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Thomas F. Edmands & another, trustees, vs. Rust and Richardson Drug Company

Massachusetts Supreme Judicial Court1906-03-05
191 Mass. 123

Summary

Holding. The court overruled the defendant's exceptions and upheld the jury instructions. The landlords were entitled to recover under the indemnity covenant for losses resulting from the lease breach, and they had discretionary authority to reject prospective tenants if they reasonably determined the tenants were not financially suitable, despite the defendant's approval.

Landlords leased property to a defendant tenant who later sublet a portion without written consent, violating the lease terms. The landlords exercised their right to terminate the lease in April 1901 and regained possession through legal process. The lease contained a covenant requiring the tenant to indemnify the landlords against any loss or diminution of rent resulting from breach of the lease covenants. The landlords subsequently managed the property, collected rent from various tenants through the end of the original lease term, and sued to recover losses under the indemnity covenant.

The defendant challenged several jury instructions, arguing the landlords should have been required to accept any financially responsible tenant proposed by the defendant, or to follow the defendant's judgment regarding prospective tenants. The court rejected these contentions, finding that the landlords had discretion to evaluate potential tenants based on their own good-faith business judgment. The court noted the landlords were acting in their own interests as well as those of the defendant and were not obligated to rely solely on the defendant's financial guaranty or assessment of tenant suitability.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Scope of landlord's duty to mitigate losses after lease termination for tenant breach
  • Landlord's discretion to select replacement tenants versus tenant's right to approve proposed tenants
  • Interpretation of indemnity covenant language in lease agreement
  • Standard of conduct required of landlord acting as both their own agent and guarantor's agent

Procedural posture

The case reached the appellate court on the defendant's exceptions to the trial judge's refusal to grant certain requested jury rulings and to the judge's actual instructions on the subjects addressed by those requests.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

Knowlton, C. J.

The plaintiffs made a lease to the defendant, containing a provision for an entry by the lessors to terminate the lease for a breach of the covenants, followed by this language: “but the lessee covenants to be responsible for any loss or diminution of rent sustained by the lessors in consequence till the end of the lease.” The defendant having under-let a portion of the premises without the consent in writing of the landlord, in violation of a provision in the lease, the plaintiffs, on April 6, 1901, made anentry and terminated the lease in accordance with its provisions. The premises were then held by the tenants to whom the defendant underlet, and there being some question whether the plaintiffs were in possession as against the defendant, a process of forcible entry and detainer was brought by the plaintiffs against the defendant, and an execution was issued on June 7,1901, under which the plaintiffs were put in possession on July 2, 1901, after which time the plaintiffs maintained possession. They received rent from different tenants to the end of the term, and then brought this action, upon the covenant quoted above, to recover for loss or diminution of rent sustained in consequence of the failure of the defendant to perform its covenants. The case comes before us on the defendant’s exceptions to the refusal of the judge to give the first, fourth, seventeenth and eighteenth rulings requested, in the form in which they were asked for, and to the rulings given upon the subjects referred to in these requests.

1. There was ample evidence to entitle the plaintiffs to recover. The evidence tended to show that the plaintiffs, upon regaining possession, managed the property in good faith, aceording to their best judgment, for the interest of the defendant as well as for their own, and that they did everything that it was their duty to do to prevent unnecessary loss or diminution of rent in consequence of the termination of the lease. The language of this covenant is quite different from that of the covenant referred to in Weeks v. International Trust Co. 125 Fed. Rep. 370, and Bowditch v. Raymond, 146 Mass. 109, and it is also different from the language in the lease before the court in Woodbury v. Sparrell Print, 187 Mass. 426. It may well be that its requirements of the lessors are less strict in some particulars than those stated in the first of the above cases, but even if they are precisely the same, the first request for a ruling was rightly refused.

2. The.fourth ruling requested was given with a modification made by inserting the words “ which entry was recognized by the defendant.” The judge left to the jury the question whether the defendant afterwards continued to hold as a tenant under the lease, not recognizing the entry as an acquisition of possession by the plaintiffs. If it did, it might be liable for rent if the plaintiffs elected to hold it as a tenant. The entire request was immaterial, because there was no claim, in the declaration or otherwise, at the trial, for rent as rent after April 6; but the only claim was under the covenant to indemnify against loss or diminution of rent.

3. The seventeenth and eighteenth requests were rightly refused, and the instructions given upon the subjects to which they relate were sufficient. On the question of financial respon sibility the plaintiffs were not bound by the determination of the defendant that a prospective tenant was satisfactory financially. They were interested for themselves, as well as for the defendant, and if a prospective tenant was not financially good, and they knew it, or if, acting in good faith and with sound discretion, they decided that he was not financially .good, they were not bound to accept him and take the risk of loss, merely because the defendant, who was in the position of a guarantor, was satisfied with him. ■ The defendant might also prove financially bad, and the plaintiffs were not obliged to rely altogether upon its covenant of guaranty, or its judgment as to tenants.

The instructions to the jury on the points covered by these requests were sufficiently favorable to the defendant. The contention of the plaintiffs in regard to their conduct was stated, and the jury were told that, if they found this contention to be in accordance with the fact, the plaintiffs might recover the amount of their claim. One of the judge’s statements was as follows: “ In general the effort must be that which a reasonable landowner would make under the circumstances. Not every proposed tenant need be accepted, but an unreasonable refusal to accept a suitable tenant will be deemed an abandonment of the election to relet at the risk of the lessee.” The contention of the defendant was stated fully, and the jury were left to decide between the parties, in a way of which the defendant has no reason to complain.

Exceptions overruled.