Court Opinion

ID: 4720100
Source: CourtListenerOpinion
Date Created: 2021-08-12 02:35:46.505207+00
Date Added: 2024-06-11T08:07:32.521812
License: Public Domain

On Rehearing.
[En Banc. April 14, 1921.]
Bridges, J.
The foregoing Department opinion in this case contains a complete recital of the facts, and we refer to that opinion. The only facts necessary for us here to recite are as follows: The charter of the city of Seattle contains the following clause:
“Bids may be received for all or any part or division of any proposed contract, and no contract shall be sublet except for the furnishing of material, without the previous consent of the city council.”
The city of Seattle entered into a contract with the defendant Pederson, which provided that the latter should furnish all material and labor and construct a certain bridge within that city. This contract provided that all provisions of the charter and ordinances of the city, in so far as they were material, should become a part thereof. Thereafter Pederson and the defendant Erickson Construction Company entered into an oral contract whereby the latter was to do a certain portion of the work required by the city contract, for which it was to receive from Pederson the sum of $18,-000. The construction company, having performed a part of the work provided by its contract, terminated it and refused to do any further work, because the written consent of the city for the making of the contract between it and Pederson, as provided by the city charter, had not been obtained. Pederson thereafter completed the work which by the terms of the contract the construction company was to do. As a defendant in this action, the construction company filed a cross-*401complaint against its co-defendant Pederson, seeking ■to recover a balance claimed to be due and owing on account of tbe work performed by it, and Pederson filed a cross-complaint against bis co-defendant Construction Company, seeking to recover damages because of tbe failure of the construction company to complete tbe contract between them. Only tbe rights under tbe two cross-complaints are now involved. We adopt those portions of tbe Department opinion which dispose of tbe cross-complaint of tbe Erickson Construction Company and the holding that tbe construction company has been paid by Pederson all it was entitled to receive for tbe work performed by it. We do not, however, adopt those portions of tbe Department opinion which bold that Pederson cannot recover under bis cross-complaint for damages. On this question tbe construction company argues that it bad tbe right to terminate its contract with Pederson because it was in violation of tbe city charter provision against subletting, and that such contract was void, or at least voidable at its election. Pederson denies tbe right to terminate tbe contract and contends that be should recover on bis cross-complaint because (1) bis contract with tbe construction company did not violate tbe city charter provision, and, (2) if it did, it was good and enforceable between tbe parties to it.
Elaborate arguments have been made on tbe construction to be given to that provision in tbe charter which prohibits subletting of contracts, and on tbe question whether tbe Erickson Construction CompanyPederson contract violated that provision. But we do not find it necessary to decide this question. If it be conceded that this charter provision is applicable to tbe contract between Pederson • and tbe construction company, and that such contract was in violation of *402that provision, it does not follow that Pederson may not recover on his cross-complaint. The provision against subletting was for the sole benefit and protection of the city, and no one else would have the right to claim its protection or seek benefits under it. It could not have the effect of invalidating or making-void the Pederson-Construction Company contract. The most it could do would be to authorize the city, if it saw fit, to terminate its contract with Pederson. The subcontract, even if it was in violation of the charter, was good and valid as to, and binding upon, the parties to it, at least, up to the time the city should take some affirmative action. Here the city did nothing more than refuse to recognize the construction company; it did not terminate its contract with Pederson, nor in any way interfere with the construction company in the performance of its subcontract. From all that appears from the record, the construction company could, without opposition from anyone, have completed its contract with Pederson. Suppose Pederson had terminated his contract with the construction company, for the identical reason given by the latter for refusing to go ahead with the work, and the construction company had sued Pederson for a breach of the contract, he could not have successfully defended. If, then, Pederson would not have had any right to terminate his subcontract on those grounds, we can see no reason why the construction company could terminate it on the same ground. An examination of the leasehold cases will be enlightening. In the case of Bemis v. Wilder, 100 Mass. 446, the court, in discussing this question, said:
“The plaintiffs claim as assignees of the defendant’s interest in the lease, by an unrecorded assignment from the defendant’s assignee in insolvency. The court declined to rule that the lease was not transferred to the *403plaintiffs without the consent in writing required in its terms, and that the assignment from the assignee in insolvency was insufficient to give a right to the plaintiffs, as against the defendant, for the reason that it had not been recorded. There is no error in these refusals. It is not for the defendant to set up the breach of his own covenant not to lease or underlet, to defeat the plaintiff’s right. That stipulation was inserted for the benefit of the lessor and those claiming under him, who alone can take advantage of any breach. The stipulation here is in the form of a covenant, and not a condition with a right of entry reserved. But if the agreement had been of the latter description, the lease would have been valid until the lessor had exercised his option to terminate it, which he has never done.”
In Garcia v. Gunn, 119 Cal. 315, 51 Pac. 684, it is said:
“It seems to he the law that where there is a clause in a lease that it shall not he assigned without the previous consent of the lessor, and there is a breach of the covenant not to assign, the lessor has only the option to forfeit the lease for the breach of the condition, and that the assignment is not void hut passes the term, and the only remedy is for breach of the covenant . . . ; and it has been held that the assignment is voidable only at the option of the lessor or his representatives. ’ ’
In 24 Cyc. 968, the following rule is laid down:
“Restrictions against assignment or subleases, whether imposed by statute or by the terms of the lease, are intended for the benefit of the lessor and his assigns, and if neither of these object to a breach of the restriction no one else may do so. One to whom the term has been assigned in breach of the restriction cannot set up the breach in defense of an action brought against him by the lessor on the lease, or in defense of an action brought against him by the lessee on obligations incident to the assignment; nor can a sublessee of the assignee set up the breach in defense of an ac*404tion brought against him by the assignee on the sublease. ’ ’
In 18 Am. & Eng. Ency. Law (2d ed.) 660, it is said:
“So also an assignment of a lease, though in violation of a provision against assignment, carries title to the leasehold as between the assignee and a stranger, or as between the lessee and his assignee, or as between the assignee and subtenants of the lessee. But an assignment without the consent of the lessor will not transfer to the assignee the right to sue the lessor on his covenants in the lease, though they were such as would have run with the term had the leasehold been assignable.”
To the same general effect see McGhee v. Cox, 116 Va. 718, 82 S. E. 701, Ann. Cas. 1916E 842; Potts Drug Co. v. Benedict, 156 Cal. 322, 104 Pac. 432, 25 L. R. A. 609; Thompson & Co. v. Gray, 15 Ky. Law 783; Spear v. Fuller, 8 N. H. 174, 28 Am. Dec. 391; Sexton v. Chicago Storage Co., 129 Ill. 318, 21 N. E. 920, 16 Am. St. 274; Chicago Attachment Co. v. Davis Sewing Machine Co., 33 Ill. App. 362, 25 N. E. 669.
It would seem that, upon authority and reason, a provision in a lease prohibiting subletting is for the benefit of the lessor and does not in itself make a contract of subletting void, but leaves it good as' between the parties to it. If such be the law with reference to leases, we see no reason why it should not be the law with reference to contracts such as the one here involved. We believe an examination of the contract cases will support us in this view.
In the case of Crane Co. v. Maryland Casualty Co., 102 Wash. 59, 172 Pac. 866, the facts were that the state let a certain contract to the Beers Building Company. It provided as follows: ‘ ‘ The contractor shall not assign this contract nor sublet any portion thereof without the written consent of the board of control and *405the bonding company.” In accordance with the provisions of the contract and the statutes of the state, Beers Building Company gave a bond for' the performance of the work, with the Maryland Casualty Company as surety. Later, the building company sublet the whole of the work to Musgrave and Blake. The latter purchased from Crane Company materials for which they did not pay. Crane Company sued Musgrave and Blake, the subcontractors, and the surety on the original bond for the amount of its unpaid bill. The surety company defended on the ground that it was not liable either to Musgrave or Blake or the Beers Building Company, because neither it nor the state had consented in writing or otherwise to the making of the subcontract. We said:
“Many authorities are cited and reviewed by counsel to support the proposition that the stipulation in the contract between Beers Building Company and the state that it should not ‘assign’ nor ‘sublet’ the contract, or any portion thereof, without the written consent of the ‘board of control and the bonding company’ is a valid and binding stipulation. We may concede this for the sake of argument, yet we think this falls far short of calling for a holding in this case that the casualty company is not liable upon its bond to both Musgrave and Blake and Crane Company. Reading this stipulation in the contract between Beers Building Company and the state in the light of the express condition in the bond and the statute in pursuance of which the bond was executed, it seems to us that the stipulation means nothing more than that no assignment of the contract and no subcontract made thereunder without the written consent of the board of control and the bonding company shall be of any avail in the working of a change in the contractual relations and the obligations arising thereunder as between the state, Beers Building Company and the bonding company which should thereafter become surety upon the bond. In other words, this provision, we think, means *406only that there shall not be any substitution of parties in place of Beers Building Company in its contract with the state, releasing that company from any obligation under its contract without the consent of both the state and the bonding company which should thereafter become surety upon the bond.”
In the case of Burck v. Taylor, 152 U. S. 634, the court, in discussing a similar provision in a contract, said:
“'The express declaration that so far as the United States are concerned a transfer shall work an annulment of the contract, carries, by clear implication, the declaration that it shall have no such effect as between the contractor and his transferee. In other words, as to them, the transfer is like any other transfer of property, and controlled by the same rules. Its invalidity is only so far as the government is concerned, and it alone can raise any question of the violation of the statute. The government in effect, by this section, said to every contractor, You may deal with your contract as you please, and as you may deal with any other property belonging to you, but so far as we are concerned you, and you only, will be recognized either in the execution of the contract or in the payment of the consideration.”
To the same effect see Pierce v. Walker, 23 Iowa 424; Goodman v. Niblack, 102 U. S. 556; Jones v. Moncrief-Cook Co., 25 Okla. 856, 108 Pac. 403.
It is asserted, however, that while the rule which we have announced may be the correct one as applied to prohibitions against assignments and subletting contained in the lease or contract as a part of the voluntary act of the parties, it should not be applied in a case like this, where the prohibition is found in a city charter or in a statute. The opinion of the Department accepted this view. We are unable to see any difference, unless it be that in the one instance the prohibition may be waived and in the other cannot be. *407But the question of waiver is not in this case. 24 Cyc. 968, supra. The trial court seems, in the first place, to have reached the same conclusion we have and ordered judgment for Pederson, hut on motion for new trial changed its view.
We hold that Pederson is entitled to recover on his cross-complaint. It seems to háve been conceded that if he was entitled to any affirmative judgment it should be in the sum of $23,369.69, with interest.. 1
The judgment in so far as it dismisses the cross-complaint of the Erickson Construction Company, is affirmed, but in so far as it dismisses the cross-complaint of Pederson, it is reversed and remanded with instructions to enter judgment in favor of Pederson and against the Construction Company, in the sum of $23,369.69 with interest from November 4, 1916.
Mackintosh, Main, Fullerton, Tolman, Mitchell, and Mount, JJ., concur.