Kutter v. Smith - 69 U.S. 491 (1864)
U.S. Supreme Court
Kutter v. Smith, 69 U.S. 2 Wall. 491 491 (1864)
Kutter v. Smith
69 U.S. (2 Wall.) 491
1. The law imposes no obligations on a landlord to pay the tenant for buildings erected on demised premises. The innovation on the common law rule that all buildings become part of the freehold has extended no further than the right of removal while the tenant is in possession.
2. Where a lease binds a landlord to pay his tenant, on the efflux of the term, for buildings erected by the tenant, or to grant him a renewal, the landlord is not bound to pay when the lease has been determined by nonpayment of rent before such efflux, and by forfeiture and entry accordingly.
3. This is true even though by the terms of the lease the repossession by the landlord is to be "as in his first and former estate," and though the erections were not on the ground at the date of the lease. _
Link demised, on the 1st of May, 1857, to Sherman, a lot in Chicago, for twelve years from that date. The lessee covenanted to pay all the taxes and assessments levied on the premises during the term.
It was provided that in case of a failure by the lessee to pay the rent when due, the lessor, his heirs or assigns should have the right to enter into the demised premises, with or without process of law, and expel the lessee or any persons occupying them, "and the said premises again to repossess and enjoy, as in his first and former estate," and the lessee covenanted that if the term should at any time, at the election of the lessor or his assigns, be ended, he and all those occupying the premises under him would immediately and peaceably surrender the possession of the premises to the lessor or his assigns. Sherman contemplated making an erection upon the premises, which it was agreed he might do, and the lease contained the following covenant:
"It is agreed upon by and between the parties that at the expiration of ten years from the first day of May, one thousand eight hundred and fifty-nine, it shall be at the election of the first party either to purchase the buildings erected on said leased premises at the appraised value at that time or renew the lease of the said demised premises for the term of ten years longer, and the value of the buildings as well as the value of the rent of the said demised premises, to be appraised by three disinterested persons, who are to decide the value of the buildings as well as the value of the rent of the above-mentioned premises, as the case may be. And it is further agreed upon by and between the parties that at the expiration of each and every ten years from May first, one thousand eight hundred and sixty-nine, for and during the term of ninety-nine years from the date
of this indenture, that the party of the first part is either to renew the lease or purchase the buildings as above stipulated."
The lessee did erect a brick structure or storehouse on the premises valued at $2,500 to $4,000.
The rights of the lessee Sherman became afterwards vested in one Kutter, and those of Link, the lessor, in a certain Smith.
On the 1st of May, 1862, Smith, as assignee of Link, went upon the premises and demanded the rent due that day on the lease, which was not paid, and the next day he gave notice that he had elected to forfeit the lease for nonpayment of rent due May 1, 1862.
In July, 1862, Kutter (assignee of Sherman) notified to the defendant that, owing to the forfeiture of the lease from Link to Sherman for nonpayment of rent, he (Kutter) was entitled to have the brick building on the demised premises appraised under the terms of the lease, and the value of it paid to him. Smith refusing to join in any effort to have it appraised, this suit, an action on the case was brought in the Circuit Court for the Northern District of Illinois.
The declaration set out the lease by Link to Sherman, the subsequent vesting of the lessor's title in the defendant, Smith, and of the lessee's in the plaintiff, Kutter, and that the defendant had declared the lease forfeited and taken possession of the demised premises and refused to join the plaintiff in having an appraisement of the building standing on said premises, and also neglected and refused to pay plaintiff the value of that building, whereby he became liable to plaintiff for its value, and this action was brought to recover it.
On the trial, the court instructed the jury as follows:
"By the terms of the lease from Link to Sherman, it seemed to be contemplated that the lessee should have power to put improvements upon the land which might remain there on the 1st of May, 1869 ('ten years from the 1st day of May, 1859'), and it was by the terms of the lease then left optional with the lessor to purchase the buildings erected on the land at the appraised
value or renew the lease for ten years longer, but up to that time -- that is to say till May, 1869 -- the clause of forfeiture for the nonpayment of rent was nevertheless in force and binding on the lessee, and notwithstanding improvements may have been in the meantime put upon the land, if the lessee did not pay the rent according to the terms of the lease, it was competent for the lessor to declare 'the term' ended and to reenter, and in case of a determination of the lease in that way prior to the time fixed (viz., May 1, 1869), no provision seemed to be made by the lease for the payment by the lessor of any improvements put by the lessee upon the land, and in the case supposed, in the absence of such provision, the lessee could not recover for the improvements, and the plaintiff can be in no better position than Sherman. Consequently, if, on the 1st day of May, 1862, there was rent due and in arrears, unpaid, after demand made for the payment thereof, and the lessor or his assigns exercised the option given by the lease, and declared 'the term' ended, and reentered and took possession of the premises, of which the lessee and his assignee had due notice, then the plaintiff cannot recover against the defendant in this action the value of the improvements made by Sherman or his assignee."
Verdict and judgment went accordingly, and the plaintiff, Kutter, took a writ of error to reverse the judgment.