Reading Iron Works

Opinion by

Mb. Justice Williams,

If the appellant’s claim in this case was for rent to fall due in the future, as the learned auditor held, the action of the court below could not be successfully attacked. In the distribution of a fund the general rule undoubtedly is that those only are entitled to share who have a definite demand against it, or a cause of action capable of adjustment and liquidation upon trial. Id cerium est quod cerium reddi potest. But the appellant denies that his demand is for rent, and insists that it is for damages resulting from a breach by the Reading Iron Works of its contract with him. This was his contention before the auditor who found, from the evidence submitted to him, the facts to be as follows: The appellant bought a lot at Fifth and Adelphi streets, Philadelphia, and erected thereon an expensive building, at the request and for the exclusive use of the Iron Works. The general plan and arrangement of the building was furnished, and its erection directed and supervised by the officers of the company. As an inducement to the appellant to make the large expenditure proposed, it was agreed that the company should lease the premises when ready for occupancy for a term of ten years at an annual rent equal to nine per cent on their cost. The board of directors adopted a resolution authorizing their president to execute a lease for the premises “ to Virtue C. Sweatman in accordance with the agreement made with Mr. Sweatman prior to the purchase and building of said premises.” A lease was accordingly executed by him on behalf of the Reading Iron Works for ten years from April 1,1888, at an annual rent of ten thousand six hundred and two dollars and one cent ($10,602.01) payable monthly on the first day of each month. The company became insolvent and made an assignment for the benefit of creditors in May, 1889. The premises were vacated by the assignee on Juty 31, 1889, to which time rent was paid. Since that time they have been unoccupied or rented for a smaller sum because of their peculiar arrangement and construction which, while adapting them to the business of the Reading Iron Works, rendered them inconvenient for other business purposes. The loss to Mr. Sweatman in rent for the remainder of the ten years the auditor fixes at forty thousand dollars. The parties agreed before Sweatman resumed possession, that he should do so and “ make the best arrangements he can for renting the property ; and that his action shall in no wise prejudice his claim against the assigned estate.”

The single question presented on these facts is “ Has Mr. Sweatman a cause of action against the Reading Iron Works for damages because of their failure to pay him as they agreed to do, for his investment made at their request and for their accommodation ? ” The learned judge of the court below concurred with the auditor in the opinion that this question should be answered in the negative. The reason given for this answer seems to be that the execution of the lease by the Reading Iron Works was a complete performance on its part of the previous parol agreement; so that all rights under that agreement were extinguished thereby, and it is not now to be regarded for any purpose affecting the rights of either party to it. This conclusion seems to us to be inconsistent with the findings of fact to which we have referred. It is true that the auditor also found as a fact that the parties intended that the written lease should after its execution be the only agreement between them relating to the premises on Fifth street; but as this finding does not rest upon the testimony, but on an inference drawn by the auditor from other facts, it has not the value to which a finding of fact is ordinarily entitled.

The facts found show that the lot was purchased and the building erected at the instance and for the accommodation of the company. Mr. Coit, the president, testified: “ It was built expressly for the business for which it was occupied.” The inducement to Sweatman to make the investment was the promise that he should be paid in rent nine per cent on the whole amount for ten years. This was the parol agreement. In pursuance of it a lease was executed containing an express covenant to pay the rents “ on the days and times when the same ought to be paid according to the stipulation thereof.” The lessor reserved the right to terminate the lease for the breach of any condition or covenant, but stipulated that his action in so doing should not relieve the tenant from liability in damages for such a breach ; and that the lease, with all its conditions, covenants and promises, was made binding upon the successors, executors, administrators and assignees of lessor and lessee respectively. If we read this lease in the light of the previous parol agreement under which the lot was purchased and the building erected, it will be evident that the parties intended to secure for Mr. Sweatman the compensation for his investment which that contract promised him as the inducement to make it. We have recently held in the Express Company v. Cadwalader et al., decided at the present term, that such a lease must be read in the light of the previous agreement out of which it arose, in order, if practicable, to give effect to the actual understanding and agreement of the parties. If, therefore, we adopt the conclusion of the auditor that “ it was the intention of the parties that all prior understandings, negotiations and arrangements should be merged in the lease,” and that as a result of this intention the lease must be held to contain “ the entire and only contract between the parties to it” relating to the building on Fifth street, we must also conclude that they understood the lease for a term of ten years, with its covenants, to impose the same obligation on the company to make, and conferred the same right on the lessor -to demand, compensation for the use of his capital invested, as the parol agreement that preceded it. If the lease wa,s- not the legal equivalent, the formal embodiment of the previous agreement, the latter would not merge in the former, and the finding of the auditor that the parties intended a merger would have nothing on which to rest. In that event the parol agreement would survive and the claim for damages could rest safely upon it. But if we adopt the other view and hold that the lease with its covenants superseded the parol agreement, then the assignment for the benefit of creditors and the vacation of the premises may be treated as a breach of the agreement to occupy and pay rent for the term of ten years, which entitled the lessor to damages.

It takes two to annul as well as make a contract. If the lessor elect not to proceed for damages but to look, to the lessee for rent as it falls due under the lease, the lessee could make no defence to an action. His assignment may relieve him from his debts as they stood at that date, but it cannot relieve, him from his contracts to be performed in the future. An abandonment or surrender of leased premises will not relieve the tenant or his surety from future liability unless the lessor accepts the surrender: Am. & Eng. Ency. of Law, vol. 12, page 752; Wood on Landlord and Tenant, 840. In this case it was agreed that the lessor should resume possession and rent the premises to the best advantage he could without affecting his rights under the lease. This was in effect an election by the lessor not to stand upon the covenant to pay rent during the remainder of the term, but for the benefit of both lessor and lessee to secure from the abandoned premises all that was practicable, holding the tenant liable in damages only for the actual loss sustained. The present value of the loss to be sustained for the remainder of the term may be ascertained and the damages liquidated. This the auditor has done. For these damages the lessor has a present cause of action, Lothrop v. Reed, 13 Allen, 294, and for that reason a right to share in the fund. The demand is not for rent, eo nomine, for under the agreement the lessor has rented the premises to others. It is for the loss he suffers by reason of the difference of the rentals now obtainable in consequence of the peculiar arrangement and construction of the premises, and the rental agreed upon as an inducement to him to make the investment for the use of the company.

The decree appealed from is reversed so far as relates to the appellant, the costs of this appeal to be paid:by-the appellee.