
    Palmer and Singer Manufacturing Company and Knickerbocker Garage, Respondents, v. Barney Estate Company, Appellant.
    First Department,
    February 16, 1912.
    Landlord and tenant — lease — failure to pay rent on day fixed — custom of parties — forfeiture — when equity will not decree cancellation of lease.
    Forfeitures are not favored in equity.
    The purpose of a clause in a lease providing that in case of default by the tenant in any of the covenants, the landlord may at his option terminate the lease on thirty days’ notice or may re-enter and resume possession, and may relet the same for the balance of the term for account of the tenant, the tenant to make good any deficiency, is to secure the payment of the rent reserved.
    Such clause ordinarily should not be permitted to be used by the landlord to regain possession of a valuable piece of property whose rental value has substantially increased since the making of the lease.
    Where a lease for a period of ten years at an annual rent of §19,500 provided-that the rent should be paid quarterly in advance and a custom grew up between the landlord and tenant during the first two years of the term whereby the payment on the first day of the quarter was not insisted upon, the landlord cannot cancel the lease and dispossess the tenant at the beginning of the third year because there was a twenty-one days’ delay in the payment of the quarterly rent, if it appears that six days before the service of the notice canceling the lease the president of the landlord corporation talked with the tenant’s vice-president about the rent then due but made no suggestion that the lease would be canceled unless the same was paid at once and if the tenant as soon as the notice of cancellation was served sent the landlord a check for the full amount due, with interest from the first day of the quarter.
    Appeal by the defendant, the Barney Estate Company, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of New York on the 17th day of November, 1911, upon the decision of the court rendered after a trial at the New York Special Term, and also, as stated in the notice of appeal, from the decision upon which said judgment was entered.
    ■ The judgment granted a permanent injunction restraining the defendant as landlord from interfering with plaintiffs’ possession of certain premises under a lease, and from prosecuting or continuing pending summary proceedings to dispossess.
    
      Walter E. Hope of counsel [Masten & Nichols, attorneys], for the appellant.
    
      Jay Noble Emley, for the respondents.
   Clarke, J.:

The defendant is the owner in fee and landlord of certain premises known as 1618 and 1620 Broadway, in the borough of Manhattan, and the plaintiffs are tenants thereof under a lease entered into in 1906 between the then owner of the property and plaintiffs’ assignor. The said lease was for a term of ten years, and provided for an annual rent of $19,500, to be paid in advance in equal quarterly payments.

The said lease further provided: “Ninth. In case of default by said tenant in any of the covenants herein contained or in case the whole or any part of said premises shall become vacant, the landlord may at his option terminate this lease at any time by giving thirty days previous notice to the tenant,. said notice to be left on the premises with any person in charge thereof, or to be affixed upon a conspicuous part of the premises, if they are vacant; or the landlord may at his option re-enter the said premises and resume possession thereof, either by force or otherwise, without being liable for any prosecution therefor, and re-let the same during the remainder of the term, at the best rent that he can obtain for account of the tenant who shall make good any deficiency. ”

The Special Term has found as a fact that said 9th clause of the lease herein, so far as same was applicable to the covenant to pay rent, was inserted as a security merely for such payment, and was so regarded by the parties.

The building which it was contemplated would be erected upon the premises was completed and the tenants entered into occupation of the same under the terms and provisions of the said lease on the 18th day of January, 1908, and on that day paid the first quarterly installment of rent in advance. Quarterly installments of rent in advance were thereafter paid as follows:

Due according to lease. Paid by check dated.
April 18, 1908. April 18, 1908.
Oct. 18, 1908. Oct. 19, 1908.
Jan. 18, 1909. Feb. 18, 1909.
April 18, 1909. April 20, 1909.
July 18, 1909. July 21, 1909.
Oct. 18, 1909. Nov. 3, 1909.

The court has found that payment of rent on the first day of each quarter had not been insisted upon; that only the first three quarterly installments out of eight were paid at the beginning of the quarter; that a custom had grown up between the landlord and the tenants of accepting and paying the rent on a day subsequent to the beginning of each quarter; that this custom was relied upon by the plaintiffs almost continuously throughout the whole term of the lease and was recognized by both plaintiffs and defendant as a custom binding upon both of them and such custom was in full force and effect on the 18th day of January, 1910; that the quarterly installment of rent in advance due said January 18, 1910, according to the terms of the lease, was not paid on that date, and on January 29, 1910, defendant wrote: “We take the liberty of calling your attention to the fact that your rent due January 19th amounting to $4,875 is still unpaid. Kindly favor us with your check for the amount by return mail.” And there was inclosed therewith a statement dated February 1,1910: “ To amount of rent due on garage building 1620/1624 Broadway, Jany. 18/April 18, $4,875.”

The vice-president of the defendant company testified that after he wrote the letter of January twenty-ninth he had a telephone conversation with the president of the plaintiff companies, whom he had called up on the first, second or third of February: “The substance of it was that I would like a check. Mr. Singer said it would be sent. That is all there was said. There was not anything said about cancelling the lease. It was not referred to at all. Nothing was said to indicate that because the rent had not been paid two or three weeks before that we would not take the rent. We were willing to take the rent at that time. I asked him for it. I have said I didn’t say anything to him when I asked him for that rent, that if he didn’t send it down we would cancel the lease.”

On February 9, 1910, the rent still being unpaid, the landlord served upon the plaintiffs the following notice: “You and each of you are hereby notified that Barney Estate Company, Landlord * * * in consequence of the default of the tenant under said lease to pay the rental therein covenanted to be paid hereby elects to terminate the said indenture of lease upon the 12th day of March, 1910, in accordance with the provision thereunto provided. Thirty days previous notice of such termination is hereby given in accordance with the terms of said lease and you are hereby notified to deliver up and vacate the .said premises on or before said 12th day of March, 1910.”

Immediately upon receipt thereof, plaintiffs’ treasurer telephoned and offered to immediately pay the rent, but the defendant would not accept the same. On February tenth the treasurer tendered the rent for the quarter, and on the fourteenth he tendered the rent plus the interest from the eighteenth of January to February fourteenth, and from that time to this tenders have been kept alive; a bond for $27,000 has been given and the rents as they accrued have been deposited, so that the defendant could, if it wished, obtain them.

Thereafter the defendant brought dispossess proceedings against the plaintiffs as holdovers after the termination of their lease, but the tenants had a decision in their favor which, on appeal to the Appellate Term, was reversed and a new trial ordered. (Barney Estate Co. v. Palmer & Singer Mfg. Co., 68 Misc. Rep. 501.) Before the coming on of the new trial this equitable action was instituted and a preliminary injunction was granted by the Special Term which was affirmed unanimously on appeal to this court, without opinion. (143 App. Div. 906.)

In the agreed statement of facts submitted to the Special Term it is conceded that the rental value of the premises since January 1, 1910, is substantially more than the amount of rent reserved in the lease.

As conclusions of law the Special Term found that the defendant waived the payment of rent for the quarter beginning January 18, 1910, on the particular day specified in the lease, and that plaintiffs aré entitled to judgment as asked for excusing plaintiffs for not paying the rent upon the rent day mentioned, and that the said lease is in full force and effect and binding upon the parties hereto in all respects, and plaintiffs were entitled to the injunction prayed for, and from the judgment entered in accordance therewith defendant appeals.

It is apparent from the record that there is and has not been the slightest chance that defendant would fail to receive the full amount of rent due. It has been tendered repeatedly and is thoroughly secured by bond and deposit, and the question is whether a court of equity is required to declare a forfeiture of a long term lease for a twenty-one days’ delay in the payment of the quarterly rent payable in advance under, the circumstances disclosed by this record. The plaintiffs are engaged in the automobile business and it is suggested that the month of January is a dull time in said business; that in the previous year the rent for the quarter due on January 18, 1909, was not paid until February 18, 1909, a full month after the due day, and was then received without any suggestion of a forfeiture of the lease.

A significant fact is that in the conversation over the telephone between the vice-president of the defendant and the president of the plaintiff companies, held on the first, second or third of February, as Mr. Brundage testified, when he said that he would like a check Mr. Singer said it would be sent and he further testified that nothing was said about canceling the lease or to indicate that because the rent had not been paid two or three weeks before that we would not take the rent. We were willing to take the rent at that time.” Yet six days later the notice was served canceling the lease for default in payment on January eighteenth. Can it be doubted for a moment that if Mr. Brundage had said to Mr. Singer, if you don’t send the check at once we will be obliged to exercise the option given to us by the lease and cancel it, he would have received it, it appearing that immediately upon receipt of the notice of February ninth the full amount due with interest was tendered ?

In view of the previous relations of the parties and their mutual conduct, it was not fair without notice to attempt to exercise the right to cancel. Forfeitures are not favored in equity. This provision was inserted by way of security but is being made use of, not to enforce payment of an amount due, but to regain possession of a valuable piece of property of which the rental value has substantially increased since the making of the lease above the amount of the rent reserved.

In Horton v. N. Y. C. & H. R. R. R. Co. (12 Abb. N. C. 30; affd. without opinion, 102 N. Y. 697), where a similar action was brought to secure relief to the plaintiffs from the forfeiture of a term, Mr. Justice Daniels said: Under the well-settled principles observed and enforced in courts of equity where such a forfeiture has been provided for as a security to the lessors for the payment of the rent reserved, as it was by this lease, the tenants have usually been relieved from the consequences of their fault when a speedy application has been made for that purpose. The right to forfeit the tenants’ term has been justly regarded as in the nature of a security provided by the terms of the lease to the lessors for the payment of the rent, and for that reason full effect can be given to it by allowing the tenants to pay the rent in arrear with interest in the meantime accruing upon it. (1 Story Eq. Jur. [12th ed.] § 187.) By the proof given upon the trial, it was also made to appear that indulgence was extended to the lessees in the payment of the rent reserved by the lease. And while this did not strictly relieve them of the obligation to perform their covenant, it still constituted an excuse for the omission to pay the rent at the time when it matured. * * * After the tenants had been in this manner lured into negligence, it would be a fraud upon them to permit the lessors or their grantee to insist upon the forfeiture.”

In Giles v. Austin (62 N. Y. 486) there was a covenant in the lease that the lessee should pay the taxes and assessments as the same should become due and payable. After notice the lessor brought an action of ejectment alleging that the lessee had neglected and refused to pay the taxes for a number of years. After the action in ejectment had been instituted plaintiff brought an action to be relieved from his forfeiture. Judge Bapallo said: “That covenants to pay taxes and assessments are in the nature of covenants to pay money, and that forfeitures incurred by their breach may be relieved against upon the same principles. By the payment of the amount due at any time before sale or the expiration of the right to redeem, the landlord is placed in precisely the same position as if no default had occurred; and where there is no bad faith on the part of the tenant, mere delay in making the stipulated payments should not bar him from relief.”

In Noyes v. Anderson (124 N. Y. 175) Bradley, J., said: “The power of a court of equity in cases properly requiring it, will be exercised to reheve a party against forfeitures and from penalties. And this is upon the principle of equity jurisprudence that a party having a legal right shall not be permitted to avail himself of it for the purposes of injustice or oppression. * * * It is also not only available to cases of leases where forfeiture of the term and entry are provided for as the consequences of non-payment of rent on the day it becomes due, but is extended to other cases, and more especially to those (although not necessarily confined to them) where the default resulting in forfeiture is in payment of money, as in such case adequate compensation can he made. (Pomeroy Eq. Jur. §§ 433, 450, 451.) ”

The judgment appealed from should be affirmed, with costs.

Ingraham, P. J., McLaughlin, Laughlin and Scott, JJ., concurred.

Judgment affirmed, with costs.  