Cain Partnership, Ltd. v. Pioneer Investment Services Company

914 S.W.2d 452 (1996)

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Nature of the Case

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Facts

P leased a tract of commercial real property for a term of 20 years and granted D, the lessee, the right to extend the lease for three terms of 20 years each and an additional term of 15 years. In 1987, the lease was assigned to a subsidiary of the D and later transferred to that subsidiary. The rent was to be $1,500 per month and D was to pay all real property taxes assessed against said property by taxing authorities during the term of this lease and any renewal thereof. Said taxes shall be paid promptly when due during the entire term. There was nothing in the lease regarding defaults in payment or performance, forfeiture, or remedies for breach of the terms of the lease, except for a provision allowing the recovery of attorneys' fees in the event P should be required to take legal action to enforce the terms of the lease. In 1984, P executed a 'Landlord's Estoppel Certificate' for the benefit of D where P agreed that it would give notice to D of any default by D in the performance of the lease and would give D 30 days from the date of its receipt of the notice within which to cure the default. The Bank agreed to give P notice of any default in D's obligation to the Bank. Dr filed a voluntary petition in bankruptcy and became a debtor-in-possession. P filed a motion to lift the automatic stay so P could repossess the leased property, on the ground that the lease had 'automatically' terminated because D had failed to pay the property taxes when due. The bankruptcy court refused because the lease contained no forfeiture or termination provision, no default by the defendant would constitute grounds for termination of the lease. The bankruptcy court and the district court determined that Tennessee law requires affirmative conduct by a lessor in order to terminate a nonresidential lease that lacks a termination or forfeiture clause on the grounds of breach. P then sued for unlawful detainer. The Bank filed a motion to dismiss the complaint, contending that pursuant to the estoppel certificate, P was obligated to give the Bank notice of and an opportunity to cure any default prior to the initiation of any action to have the lease terminated. The court held that the lease could not be judicially terminated because it contains no provision for termination. It declared the issue raised by the Bank moot and dismissed the complaint. The Court of Appeals held that the Bank had not been given an opportunity to cure the default before the suit was filed, as required by the estoppel certificate, and affirmed the trial court's dismissal of the suit. P appealed.