Continental Oil Co. v. McNair Realty Co.

• Decision Date: 02 June 1960
• Docket Number: No. 10047,10047
• Citation: 137 Mont. 410,353 P.2d 100
• Parties: CONTINENTAL OIL COMPANY, a Delaware Corporation, Plaintiff and Respondent, v. McNAIR REALTY COMPANY, a Montana Corporation, Defendant and Appellant.
• Court: Montana Supreme Court

Page 100

353 P.2d 100

137 Mont. 410

CONTINENTAL OIL COMPANY, a Delaware Corporation, Plaintiff and Respondent, v. McNAIR REALTY COMPANY, a Montana Corporation, Defendant and Appellant.

No. 10047.

Supreme Court of Montana.

Submitted March 31, 1960.

Decided June 2, 1960.

La Rue Smith, Jr., Great Falls, for appellant.

Toomey & Hughes, Helena, Michael J. Hughes, Helena, argued orally, for respondent.

PHILIP C. DUNCAN, District Judge.

This is an appeal from a judgment granting plaintiff specific performance of an option to purchase. For convenience, the plaintiff and respondent will generally be referred to as Continental, and the defendant and appellant as McNair.

On February 17, 1953, one Margaret Conrad Parker, of Kalispell, as trustee under a trust created by the will of Alice Agnes Adams, deceased, leased certain real property in Great Falls to Continental for ten years from April 1, 1954, at a monthly rental of $300 payable in advance on the 1st day of each month, plus a payment based on gasoline delivered at the station and not here important. Also Continental was to pay all taxes levied against the property in excess of $600 per year. The lease contained this provision, giving rise to this litigation:

'(9) Lessee Preference Right To Purchase: If during the term of this Lease, or during the term of any extension thereof, the Lessor decides to sell the leased premises or the leased premises and the interest, if any, that it may have in the improvements situate thereon, the Lessee shall be given the option to purchase the same at and under the same terms and conditions as contained in a bona fide offer which is acceptable to Lessor, and Lessor shall give Lessee ninety (90) days' written notice of such terms and conditions and Lessee may at any time within said ninety (90) day period notify the Lessor that it will purchase the said premises or said premises and interest, if any, that Lessor has in the improvements thereon under the terms and conditions as contained in said bona fide offer, in which event Lessor shall make said sale to Lessee; but if Lessee fails to notify the Lessor of Lessee's intent to purchase within said ninety (90) days after notice of the terms and conditions of the proposed sale, then Lessor may accept any bona fide offer to purchase the leased premises or the leased premises and interest, if any, that Lessor may have in the improvements situate thereon; provided, however, that if Lessor has not consummated any such sale within six (6) months from and after the expiration of said ninety (90) day period, no such sale shall be made unless and until Lessor shall again provide Lessee with an opportunity to buy in accordance with the provisions of this section. Any sale made by Lessor during the term of this Lease or during any extended term, shall be subject to this Lease. Notice of the intention of the Lessor to sell and the terms and conditions of the sale shall be mailed to Lessee at Butte, Montana, and notice of Lessee that it will exercise its option to purchase shall be mailed to Lessor at 435 Fifth Avenue East, Kalispell, Montana, or by personal service in either case. Notice by mail shall be by registered mail only.'

In December 1954, during the term of the lease, the trustee died, the trust terminated, and fourteen persons became the owners of the realty subject to the lease. In April 1955, four of these persons brought an action in the same district court from which this appeal is prosecuted against the remaining owners and Continental, seeking a partition sale and division of the proceeds among the parties to that action, except Continental. Jurisdiction was acquired of all parties and on July 6, 1956, the court entered its 'Amended Decree of Partition and Order of Sale' which provided:

'I. That the real estate hereinbefore described by sold at public auction to the highest bidder, in the manner provided by law, for cash, ten per cent (10%) of the purchase price to be paid at the time of sale, and the balance to be paid in full upon confirmation.

'II. That said sale be made subject to the Lease to the Continental Oil Company, a corporation hereinbefore referred to. That said Continental Oil Company, a corporation, may become the purchaser of said premises at said sale, or may within a period of ninety (90) days after such sale exercise the preferential option to purchase said premises for an amount equal to the highest bid made by another at such sale as provided in said lease. Should said Continental Oil Company fail to make such purchase or exercise its preferential option as aforesaid, then its preference right to purchase said premises, as provided in Clause (9) of said Lease, shall become, and thereafter be, wholly null and void and of no effect.

'III. That Charles R. Lowery, a disinterested and qualified person to act, be, and he is hereby appointed referee to sell said real estate and of his proceedings hereunder to make due return.

'IV. That upon the coming in of said return of sale and upon confirmation and approval thereof by this Court, said referee shall make conveyance to the purchaser as shall then be directed by this Court.'

Pursuant to the foregoing order the realty was advertised by the referee for sale at public auction, the terms to be cash, ten per cent down and the balance on confirmation, the notice including the following:

'The sale is subject to a lease to Continental Oil Company, a corporation, dated February 17, 1953, a copy of which is on file in the office of Hall, Alexander & Burton, 414 Strain Building, Great Falls, Montana, and may be there inspected by prospective purchasers, and all reservations, restrictions and conditions of record.'

Aside from the notice, McNair knew before the auction that Continental occupied the property and inquired of Continental as to whether it was interested in purchasing the property. No reply was had.

On August 15, 1956, the public auction was held and McNair made the highest bid of $33,000. Continental did not appear at the sale.

The referee made his return of the auction sale and petition for confirmation and on September 7, 1956, the court set October 10, 1956, as the time for the hearing thereof.

On September 20, 1956, Continental mailed a check for $300 for the October rent to the Adams' estate and the estate cashed it.

On October 4, 1956, an attorney for four of the defendant owners in the partition action negotiated with McNair for an increase in the price to be paid for the realty, asking for $36,000 and on October 9, 1956, the attorney appeared in the partition action by objection to confirmation on the ground that the property had a value of not less than $36,000.

On October 9, 1956, Continental gave written notice by registered mail of its election to purchase the property for $33,000 by two registered letters one addressed to, 'Heirs of Alice Agnes Adams, 435 Fifth Avenue East, Kalispell, Montana', and one addressed to, 'Hall, Alexander and Burton, Attorneys for Heirs of Alice Agnes Adams, Strain Building, Great Falls, Montana'. Both letters asked for abstracts of title brought down to date and stated that it would be necessary for Continental's attorneys to approve the same, after which and upon receipt of a proper warranty deed the purchase price would be tendered.

On October 10, 1956, the referee's return of sale and petition for confirmation came on for hearing. Continental was not present and McNair increased his bid to $36,000. On October 13, 1956, the court made its 'Order and Decree Confirming Sale by Referee and Directing Disbursement of Money', reading in part as follows:

'* * * written objections were filed to the confirmation of such sale by the above named defendants * * * upon the ground that the said sum of Thirty-three Thousand Dollars ($33,000.00) was disproportionate to the value of said property and that the value of said property was not less than Thirty-six Thousand Dollars ($36,000.00), whereupon the said McNair Realty Company, a corporation, submitted a written bid for said property in the amount of Thirty-six Thousand Dollars ($36,000.00), and there being no further bids made, and no objections being made to said bid by the plaintiffs * * * or by the defendants * * * or by any other person, the bid of the said McNair Realty Company, a corporation, in the amount of Thirty-six Thousand Dollars ($36,000.00) is accepted, and the objections to the confirmation of said sale are overruled and denied; and,

'(a) It Is Hereby Ordered And Decreed that the sale of said real property to the said McNair Realty Company, a corporation, is hereby is all respects confirmed and approved, and the said Charles R. Lowery, Referee, is hereby authorized and directed, upon payment to him of the sum of Thirty-six thousand Dollars ($36,000.00) to execute and deliver to said McNair Realty Company, a corporation, a deed for the real property so sold in accordance with the notice of sale herein referred to.'

McNair paid the balance of the $36,000 and a referee's deed dated October 10, 1956, to McNair was recorded October 14, 1956. On October 16, 1956, McNair, by letter mailed to Continental at Butte, notified Continental of the purchase, enclosing a copy of the referee's deed, and asked that rent checks be mailed to it.

On October 22, 1956, before the McNair letter of the 16th addressed to Butte was received by the Denver office of Continental where rentals were paid from, Continental's Denver office mailed a check for $300 for the November rent to the Adams' estate. The estate returned the check to Continental advising it that rent was now payable to McNair. Continental destroyed the check and sent another to E. G. Toomey, Custodian of the Files.

Late in October of 1956, McNair, on inquiry, informed Continental it would not sell for $36,000 or honor the option.

Before November 27, 1956, McNair paid the taxes payable on the property by November 30, 1956, amounting to...