Opinion
Rehearing Denied Aug. 12, 1968.
For Opinion on Hearing, see 75 Cal.Rptr. 889, 451 P.2d 721.
Charles J. Miller by James T. Ford, Sacramento, for Glenn R. Sewell and others.
Pierce J. Deasy, Jackson, for Nick Loverde.
Perkins, Carr & Anderson, Sacramento, for Bertha A. Miller and others.
OPINION
GARGANO, Associate Justice.
Plaintiffs Glenn R. Sewell Sheet Metal, Inc., and Glenn R. Sewell are sublessees of a parcel of real property located in Sacramento County. Plaintiffs brought this action for declaratory relief against defendants The cause was tried by the court sitting without a jury. At the conclusion of the trial the court denied plaintiffs the relief requested in their complaint and granted judgment to the Loverdes on their cross-complaint against the plaintiffs. The court also granted judgment in favor of the Perkins on their cross-complaint against the Loverdes. The plaintiffs have appealed from the adverse judgment against them. To protect their interests in the event of the reversal of this judgment, the Loverdes have also appealed from the judgment in favor of the Perkins. Thus, for convenience we shall hereafter refer to appellants Glenn R. Sewell Sheet Metal, Inc. and Glenn R. Sewell as the plaintiffs, to respondents and appellants Nick Loverde and Ellen Loverde as defendants, and to respondents Bertha A. Perkins and Thomas C. Perkins as the Perkins.
This litigation arose out of the following events. On September 1, 1948, the Perkins leased a parcel of land in Sacramento County to Howard and Helen McCrum for a period of ten years. On August 12, 1951, Mr. and Mrs. McCrum assigned the lease to the defendants who in turn (on June 11, 1958) subleased a part of the land to the plaintiffs for a sheet metal shop at a rental of $140 per month.
On September 1, 1958, the Perkins modified the 1948 lease to permit defendants to use the land for any lawful purpose; initially the lease specified the only permitted uses. At the same time the rental was increased and the lease term was extended (at defendant's option) to August 31, 1966. The defendants then commenced to use part of the land (the part not under sublease to the plaintiffs) for a trailer camp. However, before doing so defendants procured a trailer park permit from Sacramento County and apparently complied with the minimum public health requirements relating to trailer park improvements; they installed plumbing, concrete slabs, a wash room, a utility room and a sewage disposal system consisting of a cesspool and septic tanks.
The term was extended to August 31, 1963. Lessees were also given the option to renew for an additional three years at a rental of $500 per month. On renewal of the 3-year term lessees were required to pay the last six months' rental of $3,000 in advance.
On May 6, 1963, plaintiffs signed a new sublease with defendants. Under this agreement defendants subleased all of the land, including the trailer park and sheet metal shop, to plaintiffs at a rental of $725 per month plus any tax in excess of $100 per month.
In September of 1964 the water well for the subleased land was condemned by the public health authorities, and all three parties, the plaintiffs, the defendants and the Perkins, paid for the installation of a new water system. Subsequently, plaintiffs began having trouble with the trailer park sewage disposal system due to the pooling of effluent on the surface of the ground. Plaintiffs expended roughly $3,500 trying to improve the condition. They also tried to enlist the help of the defendants and the Perkins but this time both refused to help. Later, on September 16, 1965, when plaintiffs failed to correct the health hazard caused by the pooling of effluent on the surface of the ground, the public health authorities ordered plaintiffs to connect the trailer park sewage system to the public sewers or vacate the trailer park and surrender the operating permit. The connection cost would have been approximately $7,500. Plaintiffs then notified defendants and the Perkins that they (plaintiffs) elected to abandon the trailer park and offered to continue to occupy the sheet metal shop at the original rental of $140 per month. Defendants' rejected plaintiffs' offer, and plaintiffs vacated the premises with only 11 months remaining of the sublease term.
Plaintiffs argue that the main value of the sublease was destroyed when plaintiffs were ordered to connect the trailer park sewage system to the public sewers or to vacate the premises. They assert that it was not economically feasible to make the connection at a cost of approximately $7,500 with only 11 months remaining on the term of the sublease. Thus, plaintiffs conclude that they were entitled to be released from their lease obligations under sections 1932(2) and 1933(4) of the Civil Code.
Section 1932 provides in pertinent part:
'The hirer of a thing may terminate the hiring before the end of the term agreed upon:
'* * *
'2. When the greater part of the thing hired, or that part which was and which the latter had at the time of the hiring reason to believe was the material inducement to the hirer to enter into the contract, perishes from any other cause than the want of ordinary care of the hirer.'
Section 1933 provides in pertinent part:
'The hiring of a thing terminates:
'* * *
'4. By the destruction of the thing hired.'
Civil Code sections 1932 and 1933 are codifications of the doctrine of commercial frustration which was first recognized by the courts of England as an excuse for non-performance of a contractual duty. This doctrine has been extended to leasehold estates by the courts of this state but only in cases of extreme hardship and where there is a total or nearly total destruction of a contemplated purpose of the contract by a fortuitous event that was not reasonably foreseeable by the parties when the contract was made (Lloyd v. Murphy, 25 Cal.2d 48, 53, 153 P.2d 47). As the California Supreme Court stated in the Murphy case at pages 53-54, 153 P.2d at pages 50.
'The question in cases involving frustration is whether the equities of the case, considered in light of sound public policy, require placing the risk of a disruption or complete destruction of the contract equilibrium on defendant or plaintiff under the circumstances of a given case (Fibrosa Spolka Akcyjina v. Fairbairn Lawson Combe Barbour, Ltd. [1942], 167 L.T.R. [H.L.] 101, 112, 113; see Smith, Some Practical Aspects of the Doctrine of Impossibility, 32 Ill.L.Rev. 672, 675; Patterson, Constructive Conditions in Contracts, 42 Columb.L.Rev. 903, 949; 27 Cal.L.Rev. 461), and the answer depends on whether an unanticipated circumstance, the risk of which should not be fairly thrown on the promisor, has made performance vitally different from what was reasonably to be expected (6 Williston, op. cit. supra, § 1963, p. 5511; Restatement, Contracts, § 454). The purpose of a contract is to place the risks of performance upon the promisor, and the relation of the parties, terms of the contract, and circumstances surrounding its formation must be examined to determine whether it can be fairly inferred that the risk of the event that has supervened to cause the alleged frustration was not reasonably foreseeable. If it was foreseeable there should have been provision for it in the contract, and the absence of such a provision gives rise to the inference that the risk was assumed.
'The doctrine of frustration has been limited to cases of extreme hardship so Anglo-Northern Trading Co. v. Emlyn Jones and Williams, 2 K.B.
With the principles articulated by our Supreme Court in mind, we conclude that plaintiffs' evidence does not, as a matter of law, entitle plaintiffs to a release of their lease obligation for any one of the following reasons.
First, it was not enough for plaintiffs to prove that there was a breakdown in the trailer park sewage disposal system. It was also incumbent upon plaintiffs to prove that this breakdown was caused by a fortuitous event which they could not control or guard against in the exercise of due diligence. Significantly, however, plaintiffs offered no evidence expert or otherwise to establish the proximate cause of the breakdown. In fact, they did not even offer any evidence to prove that the breakdown was not caused by lack of proper care and maintenance.
Glenn R. Sewell testified that the trouble commenced after the new water system was installed. He also testified that he did not increase the trailer camp use after he leased the property. This testimony, however, merely suggests but it does not prove the cause.
Second, even if it is assumed arguendo that the breakdown in the trailer park sewage disposal system was caused by a fortuitous event, it was also incumbent upon plaintiffs to prove that it was not foreseeable. In other words, if the frustrating event 'was foreseeable there should have been provision for it in the contract, and the absence of such a provision gives rise to the inference that the risk was assumed.' (Lloyd v. Murphy, supra, 25 Cal.2d 48, 54, 153 P.2d 47, 50.) In this connection, Glenn R. Sewell testified he know the sewage disposal system consisted of a cesspool and septic tanks. And it is common knowledge that cesspool disposal systems will malfunction for a variety of reasons often making it necessary to connect to public sewers in order to comply with minimum public health standards. Thus, plaintiffs should have foreseen trouble with the trailer park sewage disposal system, and they could have protected themselves with an appropriate lease condition. Instead plaintiffs assumed the full financial burden of all maintenance and repair work and agreed to operate the premises in conformity with applicable state laws and county ordinances.
Paragraph D of the sublease provides:
Third, plaintiffs did not establish an extreme hardship. Plaintiffs enjoyed the full use of the premises for the major part of the sublease term. Yet plaintiffs did not prove it was not possible to meet minimum public health regulations by substantially reducing the trailer park operation for the last few months of the term. Moreover, they offered no evidence to prove the cost of connecting to the public sewers was not economically feasible (and an unfair burden) when considered in light of their past use and enjoyment of the premises. Moreover, they failed to do so while admitting In short, this is not a case where the contemplated use of leased property was forbidden or destroyed by government action or some other fortuitous event. On the contrary, plaintiffs could have continued to operate the trailer park by complying with the order of the public health authorities to connect to the public sewers even though such compliance made the operation more expensive. It is the rule that 'laws or other governmental acts that make performance unprofitable or more expensive do not excuse the duty to perform a contractual obligation' (Rose v. Long, 128 Cal.App.2d 824, 827, 275 P.2d 925, 926). Moreover, it would be manifestly unjust to hold that a lessee who has enjoyed the full contemplated use of leased premises for the greater part of the lease term can then avoid his remaining obligations to pay rent by shifting the entire economic burden of certain unanticipated expenditures, which make continued operation more expensive or less profitable, to the last few months of the term without giving any consideration to the benefit he derived from his prior use and enjoyment and without any attempt to utilize the premises for some other profitable purpose. Worse yet, that result would shift the burden of proof on the hardship issue to the lessor and from the lessee where it properly belongs.
We shall now direct our attention to defendants' appeal from the judgment in favor of the Perkins. Manifestly, this judgment should be affirmed for all of the reasons we have already set forth herein. As an additional reason, there is absolutely no evidence that the main purpose for the lease between defendants and the Perkins was for a trailer park. If anything, the evidence is clearly to the contrary.
The judgments are affirmed.
CONLEY, P. J., and STONE, J., councur.
'Sub-lessee is conversant with all of the terms of the basic lease and the modification thereof and he agrees that he will occupy and dispose the leasehold estate in a manner commensurate with the requirements and limitations imposed by said basic lease and by the requirements of applicable federal, state, county, city and district laws, ordinances, rules and regulations pertaining to any and all segments of the operations and uses to which the property may be subjected or put.
Paragraph F of the sublease provides:
'Sub-lessors shall be under no obligation hereunder for the repair or maintenance of any of the improvements upon said demised premises.'