Barnett v. Buchan Baking Co.

• Court: Washington Supreme Court
• Writing for the Court: BRACHTENBACH; PEARSON
• Citation: Barnett v. Buchan Baking Co., 108 Wn.2d 405, 738 P.2d 1056 (Wash. 1987)
• Decision Date: 02 July 1987
• Docket Number: No. 53290-7
• Parties: Joe D. BARNETT and Joyce Barnett, husband and wife, Respondents, v. BUCHAN BAKING COMPANY, a Washington Corporation, Respondent, and Howard Jones and Sandra Jones, husband and wife, Petitioners.

Page 405

108 Wn.2d 405

738 P.2d 1056

Joe D. BARNETT and Joyce Barnett, husband and wife, Respondents, v. BUCHAN BAKING COMPANY, a Washington Corporation, Respondent and Howard Jones and Sandra Jones, husband and wife, Petitioners.

No. 53290-7.

Supreme Court of Washington En Banc.

July 2, 1987.

William B. Christie, Seattle, for petitioners.

Smythe & Van Siclen, P.S., Inc., Robert C. Van Siclen for Barnett.

Montgomery, Purdue, Blankinship & Austin, Jerry W Spoonemore, Peggy C. Hughes, Seattle, for Buchan Baking Co.

BRACHTENBACH, Justice.

This case involves an option to purchase contained in a lease, and liability for contractual or consequential attorney fees. The Court of Appeals held that plaintiff had validly exercised the option and awarded attorney fees and allocated responsibility therefor. Barnett v. Buchan Baking Co., 45 Wash.App. 152, 724 P.2d 1077 (1986). We affirm the Court of Appeals, but base the awards of attorney fees upon different principles.

Defendant Buchan Baking Company (lessor) leased commercial property to plaintiff Barnett and to the additional defendant and counter-claimant Jones, naming them as "lessee." The lease granted lessee an option to purchase during a particular time period. In connection with a later sale by Barnett to Jones of Barnetts' partnership interest, including an assignment of his leasehold interest, the parties designated which party could exercise the option and during what period of time it could be exercised. In essence Jones had the sole right to exercise the purchase option during the first 50 months of its existence. If not exercised by Jones, Barnett had the sole right to exercise it during the last 4 months. The lease provided that the lessee shall not assign the lease or any part without the written consent of the lessor. Lessor did not consent to the Barnett-Jones lease assignment.

Jones later sold to TIMCO-Erickson the business conducted on the leased premises, including assignment, with lessor's consent, of the leasehold interest. According to an agreement between Jones and TIMCO-Erickson, Jones retained the right to exercise the purchase option during the last 6 months of the option.

TIMCO-Erickson thereafter secured a 1-year extension of the time in which to exercise the option. An extension letter from lessor stated, inter alia: "We understand that said Lease has been assigned to T.M. Erickson with Jones etal retaining some secondary rights for option to purchase provision." Plaintiff's Exhibit 5. As part of the agreement to extend the option period, a proviso allowed lessor to require TIMCO-Erickson to purchase a different property and then exchange it for the leased premises.

Barnett gave notice of exercise of the option on March 1, 1982, i.e., within the original option period and within the 4 month period during which he had sole right under his agreement with Jones; lessor refused to sell to Barnett without acquiescence of Jones and TIMCO-Erickson; both refused.

Barnett sued lessor for specific performance. Lessor tendered the defense to Jones who undertook lessor's defense. Later Jones counterclaimed against Barnett for tortious interference with Jones' claimed exercise of the option, and cross-claimed against lessor for specific performance. Jones' attempted exercise of the option was made after the original option time, but during the extension period.

The trial court held that since lessor had not consented to the Barnett-Jones assignment neither Barnett nor Jones could alone exercise the option. Therefore, there was no valid exercise of the option, which had expired by the time of trial. Both claims for specific performance were dismissed as was Jones' tortious interference claim. Attorney fees were awarded lessor against lessee, Barnett and Jones.

The Court of Appeals reversed, holding that Barnett was entitled to specific performance and awarding attorney fees as discussed hereafter. Barnett v. Buchan Baking Co., 45 Wash.App. 152, 724 P.2d 1077 (1986).

By written agreement the lessee, Barnett and Jones, divided between themselves the right to exercise the option to purchase. For a specified period Jones had the exclusive right to exercise it; for the last 4 months Barnett had the exclusive right. Jones contends that his right was senior and Barnett's potential right was divestible. This is his fundamental error in analysis. Barnett's right to exercise was fixed; when Jones' exclusive right expired by the passage of time, Barnett had the exclusive right. Only by a valid exercise during the time allocated to him could Jones have defeated Barnett's contractual right. There was nothing senior about Jones' right; Barnett's interest was divestible only in the sense that it could become nonexistent, and it would become so only if Jones exercised his right during the original time period. Absent a valid modification of Barnett's contractual right, or estoppel, Barnett's right was his alone during the 4 month period granted to him by the Barnett-Jones agreement.

On the issues of (1) necessity of consent by lessor to the Barnett-Jones assignment, (2) estoppel, and (3) the effect of the extension of the option, we agree with the analysis and holding of the Court of Appeals. We adopt the opinion on those points and agree that Barnett validly exercised the option. The dismissal of Jones' tortious interference claim was not raised in the petition for review so...