Court Opinion

ID: 9650908
Source: CourtListenerOpinion
Date Created: 2023-08-23 15:55:32.952865+00
Date Added: 2024-06-11T18:12:27.176101
License: Public Domain

MORTON, Circuit Judge
(dissenting).
The general rule, that the assignment of a lease by the lessee although assented to by the lessor does not release the lessee from his obligations under the lease, rests on .the assumed intent of the parties. It is in effect a construction placed by the courts on a common type of contract applied to common facts. I differ from my brethren in thinking that in the present casé the facts and certain provisions of the lease are so exceptional as to take it out of the general rule and show an intention that an assignment of the lease should relieve the lessee from further liability under it
*141The right of assignment (in connection with a right of renewal) was purchased by the lessee by the expenditure of between $800,000 and $1,000,000 on the lessors’ property. Before this was done the lessee already had an absolute right to “sublet the whole or any part of said demised premises,” i. e. an unrestricted right .to sublet provided it reserved a short interval before the termination of the lease. No additional advantage to the lessee from assignment has been suggested, if it was to continue liable under the lease. It seems very unlikely that the right of assignment, obtained at such large expense, was granted merely in order to enable the lessee to avoid the necessity of retaking possession for a few hours before the lease expired. The obvious purpose for which the right to assign was granted was to enable the lessee to realize on its large investment in the leasehold property, if it should desire to do so, a purpose which would not be accomplished, practically speaking, if the lessee were to remain liable on the lease. The combination of a right to renew with the right to assign seems not without significance. Assignment of the lease would relieve the lessee from liability on the renewal term, if one should be called for. Kaskel v. Hollander (C.C.A.) 68 F.(2d) 265; Jones Co. v. Winchester Repeating Arms Co. (C.C.A.) 61 F. (2d) 774. So the question really is whether, assuming that there was an intention to release the lessee on a renewal term (when its personal liability would be of greatest value because of the accumulated depreciation on the building), was it still the intention to hold the lessee on the original term after assignment, the right to which had been obtained by erecting an expensive new building on the lessors’ property which stood as security for the performance of the lease? I am not aware that the general rule as to intention has ever been applied to such unusual and extreme facts. It is an old rule having its origin in social conditions very different from those today. I do not think it should be extended.
Moreover, the lease itself contains at least one express provision which is consistent only with the view that the assignment of it operated to relieve the lessee from further liability. In the clause dealing with possible bankruptcy of the lessee, it is provided .that the lessors may take certain steps to repossess themselves of the property, “or the lessors may, at their election, send by registered mail to the S. S. Kresge Co., Detroit, Michigan, if it is lessee, otherwise to the lessee’s last known address a written demand of possession,” etc.; and that “after such entry or after such demand for possession by the lessors the lessee shall be deemed guilty of forcible entry and detainer,” etc. This plainly contemplates that .a situation may arise in which the Kresge Company will not be the lessee. There are also provisions of the most explicit character imposing on the assignee of the lease the obligation to perform all its covenants; and it is also provided that the covenants shall pun with the land.
While the length of the term alone is not sufficient to take the case out of the general rule (Taylor v. De Bus, 31 Ohio St. 468, 471, 472), it is a fact which must be considered. Leases having fifty years or more to run are in Massachusetts regarded as freeholds. Mass.Gen.Laws (Ter.Ed.) c. 186, § 1. As to them, there are strong practical reasons for applying the rule as to intention which is applied to personal covenants imposed on a grantee by a conveyance in fee. Broad statements as to imputed intention, in cases dealing with short-term leases where the lessee had added nothing substantial to the value of the property, and in cases where no assent by the lessor to the assignment was required, ought not to be given too much weight. In conveyances of land in fee which contain covenants to be performed by the grantee, the rule of assumed intent is that his liability ceases when he conveys the property. Hickey v. Ry. Co., 51 Ohio St. 40, 36 N.E. 672, 23 L.R.A. 396, 46 Am.St.Rep. 545. Yet the covenant by the grantee is as express, personal, and extensive in such cases as in the case of a lessee. In Sexauer v. Wilson, 136 Iowa, 357, 113 N.W. 941, 944, 14 L.R.A.(N.S.) 185, 15 Ann.Cas. 54, it was said, “It could not have been his (the grantee’s) intention to assume an obligation in perpetuum, and, in event of disposing of the fee, to remain bound for life,” etc., an observation which for practical purposes is equally applicable to a ninety-nine year lease. On a long lease like this, which runs far beyond the lives of the persons who make it and far beyond any possible business forecast, relatively slight evidence suffices to show that the parties were dealing with the property as a res, and not looking to personal liability. I think there is such evidence in this case.