Sheets v. Selden
ERROR to the Circuit Court for Indiana.
The State of Indiana, owning a certain canal and its adjacent lands, made two leases of its surplus water; the first being made, February, 1839, to one Yandes and a certain Sheets (this Sheets being the appellant in this case), and the other made January, 1840, to Sheets alone. Each lease was for the term of thirty years. Certain rents, payable semi-annually, on the first of May and November, were reserved; it being provided, that if any rent 'should remain unpaid for one month from the time it shall become due,' 'all the rights and privileges' of the lessees 'shall cease and determine, and any authorized agent of the State, or lessee under the State, shall have power to enter upon and take possession of the premises,' &c. The leases contained a further provision, that the lessees should not be deprived of the use of the water by any act of the State, or its agents, or by the inadequacy of the supply of water, for more than one month in the aggregate in one year; and that if, for the purposes of repairing the canal, preventing breaches, or making improvements to the canal, or the works connected with it, or the inadequacy of the supply of water, the lessees should be deprived of the use of any portion of the water-power leased, such deduction should be made from the rent accruing on such portions of the power as the lessees should be prevented from using, as would bear the same proportion to the yearly rent thereof as the time during which the lessees might have been deprived of its use bears to eleven months. In October, 1840, Sheets became owner of Yandes's interest in the lease of 1839.
The State subsequently sold so much of the canal, land, and water-power as was embraced by the two leases; and one Selden and others, on the 2d of October, 1857, became owners under this sale.
Afterwards (Sheets being in possession, under the leases, and having refused for several years to pay rent), the purchasers formally demanded, on the premises, rents falling due on the first day of May, 1860. The lessee failing to pay them, the purchasers brought, in June, 1860, an ejectment in the Circuit Court for Indiana (in which State the action of ejectment is regulated by statute, and has the same conclusiveness as common law judgments in other cases), to recover the possession of the property, as for forfeiture from non-payment of the rents reserved in the two leases. Verdict and judgment were given in their favor. 
After five years had elapsed since the commencement of the ejectment, the lessee now filed a bill in equity (the suit below) to enjoin the issuing of a habere facias on the judgment in ejectment, and for a redemption of the lands from the forfeiture incurred for non-payment of rent.
The bill alleged that while the ejectment was pending, the lessees tendered to the purchasers $400, as in full for the particular rents, for the non-payment of which the forfeitures were declared, and as in full for interest thereon, and the costs of suit up to that time, and that the same was now brought into court for the purchasers if they would accept it and waive the forfeiture; but it tendered nothing for rents subsequently or previously accrued. It sought to avoid such a tender by asserting an equity to set off against all rents a demand for damages on account of alleged breaches of covenants, contained in the leases. As for—
1. Inadequacy in the supply of water, when by the use of proper efforts, an adequate supply might have been furnished.
1. Inadequacy of supply, owing to the culpable negligence and gross carelessness of the purchasers in failing to repair breaches in the canal banks, and to remove obstructions created by the growth of grass in the bottom and sides of the canal, &c., setting up the expense of repairs alleged to have been made by the lessee to render the supply adequate.
3. Not prohibiting lessees under subsequent leases from drawing off needed water from the mill of the original lessee to supply their own.
The claim of reductions of the rents owing to failure of water were from the 2d October, 1852, when the title of the purchasers accrued, to the 1st May, 1865, when the last instalment of rents before the filing of the bill came due, and amounted to $2649. The rents during the same term amounted to $4500.
The lessee alleged as an excuse for not paying the rents on one of the leases, that he had abandoned that lease, and that the purchaser under the State acquiesced, and that the title so became vested in them by reverter, and declined to redeem that lease from forfeiture. While thus declining to redeem that lease, his bill sought to enjoin the whole judgment.
The defendants demurred; and the court sustained the demurrer; giving leave to the complainant to amend his bill on tender of all the rent, with interest on it that had accrued on both leases since the bringing of the ejectment, which sums the court found to be, on one lease $4494.50, and on the other $2247.25. The complainant refusing to amend on such terms, judgment was given on the demurrer against him, and he brought the case here.
Mr. Barbour (a brief of Mr. Morrison being filed), for the appellant:
1. Assuming, as we have the right to assume (the case being on a demurrer), that the facts alleged in the bill of complaint are true, the permission to amend was clogged by an onerous and inequitable condition. The suit in ejectment embraced premises covered by two several and independent leases, executed on different days, and to different parties, one of them to Yandes and the appellant, the other to the appellant alone; and yet the court ruled, that the two, for all the purposes of this suit, were one and indivisible, and that therefore, an ample tender, for the purpose of redeeming either one of them, would be of no avail, unless it should be sufficient to cover the other one also. In this there was error. The appellant had the right to pay the sum demanded for the quarter's rent of the premises held under the first lease, had he elected to do so. And if he had done this, the appellees could have declared no forfeiture as to that lease. The demands were separate and distinct acts, for distinct sums. The appellant had the right to save either premises, and let the other go, if it pleased him.
Even if the bill of complaint did not show a case that should entirely and fully absolve Sheets from all his obligations under the lease to himself, still its defects, in that regard, cannot affect so fatally the other lease.
2. The bill, as to the lease not surrendered, contains sufficient equity to entitle the appellant to be rel eved as to it. The court below assumed that the lessees could claim nothing by way of set-off, or recoupment, for any damages or injury sustained by them, consequent upon the failure to supply water, except an abatement of rents for such time as they might have been deprived of the specified supply, beyond one month in each year.
The assumption is unwarranted, unless it is shown that the appellee had used some diligence to furnish the requisite supply. But the bill avers and the demurrer admits that the appellant was deprived of the water-power by the culpable carelessness and gross negligence of the appellee.
If these averments would not entitle the appellant to damages against the appellee, as well as to an abatement of rents, then the latter would not be liable, had he cut the canal banks, and thereby deprived the appellant eleven months in the year.
The demise of the water-power and the land is equivalent to a covenant that the water shall be supplied. No particular words are necessary to constitute a covenant in a lease. It is sufficient if it be such as to show the intention of the party to bind himself to the performance of the matter stipulated for; and when covenants exist they are to be construed according to the apparent intention of the parties, looking to the whole instrument, and to the context, and the reasonable sense and construction of the words; so that a covenant is broken if the intention is not carried out. 
The general rule, that unliquidated damages cannot be set off or recouped in an action at law, is admitted; but the rule does not hold in equity, which is independent of statutes of set-off; and, besides, this being a suit in equity, the court will see to it, that the decision shall settle the mutual rights of the parties, fully and completely.
Mr. T. A. Hendricks, contra.
Mr. Justice SWAYNE delivered the opinion of the court.
^1 See 2 Wallace, 177.
^2 Comyns' Digest, title 'Covenant,' E.