American Community Stores Corp. v. Newman

American Community Stores Corporation (Plaintiff) operated a chain of Hinky Dinky grocery stores in Nebraska on rented premises. The leases had 20-year terms, with the option of extending for five-year periods. Each lease prohibited assignments without the consent of the landlord, but allowed subleases without consent. Each lease provided that if Plaintiff defaulted on the lease, Plaintiff had twenty days after receiving notice from the landlord to cure the default before the landlord could retake possession of the property. Plaintiff announced in 1985 that it would close its stores in Nebraska. Each of the three stores at issue in this case was closed and reopened the next day under different management. Plaintiff had originally arranged to assign its leases to Nash-Finch Company, which would then sublease the stores to individual operators. Plaintiff and Nash-Finch signed assignment agreements. Plaintiff informed the landlords of the three stores at issue here (Defendants) of the assignments, and Defendants refused to consent to the assignments. Within two weeks, Plaintiff destroyed the assignment agreements and signed agreements with Nash-Finch to sublet the stores, with the subleases to end two days before Plaintiff’s leases ended. The agreements allowed Nash-Finch to extend its sublease through Plaintiff’s five-year option periods, and allowed Plaintiff to reenter if the conditions of the subleases were broken. Nash-Finch signed agreements with operators of the stores providing that they could operate the stores until Plaintiff’s leases expired. Also within two weeks, Plaintiff notified Defendants that the properties would be sublet. Plaintiff then sued for a declaratory judgment as to whether it had violated the terms of the leases. The trial court found that Plaintiff had valid subleases with Nash-Finch, because the subleases ended two days before the leases did, leaving Plaintiff a right of reversion. The trial court also held that Plaintiff’s right of reentry if the conditions of the sublease were broken was a right of reversion. Finally, the trial court held that Nash-Finch’s ability to extend its subleases through Plaintiff’s option periods did not make the agreements assignments. Defendants appealed, arguing that Plaintiff had actually assigned its leases to Nash-Finch.