Italian Fisherman, Inc. v. Middlemas
313 Md. 156, 545 A.2d 1, 1988 Md. LEXIS 96 (1988)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
An assignor who transfers their entire interest in a leasehold estate, without expressly reserving a right of reentry in an instrument consented to by the landlord, does not retain a right to repossess the property upon the assignee's default. The assignor's continuing contractual liability to the landlord does not, by itself, create such a right of reentry.
Facts:
- In 1975, Rosalie Middlemas leased property to The Italian Fisherman, Inc. for 25 years under a lease requiring the landlord's consent for any assignment.
- In 1976, with Middlemas's consent, Italian Fisherman assigned all of its right, title, and interest in the lease to Armand's Chicago Pizzeria.
- Middlemas's consent stipulated that Italian Fisherman would remain contractually liable for the lease obligations.
- To secure payment for the business sale, Armand's granted Italian Fisherman a security interest in the lease, but Middlemas was not informed of and did not consent to this security agreement.
- In 1984, Armand's defaulted by failing to pay rent and taxes, closing the restaurant, and removing equipment from the premises.
- Italian Fisherman attempted to cure the default by tendering payment for the overdue rent and taxes, but Middlemas rejected the payments.
- On December 12, 1984, Middlemas sent a lease termination notice to both Armand's and Italian Fisherman, citing non-payment and abandonment.
Procedural Posture:
- Middlemas, the landlord, filed suit against the assignee, Armand's, in the District Court for Montgomery County (trial court) seeking repossession of the property.
- Italian Fisherman, the assignor, was granted the right to intervene in the lawsuit.
- The trial court found that the transfer was a complete assignment, leaving Italian Fisherman with no right of reentry, and granted possession of the premises to Middlemas.
- Italian Fisherman, as appellant, appealed to the Circuit Court for Montgomery County (intermediate appellate court), which affirmed the trial court's decision.
- Italian Fisherman then petitioned for a writ of certiorari from the Court of Appeals of Maryland (the state's highest court), which the court granted.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does an assignor of a leasehold estate, who transfers their entire interest but remains contractually liable for rent, retain a right of reentry upon the assignee's default if the landlord did not consent to a separate security agreement purporting to grant the assignor an interest in the lease?
Opinions:
Majority - Cole, J.
No. An assignor of a leasehold estate who transfers their entire interest does not retain a right of reentry upon the assignee's default. By assigning all of its "right, title, and interest" to Armand's, Italian Fisherman transferred its entire estate, leaving it with no reversionary interest or right to reenter the property. The transfer constituted a complete assignment, not a sublease, which would have required transferring less than the entire term. The security agreement between Italian Fisherman and Armand's did not create a right of reentry enforceable against Middlemas, because the original lease required landlord consent for any transfer of interest, and Middlemas never consented to the security agreement. Italian Fisherman's continued liability for rent stemmed from privity of contract, which persists after an assignment, and did not imply a possessory right to the property. Because Italian Fisherman had no right of reentry and Armand's had clearly abandoned the premises, Middlemas was entitled to terminate the lease and repossess the property.
Analysis:
This decision reinforces the strict common law distinction between an assignment and a sublease, emphasizing that an assignment extinguishes the assignor's privity of estate and right of reentry. The court clarifies that any side agreement between an assignor and assignee, such as a security agreement granting an interest in the lease, is ineffective against a landlord who has not consented to it, especially when the original lease contains an anti-assignment clause. The ruling serves as a caution to assignors that remaining contractually liable for rent does not, by itself, preserve any possessory rights; such rights must be explicitly reserved in a manner that is binding on the landlord.
