Silberstein v. Epstein

EbNee, J., delivered the opinion of the Court. The New Howard Hotel property in Baltimore is subject to a lease for a term of ten years ending February 28, 1926. The lease contains no provision for its. renewal. It was executed on March 21st, 1916, but provided for a term of ten years beginning on February 29th, 1916, which was the day succeeding the date of the expiration of a preceding term created by a lease of the property dated April 24th, 1906.

In the earliér lease there w'as a covenant that the lessee should '‘have the privilege of renewing” the lease "for another term of ten years,” at a higher specified rental. The question to be decided on this, appeal from a, decree, on a special case stated, for the specific performance of .a contract of sale, is whether the lessee of the hotel would have a right to acquire the fee simple title to the property by redemption under the terms of section 93 of article 21 of the Code, which provides: “All rents reserved by leases or sub-leases of land hereafter made in this State for a longer period than fifteen years shall be redeemable at any time after expiration of five years from date of such leases or subleases, at the option of the tenant, after a notice of one month to the landlord, for a sum of money equal to the capitalization of the rent reserved at a rate not exceeding six per centum.” If the lessee could successfully claim .the right to redeem under the statute, the title to the property is not such as the contract involved in the case describes. ²⁵⁶ As the existing lease is for a term less than fifteen years and does not provide for its renewal, it is not within the operation of the statute quoted unless the present term be regarded and treated as a continuation of the term which the preceding lease created. The recognized object of the statute, originally enacted in 1884, was to stop the practice, which was believed to be harmful to the public interests, of leasing property under covenants for long initial and renewal terms without right of redemption. Stewart v. Gorter, 70 Md. 242 ; Swan v. Kemp, 97 Md. 686 ; Brager v. Bigham, 127 Md. 157 .

It was to accomplish such a preventive purpose that all leases thereafter made for longer periods than fifteen years were declared to be redeemable upon the terms prescribed. The policy of the law, in regard to such leases, has been modified by the Acts of 1914, chapter 871, and of 1922, chapter 384, enacting and amending section 87 of article 21 of the Code, which, in its present form, states that the redemption provisions of the article “were not intended to apply and do not apply to leases or sub-leases of property leased exclusively for business, commercial, manufacturing, mercantile or industrial purposes, as distinguished from residence purposes, where the term of such lease or sub-lease, including all renewals provided for therein, shall not exceed ninety-nine years.” This section, however, could not affect the lessee’s right of redemption in this case, if it would otherwise exist, because the enactment was subsequent to the execution of the original lease upon which the assertion of the right must depend. Brager v. Bigham, supra. In Stewart v. Gorter, supra, a lease creating a term of fourteen years and providing for its renewal for a similar term and with the same covenants, thus contracting for its indefinite renewal, was regarded as an obvious attempt to evade the statute and was held to be within its scope and effect.

The Court also held that the right to redeem could not be barred or qualified by agreement. In Swan v. Kemp and Brager v. Bigham, supra, it was decided that the statute applied to leases of ground improved with buildings as well ²⁵⁷ as to leases of unimproved land. Tbe lease in Swan v. Kemp was for a term of ninety-nine years, and the one considered in Brager v. Bigham created a, twenty-year term. In each instance the term in excess of the statutory limit of irre-deemability was specified in a lease which was still in force.

There was no- question concerning the extension of the terms hy renewal beyond the period mentioned in the statute. In Stewart v. Gorter , such a question was presented, hut the continuing- provision for successive renewals was plainly a scheme by which the statute Was sought to be evaded. There are important differences between the present ciase and the three- which we have cited. In this- case the lease now in force specifies a term less than the statutory period and contains no renewal covenant.

It is certain to terminate hy its own limitations on February 28, 1926. Tbe absence of -any design to circumvent the redemption law is, therefore, clearly demonstrated. While the present lease'was executed in recognition of the privilege to renew which was conferred upon the lessee by the original lease, there Was no- specific provision that the new lease should have the same covenants which the old lease contained, and in fact their stipulations: were in certain respects materially different. The new lease' not only omitted the renewal covenant, hut it added a clause which amplified a, provision in the first lease- in reference to the payment of a mortgage- on the leased property.

Between the expiration of the old lease and the execution of the new one there was an interval of several weeks. The parties evidently .acted upon the theory that they were- making a distinct contract for the ensuing period. It was not in terms or apparent intent a mere continuance of the first agreement. Til the case of King v. Kaiser, 126 Md. 213 , the- principal question was whether a lease for five years which gave the lessee the option to renew it for a period of twenty years, at a higher rent, was in effect a, lease for twenty-five years and, therefore-, within the purview of section 1 of article 21 of the Code-, requiring that conveyances of estates- beyond seven years in duration should he executed, acknowledged and ²⁵⁸ recorded as tbe Code provides.

It was held tbat a renewal of'• the lease in pursuance of the exercise of suela a privilege would involve the execution of a new lease, .and that the provision for the renewal would not itself operate as an extension of the original term. The principle- of that decision was applied also in the recent ease of Sweeney v. Hagerstown Trust Company, 144 Md. 612 . There has been a continuity of possession under the two leases considered in this case, but the- contractual relations of the parties have not been identical during the two periods which the leases designate. The rights of the lessee during the present term must be ascertained from the separate and different agreement under which the property is now possessed.

It is clear that no right of redemption can be predicated upon the existing lease since it does not exceed the statutory limitation. No effort to redeem would find support in the preceding lease because it has not survived, by any effective process of renewal, without change, the expiration of the specific term to- which it was restricted. There is consequently no ground upon which the theory that the lessee m-ay be entitled to procure the fee simple estate by redemption under the statute can be sustained. With this view the decree of the court below is in -accord.

Decree affirmed, with costs. BoND, J., filed a concurring opinion as follows: The opinion prepared by Judge Umer seems to me to express perfectly the conclusion of all the judges, including myself, on the facts and on the principles of law which the majority of the judges accept as the basis of decision. But I think the case should be decided upon a different ground, one which has not been adopted by the majority of the Court. I am rather strongly o-f opinion that the question of the applicability of the redemption -statutes to such a relation as that established under this lease needs to be reconsidered.

And it seems to- me that it would be well to state that view. ²⁵⁹ It is well known to all lawyers and to others in this State that the Act of 1884, chapter 485, together with the acts which amended it, was designed to put a stop to the creation of the irredeemable ground rents which for about a century had been a favored form of security in Baltimore City, but which had survived to become a detriment. And that was its only purpose. “The statute involved in these oases,” this Court has said, “was passed because it was known that the system of irredeemable ground rents which had prevailed in Baltimore City became very injurious to the prosperity of the city and a, sound public policy demanded that the right, to redeem be given to holders of leasehold interests under such leases as the statute included.” Spear v. Baker, 117 Md. 570, 573 . And again, in Safe. Deposit Co. v. Marburg, 110 Md. 411 , 413, the Court said, “It is well known from cases in this Court and otherwise that the complex system of ground rents in this State often rendered titles unmerchantable, although in some instances the rents had not, been collected for many years, and some of them were for such a nominal sum and were owned by so many persons^ that it was difficult to obtain the reversions for anything like a reasonable amount- as compared with the rent reserved.” And see Swan v. Kemp, 97 Md. 686, 690 .

The “ground rent” thus, banned for the future was a perpetual charge put upon land by the device of a lease for ninety-nine years with a covenant for renewal forever. It was, as Judge Miller stated in Banks v. Haskie, 45 Md. 217 , “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 originators of this device had contrived a permanent ownership of the land in the one in the position of lessee, coupled with a permanent charge or annuity in the one standing as fee simple owner or ²⁶⁰ reversioner. On both sides were to be permanent owners, one of tbe land and tbe other of tbe charge. All enjoyment of tbe land belonged to tbe one entitled lessee, all increases in value were bis increases, all losses were bis losses; the one entitled rever'sioner or lessor bad an interest only in a fixed, unchanging money charge.

And it seems to have been no other than tbe land charge, or charges upon land in tbe own-ership of another, which developed in many jurisdictions, and under several legal systems, and which, while it was carried along under the old forms and categories of lease or sale, belonged in reality to- a relation distinct from that regularly established by either of these. Here it was embodied in a form which with all its details seems to have been made nse of only in this State, and in England and Ireland. (Banks v. Haskie, 45 Md. 218 ); but in respect to its real character it had parallels in the ground rent which in. Pennsylvania was charged upon fee simple estates', and which was made redeemable by an Act of 1850 (Cadwalader, Ground Rents, page 297), in the “ground annual” of the Scotch law, and in the land charge® of Continental Europe.

Huebner, History of Germanic Private Law, 356 to 368; Brissaud, History of French Private Law, sec. 389. And it was similar to the rent charged under the perpetual lease, or emphyteusis, of the Roman law, which after long debate was officially declared to he neither a hiring of land on the one hand nor a sale on the other, hut an arrangement of its own kind. Inst. Just. 3, 24, 3; Sohm; Institutes of Roman Law (3rd ed., Ledlie), 348 to 350; 2 Moyle, Institutes (3rd ed.), Excursus II, 328; 2 Sherman, Roman Law in the Modem World (2nd ed.), 602 to 608; Cadwalader, Ground Rents, page 102, note.

The statute enacted here to- stop the creation of these rents was broad in terms. As now printed in article 53, section 24 of the Code, the provision is that “all leases or subleases of land m'ade in this State * * * shall be redeemable at the option of the tenant * * * for a sum of money equal to the capitalization of the rent reserved” .at a. rate specified in the statute. But the object sought was clearly defined and ²⁶¹ restricted iu the general understanding*. For a long* time it never entered anybody’s, mind that anything but the familiar ground rent lease would bo affected, or that the statute would allow the redemption of any charge but a ground rent.

No one seems ever to have found a lease1 for the occupancy of premises under the ordinary relation of landlord and tenant made to conform to the operation of the redemption statute, and no one would expect to. Business premises wore lot for long terms before