Opinion ID: 1660511
Heading Depth: 1
Heading Rank: 2

Heading: The Right to Terminate the Lease.

Text: If this lease is looked upon as predominately a contract granting the lessee permission of use of the premises and controlled by contract law, as the defendant argues, rather than as a conveyance controlled by property law, we reach the problem of whether the promise of the lessors was a mutual and dependent promise so that a breach thereof entitles the lessee to terminate the lease. No such power is expressly reserved or provided for in the lease, nor was the clause expressly made dependent. As pointed out in 2 Powell, Real Property, p. 179, sec. 221 (1), a business lease has become more common and of more social importance than the agrarian lease and such a lease is looked upon as essentially a contract rather than a conveyance of an estate, and Thus the background of the lease as a conveyance, built solidly by 1500, has a tremendous foreground, evolved largely since 1800, which is purely contractual in character. The modern law is the synthesis of these two historical factors. Sometimes the background peeks through and controls. Sometimes the foreground is alone considered as determinative. The instant case presents such a problem. The effect of treating this lease as a conveyance wherein promises are incidental and not as a contract controlled exclusively by contract law is well stated in 1 American Law of Property, p. 202, sec. 3.11. In sum, it is pointed out that the nature of a lease is both contractual and a conveyance, but because of the background of conveyance the consequences of the failure to perform the promises do not normally follow contract law for breach of contracts. If there is a substantial breach of a material covenant in a bilateral contract, the covenants of which are mutually dependent, the innocent party is excused from further performance. See also 32 Am. Jur., Landlord and Tenant, p. 720, sec. 847; 51 C. J. S., Landlord and Tenant, p. 681, sec. 104. In a lease which amounts to a conveyance as does the instant lease because it is for a term exceeding three years (sec. 235.50, Stats.) the covenants are independent unless expressly made dependent. Bahcall v. Gloss (1944), 244 Wis. 473, 12 N. W. 2d 674. Thus the generally accepted view from the standpoint of a conveyance is that if the lease does not contain a termination clause and a covenant of the lease is breached, the injured party has an action for damages for breach of contract but has no power to terminate the lease. 2 Powell, Real Property, p. 278, sec. 231 (3) (a); 1 American Law of Property, p. 380, sec. 3.94; 1 Tiffany, Real Property, p. 247, sec. 153; 3A, Thompson, Real Property, p. 556, sec. 1325. Thus under the rule applicable to a conveyance, the lessee had no right to terminate the lease upon the breach of the lessors in withholding their consent unreasonably. The defendant makes a strong argument that contract law should apply and the covenants of this lease should be treated as material and dependent although not expressly so conditioned. As an original question, a lease might well have been regarded as a wholly bilateral agreement by which the lessor instead of making a conveyance, promises a continuing permission to occupy the premises. If the lease were simply regarded as a contract, there would seem to be no reason why the principles of dependency applicable to ordinary bilateral contracts should not likewise be applicable to leases. Traditionally, however, this has not been the case in common law jurisdictions. This is partly because a lease is regarded primarily as a conveyance by the common law, partly because the law governing leases has been dealt with in connection with the law of real estate, and became settled before the law of mutually dependent promises was established, and partly no doubt because leases have ordinarily been elaborately written documents in which the parties might be supposed to have expressed their intent with considerable fullness, covenants in leases have been held mutually independent unless in terms expressly conditional. 6 Williston, Contracts, pp. 585-589, sec. 890. However, whatever merit the contractual theory has over the conveyance theory, this court has recently decided the rules of conveyancing take precedence. While the particular choice of alternatives was not discussed in the opinion, this court did in Continental Grain Co. v. Afram Brothers Co. (1967), 35 Wis. 2d 676, 151 N. W. 2d 685, decide that a lessor could not rescind a lease even though it was not a conveyance and involved personal property because of the nonpayment of rent when the lease did not expressly provide for a termination in the event of nonpayment of rent. Thus the common-law rule that when a lease is a conveyance the promises or covenants are independent in the absence of an express dependency provision was perpetuated. Having so recently considered this question, we are not inclined to reverse Continental Grain and it would be entirely inconsistent for this court now to consider the contract aspects of a lease of real estate to be predominant in respect to the promises of the lessor not to unreasonably withhold his consent to an assignment of the lease. We hold, therefore, the promises were independent and the lessee had no right to terminate the lease because of the breach of the lessors. The demurrer was interposed only to part of the answer which dealt primarily with the facts underlying the right of the lessee to terminate the lease. As to this defense, the demurrer was correctly sustained. However, the alleged facts in the answer also constitute a claim against the lessor for damages for unreasonably withholding their consent. Whether this should be pleaded in the answer in bar or as a setoff or otherwise, we do not decide. To avoid confusion in the pleadings, the demurrer will be sustained and the leave granted to the lessee by the trial court to amend its answer will be extended to twenty days from the date of the remittitur. By the Court. The order is affirmed with leave to the defendant to amend its answer within twenty days from the date of the remittitur.