Homa-Goff Interiors, Inc. v. Cowden, HOMA-GOFF
| Decision Date | 12 August 1977 |
| Docket Number | HOMA-GOFF |
| Parties | INTERIORS, INC., an Alabama Corporation, John Wayne Goff, Pal Shoemaker, and J. Henry Goff v. Geraldine W. COWDEN. SC 2277. |
| Court | Alabama Supreme Court |
Jesse M. Williams, III, and James W. Garrett, Jr., Montgomery, for appellants.
W. Ernest Moss, William I. Hill, II, John M. Milling, Jr., for Hill, Hill, Carter, Franco, Cole & Black, Montgomery, for appellee.
This summary judgment case involves a counterclaim filed by the appellants, Homa-Goff Interiors, Inc., against Geraldine Cowden, the appellee, claiming interference with a contractual relationship and unlawful refusal, by Mrs. Cowden, to grant consent to a sublease agreement between Homa-Goff and certain named prospective subtenants.
In February of 1974, a lease was entered into by Mrs. Cowden and Homa-Goff, John Goff, Pal Shoemaker, Henry Goff, and Thomas Gallion for a ten-year period. The lease was negotiated by Ted Cason, Mrs. Cowden's son-in-law. The lease contained a clause which restricted the lessees' power to sublet subject to the landlord's written consent.
In October, Homa-Goff opened a furniture store on the leased premises. After several months in business, however, it became apparent to the appellants that, because of financial problems, they could not continue their operation. Therefore, they began seeking a subtenant. After some negotiation with the State of Alabama, the appellants, according to their counterclaim, reached a tentative agreement with the State to sublease the premises at a rental rate in excess of the rate paid by the lessees. Mrs. Cowden, exercising her option provided in the lease, refused to approve the State as a sublessee.
Homa-Goff also attempted to sublease the property to James Rudd, Jr. The appellants and Rudd, Jr., had several meetings and set up a meeting at the leased premises. Upon arriving at the premises, John Goff discovered Ted Cason talking with Rudd's father. Appellants charged in their counterclaim that Cason informed Rudd, Sr., that John Goff was without authority to rent the building, but that he, Cason, on behalf of Mrs. Cowden, could lease the building to Rudd, immediately, at a lower rental rate.
Rudd, Jr., testified at deposition that he had no intention of subleasing. John Goff testified at deposition that Rudd, indeed, was interested in subleasing and had inquired about prices. In any event, the building was eventually leased to Rudd, by Cason, for the same amount of rent paid by Homa-Goff.
Mrs. Cowden filed suit against the appellants claiming breach of the terms and conditions of the lease, consisting of failure to pay the November, 1975, rent installment. After Homa-Goff counterclaimed, Mrs. Cowden filed a motion for summary judgment as to the counterclaim, which was granted by the trial Judge.
The trial Judge based his ruling upon two legal principles. First, the trial Judge ruled: "Alabama is one State that does not recognize in general a cause of action for interference with a contractual relationship." Secondly, the trial Judge ruled: "(t)he landlord's withholding of consent can be arbitrary and unreasonable." From the order based on these rulings, Homa-Goff appeals. We reverse.
The threshold question is whether Mrs. Cowden, pursuant to P 15(a) of the lease, may arbitrarily and capriciously reject a subtenant proposed by the lessee. This question, apparently, has never been considered by this Court. If we hold that the trial Judge was correct in ruling in the affirmative on this issue, we need not deal with the allegations concerning interference with a contractual relationship. And this for the reason that, if Mrs. Cowden may arbitrarily reject proposed subtenants, Homa-Goff was powerless to enter into any contractual relationship with the State or Rudd, Jr., without Mrs. Cowden's approval.
It should be noted at the outset that, in the absence of a restrictive clause as set out in P 15(a), the lessee generally has the right, without consent of the lessor, to assign his interest under the lease, or to sublet the premises, because the law looks with disfavor on restraints on alienation. 49 Am.Jur.2d, Landlord and Tenant, §§ 398, 481. P 15(a) of the lease states:
The general rule throughout the country has been that, when a lease contains an approval clause, the landlord may arbitrarily and capriciously reject proposed subtenants. See 49 Am.Jur.2d, Landlord and Tenant, § 423; 51C C.J.S. Landlord and Tenant § 36(1); 31 A.L.R.2d 821. This 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.
Ohio has expressly rejected the general rule. Shaker Building Co. v. Federal Lime and Stone Co., 28 Ohio Misc. 246, 277 N.E.2d 584 (1971). In Shaker, the lease provision permitted assignment and subletting only with the permission of the landlord. The Ohio Court, in ruling on whether the landlord could arbitrarily withhold consent, stated:
"(W)here provision is made in a lease permitting assignment of rights thereunder, limited only by the requirement of prior consent of the lessor, such consent may not be withheld unless the prospective assignee is unacceptable, using the same standards applied in the acceptance of the original lessee." 277 N.E.2d at 587.
The arbitrary and capricious rule has also been rejected in Illinois. Arrington v. Walter E. Heller International Corp., 30 Ill.App.3d 631, 333 N.E.2d 50 (1975). In Arrington the situation was somewhat reversed in that the lessee had the right to refuse to consent to the occupation of the building by another lessee. The defendant leased the top fifteen floors from the plaintiff. The lease contained a provision which stated:
"Landlord covenants and agrees that it will not enter into any lease or other arrangement respecting the use of space on the ground floor, mezzanine and lower concourse of the building without the written consent of tenant, which consent shall not be unreasonably withheld."
The Appellate Court points out that, in Arrington, the tenant expressly provided that he would not unreasonably withhold consent. The Court adds, however, that this was a mere recital of the law of Illinois which is:
"Where the lease merely contains a provision without more granting a person, normally a landlord, the power to withhold consent, regardless of whether explicitly qualified to reasonable exercises of that power . . . the courts have held the person's refusal to consent to a person acceptable by reasonable commercial standards to be an unreasonable exercise and thus violative of the lease." 333 N.E.2d at 58. (Emphasis added.)
Guided by this rationale, we hold that, even where the lease provides an approval clause, a landlord may not unreasonably and capriciously withhold his consent to a sublease agreement. The landlord's rejection should be judged under a test applying a reasonable commercial standard. This question, of course, becomes a question of fact to be determined by the jury. Therefore, we hold that the trial Judge erred in granting a summary judgment in favor of Mrs. Cowden regarding appellant's claim alleging Mrs. Cowden was arbitrary and capricious in rejecting the prospective subtenants. It is a jury question whether Mrs. Cowden acted reasonably, and there is sufficient conflict of material fact to mandate a reversal.
While our decision is not limited to the particular facts before us, we can perceive no set of circumstances which would more dramatically support the reasons behind this rule, and the moral need for it, than the facts of this case. The tenant sought and secured a potential subtenant. Before a sublease agreement was consummated, Mrs. Cowden exercised her "right" under the lease to disapprove the proffered subtenant. Thereafter, however, she proceeded immediately to lease the same premises to the same person previously rejected. To accept as a tenant the very party rejected as a subtenant is, at the very least, evidence of extreme bad faith, for, in this instance, the act of disapproval became the act of approval.
Because we have ruled that a landlord may not arbitrarily and capriciously reject a subtenant when the landlord reserves the right of approval of sublessees, we must now address the issue whether Alabama law recognizes a cause of action for tortious interference with a contractual relation. The trial Judge is correct in stating that generally Alabama does not recognize a cause of action for the tortious interference with a contract. There are, however, two important exceptions to this rule which are set forth in Erswell v. Ford, 208 Ala. 101, 94 So. 67 (1922): The first involves employer-employee relationships; and the second occurs when a party to a lease has been induced, by fraud or coercion, to breach his contract. See McCluskey v. Steele, 18 Ala.App. 31, 88 So. 367 (1920). Appellants specifically allege, "Ted Cason . . . intentionally, fraudulently, maliciously and wrongfully made statements to James Rudd. . . ." Thus, under the exceptions enunciated in Erswell, the appellants have properly set forth a cause of action, and the trial Judge erred in granting summary judgment. 1
REVERSED AND REMANDED.
I concur with the majority opinion of Justice Jones in which he maintains that the lessor may not arbitrarily reject a sublessee chosen by the...
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