Court Opinion

ID: 5007710
Source: CourtListenerOpinion
Date Created: 2021-10-01 02:19:08.484889+00
Date Added: 2024-06-11T08:17:19.403972
License: Public Domain

On Rehearing.
COMBS, Justice.
In the original opinion in this case we followed the rule of decision announced in Jackson v. Knight (Tex.Civ.App.) 194 S.W. 844 (writ refused); Speed v. Jay (Tex.Civ.App.) 267 S.W. 1033 (writ re-fused), and Marathon Oil Co. v. Rone (Tex.Civ.App.) 83 S.W. (2d) 1028 (writ refused), wherein it was held in substance that, where a lessee assigns a lease, the assignee is thereby rendered liable as a matter of law for all rents thereafter maturing for the full term stipulated in the original lease, without any agreement or stipulation on his part to assume their payment.
The writer assents to such holding and to the judgment entered by this court in this case solely because the holding follows the present rule of decision in this state. He is firmly convinced that the rule is not' sound and that it is contrary to the holdings of the vast majority of other jurisdictions.
The writer realizes that it is not the function of Courts of Civil Appeals to abrogate, or in any respect to modif)', an established rule of decision in this state. That function properly rests alone with our Supreme Court for the obvious reason that to permit Courts of Civil Appeals to ignore established precedent would create all manner of confusion. But the writer trusts that it is not improper for him to express here the thought that the rule ought to be re-examined and a rule of decision .promulgated in keeping with the *213great weight of authority and which it is believed is more consistent with the principles of justice.
The obvious effect of the rule followed in this case is to bind not only the original lessee to the payment of all rentals which may accrue under his contract with his lessor, but to likewise bind every subsequent assignee of the lessee to a like performance of all the covenants of the original contract. In other words, it would place an assignee in complete privity of contract with the original lessor as .a matter of law by reason of the assignment alone, without any stipulation or agreement on his part to become so bound. It is believed that such rule is unnecessarily harsh and unjust and may, in its operation, tend to hamper the assignment of long term leases.
The rule followed by the English courts .and by at least a vast majority of American jurisdictions is thus stated in 35 Corpus Juris, 996:
“The assignee of a term for years is liable upon the covenants in the lease which run with the land. But from the mere fact of assignment, the assignees are liable only on such covenants, since they are in privity of estate only, and not in privity of contract. However, where the assignee expressly assumes the covenants of the lessee, the liability arises which is based upon privity of •contract, and, subject to the rules permitting a person for whose benefit a contract is made to sue .thereon, the landlord may maintain an action by reason thereof.”
It will be observed that under such rule the obligation of the assignee to pay rent to the lessor as stipulated in the original contract arises out of a privity of estate and not by privity of contract, in the absence of the assignee’s agreement to assume the contract. Suqh being the case, .an assignee is liable to pay the rents so long as he owns the estate but, when he transfers or assigns it to another, his liability for the rents ceases. The rule is thus stated in Jones on Landlord & Tenant, § 429:
“The liability of an assignee upon the covenants of the lease continue only so long as the privity of estate continues; when that ceases his liability ceases. That an assignee of a lease may by reassignment divest himself of all liability upon the lease, is well established.”
It would serve no good purpose to here cite the many authorities which might be cited to show that the rule above stated is the one prevailing in the vast majority of American jurisdictions. It may be helpful, however, to briefly refer to a few of the authorities in other jurisdictions to illustrate the application of the rule.
When an owner demises his property by lease, all covenants and agreements of the lease contract imposed upon the lessee become the lessee’s personal obligation by reason of the contract. Thus he becomes personally obligated, unless it is otherwise stipulated, to pay the agreed rental for the full term specified in the lease, which personal obligation of the lessee, in the absence of a release of some kind, continues for the full term regardless of any assignment which he may make. This results, of course, from the contract he has entered into. But, when he assigns his lease, the assignee does not by his mere acceptance of the assignment become a party to the contract between the lessor and lessee. But there are certain covenants which, because of their relation to the property, are deemed to be more than mere personal covenants of the lessee. They attach to the property and are in the nature of covenants running with the land. And, since they attach to the estate, they are binding upon all persons who take the estate by assignment. No agreement of the assignee to be bound is necessary. He assumes such covenants as a matter of law by accepting the assignment and thus becoming entitled to use and enjoy the estate. Among the covenants which are deemed to run with the land is the obligation to pay the rent stipulated in the lease. And thus the assignee’s liability to the lessor for “the payment of rentals arises not out of privity of contract between the lessor and his lessee’s assignee, but springs from privity of estate and is grounded upon the obligation of the as-signee to perform the conditions upon which the estate he owns and has the right to enjoy was granted. And so it follows that an assignee is personally liable for rents accruing while he holds the leasehold. But, when he parts with the estate, his obligation for the payment of rent ceases. By an assignment he lays down both the estate and its burdens. Johnson v. Sherman, 15 Cal. 287, 76 Am. *214Dec. 481; Consol. Coal Co. v. Peers, 166 Ill. 361, 46 N.E. 1105, 38 L.R.A. 624; Dougherty v. Matthews, 35 Mo. 520, 88 Am.Dec. 126; Tyler Commercial College v. Stapleton, 33 Okl. 305, 125 P. 443, 42 L.R.A.(N.S.) 162, Ann.Cas.1916E, 837; Harms v. Entleman, 21 Ga.App. 295, 94 S.E. 276.
Of course an assignee may, by his contract of assignment with the assignor, limit his right to reassign or he may assume the burdens of the original contract. But we are not here dealing with the contract between assignor and assignee but only with the question of whether the assignee, by reason of the assignment alone, establishes a privity of contract between himself and the original lessor. As between them there is no privity of contract. So far as the owner of the property is concerned, the assignee has an absolute right to reassign the estate and thus relieve himself of liability for future rents. It is consequently immaterial that his assignment be made to a person financially irresponsible or that it was made for the deliberate purpose of relieving himself from future liability. Johnson v. Sherman, 15 Cal. 287, 76 Am.Dec. 481; Hartman v. Thompson, 104 Md. 389, 65 A. 117, 118 Am.St.Rep. 422, 10 Ann.Cas. 92; Bell v. American Protective League, 163 Mass. 558, 40 N.E. 857, 28 L.R.A. 452, 47 Am.St.Rep. 481. In such case there is no fraud upon the right of the property owner for .there is no principle of law or morals which requires an assignee to retain the estate for the protection of the lessor. Hartman v. Thompson, 104 Md. 389, 65 A. 117, 118 Am.St.Rep. 422, 10 Ann.Cas. 92. The measure of his personal liability for rents is to pay the rent so long as he keeps the estate. Cohen v. Todd, 130 Minn. 227, 153 N.W. 531, L.R.A. 1915E, 846; Childs v. Clark & Couch, 3 Barb.Ch.N.Y. 52, 49 Am.Dec, 164; Washington Natural Gas Co. v. Johnson, 123 Pa. 576, 16 A. 799, 10 Am.St.Rep. 553. See, also, notes 52 L.R.A.(N.S.) 983.
Of course, for an assignee to relieve himself from liability for rents by assignment the assignment must be bona fide and not merely colorable. A “colorable assignment” is one made to cancel the assignor’s title while he continues to receive the benefits from the use of the property. See notes, 52 L.R.A. (N.S.) 989. It is apparent that in such case his privity of estate has not in fact terminated and he is, therefore, still liable for the rents notwithstanding a purported assignment.
In the instant case there was an allegation and a jury finding to the effect that the assignment in question was color-able. Under the rule prevailing in other states, the assignment was not colorable. It was made to a corporation chartered by the state and capable of taking the title. That is the controlling question. The assignment was in fact made and as between the plaintiffs and the assignor, Stark, the purpose for which it was made was wholly immaterial. The assignment terminated the estate and as a legal consequence the future liability of the assignor to pay the rentals.
It seems to the writer that the common-law rule followed in so many jurisdictions, as above indicated, is fair and reasonable in its application. When a property owner leases his property to another and confers upon such lessee the rights to assign to whomsoever he pleases, he impliedly relies upon his lessee for the performance of the covenants of the lease. In addition to that he has the personal obligation of each assignee so long as he keeps the estate and also the right at all times to repossess his property for a breach of covenant. And while the lessee, when he assigns, may impose upon his assignee the obligations of the original lease contract, that matter should be left to the contract of the parties. It should not be read into an assignment as a mere legal implication.
It seems to the writer that the unfair-, ness of the Texas rule is strikingly illustrated in the instant case. For here we have been compelled to hold that W. H. Stark, by reason of his acceptance of the assignment, thereby became bound for the payment of future rentals at the rate of $600 per month for more than ninety years. And such liability arises not from a contract to be so bound, but results merely from the application of a rule of decision which has the effect of reading into his contract an obligation which he did not by its terms assume and of which he was perhaps wholly ignorant at the time he took the assignment.
It seems to the writer that the rule prevailing in other states which has the effect of leaving the matter of such assumption of future rentals by an assignee to the contract between him and his assignor is the sounder rule, as rules long *215sanctioned by court decision are apt to be. The principle that every man is presumed to know the law is a necessary legal presumption to be indulged in proper cases. But, although necessary to an orderly administration of justice, it is in fact purely a legal fiction. And courts should hesitate to add new principles to the already too complicated system of precedent law which a man is presumed to know. They should not hesitate to abrogate a rule which is found to be clearly unsound in principle and unjust in application. It seems to the writer that the existence of such unsound rules of construction give rise to much of the “new doctrines,” which appear from time to time in our decisions. Usually such new rule but expresses the effort of the court to do justice in the case by relieving a litigant from the unjust result of the application of a rule of law which he was presumed to know but did not.