
    Hyman D. Baker, Respondent, v. Ancient Order of Hibernians, Appellant.
    First Department,
    December 30, 1915.
    Landlord, and tenant — agreement of landlord to pay liquidated damages for failure to erect building — agreement construed — assignment by lessee of sums due under an agreement without assignment of lease — when assignee has no cause of action.
    The defendant agreed to erect a theatre on lands leased by it to the plaintiff’s assignor and further agreed that if the theatre were not completed by a certain date it would pay stated liquidated damages for each day of the delay. The defendant failed to erect the theatre by the day set and the contractor who was to erect the building brought an action to foreclose a mechanic’s lien. The defendant lessor and the plaintiff’s assignor, the lessee, thereupon entered into an agreement whereby the lessee was permitted to deduct from the monthly rent the amount due from the lessor for liquidated damages, and the lessor agreed that if the action of the contractor should terminate in its favor it would “upon the termination of said action ” pay the balance of the liquidated damages, and also agreed that if the contractor should recover it would pay the lessee the damages in consecutive monthly installments. The suit to foreclose the mechanic’s lien resulted in a judgment for the contractor and an appeal from said judgment by the lessor is still pending. The lessee, though still remaining in possession of the lands, assigned to the plaintiff his claim for installments of liquidated damages due to him under the aforesaid agreement with the lessor.
    Held, that the lessee could not assign his claim against the lessor under said agreement apart from an assignment of the lease itself, and as he remained in possession of the premises the complaint of his assignee should be dismissed;
    That it was a condition precedent to any right to recover on the agreement between- the lessor and lessee that the monthly rent shall have been paid by the lessee;
    That the agreement of the lessor to pay the full amount due if the action brought by the contractor “ terminated ” in favor of the latter, meant a final termination of said action, and' as an appeal from a judgment for the contractor is still pending there was no termination of said action which made the lessor liable under its agreement.
    McLaughlin and Scott, JJ., dissented.
    Appeal by the defendant, Ancient Order of Hibernians, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Hew York on the 4th day of September, 1915, upon the decision of the court after a trial before the court, a jury having been waived. Also an appeal from an order entered in said clerk’s office on the 3d day of September, 1915, denying defendant’s motion for a reárgument.
    
      Cornelius J. Earley [Peter J. Brancato with him on the brief], for the appellant.
    
      Joseph A. Seidman, for the respondent.
   Laughlin, J.:

This action is brought to recover the sum of $6,500, together with interest thereon, and it is based oh an agreement in writing, duly executed on the 19th day of August, 1913, between the defendant as lessor and the Fifth Avenue Amusement Company as lessee. It is alleged that the lessee duly assigned the agreement to one Kobre on the 11th day of June, 1914, and that he duly assigned it to the plaintiff the next day; and as the facts were so found at the request of defendant, it is precluded from having the sufficiency of the evidence to warrant thS findings reviewed, as it requests.

On the 11th day of July, 1911, the defendant leased certain premises, of which it was the owner, to the Fifth Avenue Amusement Company, and agreed to erect thereon a theatre, and in default of delivery of possession on or before September 1, 1912, to pay liquidated damages at the rate of $75 per day. The agreement on which the action is based recites that the defendant had become liable to the lessee for liquidated damages aggregating $13,500; that an action brought by the lessee to recover the same was pending, and that in another action brought by one Gallagher against the lessor, which was also pending, the latter claimed, among other things, to be entitled to recover of Gallagher the amount of its liability to its said tenant. It does not appear by the agreement, but the evidence shows that Gallagher was the contractor for the erection of the theatre, and that his action was brought to foreclose a mechanic’s lien. The next recital in the agreement is that the defendant has agreed “in any event” to pay the lessee the liquidated damages ‘ ‘ in installments hereafter set forth. ” It is then agreed that the lessee may deduct the rent due and to grow due “ until the 1st day of September, 1913, as a part payment by the lessor to the lessee on account of ” the liquidated damages. The lessee acknowledged the receipt of the rent thus applied and the lessor agreed that if the Gallagher action “shall terminate in favor of the lessor,” it would immediately “upon the termination of said action ” pay the balance — not stated but conceded to be $6,500 — in full in cash with interest, and with respect to the payment of the balance in the event that said action “ shall terminate ” in favor of Gallagher and against the lessor the agreement provided as follows: “ Then and in that event the lessor shall pay to the lessee the said balance with interest at the rate of Q% per annum in consecutive monthly installments of Two hundred and fifty ($250) per month, commencing with the first payment on the 1st day of March, 1915, and the lessor hereby specifically agrees the lessee or its assigns or successors, while then occupying the said premises under the agreement made and entered into between the lessor and lessee on the 19th day of August, 1913, may, at its option, unless said sum shall otherwise be paid by the lessor, lawfully and is hereby authorized by the lessor to deduct the said monthly payments with interest as aforesaid at the rate of Two hundred and fifty ($250) dollars each and every consecutive month until the full balance shall have been duly paid and discharged. It being distinctly agreed and understood that if the lessor shall fail to pay any one of said installments, or part thereof, the entire unpaid balance of said Thirteen thousand five hundred ($13,500) dollars with interest shall upon such default become due and payable immediately. ” It was further agreed that the action brought by the lessee against the lessor should be discontinued, and it was discontinued in accordance with the agreement.

This action was brought on the 24th day of April, 1915. The original complaint fiierely alleged the agreeinent and assignments and failure to pay $250 on the 1st of March, 1915, and that plaintiff elected that the entire balance of $6:500 should he due and payable; but amendments were allowed on the trial by which it was further alleged that defendant also failed to pay the installment of $250 on the 1st day of April, 1915, and that prior to the commencement of the action Gallagher recovered a judgment in the action brought by him against defendant, and that prior to the commencement of the action neither plaintiff nor the lessee had deducted said two installments from the rent due to defendant under the lease. The evidence shows that a judgment was entered in favor of G-allagher March 30,1915, from which defendant duly appealed on the 26th of April, 1915; that the lessor received from its lessee a check for the full amount of the rent for the month of March, 1915; that the lessor had prepared a check in favor of the lessee for the first installment of $250 and interest, but the lessee had submitted a computation showing a larger amount of interest, and the lessor thereupon drew another check for the installment and interest, but before it was sent it received notice from plaintiff, through his attorney, of the assignment and demanding payment of the first installment. The lessor used the check for the full amount of the rent and let the matter of determining who was entitled to the installment stand over until the next month, with a view to obtaining advice thereon in the meantime. It does not appear that any objection to that course was interposed. The next month the lessee sent a check for the balance of the rent for that month after deducting the first two installments aggregating $500, being the installments for March and April, together with interest thereon; but the lessor refused to accept it. It is fairly to be inferred that this deduction was made for the benefit of the plaintiff, although not at his request, for it was shown that the lessee did not question plaintiff’s right to the payment to be made by the lessor under the agreement. The lessee retained the lease and remained in possession. It merely assigned the agreement. The provisions of the agreement quoted plainly show that it was not contemplated that it might be assigned without an assignment of the lease. It was not intended as an obligation on the part of defendant independent of the obligation of the lessee to pay rent. It seems to me quite plain that the lessee could not have continued in possession and have refused or omitted to pay the monthly rental of $1,666.66 and have recovered an installment for the same month under this agreement. If the lessee could not, then its assignee cannot. It is, I think, a condition precedent to any right to recover on this agreement that the rent due for the same month shall have been paid. The agreement contains an express provision giving the tenant the right to deduct from the rent the amount due from the landlord. That, however, was to protect it against having to pay the rent in full and not receiving the payment due it from its landlord; but the landlord had the same right, for it clearly appears that the payments were to be made in installments on the days when the rent fell due and it was contemplated that it should be deducted by the lessee, of paid by the lessor after it received the rent. The agreement shows that the lessor was not in funds. The lessee, evidently in consideration of its landlord’s not interposing, or of its waiving any defense, and admitting liability, agreed to extend the time for the payment of the liquidated damages and to continue to pay rent after September 1, 1913, without any deduction until the termination of the Gallagher action; and the lessor, evidently in consideration of said agreement on the part of the lessee, obligated itself to pay this claim regardless of whether it won or lost the Gallagher action. If it won, it is fairly to be inferred that it would have been in a position to raise money and so it agreed to pay the whole amount at once in that event, but if it lost, it was contemplated that it would have to settle with Gallagher without any deduction on account of this liability for liquidated damages, and that in that event it would need time, and so it was agreed, in effect, that from March 1, 1915, which it would seem was anticipated to be a date after the termination of the Gallagher action, that deductions should be made from the rent as it fell due. These views also tend to show, I think, that it was the final termination of the Gallagher action that was intended, notwithstanding the fact that defendant was apparently willing to have a deduction made on March first, before the termination of that action. The negotiations as to that, however, were not shown and the fact is not to be given any great weight in determining the construction of the agreement. That action cannot be held to be terminated in the sense in which the word terminated was here used while there is an appeal pending which may result in a new trial. (See 26 Cyc. 57, 58; Nebenzahl v. Townsend, 61 How. Pr. 353; Marks v. Townsend, 97 N. Y. 590; Hurgren v. Union Mutual Life Ins. Co., 141 Cal. 585.) The final termination of the action was a condition precedent to the right to recover the first installment, notwithstanding the fact that contrary to the expectations of the parties, it had not been finally terminated on or before the 1st day of March, 1915.

It follows that the judgment should be reversed, with costs, and any findings inconsistent with these views reversed and appropriate findings in accordance with these views made, and the complaint dismissed, with costs.

Ingraham, P. J., and Dowling, J., concurred; McLaughlin and Scott, JJ., dissented.

Judgment reversed, with costs, and complaint dismissed, with costs. Order to he settled on notice.  