Merchants' Insurance v. Mazange

CHILTON, J. The view which we take of this case renders it unnecessary for us to inquire, whether the covenant contained in the lease from Eslava to Chantron, that the latter would cause the premises to be insured against loss by fire, &c., was a covenant merely personal or collateral, or whether it runs with the land, so as to be binding upon the assignee of the covenantee. After arfull investigation of the authorities, we have arrived at the conclusion, that Deas does not occupy the position of an assignee of Chantron, and cannot, therefore, be chargeable with the burthens imposed upon him by the demise. Without questioning the authority of those cases which countenance the idea, that the mortgagee in possession after the law day may be regarded as the assignee of the lease, it is very clear to our minds, that Deas cannot be regarded in this light; for he has no assignment of the legal title, but a, mere right in equity to the proceeds of the sale; or rather, so much of the proceeds of the sale of Ohantron’s unexpired term as shall be required to satisfy the amount due him as ascertained by the decree of the Chancery Court. This decree conferred upon him no right whatever to take possession of the premises, and as lie acquired no title under the formal or nominal sale made by Dnmee, his possession, at most, was merely permissive. The statute confers upon the master-builder or mechanic, who has expended labor or materials in putting up or erecting buildings, a lien in the nature of a mortgage upon the lot and buildings thereon erected, provided the contract be in writing and recorded. Clay’s Dig. 375. We need not stop to inquire whether, under this statute, the mechanic could have a strict foreclosure, as in case of a [177] mortgage proper, and tbe effect of such foreclosure, in transferring the burthens of the covenants contained in the demise to the partj' who should come into the possession under the decree of foreclosure. In this ease, the decree was for a sale of the premises, and until such sale was effected, the title to the leasehold estate remained unchanged. If the parties had desired that some one should be placed in possession, charged with the performance of the covenants contained in the lease, they should have caused the sale to be made; and if they failed to do this, but remained passive, permitting Deas to bold tbo premises, without any assignment, or right to occupy, other than by their permission, they virtually consent to waive his liability. Again; as a general rule, mutuality is an essential element in every contract. Where the covenant of one party forms the consideration for the covenant of the other, both parties must be bound, or neither can be Held to performance. Chitty on Con. 4; 2 T. K. 653; Oomyn on Con. 2. Tested by this plain elementary principle of law, it is obvious that Deas cannot be beld to the performance of the covenants contained in this demise, as, in the event of a violation of the agreement on the part of Eslava, he could have no recourse whatever against him on the covenants. Suppose, for example, that there had been a failure of title, against which the demise contains an implicit covenant. It is clear, that as the only claim which Deas had, was to have the leasehold interest which Chantron had in the land sold and the proceeds paid to him, there was no such privity between him and the lessor as would enable him to maintain an action for the breach of such implied warranty. To hold him bound, therefore, as an as-signee, would be to impose upon him the burthens of the covenant, and at the same time to withhold from him its benefits. It is, however, well settled upon authority, that in cases where the party has a mere equitable lien on tbe premises for a demand due him, be is not subject to the covenants of tbe lease, and that equity will not compel him to take an assignment, so as to bo liable at law< A different doctrine was at one time held by Lord Thru-low, in Lucas v. Commerford, 3 Bro. C. R. 166, and which was followed by Flight v. Bently, [178] 7 Simons 149; but tbe contrary doctrine was asserted in Moores v. Choate, 8 Simons 508, by tbe Vice Chancellor, (Sir L. Shadwell,) who delivered the opinion in Flight v. Bently, and who said that it could not be supported, and that be did not know bow it came to be made in tbe manner in which it appears in tbe report. In tbe case of Jenks v. Portman, 1 Keene 436, decided so late as 1836, Lord Langdalc, Master of the Rolls, after reviewing tbe cases, said: “It does not appear to me that a mortgagee by assignment of a leasehold interest taking actual possession of tbe mortgaged property, is more important in equity than it is in law.” In Arkwright v. Colt, 2 Yo. & Coll. C. C. 4, tbe Vice Chancellor (Bruce) said, he was willing to consider Colt, tbe defendant, as entering as equitable tenant for life of the benefit of tbe lease, and be apprehended, that by bis entering into possession in that character, be did not become liable to the landlord in respect of the covenants in tbe lease. In Moore v. Greg, 2 Phillips C. R. 717, it was held by Lord Chancellor Cottenham, that an equitable mortgagee by deposit of a lease is not compellable in equity, at the suit of the lessor, to take a legal assignment of the lease, although he had entered upon the premisas and paid rent. This case expressly overrules the case of Lucas v. Commerford, supra, and is a stronger case for the plaintiff than the one before ns. In. that case, as in this, the party could not have been sued at law; there was no assignment of tbe lease, but the court refused its aid to compel him to take an assignment, so that the lessor might look to him for the fulfilment of the covenants contained inti idea sc. In the case before us, the rights of Leas accruing under his equitable lien have been adjudicated. The parties interested were before the court, and tbe leasehold interest oí Ohantrou was decreed to be sold ; and no effort lias been made to compel Leas to take an assignment of the lease. We think it clear, that there is no such privity between Deas and the lessor, or his assignee, as will enable the latter to look to him upon the covenants; and this, we think, is the result of the authorities above cited. But it is contended by the counsel for the defendant in er [179] ror, that Deas has complied with the covenant to insure, and this bill is merely to enable the plaintiff below to avail himself of that compliance. It is a sufficient answer to this position, that the record be* fore us does not sustain it. Deas merely insured his own interest against loss by fire. The insurance is upon four thousand dollars in value, and not upon six thousand, as provided for in the lease; so that, to hold the Company bound to respond beyond the interest of Deas, is to make another and different contract from that which they have entered into, while, at the same time, we should give to the statute conferring a lien upon the lot and premises, an operation far beyond that designed by the legislature, or intended by the parties. The policy is made directly to Deas — secures him against loss to the extent of §4000; and the rule is well settled, that his insurable interest must form the basis of his recovery. Beyond this he cannot go. See upon this point, Durand v. Thornton & Co., 1 Porter 238; Graves v. The Boston Marine Insurance Co., 2 Crunch 419; Parks et al. v. The General Insurance Co., 5 Pick. 34; 1 Met. 16; 8 ib. 348; 11 John. 302; 8 Wend. 144. It results from what wo have said, that the Chancellor mistook the law in decreeing in favor of the defendant in error. His decree is consequently reversed, and a decree will be here rendered dismissing the bill. Let the plaintiff in error recover the cost of this court, and of the court below. Note. — This opinion was delivered at the June term, 1852 ; but on petition for a rehearing by defendant’s counsel, it was withdrawn, and at the January term, 1853, the folio-wing additional opinion was pronounced: Per Curiam. We have given to the argument prepared by the counsel for the defendant in error on the petition for a rehearing, as well as to the opinion of the Chancellor which has been furnished us, a careful consideration; and a re-examination of the case has the more strongly confirmed ns in the correctness of the opiuion delivered at the last term. In order to make Deas liable, it is necessary to establish, either that he is the assignee of the whole term, (Holford v. [180] Hatch, Doug. 182; 4 Cruise’s Dig. 455; 4 Kent’s Com. 96; 2 Lomax’ Dig. 254;) or that he occupies such a position to the leasehold estate, that equity would compel him to take an assignment, the effect of which would be, to require him to respond for any breach of the stipulations contained in the lease from Eslava to Chantron. It is not pretended that Deas is in fact the assignee of the whole term, and the only question is, therefore, as to the position he occupies in relation -to it. As to the decree of sale upon the building contract, it may ■be remarked, that although the contract was in the “ nature of a mortgage,” it conferred no right of entry; it did not invest Deas with the legal title, as would be the effect of a mortgage proper; it simply, under the decree which was rendered, gave him the right to sell under the direction of the Court of Chancery, and to obtain satisfaction of his debt out of the proceeds. The lien was the creature of a statute, Avhich was enacted solely for the purpose of affording to the builder what was deemed a just security for the expenditure of his capital or labor; and neither the lien, nor the decree, of itself created any privity of estate so far as Deas was concerned ; and until a privity was created by the purchase of the leasehold estate, a court of equity would not have required him to take an assignment of the lease, so as to become responsible for the covenants contained in it. There was, however, no sale under the decree, and as neither the contract nor the decree rendered upon it authorized Deas to take possession of the premises, his possession, if taken under either, was unauthorized, and, as we have said in the opinion, “permissive” merely. In relation to the sale made by Dumee, it is apparent from the evidence of both Hamilton and Dumee, that it was made solely for the purpose of trying the market, with a view to closing the assignment made by Chantron to Dumee. The evidence also leads us to the conclusion, that the bid made by Deas was in connection with that object. Dumee represented the creditors in the deed of trust, and the estate was offered in order to ascertain if there would be any surplus, after discharging the lien of Deas, to apply to the trusts of the assignment. The offer was, in effect, of the interest in the es181 late after tbe satisfaction, of tbe superior lien; and upon the understanding as alleged in the answer of Deas, and as proved by Dumee, the transaction could not be regarded as a sale of the estate to the former. No money was paid, nor, as Dumee swears, was to bo paid by Deas upon his bid; no conveyance was executed or demanded, and the entry was made, as the answer asserts, without opposition, and with the intention of appropriating the profits of the term to the satisfaction of his claim against the property. This entry was, as we have seen, unauthorized, and made by the party under a misconception of his rights; but as he could at any time have been turned out by the Court of Chancery, which, until its decree had been executed, had the premises under its control, he could not be regarded as having, by such an entry, acquired a right to the whole of the term; and unless he had, the burthens of the covenants would not have been imposed on him. As to the insurance, we think it clear, that if Deas, without being in fact liable, took out the policy simply as a precautionary measure upon his interest in the premises, this fact would not render him liable. He surely could provide against a contingency which might result to his prejudice, without compromitting his rights in the matter. His supposed liability involved a question of law confessedly not free from difficulty; and neither upon principle nor authority can we hold, that, because he provided a fund to meet a possible loss, lie thereby should be deemed as consenting to such loss, and estopped from denying his liability. The motion for a rehearing must be denied.