Such a surrender by operation of law may result where the lessor enters into an agreement with the assignee containing materially different provisions from the old lease or amounting to a new lease. T.A.D. Jones Co. v. Winchester Repeating Arms Co. 55 F.2d 944, 948, affirmed, 61 F.2d 774, certiorari denied sub nomine Southeastern Investment Co. v. Tobler, 288 U.S. 609. Similarly, on principles of suretyship, the lessee may be discharged by an agreement between the lessor and the assignee, the effect of which is to vary the lessee's obligations under the original lease, since the lessee for many purposes is considered, after an assignment, to be a surety for the assignee's performance of the obligations of the lease.
Indeed, by the express terms of the lease, Federal's remained primarily liable by virtue of its making an unapproved assignment. Federal's relies on three cases decided by the Second Circuit Court of Appeals, In re Radio-Keith-Orpheum Corp., 91 F.2d 1004 (2d Cir.), cert. denied, Irving Trust Co. v. Burnett, 302 U.S. 754, 58 S.Ct. 282, 82 L.Ed. 583 (1937), In re Paramount Publix Corp., 85 F.2d 83 (2d Cir. 1936), and T.A.D. Jones Co. v. Winchester Repeating Arms Co., 55 F.2d 944 (D.Conn.), aff'd, 61 F.2d 774 (2d Cir. 1932), cert. denied, Southeastern Investment Co. of Savannah, Ga. v. Tobler, 288 U.S. 609, 53 S.Ct. 401, 77 L.Ed. 983 (1933), in support of the position that, upon assignment of the lease, Federal's became a surety for the performance of its assignee and was no longer a party to an executory contract. We are of the opinion that the holdings of these cases are inapposite to the facts of the present case, and do not require a result different from that reached by the district court.
Suit by the T.A.D. Jones Company against the Winchester Repeating Arms Company, wherein the Union New Haven Trust Company and others were appointed receivers, and wherein the Southeastern Investment Company of Savannah, Georgia, filed a claim. Decree expunging the claim [ 55 F.2d 944], and the claimant appeals. Affirmed.
Although there is no caselaw directly on point in Virginia, there is authority from other jurisdictions to support Grace's position. See, e.g., Samuels v. Ottinger, 169 Cal. 209, 146 P. 638, 639 (1915) ("The effect of the assignment is to make the lessee a surety to the lessor for the assignee, who, as between himself and the lessor, is the principal bound, whilst he is assignee, to pay the rent and perform the covenants."); T.A.D. Jones Co. v. Winchester Repeating Arms Co., 55 F.2d 944, 947 (D.Conn. 1932), aff'd, 61 F.2d 774 (2d Cir. 1932); Walker v. Rednalloh, 299 Mass. 591, 13 N.E.2d 394, 397 (1938); Restatement (Second) of Property, Landlord and Tenant, ยง 16.1 cmt. e (1977). We find this authority persuasive.
The Trust argues there is no distinction between contractual liability as surety and as primary obligor inasmuch as both are "direct." For this point, Trust mainly relies on T.A.D. Jones Co. v. Winchester Repeating Arms Co., 55 F.2d 944, 946 (D.Conn.1932) ("As a surety, [assignor/lessee] was directly liable for the rent to the original lessor..."). Of course, this 1932 decision post-dated the 1926 Lease and did not involve California law. Of the cases relied on by Trust in this regard, only T.A.D. Jones Co. purported to specifically characterize surety liability as "direct" liability.
Connecticut law dealing with the grant and enforcement of security interests in rents reinforces the conclusion that rents are a part of the bundle of rights that comprise real property. The owner of the land may transfer or encumber an interest in rents and leases just as he or she may transfer or encumber any other part or all of the real estate. See T.A.D. Jones Co. v. Winchester Repeating Arms Co., 55 F.2d 944, 946-47 (D.Conn.) (lessor's assignee may maintain action for collection of rent), aff'd, 61 F.2d 774 (2d Cir. 1932), cert. denied, 288 U.S. 609, 53 S.Ct. 401, 77 L.Ed. 983 (1933).
The authority cited by the objectants is in complete accord with this proposition. See, e.g., T.A.D. Jones Co. v. Winchester Repeating Arms Co., 55 F.2d 944, 947 (D.Conn. 1932) aff'd 61 F.2d 774 (2d Cir.), cert. denied, 288 U.S. 609, 53 S.Ct. 401, 77 L.Ed. 983 (1933) (assignor was primarily liable to lessor, but as between assignor and assignee, it was "doubtless that the liability of [the assignee] was precedent"); Carrano v. Shoor, 118 Conn. 86, 95, 171 A. 17 (1934) (relationship between lessee and assignee was akin to surety and principal, although lessee remained primarily liable to lessor). All of the objectants counter G W's claim with the notion that no default existed for purposes of section 365(b) because at the time of assumption G W had already cured any possible default.
"Regardless of the precise analysis of the theories by which the lessee may be relieved of liability by an assignment, the principle is clear that an agreement between the lessor and the assignee materially varying the terms of the original lease will on one theory or another result in the termination of the lessee's covenant to pay rent. Fifty Associates v. Grace, 125 Mass. 161, 163, 28 Am. Rep. 218; T.A.D. Jones Co. v.Winchester Repeating Arms Co., D.C., 55 F.2d 944, at page 948; Kaskel v. Hollander, 1 Cir., 68 F.2d 265, 267; Fairchild v. Cahn, 120 Cal.App. 418, 420, 7 P.2d 1051; Keeley v. Beenblossom, 183 Iowa, 861, 863, 864, 167 N.W. 638; Seeburger v. Cohen, 215 Iowa, 1088, 1092, 247 N.W. 292, 89 A.L.R. 427. Compare Essex Lunch, Inc. v. Boston LunchCo., 229 Mass. 557, 559, 560, 118 N.E. 899. The lessee is not discharged, however, by variations which inure to his benefit.
We do not agree. The basic distinction between an assignment and a sublease is that by the former, the lessee conveys his whole interest in the unexpired term, leaving no reversion in himself; the latter transfers only a part of the leased premises for a period less than the original term. T. A. D. Jones Co. v. Winchester Repeating Arms Co., 55 F.2d 944, 947 (D. Conn.), aff'd, 61 F.2d 774 (2d Cir. 1932), cert. denied sub nom. Southeastern Investment Co. v. Tobler, 288 U.S. 609, 53 S.Ct. 401, 77 L.Ed. 983 (1933). Contrary to Radulesco's claim, a mere reservation of the right of entry on default does not constitute retention of a reversionary interest.