Humble Oil & Refining Company v. DeLoache, Civ. A. No. 67-722.

• Decision Date: 20 February 1969
• Docket Number: Civ. A. No. 67-722.
• Court: U.S. District Court — District of South Carolina
• Parties: HUMBLE OIL & REFINING COMPANY, Plaintiff, v. Mac R. DeLOACHE, Dorothy R. Hulsey, Hazel R. Jewell, and Evelyn R. Martin (heirs at law and sole distributees of William Thomas Ridgeway, deceased) and Dorothy R. Hulsey (Administratrix of the Estate of William Thomas Ridgeway, Deceased), Defendants.

297 F. Supp. 647

HUMBLE OIL & REFINING COMPANY, Plaintiff, v. Mac R. DeLOACHE, Dorothy R. Hulsey, Hazel R. Jewell, and Evelyn R. Martin (heirs at law and sole distributees of William Thomas Ridgeway, deceased) and Dorothy R. Hulsey (Administratrix of the Estate of William Thomas Ridgeway, Deceased), Defendants.

Civ. A. No. 67-722.

United States District Court D. South Carolina, Columbia Division.

February 20, 1969.

COPYRIGHT MATERIAL OMITTED

Francis P. Mood, Boyd, Bruton, Knowlton & Tate, Columbia, S. C., for plaintiff.

Henry Hammer, Columbia, S. C., James M. Herring, Saleeby, Saleeby & Herring, Hartsville, S. C., A. Lee Chandler, Darlington, S. C., Isadore S. Bernstein, Columbia, S. C., for defendants.

FINDINGS OF FACT, CONCLUSIONS OF LAW, OPINION AND ORDER

DONALD RUSSELL, District Judge.

This action for specific performance of two written options for lease of certain properties adjacent to the intersection of State Highway 261 and Interstate Highway 95, under construction, and located in Clarendon County, South Carolina, some five (5) miles from the Town of Manning, was tried before me without a jury at a term of Court held in Columbia, South Carolina, on November 18 and 19, 1968.

One of the sites covered by an option to lease was a filling station site, 200 × 200 feet, beginning at the control access point on the southwestern corner of the intersection. The other separate option embraced a strip 10 × 1000 feet, running east from the filling station site to a sign site on Interstate Highway 95, together with the sign site itself, 40 × 50 feet. The lease options were between the plaintiff, as lessee, and William Thomas Ridgeway, as lessor-owner. Prior to notice by plaintiff of intention to exercise the two options, Ridgeway was killed in a boat accident on Lake Marion, near Manning. He died intestate. The defendants are his heirs-at-law. One of such heirs, Dorothy R. Hulsey, is, also, the Administratrix of his estate and is made a party defendant in that capacity as well as individually. The defendants-heirs, acting through the defendant Administratrix, have refused to comply with the options, thereby prompting the filing of this action.

JURISDICTION

There is diversity of citizenship between the plaintiff and all of the defendants. The subject-matter of this action is located in Clarendon County in the District of South Carolina. The amount in controversy, involved in the two lease options, is in excess of $10,000, exclusive of interest and costs.¹ There is, accordingly, jurisdiction in this Court over the controversy. Massie v. Watts (1810) 6 Cranch 148, 160, 3 L.Ed. 181; Davis v. Davis (C.C.Mont.1898) 89 F. 532, 537; American Surety Co. of New York v. Baker (C.C.A.Fla.1940) 112 F.2d 686, 688.

BACKGROUND OF CONTROVERSY

The circumstances leading up to the execution of the two lease options are relatively undisputed. The intestate acquired a farm, of which the areas embraced in the two lease options were a part, by devise from his father. After the location of Interstate Highway 95 through such farm, the intestate recognized the suitability of his corner site as a filing station site. In developing such site, he determined to seek a satisfactory long-term lease rather than to effect a sale. He preferred the guaranteed security of monthly rental payments by a responsible lessee and the avoidance of a capital-gains tax, to the responsibility, with its hazards, involved in seeking profitable and stable investment of the proceeds of a sale, diminished by the capital-gains tax.

The intestate first offered a lease of the filling station site to Gulf Oil Corporation. Gulf was represented by Mr. W. C. Langford in the negotiations that followed and the intestate represented himself. No one else participated directly in the negotiations. The option lease, as finally negotiated between the parties, contemplated a monthly rental of $300. Gulf, however, refused to exercise the option, regarding the rental too high. It did counter with an offer to buy the site for $44,000, but, for the reasons already outlined, the intestate was interested only in a lease, not a sale, and he declined the offer of Gulf to buy.

Rebuffed by Gulf, the intestate retained Joe Bates Harvin, a licensed realtor in Manning, to secure from a responsible lessee an acceptable lease of the site. Preparatory to approaching a prospective lessee, Mr. Harvin and the intestate agreed upon a fair valuation of the site as a basis for fixing a proper rental. After reviewing comparable locations in the general area, they arrived at a value of $40,000 for the one-acre site and a monthly rental providing a return of six per cent thereon, or $200 per month.

Harvin, acting on behalf of the intestate, first approached the Sinclair Refining Company, offering it a long-term lease on the filling station site at a monthly rental of $200. The management of Sinclair, feeling the rental too high, declined the offer. Only after Sinclair had refused to lease the property did Harvin approach the plaintiff, suggesting the same rental terms he had submitted to Sinclair. A conference was set up between Mr. J. F. Riddle, representing plaintiff, and Mr. Harvin and the intestate at Manning on February 22, 1967. At this conference, Mr. Riddle submitted the two lease options which are the subject-matter of this suit. Mr. Riddle read and explained the terms of the two option leases to Mr. Harvin and the intestate and answered such questions as were raised by either.² The intestate indicated he wished to consider further the contracts. This was agreeable to Mr. Riddle. The lease options were thereupon left with Mr. Harvin, available to the intestate at any time. It was suggested by Mr. Riddle as the conference ended, that the intestate should consult his attorney with reference to the lease options. On March 6, 1967, twelve days after his conference with Mr. Riddle, the intestate discussed with his attorney, Marion Riggs, Esquire, an experienced and respected member of the Manning Bar, the proposed lease options. After receiving and considering Mr. Riggs' advice (which, incidentally, was adverse but not on account of any inadequacy in the rentals), the intestate went to Mr. Harvin's office, signed the two lease options and accepted the cash consideration provided in the options.³

Between the conference on February 22 and the execution of the lease options by the intestate, no representative of the plaintiff had communicated with the intestate or sought to influence his decision in any way.

On April 30, following the execution of these options, the intestate was killed in a boat accident.

By registered letter dated June 13, 1967, and received by the defendant Administratrix on either June 14 or June 16, the plaintiff duly notified the defendants of the exercise of its options in accordance with the terms, and within the time allowed for the exercise, thereof. The defendant Administratrix, acting on behalf of herself and the other defendants, advised the plaintiff, by letter dated June 18, 1967, of their refusal to comply with the options. This suit followed.

ISSUES RAISED BY THE DEFENDANTS

It is conceded that an option to lease or to convey, based on a valuable consideration, may be specifically enforced. See, Corbin on Contracts, vol. 5A, p. 372; Willard v. Tayloe (1869) 8 Wall. 557, 567, 75 U.S. 557, 567, 19 L.Ed. 501; Sinclair Refining Co. v. Miller (D. C.Neb.1952) 106 F.Supp. 881, 885. The defendants, however, relied on the following grounds enumerated in their proposed Findings of Fact herein, as justification for their refusal to comply with the options and as a basis for denial of the right of specific performance in this case: (1) mental incompetency on the part of the intestate; (2) invalidation of the options by the failure of the plaintiff to make rental payments as required under the leases; (3) gross inadequacy of consideration; (4) hardship; (5) lack of mutuality of remedy in the leases; and (6) indefiniteness in the terms of the leases.

GENERAL RULE FOR SPECIFIC PERFORMANCE

Since the leases were executed in South Carolina, the subject of the leases is located in South Carolina and the essential acts of performance must take place in South Carolina, the law of South Carolina should control on the rights of the parties in this proceeding. Alameda County v. United States (C.C.A.Cal.1941) 124 F.2d 611, 614; Sinclair Refining Co. v. Miller, supra, p. 885 (106 F.Supp.). The holding to the contrary in Guffey v. Smith (1915) 237 U.S. 101, 114, 35 S.Ct. 526, 59 L.Ed. 856, preceded the decision in Erie R. Co. v. Tompkins (1938) 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487. See, note, 22 A.L.R.2d 573. However, the issue of State versus federal law in this case is unimportant, as it does not appear that the rules are different in the two jurisdictions.

It is often stated in the South Carolina decisions that the right to specific performance is "not a matter of absolute right, but rests in the sound discretion of the Court". Masonic Temple, Inc. v. Ebert (1942) 199 S.C. 5, 20, 18 S.E.2d 584, 590. Such discretion, however, "is not an arbitrary or capricious one, but a judicial discretion, to be exercised in accordance with the special rules and practices of equity, and with regard to the facts and circumstances of the particular case (citing the Ebert case). It was never intended to substitute the judgment or business sagacity of the chancellor for that of the contracting party and to relieve one of a supposed bad bargain when fairly entered into." Holly Hill Lumber Co., Inc. v. McCoy (1942) 201 S.C. 427, 445-446, 23 S.E.2d 372, 380 (same case 205 S.C. 60, 30 S.E. 2d 856, cert. den. 323 U.S. 778, 65 S.Ct. 191, 89 L.Ed. 621; 207 S.C. 428, 36 S.E. 2d 140); Adams v. Willis (1954) 225 S.C. 518, 527, 83 S.E.2d 171; New v. Collins (1923) 126 S.C. 294, 296-297, 119 S.E. 835; Dunlop v. Baker (C.C.A. Va.1916) 239 F. 193, 197; McCargo v. Steele (D.C.Ark.195...