Banks v. Haskie

Miller, J., delivered the opinion of the Court. The question presented by this appeal is confessedly one of much importance in this State, as it affects the rights of parties to leases for ninety-nine years, containing covenants for perpetual renewal. The present bill was filed by the owner of the leasehold interest, against the owner of the fee to enforce specific execution of a covenant of this character. No request or demand for a renewal was made by the tenant upon his landlord, during the original term of ninety-nine years, and the application to equity was not made until after its expiration.

The question therefore is, has the leasehold interest under such circumstances ceased to-exist, and all the improvements put upon the demised premises by the lessee, become the property and estate of the lessor, or can a Court of equity give the tenant relief by enforcing a renewal upon the equitable condition, that he shall pay all arrearages of rent and the stipulated renewal fine ? To determine this we must first consider the terms of the lease, the covenant and agreements it contains, and in what relative position they stand, as well as the condition of the leased premises at the time it was executed, in order to ascertain the intention of the parties, and the purpose and effect of the instrument itself, for it is upon these latter that the solution of the question before us, in a great measure, depends. The lease in the present case was executed on the 18th of January, 1772, and thereby, “in consideration of the rents and covenants hereinafter reserved, and contained on the part of ,the said” lessee, “his heirs, executors, administrators and assigns, to be paid, kept and performed,” the lessors demise and grant unto the said lessee a piece of land, containing one-quarter of an acre particularly described, situated on Eells Point in Baltimore County, and Province of Maryland, and designated in a plan or plat of a town on said Point, by the number one hundred and forty-two, ‘ ‘ to have and to hold the said demised p're ²¹⁴ mises with the appurtenances unto the said” lessee, “his heirs, executors, administrators and assigns from the day of the date hereof until the full end and term of ninety-nine years then next ensuing and fully to he completed and ended, under and subject nevertheless to the conditions, provisoes and limitations hereinafter mentioned, yielding and paying therefor yearly and every year during the said term, unto the said” lessors, “or to their or his representative or representatives, his executors, administrators or assigns, the rent of two pounds ten shillings, sterling money.” Then follows a covenant hy the lessee for himself, his heirs, executors, administrators and assigns, that he, his heirs, executors, administrators or assigns, “shall and will, within two years from the commencement of the demise hereby made, at his own proper costs and charges, build and erect on the demised premises a good and sufficient house to cover four hundred square feet, covered with jointed cypress shingles, and the same keep in sufficient repair,” and also a covenant in the same terms to pay the aforesaid rent yearly, and that it shall he lawful for the lessors, or their or his representatives, heirs, executors, administrators or assigns, to distrain in and upon any part of the demised premises for the rent aforesaid upon non-payment thereof. Immediately following these covenants, on the part of the lessee, is the covenant in question hy the lessors for perpetual renewal of the lease, couched in the most formal terms.

By it, the lessors, “for themselves, their heirs, executors, administrators and assigns, do hereby covenant, promise, grant, and agree to and with the aforesaid” lessee, “his heirs, executors, administrators and assigns, that they, the said” lessors, “their heirs or assigns, shall and will, upon the request and at the costs and charges of the said” lessee, “his heirs, executors, administrators or assigns, and upon his paying or tendering the sum of two pounds ten shillings sterling, in the name of and as a fine for renewment, ²¹⁵ at any time during the continuance of this present demise, make and execute to him, the said” lessee, “his heirs, executors, administrators or assigns, so requesting, paying or tendering as aforesaid, a lease or demise of the demised premises aforesaid, for ninety-nine years, to take effect and commence at the end of the term hereby demised, at and upon the same rent, and with and under the like covenants, provisoes and agreements, as are herein contained, so that this present demise shall and may be renewable and reneioed forever.” Then follows a covenant or agreement between the parties, that in case the house before mentioned shall not be so built within the two years, the lessee or his heirs, executors, administrators or assigns, upon paying or tendering the sum of two pounds ten shillings sterling to the lessors or their assigns, or lawful attorney, within one month next after the expiration of said two years, shall have two years, commencing from the expiration of the first mentioned two years, for erecting and completing said house, but if default shall be made in building said house within the first mentioned two years, and keeping it in repair, and also in the payment of the said sum of two pounds ten shillings within the term of one month next after the expiration thereof, or if after such last payment there shall be default in erecting and completing said house, and keeping it in repair, within the two last mentioned years, or if default shall be made in payment of any one year’s rent for the space of six months after the same ought to have been paid as aforesaid, and there shall not be sufficient on the premises to secure the yearly rent by distraint, then it shall and may be lawful, upon such default, for the lessors or their representatives, heirs, executors, administrators or assigns, to enter into the said demised premises, or into any part thereof, in the name of the whole, and the same and every part thereof again to have, hold and repossess, as in their or his former estate, and as if this demise had ²¹⁶ never been made, and upon such default, these presents, and every clause, matter and' thing therein 'contained, as from and against the lessors, their heirs and assigns, shall immediately thereupon cease, determine and be void to all intents and purposes whatsoever. The original term of ninety-nine years expired on the 18th of January, 1871. In 1848, Daniel B. Banks purchased the reversion in the demised premises for $80, subject to an outstanding life estate, which shortly thereafter fell in. In 1867, Henry Haskie, the husband of the appellee, purchased the leasehold interest in the same premises for the gum of $3400.

He died in 1868, and in 1870 the appellee, his widow, became the assignee of his interest. In May, 1874/Banks brought ejectment against the appellee to recover the property, and on the 24th of October, 1874, the appellee filed her bill for a renewal of the lease and an injunction to restrain the ejectment. Banks died after he had answered the bill, and the devisee of his. real estate was made defendant in his place. It thug) appears the bill was filed a little more than three years and nine months after the expiration of the original term, and about five months after the action of ejectment.

The case was submitted on bill and answer, and the Circuit Court passed a decree, directing the defendant, upon the complainant's paying the renewal fine of two pounds ten shillings sterling, with all arrearages of rent due under the lease, up to the time of such payment, and all necessary costs and charges, to execute to her a new lease for the premises for the term of ninety-nine years, to commence at the end of the original term, at the same yearly rent, and with the same agreements and covenants as are mentioned in the original lease, and granting an injunction, perpetually enjoining the further prosecution of the action of ejectment. Before deciding how far the particular facts of this case disclosed by the bill and answer may operate to bar relief ²¹⁷ on the ground of laches, we shall first consider, whether in any case of a lease of this character relief can be granted in equity, where the lessee has neglected to demand a renewal during the original term. This brings us to the inquiry, what was the intention of the parties, and what is the effect of such a conveyance? It seems to us quite clear, that the intention was on the part of the lessor to secure the prompt payment in perpetuity of the interest on a sum of money, equivalent to the value of the property in fee,°at the time the lease was made, and on the part of the lessee to acquire a perpetual interest in the leased premises, which would justify his making permanent improvements thereon, and enable him to avail himself of the value of the property thus enhanced, as well as of its increase in value arising from other causes.

The lease before us well illustrates and expresses this intention almost in words. The owner of vacant ground in a town located and about to be built up, from which he can derive in its then condition no adequate income, being himself unable or unwilling to erect the necessary buildings, instead of selling the property in fee for its then value and investing the proceeds in other securities, or raising by mortgage the money to make the improvements himself, resorts to this method of deriving au income from it, and making a secure and permanent investment of its value in the land itself. He makes a lease of it by which he secures the erection of improvements, which enhance the value of his property, and consequently make a permanent and safe investment of its actual market value, and this is all he had in view or intended to accomplish. The lessee is encouraged to spend his money in improvements by the permanency of the interest he acquires, and expectation of further increase in value, which will enable him also to realize a profit from the expenditure of his means.

Thus a mutual advantage was contemplated by both parties at the time, and the result has usually been beneficial to both. Such ²¹⁸ appears to us to be the intention and purpose of the parties in making and accepting a lease of this description, and the Courts should so treat and construe the instrument as most effectually to carry out that intent. This character of tenure is, so far as we know, among the States peculiar to Maryland. It has not been generally adopted so far as we are informed in any other State.

It was introduced here in Colonial times, and has been a favorite system of tenure from a very early period.' A large city has been built, and improved, and a vast majority of the real estate in Baltimore is now held under it. It is not Open to any of the objections against perpetuities. Property is not thereby placed extra commercium. On the contrary, these leasehold interests devolve upon the personal representatives of the owner, are in terms made assignable, and they, as well as the ownerships in fee under the denomination of “ground rents,” are subjects of daily transfer, and are constantly sought for as safe investments of capital.

It is a peculiar description of tenure which has been sustained by our Courts, and approved and fostered by our people. While the ground rents from their nature are usually of a fixed value, the leasehold interests are more or less fluctuating. In many, and indeed in most cases, they have largely increased in value with the growth of the city. And most extensive and costly improvements have.been and are daily made by owners of such interests on grounds thus leased.

If then in any case a party who may have recently made such improvements or purchased such an interest at its full present value, should through forgetfulness or neglect fail to secure a renewal of the lease during the original term, is he without remedy, and must he surrender under an action of ejectment his entire property to the owner of the fee? It is easy to see on which side of such a case substantial justice lies, and unless there be some inflexible rule or principle, or some binding authority, or current of ²¹⁹ decisions, which have definitely settled the law to the contrary, we are of opinion our Courts of equity ought to grant the relief asked for, and compel a renewal on the equitable conditions stated in the decree before us. How then stand the authorities? We have found none in this country hearing on the subject.

All we have been referred to coming from the Courts of our sister States, are cases in which there was a lease for a definite and comparatively short term, with an agreement or privilege to the lessee to renew for a single other like term. They are not cases like the present, and the decisions throw no light upon the questions here involved. Nor has this description of lease ever been generally used in England. From our examination of the cases, we find hut one or two instances in which a covenant for perpetual renewal has been plainly expressed in an English lease, and in those the Courts refused the application for renewal under special circumstances.

There are quite a number of cases in which the question has arisen, whether particular covenants in leases are to he construed as 'covenants for perpetual renewal or not, and in such cases the strong inclination has been not so to construe them, if, by possibility they can he construed otherwise. Most of the cases on this point are referred to and commented on in the opinion of the Lord Chancellor in Browne vs. Tighe, 8 Bligh N. S. 212. The rule there stated as deduced from all the authorities is, “that a covenant to receive the construction of perpetual renewal must he plain and distinct, and such as to hear no other construction without force and violence done to the words and the context.” That case is only important here as showing, that while there are perpetual leases in England, as in Manchester and other places, they are unlike the one before us, as not being made so by covenants, hut by the original constitution of the lease itself creating an interest resembling the Scotch feu for a fixed rent, and as also showing that the interest so created though per ²²⁰