Hub Building & Loan Co. v. Stone

OPINION

By HORNBECK, J.

In December, 1933, plaintiff sued on a past due cognovit note which it held against defendant, stones, and to foreclose a mortgage on a 99-year leasehold renewable forever on certain real estate in the City of Columbus which the Stones held as assignees from Zanes & Trokas, original lessees, from defendants the Pletsches, owners of the • reversionary fee simple title in the real estate.

In February, 1934, the Pletsches filed their answer and cross petition with averments of their title'to the real estate, breaches by lessees of certain covenants in the lease in four particulars, election to forfeit the lease and notice thereof in December, 1933, the lessees and plaintiff. To this answer and cross petition plaintiff interposed a general demurrer which was overruled. Thereafter plaintiffs replied, made an issue of the Pletsches’ right of forfeiture of the lease and prayed that their answer and cross petition be dismissed.

The court found for the Pletsches and ordered that the leasehold be forfeited.

The appeal on questions of law is grounded upon three claims:

(1) The demurrer to Pletsches’ answer and cross petition should have been sustained because it appears that as a matter of law they had waived their right of forfeiture for all covenants breached by accepting rental due after notice of an election to forfeit.

(2) Upon the issues of fact forfeiture should not have been decreed because no notice was given of election thereof after acceptance of rent.

(3) Upon principles of equity the decree was harsh and unfair to plaintiff in that it failed to order a sale of the leasehold estate upon certain conditions as to the payment of sum required to make necessary repairs on the buildings on the premises leased, etc.

Some further pertinent facts are that the property, the subject of the lease, consisted of a tract of land upon which there were four buildings, one on Livingston Avenue, a two-story brick with two store rooms on ground floor and living apartments above, a three-story brick, corner Livingston and Parsons Avenue, storeroom on first floor, apartments on second, and a hall on the third, and two two-story brick double dwelling houses on Parsons Avenue.

The net annual rentals payable monthly were to be $2700.00, first ten years; $3000.00 second ten years; and $3500.00 thereafter. $2700.00 was deposited to assure performance of the lease upon which 6% interest was allowed the lessees. The lease was in the second ten years of its term and the monthly rental was then $236.50. While the proceedings were pending m January, 1934, on motion of a tenant of lessees the court appointed a receiver to manage the properties, collect and account for rents.

At the time of the service of notice of election to forfeit the lease the Stones were in arrears for rent and had breached three other covenants of the lease, all of which defaults were included in the notices, but thereafter the rent due was tendered and accepted for the month of January, 1934. Thereafter the covenants as “to taxes and insurance were observed but at no time were the provisions of the covenant to repair met. At the time of hearing the rentals due had not been paid by $1067.00 covering a period of about five months and thei total monthly receipts were insufficient to pay the monthly rentals. The cost of needed repairs to the buildings as estimated byj witnesses for the Pletsches was $2000.00, which amount it is claimed by plaintiff, because of the nature of some of the items included in the estimate of the Pletsches’ witnesses, should not come under the classification of repairs as contemplated by the terms of the lease and should be reduced to the sum of $800.00.

In addition to the mortgage upon the leasehold the plaintiff also had an assignment from the Stones of all their right, title and interest in the lease.

The covenants, conditions and provisions of the lease which it is necessary to consider are as follows:

Article II, a covenant whereby lessee agrees to pay and discharge all legal taxes, assessments, * * * and all other charges of every kind, nature and description due or to become due on the premises leased.

Article III, a covenant of the lessees at their own cost to insure and keep insured against loss by fire in the sum of $15,000.00' all buildings on the premises leased.

Article IV, a covenant that lessee will “at his own cost and expense keep ail buildings or improvements now on or hereafter constructed on said premises, in good condition and repair”, * * * “and surrender said premises in good condition and repair as aforesaid, * *

Article IX, that * * *

“No waiver of any breach of any covenant, condition or stipulation herein contained shall be taken or construed to be a waiver of any succeeding or future breach of the same covenant, condition or stipulation or of any other covenant, condition or stipulation herein; provided, however, that the lessee shall have reasonable time and opportunity after notice of default or breach in the performance or observance of any covenant, agreement or stipulation herein, to remove or correct such default or breach to save the lessor harmless therefrom.”

We consider together the first two claims of error. In support of the first plaintiff cites many cases which go to the general proposition that where a party is entitled to a forfeiture, because of failure to pay rent and for breaches of other covenants (an acceptance oí rent after notice of election to forfeit waives not only the right to forfeit for such breach, but for known breaches of other covenants.

It follows that if there be a waiver of all known breached covenants by the acceptance of rent if the covenants be continuing 'in nature it will be necessary if lessor elects tc forfeit that a new notice be given subsequent to the date of the acceptance of the rent. The rule is so well stated in Granite Building Assn. v Green (R. I.), 54 Atl. 792, in the opinion at p. 794, that we quote it:

“Am. and Eng. Ency. of L. (2d Ed.) Vol. 18, p. 388.

“ ‘Some covenants and conditions are susceptible of a continuing breach. In such a case a waiver of a .breach extends only to past breaches, and will not preclude the lessor from taking advantage of a forfeiture incurred subsequent . to such waiver. The covenant to keep in repair, to keep premises insured, to pay taxes, * * * have been held to be continuing, so that a waiver of one breach would not preclude a' forfeiture for a subsequent breach’. In short, the rule seems to be well settled that where a condition in the lease is single, it is wholly discharged by one waiver. But if it be continuous, the waiver only discharges the partial breach.”

These statements of principle can not control as against specific provisions in the written lease between the parties if such provisions' are enforceable. The right of the plaintiff herein must be measured by and can rise no higher than that of the original lessees in respect of the claim of waiver.

By the quoted portions of Article IX of the lease the parties agreed that the act of curing the breach of' the covenant to pay rent does not waive breaches of other covenants. It follows that if a notice has been given of an election to forfeit because ol violation of several covenants the removal of the breach as to one of them will not invalidaate the notice as to the other breaches.

■ The ultimate question then upon these two assignments of error is whether or not there is anything in the terms of Article IX of the lease which prevents the lessor insisting upon a strict compliance therewith upon the simple application of the meaning of the language employed. This question was not considered nor briefed by either party. Thus there is nothing set forth which would move this court to say that the lease should not be enforced in terms.

In T3 C. J., 423, jt is said that a person may lawfully waive by agreement the benefit of statutory provisions not invoking a penalty nor against public policy. Such rights as..exemptions, homestead, statutes of limitation and usury may be waived. Many cases cited support the text. In Goshen v People, (Colo.) 44 Pac. 503, it was held that,

“A statute taking away the right of a lessor to use force in regaining possession for breach of condition does not invalidate a clause in a lease providing that on breach of condition the lessor.may enter and use such force as is necessary to remove the lessee.”

We perceive no lawful reason why Article IX of the lease should not be given full foice and effect. When this is done the general objections which are urged lose their effect in the specific situation presented between the parties because their rights are controlled by their own written contract.

The third claim of error is that the decree of forfeiture of the court under all the facts is inequitable.

This appeal is on law and by virtue thereof, unless the trial judge was manifestly unfair, abused his discretion or clearly denied plaintiff the benefit of equitable consideration, the decree must be supported. If is our judgment that the action of the trial court was neither unwise nor inequitable. At the time of the hearing there was an arrearage in rent due the Pletsches ir. the sum of more than a thousand dollars. Repairs, contemplated by the lease were and for a long time had been needed in a minimum amount of $800.00. The gross receipts from the buildings upon the leased premises were' insufficient to meet the monthly rentals. The cost of the receivership which had been effective for many months had been met from funds which but for it would have been paid to the Pletsches.

Plaintiff .urges that it was but in the status of a mortgagee out of possession. It had, however, to increase its security accepted an assignment of - the Stones’ interest in the lease and had full right and authority to act’ for and on their behalf. The plaintiff did. not. offer to secure the costs, the money which was required of lessees to make essential repairs nor any arrearage in rent. Without some such assurance the trial judge was well within his rights in refusing to order a sale under conditions when every indication was that .the value of the leasehold would not yield anything to the mortgagee, the plaintiff over and above sums then due and to the lessors, the Pletsches.

We have carefully considered all of the errors assigned and finding none of them sustained,- the judgment will be affirmed.

BARNES, PJ, and GEIGER, J, concur.