ALI-ABA Course of Study Modern Real Estate Transactions July 25 ...

2234
D. Transferees That Implicate Non-assignment Provisions.
1. Co-tenants.
2. Partnerships. Heflin v. Stiles, 663 S.W.2d 131 (Tex. Ct. App. 1983);
Borgen v. Wiglesworth, 190 Kan. 367, 375 P.2d 601 (1962); Miller v.
Pond, 214 Mich. 186, 183 N.W. 24 (1921), Annotation, 17 A.L.R. 179
(1921); Madison 52nd Corp. v. Luxenberg, 8 N.Y.2d 955, 168 N.E.2d 851,
204 N.Y.S.2d 185 (1960), noted in 7 N.Y.L.F. 118 (1961); Morris Glick v.
Grubman, 56 N.Y.S.2d 324 (Sup. Ct. 1945); 51C C.J.S. Landlord and
Tenant § 33(6) (1968 & Supp. 2002); Fidelity Trust Co. v. BVD Assocs.,
196 Conn. 270, 492 A.2d 180 (1985) (transfer of interest in limited
partnership not in violation of mortgage due on sale provision).
i. Transfer of partnership interest.
ii.
iii.
Entry of new partner(s) or exit of existing partner(s).
Deceased partner(s).
3. Corporations. See generally Alabama Vermiculite Corp. v. Patterson,
124 F. Supp. 441, 445 (W.D.S.C. 1954); Richardson v. La Rancherita La
Jolla, Inc., 98 Cal. App. 3d 73, 159 Cal. Rptr. 285 (1979); Ser-Bye Corp.
v. C. P. & G. Markets, Inc., 78 Cal. App. 2d 915, 179 P.2d 342 (1947);
Branmar Theatre Co. v. Pranmar, Inc., 264 A.2d 526 (Del. Ch. 1970);
Burrows Motor Co. v. Davis, 76 A.2d 163 (D.C. Mun. Ct. App. 1950);
Posner v. Air Brakes & Equip. Corp., 2 N.J. Super. 187, 62 A.2d 711
(1948); Rubinstein Bros. v. Ole of 34th St., Inc., 101 Misc. 2d 563, 421
N.Y.S.2d 534 (Civ. Ct. 1979); Comment, Amalgamation Transactions of
Corporate Lessees as Breaches of Nonassignment Covenants: Another
Plea for Substance Over Form, 69 YALE L.J. 1292 (1960); see attached
Case Update II (D)(3); In re Ames Dep’t Stores, Inc., 127 B.R. 744 (D.
N.Y. 1991); Kelly v. Alstores Realty Corp., 250 N.J. Super. 11, 593 A.2d
347 (Ct. App. 1991).
i. Transfer of Stock. In the opinion of some, a transfer of stock may
circumvent ordinary non-assignment clauses prohibiting the
transfer of the Tenant’s interest in the leasehold. The best way to
address this possibility, is to specifically make the unauthorized
transfer of the control of the stock of the Tenant an impermissible
assignment. 3 See 1 MILTON R. FRIEDMAN, FRIEDMAN ON LEASES §
3 Friedman notes that even a clause to this effect may not be completely effective, because like
other restraints on alienation, this provision will be construed strictly against the restriction.
Therefore, a clause applicable literally to any stock transfer may not bar the creation of enough
new stock, and its issuance to a third party, to change stock control with the same effect as if
QBMKE\5419766.5 8