Alexander's Land Co. v. M&M&K Corp.
| Decision Date | 29 August 2007 |
| Docket Number | 2007-UP-364 |
| Court | South Carolina Court of Appeals |
| Parties | Alexander's Land Company, L.L.C.; Alexander's Restaurant Company, Inc.; Franz Auer; John Peterson, Jr., and Bruce O. Rossmeyer, Plaintiffs, v. M&M&K Corporation; IFBIFB Corporation, and Roger Keyes are Defendants Of whom M&M&K Corporation and IFBIFB Corporation are the Respondents. |
THIS OPINION HAS NO PRECEDENTIAL VALUE. IT SHOULD NOT BE CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING EXCEPT AS PROVIDED BY RULE 239(d)(2), SCACR.
Heard December 5, 2006
Appeal from Beaufort County Curtis L. Coltrane, Special Circuit Court Judge
C Mitchell Brown, of Columbia and Richard A. Farrier, Jr. Walter T. Cox and Andrea St. Armand, all of Charleston, for Appellants.
Stephen E. Carter, of Hilton Head Island, for Respondents.
Alexander's Restaurant Company, Inc. (Purchaser) appeals the trial judge's decision denying its request for specific performance of an option to purchase real estate. We reverse and remand.
In 1996, M&M&K Corporation (Seller) operated a restaurant called Alexander's (the Restaurant) on Hilton Head Island. IFBIFB Corporation (Owner) owned the premises upon which the Restaurant was located (the Premises). Rodger Keyes is the sole shareholder of both corporations. At the time, Seller leased the Premises from Owner.
On November 25, 1996, Purchaser entered into a complex business deal with Seller and Owner, for the sale of both the Restaurant and the Premises that would extend over a three to five year period. The framework for the deal and the parties' obligations were provided in an Asset Acquisition Agreement (the Agreement) to which three additional agreements related to the transaction were attached as exhibits: a Personal Property Lease (the Lease) a Sublease (the Sublease); and, a Restated Commercial Lease (the Restated Lease). [1]
The Agreement provided for the purchase of the Restaurant business for a total of $1, 300, 000.00. Under the Agreement Purchaser was to take possession of the Restaurant, the Date of Possession, on December 2, 1996 [2] and was to purchase and close on the Restaurant, the Closing Date, on December 1, 1999. However, the Agreement gave Purchaser the right to extend the Closing Date for two, one year periods. If Purchaser intended to extend the Closing Date, it had to give Seller written notice ninety days in advance of the Closing Date, September 1 of each year.
During this period, while Purchaser maintained possession of the Restaurant but not yet purchased the business, Purchaser rented the Restaurant from Seller, as provided under the Lease. The Lease contained identical dates as the Agreement, such that if Purchaser extended the Closing Date for the purchase of the business, the Lease would likewise be extended.
Since the Restaurant was situated on leased premises, Purchaser also had to obtain Seller's right to lease the Premises from Owner. The parties executed the Sublease which likewise contained identical dates as the Agreement and the Lease, such that the Purchaser had to extend the Sublease if it extended the Closing Date of the purchase of the business. When Purchaser closed on the purchase of the business, the Restated Lease would take place of the Sublease. [3]
Paragraph 22.16 of the Sublease contained an option (the Option) allowing Purchaser to purchase the Premises. The Option likewise contemplated notice and closing dates similar to the Agreement, Lease, and Restated Lease. The first time Purchaser could exercise the Option was, not earlier than ninety (90) days prior to the commencement of the first renewal term, ” i.e. September 1, 1999. The last time Purchaser could exercise the Option was, not later than ninety days prior to the end of the second renewal term, ” i.e. September 1, 2001. The Option also contained a condition precedent requiring Purchaser to have consummated the purchase of [Seller's] business, ” before it could exercise the Option. [4]
From December 16, 1996 to August 26, 1999, the parties operated according to the terms of the Agreement, Lease, and Sublease. On August 26, 1999, providing Seller ninety days notice, Purchaser extended the Closing Date on the purchase of the business, and thereby extended the Lease, Sublease and Option contained in the Sublease, for one-year. In 2000, Purchaser did not provide ninety days written notice to extend the Closing Date, the Lease, Sublease or Option. In November 2000, the parties began negotiating a modification of the Agreement to allow Purchaser to extend the Closing Date through December 1, 2001.
The parties did not reach a compromise and Purchaser did not close on December 1, 2000, as required by the Agreement. Accordingly, Seller sent notice of default on December 4, 2000, triggering Purchaser's thirty-day cure period under the Agreement. On December 13, Seller waived the default, and the parties reinstated the Agreement, Lease, and Sublease. Seller additionally extended all of the agreements' respective terms to provide a Closing Date of December 1, 2001.
In summer 2001, the parties again began negotiating a modification, and resulting extension, of the Closing Date on the purchase of the business, Lease, Sublease, and Option. On August 9, Terry Finger, the attorney for Purchaser, wrote Cary Griffin, the attorney for Seller and Owner, indicating Purchaser wished to exercise the Option to purchase the Premises but wanted to extend the Closing Date on the purchase of the business for an additional four years. Griffin replied by letter dated August 14, indicating the Option to purchase the Premises was dependant on the purchase of the business such that Purchaser could not exercise the Option in 2001 without also purchasing the business in 2001. Griffin also reminded Finger of the upcoming notice deadlines, as contemplated in the Agreement. Griffin did suggest that perhaps at a later date and after a discussion with his clients that both purchases could be extended.
On August 27, Finger faxed a memo to Griffin:
This confirms our recent phone conversations. [Peterson] and his partners will exercise option on property and we would like to follow up on [Peterson and Keyes'] recent conversation about extending remainder for 3-5 yrs.
On September 5, Griffin wrote Finger, informing him the Option had expired on September 1, 2001, no notice has been received as to the exercise of the Option to Purchase.... Hence, the Option to Purchase, on its face, is extinguished.” Griffin later testified that at the time of the September 5 letter, he did not know Finger's August 27 memo had been received by his office.
Griffin and Finger attempted to resolve the problem. On November 15, 2001, Finger tendered the earnest money deposit required in the Option. Griffin returned the check, reiterating his position the Option had expired. By mutual agreement, the parties closed on the Restaurant on December 7, 2001. As a result, Purchaser owned the Restaurant and leased the Premises pursuant to the Restated Lease. However, Purchaser reserved its right to litigate the issue of whether the Option expired.
Purchaser filed a complaint against Owner, Seller, and Keyes (collectively Defendants). Purchaser asked for specific performance of the Option. In addition, Purchaser sought a declaratory judgment defining the rights of the parties pursuant to the Agreement, Lease, and Sublease. Furthermore, Purchaser alleged unfair and deceptive trade practices, sought damages for breach of contract, and asked for quantum meruit recovery of the improvements it made to the Premises.
Defendants answered, denying liability. The trial judge held a hearing, at which the parties presented evidence. Defendants argued the Option expired because (1) Purchaser failed to satisfy the condition precedent of purchasing the Restaurant before attempting to exercise the Option and (2) Purchaser failed to tender the earnest money deposit before the Option deadline of September 1, 2001. Purchaser asked for the relief requested in its complaint. Moreover, Purchaser contended Defendants should be equitably estopped from arguing the Option expired and Defendants did not comply with the default provision in the Agreement.
The trial judge found in favor of Defendants, holding Purchaser failed to satisfy the condition precedent to exercise the Option and Purchaser did not properly exercise the Option because it did not tender the earnest money deposit. Purchaser moved for reconsideration, and the trial judge issued an amended order correcting minor factual inaccuracies. Subsequently, the trial judge issued a separate order awarding attorneys' fees to Defendants. This appeal followed.
A suit for declaratory judgment is neither legal nor equitable, but is determined by the nature of the underlying issue. Hardy v. Aiken, 369 S.C. 160, 164-65, 631 S.E.2d 539, 541 (2006). An appellate court must look to the main purpose” of a suit to determine its characterization. Williams v. Wilson, 349 S.C. 336, 340, 563 S.E.2d 320, 322 (2002); Sloan v. Greenville County, 356 S.C. 531, 544, 590 S.E.2d 338, 345 (Ct. App. 2003). Thus characterization of an action as equitable or legal depends on the plaintiff's main purpose” in bringing the action. Ins. Fin'l Servs., Inc. v. S.C. Ins. Co., 271 S.C. 289, 293, 247 S.E.2d 315, 318 (1978). Whether the action is one at law or in equity is determined by the nature of the pleadings and the character of the relief sought. In re Estate of Holden, 343 S.C. 267, 278, 539 S.E.2d 703, 709 (2000).
In this case, Purchaser, as plaintiff, clearly requested equitable relief in the nature of specific performance and equitable...
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