Orient Insurance v. Pioneer Mill Co.

OPINION OF THE COURT BY LINDSAY, J. (Circuit Judge O’Brien dissenting.) The material facts in this case are as follows: On March 28, 1918, one Sarah White, the lessee of certain premises situate at Lahaina, by written indenture subleased the same to defendant for a term of fifty-nine months. On May 19, 1921, said Sarah White insured the building standing on the demised premises with the plaintiff corporation in the sum of $1250 against loss by fire, and, while the insurance was in force the building — 699 — was, through no fault or negligence on the part of the lessee, entirely destroyed by fire. Plaintiff paid to Sarah White the sum of $1250 in full discharge of its obligation under the policy of insurance, whereupon said Sarah White, by an instrument in writing, assigned to plaintiff all of her right, claim and interest against defendant by reason of the destruction of said building. The lease to defendant expired on December 1, 1922, upon which date defendant delivered up the premises to its lessor without any improvements and erections thereon. The plaintiff has brought this action, claiming that it has succeeded to the rights of Sarah White; that defendant has failed to keep and observe its covenants to keep the buildings on the premises in good order and repair, and to deliver up to the lessor the demised premises with all improvements and erections thereon at the end of the term; and that defendant is therefore liable .to plaintiff in the sum of $1250 paid by plaintiff to Sarah White under the terms of the insurance policy. Defendant demurred to the complaint on various grounds and the circuit judge has reserved for our consideration the questions raised by the demurrer. The fourth ground of defendant’s demurrer is that it does not appear that the defendant is under any contract or duty to rebuild the building destroyed by fire. The lease from Sarah White to defendant, upon which this action is predicated, recites that D. W. K. White (who at that time was insane and Sarah White having been appointed his guardian) is indebted to the defendant corporation in the sum of $585 for labor and material furnished by defendant in the erection of the building standing upon the demised premises, and that, in settlement of such indebtedness, defendant has agreed to accept a fully paid-up lease of said premises. The lessor, therefore, in consideration of the amount of such indebt — 700 — edness, leases to defendant the said premises for the term of fifty-nine months from the 1st of January, 1918, the lessee covenanting (among other things) “that it will keep all buildings, structures and erections now on the demised premises in good order and repair; * * * and that it will at the expiration or sooner determination of the lease deliver up to the lessor said premises with all improvements and erections thereon.” If a building on demised premises is accidentally destroyed and the lease contains no express covenant on the part of the lessee to rebuild or replace the same, the loss must fall upon the lessor and not upon the lessee. The parties to a lease may of course agree upon whom such loss shall fall. Did the parties to the lease herein, at the time of its execution, so agree? Was it the intention of the parties, as expressed in their written agreement, that, in case the building upon the demised premises should, during the term, be accidentally destroyed, the lessee should rebuild the same or be liable in damages to the lessor for the value of the destroyed building? No obligation by law was imposed upon the lessee to rebuild, hence such obligation could only arise from contract. In other words, such an obligation, if it exists in this case, must have arisen by reason of an express agreement to that effect. Gavan v. Norcross, 43 S. E. (Ga.) 771. On behalf of plaintiff it is contended that the covenants on the part of the lessee, to keep the buildings on the demised premises in good order and repair and to deliver up the premises to the lessor with all improvements thereon at the end of the term, were equivalent in law to an express covenant to rebuild the destroyed building. In support of this contention plaintiff cites numerous text-writers and cases. For example, in the case of Chesterfield v. Bolton, 2 Comyn 627, 92 Eng. Repr. 1241, in which the lessee of a one-hundred-year — 701 — term had covenanted that he “should and would sufficiently repair and keep in good and sufficient reparation the said capital messuage called Golden Grove, and so leave the same at the time of his decease; he being allowed to cut sufficient timber for repairing,” the court held these covenants equivalent to an express covenant to rebuild, saying: “When the defendant covenants that he will repair and keep in good and sufficient reparation without any exception, this imports that he should in all events repair it; and in case it be burnt or fall down, he must rebuild it, otherwise he doth not keep it in sufficient reparation.” In Bullock v. Dommitt, 6 T. R. 650, 101 Eng. Repr. 752, decided in 1796, and which is perhaps the leading case in support of the contention of plaintiff, the covenant on the part of the lessee was that “he, his executors, administrators and assigns would during the term of twenty-one years, when, where and as often as need or occasion should be and require, at his and their own costs and charges repair, uphold, support, maintain, amend and keep the said messuage and premises in needful and necessary repair.” The defendant pleaded in defense that the building had been accidentally destroyed by fire. On demurrer to this plea the court held the demurrer good saying, “On a general covenant like the present, there is no doubt but that the lessee is bound to rebuild in case of an accidental fire; the common opinion of mankind confirms this, for in many cases an exception of accidents by fire is cautiously introduced into the lease to protect the lessee.” The American courts seem generally to have accepted the rule thus enunciated in England and have held (with the notable exception of the case of Wattles v. So. Omaha Ice & Coal Co. hereinafter referred to) that a general covenant by a lessee to repair or keep the premises in repair, when aided by the context, amounts to an express — 702 — covenant to rebuild structures accidentally destroyed. In Phillips v. Stevens, 16 Mass. 238, decided in 1819, the court held that the covenants of the lessee that he “would keep in repair, support and maintain all and singular the fences and buildings, saving and excepting the natural decay of the same, as should be needful, at his own proper cost and charge; and at the end of said term or other certain determination of said lease, whichever should first happen, would quietly leave, surrender and yield up the premises, in as good condition as the same were in at the date of said indenture, reasonable use and wearing thereof excepted,” bound the lessee to rebuild, citing Bullock v. Dommitt, supra, and other English cases. To the same effect: McIntosh v. Lown, 49 Barb. 550; Hoy v. Holt, 91 Pa. St. 88; Ely v. Ely, 80 Ill. 532; Abby v. Billups, 35 Miss. 618. The precise question herein has never arisen in this jurisdiction. In Bowler v. Ahlo, 11 Haw. 357, this court held that a covenant in a charter-party to surrender the vessel to the owner at the expiration of the term in as good condition as she now is in, ordinary .wear and tear -excepted, the vessel having been lost before the expiration of the charter through no fault of the charterer, did not render the charterer liable in damages for the value of the vessel, the presumption being that in such cases the parties contemplate that there should be a continuing obligation only in case of the continued existence of the thing whose existence is necessary to make performance of the covenant possible. In speaking of decisions by courts in construing covenants in leases the court, through Mr. Justice Frear, remarked at page 360, “The covenant to maintain the premises in repair, &c., if made without express exception or qualification, is held (perhaps by a somewhat strained construction) to be an absolute undertaking with no implied exceptions, — 703 — and the obligation continues though a house forming part of the premises be destroyed by fire; the tenant is obliged to rebuild. Bullock v. Dommitt, 6 T. R. 650. Hence, it is usual to expressly except damage by fire or other unavoidable casualty.” We are in hearty accord with the statement of Mr. Justice Frear that the authorities above cited must have reached the conclusions they did “by a somewhat strained construction.” That these authorities in reaching the conclusion that a covenant to repair is equivalent to an express covenant to rebuild have done so by a strained construction seems all the more apparent when it is noted that it is generally held that, a covenant to deliver up the premises to the lessor in the same or as good condition as they were in when received, creates no obligation to rebuild in case of destruction by unavoidable casualty, but is a mere covenant against holding over. To the ordinary mind there would seem to be far more reason to construe an unqualified covenant to return an article in the same condition as it was when received as obligating the covenantor to in fact perform his covenant, than to construe a covenant to repair as an absolute covenant to rebuild, yet, as remarked by the court in Warner v. Hitchins, 5 Barb. 666, “In all those cases in which the same lease has also contained a covenant to surrender the premises in the same condition, or in as good condition, as at the commencement of the term, this covenant has not been noticed by the court as important, but the covenant to repair has been made expressly the basis of the recovery.” In the case of Levey v. Dyess, 51 Miss. 501, the court, in construing a covenant on the part of a lessee to deliver up to the lessor the demised premises (a sawmill, etc.,) in good running order, except the usual wear and tear, held that this covenant did not bind the lessee to rebuild the mill which had been destroyed by fire, — 704 — saying, “In construing the covenants, the cardinal rule is the intention of the parties; and the courts will not extend or enlarge the obligations of the lessee for snch losses beyond the plain meaning and intention of the parties. If there is not an express stipulation to rebuild or restore edifices and structures destroyed by casualty, or some covenant which is equivalent thereto, such as a covenant to ‘uphold and repair’ or to ‘repair,’ then the loss mnst fall upon the reversioner and not upon' the lessee. And lastly, a covenant to redeliver or restore to the lessor in the same plight and condition, usual wear and tear excepted (or other words of like import), does not bind the covenantor to rebuild in case of casual destruction by fire, or impose the burden of the loss on him. The contemplation of the parties to such a covenant, applied to a house or a saw mill, machinery and appurtenances, is, that the lessee will take ordinary, reasonable care of the property, according to its nature; and that he will surrender possession when his right to enjoy has expired. It is not within the intendment, and according to general understanding, that such stipulation imposes upon the tenant the responsibility of an insurer. If that greater risk is assumed it must be clearly and explicitly set forth in the contract.” In Gavan v. Norcross, supra, the court in construing the word “repair” held that a covenant on the part of .a lessor to repair did not bind the lessor to rebuild, saying: “The word ‘repair’ means to renew or to restore an existing thing, not to make a new one. A covenant to repair ordinarily does not bind the landlord to rebuild, though there are cases in which the word ‘repair’. aided by the context, has been held to mean ‘rebuild.’ Where the contract requires the tenant to keep the premises in repair, and return them in the same condition as when received or other language is employed showing an inten — 705 — tion to make either party rebuild, such duty will be imposed even though the word ‘rebuild’ is not used.” We must confess to an inability to comprehend why the word “repair” in a lease should be accorded one meaning when applied to a lessee and another meaning when applied to a lessor. It must be conceded, that the authorities cited go, to what appears to us, an extreme length in holding that a lessee, who has covenanted to keep the demised premises in repair, has bound himself absolutely to rebuild a structure that without fault on his part is destroyed by unavoidable accident. But, in admitting the length to which these authorities have gone when construing the particular documents before them, does this mean that in all cases involving the construction of leases the courts are bound to such a harsh construction? That all courts have not felt so bound is most ably set forth by the supreme court of Nebraska in Wattles v. So. Omaha Ice & Coal Co., 50 Neb. 251, 61 Am. St. Rep. 554. The covenants of the lessee in that case were “that at the expiration of the term above granted * * * he will quietly and peaceably yield up possession of said premises * * * in as good condition as the same were when entered upon, ordinary wear or damage by fire excepted. * * * It is understood and agreed that the buildings on the above described property have been placed in good repair by [the lessor] and shall be kept in the same condition by [the lessee] during the term of this lease, natural decay and wear and tear excepted.” All the buildings on the demised premises were entirely destroyed by a violent hurricane and the lessor contended that the lessee was bound under his covenants to rebuild the same, which contention was upheld by the trial court which held that the agreements and promises made by the lessee amounted to a covenant on his part to rebuild — 706 — the destroyed buildings. Upon appeal the court stated the question involved thus: “The lessee covenanted to keep in repair the leased premises and at the expiration of the term surrender them in as good condition as they were when he entered, ordinary wear and tear and natural decay excepted. Hoes this covenant include a promise by the lessee to restore the buildings destroyed without his fault? That it does is the first argument urged in support of the decree. It is insisted that such was the rule of construction applied to such a covenant at common law.” The court after discussing the cases and text-writers that support the rule contended for in all of its severity, and especially the case of Phillips v. Stevens, supra, goes on in the following language to state what in our opinion is the real question involved: “No one can find fault with the principle that a man should be compelled to perform what he has promised; but, with all due respect to the supreme court of Massachusetts, it seems to us that the court ignored the entire issue. The question there was not whether the lessee was obliged to perform a covenant he had made, but the question was what covenant he had made; that is, whether his covenant to repair and keep in repair the demised premises included within it a contract on his part to rebuild the buildings on the leased premises if they should be destroyed. But in that case [Phillips v. Stevens], as in the other cases cited, and in every case that we have been able to find which supports the contention of the appellee here, it was taken for granted that the rule at common law was that a covenant by a lessee to repair was equiva: lent to and involved a covenant to rebuild. Assuming, however, that such was and is the rule of construction at common law, are we bound by that rule?” The court then goes on to say that, although by statute the common law of England is applicable in Nebraska, it is provided — 707 — by another statute that in the construction of instruments concerning the conveyance of real estate or any interest in real estate, the courts are required to carry into effect the true intent of the parties so far as such intent can be collected from the whole instrument. Continuing, the court says: “If, then, the rule at common law is as is contended by the appellee, it is at most but a rule of construction, and we are not bound to apply that rule of construction to a real estate contract if to dp so would result in giving to the contract an effect not within the contemplation or intention of the parties at the time it was made. We do not know why a lease for real estate should not be construed as any other contract, — why we should not apply to it the test universal among all civilized peoples, namely, to look to the subject-matter of the contract, the language of the parties, and ascertain, if we can, what was their intention; on what proposition did the minds of the contracting parties meet; what did they consciously consent to. If we apply this rule of construction to the contract .under consideration we have for subject-matter of the contract a small tract of land, fifteen acres of which was covered with water. Prom this water ice could be harvested in the winter season, and stored in buildings then standing upon the leased premises. The lessee accepted his lease and entered upon these premises to use them solely for the purposes of harvesting and storing ice. When he did so he stipulated that the leased premises were in good repair, in good condition, and he promised that he would keep them in good repair and at the expiration of his lease so surrender them. What did the parties to this contract understand and intend by the terms ‘repair’ and ‘keep in repair’?. These words ‘repair’ and ‘keep in repair’ are not technical words, nor should they be given a technical or strained interpretation. They should receive their ordinary inter — 708 — pretation. To repair, as it is ordinarily used means to amend, not to make a new thing, hut to refit, to make good or restore an existing thing. (See Todd v. Inhabitants of Rowley, 8 Allen [Mass.] 51; Stevens v. Milnor, 24 N. J. Eq. 358.) When we speak of repairing a thing, the very expression presupposes something in existence to be repaired. If a carpenter contracts to repair a house, or a mason a chimney, the ordinary construction of these contracts would not be that these parties had agreed to build a new house or a new chimney. If the construction of the lessee’s covenant contended for by the appellee here be correct, then had this entire tract of land and its buildings been swept away by a flood of the Missouri river, the lessee would be liable for their value to the lessor. Before we can say that a lessee assumed the liability of any such a contingency as that supposed, we must find his assumption of such a risk in the clear and express language of his contract.” In Polack v. Pioche, 35 Cal. 416, decided in 1868, it was held that a general covenant of a tenant to repair the demised premises is binding upon the tenant under all circumstances, even if the injury proceeds from the act of God, from the elements, or from the act of a stranger. That case, however, has been, to all intents and purposes, reversed by the supreme court of California in the case of Realty & Rebuilding Co. v. Rea, 194 Pac. 1024, decided as recently as 1921, in which that court flatly held that a covenant on the part of the lessee to repair did not obligate it to rebuild or replace buildings accidentally destroyed by fire. The opinion in that case clearly indicates the disfavor with which the court regarded the harsh rule laid down by the earlier cases and its eagerness to seek a loophole of escape from such a strained construction. It is true that the court seeks to justify its departure from the rule laid down in Polack — 709 — v. Pioche by referring to tie fact that, since the decision in that case, section 1644 of the Civil Code, adopted in 1872, provides that “The words of a contract are to be understood in their ordinary and popular sense, rather than according to their strict legal meaning; unless used by the parties in a technical sense, or unless a special meaning is given to them by usage, in which case the latter must be followed.” The statutory provision quoted, however, gave no power to the court that it had not always possessed, for that statute but declares the well known rule of contruction that has been in vogue for ages and section 5 of the same code expressly provides that “The provisions of this Code, so far as they are substantially the same as existing statutes or the common law, must be construed as continuations thereof, and not as new enactments.” In a review of Realty & Rebuilding Co. v. Rea, in Vol. 10, p. 44 of the California Law Review the author says: “The last-named case also considers the effect of the usual covenants to repair and to surrender at the end of the lease in good condition. It decides that neither of these covenants requires the tenant to rebuild a building entirely destroyed by fire, without his fault, though to reach this result the court is obliged practically to overrule an important case, Polach v. Pioche. It is interesting to note that to annul the effect of the decision in the last-named case, without too violent a wrench, the supreme court resorted to section 1644 of the Civil Code in respect to the interpretation of contracts, a legislative declaration not in force at the time when Polach v. Pioche was decided, remarking, ‘There is no apparent reason why a lease of real property should not be construed as any other contract pursuant to the Code provisions.’ Though such a method of approach causes a temporary shock to one familiar with the ordinary covenants in leases as interpreted by the courts of common law, it is — 710 — probably a sane one. * * * The modern law, more completely disregarding form and seeking its principles in the ordinary conduct of human beings, looks rather to the presumed understanding of words by the parties ‘in their ordinary and popular sense.’ It is, of course, not a light thing to overrule doctrines established by earlier decisions, particularly in property law; but few, we think, will be found to grieve for the death of so technical a doctrine as that of Polack v. Pioche." The reasoning in the foregoing cases is so applicable to the instant case and so admirably and clearly sets forth what, to our minds, is a correct statement of the law relating to the construction of leases as well as other ■written instruments that we have quoted from them so liberally. Applying the principles so ably enunciated to the instant case, can it reasonably be gathered from the language of the lease that the lessee is bound to rebuild the destroyed building or that it is liable for its value to the lessor? As was well said in the Wattles case, the so-calléd rule of the common law is at most but a rule of construction and we are not bound to apply that rule if . to do so would result in giving to the lease an effect not within the contemplation or intention of the parties at the time it was made. Rules of construction are only to be resorted to in aid of ascertaining the intention of the parties to an instrument and not to defeat such intentions. The statute quoted by the Nebraska court which required that court to seek to carry into effect the true intent of the parties is but declaratory of the familiar rule of the common law which has always been observed in this jurisdiction as the cardinal rule of construction. In the instant case it is noticeable that the lessee did not, as in so many of the reported cases, covenant generally to keep the demised premises in repair, the covenant here being that the lessee “will keep all — 711 — buildings, structures and erections now on the demised premises in good order and repair.” Mr. Tiffany in Ms treatise on Landlord and Tenant, Vol. 1, p. 763, says, but we need not pass upon the point, that “A distinction migM perhaps be suggested, in this connection, between a covenant to keep the premises in repair, and one to keep a building thereon in repair, on the theory that the repair of the premises involves the erection of a building in place of one destroyed, while the repair of a building on the premises at the time of the lease does not involve the erection of a new one upon its destruction.” In the construction of a written instrument the intention of the parties is to be sought by a scrutiny of every part of the instrument and from all the words used. The word “now” contained in the present lease must therefore be accorded some meaning and in our opinion that word clearly implies that the contracting parties had in mind the continued existence of the thing to be kept in repair. To the ordinary mind the word “repair” conveys the meaning given that term by Webster: “ ‘Repair’ * * * means to restore to a sound dr good state after decay, injury, dilapidation, or partial destruction, and the phrase ‘in good repair’ means in such state of reparation, and implies the existence of the thing to be repaired.” Words and Phrases, Vol. 7, p. 6097. If the parties to the present lease intended that the word “repair” was to be given other than its ordinary meaning and the lessee was to become an absolute insurer, obligated to rebuild under all circumstances, why should such a serious obligation have been expressed in anything but the plainest of terms? In other words, if it was the intention of the parties that, in case the building should, during the term, be destroyed, the lessee would rebuild the same, why should that intention not have been clearly and unequivocally expressed and not hidden under — 712 — the apparently innocent promise on the part of the lessee to keep the building “in good order and repair”? A. Withington (Robertson & Castle on the brief) for plaintiff. I. M. StainbacJc (H. Holmes with him on the briefs) for defendant. Whatever meaning may have been placed by courts upon the words “repair” or “keep in repair” when construing the various instruments in which those terms were used, is not of controlling weight for, after all, in the construction of written instruments, precedents are of but slight assistance, each case depending upon its own surrounding facts and circumstances. In every such case the all important question is what was the intention of the parties, and when that intention can be discovered that should control. In many of the cases cited which have held the lessee liable to rebuild, the courts may have been warranted in finding from the language used that such was the intention of the parties. From the instrument, however, that we are now called upon to construe, we can discern no such intention. As was aptly said by Sherwood, J., in Van Wormer v. Crane, 51 Mich. 363, 369: “The general obligation of the lessee to repair and his covenants to do so are not to be enlarged beyond their fair intent, and the tenant should not be held responsible for any damages in case of injury or destruction not anticipated, contemplated or intended when the lease was made, and the usual and commonly accepted meaning of the words used in the ordinary transactions of life should be given to the language used in the covenant.” We are of the opinion that the defendant herein is under no obligation to rebuild the destroyed building or to respond in damages for failure so to do. Our answer to the fourth reserved question is therefore in the affirmative.