B-135596, APR. 8, 1958

B-135596: Apr 8, 1958

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THE LAND WAS LEASED FOR THE PURPOSE OF PERMITTING THE LESSEE TO CONSTRUCT A COMMERCIAL BUILDING THEREON AND SUBLETTING SPACE THEREIN TO SUBTENANTS FOR CONDUCTING CERTAIN SPECIFIED TYPES OF BUSINESSES. THREE SUBLEASES FOR PARTS OF THE BUILDING FOR TERMS LESS THAN THE TERM OF THE ORIGINAL LEASE WERE EXECUTED BY THE LESSEE AS FOLLOWS: DATE SUBLESSEE AUGUST 25. 1956 CARL GEER EACH SUBLEASE WAS APPROVED BY GENERAL ELECTRIC AND THE COMMISSION AND EACH REQUIRED THE SUBLESSEE OR SUBLESSEES TO PAY FOR ALL UTILITIES INCLUDING HEAT. EACH SUBLEASE STIPULATES THAT IT IS SUBJECT TO THE ORIGINAL LEASE AND THAT THE SUBLESSEE KNOWS THE CONTENTS THEREOF AND AGREES TO ABIDE BY THE PROVISIONS THEREOF. IT IS STATED THAT THE ABOVE SUBLESSEES MADE DIRECT INFORMAL ARRANGEMENTS FOR UTILITY SERVICES TO BE FURNISHED BY GENERAL ELECTRIC AS AGENT FOR THE COMMISSION.

B-135596, APR. 8, 1958

TO MR. REX L. RAY, AUTHORIZED CERTIFYING OFFICER, UNITED STATES ATOMIC ENERGY COMMISSION:

BY LETTER DATED MARCH 21, 1958, THE GENERAL MANAGER, ATOMIC ENERGY COMMISSION, FORWARDED HERE YOUR LETTER OF DECEMBER 12, 1957 (FP: RIR), REQUESTING A DECISION AS TO THE PROPER DISPOSITION OF $608.69 HELD IN SUSPENSE ACCOUNT. THE ITEM INVOLVED REPRESENTS THE AMOUNT PAID TO THE COMMISSION BY LLOYD G. COOK AS FORMER LESSEE OF CERTAIN LAND TO COVER UNPAID CHARGES FOR UTILITIES AND OTHER SERVICES FURNISHED HIS SUBTENANTS.

BY LEASE NO. 55-20, DATED APRIL 11, 1955, AS AMENDED, THE ABOVE LAND LEASED TO MR. COOK BY THE GENERAL ELECTRIC COMPANY AS AGENT FOR THE COMMISSION FOR A TERM OF 55 YEARS BEGINNING MARCH 11, 1955. THE LAND WAS LEASED FOR THE PURPOSE OF PERMITTING THE LESSEE TO CONSTRUCT A COMMERCIAL BUILDING THEREON AND SUBLETTING SPACE THEREIN TO SUBTENANTS FOR CONDUCTING CERTAIN SPECIFIED TYPES OF BUSINESSES.

ARTICLE VII OF THE LEASE SETS FORTH IN DETAIL THE TERMS AND CONDITIONS FOR OPERATION OF THE FACILITY BY THE LESSEE AND HIS SUBTENANTS. SECTION 7 OF THIS ARTICLE PROVIDES, AS FOLLOWS:

"THE LESSEE SHALL PAY ALL CHARGES ASSESSED FOR THE INSTALLATION OF TELEPHONES AND THE USE OF THE TELEPHONE SYSTEM, AND FOR ELECTRICITY, WATER AND SEWERAGE, AND REFUSE-REMOVAL SERVICE.'

SECTION 2 OF ARTICLE XVIII PROVIDES, AS FOLLOWS:

"FAILURE OF THE LESSOR TO TAKE ANY ACTION WITH RESPECT TO ANY DEFAULT BY THE LESSEE HEREUNDER SHALL NOT CONSTITUTE A WAIVER OF ANY OF THE LESSOR'S RIGHTS UNDER THIS LEASE; AND NO EXPRESS WAIVER SHALL AFFECT ANY DEFAULT OTHER THAN THE DEFAULT SPECIFIED IN THE EXPRESS WAIVER AND THAT ONLY FOR THE TIME AND TO THE EXTENT THEREIN STATED.'

ARTICLE XX PROVIDES THAT THE LESSEE SHALL PAY UPON DEMAND ALL THE LESSOR'S COSTS, CHARGES AND EXPENSES, INCLUDING FEES OF COUNSEL, AGENTS AND OTHERS RETAINED BY THE LESSOR, INCURRED IN ENFORCING THE LESSEE'S OBLIGATIONS UNDER THE LEASE, OR INCURRED BY THE LESSOR IN ANY LITIGATION, NEGOTIATION OR TRANSACTION IN WHICH LESSEE CAUSES LESSOR, WITHOUT THE LATTER'S FAULT, TO BECOME INVOLVED OR CONCERNED. THREE SUBLEASES FOR PARTS OF THE BUILDING FOR TERMS LESS THAN THE TERM OF THE ORIGINAL LEASE WERE EXECUTED BY THE LESSEE AS FOLLOWS:

DATE SUBLESSEE

AUGUST 25, 1955 DONALD PAUL AND MARY

LOUISE ABBOTT, DOING

BUSINESS AS BY-LO FOODS

JANUARY 9, 1956 JIM CLARK

JANUARY 9, 1956 CARL GEER

EACH SUBLEASE WAS APPROVED BY GENERAL ELECTRIC AND THE COMMISSION AND EACH REQUIRED THE SUBLESSEE OR SUBLESSEES TO PAY FOR ALL UTILITIES INCLUDING HEAT, ELECTRICITY, WATER, TELEPHONE, AIR CONDITIONING, AND GARBAGE DISPOSAL. EACH SUBLEASE STIPULATES THAT IT IS SUBJECT TO THE ORIGINAL LEASE AND THAT THE SUBLESSEE KNOWS THE CONTENTS THEREOF AND AGREES TO ABIDE BY THE PROVISIONS THEREOF, THE CLARK AND THE GEER SUBLEASES REFERRING SPECIFICALLY TO ARTICLE VII AND CERTAIN OTHER ARTICLES OF THE ORIGINAL LEASE.

IT IS STATED THAT THE ABOVE SUBLESSEES MADE DIRECT INFORMAL ARRANGEMENTS FOR UTILITY SERVICES TO BE FURNISHED BY GENERAL ELECTRIC AS AGENT FOR THE COMMISSION; THAT THEY WERE BILLED DIRECTLY FOR SUCH SERVICES AND MADE PAYMENTS DIRECTLY TO GENERAL ELECTRIC COMPANY. THAT THE GEER SUBLEASE WAS CANCELLED ON SEPTEMBER 1, 1956, THE CLARK SUBLEASE ON AUGUST 1, 1956, AND THE BY-LO FOODS SUBLEASE ON OCTOBER 1, 1956; THAT IN EACH CASE THE SUBLESSEE OR ITS SUCCESSOR IN INTEREST HELD OVER AND OCCUPIED THE PREMISES FOR A PERIOD NOT MORE THAN A MONTH BEYOND THE EFFECTIVE CANCELLATION DATE; AND THAT DURING THE HOLDOVER PERIODS GENERAL ELECTRIC CONTINUED TO FURNISH SERVICES TO THE SUBLEASED PREMISES.

IT IS STATED FURTHER THAT AT THE TIME THE SUBLEASED PREMISES WERE VACATED THE SUBTENANTS WERE INDEBTED FOR UTILITY SERVICES AS FOLLOWS:

BY-LO FOODS $504.24

JIM CLARK

(ELECTRICITY AND TELEPHONE SERVICE) $ 76.05

CARL GEER

(ELECTRICITY AND TELEPHONE SERVICE) $ 28.40

$608.69

IT IS STATED THAT MANY DEMANDS FOR PAYMENT WERE MADE UPON THE SUBLESSEES BY GENERAL ELECTRIC; THAT IT DID NOT NOTIFY MR. COOK, THE LESSEE, UNTIL NOVEMBER 1957, AND THAT OTHER THAN THE ABOVE DEMAND LETTERS, NEITHER GENERAL ELECTRIC NOR THE COMMISSION HAS TAKEN ANY COLLECTION ACTION AGAINST THE SUBLESSEES.

IT IS RELATED THAT ON OCTOBER 29, 1957, PURSUANT TO ARTICLE V OF THE ORIGINAL LEASE, MR. COOK REQUESTED PERMISSION FROM GENERAL ELECTRIC TO ASSIGN HIS LEASE AND SELL HIS BUILDING TO L. A. AND JEANETTE SEBBER AND THAT THIS REQUEST WAS APPROVED BY THE COMMISSION UPON CONDITION THAT MR. COOK PAY ALL OBLIGATIONS DUE AND OWING THE LESSOR UNDER THE ORIGINAL LEASE. IT IS STATED THAT AT THE TIME OF THIS REQUEST MR. COOK WAS INDEBTED TO GENERAL ELECTRIC FOR RENTAL PAYMENTS AND MUNICIPAL-TYPE SERVICES; THAT HE WAS NOTIFIED THAT HE WOULD BE REQUIRED TO PAY $608.69 REPRESENTING THE ABOVE UNPAID UTILITY AND SERVICE BILLS; AND THAT HE PAID THE AMOUNTS OWING FOR RENT AND MUNICIPAL-TYPE SERVICES BUT THAT HE TOOK ISSUE WITH THE CLAIM FOR $608.69.

IT IS REPORTED THAT FOR THE PURPOSE OF PERMITTING MR. COOK TO CONCLUDE THE ASSIGNMENT OF THE ORIGINAL LEASE AS AMENDED AND THE SALE OF HIS BUILDING TO THE WEBBERS HE AGREED TO PAY THE DISPUTED CLAIM IN THE AMOUNT OF $608.69 TO THE COMMISSION IN ACCORDANCE WITH THE PAYMENT AGREEMENT. THIS AGREEMENT STIPULATES THAT THE PAYMENT OF $608.69 BY THE LESSEE WAS MADE SOLELY FOR THE PURPOSE OF SECURING THE COMMISSION'S APPROVAL OF THE ABOVE PROPOSED ASSIGNMENT AND SALE; THAT THE COMMISSION WILL HOLD THE AMOUNT SO PAID IN A SUSPENSE ACCOUNT FOR WHOEVER SHALL BE BENEFICIALLY ENTITLED TO THE AMOUNT; THAT THE QUESTION OF THE LESSEE'S LIABILITY FOR THE UTILITIES AND SERVICES FURNISHED THE SUBTENANTS WOULD BE SUBMITTED HERE FOR DECISION AND THAT THE ABOVE AMOUNT WOULD BE DISPOSED OF IN ACCORDANCE WITH OUR DECISION.

IT IS THE COMMISSION'S VIEW THAT UNDER THE PROVISIONS OF ARTICLE VII OF THE ORIGINAL LEASE MR. COOK IS LIABLE FOR THE $608.69 ITEM. IN SUPPORT OF SUCH VIEW THE COMMISSION CONTENDS THAT THE LANGUAGE OF THIS SECTION IS CLEAR AND UNAMBIGUOUS; THAT THE SECTION GOES TO THE WHOLE OF THE DEMISED PREMISES AS DO ALL OTHER PROVISIONS OF THE ORIGINAL LEASE AND NOT JUST TO THE PORTION OF THE PREMISES USED PERSONALLY MR. MR. COOK; THAT PURSUANT TO ARTICLE VII MR. COOK INSERTED THE ABOVE QUOTED PROVISIONS IN HIS SUBLEASES; AND THAT ANY ACTIONS TAKEN BY GENERAL ELECTRIC INCIDENT TO THE LESSEE'S ACCOUNTS DO NOT CONSTITUTE A WAIVER OF THE COMMISSION'S RIGHT TO HOLD MR. COOK RESPONSIBLE FOR PAYMENT OF THE ABOVE ITEM OF $608.69.

MR. COOK CONTENDS THAT HAD THE PARTIES TO THE ORIGINAL LEASE INTENDED THAT THE LESSEE WOULD BE LIABLE FOR CHARGES FOR SERVICES FURNISHED THE SUBTENANTS IT WOULD HAVE BEEN A SIMPLE MATTER TO HAVE INCLUDED A PROVISION TO THAT EFFECT; THAT SINCE THE LANGUAGE OF ARTICLE VII IS NOT CLEAR IT SHOULD BE CONSTRUED MOST STRONGLY AGAINST THE COMMISSION; AND THAT EVEN IF THE LEASE SHOULD BE CONSTRUED AS A GUARANTEE ON HIS PART FOR THE OBLIGATIONS OF THE SUBTENANTS, NO LIABILITY ATTACHES TO HIM IN THIS INSTANCE BECAUSE OF THE UNTIMELY NOTICE AND SINCE THE SUBLESSEES SUBSEQUENTLY BECAME INSOLVENT AND "MADE AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS.'

GENERALLY, A SUBLETTING DOES NOT IN ANY MANNER AFFECT THE LIABILITY OF THE LESSEE TO HIS LESSOR FOR THE PAYMENT OF RENT OR THE PERFORMANCE OF THE COVENANTS OF THE LEASE AND THE MERE RECEIPT OF RENTS BY THE LESSOR FROM THE SUBTENANTS AND THE CREDITING OF SAME TO THE ACCOUNT OF THE LESSEE DO NOT OPERATE TO RELIEVE THE LESSEE FROM CONTINUED LIABILITY TO THE LESSOR. 32 AM.JUR. LANDLORD AND TENANT SEC. 413; 42 A.L.R. 1173; 36 ID. 319; 51 C.J.S. LANDLORD AND TENANT SEC. 47. ALSO, IT HAS BEEN HELD THAT IN ORDER TO RELIEVE THE LESSEE FROM LIABILITY THERE MUST BE AN EXPRESS OR IMPLIED AGREEMENT ON THE PART OF THE LESSOR TO ACCEPT THE SUBTENANT IN LIEU OF THE LESSEE. PRESSLER V. BARREDA, 157 S.W. 435; AGEN V. NELSON, (WASH) 98 P. 1115; SINBERG V. DAVIS, 132 A. 287.

UNDER THE EXPRESS TERMS OF SECTION 7 OF ARTICLE VII OF THE ORIGINAL LEASE, QUOTED ABOVE, THE LESSEE IS OBLIGATED TO PAY FOR THE USE OF THE TELEPHONE SYSTEM AND FOR ELECTRICITY, WATER, SEWERAGE AND REFUSE REMOVAL, AND AS INDICATED ABOVE IT HAS BEEN HELD THAT THIS MAY NOT BE DISCHARGED OR THE ORIGINAL TENANT RELEASED FROM HIS OBLIGATION MAY NOT BE DISCHARGED OR THE ORIGINAL TENANT RELEASED FROM HIS OBLIGATIONS BY SUBLETTING THE PREMISES TO ANOTHER IN THE ABSENCE OF AN EXPRESS OR AN IMPLIED AGREEMENT WHICH HAS NOT BEEN ESTABLISHED IN THIS INSTANCE. SINCE THE LANGUAGE OF THE CITED PROVISION IS CLEAR AND UNAMBIGUOUS, THERE IS NO REQUIREMENT FOR CONSTRUCTION AND, THEREFORE, THE ORIGINAL LEASE MUST BE ENFORCED AS WRITTEN. 17 C.J.S. CONTRACTS, SEC. 294. PENN BRIDGE CO. V. UNITED STATES, 59 C.CLS. 892, 896. WHILE IT APPEARS THAT MR. COOK WAS NOT NOTIFIED OF THE DEFAULT OF HIS SUBTENANTS FOR THE INVOLVED BILLS FOR OVER A YEAR AFTER CANCELLATION, THE RECORD INDICATES THAT DURING THIS INTERVAL GENERAL ELECTRIC ATTEMPTED TO EFFECT COLLECTION FROM THE SUBLESSEES AND THAT MANY DEMANDS WERE MADE UPON THEM. IN THE CIRCUMSTANCES, AND SINCE SECTION 2 OF ARTICLE XVIII OF THE ORIGINAL LEASE EXPRESSLY PROVIDES THAT FAILURE OF THE LESSOR TO TAKE ANY ACTION WITH RESPECT TO ANY DEFAULT BY THE LESSEE SHALL NOT CONSTITUTE A WAIVER OF ANY OF THE LESSOR'S RIGHTS, THE LESSEE MAY NOT BE RELIEVED OF HIS EXPRESS OBLIGATION AS STIPULATED IN SECTION 7 OF ARTICLE VII TO PAY ALL CHARGES FOR THE USE OF UTILITIES AND SPECIAL SERVICES THEREIN SPECIFIED EVEN THOUGH THE SUBLEASES OBLIGATED THE SUBLESSEES THEREFOR.

ACCORDINGLY, IT MUST BE CONCLUDED THAT THERE IS NO LEGAL BASIS FOR REIMBURSING MR. COOK THE AMOUNT OF $608.69 COLLECTED FROM HIM PURSUANT TO THE ABOVE PAYMENT AGREEMENT.