Will a Nebraska court give effect to this clause barring assignment or requiring our consent?
It depends on what kind of contract it is, and Nebraska is an outlier in both directions. IN A LEASE the clause makes the assignment INEFFECTIVE, not merely a breach: American Community Stores Corp. v. Newman states that “In Nebraska, an assignment by a lessee of an interest in a lease which prohibits such assignment without the lessor's consent is ineffective without such consent”, and adds that the lessor keeps the covenant claim too: “Nevertheless, the assignments without consent, even though invalid, were still violations of the covenants in the leases.” Moritz v. S & H Shopping Centers, Inc. is the source: “Such consent was never given or received and defendant's contention that it transferred certain interests in the lease is necessarily immaterial as no valid rights could have been transferred or acquired in the absence of plaintiff's consent.” IN A CONTRACT FOR THE SALE OF LAND the same clause is demoted to a security device and dies on tender: Riffey v. Schulke holds that such a provision “is usually considered to be a provision to safeguard performance of the contract”, and “Where the contract has been performed, or performance has been tendered as in this case, the provision is usually considered unenforceable.” Panwitz v. Miller Farm-Home Oil Service, Inc. adds that “such provision is intended as security for the seller, and when such security is not at issue, the provision is not enforceable”, and that “where such provision contains no penalty or forfeiture for its breach, it will not prevent sale or assignment.” Obermeier v. Bennett applied it: “There is no foreclosure provision linked to the nonassignment clause”, so “the provision of the contract prohibiting assignment of the contract without the permission of the Sellers is unenforceable.” TIMING then carves out two safe harbours. A post-breach assignment of a ripened money claim is outside the clause, Folgers Architects Ltd. v. Kerns: “It is undisputed that the assignment at issue occurred after the contracts were breached. The anti-assignment clause therefore did not bar the assignment of the claims at issue”, because “Assigning an interest in a lease directly affects the parties' actual performance of the contract, whereas the assignment of a right to collect damages for a breach of contract, as in the instant case, does not.” And a post-loss insurance claim is too: Millard Gutter Co. v. Farm Bureau Prop. & Cas. Ins. Co.: “We conclude that in the absence of a statute to the con- trary, a postloss assignment of a claim under a homeowner's insurance policy for the homeowner's property damage casu- alty loss is valid, despite a nonassignment clause.” The background default is Burnison v. Johnston: “contractual rights are generally assignable unless the terms validly preclude assignment or the assignment is contrary to statute or public policy.”
The trap
The boilerplate consent clause in a COMMERCIAL LEASE is silently rewritten. Newman v. Hinky Dinky Omaha-Lincoln, Inc. holds that “where a commercial lease does not expressly permit a lessor to withhold consent to an assignment or subletting and contains an approval clause, such as a provision that there can be no assignment of the lease or subletting without the lessor's prior consent, a lessor may withhold consent only when the lessor has a good faith and reasonable objection to assignment of the lease or subletting, even in the absence of a lease provision that the lessor's consent will not be unreasonably withheld.” A landlord who refuses a solvent assignee out of preference loses, and because reasonableness is a fact question it cannot be won on the papers. To keep an absolute veto the lease must expressly confer the right to withhold, and even that is not safe, because the Court “leave[s] for another day and another case the question whether an express lease provision permitting a lessor to withhold consent amounts to a restraint on alienation, in contravention of public policy in Nebraska.” Second trap, and it runs the other way: in a Nebraska LEASE a violated clause is NOT merely a breach. A buyer of a Nebraska leasehold who relies on the majority rule that an assignment in breach is still effective acquires NOTHING. Third: in a land-sale contract a clause with no consequence attached is decorative. Panwitz and Obermeier make the presence of a penalty or forfeiture the difference, and Obermeier reversed a foreclosure because none was linked. Fourth, the override is not in the statutes we publish, but it is reachable through the law we hold: Home Federal Savings & Loan Ass'n v. McDermott & Miller quotes and applies former Neb. U.C.C. § 9-318(4), the predecessor of § 9-406, and First State Bank Neb. v. MP Nexlevel sets out and construes the current § 9-406(a). Neb. U.C.C. § 9-406, which in most states makes an anti-assignment term ineffective against an assignment of accounts and payment intangibles, is absent from the Nebraska statutes we publish, and Neb. Rev. Stat. § 9-406 is a real but unrelated section whose entire text does nothing but define the word Department to mean the Department of Revenue, in the Bingo and Other Games of Chance chapter. Nebraska's only anti-anti-assignment statute is narrow: Neb. Rev. Stat. § 52-1706 makes a lease term ineffective if it prohibits assignment of a lease or of rents, or creation of a security interest in rents, and by § 52-1701 the act reaches only an instrument that creates a SECURITY INTEREST IN RENTS. Fifth: the post-loss insurance safe harbour is conditional. Millard Gutter rested on the insurer having presented no evidence for the clause and warned that it was “not confronted with a direct contradiction of explicit contrac- tual language”; in Obstetricians-Gynecologists, P.C. v. Blue Cross & Blue Shield the insurer DID put on that evidence and the clause was enforced: “appellant, OB-GYN, has failed to show that the nonassignment provision in Blue Shield should be called void for public policy reasons.”
26 authorities
The words that state the rule
Defendant had no authority to assign the lease without the consent of plaintiff. Such consent was never given or received and defendant’s contention that it transferred certain interests in the lease is necessarily immaterial as no valid rights could have been transferred or acquired in the absence of plaintiff’s consent.
The words that state the rule
In Nebraska, an assignment by a lessee of an interest in a lease which prohibits such assignment without the lessor’s consent is ineffective without such consent.
The words that state the rule
Nevertheless, the assignments without consent, even though invalid, were still violations of the covenants in the leases.
The words that state the rule
A provision in a contract for the sale of land prohibiting an assignment of the contract without the consent of the other party is usually considered to be a provision to safeguard performance of the contract. Where the contract has been performed, or performance has been tendered as in this case, the provision is usually considered unenforceable.
- case422 N.W.2d 63Panwitz v. Miller Farm-Home Oil Service, Inc.Neb.decided 1988read it at the source ↗
The words that state the rule
We further note that a contract provision requiring a seller’s consent to any future sale or assignment by the buyer is considered to have a limited application; namely, that such provision is intended as security for the seller, and when such security is not at issue, the provision is not enforceable.
- case422 N.W.2d 63Panwitz v. Miller Farm-Home Oil Service, Inc.Neb.decided 1988read it at the source ↗
The words that state the rule
Wagner also holds that where such provision contains no penalty or forfeiture for its breach, it will not prevent sale or assignment.
The words that state the rule
Under the circumstances in this case, the provision of the contract prohibiting assignment of the contract without the permission of the Sellers is unenforceable.
The words that state the rule
There is no foreclosure provision linked to the nonassignment clause, which is in the final sentence of the contract.
The words that state the rule
It is undisputed that the assignment at issue occurred after the contracts were breached. The anti-assignment clause therefore did not bar the assignment of the claims at issue.
The words that state the rule
Assigning an interest in a lease directly affects the parties’ actual performance of the contract, whereas the assignment of a right to collect damages for a breach of contract, as in the instant case, does not.
The words that state the rule
Otherwise, contractual rights are generally assignable unless the terms validly preclude assignment or the assignment is contrary to statute or public policy.
The words that state the rule
We have held that a contractual right to the benefit of a promise cannot be assigned if the obligor reasonably intended for the right to be exercised only by the party with whom it contracted.
- case889 N.W.2d 596Millard Gutter Co. v. Farm Bureau Prop. & Cas. Ins. Co.Neb.decided 2016read it at the source ↗
The words that state the rule
We conclude that in the absence of a statute to the con- trary, a postloss assignment of a claim under a homeowner’s insurance policy for the homeowner’s property damage casu- alty loss is valid, despite a nonassignment clause.
- case889 N.W.2d 596Millard Gutter Co. v. Farm Bureau Prop. & Cas. Ins. Co.Neb.decided 2016read it at the source ↗
The words that state the rule
We further note that we are not confronted with a direct contradiction of explicit contrac- tual language, i.e., Farm Bureau’s policy did not expressly prohibit assignment of a postloss claim.
- case361 N.W.2d 550Obstetricians-Gynecologists, P.C. v. Blue Cross & Blue ShieldNeb.decided 1985read it at the source ↗
The words that state the rule
we conclude that appellant, OB-GYN, has failed to show that the nonassignment provision in Blue Shield should be called void for public policy reasons.
The words that state the rule
where a commercial lease does not expressly permit a lessor to withhold consent to an assignment or subletting and contains an approval clause, such as a provision that there can be no assignment of the lease or subletting without the lessor’s prior consent, a lessor may withhold consent only when the lessor has a good faith and reasonable objection to assignment of the lease or subletting, even in the absence of a lease provision that the lessor’s consent will not be unreasonably withheld.
The words that state the rule
We leave for another day and another case the question whether an express lease provision permitting a lessor to withhold consent amounts to a restraint on alienation, in contravention of public policy in Nebraska.
The words that state the rule
A contract, which shows by its nature or terms that it is personal in character, that is, that reliance for its performance is placed on the integrity, credit, or responsibility of a party, or that confidence or trust is reposed in him personally for its performance, is not assignable, even in the sense of its performance being delegated to another, without the consent of the other party to the contract
- statuteNeb. Rev. Stat. § 52-1706enactment date not established
The words that state the rule
A term in any lease between a rent party and an assignor is ineffective if it prohibits assignment of a lease or rents due or to become due pursuant to the lease, if it prohibits creation of a security interest in rents due or to become due, or if it requires the consent of the rent party to such assignment or a security interest in rents.
- statuteNeb. Rev. Stat. § 36-213enactment date not established
The words that state the rule
Except as provided in the Income Withholding for Child Support Act, every assignment of the wages or earnings of the head of a family and every contract or agreement intending or purporting to have the effect of such assignment shall be void unless such contract, agreement, assignment, or transfer is executed and acknowledged by both husband and wife in the same manner that conveyances of real estate are required to be signed and acknowledged by the laws of this state and shall be limited to a percentage of the wages of the head of household not greater than that subject to the operation of attachment, execution, and garnishee process as provided in section 25-1558 .
- statuteNeb. Rev. Stat. § 25-302enactment date not established
The words that state the rule
The assignee of a thing in action may maintain an action thereon in the assignee's own name and behalf, without the name of the assignor.
- case449 N.W.2d 12Home Federal Savings & Loan Ass'n v. McDermott & MillerNeb.decided 1989read it at the source ↗
The words that state the rule
We next note the relevancy of Neb. U.C.C. § 9-318(4) (Reissue 1980), which provides: A term in any contract between an account debtor and an assignor is ineffective if it prohibits assignment of an account or prohibits creation of a security interest in a general intangible for money due or to become due or requires the account debtor’s consent to such assignment or security interest.
- case449 N.W.2d 12Home Federal Savings & Loan Ass'n v. McDermott & MillerNeb.decided 1989read it at the source ↗
The words that state the rule
Thus, it is clear that § 9-318(4) negated any provision in the February 13, 1981, accelerated payment agreement restricting Chapman from pledging moneys receivable under the accounting practice sale agreement as collateral for his loan from Home Federal.
The words that state the rule
As part of these duties, § 9-406(a) provides: . . . [A]n account debtor on an account, chattel paper, or a payment intangible may discharge its obligation by paying the assignor until, but not after, the account debtor receives a notification, authenticated by the assignor or the assignee, that the amount due or to become due has been assigned and that payment is to be made to the assignee. After receipt of the notification, the account debtor may discharge its obligation by paying the assignee and may not discharge the obligation by paying the assignor.
- case361 N.W.2d 550Obstetricians-Gynecologists, P.C. v. Blue Cross & Blue ShieldNeb.decided 1985read it at the source ↗
The words that state the rule
Further, Blue Shield has presented evidence to show its nonassignment clause is a valuable tool in persuading health care providers to participate in its physician’s voluntary cost effectiveness program and accept set fees for health services, keeping health care costs down and passing that savings on to its subscribers, who number 450,000 in Nebraska. Such evidence indicates a far stronger public policy than that relied on by OB-GYN.
- statuteNeb. Rev. Stat. § 52-1701enactment date not established
The words that state the rule
Assignment instrument shall mean any mortgage, trust deed, assignment of leases, assignment of rents, or other instrument or agreement which creates, provides, assigns, or grants a security interest in rents;
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.