JOHNSTON ET AL v. LANDUCCI

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District Court of Appeal, Fourth District, California.

JOHNSTON ET AL. v. LANDUCCI.

Civ. 2689.

Decided: February 17, 1942

David E. Peckinpah and L. N. Barber, both of Fresno, for appellants. G. L. Aynesworth and Samuel F. Hollins, both of Fresno, for respondent.

This is an action to quiet title to certain land in Fresno County. The defendant filed a cross–complaint claiming an equitable lien upon a portion of the property through an assignment from Arthur F. Johnston as security for a note for $9,000 given by Arthur F. Johnston to A. E. Landucci. Want of consideration for the note and assignment was set up as a defense to the cross–complaint. The court found that this note was executed and delivered in consideration of an assignment from Landucci to Arthur F. Johnston of another contract for the purchase of certain lands in Merced County. A judgment was entered quieting the plaintiff's title but subject to defendant and cross–complainant's lien upon a portion of the property and foreclosing that lien. From this judgment the plaintiffs have appealed.

The appellants are husband and wife, and Arthur F. Johnston is their adult son. In 1928, E. E. Johnston and Arthur F. Johnston purchased on contract from Miller & Lux certain real property in Fresno County, of which the land here involved and ordered to be sold is the east one–half. In 1931, these vendees, by written agreement, divided their interests in the land thus being purchased and agreed that E. E. Johnston should take the west half and Arthur F. Johnston the east half. In 1938, the purchase payments having been completed, Miller & Lux deeded the entire property to E. E. Johnston and Arthur F. Johnston. On February 27, 1939, Arthur F. Johnston quitclaimed his interest in the property to his mother, Viola Johnston.

In the meantime, and on February 2, 1931, A. E. Landucci purchased on an instalment contract from Miller & Lux certain land in Merced County. On that same day, Landucci entered into a written contract to sell that land on somewhat different terms to Arthur F. Johnston, who took possession and farmed the land that year.

In November, 1931, Arthur F. Johnston found himself unable to finance the farming of the Merced land and to make the payments called for by his contract with Landucci for the purchase of that land. About that time he entered into an escrow for the purpose of trading his interest in the Merced land for a building in the city of Fresno, owned by one Imperatrice. That deal finally fell through and that trade was never completed. For the purposes of that trade, however, Arthur F. Johnston desired to obtain an assignment from Landucci to himself of the contract under which Landucci was purchasing the Merced property. To this end he made an arrangement with Landucci in November, 1931, whereby Landucci delivered to him the contract under which Landucci was purchasing the Merced land from Miller & Lux together with a form of assignment thereof, as hereinafter described, and Arthur F. Johnston executed and delivered to Landucci a note for $9,000 and, as security therefor, an assignment of Johnston's interest in the land in Fresno County.

The contract under which Landucci was purchasing the Merced land from Miller & Lux contained this provision: “Neither this contract nor any interest therein shall be assignable without the written consent of the seller.” Attached to this contract is a form of assignment which was signed by Landucci and acknowledged by him on November 25, 1931. It purports to assign all of Landucci's right, title and interest in the contract, including the right to demand and receive a deed, to Arthur F. Johnston, followed by the words “This assignment is subject to the approval of Miller & Lux, Incorporated.” It appears that this contract and this assignment were delivered to Arthur F. Johnston on November 25, 1931, and at the same time the note and assignment of the other contract, as security therefor, were delivered by Arthur F. Johnston to Landucci's attorney. The consent of Miller & Lux to the assignment from Landucci to Arthur F. Johnston, which is attached to the contract for the Merced land, was never obtained and, so far as the record here shows, nothing further was done toward performing or completing the terms of that contract. Landucci died on May 9, 1932, and his widow, the respondent herein, has succeeded to his interest so far as material here. While the $9,000 note was payable in five annual instalments, the first of which came due on December 1, 1932, no attempt to collect any part thereof was made prior to the filing of the cross–complaint in this action, which action was filed on March 24, 1939.

The appellants' sole contention is that there was no consideration for the $9,000 note and the security therefor, and that the court's finding to the effect that a good consideration for said note existed in the execution and delivery by Landucci to Arthur F. Johnston of an assignment of the contract under which Landucci was purchasing the Merced land from Miller & Lux is without support in the evidence or in law. The respondent contends, on the other hand, that this assignment, although made “subject to the approval of” the original vendor, was not a conditional assignment and did not create a condition precedent or subsequent, or constitute a covenant on the part of Landucci to procure the approval of the vendor to such a transfer; that this was a completed and effective assignment which, with the delivery of the instruments, transferred Landucci's interest in the land to Johnston; and that the qualifying words in the assignment did not make it ineffective, but merely imposed a burden which was assumed by the assignee. There is no evidence of any consideration for this note other than the execution and delivery of the purported assignment to Johnston of Landucci's interest in this contract, and no other consideration was found by the trial court. The question is squarely presented, therefore, as to the legal effect of the language used in that assignment and as to whether the same became effective or passed any interest to Johnston. If that assignment did not become effective, Johnston neither received anything nor assumed the burden of obtaining the approval of the vendor. The language of this assignment must, moreover, be considered in connection with the provision of the contract itself, forbidding an assignment without the consent of the seller.

While contracts of this nature may be assigned in the absence of any agreement to the contrary it has long been recognized that this is not true where the contract expressly provides otherwise, in which case the intention of the parties will be enforced by the courts. La Rue v. Groezinger, 84 Cal. 281, 24 P. 42, 18 Am.St.Rep. 179. Of course such a provision may be waived by the express agreement or by the conduct of the parties. Davis v. Rawhide Gold Min. Co., 15 Cal.App. 108, 113 P. 898. With respect to leases of real property it is well settled that a breach of a covenant not to assign the lease makes an assignment voidable and not void, the lessor having an option as to whether he will forfeit the lease, which option he must exercise according to law. Buchanan v. Banta, 204 Cal. 73, 266 P. 547. Where the lessor fails to exercise this option and permits the assignee to act to his prejudice the lessor is estopped from forfeiting the lease. Standard Oil Co. v. Woolner, 113 Cal.App. 66, 298 P. 77. However, where the landlord does not in any manner consent, the assignment is not effective. Farnum v. Hefner, 92 Cal. 542, 28 P. 602.

In contracts for the sale and purchase of real estate the validity of a covenant forbidding an assignment without the consent of the seller has been generally recognized. Shively v. Semi–Tropic L. & W. Co., 99 Cal. 259, 33 P. 848; Stevinson v. Joy, 164 Cal. 279, 128 P. 751; Laguna Land, etc., Co. v. Greenwood, 92 Cal.App. 570, 268 P. 699. It logically follows that the attempted assignment of such a contract is ineffective and conveys nothing to the assignee in the absence of the consent of the vendor, or of matters of estoppel by reason of which his formal consent becomes unnecessary. This has been recognized in at least two cases in this state. In Los Angeles, etc., Bank v. Northrup, 120 Cal.App. 677, 8 P.2d 528, where a vendor had attempted to sell his interest in a contract which provided that no assignment thereof should be valid in the absence of the written consent of the vendor, and where such consent had not been obtained, it was held that the purported assignment was not valid and that the assignee had acquired no rights thereunder. The effect of the holding there made is that the assignment was ineffective for any purpose and conveyed nothing to the assignee. The case of Whitten v. Young, 14 Cal.App.2d 299, 58 P.2d 167, involving a lease and option to purchase, is to the same effect, it being pointed out that the record disclosed no rights which had accrued to the claimant in the absence of the consent which was required. Where a contract is assigned in violation of a clause forbidding such assignment the contract still remains the property of the assignor. Burck v. Taylor, 152 U.S. 634, 14 S.Ct. 696, 38 L.Ed. 578.

Applying these rules to the instant case it must be held that the contract under which Landucci was purchasing the Merced County Land, and all interests of the vendee under such contract, remained the property of Landucci, and that Johnston received nothing by virtue of the purported assignment. Similarly, Landucci suffered no detriment because he still owned the contract and all rights thereunder. The assignment was never completed. This would have been the legal effect if Landucci had executed an absolute assignment. Instead of doing this, he made his assignment “subject to the approval” of the vendor. This rather clearly indicates an attempt to comply with the requirement of the contract rather than an intention to make a complete assignment in disregard thereof. In other words, the wording of the assignment, reasonably construed, constitutes a limitation upon when the assignment shall become effective rather than a mere exception as to the amount of interest which is to be conveyed, or the setting forth of a burden which is to be assumed by the assignee. It is not a condition or covenant as to something that is immediately assumed by the assignee, but it is a restriction or limitation as to when and under what circumstances the assignment itself shall take effect and shall operate as a transfer. Under the circumstances here appearing this assignment was incomplete and never became effective. It follows that the court's findings to the effect that the assignment of this contract was valid, and that it constituted a good consideration for the note in question, are not supported by the evidence.

For the reasons given, the judgment is reversed.

BARNARD, Presiding Justice.

MARKS and GRIFFIN, JJ., concurred.

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