Stevenson v. Dersam

Opinion by

Mr. Justice Sadler,

The Stevensons and Kepler, owners of a hotel property in the City of New Castle, on December 15, 1915, leased it to Dersam for a period of ten years, and he took possession. On March 3, 1922, the lessors entered into an agreement to sell the premises to Smith, one of the plaintiffs, and to him the lease was assigned. It was then discovered that the tenant, on October 16,1919, had transferred his rights in the property to the Leslie Corporation, nominally as agent for the purpose of operation. The transaction took the form adopted, because of the inability to secure the assent of the owners to the assignment, but the contract provided for the sale of all of the property of Dersam, who reserved no share in the profits of the business, and agreed to make a formal transfer, when the consent of the lessors was obtained, and was at the time paid in full for any interest he might have. The learned court below found on ample evidence the plan followed was a mere subterfuge, having for its purpose the evasion of the prohibition against subletting without leave.

After the sale to Smith, the actual state of affairs became known, and it was also found that alterations in the building were being made in contravention of a covenant1 in the lease. A judgment was thereupon entered under the warrant of attorney contained therein for rent due, as well as in ejectment for the premises. A rule to open was granted, and later an application to strike off was presented. It may be here observed that the latter was made absolute in so far as the Leslie Corporation was concerned, it appearing no formal assignment of the lease had been made to it, — an order entirely proper (Stewart v. Jackson, 181 Pa. 549); as to the lessee, it was discharged, no irregularities in the entry of the judgment as to him being apparent on the face of the record: Williams v. Notopolos, 247 Pa. 554.

The real controversy in the present case is based on the refusal to open the judgment, so that certain defenses could be presented. In passing upon the action taken below, it must be borne in mind that such an application is an appeal to the equitable power of the court, and the petitioner must make out a case which would justify a chancellor in entering the decree prayed for: Kline v. Fitzgerald Bros., 267 Pa. 468. The question for us to determine is whether there has been a rightful exercise of the discretion lodged in the lower court: Kaier v. O’Brien, 202 Pa. 153.

The breaches of the covenant complained of are, subletting and alteration of the building without the consent of the owners. The lessee had agreed “not to relet or sublet the premises or any part thereof, not to assign this lease,......nor to make any improvements or ad-» ditions on said premises, or changes in, or additions to, the electric wiring or gas pipes or plumbing, without the written consent of the lessor endorsed thereon; ......nor to remove, destroy or damage in any way improvements made by lessee or the lessor on the premises without the written consent of said lessor, and, in case of the breach of any of the conditions of this covenant, then to pay for the use of said premises an increased rent, or sum of Five Hundred ($500) Dollars in addition to the rent hereinbefore reserved, payable by the said lessee, or by the said lessee and his subtenants, or licensees, in equal monthly payments at the time of payment of the rent hereinbefore reserved, computing from the date of the breach of any of the terms of . this covenant.”

The judgment was entered by virtue of a subsequent clause, which provided: “In case of violation of any of the covenants and agreements hereinbefore made by said lessee, then the said lessee hereby authorizes and empowers any attorney to appear in the court of common pleas of any county and confess a judgment against him and issue fieri facias for the amount due according to the terms of this lease, with costs of suit or suits and ten per cent attorney’s commission, without leave of court; and in case of violation of any of said covenants or agreements by said lessee, the said lessee further authorizes and empowers any attorney, either in addition to or without such judgment for the amount due according to the terms of this lease, to appear and confess judgment against him in an amicable action of ejectment for the premises above described and authorizes the immediate issuing of a writ of habere facias possessionem, with clause of fieri facias for the amount of such judgment and costs without leave of court.”

The judgment confessed was in the name of the lessors and their assignee, who had likewise entered into an agreement of purchase, though no conveyance had at the time been made. Defendant insists this was $ misjoinder, which entitled him to a dismissal of the proceeding. A like suggestion was made in Williams v. Notopolos, 259 Pa. 469, where, under similar facts, the objection was held untenable. There, the suit was instituted in.the name of the lessor for use of their assignee. and vendee, as well as in the name of the latter individually, the breach of the covenant having occurred after the conveyance of the property. In the present case, no deed had been made, and the breaches were before and after, the alterations to the building having commenced prior to March 3, 1922, continuing subsequently. The only difference in the naming of the plaintiffs is in the statement, in the case cited, that the vendors appeared for the use of the purchaser. This variance is not material. If the failure to so designate the parties here be considered a defect, the record will be treated as amended in the appellate court: Hewitt v. Democratic Pub. Co., 271 Pa. 546. Defendant relies upon Stoddard v. Emery, 128 Pa. 436, as sustaining his contention. What that case decides is that in an action brought by the assignor of a lease for use, without joining the transferee individually, recovery can be had only for breaches occurring prior to the assignment. This does not control the situation now presented.

The right to maintain the present ejectment is further denied on the ground that no covenant has been breached. Findings of the court below, fully justified by the preponderance of evidence, are to the contrary. Alterations of the building were made, and a change of possession permitted, which came within the prohibition of subletting or assigning without the consent of the lessor. It is true an attempt was made by Dersam and the Leslie Corporation to conceal the character of the transaction, by appointing the latter to act as agent for the former. But the agreement clearly shows it was an attempted transfer of the lease to be subsequently completed as to form when the approval of the owners could be obtained. The corporation bought in full all the property of Dersam, took possession and operated the hotel, and he had no remaining financial interest' in it. This was not the placing of a mere custodian or agent upon the premises to act for the lessee, but an assignment of all interest in the lease to another, an act prohibited by the contract. As was said in Greenaway v. Adams, 12 Ves. Jr. 395, 33 Eng. R. 149: “It would be very strange, if the landlord meant to restrain underletting, that he should not mean to forbid the tenant to part with the whole interest. Clearly both according to the letter and the spirit, this covenant did restrain assignment without license.” See also I. M. & C. Union v. Railway Co., 45 Ind. 281. In the present case, the lessee could neither sublet nor assign without permission. Nor can we see any waiver of this restriction. Admittedly, the agreement with the Leslie Corporation, by which it acquired the rights of Dersam, was not made known to the plaintiffs, and they acted promptly when the facts were discovered. The agreement of October 16, 1919, itself shows that the parties to it did not consider the lessors to have given up the right to demand written consent, for it provided for securing the same. Even if Stevenson was told the corporation was managing the property, there was nothing to indicate it was not acting merely as agent for the lessee. The conversations related by Robingson, denied by all others, do not raise such a conflict as would justify the opening of the judgment, and the lower court did not abuse its discretion in so holding.

Defendant further insists no power to enter judgment by confession existed, in view of the paragraph of the lease first quoted above. It is urged that by its term the exclusive redress provided is the right to demand additional rent in case of a breach of covenant, and not to enter an amicable ej ectment. But this overlooks the subsequent provisions which permit such action in case of “violation of any of the covenants or agreements.” The remedies which are reserved are cumulative, and both may be resorted to: Purvis v. Dempsey, 238 Pa. 173; Murphy v. Marshell, 179 Pa. 516; Dickson v. Wood, 209 Pa. 345. To construe the lease otherwise would give to the lessee the right to sublet, make alterations as he saw fit, or do any of the other things prohibited by the contract, and limit the lessor until the end of the term to a recovery of a comparatively trivial monthly sum as additional rent. This could not have been the intention of the parties, and they have expressly provided otherwise. Ellis v. Ambler, 11 Pa. Superior Ct. 406, relied on by appellant, does not control the present situation. There, the warrant to confess did not authorize the entry of a money judgment for rent or damages. In the case before us, it was expressly permitted “for the amount due according to the terms of the lease.”

We find no merit in any of the errors suggested, except as to the judgment entered, complained of in the first assignment. The lease provided that the additional rent should be computed on a monthly basis, from the date of any breach. However, in entering it in the present case, the full sum of $500, with attorney’s commissions,- was assessed as damages. This should be reduced so as to conform to the agreement of the parties, and be calculated on a monthly basis from October 16, 1919, to the end of the term. Prom the date of the breach to that of the ejectment, recovery may be had. This liquidation of damages may be made by the court below without opening the judgment: O’Maley v. Pugliese, 272 Pa. 356.

With the modification directed, the judgment is affirmed.