Kendall v. Ernest Pestana, Inc., 40 Cal. 3d 488 (1985) p473.
Subject:
subleases and assignments
Facts:
City of San Jose leased hangar space to Perlitch. Perlitch then assigned interest to Pestana. Prior to assigning interest to Pestana, the Perlitches entered into a 25 year sub lease with Bixler. Bixler owned a Flight Services business which he decided to sell to Kendall. As per the original lease, the Perliches were required to give consent to this reassignment of interests. The Perlitches refused to consent to the reassignment.
Procedure:
Case arises on appeal from an order sustaining a demurrer without leave to amend.
Issue:
Was the refusal to consent to the assignment of the lease unreasonable and an unlawful restraint on the freedom of alienation?
Rule:
Consent of assignment may be withheld only where the lessor has a commercially reasonable objection to the assignment.
Holding:
Because the Perlitches were unable to demonstrate an reasonable objection to the assignment, there is no reason why the lease can not be reassigned.
Rationale:
A leasehold interest is freely alienable. The consequences of a consent clause can sometimes be too harsh (if consent is not given). A duty is imposed to exercise discretionary power in good faith and in accordance with fair dealing. Lessee has a right to expect that consent will not be unreasonably withheld.
Policy/Notes:
overturned a strong majority rule that held stipulations in the contract should be strictly adhered to. Consent was the lessor's choice.