Venture Stores, Inc. v. Pacific Beach Co. Inc., WD

Decision Date10 November 1998
Docket NumberNo. WD,WD
PartiesVENTURE STORES, INC., Respondent, v. PACIFIC BEACH COMPANY, INC., Appellant. 55151.
CourtMissouri Court of Appeals

Neil L. Johnson, Kansas City, MO, for appellant.

Berry F. Laws, III, Kansas City, MO, for respondent.

Before SMART, P.J., and ELLIS and HOWARD, JJ.

PER CURIAM:

Venture Stores, Inc. ("Venture") exercised an option to purchase contained in a long-term commercial lease. Pacific Beach Company, Inc. ("Pacific Beach"), the other party to the lease, refused to perform under the option, and Venture brought an action in the circuit court for specific performance. The trial court found in favor of Venture. Pacific Beach appeals, claiming that the trial court erred in granting specific performance to Venture because it: (1) misinterpreted the lease; (2) erroneously declared Missouri law in ruling that a reasonable time to exercise the option was any time during the life of the lease; and (3) erroneously applied Missouri law in determining that open-ended purchase option provisions in lengthy leases are valid. Pacific Beach further argues that the trial court erred when it held that Pacific Beach should pay or credit back to Venture $666,474.00 in rent that Venture paid to Pacific Beach while the litigation was pending. Affirmed.

Facts

On May 2, 1975, Cook United, Inc. ("Cook United"), Pacific Beach's predecessor in interest, entered into a lease ("Cook Lease") with Discount Foods--Kansas City, Inc. ("Discount Foods"), Venture's predecessor in interest. The property subject to the Cook Lease is located at the intersection of North Oak and Vivion Road in Clay County, Missouri. The property was contiguous to another parcel of land already under lease to Venture pursuant to a lease entered into in 1970 ("Rockside Lease"). The Rockside Lease had a primary term of twenty-five years with the option of six extensions of five years each. Under the Rockside Lease, Venture could terminate the lease and acquire the land at anytime during the primary term of the lease. Venture acquired title to the Rockside land in 1989.

Seven years later, Venture notified Pacific Beach that it was exercising its option to purchase the land under the Cook Lease. Article XXV of the Cook Lease contained an option to purchase the leased land for $50,000.00 once certain conditions were met. Article XXV provided:

§ 25.1 Landlord represents and warrants that the demised premises are contiguous to, and constitute a single tract of land with, the tract of land demised by the "Rockside Lease" described below in § 25.2.

§ 25.2 Anything herein to the contrary notwithstanding Landlord agrees that Tenant may at its option terminate this lease upon notice delivered to Landlord of exercise of such option at any time after and in the event of the termination of the interest of Discount Foods-Kansas City, Inc., whether or not premature or for any reason whatsoever in that certain Lease dated April 1, 1970 between Second Rockside Corporation, as Lessor, and Discount Foods-Kansas City, Inc., as Lessee (herein called the "Rockside Lease"). Landlord covenants and agrees that in the event of any purchase by Tenant of all or part of the property demised under the Rockside Lease, pursuant to the terms of said Rockside Lease or otherwise, Tenant shall have the right and option to purchase the demised premises from Landlord for total purchase price of Fifty Thousand Dollars ($50,000.00).

No time limit for exercise of the option was established in the lease. The initial term of the Cook Lease commenced on May 2, 1975, and was to extend through May 31, 1996, with six consecutive extended terms of five years each. The rent from June 1, 1981, through May 31, 1996, was $1.00, payable August 31, 1981. Beginning June 1, 1996, the rent was to increase, payable in quarterly installments of $13,294.88.

On May 14, 1996, shortly before its rent was scheduled to increase, Venture gave written notice to Pacific Beach of its intent to exercise the option to purchase the premises pursuant to Article XXV of the lease. In a letter dated May 22, 1996, Pacific Beach refused to recognize Venture's exercise of the option. On May 30, 1996, Venture reaffirmed its intent to exercise the option contained in the Cook Lease, and once again Pacific Beach refused to recognize Venture's option. Venture was ready, willing and able to tender the purchase price for the premises.

Venture filed suit against Pacific Beach asking for specific performance. Venture paid rent to Pacific Beach on the property while the suit was pending and asked that the rent paid after the exercise of the option be credited toward the purchase price. Pacific Beach was aware that Venture was seeking specific performance of the option and return of the rent monies paid after the date of the exercise of the option. Both sides moved for summary judgment, although both motions were subsequently withdrawn.

At trial, the parties agree that the case was ready to be tried on the record. In addition to the facts stipulated to by both sides contained in the summary judgment motions, the court considered the affidavit and deposition testimony of Mary H. Kenefick, one of the persons who negotiated and drafted the Cook Lease, as well as the testimony of Kent Swank, Venture's Vice President.

The trial court rendered judgment in favor of Venture, finding:

1. The option to purchase the Premises for $50,000.00 which is contained in the Cook Lease is a valid and enforceable option.

2. Because the Cook Lease did not establish a time limit for the exercise of the option to purchase the Premises, under the circumstance of this case, a reasonable time in which to exercise the Cook Lease's option to purchase the Premises was any time during the existence of the Cook Lease.

3. Venture properly and timely exercised the Cook Lease's option to purchase the Premises for $50,000.00 by exercising the option during the existence of the Cook Lease.

4. The option to purchase the Premises for $50,000.00 which is contained in the Cook Lease should be enforced as of May 14, 1996, and Venture is entitled to specific performance and a final judgment from this Court so ordering and further ordering Pacific Beach to convey the Premises to Venture in consideration of the payment of the option price, $50,000.00, to Pacific Beach.

5. Venture should pay to Pacific Beach the amount of $56,750.00 which is the option price in addition to interest which Pacific Beach is entitled to and Pacific Beach should pay to Venture the amount of $66,474.00 or, at the parties' election, Pacific Beach should pay to Venture the net amount of $9,724.40 with the delivery of the deed as set forth above.

Pacific Beach appeals.

Standard of Review

Review is governed by Murphy v. Carron, 536 S.W.2d 30 (Mo. banc 1976). Thus, the judgment of the trial court will be affirmed unless it is against the weight of the evidence, is not supported by substantial evidence, or it erroneously declares or applies the law. Id. at 32. We are primarily concerned with the correctness of the trial court's result, not the route taken by the trial court to reach that result. Smith v. Estate of Harrison, 829 S.W.2d 70, 73 (Mo.App.1992). Thus, we will affirm the judgment if cognizable under any theory, regardless of whether the reasons advanced by the trial court are wrong or not sufficient. Id. We defer to the trial court as the finder of fact in our determination as to whether there is substantial evidence to support the judgment and whether that judgment is against the weight of the evidence, even where those facts are derived from pleadings, stipulations, exhibits and depositions. Aviation Supply Corp. v. R.S.B.I. Aerospace, Inc., 868 S.W.2d 118, 120 (Mo.App.1993).

In an action for specific performance, the right to sue is triggered by a party's failure to do that which is contracted for, in accordance with the procedure established by the contract. Hart v. Dick, 570 S.W.2d 820, 822 (Mo.App.1978). If an option contract contains the necessary provisions, specific performance may be enforced. Dean Operations, Inc. v. Pink Hill Assocs., 678 S.W.2d 897, 900 (Mo.App.1984). The five required contract provisions are: (1) the parties to the contract; (2) the subject matter; (3) the promises made by both parties; (4) the price; and (5) consideration. Id. The court in Frey v. Yust, 516 S.W.2d 321, 323 (Mo.App.1974), explains:

An option is a privilege, a right of election to exercise a privilege. As such, an option constitutes a continuing offer on the part of the vendor or owner until accepted within the time and on the terms limited in the option. When accepted, a valid agreement arises supported by mutual promises. Stated more specifically, when the offer is seasonably accepted, a new bilateral contract arises, and it is this contract which is specifically enforceable.

(Citations omitted).

The Option Clause

In its first point, Pacific Beach claims that the trial court erred in ruling that the original parties to the lease intended that the option to purchase could be exercised at any time. Pacific Beach contends that the court misinterpreted the language of the option clause and ignored language in other parts of the lease which would lead to a contrary interpretation. Venture's position is that the trial court's determination as to the intent of the original parties to the lease is not against the weight of the evidence.

"The cardinal rule in the interpretation of a contract is to ascertain the intention of the parties and to give effect to that intention." J.E. Hathman, Inc. v. Sigma Alpha Epsilon Club, 491 S.W.2d 261, 264 (Mo. banc 1973). When investigating intent, sources outside the contract itself are often considered, i.e., subsidiary agreements, the facts and circumstances surrounding the execution of the contract, the construction the parties have placed on the contract, and other...

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