Difference Between Surrender of Possession and Termination of Liability Under the Lease in New York
In Kottler v. New York Bargain House, Inc. (242 NY 28, 150 NE 591 ), Judge Cardozo discussed the distinction between surrender of possession and termination of liability under the lease.
There must be an express provision to terminate the liability of the tenant under the lease for the deficiency of rent after surrender of possession:
"The question remains whether by force of agreement between the landlord and the bankruptcy receiver, the term had been ended before the reletting was attempted, with the result that what was done thereafter was of no effect against the tenant. There are provisions in that agreement which read by themselves and without reference to the context would give support to that conclusion. The receiver agrees to surrender possession of the premises to the landlord, and the landlord accepts the surrender so made by the receiver. But a surrender of 'possession' is not always a surrender of a 'lease' or of the 'estate' thereby created (2 Tiffany Landlord & Tenant, p. 1307). A surrender of possession, if accepted, is evidence indeed from which a surrender of the estate may be inferred, yet it will not have that effect if the parties otherwise agree (Jones v. Rushmore, 67 N.J.L. 157, 50 A. 587).
We think it plain from other provisions of the agreement between the landlord and the receiver that they did otherwise agree. What they were bargaining for was a surrender of possession, and no more. The landlord expressly reserves the right to prove against the bankrupt for any deficiency in rent that may be incurred by reletting as his agent. This is coupled with a provision that nothing contained in the agreement 'shall be construed in prejudice or relinquishment' of the landlord's rights against the tenant or the tenant's assignors. These provisions would be frustrated by a holding that the lease was at an end. All that the receiver did was to evidence an election that the lease was not accepted as an asset for the benefit of creditors (Dushane v. Beall, 161 U.S. 513, 16 S. Ct. 637, 40 L. Ed. 791).
The election did not divest the bankrupt's title to the estate for years, which remained where it had been before. So, indeed, the defendant itself interpreted the transaction. It made an assignment of the lease a few days later, and thereby indicated its understanding that the lease was still in force. The landlord, it is true, was in possession, but not because the estate was at an end. He was in possession because the premises had become vacant, and the tenant had consented that he should have power to relet" (242 NY at 35-36).