New York Law Review

Tag: Covenant of Quiet Enjoyment

  • Fifth Ave. Bldg. Co. v. Kernochan, 221 N.Y. 370 (1917): Lessor’s Liability for Breach of Covenant of Quiet Enjoyment After Transferring Title

    Fifth Ave. Bldg. Co. v. Kernochan, 221 N.Y. 370 (1917)

    A lessor who covenants for quiet enjoyment is liable for breach of that covenant even after transferring title to the property, particularly if the breach results from the lessor’s failure to take necessary measures, such as paying interest on an existing mortgage.

    Summary

    Fifth Ave. Bldg. Co. leased property from Kernochan, who later conveyed the property to another party. The lease contained a covenant for quiet enjoyment. When the new owner defaulted on the mortgage, the plaintiff, Fifth Ave. Bldg. Co., was evicted. The court addressed whether Kernochan was liable for breach of the covenant of quiet enjoyment despite no longer owning the property. The Court of Appeals held that Kernochan was liable, emphasizing that the covenant was not conditional on continued ownership and that a lessor cannot simply abandon their obligations by transferring title. The Court reasoned that the lessor’s failure to protect the lessee from foreseeable risks, like mortgage foreclosure, constituted a breach.

    Facts

    1. Kernochan owned premises in New York City and mortgaged them.
    2. Kernochan conveyed the property to the defendant.
    3. Fifth Ave. Bldg. Co., knowing about the mortgage, leased part of the building from Kernochan for five years with an option to renew for another five. The lease included a covenant for quiet enjoyment.
    4. Kernochan paid the mortgage interest while he owned the property.
    5. Kernochan conveyed the property to another party.
    6. The new owner defaulted on the mortgage.
    7. The mortgage was foreclosed, and Fifth Ave. Bldg. Co. was evicted.

    Procedural History

    Fifth Ave. Bldg. Co. sued Kernochan for breach of the covenant of quiet enjoyment. The trial court directed a verdict against Fifth Ave. Bldg. Co. The judgment was affirmed by the appellate division. Fifth Ave. Bldg. Co. appealed to the New York Court of Appeals.

    Issue(s)

    Whether a lessor who covenants for quiet enjoyment remains liable for a breach of that covenant after conveying title to the property, when the breach arises from a pre-existing mortgage on which the new owner defaults.

    Holding

    Yes, because the lessor’s covenant for quiet enjoyment is a continuing obligation that survives the transfer of title, and the lessor is responsible for taking measures to ensure the lessee’s peaceful enjoyment of the premises for the term of the lease.

    Court’s Reasoning

    The court emphasized that the covenant for quiet enjoyment was unconditional. Kernochan promised that Fifth Ave. Bldg. Co. would “peaceably and quietly have, hold and enjoy the said demised premises for the term aforesaid.” The court stated, “His promise was not conditional upon his retention of title, nor upon the lessee’s ignorance of the existence of the mortgage nor upon refusal to pay rent to the grantee. Without qualification the compact was made. Its obligation has not been fulfilled.”

    The court distinguished this case from Wagner v. Van Schaick Realty Co., noting that the facts were different. The court stated, “When a lessor covenants for quiet enjoyment, he is bound to take such measures in relation to the mortgage as will enable him to accomplish the purpose of his covenant. His promise survives his divestment of title. If he is at fault in failing to provide payment of interest on the mortgage, even after he has ceased to hold title to the premises, he must answer for his fault. His interest in the lease continues to the extent of his covenant and he will not be allowed to abandon the obligations which he has assumed. He is liable for the loss of the bargain.”

    The court cited Mack v. Patchin and Friedland v. Myers, establishing that the lessor is liable for damages when at fault for failing to protect the lessee’s rights under the covenant. The court recognized exceptions to the ordinary rule of damages, especially when the lessor fails to remedy defects in title or refuses to incur expenses to fulfill the contract.

  • Smith v. Wait, 28 N.Y. 324 (1863): Enforceability of a Lease Despite Landlord’s Lack of Title

    Smith v. Wait, 28 N.Y. 324 (1863)

    A tenant’s obligation to pay rent under a lease is independent of the landlord’s actual title to the property, especially where the lease contains an implied covenant of quiet enjoyment, and the tenant has not been evicted.

    Summary

    This case addresses whether a tenant can avoid paying rent by claiming the landlord had no valid title to the property. Smith (landlord) sued Wait (tenant) for unpaid rent under a two-year lease. Wait argued Smith lacked title and that a third party, Williams, had obtained a judgment to recover possession. The court held that Wait was obligated to pay rent because the lease implied a covenant of quiet enjoyment, which served as sufficient consideration, and because Wait had not alleged actual eviction from the premises. The court emphasized that the agreements for quiet enjoyment and rent payment were independent.

    Facts

    The key facts are:

    1. Smith leased property to Wait for a two-year term in a written agreement, reserving rent payable quarterly.
    2. The written lease was not an indenture (a deed executed by both parties) but a parol demise (oral or simple written lease).
    3. Wait allegedly promised to pay the rent.
    4. Wait claimed Smith lacked any interest or estate in the property.
    5. A third party, Williams, obtained a judgment against Wait in a separate action to recover possession of the property.
    6. Wait did not allege that he had been evicted or deprived of possession as a result of Williams’ judgment.

    Procedural History

    The case originated from a suit by Smith against Wait for unpaid rent. Wait presented a defense claiming Smith lacked title and that Williams had obtained a judgment to recover possession. The lower court’s ruling on the demurrer is not specified, but the Court of Appeals reviewed the case on appeal from that ruling.

    Issue(s)

    1. Whether a tenant can refuse to pay rent based on the landlord’s alleged lack of title to the property when the lease contains an implied covenant of quiet enjoyment.
    2. Whether a judgment obtained by a third party to recover possession constitutes a valid defense against rent payment when the tenant has not alleged actual eviction.

    Holding

    1. Yes, because the agreement for quiet enjoyment implied in the lease is independent of the landlord’s actual title and serves as sufficient consideration for the tenant’s promise to pay rent.
    2. No, because the tenant must plead and prove actual eviction from the premises to assert a valid defense against rent payment based on a third party’s claim.

    Court’s Reasoning

    The court reasoned that the agreement to pay rent and the agreement for quiet enjoyment are independent covenants. The implied covenant of quiet enjoyment acts as a sufficient consideration for the tenant’s promise to pay rent, regardless of the landlord’s actual title. The court referenced The Mayor of New-York v. Mabie and Tone v. Brace to support the existence of an implied agreement for quiet enjoyment. Drawing on Whitney v. Lewis, the court highlighted that a covenant for quiet enjoyment is sufficient consideration even if the grantor lacks title.

    Furthermore, the court stated that to properly plead an eviction as a defense, the tenant must allege an actual eviction or expulsion from the premises and being kept out of possession until after the rent became due. Simply stating that a third party obtained a judgment to recover possession is insufficient. As the court noted, “In pleading an eviction, the plea must state an eviction or expulsion of the tenant from the demised premises, and the keeping him out of possession until after the rent became due; otherwise it is bad.”

    The court underscored the principle that without a deed executed by both parties or an actual entry, the strict landlord-tenant relationship might not exist, but the independent agreement for quiet enjoyment remains enforceable.