Mausert v. Feigenspan

The president of a corporation has no power, virtute of/lcii, to alter the provisions of a formal agreement, under seal, entered into by the corporation itself.

On appeal from a decree of the court of chancery advised by Vice-Chancellor Emery, who filed the following opinion and memorandum: In this case both complainant and 'defendant agree that complainant is entitled to the specific performance of the contract between them, dated May 20th, 1902, in relation to the execution of a lease, and as to the lease itself the case is one for the settlement of the terms or conditions to be inserted in the lease. Two disputes arise in reference to these terms — first, whether the defendant is entitled to insert a clause against assignment or subletting without consent; and second, whether complainant is entitled to have inserted in the lease a modification of the clause, which was, under the contract, to be inserted in the lease, relating to the sale of beer or liquors on the premises. On the first point, I conclude that the clause against assignment and subletting without defendant’s consent is not to be inserted. The agreement does not provide for such clause, and it expressly contemplates assignment of the agreement; and the last clause of it provides that it shall bind the assigns of the parties. The defendant is, however, entitled to have the lease recite that it is executed pursuant to the agreement, and to recite the provisions of the agreement relating to the use and sale of defendant’s goods. Defendant is entitled to this in order that when the lease is executed it may be in a position to enforce against any assignee of complainant whatever rights, legal or equitable, it may have by reason of the agreement and its provisions for binding assignees. As to the modification of the agreement contained in the written contract of. May 20th, 1902, for the sale of liquors, my conclusion is that a covenant of this character is a restriction of the use of lands, and within the statute of frauds. The subsequent modification relied on by complainant in his bill is denied in the answer, and except to the extent set up by the answer is proved only by parol. The statute of frauds not having been set up' in the answer, the contract, as modified, can be enforced so far as admitted by the answer, but only to that extent. Ash-more v. Evans, 11 N. J. Eq. (8 Block.) 151 (Chancellor Williamson, 1850); Gough v. Williamson, 02 N. J. Eq. (17 Dick.) 526. Defendant claims, that the covenant is not within the statute because it is a purely personal covenant, collateral to the use of the land, and does not run with the land. Whether the covenant runs with the land is not, at least in equity, the test of the applicability of tire statute, for in equity it is settled that an assignee of land with notice is subject to the restrictions, irrespective of the question whether the covenant runs with the land. Kirkpatrick v. Peshine, 21/. N. J. Eq. (9 C. E. Gr.) 206, 213; Brewer v. Marshall, 19 N. J. Eq. (1¡. G. E. Gr.) 587, \5!(2 (Court of Errors and Appeals, 1868). In the present case, I think it was clearly intended by the parties that the covenant related to the premises. The agreement recites that the object of defendant in taking the option and lease was to open the premises for one of its customers for the sale of its goods, and that the complainant desired to establish himself in the premises as a customer of defendant for the purpose of opening a saloon and selling the goods of defendant. The covenant which is to be inserted in the lease of the premises is that complainant is “to use and sell exclusively the goods manufactured by defendant, except those imported from a foreign country outside of the United States.” Talcing the whole agreement together, this covenant clearly relates to the exclusive use and sale on the leased premises of defendant’s goods for the term of the lease (five years), and is to that extent a covenant restricting the use of the lands leased, and is an equity attached to the lands by the lessor. It is therefore within the statute of frauds. In Manchester Brewery Go. v. Coombs, 10 Gh. Div. 608, 612 (1901), a covenant by a lessee to buy beer of the lessors and “their successors in business,” was held to be a covenant running with the land. There have been no acts of part performance to take the case out of the statute. In reference hr the modification of the contract, I think, also, that the point is well taken that the authority of the president of the corporation to modify the contract in the manner claimed by complainant has not been shown. The clause relating to the sale of liquors will therefore be the clause in the agreement, with the modificatipns stated in the answer. Second. In reference to the amount due upon the mortgage, the principal dispute is whether the complainant, in estimating the amount due upon tire mortgage, is entitled to a deduction of the amount paid by defendant in the settlement of the debts incurred by Sicke & Company, the contractors, to materialmen and others, for materials and labor included in their contract, and for which the contractors had been previously paid. These creditors claimed liens upon the leasehold and fixtures, and at the time of giving the mortgage the claims had not been paid. The total amount of tírese claims was included in the mortgage, with the understanding that complainant should have the benefit of any deduction in the claims made in their settlement, and after such deductions, which were in all instances made with complainant’s knowledge and assistance, the claims were paid by defendant in the belief that they were included in the mortgage. Complainant now claims that these duplicate payments, as they are called, became necessary because of the neglect of, defendant’s attorneys in not procuring the contract to be filed, and a large amount of evidence was produced on both sides bearing upon the question whether the failure to file the contracts was the fault of these attorneys of defendant, or of the complainant himself. Without undertaking to decide this question in this suit, my conclusion upon the whole evidence is that the mortgage in. question was given and received with the express intention and understanding that the defendant, so far as it after-wards paid these claims, was to be secured by the mortgage, and that it was not intended that as between complainant and defendant thus paying them the mortgage should be subject t-o any deduction by reason of the complainant’s claim that the attorneys were liable for the payments, and I conclude that the complainant, having procured these subsequent payments by defendant, knowing that in so paying it relied on its security under the mortgage, is -now on the entire evidence estopped from disputing that they are so secured. Complainant, however, on making the payments, is entitled to be subrogated to any claim defendant may have against its attorneys for the alleged negligence. The amount due upon the chattel mortgage will therefore not be reduced by these claims. Third. Complainant, as a condition to the execution and delivery of the lease, should be required to pay the amount due on the chattel mortgage, the time fixed for payment by the agreement having expired. It is true that the original agreement did not provide for such payment as a condition, and I think the parties contemplated the execution of the lease before the maturity of the mortgage. It appears by the evidence, however, that the failure to execute any lease before the execution of the mortgage was due to the. request of the complainant that the defendant should continue to hold the title, and was not due to any dispute between the parties as to the terms of the lease. When the defendant, in July, 1903, offered to make the lease, and submitted one for execution, there was probably an objection raised by the complainant as to the insertion of the clause against assignment, but the failure to settle this question and execute a lease at that time was not due to that objection, which was left open. The defendant, holding the legal title to the premises, paid the amount secured by the mortgage for the expenses of fitting up the premises under the contracts made in its name, and no actual conveyance to the complainant, either of the lease or fixtures, has been made. The time fixed for the payment of the mortgage having arrived, the situation is one where the ■entire equities between the parties should be settled, and the complainant, asking the equitable remedy of specific performance, should be required, on his part, to satisfy the equities which have arisen in defendant’s favor on the entire transaction. This was the view of complainant on filing the bill, which was for ■the double purpose of specific performance of the agreement for the lease and settling the amount due on the mortgage -in a .single suit. The bill asks an accounting of the amount due on the mortgage, and offers to pay the amount found due upon the performance of the agreement to execute and deliver the same. The defendant accepted the issues thus tendered, and the cause 'has proceeded to hearing- upon both questions — that of execution ■of the lease and the settlement of the amount due on the mortgage. Under these circumstances, I do not think that the complainant should now be allowed to withdraw the tender or offer in his bill and to ask that he be allowed to have the lease executed without payment of the amount due on the mortgage. Fourth. Defendant, on. the cross-bill, is entitled' to an injunction restraining the breach of the covenant relating to the •sale on the premises of goods other than those supplied by defendant. The form of decree will be settled on notice, unless counsel .agree upon the form. FURTHER MEMORANDUM AS TO FORM OF LEASE. First. The lease should bo for the full term of the lease from •the Bernard estate to the company. Leases to a subtenant for the •full term create the relation of landlord and tenant, as between •the original lessee and the sublessee, if they so intend. Stewart v. Long Island Railroad Go., W'Z N. Y. 60S, and cases cited (at p. 609). The effect as between the original landlord and •the sublessee is not before me for decision, and upon further consideration I conclude that no restriction of the full term-should be made. Second. In the clause as to the option, the lease should follow •the terms of the original lease. Whether, as between the original lessor and the company, the sublease for the full term operates as an assignment of the right or option to renew, is a question not now to be decided, and I do not consider that I have the right on a bill for specific performance to deviate from the form of contract which parties have agreed upon. Third. Neither party is entitled to costs as against the other. Although complainant was obliged to file his bill in oi'der to obtain s]Decific performance, lie claimed performance on terms in the lease to which it was decided he was not entitled. On the other hand, defendant originally, and up to the time of filing answer, refused any specific performance, and at the hearing insisted on terms in the lease to which it was not entitled. So far, therefore, as the case is to be treated as one of specific performance, both sides were in fault, and the general rule in such cases is that neither party is entitled to costs. [8 Dan. Ch. Pr. §§ 11(00, llfil. So far as the bill was a bill to settle the amount due on the mortgage and to redeem, the mortgagee would be entitled to the costs of the suit so far as they related to the mortgage claim, and if these could well be separated from the other costs of the suit they might be allowed. But both questions of specific performance and mortgage indebtedness were tried together, and it is impracticable to separate the costs. On the whole case, it is most equitable that neither side pay costs.