Brief Fact Summary. This case involves Plaintiff Miller seeking to cancel fourteen promissory notes of $175 each which he claims were rent payments under a lease where the premises were destroyed by fire.
Synopsis of Rule of Law. The intent of the parties will be the governing factor in determining whether an instrument is an assignment or a sublease.
In 1945 Defendant Jaber rented a building from the owner for a five-year term beginning March 1, 1946, and ending March 1, 1951. The lease called for rent of $200 per month and stated that the lease would terminate if the premises were destroyed by fire. Defendant had a rug shop in the building until 1949, when the stock was sold at auction and the lease transferred to Norber and Son. The instrument of transfer, whether it was an assignment or sublease, is the key issue in this case. The form of the instrument from Defendant to Norber and Son was titled “Contract and Assignment,” and stated that Defendant assigned the lease contract to Norber and Son for the remainder of the lease period. Norber and Son paid $700 in cash and executed five promissory notes for $700 each which were due in four month intervals. Norber and Son agreed to pay $200 per month and Defendant reserved the right to retake the property if Norber and Son failed to pay the rent. The instrument entitled “Cont
ract and Assignment” contained no reference to fire ending the lease. Subsequently, Plaintiff Miller obtained a transfer of the lease from Norber and Son. Plaintiff was unable to pay $700 at the four month intervals and agreed with Defendant to divide the payments into monthly installments of $175 each. Plaintiff and Defendant then executed the notes in controversy, which Defendant accepted in substitution of the other unpaid notes. When the premises burned Plaintiff asserted that the Defendant’s transfer to Norber and Son was a sublease and that the notes represented rent. Plaintiff then argued, under the rule that the sublease terminates when the primary lease terminates (such as by the fire), that Plaintiff’s sublease ended with the fire.
Issue. Was the transfer of the “Contract and Assignment” from Defendant Jaber to Norber and Son an assignment or a sublease?
Held. Assignment. Reversed, the lower court found for Plaintiff.
The Court first stated the English rule of distinguishing an assignment from a sublease, which states that if the instrument transfers the lessee’s estate for the entire remainder of the term, it is an assignment, regardless of its form or the parties’ intentions. On the other hand, if the instrument transfers the lessee’s estate for less than the entire term (even for a day less) the instrument is a sublease regardless of the parties’ intentions.
The Court noted that the common law rule was harsh in its rigorous application. The Court noted that a skilled lawyer would have no trouble drafting either an assignment or a sublease, but an unskilled lawyer or a layperson would perhaps have his intent frustrated by application of the common law rule.
The principle announced by this Court is that the intention of the parties is to govern the determination of whether a given instrument if an assignment or a sublease.
In this case the Court holds that the transfer from Defendant Jaber to Norber and Son was an assignment because the document was titled as an assignment, the language was of an assignment and the execution of promissory notes is not an act usually done in a lease situation, but does indicate deferred payments under an assignment.
Discussion. Points of Law - for Law School Success
We think of an assignment as the outright transfer of all or part of an existing lease, the assignee stepping into the shoes of the assignor. View Full Point of Law
This case contains a guide to the history of the common law rule and addresses the rules as applied by other jurisdictions. This question, should it ever arise, is one which a lawyer would do well to obtain the jurisdiction’s interpretation of the rule prior to drafting either a sublease or an assignment.