American Piano Co. v. Knabe

Urner, J., delivered the opinion of the Court. The American Piano Company is the lessee of a lot of ground and mercantile building, situated at the southwest corner of' Park avenue' and' Payette street in the City of Baltimore, under a lease dated December 29, 1908, and executed by the appellees, Ernest J. Knabe, Jr., and William Knabe, who were at that time the owners of the fee in the property. The lease is for a term of twenty-one years beginning January 1st, 1909, and it provides for a rental of $1,500 per annum to be paid by the lessee in addition to taxes, water rent and other assessments, and the costs of insurance and' repairs. There is a recital in the lease that the demised property was already in the possession of the lessee as the assignee of a pre-existing lease from the same reversioners to the William Knabe & Company Manufacturing Company, dated January 2, 1908, and that it was the desire of the parties to the newi lease that it should be executed in substitution for the one previously in force.

The provisions of the twi> leases were the same as to the rent and other charges to be paid by the lessee and also as to the duration of the leasehold terms they respectively created. At the time of the execution of the substituted lease to' the American Piano Company, the appellee, Ernest J. Knabe, Jr., was the presi ¹¹³ dent of that corporation, and he executed the lease both in his official capacity on behalf of the lessee company, and in his individual interest as one of the lessors. By a deed, bearing the same date as the new lease*, the reversion in the property was conveyed by the lessors to Mr. Theodore Marburg, in consideration of $85,000 to be paid by the grantee, and the agreement on his part to* pay to the grantors annually $1,000 of the rent to he received by him under the lease. The terms of the purchase were not set forth in the deed, only a nominal consideration being therein stated.

In March, 1915, the lessee corporation filed the pending hill of complaint alleging that it had just learned of the agreement in reference to the payment by Mr. Marburg to* Ernest J. Knabe, Jr., and William Knabe of a portion of the r,en.t for which the lease provided, and charging in effect that, with a view to such agreement, the rent which the company was required to pay had been fixed at an excessive amount by the Messrs. Knabe, while acting in the dual capacities of owners of the leased property and president and director, respectively, of the lessee company, and that in thus securing personal profit and advantage for themselves at the expense of the corporation, they practiced a fraud upon its rights which renders the lease void, at least to* the extent of the rent which they reserved for their own benefit. The answers emphatically denied the allegations of fraud, and asserted that the rental, for which the lease to the American Piano Company makes provision, is fair and reasonable, and that the reservation to* the lessors of $1,000 of the annual rent, as part of the consideration for the sale of-the reversion to Mr. Marburg, has resulted in no prejudice whatever to the lessee’s interests. Upon the evidence in the record we fully agree with the conclusion of the Court below that the charge of fraud, has not been sustained.

There is no* dispute in the testimony as to the salient facts in the case, and these are wholly inconsistent with the theory that ihe Messrs. Knabe abused ¹¹⁴ tkeir official relationship with the lessee corporation for their own advantage, or that any fraud upon it in respect to the lease in question was in fact committed. The rent which the company agreed to pay under the substituted lease of December 28, 1908, was the same in amount as the rent it had-been paying as the tenant under a