Houston v. Barnett

JOHNS, J.

The lease provides for four rental periods, the first two of which are unnecessary to this-opinion. The third states that “the lessee undertakes, promises and agrees to pay the sum of $1,200' per annum in advance as rental”; the fourth provides that “the increase of the rent above $1,200 per year shall be agreed upon by the lessors and the lessee,” and in the event that they cannot agree each shall select one arbitrator, the two selected shall choose a third and the majority thereof shall be binding. Under the eleventh clause the lease provides that if either party should refuse to appoint an arbitrator for a period of thirty days, to determine the rental increase for the last five years, upon application therefor the Circuit Court should appoint such arbitrator to represent the party refusing, and such appointment should be final and binding. It will thus be seen that as to the third period the amount of the rent is stipulated and that the lessee specifically “undertakes, promises and agrees” to pay the amount stated.

It is alleged and the proof shows that the rent was not paid for either one of the last five years, and that the defendant not only refused to pay the rent, but *99 denied any liability. For such reason the court appointed an arbitrator to act for and represent the lessee, as provided for in clause. 11. The arbitrators found that there should not be any increase of the stipulated minimum rental.

The record shows that the defendant Barnett was a man of mature years and of large business experience, and that after negotiations which covered a considerable period of time, with the plaintiff Joseph GL Houston, he personally inspected and made a careful examination of the premises, after which the terms and conditions of the lease and option were fully discussed and agreed upon. An attorney was employed by the plaintiffs herein to draft the lease, and the agreement which is now in controversy was then drawn and executed by both parties and left with him pending the examination of the abstract of title by another attorney employed by Barnett for that purpose.

1. A period of at least three months intervened between the inspection of the premises by Barnett and the delivery of the lease, and at least six months elapsed between the inception of negotiations and the date of such delivery. After the delivery of the lease the lessors and lessee agreed upon the assignment of a land certificate in lieu of the provisions of the first clause of the lease, and Barnett paid the stipulated rental for the fourth and fifth years provided for in the second clause of the lease. Thereafter he paid the first annual rent named at $1,200, provided for in the third clause. In other words, Barnett complied with all of the terms and conditions of the lease by him to be kept and performed, for a period of six years. On July 28, 1911, he assigned all of his right in the lease and option to the defendant Elrod and in *100 consideration thereof received property substantially equal in value to the same amount which he had paid the plaintiffs under the terms of the lease. In the face of this transaction and the facts shown by the record, Barnett cannot now claim or assert that he was misled or deceived by the plaintiffs. He had made a personal inspection of the premises and had ample time and every opportunity to make a full and fair investigation before the lease was delivered. For six years after the delivery he complied with all of the terms and- provisions of the lease without any complaint or criticism, and then unloaded the lease upon the defendant Elrod, from whom he received practically the same amount that he had' paid the plaintiffs as rental.

On July 28, 1911, Barnett assigned the lease to Elrod, who paid the stipulated rental and accrued taxes for two years, then declined to make any further payments and denied any liability, claiming that he had been released.

We have carefully read the testimony and are of the opinion that the plaintiffs did not, and never intended to, release either of the defendants. The testimony of the plaintiff Joseph G-. Houston would indicate that he is somewhat of a Shylock, but it also tends to show that he relied upon and expected to enforce the terms and conditions of his lease until such time as he received the purchase price of, and parted with his title to, the property.

2, 3. Notwithstanding the assignment, Barnett as lessee continued liable on the covenants in the lease to pay rent and taxes which accrued subsequent to the assignment. After the transfer the assignee then became liable to the lessors for the rental and taxes, and the lessors at their election could then sue either *101 the lessee or the assignee, or both at the same time, although they could have but one satisfaction. It is well settled that the assignee of a leasehold is personally liable for rent accruing while he retains the leasehold : 16 R. C. L., § 352,. and authorities there cited.

The defendants contend that a court of equity does not have jurisdiction of this controversy and claim that they were released from all liability. Clause 5 of the lease specifically provides for a minimum rent of $1,200 per annum for the last five-year period; that upon the failure to agree as to any increase of such rent arbitrators should be appointed and that the findings of the majority thereof should be binding. Clause 6 stipulates how any increase in the purchase price for the same period* should be determined. 'Clause 11 provides that upon the failure of either party to appoint an arbitrator, under clause 5 or 6, the other party “may apply to the Circuit Court of the State of Oregon for the County of Multnomah and secure the appointment of an arbitrator to represent the party so refusing, and such appointment shall be final and binding.” While such clauses define the minimum amount of the rent and purchase price, yet any increase of either was to be determined by arbitration. When the defendants denied further liability it must follow that they thereby refused and neglected to comply with the terms and provisions of either clause 5, 6 or 11 of the lease; and to protect and define their rights, the plaintiffs were then obliged to apply to the court to obtain the specific performance of that portion of the contract which provided for the appointment of arbitrators to determine the amount of the increase, if any, in the annual rent and the purchase price for the last five years of the lease. Denying liability, the defendants have no *102 right to complain that the plaintiffs asked the court to do that which the contract specifically provided should be done. According to the notes appended to-the report of the case of Williams et al. v. Branning Manufacturing Company in 47 L. R. A. (N. S.) 337, 380 ( 154 N. C. 205 , 70 S. E. 290 ) and the authorities there cited, persons are not allowed to enter into contracts which will oust the courts of their jurisdiction over the subject matter of such contracts. Yet the authorities recognize the right of such persons .to arbitrate incidental or collateral questions of fact which do not go to the essence of the contract and which are only intended as an aid and guide to the courts in any litigation arising out of the contract for the purpose of settling in advance some particular fact or facts so as to furnish evidence of it at the trial' which the litigants are not at liberty to dispute.

The distinction between executory agreements of arbitration which oust the courts of jurisdiction and those which are sustained as the sole remedy between the parties, is carefully drawn and fully discussed in Delaware & H. Co. v. Pennsylvania Coal Co., 50 N. Y. 250 , which is the leading case on that question.

“But the better rule seems to be that a court of equity will secure to either party the benefit of such clauses in a lease, and that, even in the face of the rule against the specific performance of an agreement to submit to arbitration, when the arbitration has failed the court may make the appraisement itself or direct it to be done by its own officer and thereafter enforce performance of the contract upon the terms so found”: 24 Cyc., p. 1006, and authorities cited.

Under facts similar to those in the case at bar, the same rule is announced in Kaufmann v. Liggett, 209 Pa. St. 87, 102 ( 58 Atl. 129, 134 , 103 Am. St. Rep. 988 , *103 67 L. R. A. 353), in which the court says, on page 999 of the opinion in the last-named report:

“The court has complete jurisdiction in equity to fix the amount of the rental to be paid by the lessees-during the extension of five years from April 1, 1903, and to enforce specific performance of the agreement providing for such extension.”

4. The arbitration clauses in the lease before us were not of the essence of the contract, but mere incidents or collaterals which defined the minimum amount of the rent and purchase price for the last five-year period and provided how and by whom the increase thereof, if any, should be determined. The lease and option was a fully executed contract without either of the arbitration clauses. Under the facts shown by the record in the instant case, we hold that a court of equity did have jurisdiction to ascertain and determine the amount of the rental to be paid under the lease during the last five-year period, and to enforce a specific performance of the agreement providing for the appointment of an arbitrator. The ruléis well settled in this kind of a case that where a court of equity has acquired jurisdiction for one purpose it has authority for all purposes, and may render a decree for the amount of accrued rent.

Elrod claims that he assigned the lease to Beeman and by> reason thereof is released from any further liability after the date of the assignment. The lower court found that the assignment was not made in good faith and that it was in fact a fraud for the sole purpose of relieving Elrod from further liability. As the facts appear of record, this question becomes immaterial. The lease was executed on March 29, 1906, and the assignment to Beeman was made on or about June 1, 1916. By the terms of the lease the *104 rental was to.be paid in advance; hence on March 29, 1916, another $1,200 as accrued rental became due and payable. The decree of the lower court was for three years’ rent, unpaid taxes and accrued interest, amounting to $4,608: Under the terms and provisions of the contract, the lessee promised and agreed to pay the stipulated rental, and by virtue of his assignment Elrod became in privity with and liable for the amount of such rental and 'would continue to be liable so long as he held under his assignment, and under the terms of the lease a full year’s rental was due and payable in advance on March 29 of each year. For such reason it is unnecessary to decide in this opinion as to the validity or the force and effect of the assignment from Elrod to Beeman.

It is also claimed that Beeman was a necessary party to the suit. The arbitrators were appointed by the court upon the application of the plaintiffs and they found that the plaintiffs were not entitled to any increase of rent or the stipulated amount of the purchase price. If the assignment was valid and the arbitrators had increased either the rental or purchase price, there might be some merit in the contention that Beeman was a necessary party, but under the findings of the arbitrators, if the assignment was valid the plaintiffs could collect only the minimum amount of the rent stipulated in the lease.

After careful consideration we are of the opinion that the decree of the Circuit Court must be affirmed.

Affirmed.

McBride, C. J., and Bean and Benson, JJ., concur.