 391, 392.

There can be no doubt that in the present case the original lessee of Stewart parted with its whole term of 50 years, and that the defendant acquired it. The Central Railroad Company assigned the entire contract, embracing the term of 50 years, as well as the right of purchase of the fee at the end of the 50 years, to the Flushing, North Shore & Central Railroad Company, and I do not understand it to be denied by any one that that company became liable to Stewart directly, on the covenants in the lease, as assignee of the entire interest of the lessee. But the Flushing, North Shore & Central Railroad Company, by its contract with the defendant, did not assign to the latter the right of purchase at the end of the term of 50 years. It, however, leased the road to the defendant for the term of 99 years, and the defendant covenanted to surrender the demised premises to its immediate lessor at the end of the 99 years. That term, however, being greater than the term of 50 years granted in the original lease, the instrument operated as an assignment of that term, and left no reversion therein in the Flushing, North Shore & Central Railroad Company. Consequently, during the continuance of the term of 50 years there was a perfect privity of estate between the defendant and the original lessor, and the legal estate in reversion was in the original lessor during the 50 years; and he, or those succeeding to his estate, were both legally and equitably entitled to the rents, and had a right of action therefor directly against the defendant by reason of this privity of estate.

It is contended that the Flushing, North Shore & Central Railroad Company, as the assignee of the Central Railroad Company, had more than the term of 50 years granted in the original lease, because it was also assignee of the contract of Stewart, by which, in case, at the end of the term, the Central Railroad Company should have performed the covenants in the lease, and should then pay to Stewart the principal sum expended by him in the construction of the road, the contract should operateas a conveyance in fee of the demised premises; that under this contract the Flushing, North Shore & Central Railroad Company was the equitable owner of the fee as well as of the term, and was in possession under both titles when it leased to the defendant; that the lease to the defendant, being for only 99 years, did not transfer its entire interest in the premises, but left...