Anderson v. Armour & Co., 45797

• Decision Date: 17 July 1970
• Docket Number: No. 45797,45797
• Citation: 205 Kan. 801,473 P.2d 84
• Parties: K. T. ANDERSON, Russ B. Anderson, and Robert L. Anderson, Appellees, v. ARMOUR AND COMPANY, a Corporation, Appellant.
• Court: Kansas Supreme Court

Page 84

473 P.2d 84

205 Kan. 801

K. T. ANDERSON, Russ B. Anderson, and Robert L. Anderson, Appellees, v. ARMOUR AND COMPANY, a Corporation, Appellant.

No. 45797.

Supreme Court of Kansas.

July 17, 1970.

Syllabus by the Court

1. A right of pre-emption differs from an option in that a pre-emption does not give to the pre-emptioner the power to compel an unwilling owner to sell, but merely requires the owner, when and if he decides to sell, to offer the property first to the person entitled to the pre-emption at the stipulated price, and upon receiving such an offer, the pre-emptioner may elect whether he will buy, and if he elects not to buy, then the owner of the property may sell to a third party.

2. Under a lease giving the lessee a pre-emptive right of purchase-at such time as the lessor decides to sell such right of pre-emption ripens into a present enforceable contract right of the lessee to purchase.

3. A provision in a lease gave the lessees a pre-emptive right of purchase-all as set out in the opinion. In violation thereof the lessor sold the property to a third party without giving notice to the lessees. Lessees brought an action against the lessor to recover damages for breach of the lease provision. The measure of damage submitted to the jury was the difference between the fair market value of the tract without the improvements and with the improvements-as of the date of sale to the third party. Verdict was for plaintiff lessees, and judgment was entered thereon. Defendant lessor appealed. The record is examined, and, all as fully set forth in the opinion, it is held-no error shown.

Elvin D. Perkins, Emporia, argued the cause, and Everett E. Stterman, and Keith A. Greiner, Emporia, were with him on the brief for appellant.

George Forbes, Emporia, argued the cause, and Russ B. Anderson, Emporia, and Arthur Claussen Topeka, were with him on the brief for appellees.

PRICE, Chief Justice.

This is an action by lessees against their lessor for damages resulting from the alleged breach of the written lease agreement.

Judgment was for plaintiff lessees, and defendant lessor has appealed.

The decisive question in the case involves the interpretation and enforceability of one provision of the lease.

For a number of years prior to 1963 the Santa Fe Railway was the owner of a 40-acre tract of land just west of Emporia adjacent to its railroad tracks. The south 3 or 4 acres were used by the Santa Fe in its operations. The remainder of the tract was for many years leased by the railroad to plaintiff Andersons and was used by them in their large-scale cattle feeding operations. The improvements and equipment were owned by the Andersons and placed there at their expense.

In June 1963 Santa Fe sold and conveyed to Armour and Company approximately 30 acres of the 40-acre tract for the construction of a packing plant. The Andersons relinquished their lease rights in the 30 acres thus sold, and entered into a written lease with Armour covering the west 13.75 acres of the 30-acre tract bought by Armour from Santa Fe.

This lease from Armour to the Andersons was entered into on June 18, 1963, and was for a term of five years commencing July 1, 1963 and ending June 30, 1968. It provided that either party had the right to terminate the lease at the end of the third or fourth year of the five-year term by giving written notice of intention to terminate not less than 12 months prior to the end of the third or fourth year, as the case may be.

The lease also contained the following provision-the alleged breach of which by Armour resulted in this law suit:

'In the event the Lessor desires to sell the premises, the Lessor agrees to notify the Lessee in writing of such intention and of the purshase price and shall allow Lessee fifteen (15) days from day of mailing such notice within which to attempt to negotiate a purchase and sale contract for the premises with the Lessor.'

In passing-it is noted the lease further provided that lessees were prohibited from filing it or a copy thereof in the office of register of deeds of Lyon county or in any other public office, and that if the same should be done the entire lease-at the option of lessor-would be null and void and of no further force and effect.

The parties operated under the lease for several years, and neither party exercised the right to terminate.

In the fall of 1967, however, Armour closed down its packing plant, and on November 29, 1967, conveyed by warranty deed the entire 30 acres-including the 13.75 acre tract under lease to the Andersons-to Iowa Beef Packers, Inc.

In violation of the above quoted provision of the lease-Armour admits that it gave no notice to the Andersons of its plan to dispose of the property.

Several months later-on March 25, 1968, Armour wrote to the Andersons and informed them of the conveyance and that the lease in question had been assigned to Iowa, the purchaser.

On October 25, 1968, the Andersons filed this action against Armour. Without detailing the allegations of the petition-the basis of the action was that the tract in question had a unique value to them and that because of Armour's failure to notify them of the proposed sale to Iowa they were deprived of the use of the tract and the opportunity to purchase the same-all to their damage in the amount of $75,000.00.

Armour's answer alleged that the provision of the lease relied on by the Andersons was vague, indefinite, uncertain and unenforceable and therefore of no force and effect, but that if valid and enforceable it was not breached in that it applied only to the 13.75 acre tract and that in fact such tract was not 'sold' but rather was 'traded' as an essential part of other related property. Damage was denied.

The case was tried by a jury which answered special questions and returned a verdict for plaintiff Andersons in the amount of $25,000.00. Judgment was entered thereon, and defendant Armour has appealed.

As stated-the real question in the case concerns the interpretation and enforceability of the quoted provision of the lease.

Briefly stated-Armour contends the provision is unenforceable because it is vague and uncertain; that it contains no price or formula by which price can be determined; that it is nothing more that an agreement to make a contract and as such is not binding because all of the terms and conditions were not agreed upon and stated therein.

On the other hand-the contention of lessees (plaintiff Andersons) can best be stated by quoting from their brief:

'The principal issue is whether or not the pertinent clause in the lease between the parties created an enforceable right. Before reviewing the applicable authorities we call the court's attention to a basic distinction between the terms of an 'option' in a lease or other instrument as compared to a 'right of pre-emption,' which is some times referred to as a 'first right of refusal,' or 'first right to purchase'. In the case of an option it is consistently held that the terms by which the optionee may buy the property must be set out in detail in the lease or other instrument granting the option because the lessor or part...