A.D. Juilliard v American Woolen
S. Ct Rhode Is. [1943]
Author: Sam Biers

Relevant Facts: Atlantic Mills leased premises to Riverside for a term of 62 yrs under a covenant to pay rent and certain charges as set forth.  There were no restrictions on assignment nor the identification of responsible party in the event of an assignment. The PL was the successor to the rights of the original lessor after 43 yrs.  Between 1893 and 1939 (46 yrs) the lease was assigned six times.  In not one of these assignments did the assignee agree to assume the obligation to pay rent for the unexpired term.

Legal Issue(s): Whether the assignment of a lease, by the Df, American to Reo, made the assignee American (as a colorable assignee) liable for the payment of unpaid rent for the entire unexpired term of the lease?

Court’s Holding: No

Procedure: Assumpsit to recover rent and taxes. Bench Trial for Df.  PL appealed.  Affirmed.

Law or Rule(s): An assignee who does not expressly assume payment of the rental amount stipulated to in the original lease is liable only for such rent as accrues while privity exists.

Court Rationale: The lessor has it w/i his power to protect himself against any detriment to him by incorporating adequate provisions in the lease concerning assignments thereof.  If he chooses to execute a lease w/o adequately protecting his rights as a lessor, he cannot thereafter complain he was deprived of a benefit. All expenses, including rent payments were paid by check of the Df and then charged against it subsidiary.  The T. Ct. found that under such circumstances the Df, in paying in this manner, was not assuming the covenants of the lease.  The Df was not bound to pay rent to the PL for the entire unexpired term of the lease through its course of dealing w/ Pl’s predecessor in title, Atlantic Mills.  (Exception) Unless fraudulent or colorable, a new assignment of the lease terminates the assignee’s liability to the lessor for rent subsequently accruing.  Textile was created as a medium for the sale of certain useless or unprofitable property by Df. The lease and some vacant land were such properties that the Df considered useless or unprofitable.  Oster bought them in the name of Reo, in which df had no interest. Oster testified “sole reason of using it and making money with it.”  Reo had exclusive control and possession of the property and no evidence to the contrary was offered.  The purchase amt was small, but this fact is not enough to render the assignment colorable.

Plaintiff’s Argument: The assignee of a lease of real property is liable for the payment of the stipulated rent for the entire unexpired term, notwithstanding that the assignee did not agree to assume such obligation

Defendant’s Argument: Although df assigned the lease to subsidiary corporations, the assignment to Reo, a non-subsidiary, released Df from liability for the unpaid rent and taxes during the unexpired term of the lease.

Privity of estate -Mutual or successive relation to the same right in property such as that which exists between a lessor and lessee or their successors.  A sub-tenant, who is in privity w/ the original lessor, may avail himself of any covenants in the original lease which “touch and concern” the land.

Assignee - person to whom an assignment is made; grantee.

Avail-profit from, benefit.