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Post, Avery & Higgins, for appellant. I will undertake to make an agreement with Danson & Williams and Hamblen & Gilbert, that party who is successor in interest of for respondent.

the lessor, or who by virtue of any contract

with the owner of the fee-simple title to GOSE, J. [1] This is an appeal from a said property has the right and power so to judgment establishing the value of a lease do, as to the rentals to be paid by the underhold interest in real property, entered at the signed, and that, upon failure so to do, that suit of the respondent, a public service cor- the undersigned will promptly name an arbiporation. The appellant, defendant below, is trator for the purpose of undertaking to fix a corporation engaged in the wholesale and the amount of such rental, as in the lease retail harness, saddlery, and manufacturing provided. The undersigned requests to be business. In November, 1903, the Northwest- promptly notified of the name of the person ern & Pacific Hypotheekbank leased to the or corporation who has the right, power, and appellant a brick building in the city of Spo- authority to agree upon the amount of such kane for the term of five years, beginning rental, and, in case of failure so to agree, January 1, 1904, and ending on the 31st day to name an arbitrator for and on behalf of of December, 1908, at a monthly rental of the lessor. The undersigned further begs to $175 per month, payable monthly and in ad- advise you that its representative will meet vance upon the 1st day of each month dur- the person who has the right, power, and auing the term. The lease contained the thority to agree upon the rental on behalf following provision: "Provided, however, of the lessor, or the representative of such that the said lessee, its successors and as- person or corporation, at any time and place signs, shall have the privilege of renewing to be named by them, for the purpose of unsaid lease for the term of five years from dertaking to mutually agree upon the amount the expiration thereof upon giving written of such rentals.” The respondent disregard." notice at least ninety (90) days before the ed the notice until after the expiration of said expiration, that they desire so to do, the original term and until after January 8, at such rental as may be mutually agreed 1909. On January 25, 1909, the respondent, upon by the parties hereto, their successors through its attorneys, addressed the followor assigns, and in case they are unable to ing letter to appellant: “January 25, 1909. agree upon the rental to be paid, then the To the A. A. Kraft Company, Spokane, Washamount of said rental shall be fixed by arbi- ington-Gentlemen : As heretofore stated to trators. The method of which said arbi- you orally the undersigned, the North Coast tration shall be as follows: One arbitrator Railroad Company, is the owner of lot 1 shall be chosen by each of the two said and part of lot 2 in block 3 of resurvey and parties hereto, and if the two persons so addition to Spokane Falls (now Spokane), chosen shall be unable to agree, then a and of the building situate thereon, it having third person shall be chosen by each of the purchased same for railroad purposes. On two said arbitrators, and the decision of account of its needing said property for railthe majority of the three arbitrators shall road purposes it cannot renew the lease, be binding upon the parties hereto.” It is which you heretofore held and which expired further provided that the lessors may re- on December 31st, 1908, for a longer period enter and repossess themselves of the prem- than eighteen months from January 1, 1909. ises, if the rent is not paid on the day stip- It is willing to renew said lease for said time ulated in the lease or for default in any of and to allow you to occupy said premises at the covenants; that the lessee shall not as a reasonable rental, said rental to be agreed sign the lease or sublet the premises with upon between it and your company, and in out having first obtained the written con- case you cannot agree it will appoint an arsent of the lessor; that the lessee will not bitrator, as provided in said lease, who, with make or suffer to be made any change or al- such arbitrator as you shall name, shall find teration in the leased premises, either ex- the reasonable rental value of said premises ternal or internal, without first obtaining the for said period as provided in said lease. written consent of the owner; that it will | This will give you ample time to secure annot allow the same to be used for any illegal other location and building for your use." or immoral purposes, but that it will use the In response to this letter, the appellant adsame as a wholesale, retail, and manufactur- vised the respondent, in writing, to conduct ing harness and saddlery or similar busi- its negotiations with its attorneys Messrs. ness. On the 22d day of October, 1907, the Post, Avery & Higgins. This action was respondent obtained a contract for the pur- commenced in April, 1909. The order of chase of the leased premises, and acquired necessity having been entered, the trial of the fee on April 20, 1909. On the 24th day the question of the value of the leasehold of September, 1908, the appellant gave notice interest commenced on November 29, 1909. to the respondent that it exercised its privi- The rental value for the renewal period of lege to renew the lease conformably to the five years had not then been fixed by any of stipulation for the period of five years from the methods agreed upon in the lease, aland after December 31, 1908, and that it though eleven months had elapsed since the

2, 1909, the appellant paid to the agent of purpose, and defendant would decline to the respandent, who had theretofore collect- name an arbitrator at this time.” The reed the rent the sum of $175. This check spondent made no reply, and the trial prowas cashed by the agent and its check for ceeded. The respondent in moving for a stay the same amount was sent to appellant on and in its offer in open court to name an January 8th. The appellant returned the arbitrator did not state whether it adhered check, and thereafter it tendered to the re- to its former policy of fixing the rent for 18 spondent $175 on the first of each month, months only or for 5 years. It is apparent Before writing the letter of January 25th, from the reinarks of the appellant's counsel there was some conversation about the rent that his understanding was that the offer to between the respondent's attorneys and the arbitrate did not contemplate the fixing of appellant, and between the former and the the rent for five years. If he misconstrued attorneys for the latter. The respondent, the motion, it was the respondent's duty to however, took the position in each of the so advise him. It rid not do so. The court conversations, as it did in its letter, that it then, over the obju vions of appellant, prowould not participate in fixing the rent for ceeded to and did hear the testimony of a renewal term longer than eighteen months witnesses as to the rental value of the propfrom January 1, 1909. The appellant stated erty for the renewal term. It is apparent that it considered that the payment of the that, after a delay of 11 months and the rent on January 1, 1909, fixed the rental respondent's refusal to meet the appellant's value of the premises at $175 per month for demand for the appointment of arbitrators the renewal term, but expressly directed the to fix the rent for the renewal period, it respondent to take the matter up with its could not require the appellant to proceed attorney as it did not care to talk about it. with such haste in the naming of an arbitraPending the trial, the respondent's attorney tor and in having the question of rental value moved for a stay of proceedings until “ap- passed upon by them. The time allowed by praisers could be appointed and the rental the court was not sufficient. A reference to value determined by them.” In passing upon the provisions of the lease makes it clear that the motion the court stated that he was it contemplates an adjustment of the rent "inclined to grant a stay for a very short for the new term before the expiration of time so that the trial can proceed tomorrow, the original one. This is made apparent by with a view that the parties agree upon ar- the clause authorizing a re-entry for a failbitrators to fix the rental value, if they can- ure to pay the monthly rent in advance. not agree among themselves." The attorney

At the close of the case the court found for the respondent then stated that he would the facts as follows: “(1) That the fair name an arbitrator “at once; by morning, if rental value of the premises occupied by the not sooner.” Thereupon the appellant's at

A. A. Kraft Company for the term of five torney inquired: “Your honor will grant a

years commencing January 1, 1909, was $375 stay until tomorrow morning?"

And the per month. (2) That the fair rental value court replied: "I think not longer than the for the remainder of the term from this date afternoon, so as to proceed at that time." is $425 per month. (3) That the loss of profThe attorney for the appellant then stated its during the time required by said the A. that he did not think that he was required to cation is the sum of $80. (4) That the dam

A. Kraft Company to remove to another lostate in open court at that time whether he would name an arbitrator. The court then ages which said the A. A. Kraft Company is adjourned for the day. Upon the convening tioner in this condemnation proceeding is

entitled to recover of and from said petiof court the next day, the appellant's attor- the difference between the rental value of ney stated: “That his understanding of said premises per month on January 1, 1909, plaintiff's motion and the court's ruling was and on the date of the trial, November 29, that arbitrators should be appointed at this 1909, or $50 a month for the unexpired term time to determine the amount of rent to of 47 months being the sum of $2,350, and be placed in the lease as though the ar- the loss of profits during the time of removal, bitrators had met before January 1, 1909, or $80, making a total of $2,430”—and enterand for the purposes of this lawsuit only ed a judgment in accordance with the findand not with the intent of allowing de- ings. fendant to remain in possession for the

The appellant contended at the trial, and period of five years, as provided in the lease, contends here, that the refusal of the reand as the fact was that the failure to ap- spondent to fix the rent for the renewal term point arbitrators was wholly the fault of in accordance with the provisions of the plaintiff, and plaintiff's attitude clearly in- lease and its notice, and the acceptance of dicates that it did not desire arbitration, but the rent on January 2, 1909, at the rate was satisfied with the old rent, and had ac- agreed upon in the original lease, fixed the cepted the same, that he believed that it was rental which it was required to pay for the improper for the court to ask defendant to renewal term. The respondent's position is now arbitrate this question for the purposes that in view of all the facts stated it was of this lawsuit and stay proceedings for that competent for the court to fix the rental

value of the property upon opinion evidence, that may arise between the parties, that submitted for that purpose.

method must be pursued before either party [2] The evidence does not show any ex- can resort to the courts for an adjustment. press direction to the agent to collect the Zindorf Constr. Co. v. Western Am. Co., 27 rent on January 1, 1909. Nor does it show Wash. 31, 67 Pac. 374; Hughes v. Bravinder, that it had been directed not to collect it as 9 Wash. 595, 38 Pac, 209; Lidgerwood Park it had theretofore done. The fact that it Waterworks Co. v. Spokane, 19 Wash. 365, went to the appellant's place of business and 53 Pac. 352. In Ryder v. Jenny, 2 Rob. (N. demanded and received the rent is a cir- Y. Superior Ct.) 56, a lease with covenants cumstance, to be considered in connection for renewal expired on the 25th day of April, with the respondent's delay in meeting the 1856. The lease provided that the landlord appellant's demand of September 24th for an would execute a renewal of the lease for the adjusting of the rent for the new term. term of 21 years, “at such annual rental as These facts and the old lease were the only should be agreed upon by the parties," and competent evidence before the court of the provided for a mode of appraisement in the rental value of the property for the five-year event that they could not agree upon the term beginning January 1, 1909. The lease rent. The tenant continued in possession provides the manner and form of fixing the until February, 1861, without paying any rent. The respondent at all times refused rent, before asking for a renewal of the to meet the request of the appellant for an lease. On January 30, 1862, an appraisement adjustment conformably to the lease. It was made by appraisers chosen by the paracquired the property subject to the lease, ties conformably to the lease, and on July and it was its duty to proceed in accordance 21st following a lease was tendered. The with its terms.

rent under the old lease was $100 per year. [3] The fact that it desired to devote the The appraisers fixed the rental value at $140 property to a public use within the five years per year. Upon these facts it was held does not change the rule or dispense with that until the rent was determined and a its duty in the premises. The renewal of lease tendered the tenant was only liable the lease would not prevent the appropria- for the amount of rent previously paid, and tion of the property to a public use. 2 Lewis that “the lease was not tendered until July, on Eminent Domain (3d Ed.) $8 414 416. This 1862, and the increased rent only became rule is based upon the principle that the payable at that time." The respondent reappropriation of the property of another to lies upon the following authorities: Hegan a public use is an exercise of sovereignty Mantel Co. v. Cook's Adm'r (Ky.) 57 S. W. which cannot be relinquished by contract. 929; Wright v. Hardy, 76 Miss. 524, 24 The respondent at all times refused to agree South. 697; Andrews v. Marshall Creamery upon the rent or to name an arbitrator to Co., 118 Iowa, 595, 92 N. W. 706, 60 L. R. fix it for a longer term than 18 months. A. 399, 96 Am. St. Rep. 412; 24 Cyc. 1008; In other words, it proceeded to appropriate Kaufmann V. Liggett, 209 Pa. 87, 58 Atl. the property in utter disregard of the con- 129, 67 L. R. A. 353, 103 Am. St. Rep. 988; tract.

Jones, Landlord & Tenant, § 346; Uhrig v. [4] If it had made a bona fide effort to Williamsburg, 101 N. Y. 362, 4 N. E. 745; comply with the contract and had named an Lowe v. Brown, 22 Ohio St. 463; and Grosvearbitrator, and the arbitration had been nor v. Flint, 20 R. I. 21, 37 Atl. 304 They fruitless, or if the failure to arbitrate had do not support its contention. The Cook been due to the refusal of the appellant to Case announces the rule that a reasonable meet it upon the terms of the lease, then the delay in the appraisement does not debar power of the court to determine the rent at either party from thereafter having the its suit upon opinion evidence could not be property appraised according to the lease. questioned. The rule in such cases rests up- In the Wright Case there was a stipulation on the principle that the court will deter- for the selection of appraisers who should mine the facts at the suit of the innocent fix the rental value of the property in the party upon the best evidence obtainable, but event of a disagreement between the parties. the court cannot disregard the contract in a The lease further provided “that should elsuit by the wrongdoer, and make for the ther party fail or refuse to make an apparties a contract materially different from praisement, or to select a referee to appraise the one they made for themselves. These said lots, the other party may cause said lots views have abundant support in the ad- to be appraised by three disinterested freejudged cases.

holders to be selected by said party." There In Sherman v. Cobb, 16 R. I. 82, 12 Atl. had been no appraisement prior to the com232, it was held that where a lease provides mencement of the action. It was held that that, upon its renewal, the rent for the ex- “the right to a revaluation has not been fortended term shall be fixed by appraisers, the feited or waived by its not having been made landlord cannot maintain an action for the or insisted upon earlier,” and that a court recovery of the reasonable rental value, un- of chancery may fix the valuation. It does til he has exhausted the methods provided not appear from the opinion which party in the contract. Where a contract provides was in default. However, under the clause

ties were equally at fault, as the power was venor Cases announce the rule we have ample in either to have the appraisement stated, viz., that when the arbitrators have made. The Andrews Case holds that, where failed to agree, or when one party refuses the tenant has affirmatively indicated his to proceed in conformity with the contract, election to renew, he has done all that is the court, at the instance of the innocent necessary to create a renewal. The same party, will determine the question of value. rule is stated in 24 Cyc. 1008, and it is fur- We do not deem it necessary to follow counther said that: "While the exccution of the sel for the respondent in the discussion of lease is not necessary, * * * it may the technical differences in meaning between nevertheless be required by either of the the words "renew" and "extend." parties after the election has been exer [5] The appellant gave the requisite notice, cised." The Kaufmann Case is an instruc- and its right to hold for the extended term tive one. There the lease provided that the thereby became fixed. The only matter left lessees should have the privilege of a re- for determination was the appraisement of newal. It also provided that the rental, in the rental value of the property. We think event the lessees elected to renew, should that the respondent's attitude upon that be fixed by arbitrators selected in a specified question has been such that the rights of way; also that, if the arbitrators and um- the appellant can only be protected by adpire failed to agree within a fixed time, then hering to the view that the rent provided in others should be chosen in the same manner. the lease continued for the renewal term. There was no provision in the lease cover- Aside from the lease and the circunistances ing the contingency of the failure of the of the collection of the rent and the delay second set of arbitrators to agree. The less of the respondent, there was no competent sees exercised their privilege of renewal, evidence before the court upon the question and gave the stipulated notice. Both sets of the rental value of the property on Janof arbitrators failed to agree. The land- uary 1, 1909. lords then gave notice to the lessees to sur [6] Evidence was admitted over the objecrender possession of the premises. There- tion of the respondent, showing the expense upon the lessees filed a bill in equity, pray- of moving the machinery, stock, and fixtures ing that the court determine the amount of to a new place of business, the damages to rental to be paid under the renewal. The the same resulting from the removal, and the court said: “But that in cases of renewal value of the fixtures lost because not removleases the weight of authority clearly favors able. These articles were not allowed as the view that the tenant in such a case has specific or independent damages. This is asa quasi proprietorship; a right, lacking mere- signed as error. Lewis on Eminent Domain ly a valuation; and that the grossest in- (30 Ed.) § 728, 'says: “But the damages to equity would be worked, should he lose his personal property, or the expense of removright through a failure upon the part of the ing it from the premises, cannot be considarbitrators to fix a valuation. While, there-ered in estimating the compensation to be fore, a court of equity will not undertake to paid.” A large number of cases are eited as compel an arbitration, which it cannot con- supporting the text. In Pause v. City of Attrol, it will in such case make an appraise- lanta, 98 Ga. 92, 26 S. E. 489, 58 Am. St. ment itself, or direct it to be done by its Rep. 290, the rule announced by Mr. Lewis own officer, and will thereafter enforce spe- was applied to the owner of a leasehold in cific performance of the contract, upon the real estate. The court said: "The measure terms so found. * * In case the rent of her damages is the injury to her property under a lease is to be fixed by appraisal, which is injuriously affected by the public then, if the referees appointed under the con- improvement. In arriving at that damage, tract or lease to make the appraisal are un- neither the profits of the business conducted able to make it, the lessor will be entitled on the premises, nor the cost to the tenant to sue for a reasonable rent. This right to of fixtures and improvements placed theresue depends upon a condition precedent, in, nor the articles purchased for the purnamely, his having tried to get the rent fixed pose of enabling the lessee to conduct the in pursuance of the terms of the lease, and business, nor diminution in the value of fixfailing to do so." Jones, Landlord & Ten- tures, improvements, or articles such as are ant, $ 346. In the Uhrig Case the court said: removed by the lessee, can be recovered as “Under the arbitration clause, it was the damages, but the increased value of the duty of each party to act in good faith to premises for rent in consequence of the putaccomplish the appraisement in the way proting in of such fixtures and improvements vided in the policy, and if either party acted may properly be considered in computing the in bad faith, so as to defeat the real object damages to the leasehold estate. of the clause, it absolved the other party Injury to business, loss of profits, inconvenfrom compliance therewith; and if either ience to the owner, damages to personal party refused to go on with the arbitration, property, or the expense of removing it are or to complete it, or to procure the appoint- not to be estimated as distinct elements of ment of an umpire, so that there could be damages." St. Louis, etc., Co. v. Knappan agreement upon an appraisal, the other Stout & Co., 160 Mo. 396, 61 S. W. 300. See, party was absolved.” The Lowe and Gros- | also, Cook v. Sanitary District, 177 111. 599,

*

52 N. E. 870. We think the evidence was mine, and the one which it did determine, admissible, not as a basis for a specific claim, was the value of the leasehold for the unbut as showing the value of the unexpired expired term in view of the restrictive clause term. Kersey v. Schuylkill, etc., Co., 133 Pa. in the lease. 234, 19 Atl. 553, 7 L. R. A. 409, 19 Am. St. Error is assigned in the admission and exRep. 632; Braun v. Metropolitan, etc., Co., 166clusion of certain testimony respecting adIll. 434, 46 N. E. 974; McMillin Printing joining property owned by the respondent Co. y. Pittsburg, etc., Co., 216 Pa. 504, 65 and the use to which it would be devoted. Atl. 1091; Metropolitan, etc., Co. v. Siegel, The court gave both parties wide latitude in 161 Ill. 638, 44 X. E. 276. The appellant presenting the facts tending to show the value relies upon the following cases: Patterson of the leasehold. The case was tried to the v. City of Boston, 23 Pick. 425; Jacksonville, court, and, as we have said, the finding as to etc., Ry. Co. v. Walsh, 106 Ill. 253; Commis- the value of the unexpired term is supported sioners v. Moesta, 91 Mich. 149, 51 N. W. by competent evidence. 903; Railroad Company v. Weiden, 69 Mich. The judgment is reversed, with directions 572, 37 N. W. 872; Philadelphia, etc., v. to enter a judgment in favor of appellant for Getz, 113 Pa. 214, 6 Atl. 356. These cases a sum equal to the difference between $175 support the contention that such losses are and $425 per month for the remainder of recoverable.

the term, plus the $80, loss of profits. [7] “Damages,” in law, means an adequate compensation for the loss suffered or the in DUNBAR, C. J., and PARKER and jury sustained. The rule itself is well set- MOUNT, JJ., concur. tled and simple of statement, but its application is often attended with difficulty, on account of the great diversity of circumstanc

(63 Wash, 187) es surrounding different cases where the SCANDINAVIAN AMERICAN BANK v. principle is sought to be applied. As was

JOHNSTON. said in Seattle, etc., Ry. Co. v. Scheike, 3 (Supreme Court of Washington. April 18, Wash. 625, 29 Pac. 88: “* It is dif

1911.) ficult, if not impossible, to lay down a rule 1. BILLS AND NOTES ($ 537*) — TRIAL - DEof universal application as to what may be FENSES QUESTION FOR JURY DIRECTED considered as elements of damage, as the

VERDICT. equities of the parties must more or less de- was that the plaintiff was not a bona fide holder

In an action on a note to which the defense pend upon the particular facts and circum- without notice, held, that on the evidence a verstances of each case." This is particularly dict should have been directed for the plaintiff. true as applied to a leasehold which may [Ed. Note. For other cases, see Bills and have no market value in excess of the rent Notes, Cent. Dig. $ 1879; Dec. Dig. $ 537.*] reserved. The appellant is entitled to be 2. TRIAL ($ 143*)-QUESTION OF Law or Fact

-CONFLICTING EVIDENCE. paid the value of the unexpired term. The

Where the evidence upon an issue of fact is items under consideration are but constitu- conflicting, it must be submitted to the jury. ent elements of that value. In principle and [Ed. Note.-For other cases, see Trial, Cent. according to what we consider the better au- Dig. $$ 342, 343; Dec. Dig. § 143.*] thority, they are not recoverable as some- 3. BILLS AND NOTES ($_525*)-ACTIONS-Evithing apart from the leasehold interest.

DENCE-PAYMENT OF VALUE.

Payment of value is a circumstance in deThey form an essential part of its value.

termining bona fides, and payment of full value [8] There is a material conflict in the evi- is entitled to great weight, but is never concludence offered by the respective parties. The sive, except in the absence of evidence tending court could have found the rental for the to show notice or bad faith. remainder of the term either more or less Notes, Cent. Dig. $ 1834; Dec. Dig. $ 525.*]

[Ed. Note. For other cases, see Bills and than $425 per month, and the finding would 4. BILLS AND NOTES (8 338*) – Bona FIDE have had abundant support in the evidence.

PURCHASER--"HOLDER IN DÚE COURSE." The court saw the witnesses in the action and A "holder in due course," as defined by viewed the premises, and we are not dispos- Rem. & Bal. Code, 8 3443, subd. 3, is a holder ed to disturb the finding as to rental value who takes it in good faith and for value. for the unexpired term.

[Ed. Note.-For other cases, see Bills and

Notes, Cent. Dig. $S 819, 820; Dec. Dig. $ 338.* [9] The appellant's contention that evi

For other definitions, see Words and Phrases, dence should have been admitted as to the vol. 4, p. 3320.] rental value of the unexpired term measured 5. BILLS AND NOTES ($ 339*) - BONA FIDE by "the highest and best use" of the prem PURCHASER-NOTICE. ises cannot be sustained. It is correct as a

Under Rem. & Bal. Code, $ 3447, which degeneral principle. The lease, however, lim-a negotiable instrument, or a defect in the title

clares that to constitute notice of an infirmity in its the appellant's use to "wholesale, retail, of the person negotiating it, the taker or inand manufacturing harness and saddlery or dorsee must have had actual knowledge of the similar business.” It further prohibits the infirmity or defect, or knowledge of such facts use of the premises for certain specific pur- amounts to bad faith, the right of a holder is

that his action in taking the instrument poses. The question for the court to deter-I not defective merely by reason of his

negligence

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