Anderson v. Overland Park Credit Union

• Decision Date: 03 April 1982
• Docket Number: No. 53019,53019
• Parties: Woodrow N. ANDERSON, Norma J. Anderson, Plaintiffs-Appellants, Bob Owen & Company, Inc. Robert C. Owen and Marjorie G. Owen, Plaintiffs, v. OVERLAND PARK CREDIT UNION, Defendant-Appellee.
• Court: Kansas Supreme Court

Page 120

643 P.2d 120

231 Kan. 97

Woodrow N. ANDERSON, Norma J. Anderson, Plaintiffs-Appellants Bob Owen & Company, Inc. Robert C. Owen and Marjorie G Owen, Plaintiffs, v. OVERLAND PARK CREDIT UNION, Defendant-Appellee.

No. 53019.

Supreme Court of Kansas.

April 3, 1982.

Syllabus by the Court

1. In order for a court to decree specific performance of a contract for the sale of real estate it is necessary the evidence pertaining thereto establish its terms, conditions and purposes with reasonable definiteness and certainty. The requirement of reasonable certainty in the terms of the contract extends to the parties, subject matter, purposes, consideration, place and time of performance, terms of payment, and duration of the contract.

2. An option agreement to sell and convey land becomes absolute and binding on both parties when the option is accepted by the vendee within the time and on the terms specified. Such an agreement will be specifically enforced if it is fairly made and for a sufficient consideration.

3. Whether equity will decree the specific performance of a contract rests in sound judicial discretion. Ordinarily there is no equity in releasing a party from a fair and reasonable contract into which he freely entered unless the circumstances of the case require it.

4. When all of the essential elements of a contract are present, the omission of nonessential but customary provisions of a contract of sale does not prevent specific performance.

5. Statutes must be construed with reason, considering the practicalities of the subject matter addressed.

6. A point not raised before, or presented to, the trial court cannot be raised for the first time on appeal.

7. In a declaratory judgment action challenging the authority of a Kansas credit union to purchase real estate and improvements for its use and occupancy, it is held : K.S.A. 17-2226 does not prohibit the credit union from purchasing a building which exceeds its present space requirements.

L. Franklin Taylor, of Payne & Jones, Chartered, Olathe, argued the cause and Michael G. Norris, Olathe, of the same firm, was with him on the brief, for plaintiffs-appellants.

James T. Wiglesworth, of Rainey & Wiglesworth, Overland Park, argued the cause and was on the brief, for defendant-appellee.

MILLER, Justice:

This is an appeal by the plaintiffs, Woodrow N. Anderson, Norma J. Anderson, Robert C. Owen, Marjorie G. Owen, and Bob Owen & Company, Inc., from summary judgment entered against them and in favor of the defendant, Overland Park Credit Union, by the Johnson District Court. Plaintiffs commenced this action for a declaratory judgment, claiming that an option to purchase contained within defendant's lease is legally unenforceable, and that defendant cannot legally exercise the option. Both plaintiffs and defendant moved for summary judgment. The trial court held that the option was valid, and entered summary judgment for the Credit Union. Plaintiffs appeal.

The facts are not disputed. The Credit Union, by warranty deed, conveyed an unimproved tract of land in Overland Park to William L. Marley and Joyce Ann Marley on October 6, 1967. On that same day, the Marleys entered into a twelve-year lease agreement, whereby they leased to the Credit Union 720 square feet of floor space in a commercial building to be built by them on the described land. The lease commenced on the date the building was completed, about February 1, 1968, and the initial term ran until January 31, 1980. The lease provided in substance that as rent the Credit Union would, concurrently with the execution of the lease, convey the described tract of land to the Marleys by warranty deed, and would thereafter pay certain annual cash rent based upon the ad valorem taxes on the property. The option provision of the lease, which is at the heart of this lawsuit, reads as follows:

"The Lessee is hereby given the option to purchase the property described in the paragraph next following and all buildings thereon, of which the leased premises is a part, at the end of the original term of this lease at a price of $93,000.00. Such option shall be exercised by the Lessee delivering written notice to the Lessor, not less than sixty (60) days prior to the end of the original term of this lease, of Lessee's intention to exercise said option. If said option is exercised, the Lessor and Lessee shall, within ten days after such exercise, execute and acknowledge in duplicate a Contract of Sale the terms thereof to be for cash upon expiration of the original lease term or upon such other conditions and terms as the parties might mutually agree."

The Credit Union went into possession of its leased space on or about February 1, 1968. It has remained in possession since that time and no issue is raised as to its proper payment of the annual cash rentals.

The plaintiffs, Robert C. Owen, Marjorie G. Owen, and Bob Owen & Company, Inc. (the Owens), presently hold legal title to the land. In 1976, however, they entered into a contract to sell the tract to Woodrow N. Anderson and Norma Jean Anderson for the principal sum of $100,000. The Andersons agreed to make a small down payment, to assume an existing mortgage on the property, and to make monthly payments to the Owens over a nine-year period. The contract provided that "existing Leases will all be honored," and it contained the following specific reference to the Credit Union lease:

"That the existing Lease with the Overland Park Credit Union grants to said Overland Park Credit Union an option to purchase the building within a given time (as shown on Lease) at a price of $93,000.00. The Buyers are fully aware of this clause in the Lease. However, the Sellers hereby agree that if the Credit Union should exercise this option, then the purchase price for Buyers herein will be lowered by $7,000.00."

K.S.A. 17-2226 sets forth a formula for determining the amount of funds which a credit union may spend to purchase real estate for its use. If such an expenditure will exceed the limitation, approval of the purchase must be secured from the credit union administrator. The statute reads:

"Credit unions may purchase real estate and improvements thereon for their use and occupancy. Without the approval of the administrator such expenditure shall not exceed five percent (5%) of the first million dollars of the total shareholdings plus three percent (3%) of the total shareholdings in excess of one million dollars ($1,000,000), plus such additional sums from undivided earnings as have been set aside for such purpose."

In the summer of 1979, the Credit Union applied to the Kansas credit union administrator for approval of its purchase of the property under its option. The administrator replied on July 23, 1979, as follows:

"My analysis of your financial statement as of June 30, 1979 shows a total allowable purchase cost for real estate and improvements (K.S.A. 17-2226) without the administrator's approval to be $71,711.48. This would exceed your option figure by $21,288.52.

"As I understand your lease, renewal of the lease calls for $300 per month. A depreciation schedule on a $93,000.00 building for 30 years calls for $258.33 per month.

"I further understand that upon purchase of the building, rental income would accrue to the benefit of the credit union members.

"In view of this, my approval of your option to purchase is hereby granted."

Shortly after receiving that approval, and in August 1979, the Credit Union sent by registered mail addressed to the Marleys, the Andersons, the Owens, and Bob Owen & Company, Inc., written notice of the Credit Union's intention to exercise its option to purchase the land for $93,000, and it requested the owners to execute and acknowledge a Contract of Sale within ten days in conformity with the terms of the option. The notices were promptly delivered and receipt acknowledged. No contract was forthcoming.

The plaintiffs sought review of the credit union administrator's decision by the Kansas Credit Union Council. That seven-member body met on October 9, 1979. All parties to this action appeared and presented evidence. The Council conducted a full review of the action of the administrator, and on October 10, 1979, advised an attorney for the plaintiffs that the Council concurred with the administrator's decision authorizing the Overland Park Credit Union to make the purchase.

Next, and on October 26, 1979, this declaratory judgment action was commenced. The Credit Union answered and counterclaimed for specific performance.

In addition to the option to purchase, the lease also granted to the Credit Union an option to extend the term of the lease for one additional ten-year period, and provided that during the extended term "the Lessee shall pay to Lessor rental in the sum of $300.00 per month, payable in advance on or before the first day of each month." On February 1, 1980, and during the pendency of this action, plaintiff Woodrow N. Anderson wrote to the Credit Union as follows:

"Under the terms of the lease you owe us $300.00 per month rent, commencing February 1st, 1980. We will look forward to receipt of this payment, and will appreciate payment on the first day of the month thereafter."

After hearing all parties, the trial court, in a comprehensive memorandum decision, entered summary judgment in behalf of the Credit Union on all claims of the plaintiffs against it, and granted specific performance of its option to purchase the land, in accordance with Count I of the Credit Union's counterclaim. A final judgment was entered, and from that judgment the plaintiffs appeal.

The primary and controlling issue before this court is whether the option provision of the lease is sufficiently specific and complete to be enforceable. Plaintiffs contend that the option does not contain all of the terms which are essential, and thus the trial court erred in granting specific performance. Specifically, they complain...