Taft Realty Corp. v. Yorkhaven Enterprises, Inc.

• Decision Date: 15 April 1959
• Citation: 146 Conn. 338,150 A.2d 597
• Court: Connecticut Supreme Court
• Parties: TAFT REALTY CORPORATION v. YORKHAVEN ENTERPRISES, INC., et al. Supreme Court of Errors of Connecticut

Page 597

150 A.2d 597

146 Conn. 338

TAFT REALTY CORPORATION v. YORKHAVEN ENTERPRISES, INC., et al.

Supreme Court of Errors of Connecticut.

April 15, 1959.

Leo E. Sherman, New York City, with whom were Joseph J. Mager, East Haven, and, on the brief, Robert C. Zampano, East Haven, for appellant (plaintiff).

Samuel A. Persky, New Haven, with whom was Bertrand B. Salzman, New Haven, for appellees (defendants).

Before DALY, C. J., and BALDWIN, KING, MURPHY and MELLITZ, JJ.

BALDWIN, Associate Justice.

The plaintiff, referred to herein as Taft Realty, is a Connecticut corporation which was created in 1936 pursuant to a plan for reorganization under § 77B of the Bankruptcy Act (48 Stat. 912, as amended, 11 U.S.C. §§ 501-676 [11 U.S.C.A. §§ 501-676]) in a cause entitled 'In the Matter of The Taft Realty Company, Debtor,' pending in the United States District Court for Connecticut. The duration of the corporation was unlimited, and it was empowered 'to lease (either as lessor or lessee) * * * theatres * * *.' Among other properties, it owned the Shubert Theatre in New Haven, which could be used only for theatrical productions and other forms of entertainment. Pursuant to the reorganization plan, all the stock of Taft Realty, with the exception of five qualifying shares, was issued to trustees under a voting trust agreement. The five qualifying shares were issued, one each, to five individuals. The voting trust agreement expired on September 1, 1951. The voting trustees were designated in the agreement. They comprised three of the five members of the board of directors elected in 1937.

On July 29, 1941, the board authorized the leasing of the Shubert Theatre to the named defendant, hereinafter referred to as Yorkhaven, for a term of twelve years beginning September 1, 1941, and ending August 31, 1953. The annual rental was fixed at $15,000 for the first two years and $21,000 for the rest of the term. On August 15, 1941, the board authorized the execution of an agreement which modified the original lease by fixing the annual rental at $10,000 plus a sum, not to exceed $11,000, equal to 4 per cent of the receipts in excess of $250,000 per annum derived by Yorkhaven by way of 'box office receipts,' excluding admission taxes, and by way of amounts for rent of the theater to others. Thus the total rent would not exceed $21,000 in any one year. The agreement expressed the consideration therefor as follows: '[I]n consideration of the mutual covenants herein contained, and in consideration of One Dollar ($1.00) and other valuable considerations, the receipt whereof are hereby acknowledged * * *.' On February 16, 1942, the board authorized an extension of the lease from August 31, 1953, at August 31, 1962. This extension agreement stated that it was 'in consideration of the mutual covenants herein contained.' The lease, modified as to rent and length of term, gave Yorkhaven the right to assign the lease or sublet the leased premises, subject, however, to the continuance of Yorkhaven's obligation for the performance of the terms of the lease. Yorkhaven sublet the premises to the Shuberthaven Operating Company, hereinafter referred to as Shuberthaven.

The plaintiff claims that the voting trustees, acting as directors, did not have the power to make a lease for a term extending beyond the termination of their term of office as trustees, which expired on September 1, 1951. The voting trust agreement gave them the right and power to vote and act, to elect and remove directors, and to consent to any lawful act of Taft Realty, as though they were the absolute owners of the stock. The powers and duties of voting trustees are fixed by the voting trust agreement. 5 Fletcher, Corporations (Perm.Ed.) § 2091.1; note, 159 A.L.R. 1067; 2 Scott, Trusts (2d Ed.) § 186; see Rev.1958, §§ 33-57; Leavitt, The Voting Trust, p. 50. The obvious intent of the agreement was to confer upon the voting trustees the complete status of stockholders. 2 Scott, op. cit., § 193. As stockholders, they could elect directors and include themselves as such. As directors, they had charge of the corporate property. Greenberg v. Harrison, 143 Conn. 519, 523, 124 A.2d 216; Krall v. Krall, 141 Conn. 325, 334, 106 A.2d 165. They could lease it upon such terms as they in good faith and the exercise of an honest judgment considered would serve the best interests of the corporation. 2 Fletcher, op. cit., pp. 551-554. They were not trustees in the ordinary sense of that term, although even a testamentary trustee may, if necessary for the accomplishment of the trust purpose or to preserve the trust property, make a lease extending beyond the termination of the trust. Russell v. Russell, 109 Conn. 187, 204, 145 A. 648, 63 A.L.R. 783. The claim that as a matter of law the voting trustees could not make a lease beyond their term as voting trustees is without merit.

The plaintiff claims that the agreements as to change of rental and the extension of the lease are invalid for lack of consideration. It assumes that because the agreement modifying the terms concerning rent appears to call for less rent than the original lease, there is no consideration for either that agreement or the agreement to extend the term. Both of these agreements recite the consideration of the mutual covenants contained in them, and the agreement as to change of rental also acknowledges the receipt of $1 and other valuable consideration. Parties to an existing contract may, by a subsequent contract, alter any term of their original one. O'Loughlin v. Poli, 82 Conn. 427, 432, 74 A. 763; Bristol & Plainville Tramway Co. v. Eveline, 89 Conn. 382, 393, 94 A. 290. The rent provided in a written lease may even be changed by a subsequent parol agreement. Baier v. Smith, 120 Conn. 568, 571, 181 A. 618. Mutual promises are sufficient consideration for a binding contract. Finlay v. Swirsky, 103 Conn. 624, 631, 131 A. 420; 1 Corbin, Contracts § 142. Furthermore, the recital of consideration acknowledged as received is prima facie evidence of the fact recited. Raymond v. Sellick, 10 Conn. 480, 484; Finegan v....