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MSM Development, LLC v. Steward

Court of Appeals of Tennessee, Knoxville

November 13, 2019

MSM DEVELOPMENT, LLC
v.
WILLIAM STEWARD ET AL.

          Session October 16, 2019

          Appeal from the Chancery Court for Roane County No. 2017-23 Frank V. Williams, III, Chancellor

         A commercial tenant transferred its interest in a lease to two individuals through a document called an assignment. The rental term set forth in the lease was fourteen months longer than the rental term set forth in the assignment. The transferees only paid rent for the term set forth in the assignment, and the landlord filed a complaint in an effort to collect the rent for the additional fourteen months. The trial court concluded that the document transferring the initial tenant's interest was a sublease rather than an assignment because the term in the assignment was shorter than the term set forth in the lease. The transferor appealed, and we reverse the trial court's judgment because the assignment specified that in the event of a conflict between the lease and the assignment, the lease controlled.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed and Remanded

          William A. Reeves, Knoxville, Tennessee, for the appellant, MSM Development, LLC.

          Thomas Lynn Tarpy and John David Haines, Knoxville, Tennessee, for the appellees, William Steward and Jennifer Steward.

          Andy D. Bennett, J., delivered the opinion of the Court, in which John W. McClarty and Thomas R. Frierson, II, JJ., joined.

          OPINION

          ANDY D. BENNETT, JUDGE

         I. Factual and Procedural Background

         MSM Development, LLC ("MSM") was the landlord of commercial property in Lenoir City, Tennessee, and it entered into a five-year lease (the "Lease") with East Tennessee Pizza, LLC ("ETP"). The Lease was dated September 21, 2010, and it provided in Section Two that the five-year term was to begin "upon TENANT's acceptance of the premises by executing Exhibit B herein." Exhibit B was titled "Lease Commencement Agreement," and it provided that the payment of rent was to begin on June 1, 2011, and that the Lease was to "end at midnight on the 30th day of May, 2016, unless sooner terminated or extended as therein provided."

         William and Jennifer Steward entered into an agreement with ETP and MSM that was titled "Assignment and Assumption of Lease for Premises at Lenoir Mills Retail Center" (the "Assignment"). The Assignment stated that it was effective as of November 1, 2012, and it provided, in pertinent part, as follows:

WHEREAS, Assignor desires to assign its interests in and to the Lease to Assignee, and Landlord desires to evidence its consent to such assignment; and
NOW, THEREFORE, for and in consideration of the sum of TEN AND NO/100 DOLLARS ($10.00), and for other good and valuable consideration given and received by Landlord, Assignor, and Assignee, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:
1. Assignment of Lease by Assignor. Assignor does hereby assign all of its right, title, and interest in, to, and ...

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