Forepaugh v. Westfall

Canty, J. The complaint in this action alleges that tbe plaintiff’s tenant, carrying on a banking business on the leased premises, made an assignment to defendant for the equal benefit of all its creditors under the laws of this state. That defendant took possession of the premises, and “continued the business thereon for the purpose [124] of carrying out the trust imposed upon him as such assignee” for one month, paid the rent to plaintiff for that month, and then abandoned the premises, there being then more than nine months of the term of the lease still unexpired. The action is brought to recover the rent of the next month. The answer is simply a restatement of the same facts. The court below ordered judgment for defendant on the pleadings, and, from the judgment entered thereon, plaintiff appeals. In support of the judgment, defendant relies on the case of Wilder v. Peabody, 37 Minn. 248, (33 N. W. 852,) but we do not think the question here presented was in that case. That was simply an attempt to prove, as a claim against the insolvent estate, the installments of rent neither earned, due, nor payable under an unexpired lease. It was held that such rent was not an absolute debt against the insolvent, due fin the future, but a mere contingent claim which might never become absolute, as the lease might be forfeited, surrendered, or otherwise terminated before the rent came due. It is a well-established principle that an assignee for the benefit of creditors does not accept a leasehold interest by merely accepting the trust, and it is his duty to refuse to accept it, if it is of no benefit to the creditors; but, if he does accept it, he is liable personally for the rent while he holds the lease, the same as any other assignee holding a leasehold interest. If he refuses to accept such leasehold interest, the lease is not thereby surrenderd to the landlord, but remains in the assignor. It has long been a mooted question what acts on the part of the assignee amount to an election to take the lease. Such English cases as Hanson v. Stevenson, 1 Barn. & A. 303, and Welch v. Myers, 4 Camp. 348, hold that an assignee in bankruptcy .may enter and remove the bankrupt’s goods without thereby accepting the lease, but that if he continues the bankrupt’s business, or sells the goods on the premises, it amounts to an acceptance of the lease. However, this was under a bankrupt law which provided that the bankrupt was not liable on the covenants in the lease after the assignee had accepted it. See Copeland v. Stephens, 1 Barn. & A. 593. Under such a provision, it might well be held that it was the duty of the assignee not to embarrass the landlord by his acts, but to act promptly in electing to accept or reject the lease, and that his acts would be construed most strongly against him. Howrever, there are [125] other English cases which do not apply this strict rule. See Wheeler v. Bramah, 3 Camp. 340. There are several American decisions which follow the strict English rule, but most of them are in cases of common-law assignments. Under an insolvency law such as ours, the assignee is an officer of the court; his powers and duties are defined by law, and not by the deed of assignment; he is more immediately under the control and protection of the court than the assignee of an assignment in pais or a common-law assignment, whose acts of use and occupation of the leased premises might be regarded more as the acts of a private party, and be construed more strongly against him. There are several American decisions which hold that such an assignee, an officer of the court, is analogous to an executor or administrator (Journeay v. Brackley, 1 Hilt. 454; Jermain v. Pattison, 46 Barb. 9), and that in such a case, if the value of the land is less than the rent, and there is a deficiency of assets, the landlord can recover of the trustee only the profits which he received from the premises (3 Williams, Ex’rs, 1756-1759). It is well settled that, in any case, the assignee of a lease may relieve himself from continuing to incur liability under it by assigning it, even to a beggar; so that the landlord has no vested right in a continuance of the assignee’s liability during the life of the lease. But the courts ought not to be too ready so to construe the liabilities of its officers as to compel them to resort to such a subterfuge as this in order to escape such liability. We are of the opinion that the mere fact that such an assignee goes upon the leased premises, and there performs his trust by selling the assigned goods, or even continuing the business a short time under the direction of the court, will not amount to an election on his part to take the lease, especially if no step is taken by the landlord or assignor to require him to elect; that, in any such case, the assignee may act in a reasonable manner without thereby incurring the liability of talcing the lease. If an executor waives a lease made to his testator, it amounts to a sort of a surrender to the landlord, but, if an assignee waives a lease made to the insolvent, it does not; the lease still remains in the insolvent until there is some act of forfeiture, as, for instance, nonpayment of rent. This being so, unless the assignee accepts the [126] lease there is no privity of estate between him and the landlord, and no action against him will lie, even for use and occupation, when he has thus temporarily used the leased premises in the performance of his trust. But a court of equity having a fund in court sometimes acts on equitable rules, and recognizes equitable rights which could not otherwise be enforced, and it will recognize and allow such equitable claim for rent during the time the assignee used the premises as a part of the expense of performing the trust. Journeay v. Brackley and Jermain v. Pattison, supra, and White v. Thomas, 75 Mo. 454. The judgment appealed from should be affirmed. So ordered. Buck, J., absent, took no part. (Opinion published 58 N. W. 689.)