Jones v. Fuller-Garvey Corporation
1963 Alas. LEXIS 167, 386 P.2d 838 (1963)
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Rule of Law:
When the specific purpose of a lease is totally frustrated by a supervening event that destroys the subject matter of the lease, the lease is dissolved, and the tenant is discharged from the obligation to pay future rent, even if the tenant had already abandoned the premises.
Facts:
- Lessor (appellant) and Fuller-Garvey (appellee) entered into a written lease for a nightclub for a ten-year term commencing October 1, 1955.
- The lease explicitly stated that its purpose was for conducting a nightclub.
- On November 5, 1960, Fuller-Garvey abandoned the premises without legal justification.
- Fuller-Garvey's rent was paid through November 1960.
- On December 3, 1960, the unoccupied nightclub building was completely destroyed by an accidental fire.
- The lease agreement contained no provision regarding the parties' obligations in the event the building was destroyed by fire.
- Fuller-Garvey communicated it would not return even if the building were rebuilt, and the Lessor did not offer or intend to rebuild.
Procedural Posture:
- The Lessor (appellant) sued Fuller-Garvey (appellee) in a trial court for damages and for future rent for the unexpired lease term.
- The trial court entered judgment for the Lessor for property damages but denied the claim for any future rent that would have accrued after the fire.
- The Lessor, as appellant, appealed the trial court's denial of future rent to the Supreme Court of Alaska.
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Issue:
Does a tenant who abandoned a property remain obligated to pay rent for the unexpired term of the lease after the leased premises are accidentally and completely destroyed by fire, thereby frustrating the purpose of the lease?
Opinions:
Majority - Arend, Justice
No. A tenant's obligation to pay future rent is discharged when the subject matter of the lease is completely destroyed by a supervening event that frustrates the purpose of the lease, even if the tenant had previously abandoned the property. While the common law rule holds a tenant liable for rent as long as any part of the leased premises remains, this case falls into a well-recognized exception for frustration of purpose. The lease was specifically for a nightclub; the destruction of the building made this purpose impossible. This supervening impossibility constitutes a complete failure of consideration for all future rent. The court rejected the Lessor's argument that Fuller-Garvey's prior abandonment should change the outcome, finding no causal link between the abandonment and the fire and holding that the subsequent destruction of the building terminated any claim for future rent, even one based on anticipatory breach.
Analysis:
This decision applies the contract doctrine of frustration of purpose to a real property lease, establishing it as a valid defense against claims for future rent. It clarifies that a subsequent, supervening event that makes performance impossible can excuse a party from future obligations, even if that party was already in breach for a separate reason (abandonment). The ruling prioritizes the complete failure of consideration—the landlord's inability to provide the leased premises—over the tenant's prior breach, effectively cutting off the tenant's liability for future rent from the moment the property was destroyed.
