Question 1 (45 minutes suggested). Paul Plumb was an experienced plumber and had always dreamed of opening his own wholesale plumbing supply store. In July 1993 his dream was finally realized. He noticed a vacant store space in a commercial building in the downtown area of the City of Provem, State of Bliss, which was owned by Larry Lowe. Plumb contacted Lowe, who showed him through the space and agreed to lease it to him for five years, beginning on September 1, 1993, at a rent of $1,500 per month. Plumb explained to Lowe the nature of the business Plumb planned to operate.
Lowe wrote up a lease on a single page and both parties signed it. However, it was not recorded in the county records. It read as follows:
July 12, 1993Plumb paid the first month's rent and opened for business on September 1. While moving in, he was somewhat disconcerted to discover that there were large water stains on the ceiling, apparently a result of leaks in plumbing in the upper floors of the building, which he had not noticed in his original walk-through. However, Plumb's customers were not the picky sort, and he decided to do nothing about the stains.
Larry Lowe and Paul Plumb agree that Plumb will lease from Lowe the ground floor store space owned by Lowe at 123 Main St., City of Provem. Lease term will commence September 1, 1993 and will last five years. Rent will be $1,500 per month, payable in advance. Plumb will pay for all repairs and maintenance, and will not transfer or sublet the premises without Lowe's consent.
[Signatures of both parties]
Two weeks later a large out-of-state real estate development firm announced that it was about to commence construction of a huge shopping-office complex immediately across Main Street from the plumbing business. Business people in Provem expected that this project would mean a major increase in real estate values throughout the downtown area. Plumb was visited by an agent for Acme Real Estate, Inc., who offered to take an assignment of Plumb's lease for a cash consideration of $20,000. The agent explained that Acme, a responsible and solvent local company, planned to put in a retail clothing store. This offer was too attractive to resist, and Plumb (without contacting Lowe) executed an assignment to Acme of the entire remaining term of the lease, to take effect October 15.
In early October Lowe learned of the assignment. He wrote Plumb a letter on October 10, notifying Plumb that Lowe was terminating the lease and demanding that Plumb vacate the premises immediately, and giving the following reasons:
1. "You have breached the terms of our lease by entering into an assignment without my consent.
2. "Your rights under the lease are void because the lease does not comply with Bliss Revised Statutes § 74-21-5, which provides that 'No lease for more than three years' duration may be enforced unless it is recorded in the county recorder's office of the county in which the leased premises are located.'
3. "You have been operating a wholesale plumbing supply business in violation of the Provem City zoning ordinance, which restricts use of this building to retail uses only. You are therefore operating an illegal business.
4. "You have failed to repair the water stains on the ceiling of the premises, as required by the lease."
Lowe's quotation of the statute and his statement about the zoning ordinance are accurate, although Plumb had not previously been aware of them. There are no other relevant statutes or ordinances.
Plumb informed Acme of Lowe's letter, and Acme's response was, "You had better take care of this, and fast. If you don't, we'll sue you to get our $20,000 back."
Please prepare a memo analyzing
Lowe's claim that the lease is terminated and any defenses to that claim
which Plumb may have. Discuss all issues and state your conclusions.
Question 2 (50 minutes suggested). Olga Olsen had arrived from the Old County penniless, but through shrewd business dealings had amassed a portfolio of valuable real estate by the time she died in late 1990. Her will contained the following clause:
I leave Olsen Manor, my five-star hotel in the City of Provem, State of Bliss, to my two nieces, Amy and Betty Olsen, as joint tenants, remainder to the survivor.Amy, who was quite interested in the hotel business, moved to Provem in early 1991 and took over active management of Olsen Manor. Betty lived out of state and took no active role in the business. The hotel has been highly profitable, generating revenues from room receipts, restaurants, banquet facilities, and parking. Amy has collected net profits from the hotel in excess of $1 million since she took over management, but has never sent Betty any of that money.
In 1992 Perry Plaintiff, a ten-year-old child, was in the hotel attending a reception that featured a large ice sculpture of a swan as a centerpiece. Perry stuck his tongue on the swan and it was frozen there. Perry (through a guardian ad litem) sued Amy in state court in Provem for his injuries; Betty was not a party to the action. In July 1993 Perry obtained a judgment against Amy for $100,000, but has not yet collected that judgment. A statute of the State of Bliss provides that a judgment imposes a lien on the real property of the defendant in the county where the judgment is docketed.
The hotel's legal problems were multiplied in August 1993. A guest of the hotel, Ann Tique, brought a small zippered canvas satchel to the front desk and asked that it be held there for safekeeping for an hour while Tique worked out in the hotel's exercise room. The desk clerk did not inquire as to the contents of the satchel or look inside it, but placed it on the credenza behind the front desk after tagging it with Tique's name. It was not placed in the hotel's safe because at the time the combination lock on the safe was not in working order. When Tique returned to claim the satchel, it was missing and its whereabouts remain unknown. Tique has advised Amy Olsen that the stachel contained two rare Tibetan bells worth $500,000, and has demanded reimbursement in that amount. Thus far Amy has not paid and Tique has not filed any litigation.
Amy was understandably tired of dealing with the hotel's problems, and she decided that it would be better off with professional management. Effective October 1, 1993, she leased her interest in the property to the Marriott Corporation, which agreed to pay her rent of $25,000 per month. Betty had no involvement in this lease. Marriott took over the management of the property, and thus far has paid three monthly installments of rent totaling $75,000.
Last week Betty Olsen died in a traffic accident in another city. Her will leaves all her property to her son Brad, who is also her executor. You have been contacted by Amy Olsen, who has asked you to prepare an opinion letter for her advising (1) who owns interests in Olsen Manor, and (2) to what extent Amy may be liable for claims by Betty Olson's estate or by Ann Tique. Please prepare a response to this request, fully discussing all relevant legal issues.