Wednesday, January 1, 2014

Abernathy v. Adous case brief

Abernathy v. Adous case brief summary
85 Ark. App. 242 (2004)

CASE SYNOPSIS
Appellee subtenant subleased a gas station from appellee, the original tenant. Appellant property owner brought a suit to forfeit the lease for non-payment of rent and insolvency on the part of the original tenant. The subtenant argued that for equitable reasons, the sublease should not be forfeited. The Crittenden County Circuit Court (Arkansas) determined that forfeiture of the subtenant's lease was inequitable. The property owners appealed.

CASE FACTS
  • In 1992, Abernathy (D) and Griffith Petroleum Inc. (GPI) entered into a commercial lease contract. 
  • The lease was for a 10 year term with 6 consecutive 5 year options to renew. 
  • A portion of the rent was to be paid directly to Abernathy’s creditor Fidelity National Bank, and another portion was to be paid directly to Abernathy. 
  • The lease provided that GPI’s insolvency and/or failure to pay would constitute a breach of the lease. 
  • Maref Quaran later executed a “Sublease Agreement” in which Quaran assumed all of GPI’s obligations under the lease (the same rent and length of the lease). 
  • Abdulazize Adous (P) later became a subtenant and then eventual became the sole tenant under the sublease agreement. 
  • In 2001, Abernathy discovered that GPI had become insolvent, terminated the lease and demanded surrender of the premises.
  • Adous had at all times remained current on the rent, first having remitted payment to GPI and later into the court registry, sued Abernathy and GPI for specific performance. 
PROCEDURAL HISTORY
  • The trial court declared that Adous was an assignee of the original lease and that forfeiture of the premises would be inequitable.
ARGUMENT
The property owner argued that the subtenant was a sublessee rather than an assignee and therefore was required to surrender possession of the premises upon breach by the original lessee.

DISCUSSION

  • The appellate court concluded that the parties clearly intended the subtenant to have been a sublessee. The most telling indicator of the subtenant and original lessee's intention was that they consistently referred to their arrangement as a sublease. 
  • Further, in their pleadings and at trial, the parties exclusively referred to the original tenant's transfer to the subtenant as a sublease rather than an assignment. 
  • Until the trial court declared the subtenant an assignee, the parties had never contemplated him being anything other than a sublessee. 
  • The intention of the parties governed. 
  • Another factor indicating that the parties intended to create a sublease was the subtenant's payment of rent to the original tenant rather than to the owner. 
  • A third indicator that the arrangement was a sublease was found in the possibility of repossession by the original lessee showing the original lessee had not relinquished its rights. 
  • Equity should not intervene to prohibit forfeiture of the sublease.
CONCLUSION
The judgment of the trial court was reversed and the case was remanded.

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