SQ. REALTY CO. v. PA. CO. FOR BANK. AND TR., 370 Pa. 70 (1952)

87 A.2d 315

Square Realty Company, Appellant, v. Pennsylvania Company for Banking and Trusts.

Supreme Court of Pennsylvania.
March 24, 1952.

Mortgages — Mortgagee in possession — Lease — Recapture upon sale — Payment of specified sum — Foreclosure — Rights of purchaser against mortgagee.

Where, in an action of assumpsit, plaintiff averred that defendant as mortgagee in possession leased a part of the mortgaged premises to a tenant for a term of five years, the tenant agreeing to vacate at any time after the third year in the event of a bona fide sale of the building by lessor and payment of $4,000 if the lessee was required to vacate during the fourth year; that defendant instituted foreclosure proceedings and plaintiff purchased the property at sheriff’s sale; that various efforts of plaintiff to evict the tenant were settled by a new lease in which the tenant agreed to pay plaintiff a higher rental and which provided that the rental for the first month was to be $4,667 and $667 for each month thereafter, and that tenant was given a credit in the amount of $4,000; and that at the time of execution of the new lease the tenant orally assigned to plaintiff any claim it might have against defendant to collect the $4,000 mentioned in the original lease; it was Held that the complaint did not state a cause of action.

Submitted January 11, 1952. Before DREW, C. J., STERN, STEARNE, BELL, CHIDSEY and MUSMANNO, JJ.

Appeal, No. 270, Jan. T., 1951, from judgment of Court of Common Pleas No. 1 of Philadelphia County, June T., 1949, No. 2445, in case of Square Realty Company v. Pennsylvania Company for Banking Trusts. Judgment affirmed.

Assumpsit. The facts are stated in the opinion by PARRY, J., of the court below, as follows:

Preliminary objection to complaint in assumpsit.

The complaint sets forth that on March 3, 1944 the defendant as mortgagee in possession leased a part of the mortgaged premises to a tenant for five years. The tenant agreed to vacate at any time after the third year of the term in the event of a bona fide sale

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of the building by the lessor, upon ninety days’ written notice, accompanied by the payment of $4,000 if the lessee was required to vacate during the fourth year or $2,000 if required to vacate during the fifth year of the term.

Before this contingency occurred, the defendant instituted foreclosure proceedings and on May 6, 1946 the property was sold by the sheriff to the plaintiff, who promptly informed the tenant that it disaffirmed the lease and demanded that it vacate by June 30, 1946 or steps would be taken to enforce the notice.

Upon the refusal of the tenant to vacate, the plaintiff in November 1946 began eviction proceedings, but on January 17, 1947 it notified the tenant it had decided to abandon them and now elected to terminate the lease made by the Pennsylvania Company as mortgagee in possession. On January 28, 1947 it tendered a cheque for $4,000 which the tenant declined to accept. It then notified the tenant that it intended to again proceed to eviction, whereupon the tenant filed a Bill in Equity and had the plaintiff preliminarily enjoined from disturbing its possession. Subsequently the dispute was settled by the execution of a new lease in which the tenant agreed to pay the Square Realty Company a higher rental.

By the terms of this lease the rental was stated to be $4,667 for the first month of the term and $667 for each month thereafter; a credit at the time being given the tenant for $4,000 which is set forth as the amount fixed as liquidated damages in the original lease in the event of the exercise of the right of recapture. It is further alleged that at the time of the execution of this new lease the tenant orally assigned to the plaintiff any claim it might have against the defendant to collect the $4,000 mentioned in the original lease but although the Pennsylvania Company was notified of these proceedings,

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it declined upon demand to pay the plaintiff $4,000.

We do not think that the complaint sets forth a cause of action. The defendant never attempted to exercise any right of recapture. Whether the purchaser at the sheriff’s sale succeeded to the rights of the defendant appears to us wholly immaterial for the recapture clause could only be invoked by the Square Realty Company if it made a bona fide sale of the property and this is nowhere averred.

The plaintiff avers that it is proceeding as assignee of the tenant’s right to collect $4,000 from the original lessor, but since the tenant had no right to recover from the defendant herein, the assignment will not avail the plaintiff. The tenant was never dispossessed; he suffered no loss by any action of the defendant; he was not paid $4,000 by the plaintiff but was simply given a paper credit in the lease for an amount it was never intended that he should pay.

Whatever the rights of the tenant and the plaintiff may have been, they elected to abandon their several contentions and settle their dispute by the execution of a new lease. No action or default of the defendant required the tenant to pay a higher rental. It was a voluntary act and we are unable to light upon any legal theory applicable to the circumstances set forth in the complaint which would enable either the plaintiff or the tenant to bind the defendant by recitals in any lease which they saw fit to execute.

We, therefore, sustain the preliminary objections and as there is no desire for amendment, judgment is entered for the defendant.

Plaintiff appealed.

Edward W. Furia and Furia DiCintio, for appellant.

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Edmund R. Finegan, Thomas P. Mikell and Saul, Ewing, Remick Saul, for appellee.

OPINION PER CURIAM, March 24, 1952:

The judgment of the court below is affirmed on the opinion of Judge PARRY.