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Travertine Corp. v. Lexington-Silverwood

July 01, 2004

TRAVERTINE CORPORATION, APPELLANT,
v.
LEXINGTON-SILVERWOOD, A MINNESOTA LIMITED PARTNERSHIP, RESPONDENT.



Heard, considered, and decided by the court en banc.

SYLLABUS BY THE COURT

1. When a contractual provision is clear and unambiguous, courts should not rewrite, modify, or limit its effect by a strained construction.

2. A nonassignment clause precludes assignment of the right to payment under a contract even if it does not explicitly limit, beyond the express nonassignment terms contained in that clause, the power of assignment, or provide that any purported assignment shall be invalid or void.

The opinion of the court was delivered by: Anderson, Russell A., Justice.

Reversed.

OPINION

We are asked to determine whether a nonassignment clause precludes assignment of the right to payment under a contract if the clause does not explicitly limit, beyond the express nonassignment terms contained in that clause, the power of assignment, or provide that any purported assignment shall be invalid or void. We hold that such a nonassignment clause does preclude assignment, and therefore reverse the court of appeals' decision to the contrary.

The underlying dispute in this case concerns the claim of respondent Lexington-Silverwood, L.P. that it was assigned the compensation that James E. Lennon was due under a "management agreement" to which Lennon, George Berkey, and appellant Travertine Corporation, a real-estate development venture, were parties. In August 1989, Travertine entered into the management agreement with Lennon and Berkey. The agreement provides that Lennon and Berkey would serve as the board of directors and officers of Travertine and would "provide all of the management services necessary to undertake the land acquisition, assembly and disposition" described in Travertine's business plan. Lennon subsequently served as President of Travertine. In return for their services, Travertine agreed to pay Lennon and Berkey a percentage of its net profits.

The management agreement further provides that if Travertine terminated the agreement, Lennon and Berkey would be entitled to compensation for their services up to the termination date. Disputes under the agreement are subject to an arbitration clause, which provides that "[i]n the event of a dispute between the parties with reference to the interpretation of this Agreement or their rights hereunder, the same shall be submitted to arbitration." The nonassignment clause at issue provides in its entirety that:

This Agreement shall be binding on the parties and their respective personal representatives, successors and assigns; provided, however, that the rights and obligations of Berkey/Lennon shall not be assignable except that Berkey may assign to Lennon or Lennon assign to Berkey such rights and obligations.

In February 1992, Berkey assigned all of his rights under the management agreement to Lennon. In May 1996, Lexington-Silverwood obtained a judgment against Lennon in a matter unrelated to Travertine. In settlement of the judgment, Lennon purported to assign to Lexington-Silverwood his rights to compensation under the management agreement with Travertine. The assignment agreement*fn1 provided that Lexington-Silverwood "has an equitable assignment of Lennon's stock in Travertine" and that "Lennon agrees to transfer all other compensation, including anything due Lennon from his management agreement with Travertine."

On November 12, 1999, Travertine's Board of Directors terminated Lennon as President and "suspended" the management agreement. Not having secured a willing and able buyer for the real estate it had acquired, Travertine cancelled the management agreement on January 15, 2001. Lexington-Silverwood filed a demand for arbitration in March 2002, alleging that, as Lennon's assignee, it was entitled to the compensation due him under the management agreement and that Travertine had refused to pay it.

Travertine moved the district court for an order staying arbitration. The court determined that Lennon's transfer of his right to compensation was not a valid present assignment, concluding that even if the assignment was enforceable, it was only an assignment of Lennon's right to receive compensation and not his right to demand arbitration. The court granted Travertine's motion to stay arbitration, ...


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