Newman v. Hinky Dinky Omaha-Lincoln, Inc.
229 Neb. 382, 427 N.W.2d 50 (1988)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Where a commercial lease contains a clause requiring the lessor's consent for an assignment or sublease but does not expressly permit the lessor to withhold consent for any reason, the lessor may only withhold consent based on a good faith and commercially reasonable objection.
Facts:
- On July 1, 1977, Raquel H. Newman, as trustee, leased commercial property to American Community Stores Corporation (ACS).
- The lease agreement included Section 10.1, which stated that ACS could not assign the lease or sublet the premises without first obtaining Newman's written consent.
- Prior to February 16, 1985, ACS sought Newman's consent to assign the lease to Nash Finch Company, which would then sublease the property to Hinky Dinky Omaha-Lincoln, Inc.
- Newman did not consent to the proposed assignment and sublease arrangement.
- Despite the lack of consent, in February 1985, ACS proceeded to assign the lease to Nash Finch, which in turn sublet the premises to Hinky Dinky.
Procedural Posture:
- Raquel H. Newman filed a forcible entry and detainer action in the district court (trial court) seeking restitution of the premises from Hinky Dinky.
- Newman moved for summary judgment.
- The district court granted partial summary judgment for Newman, ruling as a matter of law that a landlord may withhold consent for any reason.
- The court held a trial on the remaining factual issue of whether Newman had waived her right to declare a default by accepting rent.
- Following the trial, the court found no waiver had occurred and entered a final judgment for restitution of the premises in Newman's favor.
- Hinky Dinky, the occupant and sublessee, appealed the judgment to the Nebraska Supreme Court.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
In a commercial lease requiring the lessor's consent for an assignment or sublease, may the lessor arbitrarily and unreasonably withhold that consent when the lease does not expressly grant that right?
Opinions:
Majority - Shanahan, J.
No. Where a commercial lease requires the lessor's consent for an assignment but is silent on the standard for withholding consent, the lessor may not arbitrarily refuse; the refusal must be based on a good faith and commercially reasonable objection. The court rejected the traditional rule that gives a lessor absolute discretion and instead adopted the modern trend, as articulated in cases like Kendall v. Ernest Pestana, Inc., and the Restatement (Second) of Property § 15.2(2). This approach treats a lease as a contract, which imposes an implied duty of good faith and fair dealing when one party has discretionary power over the other's rights. The court found this rule consistent with existing Nebraska precedent requiring reasonableness in other lease-related contexts, such as a landlord's duty to mitigate damages. Therefore, a factual issue exists as to whether Newman's refusal was commercially reasonable, making summary judgment improper.
Analysis:
This decision officially moves Nebraska law from the traditional common law rule granting landlords absolute discretion to withhold consent to the modern rule requiring commercial reasonableness. By grounding its reasoning in contract principles of good faith and fair dealing, the court signals that leases will be interpreted more like other commercial contracts rather than solely as conveyances of property. This precedent enhances the alienability of commercial leaseholds, preventing landlords from using consent clauses to arbitrarily block suitable assignees or to extract additional concessions. Future litigation will likely focus on the application of the factors outlined by the court to determine what constitutes a 'commercially reasonable' objection in various factual scenarios.
Unlock the full brief for Newman v. Hinky Dinky Omaha-Lincoln, Inc.