Drees Farming Ass'n v. Thompson
| Decision Date | 19 November 1976 |
| Docket Number | No. 9230,9230 |
| Citation | 246 N.W.2d 883 |
| Parties | DREES FARMING ASSOCIATION, a North Dakota Corporation, Plaintiff-Appellee, v. Melvin THOMPSON, Jr., et al., Defendants-Appellants. Civ. |
| Court | North Dakota Supreme Court |
Syllabus by the Court
1. Rules of construction relating to contracts generally govern with reference to the construction of a lease.
2. Courts will not enforce a contract which is vague, indefinite, and uncertain, nor will they make a new contract for the parties.
3. Interpretation of a contract's provisions is to give effect to the mutual intention of the parties as it existed at the time of contracting so far as the same is ascertainable and lawful.
4. A contract will be given such interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties.
5. A lease ordinarily is construed against the lessor in case of ambiguity when he is responsible for the language used. Therefore, any uncertainty in an option to renew found in a lease prepared by the lessor ordinarily will be construed in favor of the tenant. The lessor has the power to incorporate terms and conditions in his own favor, and if he neglects to do so he alone is responsible.
6. Courts do not favor, but will lean against, the destruction of contracts because of uncertainty, and they will, if feasible, so construe agreements as to carry into effect the reasonable intention of the parties, if that can be determined.
7. Since ambiguity in a lease prepared by the lessor is construed in favor of the lessee, the use of the phrase 'terms to be negotiated at the time of renewal' in an option-to-renew provision will be construed to refer only to the annual rent of the renewal period where such interpretation is consistent with the parties' apparent intention.
8. A provision in a lease giving the lessee an option to renew the lease, which leaves the renewal rental to be fixed by future agreement between the parties, is enforceable.
9. Since ambiguity in a lease prepared by the lessor is construed in favor of the lessee, the use of the phrase 'and the lessee has the option of matching any other bona fide offer' in an option-to-renew provision will be construed to give the lessee an alternative method of setting the rent for the renewal term in the event the parties could not agree on the amount of such rent and the lessee chose not to seek a judicial determination of a reasonable rent.
10. A life tenant's agreement setting the rental amount for the renewal term is binding on the remaindermen where such option to renew provided that renewal rental was to be fixed by the future agreement of the lessor and the lessee and where such remaindermen took their future interests subject to such option to renew.
Mack, Moosbrugger & Leonard, Grand Forks, for defendants and appellants; argued by Jerome J. Mack, Grand Forks.
Shaft, McConn & Fisher, Grand Forks, for plaintiff and appellee; argued by Patrick W. Fisher, Grand Forks.
This appeal is by the defendant (hereinafter the Remaindermen) from the judgment of the district court of Grand Forks County entered April 20, 1976, denying the Remaindermen's motion for an order dissolving the restraining order, upholding the validity of certain lease provisions, quieting title in Drees Farming Association, a North Dakota corporation (hereinafter Drees), to the property in question, declaring all claims of the Remaindermen adverse to Drees as null and void and inferior to Drees' claim, and dismissing Drees' counterclaim.
The facts herein are not disputed. On February 18, 1971, Edith M. Thompson leased to Drees three and one-half quarters of farm land located in Grand Forks County. The lease was drawn by Attorney James E. Leo, on behalf of Edith M. Thompson. The lease (hereinafter the 1971 lease) contained the following paragraph, which is the basis for the dispute herein:
This lease further provided for an annual rental of $7,700.00.
On June 10, 1971, Edith M. Thompson conveyed said real property by warranty deed to her sons and daughter, the Remaindermen herein, reserving a life estate in herself.
By an order of the county court of Grand Forks County dated February 21, 1974, Edith M. Thompson was declared incompetent and the First National Bank of Grand Forks was appointed as her guardian.
On July 25, 1975, the First National Bank of Grand Forks, as guardian for Edith M. Thompson, executed, pursuant to the option to renew contained in the 1971 lease, a renewal of said lease for a term of five crop years from the first day of December, 1975, for an annual rent of $12,000.00.
Edith M. Thompson died on October 23, 1975.
This action was commenced by Drees to determine the respective rights to possession of said real property. Two issues are raised for our consideration: (1) is the option to renew contained in the 1971 lease an enforceable option to renew such lease?; and (2) was such option exercised so as to bind the
Remaindermen? I. IS THE OPTION TO RENEW CONTAINED IN THE
Rules of construction relating to contracts generally govern with reference to the construction of a lease. Anderson v. Blixt, 72 N.W.2d 799, 804 (N.D.1955). In Hughes Realty Company v. Breitbach, 98 N.W.2d 374, 376 (N.D.1959), this court stated:
'It is fundamental that courts will not enforce a contract which is vague, indefinite, or uncertain, nor will they make a new contract for the parties.'
However, our interpretation of a contract's provisions is to 'give effect to the mutual intention of the parties as it existed at the time of contracting so far as the same is ascertainable and lawful'. § 9--07--03, N.D.C.C. Further, this court will give a contract
'. . . such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties.' § 9--07--08, N.D.C.C.
In Hughes, supra 98 N.W.2d at 377, this court stated:
'According to the great weight of authority, a lease ordinarily is construed against the lessor in case of ambiguity. 32 Am.Jur., p. 133, Sec. 128.
'Therefore, in construing the provisions in the lease here before the court relative to the option to renew, any uncertainty in the language of the option must be construed in favor of the tenant and against the lessor. The lessor had the power to incorporate terms and conditions in his own favor and, if he neglected to do so, he alone is responsible. (Citations omitted.)
'The law does not favor, but leans against, the destruction of contracts because of uncertainty, and it will, if feasible, so construe an agreement as to carry into effect the reasonable intention of the parties, if that can be determined. (Citations omitted.)
'. . . If there is uncertainty and ambiguity, it should be construed against the landlord or the party granting the option privilege.
In the instant case, the option to renew contained in the 1971 lease provided:
'. . . The lessee has the option to lease this land for an additional five (5) year contract, terms to be negotiated at the time of renewal, and the lessee has the option of matching any other bonafided (sic) offer.'
The trial court found the foregoing to be a valid and enforceable provision. We agree.
In the instant case, the Remaindermen contend that the language of the option to renew of the 1971 lease, i.e., 'terms to be negotiated at the time of renewal', implies that more than just the annual rent was left to be negotiated. They assert that the manner, method, and mode of payment and the rights and duties of the tenant with respect to the care and cultivation of the land involved also remain to be negotiated. We find no merit in such contention.
The renewal clause was incorporated into the 1971 lease for the benefit of the lessee (Drees) and, since any ambiguity or uncertainty is construed in favor of the lessee where the lease is prepared by the lessor, we find that the parties intended the use of the word 'terms' used in the option provision in the 1971 lease to refer only...
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