In re Famous Fain Co.

HOUGH, Circuit Judge (after stating the facts as above). It is not doubted that, if O’Flyn’s tenant became bankrupt during the life of the lease, it was terminable at th,e landlord’s option. That was the bargain, both lawful and usual. This ease, therefore, lies within the narrow limits) of an inquiry as to who was the tenant of O’Flyn’s premises when Famous Fain Company became bankrupt. Admittedly there was a lease for years to Fain; that written lease was the evidence of the contract made, and privity of contract existed and continued between Fain and O’Flyn, unless destroyed by some subsequent event. But as the result of that contract Fain entered upon the premises, he became a tenant, a tenant holds an estate, and so there is privity of estate between the tenant and his lord. Asa general rule a lessee can assign the lease, unless there be a contractual restriction on his right so to do; consequently an assignment works no forfeiture, except by agreement. 16 R. C. L. 1125. Between the landlord-lessor and the assignee of the lease there is therefore ordinarily no privity of contract; but there is privity of estate if the assignee takes possession, and by virtue thereof the assignee is liable for rent. Yet he may discharge himself from liability by assigning his interest in the premises to a strangér.' Gillette v. Aristocrat Restaurant, 239 N. Y. 87, 145 N. E. 748. But, if the lessee contracts to pay, as was doné here; “it is the well-settled rule of law that, after an assignment of the lease and an acceptance of rent by the landlord from the assignee, the landlord cannot maintain an action of debt for rent against the lessee, but. an action will lie against him on the covenant for the payment of rent. The reason of the rule is that, although by the assignment the privity of estate between lessor and’, lessee is terminated, there still remains the privity of contract created by the lease, which is not affected by the assignment. The lessee still continues liable on his covenant by virtue of the privity of contract.” Wall v. Hinds, 4 Gray (Mass.) 256, 64 Am. Dec. 64, and for full citations see 16 R. C. L. 845. In this case Fain, the lessee, had good right to assign the lease; he did so to the •Fain Company, and from that now bankrupt concern the landlord accepted rent. If this Were the whole story, privity of contract would be nonexistent between O’Flyn and Fain Company, but the latter would be liable for rent because of privity of estate; but the problem would still require solution, whether that relation made Fain Company not. only a tenant but the tenant referred to in the lease, whose bankruptcy would give right of re-entry to the landlord. There is, however, more of the story, and the rest we think solves the problem. The assignee Fain Company not only entered and paid rent, but by separate agreements with O’Flyn in terms assumed the lease,agreed to pay additional rent for privileges with which Fain never had any concern, and throughout the documents evidencing these engagements it is described as “the tenant.” We think these undisputed facts clearly sh’ow that’ the intent of parties was that the Fain Company should become and did become the tenant of the original lease which it assumed, and so bound by the covenants and conditions thereof. For this reason, the order under review is reversed with costs. Whether Fain is subject. to. any existing contractual liability is a question not, before us, and we express no opinion.