Jaber v. Miller
| Decision Date | 21 May 1951 |
| Docket Number | No. 4-9507,4-9507 |
| Citation | 219 Ark. 59,239 S.W.2d 760 |
| Parties | JABER v. MILLER. |
| Court | Arkansas Supreme Court |
Lem C. Bryan and Warner & Warner, all of Fort Smith, for appellant.
Franklin Wilder and Lawrence S. Morgan, Fort Smith, for appellee.
This is a suit brought by Miller to obtain cancellation of fourteen promissory notes, each in the sum of $175, held by the appellant, Jaber. The plaintiff's theory is that these notes represent monthly rent upon a certain business building in Fort Smith for the period beginning January 1, 1950, and ending March 1, 1951. The building was destroyed by fire on December 3, 1949, and the plaintiff contends that his obligation to pay rent then terminated. The defendant contends that the notes were given not for rent but as deferred payments for the assignment of a lease formerly held by Jaber. The chancellor, in an opinion reflecting a careful study of the matter, concluded that the notes were intended to be rental payments and therefore should be canceled.
In 1945 Jaber rented the building from its owner for a five-year term beginning March 1, 1946, and ending March 1, 1951. The lease reserved a monthly rent of $200 and provided that the lease would terminate if the premises were destroyed by fire. Jaber conducted a rug shop in the building until 1949, when he sold his stock of merchandise at public auction and transferred the lease to Norber & Son. Whether this instrument of transfer is an assignment or a sublease is the pivotal issue in this case.
In form the document is an assignment rather than a sublease. It is entitled 'Contract and Assignment.' After reciting the existence of the five-year lease the instrument provides that Jaber 'hereby transfers and assigns' to Norber & Son 'the aforesaid lease contract * * * for the remainder of the term of said lease.' It also provides that 'in consideration of the sale and assignment of said lease contract' Norber & Son have paid Jaber $700 in cash and have executed five promissory notes for $700 each, due serially at specified four-month intervals. Norber & Son agree to pay to the owner of the property the stipulated rental of $200 a month, and Jaber reserves the right to retake possession if Norber & Son fail to pay the rent or the notes. The instrument contains no provision governing the rights of the parties in case the building is destroyed by fire.
Later on the plaintiff, Miller, obtained a transfer of the lease from Norber & Son. Miller, being unable to pay the $700 notes as they came due, arranged with Jaber to divide the payments into monthly installments of $175 each. He and the Norbers accordingly executed the notes now in controversy, which Jaber accepted in substitution for those of the original notes that were still unpaid. When the premises burned Miller contended that Jaber's transfer to Norber & Son had been a sublease rather than an assignment and that the notes therefore represented rent. Miller now argues that, under the rule that a sublease terminates when the primary lease terminates, his sublease ended when the fire had the effect of terminating the original lease.
In most jurisdictions the question of whether an instrument is an assignment or a sublease is determined by principles applicable to feudal tenures. In a line of cases beginning in the year 1371 the English courts worked out the rules for distinguishing between an assignment and a sublease. See Ferrier, 'Can There be a Sublease for the Entire Term?', 18 Calif.L.Rev. 1. The doctrine established in England is quite simple: If the instrument purports to transfer the lessee's estate for the entire remainder of the term it is an assignment, regardless of its form or of the parties' intention. Conversely, if the instrument purports to transfer the lessee's estate for less than the entire term--even for a day less--it is a sublease, regardless of its form or of the parties' intention.
The arbitrary distinction drawn at common law is manifestly at variance with the usual conception of assignments and subleases. We think of an assignment as the outright transfer of all or part of an existing lease, the assignee stepping into the shoes of the assignor. A sublease, on the other hand, involves the creation of a new tenancy between the sublessor and the sublessee, so that the sublessor is both a tenant and a landlord. The common law distinction is logical only in the light of feudal property law.
In feudal times every one except the king held land by tenure from some one higher in the hierarchy of feudal ownership. Pollock and Maitland, History of English Law (2d Ed.), vol. I, p. 232. In feudal law each person owed duties, such as that of military service or the payment of rent, to his overlord. To enforce these duties the overlord had the remedy of distress, being the seizure of chattels found on the land.
It is evident that in feudal theory a person must himself have an estate in the land in order to maintain his place in the structure of ownership. Hence if a tenant transferred his entire term he parted with his interest in the property. The English courts therefore held that the transferee of the entire term held of the original lessor, that such a transferee was bound by the covenants in the original lease, and that he was entitled to enforce whatever duties that lease imposed upon the landlord. The intention of the parties had nothing to do with the matter; the sole question was whether the first lessee retained a reversion that enabled him to hold his place in the chain of ownership.
The injustice of these inflexible rules has often been pointed out. Suppose that A makes a lease to B for a certain rental. B then executes to C what both parties intend to be a sublease as that term is generally understood, but the sublease is for the entire term. If C in good faith pays his rent to B, as the contract requires, he does so at his peril. For the courts say that the contract is really an assignment, and therefore C's primary obligation is to A if the latter elects to accept C as his tenant. Consequently A can collect the rent from the subtenant even though the sublessor has already been paid. For a fuller discussion of this possibility of double liability on the part of the subtenant see Darling, 'Is a Sublease for the Residue of a Lessee's Term in Effect an Assignment?', 16 Amer.L.Rev. 16, 21.
Not only may the common law rule operate with injustice to the subtenant; it can be equally harsh upon the sublessor. Again suppose that A makes a lease to B for a certain rental. B then makes to C what B considers a profitable sublease for twice the original rent. But B makes the mistake of attempting to sublet for the entire term instead of retaining a reversion of a day. The instrument is therefore an assignment, and if the original landlord acquires the subtenant's rights there is a merger which prevents B...
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