Whitney v. Leighton
Decision Date | 25 April 1947 |
Docket Number | 34285. |
Citation | 30 N.W.2d 329,225 Minn. 1 |
Parties | WHITNEY et al. v. LEIGHTON. |
Court | Minnesota Supreme Court |
On Rehearing Jan. 2, 1948.
Syllabus by the Court.
1. The obligation of an assignee of a lease is based on privity of estate. The assignee can avoid duties based upon covenants running with the land covered by the lease of which he is assignee by reassigning to another. However, the reassignment will not serve to relieve the assignee of liability for performance of the covenants if it is merely colorable or if it is fraudulent. Evidence considered and Held to sustain conclusion that reassignment here involved was not fraudulent.
2. Covenant of lease providing that considered and Held to obligate an assignee to pay taxes assessed in 1936, where he remained in possession as assignee until December 16 of that year.
Appeal from District Court, Hennepin County; Wm. A. Anderson Judge.
Thomas C. Fitzpatrick and Strong, Strong & Tully, all of Minneapolis, for appellants.
Robert Cowling, of Minneapolis, for respondent.
This is an appeal from an order of the district court of Hennepin county denying plaintiffs' motion for amended findings and conclusions of law or, in the alternative, for a new trial.
Frank I. Whitney, father of plaintiffs, was the fee owner of the Minneapolis premises involved when he leased the same on April 1, 1917, to one Ira E. Meagher. By the terms of the instrument, the lessee was obligated to pay an annual rental and 'taxes and assessments.' On June 23, 1917, Meagher, as lessee, assigned his interest in the lease to the Marquette Holding Company, a Minnesota corporation, which in turn assigned the lease on December 19, 1924, to defendant herein. This assignment was recorded in the office of the register of deeds for Hennepin county on December 22, 1924. On December 16, 1936, the lease was reassigned by defendant to the Marquette Holding Company by an instrument recorded the same day.
This action was brought by plaintiffs, owners of the real estate described in the lease, to recover of defendant unpaid rent from 1937 to 1942 and taxes against the property for the years 1936 to 1942. The theory of plaintiffs' case, as set out in the complaint, appears to be that the Marquette Holding Company is a corporation in form only; that defendant had at all times owned or controlled all the stock of the corporation and used the company for the purpose of avoiding personal liability; and that the reassignment of the lease in 1936 by defendant to the Marquette Holding Company 'was merely colorable as being made to one who is to hold in behalf of the aforesaid defendant, and subject to his control and equity.' Plaintiffs further contend that the 1936 reassignment was for the purpose of defrauding plaintiffs and placing them in a position where they could not collect the rents and income from the properly described in the lease.
The matter was tried before the court without a jury. The trial judge found that 'the Marquette Holding Company was at all times mentioned in the complaint a valid and existing corporation organized and doing business under the laws of the state of Minnesota,' and that 'plaintiffs have failed to prove any fraud or deceit on the part of the defendant in connection with said lease.' Judgment was ordered for defendant, out of which order this appeal arises.
The arguments of plaintiffs are to the effect (1) that the reassignment of 1936 was colorable only and that defendant continued in possession of the property, collecting the rents and profits; and (2) that the reassignment failed to relieve defendant from his liability under the lease because of the fact that at the time the reassignment was made he was under an obligation to pay the 1936 taxes on this real estate.
1. The law with respect to reassignment is set out in 1 Tiffany, Landlord and Tenant, s 158(n), as follows:
The power of an assignee to relieve himself from responsibility to the lessor was considered in McLaughlin v. Minnesota L. & T. Co., 192 Minn. 203, 211, 255 N.W. 839, 842, where this court stated: See, also, 16 R.C.L., Landlord and Tenant, s 369.
For present purposes, it may be assumed that defendant would be liable for the rent and taxes claimed by plaintiffs unless the 1936 reassignment served to relieve him from the obligations of the lease. At the trial, plaintiffs introduced in evidence an assignment dated December 16, 1936, according to the terms of which Robert S. Leighton and Jessie H. Leighton, his wife, assigned the lease here involved to Marquette Holding Company. From an abstract of title to the real estate offered by plaintiffs and received without objection, it appears that this assignment was filed in the office of the register of deeds of Hennepin county on the same day. To avoid the effect of this assignment, the burden was upon plaintiffs to show that it was fraudulent or merely colorable. As a general rule, one who asserts fraud has the burden of proving it, and he carries the burden throughout the trial. 3 Dunnell, Dig. & Supp. s 3837; Shaughnessy v. Shaughnessy, 135 Minn. 262, 160 N.W. 769.
There is little dispute in the evidence pertaining to the relation between defendant and the Marquette Holding Company, upon which plaintiffs base their claim that the reassignment was ineffectual. The corporation itself was organized in 1913 by a group of Minneapolis businessmen. Leighton testified that at the time of the incorporation there were 23 shares issued; 11 were in the name of Jessie H. Leighton, defendant's wife; 9 in the name of James G. Swan; and the remaining three were owned by William Innis, W. B. Elliot, and T. M. Clements. On January 11, 1915, defendant acquired the Clements share, but he has never had any other stock in the corporation. On that same date, 18 shares were issued to Jessie H. Leighton and 17 shares to Swan. In 1917, when the Meagher lease was assigned to the Marquette Holding Company, the officers were Innis, president; Elliot, vice president; and defendant, secretary-treasurer. At that time the holding company owned interests in other real estate in Minneapolis and Florida. On January 12, 1919, the corporation issued 64 shares to Jessie H. Leighton and 64 shares to Swan, so that the stock ownership was divided as follows:
William Innis ....... 1 share
W. B. Elliot ........ 1 share
Robert S. Leighton .. 1 share
Jessie H. Leighton .. 93 shares
James G. Swan ....... 90 shares
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Total .......... 186 shares
In 1919, Swan endorsed his shares to Jessie H. Leighton as collateral security for personal loans, but the shares were never transferred on the books of the corporation. By February 15, 1921, when the Marquette Holding Company joined with the fee owners in the execution of a mortgage on the premises, Jessie H. Leighton had replaced Elliot as vice president. Swan, who had been the 'controlling spirit' of the corporation during its early years, apparently became inactive after 1921, while Innis and Elliot never participated actively in corporate activities. We quote from Leighton's testimony as follows:
And further:
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