Johnson v. Emerson Phonograph Co.

MAYER, Circuit Judge (after stating the facts as above). The duty of receivers such as those in this case has been recently restated by this court as follows: “It is the receiver’s duty to accept as part of the estate to be administered for the creditors those assets which will prove of value to the estate. _ Those which are not of value are to be left outside the field of his receivership. As to those assets which are of problematical value, it is necessary that the receiver should he allowed a reasonable time within which to determine to which class of assets they belong, whether they are of the class which he should administer, or to the class which he is to let alone. In order that he may determine, for example, whether he should assume a lease belonging to the insolvent estate, he is entitled to take possession of the leased property and operate it for a reasonable time. By the mere act of taking possession he does not adopt the lease and become bound by its covenants. He is entitled to hold for a reasonable time, to ascertain the situation of affaia-s, and while so holding he is not hound by the covenants of the lease.” American Brake Shoe & Fdry. Co. v. New York Railways Co., 282 Fed. 523, 528. The receivers here promptly disaffirmed the lease and thus acted within a reasonable time. Thereafter the receivers were not bound by the covenants of the lease. The only claim which Yellin might have had against them was one irrespective of the leases; i. e., for use and occupation of the space in which the printing plant and other chattels of Emerson Company remained after their appointment, and this only if the relation of landlord and tenant had been set up between Yellin and the receivers, qua receivers. In Yellin’s petition, dated December 2, 1921, it will be noted that he stated that he desired to take steps to obtain relief in two different respects: (1) Collection of the amount due him from those responsible on the lease; and (2) dispossession of those in possession of the premises. By the order of December 8, 1921, the court distinctly provided that any proceeding instituted by Yellin to obtain a money judgment only against the receivers should be commenced in the District Court. By this reservation, it is plain that the District Court did not< permit Yellin to test in any other court any questions arising out of' the disaffirmance of the lease or any claim, asserted on any ground, which might result in what the order called a “money judgment,” and which manifestly meant any claim for which the receivers in their official capacity would be compelled to respond by the payment of money. Whether or not the receivers had successfully disaffirmed the lease and whether or not Yellin had any money claim against the receivers was to be tried out in the District Court and not elsewhere. When, therefore, Yellin brought the dispossess proceeding in the Municipal Court, there was neither duty nor occasion for the receivers to appear. That proceeding could not result in a money judgment, and could only award possession of the premises to the landlord, and the receivers, by their disaffirmance, were not in possession. It was perhaps necessary, and in any event proper, for Yellin to join the receivers as parties in the proceeding, because Emerson Company was the lessee on the lease, and the undertenant, United States Record Manufacturing Company, became such undertenant because of the right of Emerson Company to sublet the entire space concerned to [46] United States Record Manufacturing Company. See section 1415, New York Civil Practice Code, quoted in the margin.1 In this dispossess proceeding, Yellin naturally desired to cut off any claim of possession by the undertenant, under whatever circumstances and for whatever reason that claim might be asserted. In view, however, of the reservation in the order of December 8, 1921, the final order in the dispossess proceeding in the Municipal Court was in no sense res adjudicata, so as to bring the case within the principle of Prince v. Schlesinger* supra, and in no manner adjudicated that the receivers were tenants. The Prince Case differs from that at bar in at least three respects: First. Schlesinger was presumed to have been appointed permanent receiver by reason of chapter 60 of Daws of 1902 of New York. As pointed out by Mr. Justice Houghton, such receivers take title while chancery receivers do not. Second. Schlesinger, as receiver, entered into the possession of the leased premises and held over after default in the payment of rent. Third. There was no order such as that of December 8, 1921, in the case at bar reserving jurisdiction over the substantial controversy. From what has been stated, supra, it was apparent that the court below erred when it held that the Municipal Court’s final order was res adjudicata and precluded the receivers from denying that they were tenants under the lease in the proceeding heard before the special master. Assignment of error No. 8 asserts that the order below is erroneous because, inter alia, it failed to adjudicate that the receivers were under no liability to Yellin either for rent or for use and occupation. Many cases have been cited by counsel in respect of the relation existing between a lessor, on the one hand, and a lessee and undertenant or subtenant, on the other. These cases relate to situations where the conventional relationship of landlord and lessee exists, and they deal mainly with the proposition that the possession of the undertenant is possession by the tenant, and that the fact that -rent is accepted by lessor from the undertenant does not. necessarily constitute a surrender of the premises by the lessee or the acceptance of such a surrender by the landlord. No such question arises in this case. We have already pointed out that the lease was disaffirmed. The result is that there never was the relation of landlord and tenant as between Yellin and the receivers. The premises in question were occupied solely by United States Record Manufacturing Company after December 1, 1920, and the permission of that company to the receivers to leave certain chattels in a part of the premises occu [47] pied by it did not, in any manner, create the relation of landlord and tenant between Yellin and the receivers, and did not subject the receivers to any claim for use and occupation. As briefly stated in 39 Cyc. 853:' “An action for use and occupation lies only -where the relation of landlord and tenant exists.” In order to avoid misunderstanding, we may" state that what is here decided is without prejudice to a claim for damages, if any, of Yellin against Emerson Company, which may have arisen because of the disaffirmance of the lease. We are passing solely upon the question as to whether or not Yellin has any claim against the receivers which must be paid as an administration expense. We hold that he has no such claim, and hence the decree is reversed, with costs, and the District Court is instructed to enter a decree in accordance with this opinion. Footnotes [1] “The applicant must present to the judge or justice a written petition verified in like manner as a verified complaint in an action, describing tlie premises of which the possession is claimed and the interest therein of the petitioner or the person whom he (represents, stating the facts which, according to the provisions of this article, authorize the application by the petitioner and the removal of the person in possession, naming or otherwise intelligibly designating the person or persons against whom the special proceeding is instituted, and, if there are two or more such persons and some are undertenants or assigns, specifying who are principals or tenants and who are undertenants or assigns, and prayirig for a final order to remove him or them respectively. (Added by Laws 1921, c. 199, in effect October 1, 1921.)”