Opinion
No. 4262.
Argued January 5, 1954.
Decided March 2, 1954.
To constitute a surrender of a lease for a term of years by operation of law in the event of insolvency of the lessee overt acts of both parties inconsistent with the continuance of the term are essential. Where the lessor of premises for a term of years failed to exercise an option in the lease to terminate it when the lessee became insolvent or to accept the surrender thereof but rather filed a claim for all rent to become due until the expiration of the lease he was entitled to collect future rent for such period as and when it became due. Neither the failure of the receiver in such case to assume the lease upon the insolvency of the lessee nor the unsuccessful attempt on the part of the lessor to relet the premises to a third party affects the liability of the lessee for the agreed rental for the unexpired term of the lease. A lessor's claim for rent for the remainder of the term after the insolvency of the lessee is generally not provable in receivership proceedings.
RECEIVERSHIP. Exceptions to a final decree of the Superior Court in a receivership of an insolvent corporation.
Plaintiff leased to defendant corporation by a writing executed September 29, 1950, a store located in Laconia for a term of ten years from October 1, 1950, at an annual rental of $1,800 payable in monthly installments of $150 in advance. The lease contained the following clause: "Provided further . . . if the lessee shall be declared bankrupt or insolvent according to law, or shall make an assignment for the benefit of its creditors, then and in any such case the lessor . . . lawfully may, immediately or at any time thereafter, and without notice or demand, enter into and upon the demised premises . . . and repossess the same as of his former estate, and expel the lessee . . . and thereupon this demise shall absolutely determine . . . ." It contained no provision for the payment of damages in the event of termination by or on behalf of the lessee before expiration thereof.
Defendant occupied the premises and paid the rent when due until the appointment by the Superior Court on October 9, 1951, of a temporary receiver over it on a petition therefor filed by defendant and others. The receiver occupied the premises thereafter until February 2, 1952.
Plaintiff filed a claim with the receiver August 15, 1952, for rent for November, 1951, to August, 1952, inclusively in the amount of $1,500 "and rent to become due September 1, 1952, to October 1, 1960, at One Hundred Fifty Dollars ($150.00) per month, $15,000.00."
On the receiver's final report and petition for discharge the Court (Wescott, J.) made the following decree relative to said claim.
"(3) That the claim of Rubin Wein for rental of premises at 504 Main Street, Laconia, N.H., under the terms of a certain indenture dated September 29, 1950 . . . be and the same hereby is allowed as a preferred claim in the sum of $600 for the period November 1, 1951, to February 28, 1952 . . . the claim of Rubin Wein, Lessor, as a general creditor or otherwise against Arlen's, Inc., Lessee, for the unexpired term of said lease be and the same hereby is disallowed in full; the Temporary Receiver of Arlen's, Inc., be and hereby is authorized and directed to make payment of $600 to Rubin Wein forthwith out of the assets of the estate of Arlen's, Inc.; and upon such payment, Arlen's, Inc., its successors and assigns, be and hereby is released and discharged from any further liability and responsibility to said Rubin Wein, his heirs, executors, administrators and assigns, under the terms, conditions and provisions of said indenture."
Plaintiff moved to have set aside that part of the decree which disallowed in full his claim as a general creditor or otherwise for the unexpired term of the lease and also that portion which, upon the payment of $600 allowed for occupancy by the receiver, released and discharged the defendant, its successors and assigns from any further liability and responsibility to plaintiff under the terms of the lease.
Plaintiff's exceptions were allowed and transferred by the Presiding Justice.
Normandin Normandin (Mr. F.A. Normandin orally), for the plaintiff.
Burns, Calderwood Bryant and Robert E. Hinchey (Mr. Hinchey orally), for the defendant.
Under the terms of the lease the landlord was given the option to repossess the premises if the lessee was declared bankrupt or insolvent or made an assignment for the benefit of its creditors. If he exercised this option in the event of bankruptcy, there being no covenant in the lease for the recovery of damages on such exercise, his so doing would terminate all of the mutual obligations of the parties and plaintiff would lose all rights to future rent thereafter. 3 Collier, Bankruptcy (14th ed.) 1901; See Oldden v. Tonto Realty Corporation, 143 F.2d 916. A termination on account of insolvency would have the same effect. In re McAllister-Mohler Co., 46 F.2d 91, 98; 51 C.J.S. 673; 52 C.J.S. 587; see English v. Richardson, 80 N.H. 364, 366.
The plaintiff could also lose his right to future rent by accepting a surrender of the premises made by the lessee. "Surrender" has been defined as a "yielding up of an estate for life or years to him that hath an immediate estate in reversion or remainder, wherein the estate for life or years may drown by mutual agreement between them." 4 Tiffany, Real Property (3rd ed.) 16, 1 American Law of Property 390. A surrender may be either express or by operation of law. There being no evidence of a writing the only surrender which could be found would be one by operation of law. R. L., c. 259, s. 15. Elliott v. Aiken, 45 N.H. 30, 36. To constitute such a surrender overt acts of both parties inconsistent with the continuance of the term are essential. Felker v. Richardson, 67 N.H. 509, 510; 2 Powell, Real Property 331.
There was no testimony offered at the hearing. Counsel made statements to the Court. This form of proceeding was accepted by the parties without objection and it is now too late for objection to it. Kusky v. Laderbush, 96 N.H. 286.
On August 15, 1952, the plaintiff filed a claim for all rent to become due under the lease until its expiration September 30, 1960. This is inconsistent with an exercise of his option to terminate or with a surrender by operation of law. At the hearing on the receiver's final report held March 30, 1953, plaintiff's counsel stated: "I further state there was no agreement as to the cancellation of the lease in any way, shape or manner." This was not denied.
The fact that the receiver exercised no control over the premises "except to close the store; to remove the merchandise after the inventory was taken; and then leave the fixtures in there until January when I found out there was no chance of Mr. Wein's disposing, or rather, renting the store" is not a basis on which to exclude liability of Arlen's Inc. for future rent under the lease. It merely shows that the receiver did not assume the lease with the legal consequence that the relations of landlord and tenant which existed by virtue of the lease were unaffected by his conduct. English v. Richardson, 80 N.H. 364; Cooper v. Trust Co., 134 Me. 372, 382.
An actual reletting of the premises by the landlord to a third party without notice to the tenant would not constitute in itself a surrender of the lease so as to relieve the tenant of his contractual obligations to pay the balance of the rent. Novak v. Company, 84 N.H. 93. Therefore we fail to see how an unsuccessful effort to relet would constitute a basis for a finding that the landlord thereby exercised his option to terminate the lease and its obligations.
The landlord would not permit the removal of lessee's fixtures from the premises after their sale by the receiver until his counsel and the receiver had a conference about his claim for rent. Lessee had paid the October, 1951, rent in advance of the appointment of the receiver on October 9. This action of the landlord would indicate his concern that his rent be paid instead of proving his termination of the lease on the insolvency of the lessee.
In our opinion there is no basis in the record for a finding that the landlord exercised his option to terminate the lease or that there was a surrender by operation of law or a waiver by the plaintiff of his rights against the lessee arising out of the lease. He therefore retained his right to collect future rent thereunder as and when it became due. Oldden v. Tonto Realty Corporation, 143 F.2d 916. 3 Collier, Bankruptcy (14th ed.) 1901.
In view of the above plaintiff's motion asking to have set aside that part of the Court's decree which released and discharged lessee from any further liability under the lease should have been granted.
We cannot say that it was improper for the Court to disallow plaintiff's claim for rent for the unexpired term of the lease as such claims are generally held not to be provable in such a proceeding. 75 C.J.S. 898; 45 Am. Jur. 207, 208.
Exceptions overruled in part and sustained in part.
All concurred.