Circuit Court of Appeals, Second Circuit.
*688 Samuel Plumer, of New York City, for appellant.
Leo Oppenheimer, of New York City (Samuel H. Kaufman, of New York City, of counsel), for appellees.
Before HOUGH, MANTON, and HAND, Circuit Judges.
HAND, Circuit Judge (after stating the facts as above).
This case turns upon the law of New York, involving as it does real property situated in that state. Thorley v. Pabst Brewing Co., 179 F. 338, 102 Cow. C. A. 522 (C. C. A. 2). It is the settled law of that state, following the English rule, that, pending the term, a lessor may not recover the cost of repairs upon default by the lessee upon a covenant to keep the tenement in repair, but is confined to the difference in value of the reversion. Appleton v. Marx, 191 N.Y. 81, 83 N.E. 563, 14 Ann. Cas. 150, 16 L. R. A. (N. S.) 210. At the expiration of the term the rule changes, and the cost of the repairs becomes the measure of damages.
The city invokes an analogous doctrine laid down in Kanter v. New Amsterdam Casualty Co., 195 A.D. 756, 187 N. Y. S. 544, affirmed 233 N.Y. 602, 135 N.E. 935. In that case the lease was for 20 years, reserving a yearly rental of $4,200. The lessee also covenanted to change an existing stable into a garage, and delivered a bond to secure his performance. The parties fell out after the lease was made, and the lessee never went into possession. Thereupon the lessor sued the surety, and recovered the face of the bond, upon proving only that the cost of the improvements was greater than that sum. The case must be understood at least as holding that the cost of the improvements presumptively measures the added value to the fee, and, so understood, we cannot see any just ground to question it. Indeed, it seems to follow upon the rule laid down in the case of repairs. If the lease ends under such circumstances that the lessor would be entitled to the improvements, still new and unaged, the proper measure of his damages is that sum which will put him in the same position as though the lessee had performed. He would be in possession of the improvements just completed, and all that is necessary to his case is the presumption we have referred to.
But, if the lease has not ended, the present cost, even if the same presumption obtains, would give him the equivalent of the improvements in a condition in which he would not be entitled to them. He would get them only after they had been aged by the duration of the lease, and at best he must prove that they would not be of less value then than now. This is presumably the reason for the rule in the case of repairs.
Now, it is true that the lease had ended in the case at bar, but it had ended only because of the default on the covenant to improve, and it could have ended only for that reason, because there was no rent reserved. As the special master well observed, the lessee's damages are to put him in the same position as though the lessee had performed, and the lessee's performance would have extended the term and made the bulkhead some years old when the lessor got it 8 years if the lessee had performed as agreed. To allow the lessor to recover the cost would therefore put him in a better position than he could under any possibility have occupied, had the lessee fully performed. Thus it is plain that a lease is different, which ends because of a condition independent of the covenant to improve, from one where the only possible termination is a default in that covenant. In the second case, the cost cannot be the proper measure of damages, any more than it can be in the case of a covenant to repair while the term is outstanding. For this reason Kanter v. New *689 Amsterdam Casualty Co. does not rule the case at bar.
In Susswein v. Penn. Steel Co. (C. C.) 184 F. 102, I held the opposite under a similar lease. The point appears not to have been argued, and all I discussed was whether cost might be taken as a presumptive measure of added value, a point later decided in Kanter v. New Amsterdam Casualty Co. As the lease in that case could have run at most for only 2 years after the improvements were completed, and perhaps for less, it may be that the parties thought the question of only speculative importance.
Decree affirmed.
