Stedman v. Hill

Grason, J., delivered the opinion of the Court. Harry Stedman and Emma Stedman, his wife, prior to November 9, 1944, owned in fee simple by the entire-ties, a property in Ridgely, Caroline County, Maryland, where they for some fifteen or sixteen years conducted a grocery, provisions and meat store. They wanted to sell it. William G. Hill decided to go in business, and the Stedmans and Hill met and discussed the matter of Hill taking over the store.

The result was that on November 9, 1944, a “Contract and Agreement of Sale” was reduced to writing and signed by them. The provisions of this contract, which are of interest here, are: 1. That Hill was to rent the store property for $30.00 a month for a period of one year, with the right of continuing possession at the same rent for the period of two more years; 2. that Hill was to buy the stock in trade in the store at an appraised value, and was to pay $1,000.00 ⁵⁷² in cash at the time the store and provisions were delivered to him, and the balance of the price therefor was to be paid within one year from the date of-a lease to be executed; 3. that the fixtures in the store, used in connection with its operation, were to be leased at a rental of $20.00 a month, ■ with an option' to purchase the same for $3,500.00 "at .the end of a two year period, rent paid in the meantime to be deducted from the $3,500.00; 4. that Hill was to have 'an option to'.purchase the store property at a price of $3,000.00. at any time during the three year period. There were other provisions in the contract and agreement, which we need not recite.

On the 30th day of November, 1944, there was executed by the parties a “Lease and Agreement of Rental” which was to date from November 27, 1944. This Lease and Agreement of Rental contains the same provisions as the Contract and Agreement of Sale dated November 9, 1944, and the purchase price of the stock in trade was determined to be $2,700.00. This instrument provides for a lease for one year, and “that this lease shall be renewable from year to year for a period of three years for the real estate herein described, unless the Lessee shall notify the Lessors at least thirty (30) days prior to the end of any year that he does not desire to continue said Lease, and said lease shall expire at noon on November 27, 1947, without any notice from either party and shall not be renewable beyond that time, without the consent in writing of all the parties hereto. * * * that this lease, as it pertains to the fixtures and personal property, shall be renewable on November 27th, 1945, for a period of one year unless the Lessee shall give notice in writing to the Lessors that he does not desire to continue to renew said Lease for another year; but,, in any event, said lease of the fixtures and personal property shall end on November 27, 1946 without notice to either party and shall not be renewed after that, time unless by an agreement in writing signed by all the parties hereto.” This instrument...will be .¡¡referred to herein as the first lease. ⁵⁷³ Hill paid $1,000.00 in cash and he and his wife gave a note to the Stedmans for $1,700.00,, payable in one year, with interest. Hill entered possession 'of the store property on November 27, 1944.

Under this Lease and Agreement of Rental Hill conducted this business and performed all of his obligations under the first lease until September 9, 1945, when he met with an automobile accident in which he was severely injured, and was away from the store until about the first of December, 1945. From the date of the accident until that time the store was operated by the Stedmans. When Hill came back to the store, in the early part of December, 1945, what will hereafter be called the second lease was executed, on the 6th day of December, 1945. Under its terms the Stedmans leased to Hill and his wife the store property for a period of two years, beginning November 27, 1945, and ending November 27, 1947, for $35.00 per month; “that this lease shall on November 27, 1947, become automatically renewed in its entirety at the same rental for the term of one year and from year to year thereafter unless either party hereto shall notify the other party by notice in writing at least six months prior to November 27, 1947, of his or their intention to terminate same”.

It provides that the lessee shall pay all sewer and water rents incurred by reason of their occupancy of said premises, and to be responsible for the payment of charges for electric current and telephone services used by them in the conduct of the business. It provides for the removal of all fixtures or other property placed in the storeroom. This second lease is silent as to the option to buy the store property, contained in the first lease. In May, 1947, Hill notified Stedman that he desired to exercise his optional right to purchase the store building and land on which the store building was located, and Stedman told him that he had no option to purchase the store property.

The bill in this case was then filed by Hill against the Stedmans for specific performance for the sale of the prpperty, relying upon the option ⁵⁷⁴ contained in the first lease. Answer was filed by the Stedmans, testimony was taken in open court, and the chancellor decreed specific performance of the sale of the property, from which decree the appeal in this case was taken. In a case where property has been leased for a given term, in order to surrender that term before it has expired, by a new lease providing for the same term as the old one, the Statute of Frauds requires a surrender in writing, or by act and operation of law. Alexander’s British Statutes, Coe’s Ed., Vol. 2.

In Lyon v. Reed, 13 M. & W. 285, English Reprint 153, which was decided in 1844, Baron Parke said: “The ordinary course pursued on the renewal of a lease is for the lessee to deliver up the old lease on receiving the new one, and the new lease usually states that it is made in consideration of the surrender of the old one. No surrender by deed is necessary, where, as is commonly the case, the former lessee takes the new lease, and all which is ordinarily done to warrant the statement of the surrender of the old lease as part of the consideration for granting the new one, is, that the old lease itself, the parchment on which it is engrossed, is delivered up. Such surrender affords strong evidence that the new lease has been accepted by the old tenant, and such acceptance undoubtedly operates as a surrender by operation of law, and so both parties get all which they required. * * * “In order to ascertain how far those two cases can be relied on as authorities, we must consider what is meant by a surrender by operation of law. This term is applied to cases where the owner of a particular estate has been a party to some act, the validity of which he is by law afterwards estopped from disputing, and which would not be valid if his particular estate had continued to exist.

There the law treats the doing of such act as amounting to a surrender. Thus, if lessee for years accept a new lease for his lessor, he is estopped from saying that his lessor had not power to make the new ⁵⁷⁵ lease; and, as the lessor could not do this until the prior lease had been surrendered, the law says that the acceptance of such new lease is of itself a surrender of the former. * * * In such case it will be observed there can be no question of intention. The surrender is not the result of intention. It takes place independently, and even in spite of intention.” Thus it was held that the giving of a new lease extinguished the old lease, and the question of whether the parties intended this result is immaterial.

This court has recently decided that where a lease contained an option to purchase the property leased, the same constituted an indivisible contract as to both the term and conditions of the lease and the option. It has been specifically pointed out that we do not follow the English rule that an option to purchase, contained in a lease, is a collateral matter, separate and distinct from the lease. We have also stated that whether an option to purchase, contained in a lease, can be exercised by a tenant during an additional term depends upon the intention of the parties, to be gathered from the instrument itself. Gostin v. Needle, 185 Md. 634 , 45 A. 2d 772 , 163 A. L. R. 1013; Schaeffer v. Bilger, 186 Md. 1 , 45 A. 2d 775 , 163 A. L. R. 706; Gressitt v. Anderson, 187 Md. 586 , 51 A. 2d 159 .

The case chiefly relied on by the appellants is Enyeart v. Davis, 17 Neb. 228 , 22 N. W. 449 , 452. The lease dealt with in that case contained an option to sell the farm leased to the lessee by the lessor. Subsequently, during the term, a new lease was executed between the parties, in which it was provided that the lessee would give quiet possession of the premises to the lessor at the end of the term therein provided, and it was silent as to the option contained in the old lease. The lessee contended that the second lease was obtained by fraud.

The court stated: “The law is thus laid down by a standard authority: ‘Where a lessee for years accepts a new lease from the reversioner, he is estopped from saying that his lessor had no power to make such a lease; and, as ⁵⁷⁶ the lessor cannot grant a new lease until the prior one has been surrendered, the acceptance of the new lease necessarily implies a surrender of the former one. Such surrender is an act of law, and takes place independently of the intention of the parties.’ ” .' This decision follows the English rule laid down in Lyon v. Reed, supra, in which it was held that a second lease for the same term operates to render the first lease void and the question of the intention of the lessee is immaterial. Some cases have followed this rule, but we think that the weight of authority and the best rule is to the contrary. Of course, if a second lease, in material matters, is so inconsistent with the first lease, that the first lease would be smothered out by the second, there would be no question that the first lease would become inoperative and’ void by the act of the parties in the execution of the second lease.

But if the second lease varies from the first lease in slight and trivial particulars, and is silent on a vital matter which is containéd in the first lease, it would seem that the just rule should be whether by a comparison of the first lease with the second lease, and the facts and circumstances surrounding the execution of the first and- second leases, it is reasonable to suppose that the parties united in their intentions that a vital matter contained in the first lease was intended to be null and void. And in considering the 'matter it is important to determine whether the second lease can operate with the first lease, and be construed as only a modification of the first lease. Under the Nebraska case, which followed the English case, nothing like this could be done. Under those cases, the mere execution of the second lease renders the first lease null and void, ho matter what violence such á conclusion may •have Upon'the intention of the parties. * ' In Ddrilcersley v. Levy, 38 Mich. 54 , page 59, it is stated: “It is true that Levy and Asch (tenants) did not remove from' the store when thésfe events occurred; but it is also true that the company gave and Dónkersley accepted with the assent of Levy and Asch a lease in ⁵⁷⁷ consistent with that which had been given to the latter, and that Donkersley at the same time made to them and they accepted his verbal lease for the time being and which was also inconsistent with the continuance in force of the first lease.” Italics supplied.

In Van Rensselaer’s Heirs v. Penniman, 6 Wendell 569, 581 , it is said: “When the second lease was executed, the lessee had a good title by the first lease to all which it purported to convey. He had, besides, the personal covenant of the lessor for the payment of the improvements. On the supposition that a surrender was intended, the lessee must have intended to abandon all claim for his improvements, and to give up a good title for three lives, on receiving a lease for one of those lives. * * * The authorities say that the surrender in cases of second leases is presumed from the intention of the parties. In this case, every circumstance, except the fact of receiving the second lease, altogether rebuts the idea of an intention to surrender the right to compensation for improvements.” In Coe v. Hobby et al., 72 N. Y. 141 , at pages 147 and 148, 28 Am.

Rep. 120 , it is said: “Assuming that the contract and agreement of the parties was that from the time of making it, the rent should be reduced to $4,000 dollars per annum, and that the lessor should have the right to terminate the lease upon notice, and that such agreement was valid, it was but a modification of the terms of the original demise, leaving all the other covenants and conditions intact. There was no agreement inconsistent with the existing lease, or any assumption of dominion over the estate by the lessor inconsistent with the term vested in the lessee. Each, in dealing with the other, dealt with matters over which they had control under and by virtue of the lease. “The lessor assumed to release his right to a portion of the rent, which he might lawfully do, and the lessee undertook to yield conditionally, and upon notice in the future, a portion of his term. It cannot be assumed or implied from such agreement that a surrender of the ⁵⁷⁸ old lease was contemplated, by either party; The lease continued in full force, except as modified by the agreement.

It is preposterous to say that a reduction of the rent is a surrender of an existing lease, and the granting of a new one. The new agreement in such case is virtually incorporated into, and made a part of the antecedent agreement, and the two would constitute the lease for the unexpired term. (Evans v. Thompson, 5 East, 193; Hasbrouck v. Tappen, 15 J. R., 200.) There was no surrender of the lease by operation of law, for the reason that there was no dealing with the estate by the lessor incompatible with the lease, and no new letting of the premises by parol or otherwise.” Italics supplied. In Flagg v. Dow, 99 Mass. 18 , the court approved Van Rensselaer’s Heirs v. Penniman, supra.

In Copper v. Fretnoransky, Com. Pl., 16 N. Y. S. 866, 867, the court said: “Here, beyond doubt, was a termination of the demise, and a creation of a new term upon totally different conditions. ‘A surrender, by operation of law, may be derived from the acts of the parties, or be effected by words manifesting the intention of the lessee to yield up the estate, or by acts of the parties which imply that both agree to consider the surrender as made.’ Beall v. White, 94 U. S. 382 , [ 24 L. Ed. 173 ]. ‘A surrender is implied and effected by operation of law when another estate is created by the reversioner, with the assent of the tenant, incompatible with the existing estate or term, as by the taking of a new lease by the lessee.’ Coe v. Hobby, 72 N. Y. 141, 145 , 28 Am. Rep. 120 ; Abell v. Williams, 3 Daly, 17 ; 1 Schouler, Pers. Prop. 38; 6 Lawson, Rights, Rem. & Pr.

P. 4669; 12 Amer. & Eng. Enc. Law, p. 758i; McAdam, Landl. & Ten. p. 467.” Italics supplied. In Hurtt v. Woodland, 24 Md. 393 , Woodland, the landlord, executed a lease of his farm to Peacock for a term of four years, commencing on the first day of January, 1857.

During the first year of the term Woodland planted twenty-five acres thereof in peach trees. On January 31, 1859, the following agreement was executed: ⁵⁷⁹ “This agreement, made this day between J. F. Woodland and Joseph Peacock, both of Kent County, Md., witnesseth that the said Woodland for and in consideration of certain conditions hereinafter mentioned, agrees to lease to the said Peacock, the peach orchard field at Marsh Point, for the term of one year; the said Peacock agrees to furnish two tons of Peruvian guano for said field, and to till it in corn, the said corn to be planted and worked in farmer-like manner, and the fodder saved in like manner for said Woodland, who agrees for said service of Peacock, to allow him off of said field of corn to take eight hundred bushels.” Peacock assigned his interest in the lease and crops to Joseph W. Hurtt. The heirs of Woodland claimed the peaches gathered from the orchard, and sued Hurtt for their value. It was claimed in that case that the agreement of January 31st, 1859, operated