Lamson Consol. Store Service Co. v. Bowland

LURTON, Circuit Judge, after making the foregoing statement of the case, delivered the opinion of the court. What are the rights of the lessor of this store service apparatus in respect to rents which had not accrued when the petition in bankruptcy was filed against the lessee company? The lessors invoke the third clause of the lease contract, which provides that, “if any installment of said rental shall remain unpaid for sixty days after it becomes due, the entire rental to the end of the lease shall become at once due and payable.” It is entirely competent to contract that the consequence of a default in the payment of an installment of interest for the use of money, or of rent for the use of property, shall be the precipitancy of the maturity of the principal of the money loaned, or of future installments for the. rental of the property in respect to which default has been made. Rent is the compensation for the use and enjoyment of the thing rented, and is ordinarily demand-able whether the tenant actually enjoy the use and possession of the subject of the rent or not, unless the failure is due to some fault of the letter. But in this case the letter demands that the lessee shall continue to pay rent, although it has repossessed itself of the thing for the enjoyment of which the rent is to be paid. The resumption of possession by a lessor operates as a surrender of the lease, and puts an end to the liability of the lessee for future rents, unless otherwise provided. A covenant in a lease authorizing a landlord, on default in rent, to take possession, and relet, if possible, for the benefit of the tenant, and that in such case the tenant shall remain liable for the deficiency, or for the whole rent if a reletting is impossible, has been held valid. Hall v. Gould, 13 N. Y. 127. In case of a covenant such as that just mentioned, the lessor’s possession would be as agent for the lessee; and the liability of the lessee would be contingent upon a deficiency, and clearly not such a fixed and absolute liability as would be provable in bankruptcy. In the lease here under consideration, the lessor has reserved the right to resume possession in quite a number of contingencies, the effect of which the contract declares shall be to “determine all right and interest the said lessee may have in said system.” Without more, it cannot be that the lessee shall be liable for the future rents, when the effect of the act of the lessor has been to determine all of his right and interest in the subject of the lease. Forfeitures are never favored, and when it is claimed that the lessor of property may resume possession of the subject-matter of the lease, and continue to hold the lessee liable for future rents, although deprived of the use and enjoyment of the thing leased, the terms of the bond must be exceedingly plain. Inability under such circumstances for future rents would be in the nature of a penalty, and the covenant by which the lessor may have both the use of the thing rented, and the compensation which the lessee was to pay for its use, must be so specific as that no other reasonable interpretation can be placed upon it. Hall v. Gould, 13 N. Y. 127. We have heretofore set out .the clause of the léase tipon which the lessor’s right to resume possession and exact future rents, also, must rest. The contention is that under the provision quoted the lessor may resume possession of the leased property upon the happening [642] of any one of the contingencies mentioned, without the surrender of the lease as a consequence. The catalogue of contingencies authorizing a resumption of possession and a removal of the leased mechanism is followed by a declaration as to the effect of the lessor’s act, in these words: “And thereby determine all right and interest the said lessee may have in said system.” The necessary consequence of a determination of the lessee’s right and interest at the election of the landlord must be to put an end to the lessee’s liability for future rents, in the absence of some specific agreement otherwise. That this was the intention of the parties seems very plain from the last sentence of the clause, which provides that “no removal of said system made by the lessor * * * on account of any determination of the lessee’s tenancy, or on account of any default by the lessee, shall constitute a surrender of this lease.” It is plain, then, that if the lessor has resumed possession and removed the system for any reason other than the termination of “the lessee’s tenancy,” or some “default by the lessee,” the effect must be the usual and legal consequence of a resumption of possession by a lessor, the determination of the lease. The reference to a removal “on account of any determination of the lessee’s tenancy” refers to the seventh paragraph of the lease, providing for notice to the lessor “of any determination of the lessee’s tenancy in said store, so that the lessor may have the right to remove said system, if necessary, without hindrance on the part of the landlord.” The only other case, then, in which a removal by the lessor of the system is not to constitute a surrender of the lease, is when the possession has been recovered in consequence of some “default by the lessee.” On what authority has the lessor taken possession of the leased store service? That the lessor did take possession about the date of the adjudication in bankruptcy is reported by the referee. But on what ground is this justified? Unless the appellant can show that this conceded possession was taken upon some ground which kept the lease alive, the appeal must fail. It was stated at the bar, and in the printed brief of counsel, that “the Lamson Consolidated Store Service Company, in accordance with its custom in case of bankruptcy, removed its system from the store of the bankrupt, as a protection to its own business, and to prevent such system from falling into the hands of persons unauthorized to use the same.” An adjudication of bankruptcy against the lessee would seem to justify the lessor in recovering possession. But the result would be the surrender of the lease. Thereafter no right to exact futitre rents would remain. If this appellant has the right to collect future rents after recovering the possession and enjoyment of the leased property, it must make out a clear case. As we have seen, counsel have attempted to justify the possession upon a ground which leaves no foot to stand upon, when asserting a claim for future rents. But can the dispossession of the lessee be justified by the default in payment of the installment of rent due December i, 1900? We think not, and for more than one reason. But it is sufficient to say that it does not appear that any formal demand was made for the rent on the pay day. Before a re-entry can be made [643] for default in rent, demand must be made for the precise dues at a convenient time before sunset on the day when the rent was due. Connor v. Bradley, i How. 217, 11 L. Ed. 105; Prout v. Roby, 15 Wall. 471, 476, 21 L. Ed. 58; Henderson v. Coal Co., 140 U. S. 25, 33, 11 Sup. Ct. 691, 35 L. Ed. 332; Parks v. Hays, 92 Tenn. 161, 22 S. W. 3; Smith v. Whitbeck, 13 Ohio St. 471; 18 Am. & Eng. Enc. Law, p. 375. Of course, it was competent to provide for a forfeiture without demand, but the contract in question contains no stipulation to that effect. Inasmuch as the agreement does not provide in express terms that the liability of the lessee should continue after the re-entry of the lessor, we must conclude that no liability for future rents was intended. There was no liability for past rents, for the lessor has either enjoyed the rents, or the use of the system, since December ij 1900. The judgment of the court below is accordingly affirmed.