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American Community Stores Corp. v. Newman

Nebraska Supreme Court
232 Neb. 434, 441 N.W.2d 154 (1989)


American Community Stores Corporation (ACS) (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 ACS defaulted on the lease, ACS had 20 days after receiving notice from the landlord to cure the default before the landlord could retake possession of the property. ACS 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. ACS had originally arranged to assign its leases to Nash-Finch Company, which would then sublease the stores to individual operators. ACS and Nash-Finch signed assignment agreements. ACS informed the landlords of the three stores at issue here (defendants) of the assignments, and the landlords refused to consent to the assignments. Within two weeks, ACS destroyed the assignment agreements and signed agreements with Nash-Finch to sublet the stores, with the subleases to end two days before ACS’ leases ended. The agreements allowed Nash-Finch to extend its sublease through ACS’ five-year option periods, and allowed ACS 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 ACS’ leases expired. Also within two weeks, ACS notified the landlords that the properties would be sublet. ACS then filed suit for a declaratory judgment as to whether it had violated the terms of the leases. The trial court found that ACS had valid subleases with Nash-Finch, because the subleases ended two days before the leases did, leaving ACS a right of reversion. The trial court also held that ACS’ 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 ACS’ option periods did not make the agreements assignments. The landlords appealed, arguing that ACS had actually assigned its leases to Nash-Finch.

Rule of Law


Holding and Reasoning (Hastings, C.J.)

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