239 So. 3d 1139
Ala.2017Background
- In 1974 Multiple Properties (lessor) granted a long-term ground lease (initial 31 years + renewal options) that was recorded; Bruno's later held the lessee interest.
- In 1997 Bruno's assigned its leasehold to Rochester-Mobile and Salzman-Mobile (Rochester‑Salzman) as part of financing; Rochester‑Salzman simultaneously subleased the premises back to Bruno's for 25 years with renewal options. The sublease was not recorded.
- Bruno's bankruptcy in 2009 resulted in Southern Family Markets (SFM) assuming Bruno's sublease obligations; C & S guaranteed those obligations.
- Multiple Properties sued in 2015 over renewal issues; SFM and C & S counterclaimed that the unrecorded sublease was void beyond 20 years under Ala. Code § 35‑4‑6 and thus would terminate at 20 years.
- The trial court granted judgment on the pleadings for SFM and C & S, holding the unrecorded sublease void beyond 20 years; Rochester‑Salzman appealed.
Issues
| Issue | Rochester‑Salzman (Plaintiff) Argues | SFM & C & S (Defendants) Argue | Held |
|---|---|---|---|
| Whether Ala. Code § 35‑4‑6 applies to a sublease | § 35‑4‑6 is in derogation of common law and must be strictly construed; "lease" does not include "sublease"; legislature uses both terms elsewhere; recording master lease suffices | A sublease is a lease and § 35‑4‑6 unambiguously applies to all leases | The term "lease" in § 35‑4‑6 does not include a sublease; statute does not apply to subleases |
| Whether an unrecorded sublease is void beyond 20 years under § 35‑4‑6 | Recording the master (ground) lease provides the notice the statute seeks; applying § 35‑4‑6 to subleases does not further legislative purpose | The sublease was not recorded within one year, so it terminates at 20 years under § 35‑4‑6 | The recording purpose is satisfied by recording the master lease; an unrecorded sublease is not void under § 35‑4‑6 |
| Whether a lessee may transfer or alienate parts of a valid >20‑year leasehold (assign vs. sublease) | If a >20‑year lease is valid, its parts should be alienable; § 35‑4‑6 does not restrict subleases though it omits assignments | § 35‑4‑6 should be read to limit long subleases as it limits leases generally | The statute applies to leases, not subleases; assignments are not governed by § 35‑4‑6 and subleases likewise need not be recorded under that statute |
| Enforceability of independent monetary covenants if sublease invalidated | Payment obligations were part of a financing deal and are separate, enforceable obligations regardless of sublease validity | If sublease voided, post‑20‑year rent obligations cannot be enforced under the sublease | Court did not decide this issue (pretermitted) because it held the sublease is not void under § 35‑4‑6 |
Key Cases Cited
- Foster v. Martin, 246 So.2d 435 (Ala. 1971) (statutes in derogation of common law must be strictly construed)
- Eastwood Mall Assocs., Ltd. v. All American Bowling Corp., 518 So.2d 44 (Ala. 1987) (recording requirement provides notice to purchasers of long leases)
- Pantry, Inc. v. Mosley, 126 So.3d 152 (Ala. 2013) (distinguishing assignment from sublease)
- IMED Corp. v. Systems Eng'g Assocs. Corp., 602 So.2d 344 (Ala. 1992) (plain statutory language controls when unambiguous)
- Universal Underwriters Ins. Co. v. Thompson, 776 So.2d 81 (Ala. 2000) (judgment on the pleadings reviewed de novo)