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Keywords

contractsummary judgmentleaseobjectiongood faithbad faithrespondentappellantcommercial lease
contractdefendantappealaffidavitpleasummary judgmentwillleasegood faithbad faithrespondentappellantcommercial lease

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Schweiso v. Williams, 150 Cal.App.3d 883, 198 Cal.Rptr. 238

Facts

Appellants Stevenson, Schweiso, and Jazbutis leased commercial premises from the respondents, with each lease containing a clause that prohibited assignment without the lessor's written consent. The lessor refused to consent to Stevenson's proposed assignee unless he paid a 10% fee, which he did under protest. The lessor also interfered with Schweiso's contract with a prospective buyer, leading to its cancellation. Jazbutis faced similar issues when the lessor demanded a commission from his brokers as a condition for consent, resulting in the cancellation of his sale contract as well.

The pleadings, affidavits and counteraffidavits alleged the following: Appellants Stevenson, Schweiso, and Jazbutis each had leased commercial premises from the respondents. Paragraph 13 of each lease provided that the lessee was precluded from assigning the premises without the written consent of the lessor.

Issue

Whether a lessor may arbitrarily refuse consent to an assignment of a commercial lease when the lease requires the lessor's written consent for such assignments.

On this appeal from dismissals in these consolidated actions following summary judgments in favor of the same defendants (Williams, Palo Alto Town & Country Village et al.) the only issue is whether a lessor may arbitrarily refuse consent when a commercial lease provides that a lessee shall not assign or sublease the premises without the written consent of the lessor.

Rule

A lessor may refuse consent to an assignment only if there is a good faith reasonable objection to the assignment, even in the absence of a provision prohibiting the unreasonable or arbitrary withholding of consent.

The court reasoned that since a lease constitutes both a conveyance of a leasehold interest and a contract, there was an implied covenant of good faith and fair dealing, which militated against the arbitrary or unreasonable withholding of consent to an assignment.

Analysis

The court applied the rule by examining the lessor's actions and found that they lacked any good faith basis for withholding consent. The lessor's demands for additional payments and their interference with the lessees' contracts indicated bad faith. The court noted that the lessor's reasons for refusal were arbitrary and did not meet the standards of good faith and reasonableness required in commercial leases.

While the lease provisions at bench, are identical to that involved in Cohen, supra, the alleged facts averred are far more egregious and indicative of bad faith, as respondents sought additional amounts of “blood” money from the appellants as a condition of their consent to the assignments.

Conclusion

The court reversed the summary judgment in favor of the lessor, concluding that there was a triable issue of fact regarding whether the lessor unreasonably withheld consent and breached their implied duty of good faith and fair dealing.

As there is a triable issue of fact as to whether respondents unreasonably withheld their consent to the assignments and thereby breached their implied duty of good faith and fair dealing, the summary judgments must be reversed.

Who won?

The appellants (lessees) prevailed in the case because the court found that the lessor's refusal to consent was arbitrary and lacked a good faith basis.

The court noted that under the terms of the lease agreement, the lessor's consent to an assignment does not relieve lessee of any obligations under the lease.

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