Metropolitan Life Insurance v. Hellinger , 284 N.Y.S. 432 ( 1935 )

Untermyer, J. (dissenting).

The action is for rent of room No. 607 in the building 657-659 Fifth avenue in the city of New York, of which Barclay Arrow Holding Corporation in 1928 was, and apparently still is, the owner in fee.

The complaint alleges that on June 6, 1928, the Barclay Arrow Holding Corporation leased the entire building to William H. Minton. On March 2, 1929, Minton assigned the lease to Plaza Investing Corporation. On May 6, 1929, the defendant leased from Plaza Investing Corporation room 607 for a term to commence September 1, 1929, and to continue to September 30, 1934. On December 30, 1929, Plaza Investing Corporation assigned its lease of the entire building to Plaza Trust Company. The complaint alleges that on September 13, 1930, Plaza Trust Company assigned all subleases of the entire building to Barclay Arrow Holding Corporation, the owner of the premises, which assignment included the defendant’s sublease of room 607. On December 31, 1931, Barclay Arrow Holding Corporation assigned all rents and leases pertaining to the building 657-659 Fifth avenue to the plaintiff and, it is alleged, after such assignment the defendant duly attorned to the plaintiff and recognized the plaintiff as his landlord.

In addition to other denials the defendant by his answer denies the assignment on September 13, 1930, by Plaza Trust Company to Barclay Arrow Holding Corporation of the defendant’s sublease and that he has attorned to the plaintiff. By the separate defense, which has been stricken out by the Special Term as insufficient in law, the defendant alleges that on September 13, 1930, Plaza Trust Company, then the assignee of the lease of the entire building, by an agreement in writing which is annexed to the answer, duly surrendered, and Barclay Arrow Holding Corporation, then the owner, duly accepted the surrender of the lease of the building from and after December 31, 1930. Thereby the defendant asserts, the sublease of this defendant, on which it is sought to hold him hable for rent, was completely extinguished from December 31, 1930, by merger of the lease of the entire building in the fee title of Barclay Arrow Holding Corporation. He alleges that though he remained in possession and paid rent under the sublease from December 31, 1930, to January 4, 1933, he did so without knowledge of the surrender. The defendant further alleges that he has performed all the terms of the lease until he removed from the premises on January 4, 1933, and that he is not hable for rent under the sublease after the date of removal.

Assuming, as we must, the truth of the allegations of the answer, it is necessary to determine the effect upon the obhgations of the defendant, an undertenant, of the surrender on December 31, 1930, by Plaza Trust Company, the assignee of the lease of the entire building, to Barclay Arrow Holding Corporation, the owner of the fee. Such a surrender would not have affected the rights of a subtenant had he elected to affirm the sublease by refusing to recognize as binding upon him a transaction to which he was not a party. (Eten v. Luyster, 60 N. Y. 252; Ashton Holding Co., Inc., v. Levitt, 191 App. Div. 91; 2 McAdam on Landl. & Ten. [5th ed.] § 324.) “ It was not competent for the lessor and lessee to affect the rights of third parties by a formal surrender of the lease. * * * The surrenderees and owners in fee became the immediate landlords of the plaintiff, with only such rights as his lessor would have had to the possession of the premises before the expiration of the term.” (Eten v. Luyster, supra.) The consequences are different where the lease is terminated, not by voluntary action of the parties, but on account of a breach by the lessee. (Hoffmann Brewing Co. v. Wuttge, 234 N. Y. 469; New York Railways Corp. v. Savoy Associates, Inc., 239 App. Div. 504; Ash v. Purnell, 16 Daly, 189.) But here we are not concerned with the rights of a subtenant upon the extinction of an intervening estate, but with his obligations under such conditions. The two situations are by no means identical, for it is not uncommon that a party is placed in a position where he may elect to affirm or disaffirm a transaction as his interest may suggest. It does not follow, therefore, that because a subtenant under such circumstances may refuse to recognize the surrender as curtailing his rights, he may not avail himself of its legal consequences.

It has been said that “ a surrender is the restoring and yielding up an estate or interest in lands to one who has an immediate estate in reversion or remainder.” (Coe v. Hobby, 72 N. Y. 141.) Consequently, when Plaza Trust Company surrendered to Barclay Arrow Holding Corporation the lease of the building, of which it was assignee, the lease was extinguished by merger in the fee. What exactly was the effect of this upon the underlease, which, in the language of the common law, had been “ carved ” out of the estate which was destroyed? The rent being incident to the reversion, the tenant could not thereafter, collect it because he had parted with his reversion to the owner of the fee. The owner could not collect it because, though the reversion to which it was incident had been conveyed to him, yet, when conveyed it merged immediately in the superior title of which he was possessed. So inevitable was this result that even an agreement between the owner and the tenant would have been ineffectual to avert the consequences of their act. (Schulte, Inc., v. Cross, 146 Misc. 763.) The parties to the lease could not destroy the intervening estate and at the same time keep alive that which was dependent upon what they had destroyed. Byjhperation of law, the obligation of a subtenant was terminated when the lease was surrendered. Thereafter nothing remained which could have been assigned. Moreover the Plaza Trust Company did not attempt to preserve the subleases by any assignment to the owner, futile though such an attempt would be. It merely surrendered the lease “ subject to the subleases, a schedule of which is hereto annexed,” and the owner covenanted to “ assume the obhgations imposed upon the lessor in each of said subleases.” This, quite obviously, was intended merely as notice to the owner of the existence of subleases created by the tenant, subject to which the surrender was made and the obhgations of which were assumed by the owner for the protection of the tenant against claims by subtenants. The interest of the tenant in the subleases was not assigned. Indeed, these provisions did not alter the rights of the parties as they would have existed by operation of law. (Eten v. Luyster, supra.)

The general rule apphcable here is stated in Smith on Landlord and Tenant (p. 232), as follows: “A surrender is never allowed to operate injuriously to the rights of third parties; and, therefore, a tenant cannot, by a surrender of bis lease, to his landlord, affect the estate or rights of his underlessee. (Shep. Touch. 301; McKenzie v. Lexington, 4 Dana, 129.) But although a tenant who has made an underlease cannot by a surrender prejudice his tenant’s interest, yet he will himself lose the rent he has reserved upon the underlease; for since rent is an incident to the reversion, the surrenderor cannot collect it, because he has parted with his reversion to the lessor; nor can the surrenderee have it, because although the reversion to which it was incident has been conveyed to him, yet, since it was so conveyed, it merged in the greater reversion of which he was already possessed, and the consequence is that the underlessee holds without the payment of any rent; except where the contrary has been expressly provided by statute.” Other commentators state the rule in similar terms. (Tiffany Real Prop. p. 211; Thompson Real Prop. § 1664; Taylor Landl. & Ten. [9th ed.], §§ 517, 518; Woodfall Landl. & Ten. [22d ed.] 306. Compare, also, “ Effect of the Surrender of a Lease,” 13 Columbia Law Review, 245.) Such always was the common law of England (Thre’r v. Barton, Moore, 94; Webb v. Russell, 3 Term Rep. 393; 3 Preston Conveyancing, 448) until changed by statute. (8 & 9 Vict. chap. 106, § 9.) Such also is the law in other jurisdictions. (Appleton v. Ames, 150 Mass. 34; 22 N. E. 69; Bailey v. Richardson, 66 Cal. 416; 5 P. 910; Krider v. Ramsay, 79 N. C. 354; McDonald v. May, 96 Mo. App. 236; 69 S. W. 1059.)

These principles of the common law, so ancient and so widely recognized, have never been changed by any statute in this State. On the contrary, the only statute which appears to have relation to the subject is convincing evidence that the Legislature, conscious of the rule, intended that it should continue except where, at the time of the surrender, a new lease was acquired by the tenant. Section 226 of the Real Property Law provides: “ The surrender of an under-lease is not requisite to the validity of the surrender of the original lease, where a new lease is given by the chief landlord. Such a surrender and renewal do not impair any right or interest of the chief landlord, his lessee or the holder of an under-lpase, under the original lease.” (Italics mine.)

The effect of these provisions is to preserve the obligations of sublessees where the tenant surrenders the original lease and receives a new lease in return. To this extent the statute introduced a change in the existing law. (Compare Coe v. Hobby, supra.) But the statute does not affect the obligations of a sublessee except under the special circumstances which concededly do not exist here. Indeed, it must be evident that when the Legislature enacted these provisions, limited to instances where there was a “ surrender and renewal,” it recognized that a surrender without renewal would “ impair ” the right to enforce an underlease and that it indicated as clearly as could be that this condition should remain unchanged except as thus expressly modified.

It need only be added that this would not deprive the landlord of the right to maintain summary proceedings against the under-tenant or to recover for use and occupation if he has remained in possession after the surrender without payment of rent. (Christatos v. United Cigar Stores Co. of America, 144 Misc. 322.) It may further be observed that attornment by the undertenant with knowledge of the facts would undoubtedly constitute a binding election on his part to affirm the continued existence of the lease. (Compare Rhinelander Real Estate Co. v. Cammeyer, 216 App. Div. 299.)

For these reasons I am of opinion that the order appealed from should be reversed, with twenty dollars costs and disbursements, and the motion denied.

Order affirmed, with twenty dollars costs and disbursements.