The opinion of the court was delivered by: CAMPBELL
CAMPBELL, District Judge.
This is a hearing on a petition of Ruth Paula Realty Corporation to review an order of Henry C. Frey, Esq., Referee in Bankruptcy, dated July 11, 1940, which directs the said Ruth Paula Realty Corporation to turn over to the Trustee the sum of $550 in its possession.
The Ruth Paula Realty Corporation was the owner of certain premises, which it leased to the bankrupt and one Florence Kantor, who was the president of the bankrupt, by written lease, at a fixed rental, payable monthly, and pursuant to the terms of that lease the bankrupt, and not Florence Kantor, deposited with the Ruth Paula Realty Corporation the sum of $650 as security.
The paragraphs of the said lease relating to said deposit read as follows:
"15th. The Tenant has this day deposited with the Landlord the sum of $650.00 as security for the full and faithfull performance by the Tenant of all the terms, covenants and conditions of this lease upon the Tenant's part to be performed, which said sum shall be returned to the Tenant after the time fixed as the expiration of the term herein, provided the Tenant has fully and faithfully carried out all of said terms, covenants and conditions on Tenant's part to be performed. In the event of a bona fide sale, subject to this lease, the Landlord shall have the right to transfer the security to the vendee for the benefit of the Tenant and the Landlord shall be considered released by the Tenant from all liability for the return of such security; and the Tenant agrees to look to the new Landlord solely for the return of the said security, and it is agreed that this shall apply to every transfer or assignment made of the security to a new landlord. Security to bear interest at 4% per annum and to be applied as rent for the last three months of the term of this lease, or any part thereof."
"8th. That if the said premises, or any part thereof shall be deserted or become vacant during said term, or if any default be made in the payment of the said rent or any part thereof, or if any default be made in the performance of any of the covenants herein contained, the Landlord or representatives may re-enter the said premises by force, summary proceedings or otherwise, and remove all persons therefrom, without being liable to prosecution therefor, and the Tenant hereby expressly waives the service of any notice in writing of intention to re-enter, and the Tenant shall pay at the same time as the rent becomes payable under the terms hereof a sum equivalent to the rent reserved herein, and the Landlord may rent the premises on behalf of the Tenant, reserving the right to rent the premises for a longer period of time than fixed in the original lease without releasing the original Tenant from any liability, applying any moneys collected, first to the expense of resuming or obtaining possession, second to restoring the premises to a rentable condition, and then to the payment of the rent and all other charges due and to grow due to the Landlord, and surplus to be paid to the Tenant, who shall remain liable for any deficiency."
"17. It is expressly understood and agreed that in case the demised premises shall be deserted or vacated, or if default be made in the payment of the rent or any part thereof as herein specified, or if, without the consent of the Landlord, the Tenant shall sell, assign, or mortgage this lease or if default be made in the performance of any of the covenants and agreements in this lease contained on the part of the Tenant to be kept performed, or if the Tenant shall fail to comply with any of the statutes, ordinances, rules, orders, regulations and requirements of the Federal, State and City Government or of any and all their Departments and Bureaus, applicable to said premises, or hereafter established as herein provided, or if the Tenant shall file a petition in bankruptcy or be adjudicated a bankrupt, or make an assignment for the benefit of creditors or take advantage of any insolvency act, the Landlord may, if the Landlord so elects, at any time thereafter terminate this lease and the term hereof, on giving to the Tenant five days' notice in writing of the Landlord's intention so to do, and this lease and the term hereof shall expire and come to an end on the date fixed in such notice as if the said date were the date originally fixed in this lease for the expiration hereof. Such notice may be given by mail to the Tenant addressed to the demised premises."
For failure to pay the rent summary proceedings were instituted by the owner, against the bankrupt and Florence Kantor, and a final order was entered in those proceedings, directing the Marshal to put the bankrupt in possession.
This order was executed by the Marshal taking possession of the property, but he did not finally remove the tenants from the premises.
Assuming that nothing further appeared, there would be no question of the landlord's right to hold the amount deposited as security until determination of the lease. In re Homan (Burlingame v. Meyer), 2 Cir., 45 F.2d 481; Lenco, Inc., v. Hirschfeld, 247 N.Y. 44, 159 N.E. 718.
This case, however, has many other features, which cause it to present many other questions.
The bankrupt, and Florence Kantor, who was a co-tenant, had difficulties in establishing a new business, and were in the habit of paying the rent, not in full, but in installments, during the early part of the month.
Acceptance of payment for a number of months after the first of the month constituted a waiver of the requirement for payment on the first. Paul Pleating & Stitching Co., Inc. v. Levine, 137 Misc. 82, 242 N.Y.S. 729.
Originally the stock of the bankrupt corporation was held by two women, Florence Kantor, who was the president of the ...