Case Name: Ewald A. FUNK and Pearl S. Funk, husband and wife, Plaintiffs-Appellants, v. Melvin R. FUNK and Diane A. Funk, husband and wife, Defendants-Respondents
Court: Idaho Supreme Court
Jurisdiction: Idaho
Decision Date: 1981-09-02
Citations: 102 Idaho 521
Docket Number: No. 13310
Parties: Ewald A. FUNK and Pearl S. Funk, husband and wife, Plaintiffs-Appellants, v. Melvin R. FUNK and Diane A. Funk, husband and wife, Defendants-Respondents.
Judges: McFADDEN, BISTLINE and DONALDSON, JJ., concur.
Reporter: Idaho Reports
Volume: 102
Pages: 521–527

Head Matter:
633 P.2d 586
Ewald A. FUNK and Pearl S. Funk, husband and wife, Plaintiffs-Appellants, v. Melvin R. FUNK and Diane A. Funk, husband and wife, Defendants-Respondents.
No. 13310.
Supreme Court of Idaho.
Sept. 2, 1981.
Melville W. Fisher, II of Green & Sullivan, Boise, for plaintiffs-appellants.
Randall C. Budge of Racine, Huntley & Olson, Pocatello, for defendants-respondents.

Opinion:
SHEPARD, Justice.
This is an appeal from a summary judgment which denied the relief sought by plaintiff-lessors, f. e., the termination of a farm lease. We affirm.
The principal question presented is the ability of a lessee to sublease without the consent of the lessor when the lease allows subletting conditioned on the lessor's consent and the lessor arbitrarily and capriciously withholds such consent.
In November of 1969, plaintiff-appellants Ewald and Pearl Funk [hereinafter lessors] leased certain farm land to Melvin and Diane Funk [hereinafter lessees] for a ten year period commencing January 1, 1970 and ending December 31,1979. Semi-annual rental payments were required on or before March 1 and December 1 of each year. The written lease provided in pertinent part: "(e) That the Lessee shall have the right and privilege of sub-leasing or assigning this instrument provided that the consent of the Lessor is first obtained."
During early 1978 the lessees were desirous of subleasing the property for the 1978 crop year. In January, the then attorney for the lessees wrote a letter expressing the lessees' desire to sublet the property and indicated that the lessees would make both 1978 lease payments on March 1 to ensure that the entire 1978 rent was paid in advance. They also promised to supervise the subtenant's operations to assure that the land was farmed in a good and husbandry-like manner and that proper weed control was practiced. They also offered to provide any additional information concerning the sub-tenant that might be requested by the lessors.
In February, lessors responded ". . . that we cannot allow a sublease of any type" and declared ". . . that we do not intend to allow a sublease of .this property." In response to further correspondence from lessees' attorney, the lessors in February expressed their belief that the rental fee was below the fair rental value and again emphasized their refusal to allow a sublease, stating: ". . . we do not now or in the future wish to honor any subleasing of this property. We already have more information concerning the proposed sublessees than you can possibly assemble." Thereafter, an additional letter was written on behalf of lessors indicating that a sublease would be allowed if the lessees would assign one-half of the sublease proceeds to the lessors, if the lessees would pay the 1978 property taxes and if the lessees would agree to terminate the underlying lease on December 31, 1978. Thereafter, the lessees indicated they would farm the property themselves and would not sublease it.
Lessees did, however sublet at least a portion of the premises for the 1978 crop year. When lessors learned of that sublease in September of 1978 they served notice of termination of the lease agreement. When lessees refused to quit the premises, this action was commenced. In March, 1979, summary judgment was entered in favor of the lessees declaring the lease agreement to be in full force and effect. The lessees continued to farm the property through the final year of the lease, 1979, and lessors accepted semi-annual rental payments in March and December of both 1978 and 1979.
Appellant-lessors had claimed below that the lessees had committed waste on the premises and appellant-lessors argue on appeal that factual issues remain regarding the alleged waste. We disagree. Lessees admitted removing certain hand irrigation lines, but there was no evidence or even allegation that the equipment would not be returned at the termination of the lease. As the trial court noted, no evidence or even allegations existed which, if accepted as true, would establish the commission of waste. On the contrary, it is without dispute that lessees greatly increased the value of the farm land.
Appellant-lessors next argue that an additional factual issue was raised which prevented the entry of summary judgment in that appellant-lessors submitted affidavits to the trial court claiming that they might have given the matter of a sublease further consideration. No contention is made that any such purported reconsideration was in any way communicated to the respondent-lessees and the lessors' claim of possible reconsideration is belied by their unequivocal communications. Lessors clearly and without equivocation informed the lessees that they would under no circumstances consent to a sublease. At a later time they informed the lessees that they would consent to a sublease only if lessees consented to a total rewriting of the lease agreement which would require lessees to shoulder much greater financial burdens than required of them in the lease. Lastly and conclusively, appellants-lessors filed the instant action seeking to oust lessees from the premises because they had not obtained the consent of the lessors to a sublease. The existence of an alleged change of mental state on the part of appellant-lessors does not create a material issue of disputed fact under the circumstances presented here. A genuine factual issue is not created by a mere scintilla of evidence. LePelley v. Grefenson, 101 Idaho 422, 614 P.2d 962 (1980); Jones v. Jones, 100 Idaho 510, 601 P.2d 1 (1979).
We now turn to the principal question presented here, i. e., whether a lessor has an absolute right to withhold consent to a proposed sublease when the underlying lease grants to the lessee a right of assigning or subleasing upon the consent of a lessor.
A tenant holding under a lease for a definite period may sublet the premises in whole or in part in the absence of restrictions placed thereon by the parties or by statute. Homa-Goff Interiors, Inc. v. Cowden, 350 So.2d 1035 (Ala.1977); 49 Am. Jur.2d, Landlord and Tenant, § 481 (1970). That common law right is limited to the extent that a lessee may not sublet premises to be used in a manner which is injurious to the property or inconsistent with the terms of the original lease. Williams v. Safeway Stores, Inc., 198 Kan. 331, 424 P.2d 541 (1967).
In the case at bar the lessees' right to assign or sublet existed by virtue of the parties' written agreement, as well as by virtue of common law, but was also subject to a contractual restriction. The effect of such contractual restrictions on a right to assign or sublet has not been previously presented to this Court. In Enders v. Wesley W. Hubbard & Sons, Inc., 95 Idaho 590, 513 P.2d 992 (1973), a lease of grazing land was forfeited under a lease provision prohibiting assignment or subletting without the consent of the lessor. However, the sublease issue there was whether the actions of the lessee constituted a sublease or merely a granting of a license. In Enders the question of whether the consent of a lessor could be unreasonably withheld was not presented nor discussed.
The appellant-lessors correctly argue that the traditional majority position is that unless the lease provides that the lessors' consent shall not be unreasonably withheld, a provision against assignment or subletting without the lessors' consent authorizes the lessor to arbitrarily withhold consent for any reason or for no reason. Richard v. Degen & Brody, Inc., 181 Cal.App.2d 289, 5 Cal.Rptr. 263 (1960); Union Oil Company of California v. Lindauer, 131 Colo. 138, 280 P.2d 444 (1955); Food Pantry Ltd. v. Waikiki Business Plaza, Inc., 58 Hawaii 606, 575 P.2d 869 (1978); Jacobs v. Klawans, 225 Md. 147, 169 A.2d 677 (1961); Gruman v. Investors Diversified Services, 247 Minn. 502, 78 N.W.2d 377 (1956); Segre v. Ring, 103 N.H. 278, 170 A.2d 265 (1961); Dress Shirt Sales, Inc. v. Hotel Martinique Associates, 12 N.Y.2d 339, 239 N.Y.S.2d 660, 190 N.E.2d 10 (1963); B & R Oil Company, Inc. v. Ray's Mobile Homes, Inc., 422 A.2d 1267 (Vt.1980); 49 Am.Jur.2d, Landlord and Tenant, § 423, 485, 499 (1970).
We find, however, an increasing number of jurisdictions departing from that traditional position and an increasing volume of authority that the consent of a lessor may not be unreasonably withheld. As stated in Homa-Goff, supra, "[the majority] rule, however, has been under steady attack in several states in the past twenty years; and this for the reason that, in recent times, the necessity of reasonable alienation of commercial building space has become paramount in our ever-increasing urban society." Id. at 1037. See also Mowatt v. 1540 Lakeside Drive Corp., 385 F.2d 135 (7th Cir. 1967); Warmack v. Merchants Nat. Bank of Fort Smith, 612 S.W.2d 733 (Ark.1981); Logan v. 3750 North Lake Shore Drive, Inc., 17 Ill.App.3d 584, 308 N.E.2d 278 (1974); Shaker Building Co. v. Federal Lime & Stone Co., 28 Ohio Misc. 246, 277 N.E.2d 584 (1971); Restatement (Second) of Property § 15.2(2) (1977). See generally Kehr, The California Landlord's Arbitrary Refusal to Consent to an Assignment, 55 Calif.State Bar J. 108 (1980).
We deem the principal enunciated in the minority position to be based on more solid policy rationale than is the traditional orthodox majority's position. A landlord may and should be concerned about the personal qualities of a proposed subtenant. A landlord should be able to reject a proposed subtenant when such rejection reflects a concern for the legitimate interest of the landlord, such as assurances of rent receipt, proper care of the property and in many cases the use of the property by the subtenant in a manner reasonably consistent with the usage of the original lessee. Such concerns by the landlord should result in the upholding of a withholding of consent by a landlord. However, no desirable public policy is served by upholding a landlord's arbitrary refusal of consent merely because of whim or caprice or where, as here, it is apparent that the refusal to consent was withheld for purely financial reasons and that the landlord wanted the lessees to enter into an entirely new lease agreement with substantial increased financial benefits to the landlord. If the lessor is allowed to arbitrarily refuse consent to a sublease for what is in effect no reason at all, such would virtually nullify the right of a lessee to sublet. The imposition of a reasonableness standard also gives greater credence to the doctrine that restraints on alienation of leased property are looked upon with disfavor and are strictly construed against the lessor. See, e. g., Chanslor-Western O. & D. Co. v. Metropolitan San. D., 131 Ill.App.2d 527, 266 N.E.2d 405 (1970); Williams, supra; Smith v. Hegg, 88 S.D. 29, 214 N.W.2d 789 (1974); Kroger Co. v. Chemical Securities Co., 526 S.W.2d 468 (Tenn.1975); 49 Am. Jur.2d, Landlord and Tenant, § 485 (1970).
The burden of proving that the landlord's conduct is unreasonable rests upon the party challenging that conduct. Haack v. Great Atlantic & Pacific Tea Co., 603 S.W.2d 645 (Mo.App.1980); Jones v. Andy Griffith Products, Inc., 35 N.C.App. 170, 241 S.E.2d 140 (1978). See also Arrington v. Walter E. Heller International Corp., 30 Ill.App.3d 631, 333 N.E.2d 50 (1975). A standard of reasonableness has been applied in cases which have implied a reasonable standard as well as those cases in which the lease contained express language that consent could not be unreasonably withheld. "Arbitrary considerations of personal taste, sensibility, or convenience do not constitute the criteria of landlord's duty under an agreement such as this the standard is the action of a reasonable man in the landlord's position." Chanslor-Western, supra, 266 N.E.2d at 407, quoting Broad & Branford Place Corp. v. J.J. Hockenjos Co., 132 N.J.Law 229, 39 A.2d 80, 82 (1944).
In the instant case, the proper standard by which to review the lessors' refusal to consent to the proposed sublease is one of a reasonable person in the position of a landlord owning and leasing commercial farm land. Criteria to be utilized in application of that standard would include, but would not necessarily be limited to, assurances of proper farming practices and financial responsibility. In the instant case the record discloses no contentions by the landlord of the absence of these or any other criteria and hence we hold that the arbitrary refusal of the appellant-lessors in the instant case to grant their consent to the sublease was unreasonable.
We have considered appellants' remaining assignments of error and find them to be without merit.
Judgment is affirmed. Costs to respondents.
McFADDEN, BISTLINE and DONALDSON, JJ., concur.
. We do not discuss the possible application of the doctrine of waiver because of our disposition on the basis of unreasonable withholding of consent.
. Also in Enders the lessees had covenanted not to assign or sublet without the lessors' written consent, while in the case at bar the lessees were granted the right and privilege of subleasing or assigning provided that the consent of the lessors was first obtained.