Davis v. Vidal
151 S.W. 290, 105 Tex. 444, 1912 Tex. LEXIS 175 (1912)
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Rule of Law:
A transfer of a leasehold estate is a sublease, not an assignment, if the original lessee retains a contingent reversionary interest in the property, such as the right to re-enter and terminate the agreement upon the transferee's failure to pay rent.
Facts:
- On April 26, 1907, Antoinette W. Davis leased a commercial property to the Dallas Brewery for a three-year term, ending April 30, 1910, at a rate of $100 per month.
- The lease agreement expressly permitted the Dallas Brewery to sublet the premises without Davis's consent.
- On October 1, 1907, the Dallas Brewery executed an instrument transferring its interest in the property to Lewis Vidal for the remainder of the lease term.
- The instrument required Vidal to pay the $100 monthly rent as stipulated in the original lease.
- The instrument between the Dallas Brewery and Vidal specified that if Vidal failed to pay rent, the Dallas Brewery could, at its option, declare the transfer void and re-enter and repossess the premises.
- Vidal took possession of the property but allegedly failed to pay rent due to Davis.
Procedural Posture:
- Antoinette W. Davis sued Lewis Vidal in the District Court of El Paso County to recover $1,200 in unpaid rent.
- The trial court found the instrument was a sublease and rendered judgment for the defendant, Vidal.
- Davis, as appellant, appealed to the Court of Civil Appeals.
- The Court of Civil Appeals affirmed the judgment of the trial court in favor of Vidal, the appellee.
- Davis then appealed to the Supreme Court of Texas.
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Issue:
Does a tenant's transfer of their entire remaining lease term constitute a sublease rather than an assignment if the tenant reserves the right to re-enter and repossess the property upon the transferee's failure to pay rent?
Opinions:
Majority - Mr. Justice Dibrell
Yes, the transfer is a sublease. A transfer of a lease constitutes a sublease rather than an assignment if the original lessee does not part with their entire estate or interest in the property. The term 'term' in a lease refers not only to the time period but also to the entire estate and interest conveyed. By reserving the right to re-enter the premises upon Vidal's failure to pay rent, the Dallas Brewery retained a contingent reversionary interest in the estate. This reservation means the Dallas Brewery did not convey its whole estate, thereby creating a sublease. Because the transaction was a sublease, no privity of estate or contract was created between the original lessor, Davis, and the sub-tenant, Vidal, precluding Davis from suing Vidal directly for rent.
Analysis:
This decision establishes that the reservation of a right of re-entry is sufficient to create a sublease, even when the original tenant transfers the property for the entire remaining duration of the original lease. This interpretation rejects the view held in some jurisdictions that a right of re-entry is a mere chose in action and not a reversionary interest. The precedent solidifies the rule that any retained interest, however contingent, prevents the formation of an assignment and the corresponding privity of estate between the landlord and the new tenant. Consequently, landlords in similar situations must pursue the original tenant for rent, as they cannot sue the sub-tenant directly.
