Guntert v. City of Stockton

In Guntert v. City of Stockton (1974) 43 Cal. App. 3d 203, the city leased certain waterfront property to a tenant, but the lease allowed the city to terminate the lease when the city council was satisfied with a development proposal for the property from a third party. In a lawsuit by the tenant, the trial court found that the city terminated the lease unreasonably and in bad faith when it failed to inquire into the feasibility of the third party's development proposal or its ability to finance it. ( Guntert, supra, 43 Cal. App. 3d at p. 207.) The appellate court upheld the trial court's decision on the ground that the city acted unreasonably, but the court declined to examine whether the city acted in good faith, finding reasonableness to be the only standard by which to evaluate the city council's satisfaction with the development proposal. ( Id. at pp. 211, 217.) The choice of objective or subjective test to evaluate a promisor's satisfaction depends upon the intent of the parties, as expressed in the language of the contract. In the absence of a specific expression in the contract or one implied from the subject matter, the preference of the law is for the less arbitrary reasonable person standard. ( Guntert, supra, 43 Cal. App. 3d at pp. 209-213.) The reasonableness test is especially preferable when factors of commercial value or financial concern are involved, as distinct from matters of personal taste. ( Kadner, supra, at pp. 264-267.)