GUERIN v. BLAIR

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District Court of Appeal, Second District, Division 2, California.

GUERIN et al. v. BLAIR.

Civ. 16374.

Decided: August 11, 1948

Arthur C. Webb, of Los Angeles, and Charles Reagh, of San Francisco, for appellant. Latham & Watkins, of Los Angeles, and John G. Evans, of San Francisco, for respondents.

On January 8, 1945, plaintiffs leased to Vergil Grove under an equipment rental agreement two tractors, each with a power control unit, and two carryalls. Paragraph 16 of the lease reads as follows: ‘Subletting. No equipment shall be sublet by the lessee, nor shall he assign or transfer any interest in this Agreement without written consent of the Lessor.’

In violation of this provision against subletting, on January 15, 1945, Grove sublet one of the tractors to defendant. On September 7, 1946, plaintiffs brought a claim and delivery action against defendant to recover possession of the tractor and from a judgment in favor of plaintiffs, defendant appeals.

The only demand made by the plaintiffs upon the defendant for the return of this equipment was by a telegram filed at 4:12 P.M. on September 6th, and delivered at 8:00 P.M. of the same day. Suit was filed the following day at 10:12 A.M. No notice or demand was served on Grove.

Defendant maintains that this action is prematurely brought by reason of the fact that a three-day notice was not given as required by paragraph 13 of the rental agreement, the pertinent provisions of which are as follows: ‘Termination of Agreement. Should the Lessee defer any payment more than thirty (30) days * * * as provided by this Agreement, or substantially violate any provision thereof, the Lessor may, after three days' notice, terminate this Agreement, take possession of the equipment without becoming liable for trespass, and recover all rental due, full damages for any injury to, and all expenses incurred in returning the equipment.’

Plaintiffs contend that by virtue of the violation of the provision against subletting, defendant's possession was unlawful and notice was not required.

In order to maintain an action for claim and delivery, plaintiff must be entitled to immediate and exclusive possession. Garcia v. Gunn, 119 Cal. 315, 317, 51 P. 684; Sutton v. Stephan, 101 Cal. 545, 548, 36 P. 106; Commercial Discount Co. v. Cowen, 18 Cal.2d 610, 613, 116 P.2d 599; Davenport v. Alexander, 53 Cal.App. 688, 692, 200 P. 771. Furthermore, plaintiff must have an unqualified right of possession and if there be any condition precedent or preliminary act which must be executed before the plaintiff is entitled to that unqualified right, the action cannot be maintained. People's Savings Bank v. Jones, 114 Cal. 422, 426, 46 P. 278.

The law is settled in this state that a violation by the lessee of a covenant against subletting or assigning does not ipso facto terminate or render void the lease. The lessor has the option of declaring a forfeiture of the lease or of ignoring the breach and treating it as subsisting. People v. Klopstock, 24 Cal.2d 897, 901, 151 P.2d 641; Chapman v. Great Western Gypsum Co., 216 Cal. 420, 427, 14 P.2d 758; Buchanan v. Banta, 204 Cal. 73, 76, 266 P. 547; Garcia v. Gunn, supra; Northwestern Pacific R. R. Co. v. Consumers Rock & Cement Co., 50 Cal.App.2d 721, 723, 123 P.2d 872; Licht v. Gallatin, 84 Cal.App. 240, 245, 257 P. 914.

The Northwestern Pacific Railroad Company case is an action for unlawful detainer. In violation of a covenant in the lease the lessee assigned without the consent of the lessor who refused to recognize the validity of the assignment but did not serve notice terminating or declaring a forfeiture of the lease. The court stated, 50 Cal.App.2d at page 723, 123 P.2d 873, ‘If the lessor desired to stand upon the covenant against assignment, he could have given notice of his election to declare a forfeiture of the lease and could have sued for breach of the covenant. He could also have had his remedy in unlawful detainer if possession had been thereafter withheld following proper notice.’

The cases cited above relate to leases involving real property. However, the principles of law declared in those cases are equally applicable to a lease involving personal property since an estate for years is not real property but is a chattel real. It is regarded as part of the personal estate of the lessee. Potts Drug Co. v. Benedict, 156 Cal. 322, 328, 104 P. 432, 25 L.R.A.,N.S., 609; Summerville v. Stockton Milling Co., 142 Cal. 529, 539, 76 P. 243; Guy v. Brennan, 60 Cal.App. 452, 454, 213 P. 265; Universal Pictures Corp. v. Roy Davidge Film Labratory, Ltd., 7 Cal.App.2d 366, 369, 370, 45 P.2d 1028; Dabney v. Edwards, 5 Cal.2d 1, 6, 7, 53 P.2d 962, 103 A.L.R. 822.

The case of First National Bank v. Thompson, 60 Cal.App.2d 79, 140 P.2d 75, relied upon by respondent, is not applicable to the facts herein. That case involved a conditional sales contract, the court holding that a sale by a conditional vendee without authority from the vendor constitutes a conversion and where the taking of the property is wrongful, no demand is legally necessary. It does not appear from the contract that notice of any character was required in order to authorize retaking of possession for violation of its terms.

The rule of law stated in Harpending v. Meyer, 55 Cal. 555, is not applicable. That case involved the conversion of jewelry belonging to plaintiff which had been deposited for safekeeping. It was a gratuitous bailment and there was no agreement between the parties requiring notice before the bailor could retake possession. The bailee pawned the jewelry with defendant and not having redeemed the pledge, defendant sold it. The court held that the defendant's possession was tortious and constituted a conversion, and where possession of property is obtained from one who had no right to transfer it, the right of action by the owner against the transferee accrues as soon as the latter acquires possession and no demand is necessary.

The case of Carstensen v. Gottesburen, 215 Cal. 258, 9 P.2d 831, was a claim and delivery action for the return of a fishing barge and involves a bailment for hire. Plainbarge and involves a bailment for hire. Plaintiff leased a fishing barge to defendant and in violation of a provision in the agreefendant assigned a one-half interest in the lease. There was no clause in the contract between the parties providing for a forfeiture upon the breach of a covenant. The court held that plaintiffs were entitled to terminate the hiring and reclaim the barge under subdivision 1 of section 1931 of the Civil Code, which provides that the letter of a thing may terminate the hiring before the end of the term agreed upon ‘when the hirer uses or permits a use of the thing hired in a manner contrary to the agreement of the parties.’ The court further held that the plaintiffs had made a sufficient demand for the return of the barge prior to bringing the action.

In a contract of bailment the ‘rights, duties, and liabilities of the bailor and the bailee must be determined from the terms of the contract between the parties, whether express or implied. Where there is an express contract, the terms thereof control, since both the bailor and the bailee are entitled to impose on each other any terms they respectively may choose, increasing or diminishing their rights, and their express agreement will prevail against general principles of law applicable in the absence of such an agreement.’ 8 C.J.S., Bailments, page 255, § 22; 6 C.J. p. 1110, § 42; Jacobs v. Grossman, 310 Ill. 247, 141 N.E. 714, 715; Oklahoma Petroleum & Gas Co. v. Winship, 83 Okl. 146, 200 P. 844, 849; Bratt v. Poole, 105 Wash. 565, 178 P. 638, 639; Geis v. Mathes, 128 Kan. 753, 280 P. 759, 760; Locomotive Exchange, Inc. v. Rucker Bros., 106 Wash. 278, 179 P. 859, 860, 184 P. 848.

In the instant case the parties made their own contract and imposed on each other the terms they chose, one of which was the provision for a three-day notice before the lessor could terminate the agreement in the event that the lessee should ‘substantially violate any provision thereof.’ The provision in the contract against subletting was a covenant and not a condition. The defendant's possession was not unlawful. Grove's violation of the covenant did not give plaintiffs the right to immediate possession, it gave them the right to possession only after notice given in accordance with the express provisions in the lease agreement. There was a preliminary act to be performed before plaintiffs were entitled to an unqualified right of possession, to wit, the serving of a three-day notice. No such notice was served and since plaintiffs did not have an unqualified right to immediate and exclusive possession they cannot maintain this claim and delivery action. People's Savings Bank v. Jones, supra.

Judgment reversed.

I concur with the opinion of Mr. Justice WILSON but think some vital distinctions should be more clearly defined.

Guerin's lease to Vergil Grove contained a provision against subleasing as follows: ‘No equipment shall be sublet by the Lessee, nor shall he assign or transfer any interest in this Agreement without written consent of the Lessor.’

Also there was a forfeiture provision for a violation of any of the terms thereof as follows: ‘Should the Lessee defer any payment more than thirty (30) days, or become bankrupt, or fail to maintain and operate or to return the equipment as provided by this Agreement, or substantially violate any provision thereof, the Lessor may, after three days' notice, terminate this Agreement, take possession of the equipment without becoming liable for trespass, and recover all rental due, full damages for any injury to, and all expenses incurred in returning the equipment.’ In violation of the first quoted provision Grove subleased to Blair. Thereafter Guerin brought this claim and delivery action to regain possession and for damages. Concededly Guerin may recover possession of the equipment by reason of the sublease. The only undetermined question is the amount, if any, of the damages to which he is entitled against Blair for holding the chattel. Inasmuch as damages for detaining movable property are its usable rental value during the period of its wrongful detention (Ferris v. Cooper, 125 Cal.App. 234, 237, 13 P.2d 536), the amount thereof in the instant case is to be computed either (1) from the time Blair came into possession or (2) from the day Guerin served notice on him to return the equipment. This can be resolved only by determining whether Blair's possession was lawful or unlawful. If the latter gained possession lawfully, damages should be payable from the time Guerin notified Blair to return the equipment. If such possession was unlawful, damages should be computed from the day appellant acquired possession.

Whether Blair obtained possession lawfully must be determined by the extent of Grove's right, if any, lawfully to transfer possession; and that in turn depends upon the construction of the language of the lease. If the above quoted provisions should be construed as conditions, a violation thereof would result in a termination of Grove's right possession of the equipment; if they are covenants, a violation would not terminate the lease but would merely give rise to a cause of action by Guerin against Grove for breach of covenant.

Pursuant to familiar rules of construction these provisions must be construed most strongly against Guerin for three reasons: (1) he drew the lease into which he could have incorporated such conditions as beyond doubt would terminate all rights of the lessee upon his violation of them; (2) the forfeiture clause is for the protection of the lessor and is therefore to be construed most strongly against him; (3) the construction which avoids forfeiture must be made if it is at all possible. Ballard v. MacCallum, 15 Cal.2d 439, 444, 101 P.2d 692; Civil Code, sec. 1654; Ghirardelli v. Peninsula Properties Company, 16 Cal.2d 494, 496, 107 P.2d 41; Rest., Contracts, sec. 236–D.

Whether the quoted provisions are conditions or covenants depends entirely upon the intent of the parties as manifested by their agreement. Such intent is indicated by the language they employed to evidence their understanding. If the anti-subleasing clause had been intended to operate an automatic termination of the lease there was no need to provide for the lapse of any time after service of notice, in fact no notice would have been necessary. Since the lease must be construed in its entirety (Civil Code, sec. 1641; Code Civ.Proc., sec. 1858; Ghiradelli v. Peninsula Properties Company, supra), the provision against subleasing, in the light of the clause requiring three days' notice before termination, must be construed as a covenant for the breach of which an action would lie in favor of Guerin against Grove. However, such breach would not terminate Grove's lease and consequently would not deprive him of his right of possession without a prior strict compliance with the terms of the forfeiture provision. Inasmuch as there was no allegation of a notice having been given by Guerin to Grove, it must be assumed that none was given, in which event the contractual relationship between Guerin and Grove continued.

By virtue of the language of the lease Guerin was not entitled to possession until three days after notice to Grove that the lease was terminated. Since Grove was the lawful possessor of the equipment until three days had expired after notice was served by Guerin, Grove could lawfully give possession to a third party even though he thereby became liable for breach of covenant. If he could lawfully give possession to Blair the latter could lawfully take possession. As against Grove, Blair's possession was lawful; and since Guerin could not deprive Grove of possession until three days after service of notice, then as against Guerin, Blair's possession was lawful from the day he acquired possession.

Damages would therefore be measured from the time Blair's possession became unlawful. This could have been fixed only by the telegraphic notice served on Blair late in the evening of the day before the action was commenced. The legal effect of such notice was that the service was on the day the suit was filed. Since the most reasonable construction of the lease leads to the conclusion that Guerin was entitled to possession only after the three days' notice to Grove and actual notice to Blair, to award him right to possession without his first giving such notice would make such provision a nullity. Guerin served no notice on Grove, and did not serve notice on Blair until the day this action was commenced. Having come lawfully into possession of the equipment, Blair could not ‘be sued for possession, unless a demand has been made upon him.’ Commercial & Savings Bank v. Foster, 210 Cal. 76, 82, 290 P. 583, 586.

It follows that the award of damages against appellant was error.

I dissent.

As pointed out in the majority opinion, the contract of bailment prohibited Mr. Grove from subletting the property covered by the contract. Hence the bailee received only a limited title to the property which was the subject of the bailment and he could not transfer any greater title to a third party than he himself had received, and when he attempted to do so his transferee received no title and held the property without any legal title and wrongfully. The situation is analogous to that in the case of Carstensen v. Gottesburen, 215 Cal. 258, 9 P.2d 831. At page 261 of such case, 9 P.2d at page 832, Mr. Chief Justice Waste, in speaking for our Supreme Court, had the following to say:

‘Under the terms and provisions of the lease here involved, the barge was placed in the appellant's possession for his sole and exclusive use and operation as a fishing barge. That the parties intended confining its use and operation exclusively to the appellant is established by the clause in the instrument which precludes and prohibits the appellant from assigning the lease or subletting any part of the barge without having first procured the written consent of the respondents. They did not consent to an assignment of the lease, and therefore to permit of the use and operation of the barge by one not a party to the hiring (and one not acting as agent or employee of the lessee) is to permit ‘a use of the thing hired in a manner contrary to the agreement of the parties' just as effectively and as completely as though the lessee had used the barge for illicit ‘rum-running’ purposes when the provisions of the lease required that it be engaged only as a fishing boat. Therefore, for the appellant to transfer the lease or any interest therein, to Sheldon, a stranger to the hiring, or to a corporation, a partnership or any other entity, having no connection therewith, when the lease by its terms forbade such a transfer and engaged only to permit of appellant's use of the barge, constituted, in our opinion, a positive violation of the terms of the hiring and permitted ‘a use of the thing hired in a manner contrary to the agreement of the parties' within the meaning of subdivision 1 of section 1931, supra. This being so, the respondents, as lessors, were authorized by the cited section to terminate the hiring and reclaim the barge before the end of the term agreed upon. The action of the trial court in decreeing a return of the barge to the respondents was therefore proper.’

The applicable rule is thus stated in 8 C.J.S. (1938) Bailments, page 315, section 39(3):

‘As a general rule, the bailor may recover possession of the subject matter of the bailment, or its value, from any person who has acquired possession by a wrongful act of the bailee, such as a sale, mortgage, pledge, or other transfer; and this right of the bailor may be enforced against one who purchases from the bailee in good faith and without notice of the bailor's title, the principle being that the bailee cannot transfer a greater right or a better title than he himself possesses, and that a person purchasing property from a stranger does so at his peril.’

The cases involving leases of real property cited in the majority opinion are in my judgment inapplicable to a contract of bailment which pertains to personal property. It is my view that the unanimous opinion of this court filed June 3, 1948, reported in —— Cal.App.2d ——, 194 P.2d 74, 75, is correct and that the judgment should be affirmed. Such opinion reads as follows:

‘McComb, Justice. From a judgment in favor of plaintiffs after trial before the court without a jury in a claim and delivery action, defendant appeals.

‘The record supports the following facts:

‘On January 8, 1946, plaintiffs leased a tractor and power until control to Vergil Grove for a monthly rental of $3,750. The lease contained a provision prohibiting the subletting of the equipment, and a condition No. 13, reading:

“Should the Lessee defer any payment more than 30 days or substantially violate any provision hereof, the Lessor may, after three days' notice, terminate this agreement, take possession of the equipment without becoming liable for trespass and recover all rental due, * * *.'

‘On January 15, 1946, in violation of the provision in the lease, Mr. Grove sublet the equipment to defendant, who took possession of it and paid Mr. Grove $800 a month rental for two months. Thereafter plaintiffs located the equipment in defendant's possession, demanded its return on September 6, 1946, and on the following day filed the present claim and delivery action. The equipment was delivered to the sheriff of Los Angeles County on September 12, 1946, and thereafter judgment was entered in favor of plaintiffs in the present action for damages in the sum of $5,120.

‘Questions

‘First: Since plaintiffs had leased the equipment to Mr. Grove, who was rightfully in possession thereof, and who in turn, in violation of a provision in the lease, sublet it to defendant, were plaintiffs (a) estopped to assert their claim against defendant, and (b) was it a prerequisite to the accrual of plaintiffs' cause of action that they make demand upon defendant for the return of the property?

‘This question must be answered in the negative. [1] Where the possession of personal property is obtained in good faith or otherwise from a person who has no right to transfer such property, a right of action accrues against the transferee as soon as he acquires possession of the property, and it is not a prerequisite to the owner's filing a claim and delivery action that he make demand for his property. (Harpending v. Meyer, 55 Cal. 555, 558 et seq.)

‘[2] The foregoing rule is applicable to the present case. By the very terms of the agreement of the lease under which Mr. Grove obtained possession of the property here involved, his right to possession was a limited one and he was prohibited from subleasing the property. Therefore, when he transferred it to defendant, defendant's possession was unlawful and it was unnecessary for plaintiffs to make a demand for the return of their equipment. (First National Bank v. Thompson, 60 Cal.App.2d 79, 82, 140 P.2d 75.)

‘[3] Second: Was it a prerequisite to plaintiffs' maintaining the present action that they give the three-day notice required by condition No. 13 in the lease between plaintiffs and Mr. Grove?

‘This question must also be answered in the negative. The present action is not predicated upon the lease between plaintiffs and Mr. Grove or for the breach of any condition thereof by defendant. It is based upon the fact that defendant is unlawfully in possession of property belonging to plaintiffs, hence the provision of the lease relative to notice is immaterial in this action.

‘Davenport v. Alexander, 53 Cal.App. 688, 200 P. 771, relied on by defendant, is not here in point for the reason that in the cited case, defendant had come into possession of the personal property lawfully, and hence demand for its return was a prerequisite to a claim and delivery action. In the present case, defendant came into possession of the property unlawfully.

‘Third: Did the trial court commit prejudicial error in excluding (a) evidence that defendant had requested Mr. Grove to remove the equipment after he had had it for two months, and (b) the record of another suit in the Superior Court between plaintiffs and Mr. Grove involving the property in question in the present case?

‘This question must likewise be answered in the negative.

‘[4] (a) Evidence that defendant had requested Mr. Grove to take possession of the equipment and that he in fact did not do so would not relieve defendant of liability for wrongfully having possession of plaintiffs' property. The proffered evidence was immaterial and therefore properly excluded.

‘[5] (b) It is conceded that defendant was not a party to the suit between plaintiffs and Mr. Grove. Evidence was not introduced, nor has defendant pointed out in his briefs any reason why the record in another action to which defendant was not a party would be material or binding on defendant in this case. The trial court's ruling was correct.

‘[6] Fourth: Was the amount of damage awarded defendant excessive?

‘This question must be answered in the negative. The finding was supported by evidence which disclosed that the reasonable rental value of the equipment was $800 per month; that defendant had possession from January 15, 1946, until September 12, 1946; that plaintiffs had received payment for rentals to March 1, 1946; thus defendant was chargeable with the reasonable rental value of the equipment from March 1, 1946, to September 12, 1946, a period of six months and 12 days. Based on these facts, the judgment in the amount of $5,120 was correct.

‘The judgment is affirmed.

‘Moore, P. J., and Wilson, J., concurred.’

WILSON, Justice.

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