[Real property]5. A.D. Juilliard & Co., INC v. American Woolen Co., Supreme

[Juyoung]

5. A.D. Juilliard & Co., INC v. American Woolen Co., Supreme Court of Rhode Island, 69 R.I. 215, 32 A.2d 800 (1943)

1. Fact

In 1893, Atlantic Mills leased property to Riverside Worsted Mills until 1955 without restricting assignment or obligating assignees to assume rent payment. The lease was assigned multiple times, eventually to the American Woolen Company (American), which then assigned it to a third party in 1939. None of the assignments required the assignee to pay rent for the remainder of the lease term. In 1941, A.D. Juilliard & Co. (Juilliard), Atlantic Mills' successor, sued American for unpaid rent from September 1940 to March 1941. American argued it wasn't liable as it wasn't in possession and hadn't agreed to pay rent for the entire lease term; the trial court ruled in American's favor, and Juilliard appealed to the Rhode Island Supreme Court.

2. issue

Whether American Woolen Company, which assigned the lease to Reo Realty Company, remains liable for the unpaid rent for the period after the assignment, despite not being in possession of the property and not having expressly assumed the obligation to pay rent for the remainder of the lease term.

3. rule

*The general rules : The courts in this country have consistently held that, in the absence of the assumption by the assignee of the obligations of the lease, the liability of such assignee to the lessor rests in privity of estate which is terminated by a new assignment of the lease.made by the assignee.

*The Waggoner case : Notwithstanding “the absence of an express -agreement on the part of an assignee of the unexpired term of a lease of real property to assume and pay the rentals contracted to be paid by the original lessee . . . the assignee under such circumstances becomes primarily liable for the debt, and the original lessee only secondarily liable. The lessee having enjoyed and exercised his right to dispose of such leasehold estate, the assignee is held to take the estate subject to all the terms and conditions expressed in the original lease contract, and is bound to the original lessor for the performance of the obligations which were imposed upon his assignor, or, in other words, he simply stands in the shoes of the original lessee.”

4. application

The plaintiff argued that the defendant, American Woolen Company, remains liable for rent even though it did not expressly assume the obligation to pay rent for the entire lease term. The defendant contended that it is not liable for rent after assigning the lease to a third party, as it no longer had possession of the property. The court held that an assignee’s liability for rent is based on based on privity of estate, which exists only while the assignee has possession of the property. The plaintiff’s argument that the court should adopt the “progressive rule” from Texas was not accepted by the court. While the Texas court in the Waggoner case held that an assignee is primarily liable for rent, the court in this case did not follow this precedent. The court noted that lessors can protect themselves by including adequate provisions in the lease regarding assignments. If the lessor does not include such provisions, they cannot later complain about being deprived of benefits they could have secured.

5. Conclusion

The assignment of the lease by the defendant terminated its liability for rent, as the defendant did not retain any benefits or possession of the property post-assignment.

*Feedback.

Sublease와 assignment 차이.

Common law와 Texas law구별.

미국에서는 sublease금하는 조항들이 있음. But 많이 광고함.

Lesser가 sub-leasee서로 고소 X.

예외적으로 규정 있는 경우 있음.

Reid v. Mutual of Omaha Insurance Company and.. case

Surrender acceptance : 용서?

Litigation duty : acceptance 안하면 계약위반이라 남은 기간 rent비 다 내야한다?

Surrender acceptance 받아들여지면 완전용서.

실패하면 litigation duty인정함.