Travertine Corp. v. Lexington-Silverwood
2004 Minn. LEXIS 373, 2004 WL 1469920, 683 N.W.2d 267 (2004)
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Rule of Law:
A contractual clause stating that rights 'shall not be assignable' is a valid and enforceable prohibition on assignment that renders any purported assignment void, even if the clause does not contain specific language declaring such assignments 'void' or 'invalid.'
Facts:
- Travertine Corporation entered into a management agreement with James E. Lennon and George Berkey, whereby they would manage the company in exchange for a percentage of its net profits.
- The agreement contained a non-assignment clause stating: 'the rights and obligations of Berkey/Lennon shall not be assignable' except between Berkey and Lennon themselves.
- In 1992, Berkey assigned all of his rights under the agreement to Lennon, as permitted by the clause.
- In 1996, Lexington-Silverwood, L.P. obtained a monetary judgment against Lennon in an unrelated matter.
- To settle this judgment, Lennon purported to assign his rights to compensation under the Travertine management agreement to Lexington-Silverwood.
- Subsequently, Travertine's Board of Directors terminated Lennon as President and later cancelled the management agreement.
Procedural Posture:
- Lexington-Silverwood filed a demand for arbitration against Travertine, asserting its rights as Lennon's assignee.
- Travertine filed a motion in district court (the trial court) to stay the arbitration proceedings.
- The district court granted Travertine's motion to stay arbitration, concluding the assignment was not valid.
- Lexington-Silverwood, as appellant, appealed the district court's decision to the court of appeals.
- The court of appeals reversed the district court's decision.
- Travertine, as petitioner, sought and was granted further review by the Supreme Court of Minnesota.
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Issue:
Does a contractual non-assignment clause that states rights 'shall not be assignable,' but does not explicitly declare such assignments 'void' or 'invalid,' render a purported assignment ineffective?
Opinions:
Majority - Anderson, Russell A., Justice
Yes. A non-assignment clause stating that rights 'shall not be assignable' is a clear manifestation of the parties' intent to prohibit assignment, rendering any attempted assignment void. The court's primary goal in contract interpretation is to enforce the intent of the parties based on the plain language of the instrument. Minnesota precedent, such as Wilkie v. Becker, requires only that the contract manifest an intention to prohibit assignment, not that it use specific 'magic words' like 'void' or 'invalid.' The use of the term 'shall' indicates a mandatory imposition, making the clause a clear prohibition. The court declined to adopt the Restatement (Second) of Contracts § 322's default rule, which might otherwise treat this as a mere covenant not to assign, because the plain language of the contract demonstrates a clear intent to deny the power of assignment. Therefore, Lennon's assignment to Lexington-Silverwood is void.
Analysis:
This decision reinforces a strong contractarian approach, prioritizing the plain meaning of contractual language and the expressed intent of the parties over modern interpretive default rules like those in the Restatement. The court solidifies Minnesota's position that specific 'magic words' are not required to create an anti-assignment clause that divests a party of the power to assign, thereby rendering a non-conforming assignment void. This provides greater certainty for contracting parties in Minnesota that clear prohibitory language will be enforced as written, contrasting with jurisdictions that strictly distinguish between a party's 'right' to assign versus their 'power' to assign.
