Agency Possession Estoppel: Validity of Leases by Non-Title-Holding Lessors

Introduction

In Hembree Insurance Trust v. Maples Industries, Inc., the Supreme Court of Alabama addressed whether a named lessor who did not hold record title to leased premises could nonetheless validly lease those premises and enforce the lease against its tenant. The dispute arose out of a five-year industrial lease executed in February 2019, under which Hembree Insurance Trust (“Hembree”)—though not the record owner—leased a large warehouse to Maples Industries, Inc. (“Maples”). When Maples refused to perform roof repairs, Hembree sued for breach. Maples countered that the lease was “void ab initio” because Hembree lacked title, and successfully obtained summary judgment in the trial court. Hembree appealed. The Supreme Court reversed, holding (1) a party with legal possession and authority may validly lease property even if the title is held by another entity, and (2) a tenant in possession is estopped from challenging the lessor’s right to lease.

Summary of the Judgment

The Supreme Court of Alabama reversed the trial court’s grant of summary judgment in Maples’s favor. The Court held:

• A lessor need not hold record title if it lawfully possesses or controls the property and has authority—under entity‐formation documents or agency principles—to lease it.
• A tenant who accepts possession under a lease is estopped from disputing the lessor’s right to lease the premises.
• On the record before it—showing that Hembree was the sole member and manager of the actual owner (Woods Cove Industrial Property, LLC) and had authority to lease, and that Maples accepted and paid rent—the Court concluded that genuine issues of fact remained and that the lease was not void as a matter of law.

The matter was remanded for further proceedings consistent with this analysis.

Analysis

Precedents Cited

Several authorities and cases guided the Court’s decision:

• 49 Am. Jur. 2d Landlord & Tenant § 3 (2018): Establishes that “a lessor may validly lease property to another, despite the fact that the title to the property is in a third person, if the lessor lawfully possesses the property.”
• 52 C.J.S. Landlord & Tenant § 503 (2024): Reinforces that possession or an interest enabling the grant of a lease suffices; without any right, title, or interest, the lease is void.
• Ala. Code § 35-9-1 (1975): Provides that “the tenant cannot dispute his landlord’s title,” embodying the public‐policy rule against tenants challenging the landlord’s title after taking possession.
• Davis v. Williams, 130 Ala. 530 (1901): Explains the mutual estoppel that arises when a tenant accepts possession, forbidding the tenant from later asserting that the lessor lacked title.
• Whaley v. Wynn, 208 Ala. 342 (1922): Holds that a tenant is estopped from denying the lessor’s authority when the lease was executed by the lessor’s agent and the tenant took possession under that lease.

Legal Reasoning

The Court’s reasoning unfolded in three steps:

1. Summary-Judgment Standard: Because the trial court treated Maples’s Rule 12(b)(6) motion as a summary‐judgment motion, the Court applied a de novo review of whether genuine issues of material fact existed and whether Maples was entitled to judgment as a matter of law.
2. Authority to Lease: The record showed that in 2014 Hembree organized Woods Cove Industrial Property, LLC, with itself as sole member and manager. The LLC’s operating agreement empowered Hembree to acquire, manage, and lease property on Woods Cove’s behalf. Thus, Hembree lawfully possessed the property and had the right to lease it—even though record title rested in the LLC.
3. Tenant Estoppel: Under longstanding Alabama law, once a tenant accepts a lease and takes possession, the tenant is estopped from later asserting the lessor lacked title or authority. Maples leased, occupied, and paid rent under the lease; accordingly, it could not void the lease on the ground that Hembree (rather than Woods Cove) was the named lessor.

Given these principles, the Court concluded that as a matter of law the lease was not void ab initio and that genuine fact issues remained, warranting reversal of the summary judgment.

Impact

This decision clarifies and cements the following legal doctrines in Alabama:

• Non-Title Lessor Leasing Authority: Single-member or controlling members of LLC-owners may validly lease property in their own names if empowered by entity documents.
• Possession Estoppel: Tenants cannot evade lease obligations by later attacking the lessor’s title or authority once they have taken possession and enjoyed the benefits of the lease.

In practice, parties structuring leases with LLC or trust-owned property will now pay closer attention to organizing and documenting agency and management authority. Tenants will be foreclosed from “title‐fraud” defenses when a formally empowered agent or member leases premises.

Complex Concepts Simplified

• Summary Judgment: A procedure where the court decides a case without trial if no important facts are in dispute and the moving party is entitled to win as a matter of law.
• Rule 12(b)(6): A rule allowing dismissal of claims if the complaint fails to state a legal claim, but courts may treat such a motion as a summary‐judgment motion if extra evidence is considered.
• Estoppel: A legal barrier preventing a person from asserting a fact or right when their previous words or actions contradict that assertion. Here, a tenant is estopped from challenging the lessor’s authority after taking possession.
• Single-Member LLC: A limited liability company with one owner (“member”). That member often has management and agency powers under the LLC’s operating agreement.

Conclusion

Hembree Insurance Trust v. Maples Industries, Inc. establishes that under Alabama law:

• Possession and managerial authority—properly documented—can suffice to legitimize a lease even if record title is in a separate entity.
• Tenants who accept possession under such leases cannot later challenge the lessor’s right to lease by attacking title.

This ruling strengthens transactional certainty in real‐estate leases involving trusts and LLCs, and it underscores the enduring principle that a tenant’s acceptance of possession under a lease carries with it an estoppel against later title challenges.