## Facts

- A debtor affiliate held a long-term anchor-store lease in a multi-tenant shopping center in Illinois, containing restrictions on assignment and use, with allowances for certain affiliate transfers.
- The tenant’s corporate group reorganized operations and transferred the lease among related entities; the parent later sold the retail business to an unaffiliated buyer, leaving the lease in the debtor affiliate’s name when Chapter 11 began.
- The debtor moved to assume and assign the lease under 11 U.S.C. § 365 to a proposed assignee that planned to operate a furniture store in part of the space and sublease the remainder for retail uses permitted under the lease.
- The landlord objected, asserting (i) the lease had already terminated prepetition due to violations of the lease’s non-assignment provisions, and (ii) the shopping-center protections of § 365(b)(3) and the lease’s anti-assignment language barred assignment to the proposed assignee.

## Issues

1. Whether the lease terminated prepetition due to alleged breaches of the lease’s anti-assignment provisions, making it incapable of assumption and assignment under § 365.
2. Whether, if the lease remained in effect, § 365(b)(3) and the lease’s restrictions barred assignment to the proposed assignee in a shopping-center setting.
3. What cure and adequate-assurance conditions were required for assumption and assignment under § 365(b)(1) and § 365(b)(3).

## Decision

- The court held the lease had not terminated prepetition; the intra-corporate transfers and subsequent change in stock ownership did not effect a forfeiture under applicable Illinois law or the lease terms.
- The court authorized the debtor to assume and assign the lease under § 365, overruling the landlord’s objections that § 365(b)(3) or the lease categorically barred the assignment.
- The authorization was conditioned on satisfaction of statutory requirements to cure defaults (or provide assurance of prompt cure) and to provide adequate assurance of the assignee’s future performance, including shopping-center-specific assurances.

## Legal Principles

- Lease forfeitures are disfavored and strictly construed under Illinois law; absent clear lease language, a change in corporate stock ownership is not an “assignment” of a lease and does not terminate the lease.
- A lease clause permitting transfers among affiliates will be enforced according to its text; courts will not add implied conditions (such as barring affiliate transfers made with knowledge of a forthcoming stock sale) to create a forfeiture.
- In shopping-center cases, § 365(b)(3) requires adequate assurance of future performance, including assurances tied to lease use provisions and protection of the center’s tenant mix, but it does not grant landlords an automatic veto over otherwise permissible assignments.
- Section 365(f) embodies a federal policy favoring assignability of estate leases; anti-assignment provisions are applied consistently with § 365’s cure and adequate-assurance safeguards rather than as independent grounds for forfeiture.

## Conclusion

The court permitted assumption and assignment of a shopping-center anchor lease because the lease had not been forfeited by intra-corporate transfers or a later change in stock ownership, and because the proposed assignment complied with § 365’s cure and adequate-assurance requirements, including the shopping-center protections of § 365(b)(3).


In re Ames Dep’t Stores, Inc., 127 B.R. 744 (Bankr. S.D.N.Y. 1991)