Standard Operations, Inc. v. Montague, 70363

Decision Date18 October 1988
Docket NumberNo. 70363,70363
Citation758 S.W.2d 442
PartiesSTANDARD OPERATIONS, INC., Respondent, v. Sharon J. MONTAGUE, Appellant.
CourtMissouri Supreme Court

Mary Pat Schroeder, Neil J. Bruntrager, St. Louis, for appellant.

Jay L. Levitch, St. Louis, for respondent.

BLACKMAR, Judge.

On May 31, 1978, the appellant lessor, Sharon J. Montague, leased property in St. Louis County to National Pride Equipment, Inc., lessee, a Missouri corporation, for 20 years with options for renewal. In March of 1979 all of the stock of National Pride was acquired by Standard Operations, Inc., a Delaware corporation, which is the plaintiff and respondent in this case. On September 30, 1983, National Pride was merged into Standard Operations pursuant to the Delaware corporation statutes. No formal notice of the merger was given to the lessor. National Pride continued as an "operating division" of Standard Operations and paid rent to the lessor by its own checks as in the past.

On April 6, 1985, the lessor apparently found out about the merger and sought to declare the merger an event of default under the lease, relying on the following lease provisions (Par.20):

(a) Tenant shall not voluntarily transfer or assign this Lease or its interest in this Lease or in the leasehold created by this Lease, or sublease all or any part of the Demised Premises or allow any other person or entity to occupy or use all or any part of the Demised Premises without first obtaining Lessor's written consent, which consent shall not be unreasonably withheld, and complying with all other applicable provisions of this paragraph 20. Any assignment or sublease not made in compliance with this paragraph 20 shall be voidable and at Lessor's election, shall constitute a default. No consent to any assignment or sublease shall constitute a waiver to any subsequent or other assignment or sublease.

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(f) No interest of Tenant in this Lease or in the Leasehold estate created by this Lease shall be assignable by operation of law. Without limiting the generality of the foregoing, each of the following acts shall be considered an involuntary assignment: (i) if Tenant becomes bankrupt or insolvent, or makes an assignment for the benefit of creditors, or files a debtor proceeding, or files or has filed against Tenant in any court pursuant to any statute either of the United States or of any State a petition in bankruptcy or insolvency or for reorganization or for the appointment of a receiver (except pursuant to paragraph 16(e)) or trustee of all or a portion of Tenant's property, or petitions for or enters into an arrangement, including any proceeding in the nature of proceeding now covered by Chapter X or Chapter XI of the Bankruptcy Act of the United States; (ii) if a writ of attachment or execution is levied on this lease; (iii) if any proceeding or action to which Tenant is a party, a receiver is appointed with the authority to take possession of the Demised Premises under this Lease, except a receiver appointed at the instance of Lessor as in paragraph 16(e), above provided. An involuntary assignment shall constitute a default by Tenant, and this Lease shall terminate and shall not be treated as an asset of Tenant.

Standard Operations sought a declaratory judgment to establish its right to continue in possession of the premises. The lessor filed counterclaims, essentially asserting her right to terminate the lease and take immediate possession. The trial court entered summary judgment in favor of Standard Operations declaring that the merger did not constitute a default and dismissing the counterclaims. The court of appeals reversed and remanded for trial, concluding that factual issues precluded summary judgment. We granted transfer because of the importance of the question of the effect of the merger on the nonassignment clauses, and now affirm the judgment of the circuit court. The case has been well briefed and ably argued by counsel on both sides.

The lessor must demonstrate that the merger transaction violates the lease provision stating that the leasehold estate shall not be "assignable by operation of law." The starting point in our inquiry is the frequently cited case of Dodier Realty & Investment Company v. St. Louis National Baseball Club, 361 Mo. 981, 238 S.W.2d 321 (Mo. banc 1951), in which the long lamented St. Louis Browns unsuccessfully tried to eject the formidable Cardinals from historic Sportsman's Park. There we held that a corporate merger was not an assignment of a lease in which one of the parties to the merger was the lessee. We said rather that, on the effective date of the merger, all leasehold estates held by any of the constituent corporations passed to the surviving corporation by "operation of law," along with all other corporate property.

The Dodier case does not end our inquiry. That lease prohibited only voluntary assignments. The present lease makes use of the phrase, "operation of law," which was used in the Dodier opinion to describe the transaction we found not to be covered, but continues to use the term, "assignment," which we there found to be an inappropriate description of the effect of a merger. The lessor argues that the language of her lease effectively includes a merger as a prohibited assignment.

If the lessor's position is upheld she would have a distinct advantage over the lessee. She could hold Standard Operations to the lease so as to have the benefit of her initial bargain, or could use the threat of termination to negotiate with the successor or outsiders for additional remuneration. Dodier holds emphatically that forfeitures are viewed with disfavor and that instruments should be construed to avoid the divestment or impairment of valuable rights unless the language is compelling. 1 Merger is expressly authorized by the corporation statutes of all American jurisdictions. A merger transaction is entered into by the parties in pursuit of their economic interests and would usually be expected to be beneficial rather than harmful to the creditors. The possibility of merger is easily foreseeable. See Alexander & Alexander, Inc. v. Koelz, 722 S.W.2d 311 (Mo.App.1986). Cf. Segal v. Greater Valley Terminal Corp., 78 N.J.Super. 42, 187 A.2d 374 (1963), aff'd 83 N.J.Super. 120, 199 A.2d 48 (1964). A creditor or lessor who fears merger may obtain the desired protection by insisting on express language. There is no reason to indulge in an expansive construction of general language.

The phrase, "assignment by operation of law" is not a term of legal precision. 2 See, e.g., Buddon Realty Co. v. Wallace, 238 Mo.App. 900, 189 S.W.2d 1002 (1945), holding that the passing of the lessee's interest to the personal representative on death is not an assignment by operation of law. It is appropriate to consider the phrase in context. We are aided in our task both by maxims of construction and by the general reluctance to decree forfeiture.

The second sentence of 20(f) refers to "involuntary assignment," as though that term were synonymous with assignment by operation of law. The specific examples given, bankruptcy, attachment, and receivership, all describe situations in which the rights of an owner of property are involuntarily taken away or suspended because of financial exigencies. A merger is a voluntary transaction, depending on an affirmative vote of the shareholders of the constituent corporations. The analysis in this paragraph is essentially the application of the historic maxim noscitur a...

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7 cases
  • TXO Procuction v. M.D.Mark, Inc
    • United States
    • Texas Court of Appeals
    • July 29, 1999
    ...a non-assignment clause in a real estate lease. See, e.g., Giaise v. Cuccia, 420 So. 2d 700 (La. Ct. App. 1982); Standard Operations, Inc. v. Montague, 758 S.W.2d 442 (Mo. 1988); Dodier Realty & Inv. Co. v. St. Louis Nat'l Baseball Club, Inc., 361 Mo. 981, 238 S.W.2d 321 (Mo. 1951); Segal v......
  • Txo Production Co. v. M.D. Mark Inc.
    • United States
    • Texas Court of Appeals
    • March 11, 1999
    ...a non-assignment clause in a real estate lease. See, e.g., Giase v. Cuccia, 420 So.2d 700 (La. Ct. App. 1982); Standard Operations, Inc. v. Montague, 758 S.W.2d 442 (Mo. 1988); Dodier Realty & Inv. Co. v. St. Louis Nat'l Baseball Club, Inc., 238 S.W.2d 321 (Mo. 1951); Segal v. Greater Valle......
  • Klecka v. Treasurer of Mo.
    • United States
    • Missouri Court of Appeals
    • June 22, 2021
    ...more general words." Circuit City Stores, Inc. v. Director of Revenue, 438 S.W.3d 397, 401 (Mo. banc 2014) (quoting Standard Operations, Inc. v. Montague, 758 S.W.2d 442, 444 (Mo. banc 1988)). Where one provision of a statute contains general language and another provision in the same statu......
  • Show Me Sunshine Props., LLC v. Blueline Rental, LLC, Case No. 6:17-03131-CV-RK
    • United States
    • U.S. District Court — Western District of Missouri
    • October 9, 2018
    ...transfer occurred because the original tenant merged into another company and then ceased to exist. Id.; see also Standard Operations, Inc. v. Montague, 758 S.W.2d 442, 443-45 (Mo. banc 1988) (reaffirming Dodier); Alexander & Alexander, Inc. v. Koelz, 722 S.W.2d 311, 313 (Mo. App. 1986) ("A......
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6 books & journal articles
  • 27.6 IV. Assignments By Operation Of Law
    • United States
    • New York State Bar Association Commercial Leasing (NY) Chapter Twenty-seven Assignment and Subletting Restrictions In Leases and What They Mean In the Real World
    • Invalid date
    ...189 N.Y.S.2d 384 (App. Term 1959).[661] . See Gazlay v. Williams, 210 U.S. 41, 47 (1908); see also Standard Operations, Inc. v. Montague, 758 S.W.2d 442, 444 (Mo. 1988); Miller v. Fredeking, 133 S.E. 375, 377 (W. Va. 1926).[662] . See In re Prudential Lithograph Co., 265 F. 869, 871 (S.D.N.......
  • CHAPTER 15 MINING MATERIAL AGREEMENTS AND UNRECORDED DOCUMENTS: WHAT'S HIDING UNDER THAT PILE OF PAPER?
    • United States
    • FNREL - Special Institute Due Diligence in Mining and Oil & Gas Transactions (FNREL)
    • Invalid date
    ...the surviving corporation of the protection bargained and paid for by the merged corporation."); Standard Operations, Inc. v. Montague, 758 S.W.2d 442, 444 (Mo. 1988) (noting that a "creditor or lessor who fears merger may obtain the desired protection [from assignment by operation of law] ......
  • Section 18 Recording of Leases
    • United States
    • The Missouri Bar Real Estate Leasing and Landlord-Tenant Actions and Remedies (2011 Forms) Chapter 1
    • Invalid date
    ...assignments and not to a voluntary assignment resulting from a merger or consolidation. Standard Operations, Inc. v. Montague, 758 S.W.2d 442 (Mo. banc 1988). Different considerations apply to assignments of the landlord’s interest in a lease. Landlords will generally want to be free to sel......
  • 27.7 V. Mergers
    • United States
    • New York State Bar Association Commercial Leasing (NY) Chapter Twenty-seven Assignment and Subletting Restrictions In Leases and What They Mean In the Real World
    • Invalid date
    ...1987) (surviving corporation after merger more accurately described as successor than assignee); Standard Operations Inc. v. Montague, 758 S.W.2d 442, 443 (Mo. 1988) (“The present lease makes use of the phrase, ‘operation of law,’ which was used in the Dodier opinion to describe the transac......
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