Metropolitan Life Insurance v. Hellinger , 246 A.D. 7 ( 1935 )

Merrell, J.

Plaintiff brought this action to recover rent of a certain space in the premises at 655 Fifth avenue under a written .lease executed by the defendant. According to the allegations of the amended complaint, Barclay Arrow Holding Corporation, the owner of the premises, executed a lease of the entire building to one William H. Minton on June 6, 1928. Said Minton assigned the master lease to Plaza Investing Corporation on March 2, 1929. On May 6, 1929, Plaza Investing Corporation subleased room 607 to the defendant for a term expiring September 30, 1934. On December 30, 1929, Plaza Investing Corporation assigned the master lease to Plaza Trust Company. On September 13, 1930, Plaza Trust Company assigned all subleases, including that of the defendant, to Barclay Arrow Holding Corporation, the owner of the building. On December 31, 1931, Barclay Arrow Holding Corporation assigned all rents and leases pertaining to the premises at 655 Fifth avenue to plaintiff.

In a separate and complete defense contained in the answer, the allegation of the plaintiff that the subleases were assigned to plaintiff is denied. The answer then alleges a first separate and complete defense, which, in substance, makes claim that there is a break in the plaintiff’s chain of title, that a contract between Plaza Trust Company and Barclay Arrow Holding Corporation, a copy of which is annexed to the answer as Exhibit A, had the legal effect of extinguishing the defendant’s lease as of September 13, 1930. The paper, Exhibit A, is not the assignment alleged in the amended complaint. However, for the purpose of the plaintiff’s motion to dismiss the separate and complete defense contained in the defendant’s answer, and for the -purposes of this appeal, the effect of that contract of September 13, 1930, will be considered.

It is the contention of the defendant-appellant, as alleged in his answer, that the contract between Plaza Trust Company and Barclay Arrow Holding Corporation extinguished the defendant’s sublease. The court below held, however, we think, correctly, that the contract aforesaid did not extinguish the defendant’s lease, but carried the reversion to the plaintiff’s assignor, Barclay Arrow Holding Corporation. A reading of the allegations contained in the first separate and complete defense contained in the answer of the defendant clearly shows that the defendant is relying solely upon the termination of the master lease by reason of the contract of September 13, 1930, whereby Plaza Trust Company assigned all subleases, including the defendant’s sublease, to Barclay Arrow Holding .Corporation. There is no allegation in the answer that the master lease was terminated by reason of the occurrence of a condition contained therein which would permit either the landlord or the tenant under such master lease to terminate it pursuant to its own terms. Under such circumstances the law seems to be well settled in this State that a sublease is not terminated on cancellation of the master lease, and that the only legal effect of the assignment from Plaza Trust Company to Barclay Arrow Holding Corporation of September 13, 1930, was to transfer the reversion, as incumbered by the sublease, to the then owner of the fee, and that, therefore, the subtenant became the direct tenant of the owner of the fee. The case on which the court below relied in granting plaintiff’s motion was Eten v. Luyster (60 N. Y. 252). This case seems to have been followed consistently by the later decisions on the subject. In the Eten v. Luyster case the master lease contained a sixty-day cancellation clause. Under the master lease the tenant then sublet a portion of the premises. Prior to the expiration of the sublease the owner and the tenant under the master lease agreed to terminate the master lease, not,, however, by taking advantage of the sixty-day provision in the master lease itself. The court held in that case that if the owner and the tenant under the master lease had taken advantage of the sixty-day cancellation clause, the sublease would have fallen with the master lease, since it was subject to all conditions of the master lease, but, inasmuch as the master lease had been canceled by an entirely new contract, the sublease was not affected thereby, but remained in full force and effect. In reaching this decision, the Court of Appeals said (at p. 259):

“ The defendants claimed the right of possession and to dispossess the plaintiff under a surrender of the term by the original lessee, without the knowledge or assent of the plaintiff. That surrender, and the consequent merger of the greater and lesser interest, terminated the original lease and the term created thereby, as between the parties to the lease and the surrender. The covenant, in respect to the termination of the lease upon the specified notice and payment, became inoperative with all the other covenants and conditions of the demise. But it was not competent for the lessor and lessee' to affect the rights of third parties by a formal surrender of the lease. The interests and the terms of the subtenant of the lessee continued as if no surrender had been 'made. The defendants, the surrenderees and owners in fee, became the immediate landlords of the plaintiff, with only such rights as his lessor would have had to the possession of the premises before the expiration of the term.” (Italics are the writer’s.)

The other case relied upon by the court at Special Term in granting plaintiff’s motion was that of Ashton Holding Co., Inc., v. Levitt (191 App. Div. 91). That was a case which passed through this court. The facts there are substantially on all fours with those in the case at bar. It was there decided by this court that a sublease was not terminated by the termination of the master lease by special contract. This court was unanimously of the opinion that a sublease was not terminated by a termination of the master lease. Mr. Justice Page, writing for this court in that case, said (at p. 93): “ The surrender by the immediate landlord of bis lease to the owner of the fee, and the consequent merger of the greater and lesser interest terminated the lease of Wiegan, and the term created thereby, as between the parties to the lease. But it was not competent for the owner and its lessee to affect the rights of third parties. The interest and term of the subtenant of the lessee continued as if no surrender had been made. The owner of the premises, upon the surrender of the lease, became the immediate landlord of Mollie Levitt, with only such rights as Wiegan would have had to the possession of the premises before the expiration of the term. Wiegan could not sell, give up or surrender anything that did not belong to him. He could not terminate the lease to Mollie Levitt or destroy her right therein. (Eten v. Luyster, 60 N. Y. 252, 258, 259.) Therefore, when the new owner accepted the rent it was the rent reserved in the lease, and not merely for use and occupation or upon a new agreement of hiring for an indefinite term. It was an attornment of the tenant to the new landlord under the existing lease.”

In Hoffmann Brewing Co. v. Wuttge (234 N. Y. 469) the Court of Appeals held that where the master lease was terminated pursuant to its own terms, citing Eten v. Luyster (supra) with approval, the sublease would terminate. So in Kottler v. New York Bargain House, Inc. (242 N. Y. 28) Judge Cardozo, writing for the Court of Appeals, said (at p. 37): “ We think the possibility ceased when he surrendered his own lease to the owner of the fee. So far as the subleases were concerned, the effect of this surrender was equivalent to a transfer of the reversion (Eten v. Luyster, 60 N. Y. 252, 259; 2 Tiffany on Landlord & Tenant, pp. 1348, 1351).” The language of Judge Cardozo, above quoted, clearly demonstrates that, so far as subleases are concerned, the transaction was a transfer of the reversion to the owner of the fee. (See, also, Rhinelander Real Estate Co. v. Cammeyer, 216 App. Div. 299; 2 Reeves Real Prop. [1909 ed.] pp. 915, 916; 2 McAdam Landl. & Ten. [5th ed.] § 324, and cases cited.)

It is evident that even though Plaza Trust Company and Barclay Arrow Holding Corporation had intended to cancel the master lease by the contract which they entered into without making provision for subleases, such contract would have no legal effect upon the continuance of the sublease in existence at the time. The contract upon which the appellant relies clearly indicates that the parties thereto expressly intended not to disturb any of the subleases. That contract provides, among other things, as follows: “ This surrender of lease is expressly made subject to the subleases, a schedule of which is hereto annexed, and the party of the second part does hereby assume the obligations imposed upon the lessor in each of said subleases.” In the schedule annexed to the contract the name of the defendant as a sublessee appears. The above-quoted provision clearly shows that the parties intended merely to release the Plaza Trust Company from its obligations under the master lease, but did not intend in any way to interfere with the subleases then in force. We think the contract between the Plaza Trust Company and the Barclay Arrow Holding Corporation did not constitute any defense to plaintiff’s cause of action, and that the same was properly stricken out by the order appealed from.

The order appealed from should be affirmed, with twenty dollars costs and disbursements to plaintiff-respondent against defendant-appellant.

McAvoy, O’Malley and Glennon, JJ., concur; Untermyer, J., dissents and votes to reverse and deny the motion.