Warehouses Inc. v. Wetherbee

1. The Code, § 61-101, provides as follows: "When the owner of real estate grants to another simply the right to possess and enjoy the use of such real estate, either for a fixed time or at the will of the grantor, and the tenant accept the grant, the relation of landlord and tenant exists between them. In such case no estate passes out of the landlord, and the tenant has only a usufruct, which he may not convey except by the landlord's consent and which is not subject to levy and sale; and all renting or leasing of such real estate for a period of time less than five years shall be held to convey only the right to possess and enjoy such real estate, and to pass no estate out of the landlord, and to give only the usufruct, unless the contrary shall be agreed upon by parties to the contract and so stated therein."

2. Under the rules of the common law, a grant of the mere right of use or occupancy in realty, no matter for what limited period conveyed an estate for years. Hutcheson v. Hodnett, 115 Ga. 990, 993 (42 S.E. 422). An estate at common law is defined by Bouvier's Law Dictionary (Baldwin's Century Ed.) as"the quantity of interest which a person has, from absolute ownership down to naked possession. 9 Cow. (N. Y.) 81." By a provision contained in the original Code of this State as adopted in the year 1861 (now Code, § 61-101), a grant of the mere right to use or occupy land was declared not to convey an estate in realty, but to pass a usufruct only. By a statutory amendment (passed in 1876) to this Code section, an additional provision was added to the end of the section, declaring that any lease of realty for a period of less than five years would be taken as passing a usufruct only, unless the instrument by its own terms expressly indicated a contrary purpose and intent. Accordingly, under the law of the Code, as thus amended, it will be seen that any lease for less than five years which does not purport by its own provisions to create an estate for years will be taken to pass only a usufruct.

3. As to leases for as much or more than five years, the amendment to the Code, § 61-101, has no application, and the rule of the common law would prevail so as to pass an estate for years unless the agreement by its own terms, as is authorized by the above-quoted Code section, cuts down the interest passed to a mere usufruct. Thus, if the express terms or necessary implication of the words used in the agreement should in fact so provide, the Code section requires that they be given effect despite the rule of the common law to the contrary. Burnett Bros. v. Rich Co., 45 Ga. 211, 212. If, however, the lease does not expressly or by necessary implication so limit the interest, then and in such event the rule of the common law will continue to operate, with the result that the interest conveyed by such a lease for five years or more will still be taken to convey an estate for years. Accordingly, while a lease for five years or more which does not by its owned terms interpret the intent of the parties to pass a lesser interest will be presumed now, as under the common law, to convey an estate for years, there is nothing to prevent a lease for five years or more from being narrowed by the terms of the contract itself so as to convey a usufruct only, since such is the clear purport of the rights and authority conferred by the Code section indicated.

(a) There may have been some confusion engendered by certain pronouncements made by this court and by the Court of Appeals, such for example to the effect that "A lease of real estate for a period of five years passes such an estate from the landlord to the tenant as he may convey or contract to convey." (Italics ours.) See as illustrative of the cases just mentioned, Schofield v. Jones, 85 Ga. 816, 823 (11 S.E. 1032); Anderson v. Kokomo Rubber Co., 161 Ga. 842, 846 (132 S.E. 76); Jones v. Fuller, 27 Ga. App. 84, 87 (5 a) (107 S.E. 544). But in all of these cases, the question involved was not whether an estate was conveyed; but the court was seeking to determine the nature and effect of an actual conveyance of an estate. Consequently, in the cases mentioned, the question now dealt with was not under consideration. It might be mentioned in this connection that, contrary to a somewhat common impression in the public mind, the term "lease" does not imply a long-term relationship of landlord and tenant, as distinguished from a conveyance of an estate. The Code itself (§ 85-806) provides that "When one grants to another an estate for years out of his own estate, reversion to himself, it is usually termed a lease." That this court has never intended to hold that a lease for five years or more is ipso facto and as a matter of law an estate for years, is conclusively shown by numerous cases in which this court has construed the terms of such a lease for the purpose of determining whether or not the instrument by its express terms or by the necessary implication of its terms did or did not limit the interest passed to a mere usufruct. Hutcheson v. Hodnett, 115 Ga. 990, 993 (supra); Collier v. Hyatt, 110 Ga. 317 (35 S.E. 271); Griffith v. Smith, 155 Ga. 717 (118 S.E. 194); Johnson v. Brice, 151 Ga. 472 (107 S.E. 338).

4. Where an estate for years is not only prima facie, but in fact conveyed, the grantee would ordinarily, that is, where no agreement appears to the contrary, have the right to assign his lease; although he cannot substitute another paymaster without the consent and acceptance of the landlord. Garner v. Byard, 23 Ga. 289 (68 Am. D. 527).

5. The lease in the instant case being for more than five years, and therefore prima facie conveying an estate for years, it becomes necessary to determine whether or not the instrument by its own provisions shows an intent of the parties to negative either by express terms or by necessary implication the presumption that an estate had been conveyed, so as to bring it down to a mere right to possess and enjoy the use of such realty as referred to in the Code, § 61-101.

6. The language of the instrument under consideration not only does not negative the presumption of an estate by its express language, or by provisions such as would by necessary implication forbid the usual legal presumption of an estate for years, but the language actually employed seems to indicate that the parties had in mind the usual legal import of a lease for more than five years at the time the agreement was entered upon. This division of the syllabus will be further discussed in the opinion.

Nos. 16088, 16096. FEBRUARY 10, 1948. REHEARING DENIED MARCH 19, 1948. STATEMENT OF FACTS BY JENKINS, CHIEF JUSTICE. J. R. Wetherbee brought an action in the Superior Court of Fulton County, Georgia, against The General Tire Rubber Company, Warehouses Inc., and Piston Ring Parts Company. It was alleged that the plaintiff's predecessor in title, in November, 1939, entered into an agreement of lease for a period of ten years with an option to renew for five more years, as to property known as 481 Spring Street, Atlanta, Georgia, with General Tire Rubber Company. A copy of the agreement of lease was attached to the petition. In April, 1940, General Tire Rubber Company, with the written consent of the plaintiff's predecessor in title assigned the lease to The General Tire Rubber Company, which assumed all obligations of General Tire Rubber Company, and General Tire Rubber Company was released from all further liabilities under the agreement. Immediately prior to the filing of the petition, The General Tire Rubber Company had vacated the premises and had undertaken either to assign or sublease the property to Warehouses Inc., which in turn had assigned or subleased to Piston Ring Parts Company without the consent of the plaintiff. It was further alleged that neither of the above-named parties had gone into possession; that the plaintiff had no adequate remedy at law, and should either attempt to go into possession, it would constitute a continuing trespass for the reason that such attempted assignment or sublease, without the consent of the plaintiff, was void. The prayers were: that injunction relief be granted against entry into possession; that the assignment or sublease made by The General Tire Rubber Company to Warehouses Inc., as well as that between Warehouses Inc. and Piston Ring Parts Company, be canceled and declared null and void; and that the agreement of lease be construed by the court, and the relation of the parties with respect thereto and to each other be determined. The General Tire Rubber Company filed a general demurrer, which was overruled. Exceptions are to this order. The sole issue involved, which will determine the right to injunctive relief and to cancellation of the assignments or subleases, is whether or not the lease created an estate for years in The General Tire Rubber Company, which was assignable, or a mere usufruct which, without the consent of the plaintiff, would authorize neither assignment, nor subleasing.

On the one hand, the lessee, The General Tire Rubber Company, contends that, in all leases where the term of enjoyment is to be five years or more, an estate in realty is thereby acquired in every such case without regard to any other terms of the instrument; and further contends that the other terms and conditions of the instrument, in fact, show that it was the intention of the parties at the time the agreement was entered into to create an estate for years. On the other hand, the plaintiff, successor to the original lessor, contends that the terms and conditions of the instrument manifest an intention of the parties to grant only a usufruct. The following provisions of the lease are relied upon by the plaintiff (lessor) as showing an intent of the parties to limit the grant to a usufruct only: The provision in which the lessee agrees to pay rental for the use and occupancy of the premises, with a reservation by the lessor of the right to terminate upon failure to pay the stated monthly rental; the provision that the lessor is obligated to pay all taxes, assessments, and charges levied against the real property, the building and improvements; the obligation assumed by the lessor to keep the premises insured and to reconstruct and repair the building and improvements; the provision that, unless the lessor promptly rebuilds or repairs, the lessee may terminate the lease, and that rent shall be abated to the extent that the lessee is unable, in the event the lease is not terminated, to use a part of the premises; the provision reserving the right in the lessee to terminate, should the premises become unsuitable for the business conducted by the lessee; the reservation of the right by the lessor to enter and make repairs; the provision that the lessor may mortgage to improve the property, provided he obtain from the mortgagee written consent to the lease; the provision that the contemplated construction of a building, which was to be used by the lessee, is to be made by the lessor and turned over to the lessee free and clear of all liens for material or labor; the further reservation of the right by the lessor to terminate in the event of a receivership in bankruptcy or otherwise of the lessee. It is further contended that the original parties to the lease placed their own construction upon the instrument, by reason of the fact that the original lessee, General Tire Rubber Company, obtained the consent of the original lessor, when the lease was assigned to the present lessee, The General Tire Rubber Company, which, it is urged, indicates that only a usufruct was intended to be granted, and that the parties thereby recognized the necessity for such consent, and further that in such written consent the original lessor is referred to as "landlord of the premises." Before construing any specific provision of the lease, it may prove helpful to look to certain general characteristics of the instrument as a whole, which, we think, are indicative of the true intent of the parties with respect to the interest passed thereunder. For example, the instrument does not contain a provision specifically limiting the interest conveyed to a mere usufruct, as might have been done had the parties seen fit so to provide. The instrument is termed an "agreement of lease;" the parties are referred to throughout as "lessee" and "lessor." The later part of the lease contains a provision that the word "lessee" as used therein shall include the successor and assigns of General Tire Rubber Company (the lessee); the lessee's interest is referred to as a "leasehold interest," and the period of the lease is referred to as the "term;" and in the granting clause and throughout the instrument the term "demised premises" is used. With respect to the meaning of these terms, it is provided by the Code, § 20-704 (2), that "Words generally bear their usual and common signification; but technical words, or words of art, or used in a particular trade or business will be construed, generally, to be used in reference to this peculiar meaning." As has already been pointed out in division 3 (a) of the syllabus, the Code, § 85-806, declares that "When one grants to another an estate for years out of his own estate, reversion to himself, it is usually termed a lease." The word "demised" is defined by Bouvier's Law Dictionary (Century Ed.) as "A conveyance, either in fee, for life, or for years;" and also as "A lease or a conveyance for a term of years." The same authority defines the word "terms," as used in the lease, as "The limitation of an estate: as a term for years, and the like. The word term does not merely signify the term specified in the lease, but the estate, also, and interest that passes by that lease." While it is recognized, of course, that the use of the above-defined words and phrases is not conclusive as to the intention of the parties yet, when they are given their peculiar technical meaning, they are not only consistent with the prima facie presumption that an estate for years was created under such lease, but they are also inconsistent with an interest less than an estate.

Turning now to a consideration of the specific provisions of the instrument, from what has been said above, it will be seen that, unless such provisions impose conditions and limitations upon the use of the premises which will negative the conveyance of an estate for years and reduce the interest passed to a mere usufruct, then the presumption of an estate must prevail. We do not deem it necessary to treat separately each of the conditions of the lease, as set forth in the statement of facts, which the lessor contends indicate an intent of the parties to limit the interest under the lease to a usufruct only. It will be observed that most, if not all, of the provisions, such as the agreement to pay rent for the use and occupancy of the premises, would be equally appropriate to the conveyance of an estate as it would be to the grant of a usufruct. On the other hand, certain of the provisions relied upon by the lessor as indicating a usufruct interest would seem more strongly to indicate an intention of the parties to pass an estate. For example, if the relation of landlord and tenant had been intended under the grant of a mere usufruct, it would have been unnecessary to make provision in the lease that the landlord would assume responsibility for upkeep of the premises, the payment of taxes, insurance, etc., for such obligations are imposed by law upon the landlord (Code, Chapter 61-1 et seq.); whereas, if the parties had intended to convey an estate, under the law (Chapter 85-8 et seq.), such duties would be upon the lessee, and for this reason, in order to relieve the lessee of such obligations, it would have been necessary to make specific provision, as was done here, to relieve the lessee of such expense. The various conditions relating to the reservation in the lessor of the right to terminate the lease are but conditions of forfeiture, and are not in any sense repugnant to the grant of an estate. Furthermore, with respect to the right to terminate upon the event of receivership of the lessee by reason of bankruptcy or otherwise, this provision would seem to indicate clearly that the parties recognized that an estate did in fact pass; and the lessor, realizing that a leasehold interest was assignable, saw proper to protect himself by making such a condition a ground for termination of the estate. This construction of the provision would seem to be indicated by reason of the fact that, under section 70 of the Bankruptcy Act of 1938, it is recognized that "an express covenant that an assignment shall terminate shall be enforceable," whereas "a general covenant that the lease shall not be assigned shall not prevent the trustee for assuming it at his election and then subsequently assigning." The contention of the lessor that the original parties to the lease had recognized the interest thereunder to be only a usufruct, by reason of having obtained the consent of the original lessor to an assignment, prior to the one here undertaken, is without merit. This is true for the reason that such consent was necessary, in order to relieve the original lessee of liability under the lease, even though the leasehold interest, as an estate, was assignable without the consent of the lessor. As to the use of the phrase, "landlord of the premises," in referring to the lessor in the above-mentioned written consent to assignment, the single use of this technically inept phrase cannot be said to have the effect of changing the prima facie character of the interest conveyed under the contract of lease, as well as negativing the numerous other indicia of an estate embodied within the agreement itself; and for this reason the use of such verbiage can not be said to be more than a circumstance to be considered as one of many other words of art repeatedly used throughout the contract indicating an actual contrary intent.

In conclusion it may be pointed out that — even though some of the provisions of the instant lease might result in imposing liabilities upon the lessor which are usually incident to the relationship of landlord and tenant, and even if it could be said that certain of the provisions might be construed to impose limitations upon the use of the premises — yet, a contract which ordinarily would be construed to create an estate for years is not reduced to a mere usufruct because certain limitations are put upon its use. The interest so passing may be encumbered or somewhat limited, without necessarily changing the character of the estate. State v. Davison, 198 Ga. 27, 40 (31 S.E.2d 225). Accordingly, since under the above construction of the lease the legal presumption of an estate for years is not negatived either by express language or by any provision such as would by necessary implication forbid the usual legal presumption of an estate, and since the instrument contained no provision restricting the lessee's right of assignment, other than in the event of receivership, the lessee could properly have assigned the lease without the consent of the lessor, and the trial court therefore erred in overruling the lessee's general demurrer to the petition and in granting the injunctive relief as prayed by the lessor.

Judgment reversed in both cases. All the Justices concur,except Bell, J., absent on account of illness, and Wyatt, J., whotook no part in the consideration or decision of this case.