Bowles v. Gantenbein

Mr. Justice Moore delivered the opinion of the court. The material facts stated in the complaint are to the effect that on September 30,1910,1. N. Fleischner and others leased real property, having a building thereon, in Portland, Oregon, for a term of 50 years to A. B. Widney, who agreed to pay as rent therefor $3,000 a month for the first ten years and greater rates thereafter, to begin on or before October 1,1914, and speedily to complete on the demised premises, at his own expense of not less than $350,000, a new 6-story build [512] ing with a basement in lien of an old structure on the land, and also to pay the lessors all the taxes and assessments that might be levied against or imposed upon the real property. For the faithful pérformance of all these conditions, except the erection of the new building, the- lessee as principal and the plaintiffs as sureties executed to the lessors a bond in the sum of $75,000. The lessee on October 17, 1910, with the consent of the lessors and of the plaintiffs, assigned all his interest in the lease to the Willamette Building & Realty Company, which corporation promised in writing to give the assignor $7,000 of its bonds to be issued to raise a fund with which to erect the new building, or at its option to pay that sum in money; the plaintiffs agreeing to remain liable for the performance of all the conditions specified in the bond. Owing to unforeseen obstacles the rents received by the corporation have been insufficient to pay the lessors the sums of money due them, and the plaintiffs in order to protect their rights and preserve the lease have been compelled to advance from their own funds $6,434.74 more than has been received. After the assignment of the lease its terms were so modified that the time within which the new building is to be commenced was extended to April 1, 1917. Widney assigned his claim against the corporation for $7,000 to the defendant herein, who, on May 4, 1915, commenced an action for the recovery of that sum with interest from February 1, 1914; and having caused to be issued a writ of attachment he garnished in the hands of the subtenants the rents due for March, April, and May, 1915. The initiatory pleading contains a clause which reads: “The said Willamette Building & Realty Company is and has been at all times since its organization without assets or funds, except the said lease, and the rents received from the subtenants on said premises.” [513] The plaintiff’s counsel invoking the rule announced in the case of Otis v. Conway, 114 N. Y. 13 (20 N. E. 628), where it was held that the creditors of an insolvent lessee have no equitable claim to the profits issuing from leased land until after the landlord’s claim for rent is satisfied, contend that the averments of the complaint bring their case within the legal principle so promulgated, and this being so, errors were committed in sustaining the demurrer and in dismissing the suit. In the case referred to the plaintiffs, on January 1, 1881, leased to Oscar Strasburger property in the City -of New York for a term of five years at an annual rental payable on the first days of February, May, August, and November. Strasburger sublet a part of the premises and occupied the remainder until September, 1884, when he was adjudged a lunatic and his son Albert was appointed his committee and continued the business in which his father had been engaged at the same place until November 20, 1884. Pursuant to orders made by the court having charge of the lunatic’s estate Albert paid to the plaintiffs the rent to February 1, 1885. During that month Albert’s resignation was accepted by the proper court, which appointed in his stead the defendant, who continued to act as such guardian. Soon thereafter a dispute arose as to who was entitled to the rents for the year 1885, whereupon it was stipulated by all the interested parties that pending the controversy the money derived from that source from all but one of the tenants should be deposited in court to await its final order in the cause. Prior to his lunacy Oscar Strasburger leased a part of the land to Jacob G-odhelp, who occupied the premises until January 1, 1886, the termination of the original lease. By agreement of the parties the rent received from the • subtenant was deposited in a bank subject -to the final [514] determination of the suit. The disposition of these two items of rent was the question considered by the court. In deciding-the case Mr. Justice Brown remarks: “We think that the plaintiff’s claim to have the God-help rent paid to them is well founded. The lunatic’s estate is insolvent, and will pay but a small percentage upon the debts conceded to exist against it. Technically, rent is something which a tenant renders out of the profits of the land which he enjoys. Equitably, it is a charge upon the estate, and the lessee, in good conscience, ought not to take the profits thereof without a due discharge of the rent. (Citing cases.) The creditors of an insolvent lessee can have no moral or equitable claim to the profits issuing from leased land, until after the landlord’s claim for rent is satisfied. ” The language so employed should be interposed in the light of the facts involved.. There the lunatic’s estate was in legal custody and under the control of the guardian. The court having thus obtained jurisdiction of the subject matter and of the person of the lunatic would not allow the original landlords to re-enter so long as the rent reserved by the lease was being paid by the under-tenant and the money so received was held subject to final judicial determination. It would have been a travesty on justice to have held in that case, that while the landlords could be deprived of their right to declare a forfeiture of the lease, the rent to which they were entitled and which should have been paid to them could be divided among the general creditors of the lunatic’s estate. Any other conclusion would have been equivalent to a confiscation of the rents without the landlords’ consent or power to prevent the appropriation of their property to a private use, for they could not, without the consent of the court, interfere with the committee’s right of possession of the demised premises. Other decisions relied [515] upon by plaintiff’s counsel are to the same effect. Thus in Bredell v. Fair Grounds Real Estate Co., 95 Mo. App. 676 (69 S. W. 635), a receiver having been appointed a like conclusion was reached as in the preceding case. So too in Riggs v. Whitney, 15 Abb. Pr. (N. Y.) 388, it was held that the rents which came from the under-tenants of a judgment debtor into the hands of a receiver were not subject to distribution among the creditors until the claim of the original landlord for rent had been extinguished. To the same effect see also 2 Taylor’s Land, and Ten. (9 ed.), § 659. The complaint in the case at bar does not allege that the corporation, which is the present lessee of the real property, is insolvent. We do not, however, rest our decision on the absence of such averment, though that would be sufficient to sustain the action of the court in its ruling upon the demurrer if the plaintiffs’ theory were to prevail. The demised property is not in the custody of the law, and this being so there is nothing to prevent the original landlords from re-entering the premises for a default in failing to keep thé covenants -of the lease. It is unnecessary to consider other questions presented by counsel for the respective parties. No error was committed as alleged, and the decree is affirmed. Affirmed. Mr. Chief Justice McBride, Mr. Justice Bean and Mr. Justice Burnett concur. Mr. Justice McCamant taking no part in the consideration of this case.