85 Ark. App. 242 (2004)
- 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.
- The trial court declared that Adous was an assignee of the original lease and that forfeiture of the premises would be inequitable.
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.
- 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.
The judgment of the trial court was reversed and the case was remanded.
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