Brief Fact Summary. This case involves a dispute between an assignee of a lease and a lessor for rents accruing while the premises was assigned to a second assignee.
Synopsis of Rule of Law. When a covenant of prohibition or restriction against reassignment is made to the heirs and assigns of lessee, then the restrictions binds the lessee and any of his heirs and assigns.
The Berkley Company owned the premises in question in 1923. Then on February 1, 1923, the Berkley Company leased the premises to Craver for a period of five years to begin February 1, 1923, and end January 31, 1928. Thereafter, the Berkley Company conveyed their ownership to the Plaintiffs herein. On June 10, 1925, Craver, the lessee, transferred and assigned the lease to Warner Brothers Southern Theatres, Inc., the Defendant. The transfer or assignment from Craver to Defendant purported to transfer “all right, title and interest.” The Plaintiffs (owners of the premises) assented to the assignment. Then Defendant took the property and occupied the premises until January 28, 1926, when the Defendant reassigned the lease to The Carolina Theatres, Inc. Carolina Theatres took the premises and occupied the premises until it was placed into the hands of a receiver. Defendant paid all rent due up until the lease was reassigned to Carolina Theatres. When Defendant made the reassignmen
t to Carolina Theatres the defendant did not let the owner (Plaintiff) know of the reassignment until after the fact. This caused the owner to state that it was acceptable for Carolina Theatres to remit the rent directly to Plaintiff, but that Defendant was still recognized as lessee and would have the responsibility to make sure the payments were made. The original lease between the Berkley Company and Craver stated that if the lessee shall fail to perform any of the covenants or become bankrupt then the lessor shall have the right to re-enter the premises. The original lease also provided that Craver could not convey or underlet the lease without permission of the lessors. The trial judge found that the Defendant assignee was liable for $450 in rent, which was the amount unpaid at the end of the term. The Defendant appealed.
Issue. If a lessor executes a lease, and the lease provides that the lessee shall not reconvey the lease without written consent of the lessor, and thereafter there is a first reconveyance by lessee with consent, followed by a second assignment without consent, is the second assignment valid?
Held. Yes. Affirmed.
The Court cited the common law rule stating that if a lessor once gives his assent to an assignment, such assent is said to be a waiver of the prohibition against assignment, and the control of the lessor over the property is forever gone.
The Court noted that some jurisdictions have made exceptions to the general rule by holding that when the prohibition against assignment by the lessee ran to his heirs and assigns, then the covenant was multiple in nature. This Court finds that rule to be controlling here.
Because the original lease from Berkley Company to Carver made the covenants run to heirs and assigns, the restriction against assignment and subletting operated upon the heirs and assigns of lessee as well as lessee himself.
In this case when Defendant made the lessor aware of the reassignment to Carolina Theatres, the Plaintiff made it clear to Defendant that Defendant was to still be held liable for the rent.
Discussion. The Court here announced a rule that makes it much easier for the lessor to control who occupies the premises.