Court Opinion

ID: 8895625
Source: CourtListenerOpinion
Date Created: 2022-11-26 23:57:27.983346+00
Date Added: 2024-06-11T17:07:28.357329
License: Public Domain

TIMMONS-GOODSON, Judge,
concurring in part, dissenting in part.
I vote to exercise our discretion under Rule 2 and review the issue of the sublease on the merits. The two violations of our rules are minor and no prejudice has resulted to any party. I agree with the majority concerning the trial court’s ruling granting summary judgment in favor of plaintiff, Carolina Place Joint Venture (“Carolina Place”), and awarding damages against defendant, Flamers Charburgers, Inc. (“Flamers”). However, I respectfully dissent from the order of the trial court granting summary judgment in favor of Carolina Place against third-party defendant, F.A. International *694(“FAI”). Based on the merits, the trial court should have granted summary judgment in favor of FAI.
Carolina Place instituted this action against Flamers and FAI seeking all past and future rent owed under the lease. Flamers entered into a ten-year lease with landlord, Carolina Place, for space in the food court in a Charlotte mall. The lease term began on 1 August 1991 and was set to expire on 1 August 2001. FAI was not a party to the original lease. Flamers sublet the space to FAI through a sublease which began 20 September 1994 and was set to expire 7 March 2001.
The original lease between Carolina Place and Flamers provided that in the event that Carolina Place terminated Flamers’ right to possession, but not the lease, Flamers would be held liable for 1) all past-due rent; 2) remaining rent due under the lease until the space was re-let; 3) attorney’s fees and expenses incurred by Carolina Place in regaining possession; 4) all costs to re-let; 5) “double-rent” for any holdover period during which Flamers remained in possession after Carolina Place terminated such possession.
Carolina Place filed an action in summary ejectment against Flamers and FAI for failure to comply with certain requirements in the lease related to the maintenance of the store, and the court awarded possession of the premises to Carolina Place on 10 June 1998. FAI remained in possession until 30 June 1998, continued to pay rent until July, but did not pay double-rent.
Carolina Place filed the present action in March 1999 and filed a motion for summary judgment in December 1999. The trial court granted the motion in favor of Carolina Place and held Flamers and FAI jointly and severally liable for $214,520.00 in damages. This amount included unpaid rent, unpaid holdover double-rent and Carolina Place’s cost to re-let the premises.
Summary judgment is to be granted when there is no genuine issue of material fact and any party is entitled to judgment as a matter of law. Johnson v. Insurance Co., 300 N.C. 247, 266 S.E.2d 610 (1980). In order to determine whether a party was entitled to a judgment as a matter of law, we must review the merits.
The dispositive issue in this case was whether an agreement in which the tenant transferred its interest in the leased premises, reserving some interest unto itself before expiration of the original lease, was an assignment.
*695“[O]ur courts have adopted the traditional ‘bright line’ test for determining whether a conveyance by a tenant of leased premises is an assignment or a sublease. Under this test, a conveyance is an assignment if the tenant conveys his ‘entire interest in the premises, without retaining any reversionary interest in the term itself.’” Northside Station Associates Partnership v. Maddry, 105 N.C. App. 384, 388, 413 S.E.2d 319, 321 (1992) (citing James A. Webster, Jr., Webster’s Real Estate Law in North Carolina § 241 (Patrick K. Hetrick & James B. McLaughlin, Jr. eds., 3d ed. 1988). “A sublease, on the other hand, is a conveyance in which the tenant retains a reversion in some portion of the original lease term, however short.” Id.) see also Neal v. Craig Brown, Inc., 86 N.C. App. 157, 162, 356 S.E.2d 912, 915 (1987); J.D. Cornell Millinery Co. v. Little-Long Co., 197 N.C. 168, 170, 148 S.E. 26, 27 (1929) (“The reservation by the lessee ... of some portion of the term [is] the chief distinction between a sublease and an assignment.”). “If the conveyance is an assignment, ‘privity of estate’ is created between the original lessor and the assignee with regard to lease covenants that run with the land, and the original lessor has a right of action directly against the assignee. The original lessor has no such right against a sublessee.” Northside Station Associates Partnership, 105 N.C. App. at 389, 413 S.E.2d at 322 (emphasis added).
Carolina Place’s lease signed with Flamers and the subsequent lease Flamers signed with FAI, included as exhibits with Carolina Place’s motion for summary judgment, reveal that the subsequent lease was to expire 7 March 2001 and the original lease was to expire 1 August 2001. Thus, Flamers retained four months reversionary interest in the term of the lease. Because Flamers did not convey its entire interest in the leased premises, its subsequent lease agreement with FAI constituted a sublease and not an assignment. Therefore, no privity of estate existed between Carolina Place and FAI, allowing Carolina Place no right to assert a direct claim against FAI based on the provisions of the lease.
FAI, under the theory of joint and several liability, may become obligated to pay the entire damage amount, although Flamers is the lawfully liable party. Moreover, Flamers has the remedy of recovering from FAI damages it owes Carolina Place. As sublessor and sublessee, privity of estate exists between FAI and Flamers through their agreement. Flamers may, therefore, assert a direct claim against FAI.
*696Based on the foregoing, I respectfully dissent from the trial court’s ruling granting summary judgment against FAI.