Ernst v. Conditt

Brief Fact Summary. The Complainants, Mr. and Mrs. Ernst (Complaintants), approved a modification to a lease that allowed the Defendant, Conditt (Defendant), to sublease the premises and left the lessee personally liable. Defendant ceased paying rent and Complainants sued to determine whether the instrument was a sublease or assignment.

Synopsis of Rule of Law. The words used in an instrument are not conclusive, rather it is the intentions of the parties that govern whether the instrument is a sublease or assignment.

Facts. The Complainants leased a tract of land to Rogers for one year and seven days. Rogers proceeded to construct a racetrack, fence and undertake other improvements to the land. The lease contained provisions prohibiting subletting, assignment and a duty to clear any construction or improvements at the end of the lease. Rogers sold the business to the Defendant and a new lease was created with an accepted sublease agreement to Defendant. Defendant ceased paying rent and the Complainants brought suit to recover past rent. Defendant argued that Rogers remained personally responsible for the rent. The lower court found for the Complainant and the Defendant appealed.

Issue. Whether the lease and modifications to the lease created a sublease or assignment.

Held. Affirmed, the use of the word “sublet” is not conclusive of the construction to use on the instrument. Rather the instrument was an assignment.
A sublease grants the sublessee an interest in the lease premises with a reversionary interest remaining with the lessee. An assignment conveys the whole term, leaving no interest or reversionary interest in the lessee.
The Common law rule is if the instrument purports to transfer the lessee’s estate for the entire remainder of his term, it is an assignment, regardless of its form or the parties’ intentions.
This current agreement, despite its terms, does not leave the lessee with a right to re-enter or a reversionary interest, thus it is an assignment.

Discussion. The court ruled that no matter what rule the court used to analyze this case (modern or common law), the result was the same. Because the sublease agreement left the lessee with no rights either express or implied, the intention of the parties was an assignment and not a sublease.