## Facts

- A shopping-center landlord leased retail space to Stanley and Margaret Hryniuk (The Video Shoppe) under a written lease beginning September 1, 1987, expiring June 30, 1989, with monthly rent of $1,296.25.
- The lease contained a holdover clause providing that a tenant remaining after expiration without a new lease would become a month-to-month tenant at 150% of the stated rent.
- During the lease term, the Hryniuks and Carolyn Maddry (The Floral Emporium) executed a document titled “Sublease Agreement,” with the landlord’s consent and signature.
- The agreement stated Maddry would occupy the premises on the terms and conditions of the original lease and that both the agreement and underlying lease would expire June 30, 1989.
- Maddry’s rent payments under the agreement were set at amounts lower than the rent in the original lease; Maddry also agreed to pay certain charges (water and sewer) directly to the landlord.
- The agreement included a confidentiality clause binding the tenant, Maddry, and the landlord regarding rent disclosures.
- After June 30, 1989, Maddry remained in possession without executing a new lease and refused to pay the holdover rent demanded by the landlord.
- The landlord sued Maddry for unpaid rent and related damages; the trial court dismissed under Rule 12(b)(6) on the ground the agreement was a sublease creating no privity with the landlord.

## Issues

1. Whether the transfer labeled a “Sublease Agreement” was, in legal effect, an assignment or a sublease.
2. Whether the landlord’s complaint, including attached lease documents, stated a claim against Maddry sufficient to survive a Rule 12(b)(6) motion.

## Decision

- The North Carolina Court of Appeals reversed the Rule 12(b)(6) dismissal and remanded.
- The court treated the transaction as an assignment because it transferred the entire remaining lease term and incorporated the original lease’s terms.
- Because the landlord participated as a signatory and Maddry assumed obligations tied to the leasehold, the pleadings supported privity between the landlord and Maddry.
- Taking the complaint and exhibits as true, the landlord plausibly alleged entitlement to rent from Maddry, including potential holdover rent, so dismissal at the pleading stage was improper.

## Legal Principles

- The legal effect of a transfer controls over its label; a transfer of the entire remaining lease term is an assignment, while retention of any reversionary interest indicates a sublease.
- An assignee who takes the leasehold subject to the original lease obligations, particularly with landlord participation/consent reflected in the transfer instrument, may be directly liable to the landlord for rent.
- On a Rule 12(b)(6) motion, the court accepts pleaded facts and reasonable inferences as true and considers attached exhibits as part of the pleadings; dismissal is improper if any set of facts consistent with the pleadings would permit relief.
- An assignee who remains in possession after the lease expires may be subject to the lease’s holdover provisions and related rent obligations.

## Conclusion

The court held that the purported “sublease” was an assignment because it conveyed the full remaining term and tied Maddry’s possession to the original lease; the landlord therefore could pursue rent claims directly against Maddry, and the complaint could not be dismissed under Rule 12(b)(6).


Northside Station Assocs. P’ship v. Maddry, 105 N.C. App. 384, 413 S.E.2d 319 (N.C. Ct. App. 1992)