end piers, as described in the report. The verdict of the jury was rendered May 7, 1888, and a precept in accordance therewith was issued June 13, 1888, requiring the superintendent of buildings to make the repairs specified in the verdict; but for some reason, for which no explanation is given, the precept has never been executed. The various proceedings recited were taken pursuant to title 5, subc. 11, of the consolidation act of 1882, as amended by chapter 566 of the Laws of 1887.

In addition to the general covenant above referred to, the lessor covenanted "that all alterations, improvements, rebuilding, and additions of and to the said property which shall be required during the term hereby granted by any present or future law, ordinance, or authority whatsoever, shall be made or procured to be made by the parties of the first part (lessor) at their own proper cost and expense: provided, however, such alterations, improvements, rebuilding, and additions as are hereinabove covenanted to be made by the parties of the first part shall be such as are of a permanent nature, and become a part of the freehold, and shall not be such as are rendered necessary by reason of the uses to which the said property is or shall be put." The lessor reserved a right of reentry to make such repairs as it was required to make, and following this reservation is the clause: "It being mutually understood and agreed, however, that the parties of the first part, their heirs, executors, administrators, or assigns, shall be responsible for the making of said repairs and rebuilding, and for the making of the same as soon as practicable, only upon said property as it exists at the time of this letting, the rent hereinbefore reserved to be abated and suspended in the cases hereinbefore specified in similar manner and proportions as it is hereinafter agreed such rent shall abate and be suspended in case of damage by fire." The provisions defining the obligations of the respective parties in case of damage by fire declare that if damage is so caused as will cause a liability to repair or rebuild to accrue to the lessor, he will, at his own cost and expense, as soon as practicable, put the buildings in a state of repair equal to that in which they were before said damage was done. The provision for such suspension or apportionment of the rent in case of damage by fire is as follows: "And during the time the party of the second part, its successors or assigns, are deprived of the use and possession of the premises hereby demised by reason of such damage and rebuilding by the parties of the first part, the rent heretofore reserved, or such part thereof as shall be justly proportionate to the portion or portions of the said demised premises of the use of which the said party of the second part, its successors or assigns, shall be deprived by reason of such damage or rebuild. ing, or by reason of the possession or control

of the said premises by the said parties of the first part, shall be suspended or abated." The lessor has never repaired the building to conform to the requirements in the building department proceedings, nor has he done anything to remedy the defects therein defined. Evidence was given on the trial as to the safety of the building at and since these proceedings were taken, and it was shown by the great preponderance of evidence that at least the four upper floors were unsafe, and unfit to be occupied for any business purpose, by reason of the insecurity of the walls of the building. They have never been occupied in fact by the lessee for any purpose.

The lease also contained a covenant by the lessor to put in and build two staircases on the Twenty-Fourth street side of the premises, and one staircase on the Twenty-Fifth street side, and to alter the location of the Otis elevator and the size of the freight elevator "at any time after the date of the lease and upon thirty days' notice in writing" from the lessee. Notice to perform this covenant was given by the lessee to the lessor 30 days prior to May 1, 1888. The lessor took out the existing stairway on the Twenty-Fifth street side of the building in June, 1888, leaving a staircase on the Twenty-Fourth street side as the only means of access to the building, and proceeded no further. This covenant has never been in any respect performed. Subsequent to the entry of the lessee under the lease, disputes arose between the parties, based upon the violation by the defendant of its covenants. The plaintiff neglected and refused to pay the rent, and the defendant commenced summary proceedings in a district court of the city of New York under the statute to dispossess the plaintiff for nonpayment. The plaintiff sought to set up in these proceedings its claim for damages for breach of the covenants by the lessor as a defense, and succeeded in that court, but the judgment was reversed on appeal on the ground that such damages could not be considered in those proceedings. Several proceedings of this character were instituted by the defendant, and more were threatened. Thereupon this action was brought by the plaintiff. The complaint sets forth a breach by the defendant of the covenants herein specially referred to and of others, and demanded damages therefor, and that an injunction issue restraining further proceedings to eject the plaintiff. The defendant, in its answer, denied the breaches alleged, and set up a claim for rent. The referee to whom the ac tion was referred found that the plaintiff was entitled to certain allowances for damages on certain covenants of the lessor, which should be deducted from the rent, taxes, etc. He refused to allow any damages on the covenant to make the alterations required "by any present or future law, ordinance, or authority whatsoever"; and he also refused to allow any damages for any breach of the covenant

of $70,967.05. The judgment entered upon the report was affirmed by the general term, and the plaintiff thereupon appealed to this court. Further facts are stated in the opinion.

William B. Putney and Henry B. Twombly, for appellant. Esek Cowen and Charles J. Hardy, for respondent.

ANDREWS, C. J. The principal question of fact litigated on the trial related to the condition of the walls of the building on the demised premises. A large mass of evidence was taken of architects, builders, and other persons, and it tended to establish by the great preponderance of proof that the walls were unsafe, and rendered the upper stories of the building unfit for occupation for any business purpose. The building was condemned as wholly unsafe by the building department of the city of New York prior to May 1, 1888. The defendant contested the decision, and issues were tried before a jury, under the provisions of chapter 410 of the consolidation act of 1882, as amended by chapter 566 of the Laws of 1887, and the jury, on the 7th day of May, 1888, found that the building was unsafe in its then condition, and that buttresses should be built to support the east wall, and that the front wall on Twenty-Fourth street should be taken down above the first story, with the exception of the two end piers. The referee, however, refused to make any finding or adjudication upon the question of the soundness or unsoundness, safety or unsafety of the walls of the building, for the reason assigned in his report, viz.: "That an adjudication on this question was immaterial, because of the fact that the plaintiff has used and occupied the building for its business, and has had an undisturbed right to the beneficial use of the remaining part of the building (i. e. the part not actually used) under the lease, up to the date of the report." It is apparent from the report of the referee that, if he had deemed a finding on the subject material, he would have found that the walls were unsafe, and that the occupation of the upper stories of the building for purposes of business would have been dangerous. This was a vital and material question in the case, and the refusal of the referee to pass upon it was manifest error. The reason assigned by the referee for refusing to make a finding in regard thereto was based upon a misconception of the action, and of the character and scope of the covenants in the lease. The covenant on the part of the lessee to pay the rent and charges specified in the lease, and on the part of the lessor to deliver the demised premises to the lessee at the commencement of the lease in "a sound and substantial condition, and in a state of good repair," and also to make, as soon as practicable, all

time during the term by any present or fu ture law, ordinance, or authority whatsoever," were distinct and independent covenants. The plaintiff, having entered upon the demised premises under the lease, and continued in possession, was bound to pay the rent reserved, and it could not defend on the ground that the covenant on the part of the lessor to put the premises in repair, or to make changes or alterations required by municipal or other legal authority, had not been performed. On the other hand, the lessor, when sued on its covenants, could not allege in bar of the action that the lessee had remained in possession of the premises. But either one, in an action brought against him by the other, could counterclaim any demand arising under the lease against the plaintiff in the action. The tenant, in a suit for the rent, could recoup any damages for a breach of the covenants to repair; and the landlord, if sued by the tenant for a breach of the covenants on its part, could counterclaim the rent reserved by the lease. The matter set up in the answer in either of the supposed cases would arise out of the contract or transaction set forth in the complaint as the foundation of the plaintiff's claim. Code, § 501; Cook v. Soule, 56 N. Y. 420. The taking and retaining of the demised premises by the lessee is not inconsistent with a remedy on the covenants to repair made by the landlord, and would not be a waiver of the tenant's right to claim damages for a breach. The lessee is not bound to give up its lease to avail itself of the landlord's covenants, and a rule that remaining in possession would constitute a bar to his action would defeat one of the very purposes of the rule that covenants of this character are separate and independent. Such a case is not to be confounded with one where an eviction is relied upon as a defense to an action for rent. When an eviction is pleaded in such an action, an abandonment or surrender of the possession must be shown, because the general rule is that there can be no eviction, actual or constructive, without abandonment of possession. Boreel v. Lawton, 90 N. Y. 293. If, therefore, the condition of the walls deprived the plaintiff of the beneficial use of the upper stories of the building, and if suffering them to remain in an unsafe condition was a violation by the lessor of any covenant in the lease, it was entitled not only to a finding that the walls were unsafe, but also to any legal damage shown to have resulted to it from such violation. Upon the first branch of this inquiry there can be no reasonable doubt. The plaintiff has not occupied, up to this time, the upper stories of the building. Its actual occupation has been restricted to the first and second stories. The evidence tends to show that the use of the upper stories by itself or by subtenants would be dangerous. It would be an act of temerity for the plain

tiff to use them for business purposes, and to sublet them to tenants in the existing condition would be inexcusable, if not criminal, negligence. The use of the lower floors is rendered comparatively safe, as the engines and machinery are placed upon independent foundations, specially constructed, and supports were put in by the plaintiff, which tended to strengthen the portions of the building occupied by it.

The other branch of the inquiry requires a reference to the lease to ascertain whether the defendant entered into any contract which bound it to make the necessary changes and reparations to make the walls secure. There is as little doubt on this branch of the inquiry as upon the other. Leaving out of view the general covenant to surrender to the plaintiff at the commencement of the term "in a sound and substantial condition, and in a state of good repair," the special covenant of the lessor to make all changes which might be required at any time during the term "by any present or future law, ordinance, or authority whatever," plainly covers the case. It is not denied that the proceedings of the building department of the city of New York, which terminated in the verdict of the jury, were regularly conducted, and bound the defendant. The improvements and alterations specified in the verdict and required to be made were of a permanent nature, and, when made, would become a part of the freehold, and to make them required a large expenditure. This was the situation contemplated by the covenant. It became the duty of the defendant, as between it and the plaintiff, to make the improvements and alterations so directed to be made, and this obligation it wholly failed to discharge. If it had performed its covenant, the whole building would have been rendered safe and fit for occupation. The breach of this covenant was clearly estab lished, and the plaintiff was entitled to recover the damages shown to have resulted therefrom. The referee awarded neither substantial nor nominal damages. It is claimed on behalf of the defendant that no proof was given based upon the true measure of damages, and that, in the absence of such proof, the refusal of the referee to find a breach of the covenant, or that the building was unsafe, was not reversible error, as no legal harm resulted from such refusal. The plaintiff, as the evidence tends to show, by reason of the failure of the defendant to render the building safe, was deprived of the beneficial use of the upper stories. What the true rule of damages in such case would be, independently of the contract, has been the subject of much comment by counsel. The plaintiff sought to recover the rental value of the space which it could not use by reason of the unsafe condition of the building at a price per square foot, and gave evidence tending to show that the several floors could have been rented upon that basis for a sum which

in the aggregate was considerably more than the entire rent reserved in the lease. In support of this basis for damages reference is made to the fact that in the agreement for a lease it was provided that for the portions of the building which the plaintiff might occupy before the commencement of the term it should pay rent at a certain rate per square foot for the space occupied. The referee also adopted this method for ascertaining the allowance made by him to the plaintiff for the time from May 1, 1888, during which the defendant was engaged in making repairs. The defendant's counsel insists that the true rule of damages was ei ther the cost of repairing the walls or the difference between the rental value of the premises as they were and the rental value as they would have been if the covenant had been complied with. We are inclined to the opinion that when a building erected for business purposes is rented as a whole, and without any specific reference to a use by way of subletting, or where that is not the primary purpose contemplated by the parties, the damages for the breach of a covenant to repair is the difference in the rental value of the premises as they are and as they were to be, regarding the premises as a whole, and that they are not to be measured by supposed loss by reason of the tenant being unable to parcel out separate portions and let them to undertenants. Such a rule of damages would lead to great uncertainty, and subject the lessor to liability based on covenants with third persons, of which ordinarily he could know nothing. Loss of profits upon the very contract sued upon, if definite and certain, may be recovered (Masterton v. Brooklyn, 7 Hill, 61); or where a contract is made in view of an already existing contract with a third person, and the contract sued upon is made with special reference to such contract, and to enable the party to carry it out, then the loss sustained, or the profits which might have been realized on such contract with a third person, may be a proper subject for consideration (Messmore v. Lead Co., 40 N. Y. 422). But in the ordinary case of a lease of a building to be used for any purpose at the discretion of the lessee, and there has been a breach by the lessor of a covenant to repair, the rule which measures the damages by the difference in general rental value is usually compensatory, and, in most cases, best satisfies the demand of justice. If in all cases it does not afford full compensation, it eliminates an element of speculation and uncertainty which, if permitted to be considered, would often lead to great injustice. The cases of Myers v. Burns, 35 N. Y. 269, and Hexter v. Knox, 63 N. Y. 561, were cases of leases for hotel purposes, and for a breach by the landlord of a covenant to repair the tenant was allowed to recover the value of the use of certain rooms in the hotel for hotel purposes during the time they

were rendered untenantable because of the failure to perform the covenant. These cases fall within a well-defined class, which permits a recovery on a breach of contract of damages which it may be found were contemplated by the parties when the contract was made, as a consequence of the breach of the covenant.

The claim that the cost of repairing the walls is the measure of damages cannot be sustained. If the tenant had elected to repair the walls it is possible that he could have charged the necessary expense to the landlord, or recouped the amount in an ac tion brought for the rent. But a tenant is not bound to make permanent and important repairs, which the landlord was to make, but may seek his remedy by action to recover the damages or by counterclaim. Cook v. Soule, 56 N. Y. 420; Hexter v. King, supra. But we are of opinion that in this case the parties have, by their contract, fixed the rule of damages for a breach by the defendant of his covenant to make alterations required at any time during the term by municipal or other public authority. "Modus et conventio vincunt legem." The lessor reserved a right of re-entry to make "such repairs as shall be necessary to be made by them," and covenanted to make them as soon as practicable; and the lease provided that meanwhile the "rent hereinbefore reserved to be abated and suspended, etc., in similar manner and proportion as it is hereinafter agreed such rent shall abate and be suspended in case of damage by fire." The provision in respect to damage by fire declares that the "rent hereinbefore reserved, or such part thereof as shall be justly proportionate to the portion or portions of the said demised premises, of the use of which the said party of the second part (lessee)," etc., "shall be deprived by reason of such damage," etc., "shall be suspended and abated," etc. The parties have declared, in substance, that in the case now presented the rent shall be apportioned as between the part occupied and the part not tenantable. The measure of damages would, under the agreement, be determined by assuming, in the first place, that the rent reserved is the annual rental value of the whole premises, and by then ascertaining the proportionate value of the portion of the building of which the plaintiff has been deprived of the beneficial use by the failure of the defendant to perform its covenant. The plaintiff failed to give evidence of loss founded upon the true measure of damages. But, in any event, having established the breach of the covenant, it was entitled to nominal damages; and even these were not awarded. The referee erred in the rule of law adopted by him in a very material respect, which rendered the question of nominal or substantial damages unimportant. The right to nominal damages, where the right thereto has been improperly denied, may not require a reversal of a judgment when it appears that

on a new trial only nominal damages could be recovered. If the refusal to award them did not influence the question of costs, and the judgment would not constitute an estoppel in respect to other interests, the party' whose strict right was denied might not be deemed aggrieved, and the judgment would not, perhaps, be reversed merely to vindicate a barren right. But it would be a perversion of justice to deny a new trial in a case like the present, where the court can see that substantial damages have been suffered, but the party mistook the basis on which they should be ascertained. In such case, denial of the right to nominal damages, to which in any event the party was entitled, is error for which the judgment should be reversed. See, Brantingham v. Fay, 1 Johns. Cas. 256; Leeds v. Gaslight Co., 90 N. Y. 26.

Other questions were argued at the bar, but, in view of, the conclusion that there should be a new trial, they need not be considered. The judgment should be reversed, and a new trial ordered. All concur. Judgment reversed.

(143 N. Y. 476)

STEPHENS v. PERRINE et al. (Court of Appeals of New York. Nov. 27, 1894.)

CHATTEL MORTGAGE-FAILURE TO RECORD.

1. The failure to file a chattel mortgage given by a debtor, and unaccompanied by a change of possession of the mortgaged property, renders the mortgage void as to then existing creditors, under Laws 1833, c. 279, § 1, although they had no judgments against the mortgagor.

2. Where a chattel mortgage was void as to the mortgagors' creditors for want of filing, although the mortgagee subsequently filed it, and sold the property thereunder to pay her claim, before the creditors had acquired any lien on the property by legal process, she is liable to the creditors for the value of the property. 24 N. Y. Supp. 21, reversed.

3. A receiver appointed in supplementary proceedings may sue on behalf of a mortgagor's creditors to set aside a chattel mortgage on the ground that it was not filed.

Appeal from supreme court, general term, Fifth department.

Action by John B. M. Stephens, as receiver, against Mary J. Perrine and others, to set aside a chattel mortgage. From a judgment of the general term (24 N. Y. Supp. 21) reversing a judgment for plaintiff, plaintiff appeals. Reversed.

In February, 1892, the defendants Frank Aldrich and Charles W. Perrine composed the firm of Frank Aldrich & Co., and on the 25th of that month they gave a chattel mortgage on personal property owned by them, and then in their possession, to the defendant Mary J. Perrine, for the purpose of securing to her the payment of something over $2,000 then loaned by her to the firm. The mortgage was not filed until March 30, 1892, on which day it was filed in the Monroe county clerk's office. The omission to file was in tentional. The mortgaged property remained

in the possession of the mortgagors until the 30th of March, 1892, when the mortgagee took possession of it under her mortgage, and, after advertisement, the property was sold, and the mortgagee became the purchaser, as the highest bidder at the auction sale. The mortgage was made without any fraudulent intent on the part of the mortgagors, and it was received by the mortgagee to secure a valid indebtedness, and without any intent to defraud on her part. Prior to and at the time of the execution of this mortgage, the mortgagors were indebted to many other people, and among them to Redfield & Sons, and also to Hill Bros. & Co. Subsequent to the date of the filing of the chattel mortgage, and the taking possession of the property by the mortgagee, the creditors above mentioned commenced separate actions against the mortgagors, and recovered judgments therein subsequent to the sale of the mortgaged property by the mortgagee under her mortgage. Executions were issued upon these judgments, and returned wholly unsatisfied, and the plaintiff was subsequently appointed receiver in proceedings supplementary to execution based upon such judgments. Before the commencement of this action the plaintiff demanded of the defendants the delivery to him of the property covered by the chattel mortgage, or payment of the value thereof, which was refused. This action was thereupon commenced to set aside the mortgage, and to recover the property or its value. Some claim was made on the part of the plaintiff that the mortgage was executed for the purpose of defrauding creditors, but the referee found against the plaintiff on that issue. He gave judgment for the plaintiff on the ground that the failure to file the mortgage or to deliver the possession of the property to the mortgagee at the time of the execution of the mortgage rendered it void as against the creditors represented by the plaintiff, and the referee further held that the plaintiff, as a receiver in proceedings supplementary to execution, could maintain this action. The general term reversed this judgment, and the plaintiff has appealed to this court.

Albert H. Harris, for appellant. William B. Hale, for respondents.

PECKHAM, J. (after stating the facts). The single question argued here has been, which of these parties, upon the foregoing facts, is entitled to judgment? At the threshold of an examination of the subject it may be stated that this mortgage was void as against those creditors who were such at the time it was executed, although at that time they had obtained no judgments in their favor, and then stood in the condition of simple contract creditors. The failure to file the mortgage, there being no change of possession of the property mortgaged, rendered it void as against creditors then existing. Laws 1833, c. 279, § 1; Karst v. Gane, 136 N.

Y. 316, 32 N. E. 1073. The supreme court has reversed the judgment for plaintiff upon the ground that although such mortgage was void even as to existing creditors, yet as the mortgagee filed her mortgage, and under it took possession of the property mortgaged, and sold the same by virtue of it, before the creditors represented by the plaintiff had obtained any lien on the property by judgment and execution, or by some other legal process, the mortgagee had the right to hold such property, or its proceeds, against these creditors. The court stated that the creditors, in order to take advantage of this void mortgage by reason of a failure to file it, must not only acquire a lien upon the property by virtue of a levy or other legal process, but such lien must be had before the mortgagee has reduced the property to possession, and sold it to satisfy his claim. In this holding we are of the opinion the court below erred. The mortgage, as to the creditors of the mortgagor, was always void. It continued to be void notwithstanding the fact that the mortgagee assumed to take possession under, and to sell the property by virtue of, such void instrument. As between these mortgagors and creditors, it was the same as if the mortgage did not exist, and the mortgagee could not, as against these creditors, obtain any rights under it. How could a mortgagee in

a void mortgage, as against creditors, obtain any title to property by virtue of such mortgage? As against them, the mortgagee could not rightfully take the property by virtue of this void instrument, and, if she did take it in spite of the fact that the mortgage was void and no protection to her, how could she secure any further or greater right by the sale of the property and the receipt of its value? This action is against the mortgagee; and I cannot see the force of the reasoning which, while admitting that the mortgage is void as to creditors, nevertheless asserts that a title to the property covered by it may be obtained by the mortgagee by proceedings taken under it, and which assert the validity of such instrument, provided they are taken before the creditors are armed with a judg ment and execution, so as to enforce their rights which rest upon the invalidity of the mortgage. If void, what right has the mortgagee, as against creditors, to take possession in her character of mortgagee, and to sell or dispose of property described in it? Clearly, she has none, and she does not acquire any by the celerity of her movements in seizing and selling property under it.

Although, in order to themselves take the property, it was necessary for the creditors to have some legal process, yet, when that condition was complied with, their right to take it, as between these parties, became perfect. If, before any lien had been acquired by the creditors, the mortgagors had delivered the property to the mortgagee in payment of her debt, she could have then held it because it would have been, in such