Yip Lan v. Ahulii

OPINION OP THE COURT BY ROBERTSON, C. J. This is a suit to compel specific performance of a covenant contained in a lease for its renewal. The respondent appeals from a decree entered in the court below granting the relief prayed for. — 308 — By the lease in question the respondent demised to one J. Mahiai Kaneakua certain land situate at Waiakoa, Kula, Island of Maui, for the term of ten years commencing the first day of June, 1904, at an annual rental of two hundred and fifty dollars payable semi-annually. The lease was dated January 11, 1901, and recorded on April 1, 1901. For some unexplained reason the rental was thereafter increased to two hundred and sixty-five dollars. The bill averred, and the answer admitted, that Kaneakua assigned the lease to one Young Nap, who, in turn, assigned it to one Jun Kum Sou. The bill also alleged that on February 14, 1906, the said Jun Kum Sou assigned to the complainant. This was denied in the answer. At the hearing the complainant introduced in evidence two instruments in the form of receipts for money, dated respectively February 14, and May 7, 1906, and signed by Jun Kum Sou, the latter of which included the statement “I hereby transfer to Yip Lan the lease of land, the building, implements and everything.” Counsel for the respondent contends that these instruments were erroneously received in evidence because they were unstamped, citing O. R. & L. Co. v. Kaili, 22 Haw. 693. No objection was made to the admission of the evidence at the hearing and the point comes too late when raised for the first time on this appeal. In this connection, it may be pointed out, that there! was no real dispute as .to the tenancy of the complainant under the original lease. The husband and agent of the respondent testified, and a number of receipts for rent which were introduced showed, that the complainant had held and had been recognized by the respondent as her tenant for a number of. years, thus corroborating the complainant’s testimony that he had occupied the premises since he acquired the lease in 1906. It is contended that the court erred in refusing to allow — 309 — the respondent to prove that the complainant was bankrupt. It appears from the record that. counsel for the respondent started to question the complainant on cross-examination as to whether he owned property in the Territory. An objection having been interposed, counsel stated that he intended to prove that the complainant is bankrupt, meaning, apparently, insolvent. But the court made no definite ruling, no offer of proof was made, and counsel apparently voluntarily abandoned further examination on the point. It is contended that as the complainant neglected to exercise the renewal option at or before the expiration of the original term he is not entitled to have specific performance of the covenant. The term expired on June 1, 1914. There was evidence showing that on June 2, the complainant gave one Ah Chip one hundred and thirty-two and a half dollars to be remitted to the respondent for the half-year’s rent, but it was not until the 10th of June that the money was sent by post-office money orders. On June 6 the complainant received from Ahulii a letter dated June 1, in which the writer stated that the lease had expired, offered to give Yip Lan a new lease at an annual rental of three hundred dollars, asking him to “come at once” if he was agreeable to the new terms, and saying “I will wait for you for one week only.” The complainant seems not to have replied to the letter, but' he went personally over to Kaupo, arriving at Ahulii’s place on June 15. Ahulii and his wife being present, the complainant requested a renewal of the lease. Ahulii replied that it was too late, and that one Fat On, who also was there, had offered three hundred dollars a year. At that time the rent which Yip Lan had remitted had not been received, but, upon being shown the post-office receipts, Ahulii went over to the post-office and got the orders, apparently on the next day. He retained the money and sent Yip Lan a receipt for it. Yip Lan returned — 310 — to his home without having received a new lease. On June 19 the respondent executed a lease of the premises to Fat On for the term of ten years from June 1, 1914, at the annual rental of four hundred dollars. At the same time the Ahu-liis seem to have made an arrangement with Fat On whereby Yip Lan should have the right to continue in possession of the land until January 1, 1915. In a letter dated June 22, 1914, addressed to one Antony Fernandez at Waiakoa, Kula, Ahulii referred to the leasing of the land to Fat On, and stated that he had demanded that Yip Lan have the right to remain on the land until January 1, 1915, in order that he might take off his crops, and that he had paid Fat On two hundred dollars for the purpose. He referred also to the payment by Yip Lan of one hundred and thirty-two and a half dollars, that the balance to be paid would be sixty-seven and a half dollars, and said, “if he consents to return what I paid then you are to give him this receipt, and if not, you are to return that receipt, and I will return these money orders.” The paper which was enclosed with the letter contained the following: “Kaupo, June 19, 1914. “By this I hereby grant permission to Yip Lan, from this day to the 1st. day of Jan. A. D. 1915, to take his things and leave everything appertaining to the land of Mrs. Inoaole Ahulii Jr. for myself. “Yours truly, “Fat On “Per Geo. J. Kunukau “Kaupo, June 19, 1914.. “Received by me two hundred dollars ($200) from Joseph Ahulii Jr. for this six months, beginning from June 1, 1914, to Jan 1, 1915. “Fat On.” There is no evidence that the complainant paid the sixty-seven and a half dollars or otherwise acceded to the arrangement made between the Ahuliis and Fat On. On November — 311 — 23, 1914, the complainant made another remittance of one hundred and thirty-two and a half dollars for rent for the next succeeding half year but it was not accepted by the respondent. The complainant remained in possession of the premises for several months when he was put out by the sheriff, other litigation having intervened. See Ahulii v. Yip Lan, 22 Haw. 708; 739. A covenant in a lease for its renewal is a valid agreement of which equity may compel specific performance at the suit of the lessee. A covenant to renew, as distinguished from a privilege to extend, a lease gives the lessee an option which he must ordinarily act upon by giving notice of his intent to renew at or before the end of the term demised. But time is not of the essence of the agreement, unless made so, and the notice, being for the benefit of the lessor, may be waived by him. In the lease under consideration there was no express requirement that the lessee should give notice at or within a specified time. Time was not of the essence of the agreement. By his letter of June 1 the lessor notified the lessee to signify his desire within a week of that date. The lessee, however, remained in possession, forwarded six months’ rent, and on the 15th of June personally notified the lessor that he desired the renewal. Up to that time the lessor had not altered her position, and there was nothing to prevent her from complying with her agreement. The option was exercised within a reasonable time, both parties were bound by it, and the lessee became entitled to have the lease renewed on the terms agreed upon. Caley v. Thornquist, 89 Minn. 348; Chittenden v. Western Union Tel. Co., 154 Mich. 1; McBrier v. Marshall, 126 Pa. St. 390; Holton v. Andrews, 151 N. C. 340; Gerhart Realty Co. v. Brecht, 109 Mo. App. 25; Myers v. Silljacks, 58 Md. 319, 331. The lessee had paid the rental for the first six months of the new term, and, by accepting it, the lessor waived the — 312 — requirement of notice at or before the end of the term. The lessor having accepted and retained the money could not thereafter deny the lessee’s right to a new lease and give a valid lease to another who had notice of the lessee’s rights in the premises. The lessor could not be permitted to take the lessee’s money and then say to him “you are too late.” The subsequent attempt of the Ahuliis to devote the money received from Yip Lan to a purpose other than that for which the payment was made, namely, for a six months tenancy under Fat On, was neither authorized nor ratified by Yip Lan, and, therefore, was not binding upon him. No contention has been made by counsel for the appellant that the appellee had voluntarily abandoned or waived his right to demand a renewal of the lease. His action in paying the rent at the rate specified in the covenant plainly shows that he intended to exercise the option. The contention of the appellant that the decree requiring the execution of a lease to the complainant would be nugatory since Fat On who holds a lease of the premises from the respondent has not been made a party to this suit is well taken. The record shows, moreover, that Fat On has executed certain sub-leases to others, who, presumably, are now in possession of the land, but have not been made parties. “Persons who, after the making of a contract for the conveyance of lands, acquire interest in the lands derived from the vendor, are necessary párties to a bill for the specific performance of the contract.” 20 Enc. Pl. & Pr. 415. See also Pomeroy on Contracts (2nd ed.) Sec. 493; 36 Cyc. 761. The decree in this case, in order to be effective, should extinguish the legal rights in the land of Fat On and his sub-lessees. In case of the non-joinder of an indispensable party “the appellate court may, in its discretion, if it cannot make a decree which will finally and properly dispose of the subject-matter of the controversy in the absence of a party, remit the cause for the purpose of — 313 — bringing him in.” 1 Beach Mod. Eq. Pr., Sec. 78. E. Vincent (D. H. Case with him on the brief) for petitioner. E. Murphy for respondent. The decree is reversed and the case remanded to the circuit judge for further proceedings consistent with this opinion.