Creighton Owned a Commercial Property on the Main Street of a Large

Essay

Creighton owned a commercial property on the main street of a large city.He leased the property for 15 years to a franchise of a nationwide department store.The lease contained a covenant prohibiting the department store tenant from establishing another one of its stores within a 10-mile radius of its current location.The main reason for the restrictive covenant was to protect the landlord's rental revenues.The rent for the property was set at a $24,000 minimum per year plus 3 percent of gross sales receipts.In reality,another franchisee of the department store had been operating a store within 6 blocks of Creighton's property for the last 10 years.Creighton was well aware of this fact,but had never taken any steps to enforce the covenant in his lease.
In December,Creighton sold his property to Murdock and assigned the lease in its entirety.Creighton and Murdock arranged the deal such that Murdock made a lump-sum down payment and Creighton held a mortgage that Murdock would pay,in part,with the monthly rental revenues from the property.The assignment was executed under seal and immediately written notice was sent to both the store manager at the leased property and to the national office of the department store chain.The notice informed the tenant that the assignment had occurred and that all future rental payments were to be directed to Murdock.The tenant properly forwarded its monthly payments to Murdock for several months.
In March,Murdock telephoned the tenant to inform it that he had reassigned the right to receive the rental income to Creighton and that future payments should again be made directly to Creighton.The purpose of the reassignment was to reduce the length of time it took each month to get the payments processed from the tenant to Murdock and on to Creighton.In return,Creighton reduced the rate on Murdock's mortgage by 0.25 percent.Murdock pointed out,however,that he retained his capacity as landlord,having assigned only the rental income back to Creighton.
One week later Creighton brought an action against the tenant for damages for breach of the lease's covenant prohibiting the existence of the second store within 10 miles.Creighton sought damages in the amount equal to lost rental revenue for the previous 10 years.
What legal issues are raised in this case? What arguments will be used by both Creighton and the tenant and what will be the likely outcome?