Whitlock v. Duffield, et al., 2 Edw. Ch. 366

The Vice-Chancellor: It is to be observed that this bill is framed with a double aspect, either to compel payment of the appraisement and establish a lien for the amount upon the premises demised or that the complainant’s right to a new lease may be declared upon such terms and at such reasonable rent as the court shall ascertain to be just. If a right to any relief be shown by the bill, the demurrer must be overruled.

The first objection—that the remedy, if any, is at law— seems applicable to the first branch of the alternative relief prayed for; and if, according to the legal construction and effect of the covenant and of the agreement or submission to abide by and perform the appraisement, an absolute liability to pay the amount fixed by the appraisers has been created, then a court of law can furnish an adequate and appropriate remedy for enforcing it and the complainant should be left to pursue his remedy there: unless, ‘indeed, their is a lien in equity for the appraised value of the buildings which ought to be enforced against the property—for such a purpose this court might be required to entertain jurisdiction.

This is not a case, however, according to my judgment, in which such a lien can be said to exist, even if an obligation rests upon the defendants at law to pay the money. The contract provides for no such thing in terms ; and it is not a case between vendor and vendee of real estate where a lien for the purchase money is implied. But with respect to a personal liability to pay for the buildings, the covenant is not an absolute one: for it is in the alternative and would be satisfied by the defendants granting a new lease.

In an action at law the complainant would be met by evidence of their having offered such new lease, which the complainant declined, and then, according to the letter of the covenant, it is not obligatory upon the defendants to pay for the buildings.

Whether a court of law would permit an inquiry into the circumstances under which such offer was made, as set forth in this bill, may be considered very doubtful or if it did entertain this inquiry and the court and jury should become convinced that the offer of a new lease, at six thousand dollars rent, was merely colorable and made in bad faith and not such a lease as the defendants were bound to propose for the plaintiff’s acceptance, still the defendants might perhaps insist upon the right to offer other terms, such as a Court of Equity would deem to be fair and reasonable in preference to paying the appraised value of the buildings and thus embarrass if not entirely defeat the action at law.

For these reasons I am inclined to think the remedy at law would be, at least, doubtful and difficult; and also that, if there be any remedy, it is in this court where the defendants can be compelled to make their election, either to pay the amount awarded or specifically perform the alternative part of the covenant. The next enquiry then is, whether there is enough presented by this bill to authorize the court to interfere even upon this ground. The covenant in the lease is very indefinite in regard to the terms upon which the new lease should be granted.

After providing for the mode of ascertaining the value of the buildings, and declaring that the lessors are to pay the appraised value or grant a new lease for twenty years (and so far it is plain and perfectly optional with the lessors) it goes on to say that if they elect to give a new lease, it is to be upon such terms as they may think proper and as may be approved of by the lessee or his assigns, and if the latter should not approve of the terms so offered by the former, he or they are to be at liberty to take away the buildings.

Thus, except as to the duration of the new lease and that it was to be upon the same premises, every thing which it should contain as constituting the terms upon which it was io be granted are left open to the agreement of the parties.

In making a proposition for this purpose, the complainant insists that the defendants were bound to make a fair and reasonable proposition —a proposition in good faith and with a view of having it accepted and such a one too as the complainant or any person willing to take a lease of the land for twenty years might, with some degree of propriety,-accept, and the bill alleges, in substance, that the proposition was not made with any such view, that the defendants had previously determined not to renew the lease on any terms, that the proposed yearly rent was grossly exorbitant and such as they knew could not be accepted and that the proposition was designedly intended to preclude the possibility of the acceptance of a new lease and thereby, at the same time, to avoid the payment of the valuation.

I am not prepared to say, in consequence of these allegations in the bill, that there has not been a breach of the covenant. Covenants are to be expounded so as to carry into effect the intention of the parties. The spirit as well as the letter of the covenant is to be attended to; and although the covenantor performs it according to the letter, yet, if he violates the spirit and does any act to defeat its interest or use, he is guilty of a breach: Platt on Covenants, 139.

The covenant in question can hardly admit of such a latitude of construction as to authorize the defendants, after ascertaining the value of the buildings, to exercise an arbitrary will upon the subject of the terms of a new lease and thereby prevent its acceptance and throw the opposite party upon the only other alternative of removing his buildings. This would render the covenant nugatory, so far as respects the granting of a new lease, and leave it effectual only for the purpose of permitting the lessee or his assigns to take off the buildings.

It is true, the words “ upon such terms as the lessors might think proper” are expansive and would seem to leave it very much at their will; but when read, as they must be, in connection with the words “ and as might be approved of by the lessee or his assigns” the whole sentence implies that the terms to be offered should be made in good faith—should be such as not to shock the “ moral sense”—such as might be taken into consideration and with reference to the value of the property and a due regard to the object'of a new lease might possibly be acceptable.

If a proposition were thus made in a spirit of fairness and the parties should, notwithstanding, be unable to agree, there might be a difficulty still in making (a lease; and whether this court can, in such a case, interpose and settle the terms by a reference to a master, I will not now undertake to determine. Perhaps it may turn out that the covenant in this respect is too loose and indefinite to be the subject of interference here, in the way of decreeing a specific performance : Rutgers v. Hunter, 6 J. C. R. 220.

Still I think good faith and the spirit of the covenant require that, in order to avoid paying for the buildings according to the valuation, the defendants should have made an offer of a new lease at such rent and upon such terms as they, in their own conscience at least, sincerely believed to be just. Any offer not so based, must, in my judgment, be deemed a noncompliance with the spirit and intent of the covenant and insufficient to exonerate them from the payment of the money.

As the allegations in the bill (and which stand admitted by the demurrer) go to show that in making the offer, the defendants were actuated by improper motives; that their designs were unjust towards the complainant; not made in good faith or with any idea of its being accepted: but, on the contrary that it was colorable only, and one which they knew could not be accepted, I am far from being certain that the court, under such circumstances, can avoid granting relief to some extent, namely, to the putting of the defendants to their election of either paying for the buildings according to the valuation or of making an offer of a new lease which shall be free from such imputations.

Upon the whole, I think the defendants must answer the bill. Demurrer overruled, with costs.