R-Ranch Markets 2, Inc. v. Old Stone Bank

This case involves cross-appeals from a declaratory relief judgment concerning the rights of the parties to a commercial lease and the rights of the beneficiary under a deed of trust who eventually purchased the property at a nonjudicial foreclosure sale. The primary issues presented are whether the foreclosure under the trust deed extinguished the lease itself, whether the foreclosure extinguished an amendment of the lease made after the trust deed was recorded, and whether assignments of the lease made subsequent to the trust deed are valid.

Facts

In May 1961, Alpha Beta Acme Markets, Inc. entered into a lease with Lenhardt Corporation for the anchor tenant space at Valley Center Shopping Center. The lease provided in part, “Lessee shall not transfer, assign, sublet, or hypothecate this Lease or Lessee’s interest .... Any such attempted transfer, assignment, subletting, or hypothecation shall be void and confer no rights upon any third person, and shall constitute a default by Lessee under this Lease.” The lessee could assign the lease with the lessor’s written consent.

On December 5, 1986, Old Stone Bank loaned $7.4 million to Valley Center Venture for the purchase…