F & L Center Co. v. Cunningham Drug Stores, Inc.

I would read the words "for any other reason" in the context in which they appear in paragraph 25 of the lease to require good faith and commercial reasonableness.

Restrictions against the assignment of leases are restraints against the alienation of property interests. Fairbanks v. PowerOil Co. (1945), 81 Ohio App. 116, 122 [36 O.O. 418]. As such, they are strictly construed against the lessor. Funk v. Funk (1981), 102 Idaho 521, 524, 633 P.2d 586; see Fairbanks, supra, at 122. This basic principle is exemplified by the trend of recent cases which have held that a lessor must act reasonably in withholding consent under a lease provision requiring the lessor's consent to the lessee's assignment. Accord L HInvestments v. Belvey Corp. (W.D.N.C. 1978), 444 F. Supp. 1321;Homa-Goff Interiors, Inc. v. Cowden (Ala. 1977), 350 So.2d 1035;Cohen v. Ratinoff (1983), 147 Cal.App.3d 321,195 Cal.Rptr. 84; Fernandez v. Vazquez (Fla.App. 1981), 397 So.2d 1171; Funk v. Funk, supra; Logan v. 3750 N. Lake Shore Drive, Inc. (1974),17 Ill. App.3d 584, 308 N.E.2d 278; Boss Barbara, Inc. v.Newbill (1982), 97 N.M. 239, 638 P.2d 1084.

The underlying rationale for requiring a lessor to act reasonably "is that a lease, being a contract, should be governed by general contract principles of good faith and commercial reasonableness." Boss Barbara, supra, at 241; Fernandez, supra, at 1173-1174. The Second District Court of Appeals of California, quoting from McWilliams v. Holton (1967), 248 Cal.App.2d 447,451, 56 Cal.Rptr. 574, has stated that:

"``In every contract there is an implied covenant that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract; which means that in every contract there exists an implied covenant of good faith and fair dealing' (Universal SalesCorp. v. California etc. Mfg. Co., 20 Cal.2d 751, 771 [128 P.2d 665].) ``This covenant not only imposes upon each contracting party the duty to refrain from doing anything which would render performance of the contract impossible by any act of his own, but also the duty to do everything that the contract presupposes that he will do to accomplish its purpose. [Citations.]' (Harm v.Frasher, 181 Cal.App.2d 405, 417 [5 Cal.Rptr. 367].)" Cohen v.Ratinoff, supra, at 329, 195 Cal.Rptr. at 88-89.

In effect, if the lessor is permitted to arbitrarily refuse consent to an assignment, the right of the lessee to assign would be virtually nullified.

Further, the jurisdictions which would have rejected the old traditional rule have emphasized that the days of caveat emptor no longer exist even as to commercial leases. See, e.g.,Schweiso v. Williams (1984), 150 Cal.App.3d 883,198 Cal.Rptr. 238, 240. The need for permitting the reasonable alienation of commercial building space has become paramount in our increasingly urban society. Id.; Homa-Goff Interiors, supra, at 1037.

For all of the above reasons, I would imply a standard of reasonableness to the words "for any other reason" and hold that appellee-lessor may refuse consent only where it has a good faith reasonable objection to the lessee's assignment, i.e., one related to the assignment itself and not, as here, to the wish of the lessor to lease the property to another. Examples of good faith reasonable objections would be the inability to fulfill the terms of the lease, financial irresponsibility or instability, the unsuitability of the premises for the intended use, or the intended unlawful or undesirable use of the premises. Cohen,supra, at 330, 195 Cal.Rptr. at 89. However, denying consent solely on the basis of personal taste, convenience, sensibility, or to charge a higher rent will not meet the tests of good faith and commercial reasonableness. Fernandez, supra, at 1174. Whim or caprice constitute arbitrary reasons and will not be upheld.Funk, supra, at 524. In other words, consent is not to be withheld unless the prospective assignee is unacceptable, using the same standards that were applied in accepting the original tenant. Boss Barbara, supra, at 241.

This case differs from Shaker Bldg. Co. v. Fed. Lime StoneCo. (March 2, 1972), Cuyahoga App. No. 31451, unreported, in one critical respect. In Shaker Bldg., the lease contained a specific prohibition against assignments as follows:

"The Lessee shall not, without the prior written consent of the Lessor, (a) assign or convey this lease or any interest under it, (b) allow any transfer here of or any lien upon the Lessee's interest by operation of law, (c) sublet the premises or any part thereof, or (d) permit the use or occupancy of the premises or any part thereof by anyone other than the Lessee."

No such language or anything similar appears in the lease before us. In fact, paragraph 25 of the lease herein gives rights to the tenant rather than to the landlord. Had the parties intended to give the landlord an arbitrary, unfettered right to refuse consent to an assignment of the lease, they could have expressed it clearly. I would not read the language used in a way that works a forfeiture.

I would reverse and enter judgment for appellants.