70 Cal. 2d 666

[Sac. No. 7841.

In Bank.

Mar. 28, 1969.]

GLENN R. SEWELL SHEET METAL, INC., et al., Plaintiffs, Cross-defendants and Appellants, v. NICK LOVERDE et al., Defendants, Cross-complainants and Appellants; BERTHA A. MILLER et al., Cross-complainants, Cross-defendants and Respondents.

*669Miller, Ford & O’Neal and Charles J. Miller for Plaintiffs, Cross-defendants and Appellants.

Pierce Deasy for Defendants, Cross-complainants and Appellants.

Perkins, Carr & Anderson for Cross-complainants, Cross-defendants and Respondents.

TRAYNOR, C. J.

Plaintiffs and cross-defendants Glenn E. Sewell Sheet Metal, Inc., and Glenn E. Sewell appeal from an adverse judgment in their action for declaratory relief against defendants and cross-complainants’ Nick and Ellen Loverde, Sewell’s sublessors, to declare Sewell’s sublease unenforeible and to recover a $3,000 deposit. The Loverdes cross-complained against cross-defendants and cross-complainants Bertha A. Miller, also known as Bertha A. Perkins, and Thomas C. Perkins alleging that if the Sewell-Loverde sublease is unenforeible the Loverdes’ lease with the Perkinses .is likewise unenforeible.

This controversy arises out of the abandonment by Sewell of premises leased to the Loverdes and subleased to Sewell. .The abandonment occurred when a septic system on the premises failed, precluding further use of the premises as a trailer court unless adequate sewer connections were made.

On September 1, 1948, the Perkinses leased a parcel of land to Howard and Evelyn McCrum for a 10-year term with an option to renew for five years. The premises included a house and a store. The house was to be used as a home; the rest of the premises could, be used only for retail-store, restaurant,.or .:agricultural uses. The lessees covenanted to.'maintain the premises in as good or better condition than they were in at' th’e time of the lease. ' " ’

*670On August 13, 1951, with the approval of the Perkinses, the MeCrmns assigned the lease to the Loverdes, who assumed the covenants therein. On September 1, 1958, the Loverdes exercised their option to extend the lease to 1963. At the same time the lease was modified to grant the Loverdes another option to renew for an additional three years, i.e., until August 31, 1966, and to remove all restrictions on the use of the premises thus permitting the Loverdes to continue using the premises for an auto repair business, a use not within the original permitted uses.

On May 6, 1963, Sewell, who had previously subleased the store building for use in his sheet-metal business, subleased the entire premises from the Loverdes for the period of the additional three-year option (1963-1966). At that time the Loverdes were using the premises as a trailer park for which they had previously installed the necessary improvements, including the septic system involved in this action.

Sewell successfully operated the premises as a trailer park until sometime after September 1964, when difficulties arose with the septic system. Sewell spent some $3,500 to alleviate the resulting pooling of effluent on the grounds, but was unable to rectify the defect. On September 16, 1965, the Sacramento County Department of Public Health ordered Sewell to connect the trailer park sewage system to nearby public sewer lines or to terminate the use of the premises as a trailer park.1 After determining that the required connection would cost approximately $7,500, and that neither the Perkinses nor the Loverdes were willing to pay for the connection, Sewell elected to terminate his operation of the trailer park and ordered the occupants to leave. After unsuccessfully attempting to negotiate a return to his sublease of the store alone, Sewell abandoned the premises 11 months before the termination date of the sublease and paid no rent for that period. *671Sewell contends that he was justified in abandoning the premises and that he therefore owes no rent and is entitled to the return of $3,000 he paid in advance.2

The question presented is which party had the duty under the terms of the lease and sublease and the applicable law to comply with governmental laws and orders governing the use of the premises.

At the outset we distinguish two similar but unrelated duties that often overlap and may create unnecessary confusion. The first, not directly involved in this case, is the duty to repair or maintain the premises in the absence of special laws or governmental orders. Since no general public policy requires that private property and the improvements thereon be maintained in good condition at all times, a private property owner is under no general duty to correct defective conditions,3 and the fact that he leases the premises to another does not alter the rule. (Cowell v. Lumley (1870) 39 Cal. 151, 153 [2 Am.Rep. 430]; Strecker v. Barnard (1952) 109 Cal.App.2d 149, 152 [240 P.2d 345] and cases cited).4 Similarly a lessee is under no general duty to correct defective conditions on the leased premises except when necessary to prevent waste or to rectify dilapidations caused by his own lack of ordinary care. (Civ. Code, §§ 1928, 1929; 1 American Law of Property (A. J. Casner ed. 1952) § 3.78, pp. 346-348.)5 Thus, with regard to the duty to repair or maintain, many dilapidations may go unrectified, neither the lessor nor the lessee having a duty to ameliorate the condition, but each having assumed the risk that the dilapidation will decrease the use or value of his interest. (Western Motors Servicing *672Corp. v. Land Dev. & Inv. Co. (1957) 152 Cal.App.2d 509, 513 [313 P.2d 927].)

A different conclusion must be reached however, when preventative or reparative áctions are required by laws and orders governing the premises and their uses. In such a case •public policy requires that someone at all times be obliged to comply with such laws and orders, and parties to a lease will not be permitted to create a hiatus in their respective duties of compliance. One or more of the parties interested in the property must therefore be obliged to comply with some or all of the laws and orders affecting the premises. Since the property owner is initially under the duty to comply with all laws and orders, he, as lessor, remains subject to that duty unless it is assumed by the lessee. (1 American Law of Property, supra, § 3.80, pp. 353-355; 2 Walsh, Commentaries on the Law of Real Property (1947) § 165, pp. 232-233. Cases on "the allocation between a lessor and lessee of the duty to comply with applicable laws are collected in Annot. (1924) 33 A.L.R. 530-541 and Annot. (1968) 22 A.L.R.3d 521, 555.)

There are three ways in which a lessee may obligate himself to comply with laws and orders. One is unrelated to this case ;6 the other two will be discussed in the order in which they arose in the transactions before us.

A lessee who voluntarily puts the premises to uses different from those to which they were put before the creation of his tenancy, and thereby causes the premises to fall within the scope of existing laws7 not previously applicable to the premises, must bear the burden of conforming his new use to the requirements of the law and of taking all action necessary to rectify any subsequent instances of noncompliance. This rule applies whether the lessee’s obligation is viewed as arising from an implied assumption of the lessor’s initial *673duty not to alter the use of the premises under his control without complying with all applicable laws (see Pross v. Excelsior Cleaning & Dyeing Co. (1919) 110 Misc. 195 [179 N.Y.S. 176, 180] (dicta); Clarke v. Yukon Inv. Co. (1915) 83 Wash. 485 [145 P. 624, 627, Ann. Cas. 1916E 625] (dicta)), or whether it is viewed as reflecting an independent duty to comply with the particular laws made applicable by the lessee’s new use of the premises. (See Mulligan v. Fioravera (1930) 228 App.Div. 270 [239 N.Y.S. 438, 442] (dicta); Johnson v. Snow (1903) 102 Mo.App. 233 [76 S.W. 675, 677] (dicta), revd. on other grounds, 201 Mo. 450 [100 S.W. 5] (1907).) Under either theory the reason for imposing the duty on the lessee remains the same. If he were free to modify the use of the premises as he wished8 and did not by such modification assume the duty to comply with applicable laws, he would have the lessor at his mercy. [A] landlord might be called upon to meet the cost of fire escapes, if the lessee decided to open a rooming house. If that use proved unprofitable, the tenant might use the property as a. theatre . . . and the landlord would be compelled to provide such additional exits and escapes [as required by law], or, that venture failing, he might be called upon to meet the expenses of adapting the premises to the [governmental] requirements of a restaurant, if the lessee willed to engage in it.” (Clarke v. Yukon Inv. Co., supra. 145 P. 624, 625.) It would be inequitable to impose such a burden upon the Perkinses in this ease. They permitted the Loverdes to make whatever use of the premises the Loverdes wished. When the Loverdes ceased to use the premises for automobile repairs and converted them to a trailer park, the duty became theirs to make the new use conform to all laws and orders applicable to a trailer park. They therefore had the initial duty to comply with laws governing the septic system that they had-installed.

We turn to the relation between the Loverdes and Sewell who, as between themselves, were lessor and lessee respectively. Since Sewell did not change the Loverdes ’ use of the premises as a trailer park, no assumption of the duty to comply with the laws applicable to that use arose under the rule discussed above. A lessor is free, however, to transfer *674his obligations to his lessee by an agreement in which the lessee assumes the duty of compliance and the risk that the performance of such duty may prove expensive or inconvenient.

We must therefore interpret the terms of Sewell’s sublease9 to determine whether he assumed that duty and risk. (Civ. Code, §§ 1635-1657; Realty & Rebuilding Co. v. Rea (1920) 184 Cal. 565, 575-576 [194 P. 1024].) Under paragraph D of the sublease, Sewell agreed to comply with “requirements of applicable federal, state, county, city and district laws, ordinances, rules and regulations. ...” Although this general covenant literally applies to the order of the Sacramento County Department of Public Health that public sewer connections be made or the trailer park operations be terminated, the general rule is that a lessee’s unqualified covenant to comply with applicable laws, standing alone, does not constitute an assumption of the duty to comply with those laws that require curative actions of a “substantial” nature.10

*675Sewell’s general covenant to comply does not, however, stand alone. Even if the sewer connections were classified as “substantial” within the meaning of the foregoing rule, provisions of the sublease other than paragraph D make it clear that Sewell assumed the duty to comply with the order in question.

Sewell not only covenanted to comply with all applicable laws, but represented, in paragraphs E and P, that he had examined the premises and knew of their condition, that the Loverdes had made no representation as to their condition, and that the Loverdes were relieved of all obligations as to the repair or maintenance of the improvements thereon. In the absence of a covenant by the Loverdes to repair or maintain the improvements, their only obligation in this respect would arise from the duty to comply with applicable laws.11 Under these circumstances the Loverdes’ disclaimer of any obligation at all under paragraphs E and P can be given effect only by interpreting them to relieve the Loverdes of any duty to take those “substantial” curative actions required by law that the language of paragraph D alone would not cover. (See Rose v. Long (1954) 128 Cal.App.2d 824 [275 P.2d 925].) Moreover, in paragraph I Sewell agreed to assume all risk of loss by reason of damage to person or property, and to indemnify the Loverdes for all expense and damage, caused by Sewell’s use of the premises. One source of such liability to third parties would be illegal unsanitary conditions on the premises, and it would be contradictory to hold that the Loverdes remained responsible for the “substantial” curative actions necessary to preclude or alleviate such conditions but that Sewell was to assume all risk of loss of, and to indemnify the Loverdes for any liability arising from, the Loverdes’ breach of that duty.

Any doubt that might persist that Sewell assumed the risk of conforming the sewer system to the governmental requirements is dispelled by a consideration of the character of the premises involved. The primary use of the premises was for a trailer park, the principal features of which are the ground space and pads upon which the trailers rest, and the water, *676utility, and sewer facilities to which the trailers connect. Accordingly, one who intends to operate a trailer park must know that laws respecting and regulating such facilities would be of primary importance to him and would be those most obviously included in a clause requiring compliance with all applicable laws.

Sewell knew that adequate sewage disposal was essential, and he testified that he assumed that the sewer system was not connected to the public sewer. He lmew or should have known that cesspool systems do not last forever and that when the septic system failed public sewer connections would be required.12 He took the premises “as is,” relieved the Lover des of the duty to repair or maintain the improvements, agreed to indemnify them for any liability arising out of his use of the premises, and assumed the duty of compliance with all laws respecting the premises. Under all the circumstances Sewell’s covenant to comply included the obligation either to connect the sewer system to a public sewer or to cease using the premises as a trailer park. Accordingly, he assumed the risk that such compliance might interfere with his use of the premises or render it less profitable.

Having voluntarily assumed this duty and its attendant risk, Sewell may not avail himself of either the common law doctrine of frustration, or the doctrine relating to the destruction of the subject matter of a hiring as codified in Civil Code section 1932, subdivision 2.

“ It is settled that if parties have contracted with reference [to the frustrating event] or have contemplated the risks arising from it, they may not invoke the doctrine of frustration to escape their obligations.” (Lloyd v. Murphy (1944) 25 Cal.2d 48, 55 [153 P.2d 47]; see Gold v. Salem Lutheran Home Assn. (1959) 53 Cal.2d 289, 291 [1 Cal.Rptr. 343, 347 P.2d 687].)13 The foregoing principle is not limited *677to the doctrine of frustration. (See e.g., McLarren v. Spalding (1852) 2 Cal. 510, 514.) It applies also to subdivision 2 of section 1932 of the Civil Code.14 Whether the perishment required by section 1932 was the failure of the cesspool or the consequent termination of the trailer park operations pursuant *678to governmental order, Sewell cannot prevail, for he assumed the risk of both occurrences. Both before (Ainsworth v. Ritt, supra, 38 Cal. 89, 90) and after (Egan v. Dodd (1917) 32 Cal.App. 706, 710-711 [164 P. 17], cf. Realty & Rebuilding Co. v. Rea, supra, 184 Cal. 565, 574-576) the enactment of section 1932, it was recognized that a party could not terminate a lease because of the destruction of the subject matter when he had assumed the risk of such destruction by his covenants to repair since to do so would be to evade one of the essential elements of the risk allocation intended by the parties’ agreement. The result must be the same when the lessee has assumed the risk involved by his covenants relieving his lessor of all duties of repair and maintenance and undertaking for himself the duty to comply with all laws and orders respecting the premises.

The judgment is affirmed.

McComb, J., Peters, J., Tobriner, J., Mosk, J., Burke, J., and Sullivan, J., concurred.

Glenn R. Sewell Sheet Metal, Inc. v. Loverde
70 Cal. 2d 666

Case Details

Name
Glenn R. Sewell Sheet Metal, Inc. v. Loverde
Decision Date
Mar 28, 1969
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70 Cal. 2d 666

Jurisdiction
California

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