Cotter v. James L. Tapp Co.

• Decision Date: 08 December 1976
• Docket Number: No. 20325,20325
• Citation: 267 S.C. 647,230 S.E.2d 715
• Court: South Carolina Supreme Court
• Parties: L. Arlen COTTER et al., Respondents, v. JAMES L. TAPP COMPANY, Appellant.

Page 715

230 S.E.2d 715

267 S.C. 647

L. Arlen COTTER et al., Respondents, v. JAMES L. TAPP COMPANY, Appellant.

No. 20325.

Supreme Court of South Carolina.

Dec. 8, 1976.

Robinson, McFadden, Moore & Pope, Columbia, for appellant.

Boyd, Knowlton, Tate & Finlay, Columbia, for respondents.

PER CURIAM:

This appeal is from an order of the Honorable Clyde A. Eltzroth, presiding judge of the Court of Common Pleas for Richland County. His order, dated November 7, 1975 and granting summary judgment to respondents (plaintiffs below), fairly sets forth and disposes of all the issues raised by appellant. Let this order be printed as the directive of this Court. Matters not necessary to a decision have been deleted.

Order of Judge Eltzroth

The action is one for a declaratory judgment to determine the rights of the parties under a certain written lease executed by the plaintiffs as landlord and the defendant as tenant on March 10, 1969.

The individual plaintiffs are the general partners of the plaintiff Dutch Square Associates, a South Carolina Partnership, which operates as landlord of the Dutch Square Shopping Center in Richland County. Defendant is a South Carolina corporation owning a chain of large department stores, one of which is located at the Dutch Square Shopping Center. The lease in controversy covers the defendant's department store at the Dutch Square Shopping Center. Defendant went into possession of the premises under this lease on March 1, 1970.

The specific provisions of the lease that are in dispute are contained in Article XXXII of the lease. This article, among other things, grants the defendant an option to lease either one or both of two expansion areas adjacent to the store space presently leased by defendant. This option, which for convenience sake will be hereinafter referred to as the primary option or the option to expand, is exercisable by the defendant at any time during the first five years of its lease, which five year period ended March 1, 1975. Article XXXII also gives defendant the option to renew this primary option for an additional three years 'upon the payment by tenant of thirty cents ($0.30) per sq. ft. per year for said expansion area, payable monthly as an option cost.' This option, which for convenience sake will be hereinafter referred to as the renewal option, contains no notice requirements for its exercise.

The present motion for summary judgment raises the question whether defendant has taken adequate legal steps to exercise this renewal option and thereby extend the primary option beyond the date on which it would have otherwise expired, March 1, 1975.

The complaint alleges among other things that the primary option expired on March 1, 1975, by reason of the defendant's failure to pay or tender on or before that date the option cost referred to above. Defendant in its answer alleges that it exercised the renewal option by written notice contained in a letter to plaintiffs dated February 13 Defendant also opposes summary judgment on the ground that there exist disputed issues of material fact that require the taking of testimony and defendant has filed with the court an affidavit in opposition to plaintiffs' motion for summary judgment with copies of correspondence attached. Neither party desires a jury trial and if the motion for summary judgment were denied, the matter would be heard by the Court of Common Pleas without a jury.

1975, and defendant specifically denies that it was required to pay the option cost on or before March 1, 1975, in order to exercise the renewal option.

It is undisputed that the defendant has not as of this date moved into the expansion area and for purposes of the present motion, both parties agree that the defendant has not yet exercised the primary option. The only question to be presently decided by me is whether defendant has taken adequate steps to exercise the renewal option and thereby extend the primary option beyond its expiration date of March 1, 1975. Stated differently, the question is: was defendant's letter to plaintiffs dated February 13, 1975, sufficient in law to exercise the renewal option or was defendant required to pay or tender the option cost prior to March 1, 1975? With respect to this question, I conclude that there exists no genuine issue as to any material fact and that plaintiff is entitled to summary judgment for the reason that payment of the option cost was clearly required by the terms of the renewal option and under the existing law in South Carolina.

Undisputed Facts

1. The lease provides in pertinent part:

ARTICLE XXXII

(after five years) this option may be extended for another three (3) years upon the payment by tenant of thirty cents ($0.30) per sq. ft. per year for said expansion area, payable monthly as an option cost.

2. The first five years of defendant's lease ended March 1, 1975.

3. On March 1, 1975, defendant had not exercised the primary option to expand so as to create a binding bilateral contract between plaintiffs and defendant to go forward with expansion. (Defendant alleges this in its verified answer and plaintiffs admit it for purposes of this motion).

4. Defendant did not pay or tender to plaintiffs the option cost referred to in Article XXXII of the lease on or before March 1, 1975. Verified Answer, Paragraph 7.

5. By letter to plaintiffs dated February 13, 1975, which covered several subjects, defendant stated:

We are very anxious to proceed with the expansion and wish to take this opportunity to notify you that we wish to exercise our option as per our contract under Article XXXII, to reserve the expansion space until such time as we do expand.

6. By letter mailed June 13, 1975, and received on June 14, 1975, the plaintiffs notified defendant that the option to expand had terminated for failure to pay the option cost.

7. By letter dated June 30, 1975, and hand delivered on July 1, 1975, defendant tendered the option cost.

8. By letter dated July 2, 1975, and delivered on July 5, 1975, plaintiffs returned defendant's tender of the option cost.

Conclusions of Law

It is well settled in South Carolina that option contracts are strictly construed in favor of the optionor and against the optionee. E.g., Southern Silica Mining & Manufacturing Company v. Hoefer, 215 S.C. 480, 497, 56 S.E.2d 321, 328 (1949) ('(the) argument by the defendant that the Courts do not favor forfeiture and therefore the option to renew must be granted, overlooks the fact that options because unilateral, are strictly construed against the party claiming the option').

It is also well settled in this state that if the option requires performance in a certain manner, time is of the essence and exact compliance with the terms of the option are required. E.g., Pope v. Goethe, 175 S.C. 394, 179 S.E. 319 (1935), Edwards Lumber & Land Company v. Smith, 191 N.C. 619, 132 S.E. 593, 594 (1926) ('(optionor) not bound by a mere notice of acceptance of his offer as contained in the option, unaccompanied by a tender of the purchase price'). See also 51C C.J.S. Landlord & Tenant § 57 (mode of exercising extension or renewal contained in lease must be in accordance with that prescribed in the agreement and lessee must strictly adhere to the terms thereof).

In its answer defendant asserts that its letter of February 13 was a valid exercise of the renewal option. The renewal option, however, contains no notice requirements. It provides that the primary option may be extended for an additional three years upon payment of a specified option cost.

Thus, the fact that defendant gave notice prior to March 1, 1975, that it wished to extend the primary option is completely irrelevant. Plaintiffs were entitled to exact compliance with the terms of the option and there is simply to way to equate a requirement to pay money with the giving of written notice. Defendant could have given written notice every day in the month of February, 1975, and such notice still would not have satisfied a requirement to pay money. Plaintiffs, upon receiving defendant's letter, could assume that timely tender of the option cost would be forthcoming. Defendant, however, neglected to pay or tender the option cost on or prior to March 1, 1975, and the primary option lapsed on that date.

Also, in South Carolina it is well settled that the consideration for a renewal option must be paid or tendered in advance before the original time limit expires, unless there is an express provision to the contrary. A. C. Tuxbury Lumber Company v. Byrd, 131 S.C. 32, 127 S.E. 267 (1925). The Tuxbury case involved a timber deed with a fifteen year term plus 'such additional time as (Tuxbury) may desire for cutting and removing said timber upon the payment of interest on the original purchase price, at the rate of six (6%) per cent, per annum, payable for each additional year, provided such additional time does not exceed ten (10) years . . .' 131 S.C. at 34, 127 S.E. at 268. No timber was cut during the first fifteen years of the contract and the renewal money was tendered shortly after the expiration of the fifteen year period. In holding that Tuxbury's tender was ineffectual to extend the contract, the court said:

'The provision for extension, conferring a privilege and unilateral in its obligation, partakes of the nature of an option, in which time is ordinarily of the essence, and the accepted doctrine applicable to such contracts is that they should be strictly construed in favor of the grantor or optionor. (citing cases). Applying that principle, we are of the opinion that a correct interpretation of the agreement for extension requires that the terms upon which the extension was to be granted should be complied with on or before the expiration of the specific period of 15 years for the removal of the timber . . . There is no express provision in the contract as to the time of payment of the extension which could reasonably be construed to...