Tatelbaum v. Chertkof

Henderson, J., delivered the opinion of the Court. ⁴⁷⁷ Receivers appointed for Saxony Caterers, Inc., brought an action in the Superior Court of Baltimore City to recover $12,000.00 paid by the insolvent corporation as tenant under a lease of premises known as 3906 Liberty Heights Avenue. After a demurrer to an amended declaration had been sustained without leave to amend, the court entered a judgment for costs in favor of the defendants, appellees. The question presented is whether the payment was by way of rent, or by way of a security deposit. The amended declaration alleges that on February 4, 1955, the appellees leased the premises in question to Saxony Caterers, Inc., for a period of ten years beginning April 1, 1955, and terminating March 31, 1965, at a rental of $120,000.00 for said period, payable in equal monthly installments of $1,000.00 each, with an option to extend the lease for an additional period of five years on the same terms.

The tenant, at the time of the execution of the written lease, paid the sum of $12,000.00 to the landlords, pursuant to the following clause in the lease: “(12) Prepayment of Rent: The Tenant, simultaneously with the execution of this Lease, has paid the sum of Twelve Thousand Dollars ($12,000.) to the Landlords, the receipt of which the Landlords hereby acknowledge, said sum being paid for the rent for the last twelve months [of this Lease, or the last twelve months] 1 of the option period, if said option is exercised. This prepayment of the last year’s rental shall in no way interfere with the collection of any previous rents which shall become due and shall not waive the rights of the Landlords for any such rent. In the event that this lease is terminated because of the bankruptcy, insolvency, or other default of the tenant, then in that event Landlord’s right to collect the rent otherwise payable under the provisions of this lease to the date of such termination shall not be prejudiced by such prepayment. In consideration of said prepayment of rent landlord agrees to give tenant a discount of ⁴⁷⁸ Three Hundred Dollars ($300.00) on each successive' twelfth month’s installment of rent due hereunder provided that all prior monthly installments shall have each been paid within five days froin the due dates thereof.” This lease was duly recorded and the tenant went into possession and paid rent each month for about a year.

But on March 21, 1956, when receivers were appointed, the tenant was in arrears in the payment of rent in the amount of $2,000.00. On or about April 2, 1956, the tenant vacated the premises and the landlords distrained for the overdue rent, reentered, and leased the premises to other persons. On April 27, 1956, the court that appointed the receivers authorized them to commence this action. It appears to be conceded that if, in legal effect, the payment of the $12,000.00 was a security deposit the receivers are entitled to recover it, but if it is advance rent the landlords may retain it.

The general rule is stated in American Law of Property, § 3.73, p. 338. See also Schoen v. New Britain Trust Co., 150 A. 696 (Conn.) and Galbraith v. Wood, 144 N. W. 945 (Minn.). Other cases are collected in a Note, 27 A. L. R. 2d 656. In Sline Properties v. Colvin, 190 F. 2d 401, 403 (U. S. C. A. 4th), property in Baltimore was leased for a term of five years from December 5, 1947, at a yearly rental payable in monthly installments of $400.00 each.

The tenant also agreed to pay, and paid, $1,200.00 “representing rental for the months of October, November and December, 1952”, the last three months of the term. A trustee in bankruptcy claimed this sum, upon his appointment in 1949, but recovery was denied. Judge Soper, for the court, said: “The decision depends upon the interpretation of the lease. If the deposit was made by the tenant as security for the performance of the covenants in the lease, it remained the property of the tenant and passed to the trustee in bankruptcy subject to the claims accruing to the landlord by reason of the tenant’s default; but if the deposit was in fact payment of rent in advance it became the property of the landlord and the trustee has no title to it and no right to use it as an offset to the landlord’s claim for use and occupancy of the premises by the trustee.

In our opinion the ⁴⁷⁹ latter alternative is the effect to be given to the contract. * * * No provision appears such as is frequently found in leases of this kind in which it is expressed or from which it may be implied that the