## Facts

- Cain Partnership, Ltd. leased commercial real property in Knox County, Tennessee under a long-term ground lease requiring (1) monthly rent and (2) payment of all real property taxes “promptly when due” as further consideration.
- The lease contained no express default, forfeiture, termination, or remedy provision tied to nonpayment, aside from an attorneys’ fees clause for enforcement actions.
- The lease was assigned and ultimately held by Pioneer Investment Services Company as tenant.
- Cain executed a landlord’s estoppel certificate for the benefit of Pioneer and a lender bank, providing the bank notice of lease defaults and a 30-day opportunity to cure after notice.
- Pioneer entered Chapter 11 bankruptcy; in that proceeding, Cain argued the lease had automatically terminated due to failure to pay property taxes. Federal courts rejected automatic termination in the absence of a forfeiture clause.
- After bankruptcy, Cain filed an unlawful detainer action in Tennessee state court seeking possession based on Pioneer’s alleged failure to pay real property taxes when due; the lender bank intervened to protect its security interest.
- The trial court granted summary judgment to Pioneer, holding the lease could not be judicially terminated because it lacked a termination/forfeiture clause; the court of appeals affirmed.

## Issues

1. Whether, under Tennessee law, a commercial lease lacking an express forfeiture or termination clause may be judicially terminated for the tenant’s alleged material breach (nonpayment of real property taxes) in an unlawful detainer action.
2. Whether prior federal bankruptcy rulings concerning the lease precluded litigation in state court on the availability of judicial termination under Tennessee law.

## Decision

- The Tennessee Supreme Court reversed the summary judgment for Pioneer and remanded.
- The Court held that a lessor may seek judicial termination and recovery of possession for a tenant’s material breach even if the lease lacks an express forfeiture or termination clause.
- The Court held the prior federal bankruptcy rulings did not collaterally estop Cain because they addressed automatic termination, not the availability of judicial termination as a state-law remedy.
- The Court concluded summary judgment was improper because it rested on an incorrect legal premise that termination is categorically unavailable without a forfeiture clause.

## Legal Principles

- A lease is both a conveyance of an interest in land and a contract; contract remedies may apply to serious nonperformance.
- Absence of an express forfeiture/termination clause may prevent automatic termination upon default, but it does not bar a court from ordering judicial termination for material breach.
- Forfeiture is a harsh remedy; judicial termination is discretionary and depends on proof of material breach and equitable considerations.
- Unlawful detainer may be used to pursue recovery of possession based on a tenant’s default; availability is not limited to leases containing express termination language.
- Collateral estoppel requires that the identical issue was actually litigated and necessarily decided; determinations limited to automatic termination in bankruptcy proceedings do not resolve judicial termination under state law.

## Conclusion

The Tennessee Supreme Court held that a commercial lease may be judicially terminated for a tenant’s material breach, including failure to pay required property taxes, even when the lease contains no express forfeiture or termination clause, and it remanded because the lower courts improperly treated the absence of such a clause as an absolute bar to termination.


Cain Partnership, Ltd. v. Pioneer Inv. Servs. Co., 914 S.W.2d 452 (Tenn. 1996)