ICSC Legal Database - Cases Monday, February 22, 1999 05:01 PM Case Index: 00123 Citation: American Community Stores Corporation v. M.J. Newman, 232 Neb. 34, 441 N.W.2d 154 (1989). Issue: Whether tenants, in subletting for a period ending a few days prior to the prime lease, violated the terms of their leases which prohibited assignment without the prior written consent of the landlord? Facts: After announcing the closing of its Columbus, Auburn, and Omaha stores, Plaintiff, American Community Stores, contacted Defendants, trustees for the landlords, and requested permission to assign its leases for grocery stores to Nash-Finch Company. Nash-Finch, a grocery wholesaler, was to sublet the stores to the new operators. After the Columbus store was assigned to Nash-Finch and sublet to the new operators, Nash-Finch wrote Defendants informing them of the transactions. Defendants replied that the landlords did not consent to the assignments of the Auburn and Omaha stores and that if Plaintiff assigned without consent, its letter was to constitute notice of default. Defendants also notified Plaintiff that they considered the transfer of the Columbus store an assignment without consent and that their letter constituted notice of default. Within two weeks, Defendants were notified that the stores would be sublet instead of leases being assigned. Plaintiff replaced the assignments with subleases, which were designed to end two days prior to the end of Plaintiff's prime leases with Defendants and also gave Nash-Finch the right to exercise the remaining option periods granted by the prime leases. Each lease prohibits assignment without prior consent of the landlord but allows the tenant to sublet without such consent. The prime lease also provides that if default continues for 20 days after notice of such default by the landlord, the landlord may reenter and take possession of the. property. Plaintiff filed petitions for declaratory judgment, seeking a determination as to whether it had violated the lease terms prohibiting assignment. Defendants counterclaimed for possession. The trial court found for Plaintiff. Defendants appealed. Holding: Affirmed. Since Plaintiff had no authority to assign the leases without the consent of the landlords, the assignments were ineffective. Therefore, they did not have to be rescinded or reassigned back to Plaintiff before it could enter into valid subleases. Even though ineffective, the assignments violated the leases and constituted default. However, by later executing subleases, Plaintiff cured the default within the requisite 20-day period. The new transfers are deemed subleases rather than assignments because Plaintiff retained a reversionary interest in both its right of reentry and in the fact that the Nash-Finch tenancy ends two days prior to the end of the Plaintiff's tenancy. Finally, Defendants' argument that the terms of the subleases between Nash-Finch and the new operators reveal that Plaintiff intended to assign the leases is rejected. Also rejected is Defendants' argument that by granting Nash-Finch the right to exercise the renewal options in the prime lease, the transfers became assignments. It is interesting to note that while the Nebraska Courts have upheld provisions requiring consent of landlord, they are nevertheless liberally construed in favor of the lessee. Publication: Legal Update Date: Winter 1989 Classification 1: Landlord and Tenant Classification 2: Classification 3: 00123 - Legal Update - Winter 1989