Provision Against Assignment In a Contract In California

In California, general assignment clauses do not preclude assignments that occur by operation of law. "California courts have long recognized the distinction between voluntary assignment of contract rights by one party and involuntary assignments by operation of law." (Miller v. San Francisco Newspaper Agency (1985) 164 Cal.App.3d 315, 317 210 Cal. Rptr. 159.) The rule traces at least to Farnum v. Hefner (1889) 79 Cal. 575, in which the Supreme Court held that the transfer of a lease by execution sale did not cause a forfeit of the leasehold under an assignment clause. As the court noted, "the covenant in the lease is the ordinary kind, which applies, it seems to us, to a voluntary, and not an involuntary, assignment of the lease. It is firmly established by authority that under such a covenant an involuntary assignment by sale under execution--bankruptcy and the like--is not a violation of the covenant, and does not work a forfeiture." (Id. at p. 580.) Citing Farnum, the Supreme Court held in California Packing Corp. v. Lopez (1929) 207 Cal. 600 279 P. 664, that a non-personal-services contract containing a clause forbidding assignment survived the second party's death, noting that "the prohibitory clause against assignment ... forbids only voluntary assignment by the parties; it is not violated by an involuntary assignment by operation of law ... ." (Id. at p. 603.) Trubowitch v. Riverbank Canning Co. (1947) summarized this rule as holding that "a provision against assignment in a contract or lease does not preclude a transfer of the rights thereunder by operation of law ... ." (Trubowitch, supra, 30 Cal.2d at p. 344.) Because subrogation is effectively an assignment by operation of law, the general assignment clause cannot be construed to preclude National's equitable subrogation rights, assuming the other requirements for the doctrine are met.