Williams v. Lillet

• Citation: 34 A. 765,67 Conn. 50
• Court: Supreme Court of Connecticut
• Decision Date: 22 November 1895
• Parties: WILLIAMS v. LILLET et ux.

34 A. 765

67 Conn. 50

WILLIAMS

v. LILLET et ux.

Supreme Court of Errors of Connecticut.

Nov. 22, 1895.

Case reserved from superior court, New Haven county; Prentice, Judge.

Action by Samuel P. Williams against George L. Lilley and wife for specific performance of a contract to convey land, and for other relief. Case reserved. Judgment advised for plaintiff.

William C. Case and William H. Ely, for plaintiff.

John W. Ailing and Charles G. Root for defendants.

FENN, J. This is a case reserved by the superior court for the advice of this court. The facts found, so far as material to be stated here, are as follows: On June 20, 1890, the defendants (husband and wife, married since 1877) were, and still are, the equal owners, as tenants in common, of a piece of land situated in Waterbury, in this state, with a business block, five stories in height, standing thereon. On said day the plaintiff and defendants executed in duplicate an instrument by which the defendants leased to the plaintiff the four upper floors of said building for the term of 10 years from the 1st day of July, 1890, for the annual rent of $3,000. Said lease was in the usual form of such instruments, but contained the following peculiar provisions: "With right to purchase said property at the expiration of this lease, or before, at the option of said Williams, for the sum of $120,000; whatever sum said Williams shall have paid before that time, by way of rent, to be deducted from that sum. Said Williams covenants to pay all taxes and insurance, to keep said building, to operate and keep running the elevator in said building, to heat said building and furnish fuel therefor, and generally to do and perform all things necessary to make said property desirable for tenants, and prevent the depreciation in value thereof. Said Williams shall keep books of account in which shall be entered all receipts and expenditures relating to said property, with vouchers for the payment of all moneys therefor, which books and vouchers shall at all reasonable times be open to the inspection of the lessors or their agents, and shall render a statement, once each year, of his receipts and expenditures relating to said property. * * * And said lessors hereby further covenant and agree that in case said Williams shall not, at the expiration of this lease, have realized from rents collected by him, after the payment of expenses as aforesaid, so much as he shall have paid the lessors by way of rent, in such event they will repay him such a sum as he shall have paid, by way of rent, in excess of his net receipts from rents collected by him; but it is mutually understood and agreed that at the expiration of each year said Williams shall make a written statement of such deficit, and of his intention to claim reimbursement therefor, if any such deficit at any time occur, and on receipt of such notice said lessors may cancel said lease, if they so desire, by notice in writing to said Williams within ten days from the receipt of such said statement and notice of claim by Williams. * * * It is agreed that, if said Williams shall purchase said property, $100,000 of the purchase price shall remain on mortgage, at five per cent.*' Upon July 1, 1890, the plaintiff entered into possession, and has continued in possession down to the present time. Shortly after the lease was executed, the plaintiff and the defendant Lilley had several conversations concerning the amount of insurance which should be placed upon the property. As the result of these talks, insurance to the amount of $35,000 was placed, to the mutual satisfaction of the parties. The building continued to be insured for said sum down to the time of the fire hereinafter described. The policies were all issued to George L. Lilley and wife, and, as soon as issued, were delivered to the defendant Lilley, who kept them. The plaintiff paid the premiums. At no time was any conversation had between the parties as to the terms of the policies, the interest to be insured, for whose benefit the Insurance was to be, or the use or application of any insurance money which might be received in case of a loss. The plaintiff regularly continued to pay to the defendants the payments of rent stipulated in the lease, and in other respects to keep the covenants of said instrument, until the time of the fire. On April 9, 1893, a fire occurred in the upper portion of said building. As a result, the four stories occupied by the plaintiff were seriously injured, both by fire and water, so that they were wholly untenantable. Immediately after the fire, Mr. Lilley adjusted the loss with the several insurance companies, and received from them the sum of $24,351.54 in settlement. Immediately after the fire, steps were taken for the reconstruction of the building. The plaintiff desired some changes made for the better adaptation of the building for renting. As the result of the conferences between him and Mr. Lilley, who, in all matters connected with the care and charge of the premises, acted as the agent of his wife, it was arranged and agreed that such changes should be made; and contracts for the reconstruction of the building, incorporating such changes, were made by Mr. Lilley, acting for himself and his wife. In consideration of the making of these changes, the plaintiff agreed to make his monthly payment of rent without interruption, and to do on his part, as ordinary repairs, some minor things involved in putting the property into condition suitable for renting. Said restoration was wholly completed in the early part of July, 1893, and the tenants then began to reoccupy. The defendants expended in restoring said building $15,161.60. They also performed services, by themselves and their teams and laborers, of the value of $400; leaving in the defendants' hands a balance of said insurance money, unexpended in the restoration of said property, of $8,789.94.

Ever since the restoration of said building was completed and paid for, the plaintiff has claimed, and persistently asserted to the defendants, that the excess of insurance received, over and above the cost of restoration, belonged to him, and that, whenever he should exercise his right to purchase the property under the provisions of the instrument referred to, he would be entitled to have such excess applied on account of the purchase price. This claim of the plaintiff the defendants have ever disputed, and now dispute. The correctness of this claim of the plaintiff is the sole question we are now called upon to determine.

Without adopting what may be termed the extreme theories of either party, and confining ourselves to what we deem manifest and clear, it is evident, we think, that the option to purchase the entire property, conferred by the contract upon the plaintiff, constituted a material inducement to the agreement in question, which established the relation between the defendants and the plaintiff of lessors and lessee of a portion only of such property. There were in fact two contracts, evidenced by the same instrument, related in some degree, in other essentials distinct The same consideration extended, measurably at least, to both. The right to purchase the entire property furnished an inducement to the plaintiff to make and carry out the stipulations in regard to such entire property, though he was to be a tenant of only a portion of it. If the case before us, then, is not one in which the relation of parties to a contract for the sale and purchase of real estate exists, it is also clearly not one in which that of lessor and lessee of property, with an incidental option to the lessee to purchase only the leased property, is created, or of a simple unilateral contract of option. None of the cases cited in the briefs and arguments of the counsel, in other jurisdictions, are precisely in point; and as, confessedly, there is no similar case in our own state, we deem ourselves fully at liberty, and in duty bound, to consider the question presented to us res Integra, and to decide it upon our view of what is reasonable, equitable, and just Indeed, the provisions of the agreement between the parties are so exceptional and peculiar that we desire it to be clearly understood that our decision is largely based upon them, and confined to the individual case presented, and should not be regarded as laying down general principles alike applicable to all contracts of option, or to such contracts usually. Here, in fact, was not only a lease of a portion of certain premises, with the grant to the lessee of the right to purchase all of such premises, to be exercised at the lessee's option, either at the time specified in the instrument for the termination of the lease, or at any earlier time, but upon such purchase the sums theretofore received by the defendants from the plaintiff by way of rent, it was provided, should be applied as part payment of the purchase price. The intent of the parties to treat the contract, in the event of the plaintiffs election to take the property, as in effect a present purchase of it, as of the date of the agreement, appears to be thus clearly manifested. Again, that it was the clear understanding of both parties that the plaintiff would purchase the property, and also that the right granted him to do so constituted a material consideration and inducement for his undertakings, is shown by other provisions of the instrument, namely, the covenant of the plaintiff to pay all taxes and insurance on the entire property, to keep the whole building, to operate and keep running the elevator in it to heat it, furnish fuel therefor, "and generally to do and perform all things necessary to make said property desirable for tenants and prevent the depreciation in value thereof." Thus, the situation of the parties was this: During the term of the lease, or until the plaintiff exercised his right to purchase, the defendants were relieved from all expenditure upon, or by...