Montant v. Moore , 120 N.Y.S. 556 ( 1909 )

Ingraham, J.:

On the 8th day of April, 1887, one Mary Elizabeth Moore, the defendants’ predecessor in title, leased certain premises in the city of New York to the plaintiff for a term of twenty-one years from the 1st day of May, 1887, at the yearly rental of $130, payable in semi-annual payments on the first days,of May and November in each year. A copy of the lease is annexed to the complaint. There had been erected upon the said premises a .dwelling house which belonged to the plaintiff, who was in possession of the premises under the said lease down to the time of the commencement of this action in September, 1908. J. N. Wells’ Sons, a firm of real estate agents, had represented the defendants to collect the rent from-the plaintiff, and the same brokers were the plaintiff’s agents to collect the rent due from sub-tenants, for ten years prior to the termination of the lease. These real estate brokers, thus representing both the plaintiff and defendants, were in the habit of sending a notice to the plaintiff when the rent was due, and upon the receipt of such notice plaintiff sent a check to the brokers for the rent. Checks were produced for the payments of rent from November, 1894, showing that payments had been made at varying dates from five to twenty-five days after the rent became due, and had been accepted by the defendants. No objection was ever made on the ground that the rent was not paid in time, nor had payment on the first day of the month when the rent became due been insisted on, and thus a custom had grown up in relation to the method by which the rent should from time to time be paid. This lease contained the usual covenant of re-entry; required the tenant to pay all duties, taxes and assessments. The lease also contained a provision that “ if at the end and expiration of the said term hereby granted, there shall be-standing oh the hereby demised premises a good and substantial dwelling house of at least two stories in height, constructed of brick or stone, with fireproof roof, and the said party of the second part, her executors, administrators and assigns shall and will during the whole of the said term, well and faithfully keep all and every the covenants herein contained, on her and their part and behalf, that then the said party of the first'part, her heirs or- assigns, shall and will at such the end and expiration of the said term, grant unto the said j>arty of the second part, her executors, administrators or assigns, at .her or their expense, a new lease of the said lot of ground for a further term of twenty-one years thence next ensuing, at such reasonable annual rent, to be paid half yearly, as shall then have been agreed upon by the parties, or otherwise settled and ascertained as is hereinafter provided, hut not less than the rent reserved by these presents.” Such renewal le'ase to contain a covenant for a further renewal of the lease for twenty-one years at a rent to be ascertained as provided for in the lease; and a further provision'that at the expiration of the renewed term the landlord was at her option either to pay to'the tenant the just and fair value of the house upon the property, to be agreed on or ascertained in the manner provided for, or to renew the lease for a further term of twenty-one years at a rent to be ascertained in like manner. It was further provided that in the event that the parties, were unable to agree as to the rent to be reserved by the renewal lease the amount of such rent should he ascertained by arbitrators, one to be nominated by the landlord and one to be nominated by the tenant, which nominations were to be made and signified by each party to the other at least one month before the expiration of the term; that if the two persons to be so-nominated and appointed should differ in judgment they were to appoint a fit and impartial person to be associated with them for such purpose, and the decision of any two of the three persons so chosen to be final and conclusive.' There was a dwelling house upon the premises which complied with this provision of the lease. The lease expired on the 1st day of May, 1908. . On March 18, 1908, the firm of brokers which had acted as agents for both parties in relation to the premises wrote a letter to the plaintiff notifying her that the léase held by her would' expire on the first of May ensuing, and that the landlord was ready to renew the lease as provided in the lease itself for a further term of twenty-one years at the yearly rental of $425. Plaintiff refused to accept this rental and about the fifteenth of April, to which time the appointment had been extended by mutual consent, appointed Mr. Dayton as arbitrator. On the 29th of April, 1908, the defendant Moore wrote a letter to the plaintiff notifying the plaintiff that he was the owner of the premises desci-ibed in the lease, and that he nominated a Mr. P. A. Geoghegan to act- as arbitrator to determine -what augmentation of the rent, if any, should take place during the next ensuing term of twenty-one years from May 1,1908, and thus both parties prior to the end of the term had appointed the arbitrators who were to determine under the lease the amount that the tenant was to pay as rent for the ensuing term of twenty-one years. All questions having thus been settled as to the renewal of the lease except the amount of rent that the tenant was to pay, and the arbitrators who were to determine that amount having been appointed by both parties, all that was necessary for the parties to do to carry into effect the covenant for a renewal had been done.

On the first day of May when the term expired, six months’ rent of the premises was due. JSTo notice was sent to the plaintiff that the rent was due in accordance with the existing custom that had been in force for over ten years, and the plaintiff, relying upon the fact that she would receive the usual notice when the rent was required, did not pay the rent on that day. On the 5th of May, 1908, the plaintiff received a letter from the attorneys for the defendants stating that under the terms and provisions of the lease which expired on May first the plaintiff was not entitled to a renewal unless she should have during’ the whole of the said term well and faithfully kept all the terms and covenants on her part to be performed ; that the plaintiff had not kept all of these covenants, having violated among others the covenant to' pay the rent, and that the landlord was, therefore, under no obligation to grant to the plaintiff a renewal, and did not care to do so. Immediately upon receipt of this letter plaintiff sent to the defendants a check for the rent which was. accepted, and plaintiff received from the defendants’ agents a receipt stating that the payment was accepted by the landlord without waiving any right to insist that the tenant’s right' to a renewal of the lease expiring on Hay 1,1908, was terminated for a failure to observe a covenant of the lease. This position having been taken by the defendants immediately after the first of May, the arbitrators ■ never proceeded to ascertain the amount of rent to be paid during the new term. It was conceded that-the plaintiff was ready, willing and able to pay the rent reserved under the lease on May 1, 1908. It further appeared that the plaintiff was in poor health at the expiration of her term, and had left the exclusive charge of everything relating to this property with her husband ; that the. only reason this rent was not paid was. because' the plaintiff’s husband did not think of it as he relied upon the custom of receiving a notice when the landlord required the rent. It appeared that, all the taxes imposed upon the property during the term had been paid by the tenant, and that the tenant had complied with all the other terms and conditions of the lease. The-defendants having taken this definite position and refused to grant a renewal of the lease or recognize the plaintiff’s right to a renewal lease in consequence of this default in the payment of the amount of rent due on the 1st of May, 1908, plaintiff commenced this action for a specific performance of the-covenant and asked to be relieved from the default, if any.

By the terms of the lease the rent was due upon the 1st day of May, 1908. There was nothing in the lease which required this rent to be paid at the termination" of the demised term. Under"the terms of the lease the plaintiff would have the whole of the first day of May-to pay the rent before she was in default. The covenant in regard to the renewal of the lease was that “ if at the end and expiration of the said term hereby granted there shall be standing on the hereby demised,premises a good and substantial dwelling house * * * and the said party of the second part, her executors, administrators and assigns shall and will during the whole of the said term well and faithfully keep all and every the covenants herein contained on her and their part and behalf, that then the said party of the first part, her heirs .or assigns, shall and will, at such the end and expiration of the said term grant unto the said party of the second part, her executors, administrators or assigns, at her or their expense, a new lease of the said lot of ground for a further term of twenty-one years thence next ensuing.” The position of the defendants is a most technical one. Both parties had appointed their arbitrator to determine the amount to be paid on the renewal; and it is not claimed that up to the time that the lease had terminated on the 1st day of Hay, 1908, the plaintiff had' failed to perform any of the terms and conditions of the lease to be kept and performed by her. She had not paid the vent that became due on the 1st day of Hay, 1908, but there is nothing in the lease to provide that that rent should be paid before the demised term had terminated, and, strictly speaking, I think it could well be said that at the time of the termination of the lease none of the terms or conditions to be kept and performed by the plaintiff had not' been kept and performed. But the parties had by their uniform custom established a method of collecting the rent of the premises. Undoubtedly the rent became payable on the first days of May and November in each year; but by this custom, which had been clearly established, before the rent was expected to be paid, a notice to or a demand upon the plaintiff for it was made. This method of collecting the rent had hardened into a custom which, I think, can be fairly said to have become a part of the contract between the parties, so that there would be no default in the payment of the rent which would constitute a failure to comply with the terms and conditions of the lease until a demand had been made or notice given to the plaintiff that the rent was due and payment was required.

The power of a court of equity to open or disregard defaults or penalties,incurred without the fault or neglect of the party against whom the default is sought to he enforced cannot be questioned. Nor can there be any question about the right of a party to whom a sum of money is payable at a specific time to waive the right to receive it at such a time or to enforce any penalty or forfeiture because of a failure of payment at the specific date named. And where a party is entitled to receive payments at specific dates, with a forfeiture or penalty imposed for a failure to pay at any date specified, the right to enforce such penalty or forfeiture may be waived by the parties having established a custom by which a particular method has been adopted for making such payments, and so long as such custom is complied with the person who is obligated to make the payments is not in default. This principle has been applied to a great variety of conditions, frequently in actions in relation ■ to policies of life insurance. In Toplitz v. Bauer (161 N. Y. 325) the plaintiff was plainly in default, both in the performance of the condition of the ptolicy with the insurance company and in default in the payment of the note, for the - ptayment of which, the policy had been ptledged as security. The court held that it must be conceded that no legal extension of the time for the payment of the note was given, arid that the plaintiff could not recover upon the theory tliat a right to demand aiid enforce piayment of the debt was suspended ; ■ but that the extension of the time for the payment of the debt, which must be supported by a sufficient consideration, must not be confused with a. waiver of the right to forfeit the-pledge without previous notice to the pledgor, "or those who represented him, or were interested in the pledge; and that the piarties occupied the same relation to each other as pirevails between. a vendor and vendee in executory contracts for. the sale of laud where it had been held that a forfeiture of the contract cannot be" insisted upion by the vendor under such circumstances, although containing an express provision that that result would follow a failure to make the piayments at the time stipulated. The court then said: “ The same principle has been applied to other "contracts, which, by their terms, provide for a forfeiture or a loss of the fruits of the contract by the failure to pay a certain sum or to, do a certain thing at. a specified time.” Thus a waiver has been implied where there was. a covenant in the lease not to sublet without the written consent of the landlord, under penalty of forfeiture, where the tenant sublet with the knowledge of the landlord, who. subsequently received the rent. (Ireland v. Nichols, 46 N. Y. 413. See, also, Gallagher v. Nichols, 60 N. Y. 438, and Dunn v. Steubing, 120 id. 232.) In Lindenthal v. Germania Life Insurance Co. (174 N. Y. 76) it was. said: “ Where an insurance company makes a valid waiver of the punctual payment of premium • oh the law day without submitting another time of payment, but leaves the matter open and indefinite, it cannot enforce a forfeiture for non-payment without reasonable notice to the policyholder or person in whose favor the time limit has been waivéd.” The fact that this is a condition precedent to the right of the plaintiff to a new lease and not strictly speaking a forfeiture or a penalty is not material, for a party to a contract can waive the performance of a condition precedent. (See Pechner v. Phoenix Insurance Co., 65 N. Y. 195.)

We think, therefore, that where under a lease in which payment of the rent is required upon a day certain the parties by a course of conduct extending for years have acquiesced in a method by which the rent is to be paid, the provision for payment in the original contract is so far waived as to prevent a claim that a failure to pay upon the day named is a breach of the condition until the lessee has notice of the fact that such a custom will not in the future be continued and payment is required upon the day named in the contract.

The court below found that it was the plaintiff’s custom to make payment of the semi-annual ground rent to the order of James IN. Wells Sons on behalf of the landlord; that said firm was also the agent of the plaintiff to collect the rent from the sub-tenant; that for many years prior to May 1, 1908, the plaintiff did not pay the various installments of rent on the very day upon which the installments became due and plaintiff did not pay any of such installments until from fifteen to twenty-nine days after the same respectively became due, and then only after the receipt by the plaintiff from the said defendants’ agents of a notice given subsequent to the day upon which payment was due that the said payment was overdue and requesting that it be made; that no such notice or any other notice was given with regard to the installment which became due on May 1, 1908, and that said defendants prior to May 1, 1908, always accepted the rental so paid after the sending of such notice without question ; that plaintiff has been at all times ready and willing to take a new lease of said premises for a term of twenty-one years from the 1st day of May, 1908, but said defendants have refused and still refuse to execute such renewal lease. "Upon the facts the court dismissed the complaint.

We think upon the facts here established that the defendants waived the payment of the rent upon the first day of each month upon which it was payable, and that before the plaintiff could be said to have violated one of the terms or conditions of the lease notice that the rent was due must be given or a notice before the' day upon which it tras.payable by the lease must be given, that the custom theretofore established would not be continued and that the landlord demanded the payment of the rent upon the day specified. The plaintiff was not, therefore, in default- and was entitled to a renewal lease. Pone of the cases cited by the respondents are in point. Peoples Bank v. Mitchell (73 N. Y. 406), which is relied upon by the respondents,, was an action, at law to recover the -value- of the building upon the leasehold premises, and it was held that such an action could not be maintained where it appeared that the tenant had failed to pay taxes which were imposed upon the premises and which by the. lease he was to pay.. There was no claim there that the landlord had waived .this breach of the covenant and the court placed its decision squar'ely upon the: proposition that until the plaintiff had fulfilled this condition he had no remedy at law against the defendant. There was no claim that the payment of the rent upon the day specified in the lease had been waived, which is the ground upon which we place our decision in ■this- case.

It follows, therefore, that the judgment, should be reversed and a new trial ordered, with costs to the appellant to abide the. event.

Pattebsokt, P. J., Laughlin and Scott, JJ., concurred; Clabke, J., dissented; , •