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Branmar Theatre Co. v. Branmar, Inc. - 264 A.2d 526 (Del. Ch. 1970)

Rule:

In the absence of fraud, transfer of stock of a corporate lessee is not a violation of a clause prohibiting assignment.

Facts:

A lease agreement between the parties provided for the erection of a theatre building. The agreement contained a provision that prohibited the plaintiff Branmar Theatre Co. ("Branmar Theatre"), the lessee, from assigning the premises without the prior written consent of the lessor, defendant Branmar, Inc. ("Branmar"). Subsequently, Branmar Theatre executed an assignment to another party who purchased the outstanding shares of Branmar Theatre. Branmar rejected the assignment under the power reserved in the lease and advised Branmar Theatre that it considered the sale of shares to the new party to be a breach of the lease and the lease to be null and void. Branmar Theatre filed a declaratory judgment action seeking to enjoin Branmar from cancelling the parties' lease agreement.

Issue:

Was the lease null and void?

Answer:

No

Conclusion:

The court concluded the lease remained in full force and effect. The court reasoned that when Branmar chose to deal with a corporation as its tenant it must also have known that shares of stock therein might be owned by different stockholders and were subject to assignment to others. The court held that: 1) the inhibitions against assignment ran as to the lease itself and not to the stock in Branmar Theatre, and; 2) had the parties intended that the sale and transfer of stock was to be deemed an assignment, the fact should have been expressed in the lease in clear and unequivocal language.

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