Calvert Building & Construction Co. v. Winakur

Parke, J., delivered the opinion of the Court. There are two appeals on this record that present a controversy arising among a former landlord, a mortgagee of .goods and chattels, and certain creditors, over the proceeds of sale of this personalty which had been owned by one whose relation with each had been respectively that of tenant, mortgagor, or debtor. The landlord was the Calvert Building & Construction Company, appellant, which, on August 31st, 1921, had leased unto(Paul M. DeCrette a portion of its premises to be used for a lunchroom and kitchen during a term of five years, beginning on October 1st, 1921, at a yearly rental of seven thousand dollars and of a sum to be ascertained by the quantity of electric current consumed on the premises demised at a fixed rate. The definite rental was to be paid in equal monthly payments in advance on the first day of every month during the term, and the indefinite rental, which was to be computed on the electric current used, was payable on or before the tenth day of every succeeding month of the demise.

The tenant did not prosper, was in ■debt, fell in arrear' with his rent, and in July, 1924, when .his arrears of rent were $1,824.95, desired to be relieved ⁵²² of his obligations as tenant. At the landlord’s request, the tenant submitted a list of his overdue accounts, and the landlord, in order to afford the tenant an opportunity to pay these debts, agreed to extend the time for the payment of the rent due and to become due until the first day of October, 1924, when such rent would aggregate the sum of $3,321.61, estimating the electric current to be consumed at $658.50, which was $121.70 in excess of the amount later found to have been used. The agreement was in writing and was executed on July 15th, 1924, by the landlord and tenant. In addition to the provision for the extension of time for the payment of the monthly installments of rent, the original lease was amended so as to contain the stipulation that: “All fixtures, appliances, furniture and machinery installed by the lessee shall be the property of the lessor, provided, however, that if at the expiration of the lease by lapse of time or otherwise the rent shall have been paid in full and all the covenants of the lease shall have been performed, said property shall revert to and become the property of the lessee.” The extension of time did not enable the tenant to meet his obligations, and, the full amount of the rent to October 1st, 1924, remaining unpaid, the landlord and tenant executed, on September 30th, 1924, a sealed instrument, which, omitting the formal beginning and ending, was of the following tenor: “Whereas the said DeOrette is indebted to the said corporation in the sum of thirty-three hundred and twenty-one ($3321) dollars and sixty-one (61) cents for rent due under the lease from said corporation to him of the premises described therein as the basement story of the Calvert Building dated the thirty-first day of August, 1921, and under an agreement between the said parties dated the fifteenth day of July, 1924; “And whereas the said Decrette desires to surrender said lease and to vacate said premises and to deliver the personal property therein and thereon to said corporation ; • ⁵²³ “Aow this agreement witnesseth that the said De-Crette does hereby surrender said lease and vacate said premises and deliver said personal property to said corporation; “And the said corporation hereby accepts the surrender of said lease and discharges and releases the said DeOrette from the payment of said sum of thirty-three hundred and twenty-one dollars and sixty-one cents.” The effect of this surrender and release was to end the relation of landlord and tenant and to put the corporation in full possession of the premises and of the personal property, but, in order that the former landlord might have the advantage of a going business in its effort to secure a new tenant, the appellant, as the owner of the premises, entered Into a written agreement under seal with DeOrette on October 1st, 1924, whereby the owner employed DeOrette on that date to conduct as the agent of the corporate owner the cafeteria business on the same premises.

DeOrette’s compensation was to be a sum equal to the net profits of the business, and it was expressly provided that, in the ascertainment of such net profits, the business was not to be charged with the expense of either rent or light. DeOrette was to render a weekly statement of the business which was stated to be temporary in nature, and could, be terminated at the option of either party by giving the other party notice of ten clays in writing. The agreement further sot forth that the corporation assumed “no liability for any debt which the said DeOrette may have previously contracted in the cafeteria business previously conducted by him on said premises on his own account,” but that these would be paid by DeOrette with as little delay as possible. The corporate owner was thereby enabled in the early part of Aovember, 1924, to conclude its negotiations of about two months with prospective tenants, and to lease the premises to them for a term of five years from January 15th, 1925, and to sell to the new tenants the chattels which it had obtained ⁵²⁴ from DeGrette for the sum of $4,000.

On November 13th, 1924, the corporation gave the prescribed written notice to DeCrette, who elected to terminate his agency on November 15th, 1924, and the cafeteria was closed on that day, and on November 17th the new lease was executed. After the execution of this lease, but on the same day, the corporation received a letter from H. J. Weiskopf, which was dated and mailed on Saturday, November 15th, notifying the corporation that he had that day been appointed by decree of the Circuit Court No. 2 of Baltimore City trustee to sell under mortgage foreclosure the chattels formerly owned by DeCrette, but then in the possession of the corporation, and that unless the mortgage indebtedness be paid on or before the 30th of November, 1924, the property would be advertised for sale. The proceedings referred to were to foreclose a mortgage on the chattels mentioned that had been given by DeCrette on March 6th, 1924, to Eleazur Winakur, to secure a purporting indebtedness of five thousand dollars. The principal amount was payable in fifty-one weekly installments of seventy-five dollars each, and the residue of eleven hundred and seventy-five dollars at the expiration of fifty-two weeks from the date of the mortgage.

The mortgage contained a covenant of the mortgagor to pay to the landlord of the premises where the chattels were located the monthly installment of rent by the third of every month. In case of default in the payment of the mortgage debt and of the rental, the mortgagor assented to the passage of a decree for the sale of the property mortgaged in accordance with the Acts of 1898, ch. 123, secs. 720-732. This mortgage was duly executed and recorded within a day from its date, and while this put the corporation on constructive notice, it did not have actual notice of this chattel mortgage until the receipt of the letter of the trustee on the early afternoon of November 17th. As soon as the corporation received the letter, it began negotiations with the trustee, to whom the court had decreed the immediate surrender of the chattels, and obtained his consent to wait for thirty days from November 18th before proceeding further with the foreclosure proceedings.

The chattels meanwhile ⁵²⁵ remained in the possession of the corporation, which on November 25th distrained the chattels for rent in arrear to November 1st, 1924. This action created a situation where the chattels were at once claimed by the corporation under its distress for rent, and by the trustee for their sale under the foreclosure proceedings, and by the new tenants as purchasers from the corporation. Under these circumstances, it was agreed on November 27th that the corporation would indemnify the new tenants from loss, and that the chattels would be sold by the trustee, and the conflicting claims of the corporation and the mortgagee would be asserted against the proceeds of such sale. On December 13th, the trustee reported the sale of the chattels to the corporation for $2,700; the sale was duly ratified on January 10th, 1925, after it had been objected to on the ground of inadequacy of price; and the account of the auditor distributed the sum of $2,300 to the mortgagee in full payment of his mortgage claim, and the residue of the net proceeds of sale, amounting to $224, was distributed to the Calvert Building & Construction Company of Baltimore 'City The latter excepted to the ratification of the auditor’s account on the ground that the entire net proceeds of $2,524 should have been distributed to it as rent in arrear.

DeCrette and J. L. Appleby & Company, a judgment creditor, excepted to the allowance of the mortgagee’s claim in full, claiming it was usurious in part, and to the distribution of any part of the fund to the former landlord, each of these two exceptants claiming the residue after the payment of the amount actually due to the mortgagee. The claim of the J. L. Appleby Company had been filed in the proceedings and was based on a judgment against DeCrette, obtained on January 3rd, 1925, in the Baltimore City Court, for $1,326.23, and a fieri facias issued thereon on January 6th, 1925. Another judgment creditor, George Waldhauser, trading as the Clover Dairy, had obtained a judgment in the Baltimore City Court against DeCrette on January 10th, 1925, for $999.35, and, pursuant to leave granted him on January 13th, 1925, by the court in the pend ⁵²⁶ ing equity cause, an attachment on his judgment had heen issued and laid in the hands of the trustee Weiskopf on February 17th, 1925, and on March 9th, 1925, a judgment of condemnation nisi had been obtained. These attachment proceedings were brought to the attention of the chancellor by being filed in the cause.

The several parties took testimony in open court before the chancellor in support of their respective claims, and the final decree gave priority to the mortgage indebtedness, after it had been reduced to the extent of usury exacted, and distributed the residue, together with any accrued interest, between the J. L. Appleby Company and George Waldhauser, trading as the Clover Dairy, in proportion to their respective claims. Erom this decree an appeal was taken by the Calvert Building & Construction Company of Baltimore City, and also by George Waldhauser, trading as the Clover Dairy. ' On November 25th, 1924, the owner’s solicitor delivered to DeCrette a written notice declaring the recited agreements between it and DeCrette of July 15th, September 30th, and October 1st, 1924, to be rescinded for fraud. After the delivery of this note, but on the same day, the owner first began its distraint proceedings pursuant to which the chattels were seized, and then its solicitor mailed to the trustee to foreclose the chattel mortgage a letter enclosing .a copy of the notice to DeCrette, and advising him of the distress for rent claimed to be due on the first day of November. The attempted rescission was based upon a charge that the three agreements were procured by fraud of DeCrette.

The fraud alleged was that the landlord had, before the execution of the first agreement, requested of DeCrette a statement of all his outstanding debts, and that DeCrette had furnished the statement and had assured the landlord that it contained a complete list of all. his, creditors; and debts. The statement did not include the outstanding mortgage debt of DeCrette, which was secured by a mortgage lien on the equipment of his 'place of business and, not haying actual knowledge of its existence, the landlord was -induced ⁵²⁷ by the tenant’s misrepresentation to execute tbe three agreements mentioned. DeCrette’s reply to this accusation is that he was simply asked for a list of those creditors who were pressing him for payment, and that he did not mention the mortgage debt because he believed the landlord knew of it and he did not regard the obligation as coming within the meaning of a pressing debt, since he had paid the installments of the mortgage debt as they had fallen due every month. But the landlord offered proof in support of its charge and, accepting the misrepresentation and its materiality as established, the question whether the owner had the right to distrain nevertheless remains. 1.

Rent is a demand of high nature. If a tenant makes default in its payment, the landlord has a remedy for its recovery by action or by distress. Venable’s Syllabus of Law of Real Property, 46; Code, art. 53, secs. 9, 11. In the settlement of a decedent’s estate, after taxes due and in arrear, claims for rent in arrear against the decedent, for which a distress might be levied by law, are preferred debts.

Code, art. 93, secs. 120, 91, 92. And there is a further statutory provision that the Hen of any landlord upon goods or chattels for the satisfaction or security of rent due or accruing shall not in any way be affected or postponed by a vendor’s Hen upon personalty under section 31 of article 66 of the Code. And in five counties of the state, where the rent reserved is a share of a growing crop, or, when the rent is so reserved, the landlord has made advances upon the faith of the crop to be grown, the rent reserved or advance made is by statute declared to be a lien on such crop, which shall not be divested by a sale made by the tenant or by his insolvency or by process of law issued against the tenant. Code, art. 53, secs. 23, 24; Hopper v. Haines, 71 Md. 64 .

In the event the tenant should remove from the demised premises, within sixty days prior to or subsequent to the time when the rent has or will become due, property belonging to the tenant at the time of its removal, it is made lawful by statute for the landlord to follow, seize, and sell such ⁵²⁸ property under distress for the rent due at any time within sixty days after the time when the rent becomes due, provided that such property shall not have been sold to a bona fide purchaser without notice or taken in execution. Code, art. 53, sec. 19; Gaither v. Stockbridge, 67 Md. 228 ; Burnett v. Bealmear, 79 Md. 38 ; Dorsey v. Hays, 7 H. & J. 370 . See 2 Coe's Alexander’s British Statutes, pp. 994-996. And, finally, it is well settled that goods levied upon under a writ of fieri facias or otherwise in the custody of the law cannot be distrained for rent in arrear, so, to avoid the injurious operation against landlords of this common law rule because of their loss of the right of distress when the goods on the premises of-their tenants were seized under an execution, the Statute of 8 Anne, ch. 14, sec. 1, was enacted.

This statute is in force in Maryland. It was styled “An act for the better security of rents, and to prevent frauds committed by tenants,” and the enactment is: “Eor the more easy and effective recovery of rents reserved in leases, * * * no goods or chattels whatsoever lying or being in or upon any messuage, lands or tenements, which are or shall be leased for life or lives, term of years, at will or otherwise, shall be liable to be taken by virtue of any execution on -any pretense whatsoever, unless the party at whose suit the said execution is sued out, shall before the removal of such goods from off the said premises, by virtue of such execution or extent, pay to the landlord of the said premises, or his bailiff, all such sum or sums of money as are or shall be due for rent for the said premises at the time of the taking such goods or chattels by virtue of such execution; provided the said arrears of rent do not amount to more than one year’s rent, and in case the said arrears shall exceed one year’s rent, then the said party, at whose suit such execution is sued out, paying the said landlord, or his bailiff, one year’s rent, may proceed to execute his judgment as he might have done before the making of this act; and the sheriff or other officer is hereby empowered and required to levy and pay to the plaintiff as well the money so paid for rent, as the execution- ⁵²⁹ money.” 2 Coe’s Alexander’s British Statutes, pp. 921, 924-929. It is this statute which the appellant argues creates such a lien before a distress has been levied that it will be preserved for the benefit of the landlord, although the three paper writings are not rescinded. The complete answer to this contention is that the statute plainly does not create a lien of any kind unless and until an execution or attachment is levied upon goods or chattels of the tenant located on the demised premises and subject to the distress for rent in arrear.

Code, art. 53, sec. 22; Washington v. Williamson, 23 Md. 244, 251, 252 ; Gaither v. Stockbridge, 67 Md. 222, 228 ; Buckey v. Snouffer, 10 Md. 149, 155 ; 2 Poe, Pl. & Pr., secs. 632-638; Rotherey v. Wood, 3 Camp. 24; Cloud v. Needles, 6 Md. 504 . In construing the statute it was held that an attachment on warrant is not an execution within the meaning of the act, for the reason that an attachment is but mesne process, liable at any time to be dissolved, and the judgment upon which may or may not affect the goods or chattels seized, while the execution contemplated by the statute is a judicial process for obtaining the debt or damages recovered by a judgment that is final in its nature. Nevertheless, it was observed by Le Grand, J., at nisi prius, in Fisher v. Johnson, 6 Gill, 354, 360, 361 , that the execution issued to enforce the judgment of condemnation obtained under an attachment is an execution within the purview of the Statute of Anne, but Thompson v. Baltimore & Susquehanna Steam Co., 33 Md. 312 , did not so hold. In that case the goods of a tenant were seized and sold by the sheriff, without paying the arrears of rent due the landlord, after notice given the sheriff under the Statute of Anne.

The goods were perishable, and, for the purpose of preventing a loss pending the attachment, the court passed an order requiring a sale, so that the proceeds should remain subject to the final judgment of the court. In an action against the sheriff by the landlord for making the sale and removing the goods without securing the landlord his rent, it was pointed out that ⁵³⁰ by a seizure of property under an attachment the sheriff or other officer has no power to sell the property seized, unless by the express order of the court, and so an attachment was not an execution within the meaning of the Statute of Anne, and, moreover, the sheriff, acting under the order of competent authority, was fully justified and protected by the court’s order to sell. But, although our predecessors held that the sheriff “can neither be held liable for selling the property before judgment of condemnation under an order of court, nor after such judgment under a fieri facias issued thereon,” it also declared that, as the seizure under the attachment placed the goods in the custody of the' law, and as their seizure and condemnation under the attachment, followed by execution, might deprive the landlord of his remedy by distress, if there be not sufficient goods left remaining to satisfy his demand, as effectually as if there had been an execution, he should be allowed, in view of the similarity of the two proceedings, and of their ultimate effect on the landlord, to come in and claim for such an amount of rent in arrear as he could have legally demanded if the goods had been taken on execution, and, if such demand be properly established, it will take precedence of the debt or claim for which the attachment issued, and, out of the proceeds of the property condemned, will be entitled to be first paid. Supra, p. 319.

See Dixon, v. Smith, 1 Swanst. 457, 36 Eng. Reprint, 464 (sequestration). The appropriation of the goods attached after judgment of condemnation is accomplished by a writ of execution and the exclusion of an attachment from the Statute of Anne was on technical grounds, and, in presenting its reasons for deciding that the landlord was not without remedy, because he came “within the equity of the statute,” this court remarked that “the landlord has a quasi lien on the goods of his tenant subject to distress, even before distress levied, for arrearages of rent.” Thompson v. Baltimore & Susquehanna Steam Co., 33 Md. 319 . See Wanamaker v. Bowes, 36 Md. 42, 59 ; White v. Hoeninghaus and Curtess, 74 Md. 127, 129, 130 ; Gaither v. Stockbridge, 67 Md. 222, 228 . ⁵³¹ But a quasi lien, in the sense used in Thompson v. Baltimore etc. Co., supra, and the other cases cited, means nothing more than the potential right of a landlord to subject to distress the goods and chattels on the demised property for the rent in arrear.

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