## Facts

- Branmar, Inc. developed a shopping center and agreed to construct a building for use as a motion picture theater.
- Branmar, Inc. and Branmar Theatre Co. executed a detailed 20-year lease (with a 10-year renewal option) for the theater premises.
- The lease required fixed annual rent plus percentage rent based on admissions receipts and certain concession-related payments.
- The lessee also agreed to advance $60,000 to the lessor for construction and to provide fixtures and equipment at the lessee’s cost.
- The lease contained a non-assignment clause barring the lessee from subletting or assigning without the lessor’s prior written consent, which “shall not be unreasonably withheld.”
- After execution, experienced theater operators (the Schwartzes) sought to operate the theater; the lessor refused consent to a proposed direct assignment of the lease to them.
- The original shareholders instead sold all shares of Branmar Theatre Co. to the Schwartzes (or entities they controlled), changing control of the corporate lessee while leaving the corporate lessee as the named tenant.
- The lessor asserted the stock sale breached the non-assignment clause, treated the lease as terminated, and refused to recognize the lease’s continuation.

## Issues

1. Whether a transfer of all stock of a corporate lessee constitutes an “assignment, transfer or disposition” of the leasehold in violation of a standard non-assignment clause.
2. Whether the lease should be treated as sufficiently “personal” to the original shareholders’ abilities that a change in corporate control triggers the non-assignment restriction absent explicit language.

## Decision

- The Court of Chancery entered judgment for the lessee and declared the lease valid and enforceable notwithstanding the change in stock ownership.
- The court held that a sale of all stock of a corporate lessee, standing alone, is not an assignment or transfer of the leasehold within the meaning of the lease’s non-assignment clause.
- The lessor was not entitled to terminate the lease based on the stock sale, and its attempted cancellation was rejected.

## Legal Principles

- A corporation is a legal entity separate from its shareholders; a transfer of shares transfers personal property (stock) and does not transfer the corporation’s assets, including its leasehold, absent a transaction structured to do so.
- A lease covenant prohibiting assignment or transfer of the lease does not ordinarily prohibit changes in ownership of a corporate tenant’s stock unless the lease clearly states that a change in stock ownership or control is deemed an assignment or requires consent.
- Claims that the lessor relied on the original owners’ personal skill or connections do not override unambiguous written lease terms that name the corporation as tenant and do not condition the lease on continued ownership by particular shareholders.
- Courts require clear contractual language before enforcing forfeiture-like results based on ownership changes of a corporate tenant.

## Conclusion

The court enforced the corporate form and the lease’s text, holding that the tenant’s change in shareholders did not breach a standard non-assignment clause; because the lease did not expressly restrict stock transfers or changes in control, the lessor could not terminate the lease on that basis.


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