Borcherling v. Katz

Vast Fleet, V. C. This is a novel case. The complainant seeks to hold the defendants for the rent reserved by a lease made by him to other persons than the defendants. The special ground on which he seeks to do this is, that the defendants were the real lessees, that, though the demise was made to other persons, they acted simply as the agents of the defendants, who were the principals in the affair and entitled to the benefit of the demise. The legal principle on which he rests his right to relief, is that which entitles a vendor who, having made a sale to a person whom he believed at the time to be the principal in the transaction, is afterwards — 152 — discovered to have been the agent of a third person, to recover the price of the goods of the principal, though he has in the meantime debited the agent. The following summary presents all the important facts: On the 22d of October, 1877, the complainant made a lease, under seal, to Rudolph Heller and William Katz, partners, doing business under the name of Keller & Katz, demising certain premises, situate on Mulberry street, in the city of Newark, for a term of two years and five months from the 1st day of November, 1877, at an annual rent of $840, payable monthly in advance. The lease was executed by both parties. It gave the lessor the right to re-enter for the breach of any covenant on the part of the lessees. The lessees covenanted not to underlet, nor to assign the lease, or any part of their term, without the written consent of the lessor. On the 31st day of October, 1877, the defendants, Bernard Katz and Philip Katz, constituted and appointed Heller & Katz their attorneys, empowering them to carry on and conduct the business then owned by the defendants in the city of Newark, and to do and perform all and fevery act and thing whatsoever requisite and necessary to be done in carrying on the -business. Heller & Katz took possession of the demised premises soon after the commencement of the term, and continued to occupy them, jointly, until December, 1878, when Heller left. Afterwards Katz continued to occupy them alone until April 1st, 1879, when he left. At the time the premises were abandoned there was $220 rent in arrear, which the complainant attempted to collect by distress, but the defendants claimed the property seized, and the complainant surrendered it. This claim by the defendants was, in part at least, false. They now admit that most of the chattels seized belonged to Heller & Katz. The complainant subsequently brought an action at law against the lessees for the rent in arrear, but, on discovering the power of attorney, proceeded no further. He did not know of the existence of the power of attorney until May, 1879, some time after he had commenced his action at law. Eor the purpose of putting the ease in the most favorable form for the complainant, I shall assume that the business carried on — 153 — on the demised premises was the business of the defendants, and that Heller & Katz were the agents of the defendants when the lease was executed, although the weight of the evidence shows both facts to have been otherwise. Some of the complainant’s legal propositions are so firmly established as to be beyond, dispute. There can be no doubt that a principal is bound by the acts of his agent within the authority expressly given to the agent, and also for such acts as are necessary and requisite to be done in order that the agent may accomplish the object of his appointment. It is also true, as a general rule, that where a contract is made by an agent, without disclosing his principal, and the other contracting party afterwards discovers that the person with whom he dealt was not the principal, but that a third person stood behind him as the real party in interest, he may abandon his right to look to the agent personally, and resort to the principal. And this he may do even when the ■contract is in writing, and is such as is required by the statute of frauds to be in writing, fo.r, in such case, parol evidence, showing that an additional party is liable, in no way contradicts the written instrument. “ It does not deny that it is binding on those whom, on its face, it purports to bind, but shows that it also binds another, by reason that the act of the agent, in signing the agreement, in pursuance of his authority, is, in law, the act of his principal.” Higgins v. Senior, 8 M. & W. 834, 844- Parol ■evidence is admissible in such cases to charge the principal, but not to discharge the agent. 2 Smith’s Lead. Cas. 226. But where an agent makes a lease in his own name, and executes it in his own name, though the rent is reserved to his principal, and all the covenants purport to be made with his principal, the .principal cannot maintain an action on it, for the reason that on a deed inter partes no person can maintain an action except a party to it. Berkeley v. Hardy, 5 B. & C. 355; Sheldon v. Dunlap, 1 Harr. 245. The complainant puts his right to relief against the defendants, on these legal rules. He justifies his resort to this court in this wise: He insists that by force of the legal rules just stated, his right to hold the defendants for the rent js clear, but — 154 — that he cannot maintain an action at law against them because they are not parties to the lease. He says he cannot maintain an action for use and occupation, for the statute declares that such action can only be maintained where the agreement for the occupation of the land is not by deed (Rev. p. 570 § S); he claims,, therefore, that his case falls within that principle of equity jurisprudence which declares that where there is a right there ought to be a remedy, and, if the law gives none, it ought to be administered in equity. This conclusion, I think, may be admitted to be sound, provided it is found that the defendants are subject to the legal principle on which the complainant mainly rests his right to relief. This, in, my judgment, is the test question of the case. Neither the researches of counsel, nor my own, have resulted in the discovery of a precedent for this action. I think it may safely be said that no instance exists in which some other person than the lessee named in a lease, under seal, has been held liable in equity for the rent reserved by the lease, on the ground that he was the undisclosed principal in the transaction, and liable, as-such, by force of the rule which renders an unnamed and unknown vendee liable for the price of goods purchased by him through his agent. The only case to which my attention has been, directed, which can be regarded as authority for the complainant’s position; is Clavering v. Westley, 3 P. Wms. 402. There the plaintiff made a lease of a coal mine to A for twenty-one years. A then declared a trust of the lease for five persons. These five persons entered into possession, worked the mine, and took its products, but some time after, the lessee becoming insolvent, and the mine unprofitable, they abandoned it. The lessor then brought his bill against the lessee and eestuis que trust to compel them to pay the rent in arrear, and also the accruing rent, insisting that though the lease was made to A, yet it being declared by him to be in trust for the five persons, as tenants in common, it was the same thing as if it had been made to them originally. The master of the rolls (Sir Joseph Jekyll) held that the eestuis que trust were not liable, and dismissed the bill. His reason was this: That inasmuch as the plaintiff had chosen. — 155 — to let the mine to A alone, and to accept his covenant for the rent, he should be restricted to the security he had voluntarily accepted. Having accepted the covenant of the lessee, his remedies were limited to that. Lord Talbot, on appeal, reversed this decree, and decreed that the lessee was primarily liable, but in case the rent could not be collected of him, then that each of the five cestos que trust should pay one-fifth of the rent in arrear, and also that which should afterwards accrue. The report of this case, on appeal, is extremely meagre and unsatisfactory. The conclusion of the lord chancellor is simply'given, without more. No reasons are given, and we have not a even a hint of the lega-l rule which it was supposed the judgment of the master of the rolls had overlooked or disregarded. • But this case has since been overruled. It is no longer an authority in the court which decided it; on the contrary, its doctrine has been repudiated. Lord Cranworth, in Walters v. Northern Coal Mining Co., 5 De G. M. & G. 629, after expressing regret that the grounds of Lord Talbot’s decision are not given, says: “ If he is to be taken as laying down a general proposition that whenever a legal lessee is trustee for another, the rent becomes an equitable debt from the cesto que trust, to be recovered by bill in this court, I must, with all respect, say that is a proposition to which I cannot assent. I rest my judgment on the ground that no such general principle exists.” Lord Cranworth’s discussion of the question on which the decision here must turn, is so exhaustive and unanswerable that this case may be decided by a single quotation from his opinion. He says: “ The rights of a landlord against those who occupy his land are legal rights, well defined and understood. Where a tenant is holding under a demise at a stipulated rent, the landlord has his remedy by distress or action of debt. If the lessee assigns to another, the landlord has against the assignee, so long as he remains in possession, the same rights which he had against the original tenant. If instead of assigning his interest, the lessee creates a tenancy under himself, then the original landlord may either distrain on the under-tenant, or may bring his action of debt or covenant, as the case may be, against the original lessees. — 156 — * * * The object of the present bill is to give to the landlord an additional remedy in case the legal lessee is a mere trustee for others, who have in fact occupied the lands, to enable the landlord, in such a case, to treat the cestuis que trust as equitable debtors for the amount of the rent. But I can discover no principle to warrant such a proposition. The relation between the owner of the land and those who occupy it is of a purely legal character. The circumstance that there is a relation of' an equitable character subsisting between the lessee and the actual •occupier cannot give any equitable rights to one who claims by a title paramount both to the trustee and the cestui que trust. Whatever be the relation between the lessee and the occupier, the landlord’s rights are unaffected. He has his legal remedy by distress, or he may bring his action against the lessee.” The same doctrine, substantially, was enforced by Lord Justices Knight Bruce and Turner in Cox v. Bishop, 8 De G. M. & G. 815. An attempt was made there to hold the equitable assignee of a lease for the rent which accrued during the time he was in the actual possession and enjoyment of the demised premises. Lord Justice Knight Bruce said : “ They [possession and enjoyment] do not, in my judgment, create a contract between the lessor and the equitable assignee which can give the former a title to the relief prayed against the latter. The possession by itself would not, nor would the equitable assignment by itself, have given the lessor the equitable right which he is here asserting against the lessee; neither, I think, can the union of the two.” It is quite impossible to distinguish these cases from the one under consideration. They are, in all material and essential points, identical, and must all be governed by the same general rules of justice. The fact that the complainant has chosen to describe the relation existing between the defendants and the lessees in this case, as principal and agent, and that in the cases just referred to the relation which existed between the lessees and the persons sought to be charged with the rent was spoken of as trustee and cestuis que trust, is without the least significance in legal estimation. The difference is in terms or names, and not in the legal character of the relation. The relation, in principle and — 157 — substance, is the same, whether it is described by one set of terms or the other, and its rights and obligations are the same, whether called by one name or the other. In every instance in which ah agent takes title in his own name ’to property purchased for his principal, he makes himself, in equity, the trustee of his principal. And if, in the transaction under consideration, Heller & Katz were the agents of the defendants, then in taking the lease in their own names they made themselves the trustees of the defendants, and the more accurate description of the relation of the parties, in that case, would be trustee and cestui que trust, rather than principal and agent. The precedents are against the complainant. I think reason is also against him. No reason of justice or policy can be suggested why landlords should have the additional remedy sought in this case. A creditor of that kind is already highly favored by the law. He may distrain either against the tenant or the under-tenant; if the person in possession fails or refuses to pay the rent in arrear, the landlord may dispossess him, and thus recover the possession of the premises, and in addition, he may use-the only means within the reach of ordinary creditors—bring his action at law. If with these ample remedies at his command he fails to secure the payment of his rent, it may be safely concluded it is not for the want of adequate remedies. The complainant’s bill must be dismissed, with costs.