Van Schaick v. Third Avenue Railroad

By the Court, James C. Smith, J. When this case was before the court on the former appeal, the judgment theretofore rendered in favor of the plaintiffs’ testator was reversed, and a new trial was ordered, by a divided court. The majority of the court were of opinion that as the case then stood, there was no evidence of an adoption by the defendants, express or implied, of the liability of the original cestui que trust to pay the rent reserved by the lease, and on the ground above they concurred in a judgment of reversal. That point is therefore the only one adjudged by the decision. On the second trial, which is now under review, considerable testimony was given, in addition to that appearing on the first, and the learned justice before whom the last trial was had, found as matter of fact that the defendants, on becoming incorporated, impliedly agreed to pay the rent, and perform all the covenants of the lease, and assumed the position of lessees, and he decided that in equity the plaintiffs are entitled to enforce against the defendants the covenants of the lease, and the duties created by them. The counsel for the appellants contends that even as the case now stands, there is no evidence warranting the conclusion of fact above stated ; and that upon no ground are the defendants liable to pay rent accruing after their assignment of the lease to Searles, and their transfer to him of the possession of the premises. As it will not be difficult to deduce the defendants’ liability from the alleged agreement, if the latter be established, the case is substantially narrowed down [416] to the question whether there is sufficient evidence to support the finding of fact. I am of opinion that the testimony satisfactorily establishes the implied agreement found by the judge at special term. It is proved, beyond doubt, that the lease for the term of fifteen years from 9 th July, 1853, although executed to Henry Van Schaick, nominally, was in fact so executed at the request of the incorporated association then existing, and known as “ The Third Avenue Eailroad Company,” and for the benefit of said association, ■ and of such other company as should be formed thereafter to carry on the railroad then owned by the association ; and that as between Van-Schaick and the association, the former was a mere trustee, and the latter was ■ to pay the rent to Myndert Yan Schaick, the lessor. This is shown by the testimony of Eeynolds, the declaration of trust and the resolutions of April 28th and August 17th, 1853. It also appears from the latter resolution referred to, and the written contract executed in pursuance- of it, that the association expressly agreed with Henry Yan Schaick that they and the said company would assume, and the association did thereby assume, the performance of all the covenants in the lease which, by its terms, were to be performed by him. It next appears that the defendants were created a corporation on the 8 th October, 1853, under the provisions of the general railroad act, by the joint action of all the members of the association save one, for the purpose of maintaining, operating and finishing the construction of said railroad. The action of the members of the association, in forming such corporation, was authorized by the articles of association, which provided that the members might incorporate themselves, under the general railroad act, whenever two thirds in interest should require it. The same name by which the association had been known was given to the corporation. The association transferred to the corporation, on the day it was organized, the bulk of the property of the [417] association, including the lease and premises in question. The corporation at once accepted the property, entered upon the premises, and engaged in and continued the business of operating the railroad. On the 7th November, 1853, it received from Henry Van Schaick his assignment of the lease, and it used the premises and paid the rent from the time of its organization until the transfer to Searles, in January, 1858. In June, 1854, the corporation mortgaged the lease in question, and the premises demised by it, to secure the bonds of the corporation issued for money then borrowed, to the 'amount of $150,000. The important circumstance also appears, that all the transactions of the corporation, above mentioned, were had with full knowledge, on the part of their president and of a majority of their directors, of all that had previously occurred respecting the lease, as above stated, including the fact that the association had agreed, in behalf of itself and of the company which should succeed it, to perform the covenants in the lease. These facts and circumstances clearly justify the conclusion that the defendants adopted the engagements made in their behalf by the association which they succeeded, and that when they entered into possession they were regarded and treated by all parties, themselves included, as the absolute owners of the leasehold estate remaining, and as bound to pay the stipulated rent to the end of the term • created by the lease. On the transfer to the corporation, the association or partnership was practically terminated. Thenceforth all parties evidently regarded the liability of the association and of its members as such, for rent accruing upon the lease, as at an end. The corporation intended to take, and it did take, the place of the association as cestui que trust and lessee, and assumed all the liabilities of the association in respect to the lease. There can be no doubt that under the original arrangement [418] the lessor might have compelled the association, in a court of equity, to perform the covenants in the lease, although the association was not named in. the lease, as a party to it. His executors have now the same right against the defendants, they having adopted the agreement made by the association. Although the agreement which the defendants adopted was made with Henry Van Schaick, yet as they thereby became liable to pay rent to the testator of the plaintiffs, the latter may enforce the obligation. (20 N. T. Bep. 268.) [New York General Term, April 3, 1867. The case is not the ordinary one of a naked assignment by an original lessee to a subtenant, and in the view above presented, it is clearly distinguishable from Walters v. Northern Goal Mining Company, (5 DeGex, McN. & G. p. 629,) cited by the appellants’ counsel. For these reasons I am of opinion that the judgment should be affirmed, with costs. Leonard, Ingraham and J, C. Smith, Justices.]