Glocksine v. Malleck, 24

• Decision Date: 27 December 1963
• Docket Number: No. 24,24
• Parties: Paul R. GLOCKSINE and Irma G. Glocksine, his wife, Plaintiffs and Appellees, v. Martha MALLECK and The Peoples National Bank and Trust Company, Co-Administrators of the Estate of Gertrude Leix, Deceased, Defendants and Appellants.
• Court: Michigan Supreme Court

Page 298

125 N.W.2d 298

372 Mich. 115

Paul R. GLOCKSINE and Irma G. Glocksine, his wife, Plaintiffs and Appellees, v. Martha MALLECK and The Peoples National Bank and Trust

Company, Co-Administrators of the Estate of

Gertrude Leix, Deceased, Defendants and

Appellants.

No. 24.

Supreme Court of Michigan.

Dec. 27, 1963.

Lyle M. McCormick, Bay City, for plaintiffs and appellees.

John M. Patterson, Bay City, for defendants and appellants.

Before the Entire Bench.

SOURIS, Justice (for reversal).

Plaintiffs leased a gasoline station from Gertrude Leix for a term of five years, beginning on April 1, 1953. The lease contained the following provisions pertinent to this appeal:

'It is agreed that if First Party desires to sell the property at any time that Second Parties, or either of them, shall have the first option to purchase the same and the right to meet any offer.

'It is further agreed that in the event of the death of the First Party, Second Parties may purchase the property from the estate of First Party for the sum of $5,000.00 cash. In the event of a purchase by Second Parties under either one of the above options the lease shall terminate.'

On October 1, 1957, defendant Malleck was appointed special guardian of lessor, who had been declared mentally incompetent. Upon expiration of the lease on April 1, 1958, the Glocksines remained in possession of the premises and continued to pay to the lessor's estate the monthly payments prescribed in the lease. The lessor died in March, 1959, and in September, 1959, Paul Glocksine informed defendant Malleck (who had been appointed co-administrator of the deceased lessor's estate) by letter that the plaintiffs were exercising their option to buy the leased premises from the lessor's estate for $5,000. Upon the defendants' refusal to sell, plaintiffs sought relief in equity. Defendants appeal from the chancellor's decree that they convey the property to plaintiffs in consideration of plaintiffs' payment to the estate of $5,000.

In the court below plaintiffs argued successfully that at the expiration of the lease's term they became, by holding over, tenants from year to year, subject to all of the provisions of the expired lease, and that as such they retained the right to exercise the options contained in the lease, which options, they maintained, had no specific expiration dates. It is true that the lease does not explicitly set forth the month, day, and year upon which the options were to expire. Since, however, the options were included in a lease for a definite term, it is reasonable to infer that it was the intent of the parties that the options had to be exercised during the term of the lease. Durepo v. May (1947), 73 R.I. 71, 54 A.2d 15, 18, 172 A.L.R. 429. Such an inference is also supported by language in the lease providing for its termination in the event of purchase by the plaintiffs under either one of the options. This suggests that it was the understanding of the parties that the options were to be exercised, if at all, during the term of the lease. If it be said that such language does not indicate the date by which the option had to be exercised, but rather means only that exercise of either option during the term of the lease terminated the lease, the language would be superfluous, since the exercise of a purchase option by a tenant during the term of his lease automatically terminates the lease. Rosenthal v. Shapiro, 333 Mich. 302, 315, 52 N.W.2d 859.

Moreover, a finding that the option was established for an indefinite period contradicts inherent probabilities, for an option to purchase is of such a nature that it is nearly always intended to be of limited duration. See 1A Corbin, Contracts, § 273. The likelihood of this being true is especially pronounced in the instant case, where there is a fixed price to provide for the contingency of the lessor's death. That a lessor would bind himself to a tenant indefinitely by such an agreement, beyond the normal term of his lease, thereby depriving his estate of any potential increase in property values, is unlikely.

We are not unmindful of cases like Starr v. Holck, 318 Mich. 452, 28 N.W.2d 289, 172 A.L.R. 413, which hold that ambiguous provisions in a lease should be construed against the lessor. Such cases, however, generally justify the result they reach as being 'consistent with the actual intention of the parties'. Starr v. Holck, 318 Mich. at p. 462, 28 N.W.2d at p. 293, 172 A.L.R. 413. A general presumption favoring lessees cannot outweigh the evidence of the parties' intention as set forth by the language of the lease.

We hold, therefore, that the parties to the lease indicated with sufficient clarity that they intended the option to expire at the end of the lease term. The question then becomes whether the option could be exercised by the plaintiffs as tenants holding over. In Scott v. Beecher, 91 Mich. 590, 52 N.W. 20, defendant leased a store from plaintiff for one year. At the end of the year defendant continued to occupy the premises and to pay rent. However, before another year had elapsed defendant vacated the premises and plaintiff sued for the rent he had lost during the period between defendant's departure and the entry of a new tenant. In affirming a judgment for plaintiff the Court said:

'It is well settled that * * * when a tenant under a valid lease for years holds over, the law implies a contract on his part to renew that tenancy on the same terms for another year; but the landlord may treat him as a trespasser or as a tenant holding upon the terms of the original lease.' 91 Mich. p. 592, 52 N.W. p. 21.

This language, unqualified, is certainly broad enough to justify the Golcksines' contention that since the option is a term of the lease, it may be exercised during a holdover tenancy.

However, in Faraci v. Fassulo, 212 Mich. 216, 180 N.W. 497, defendants who were holdover tenants appealed from a judgment ordering them to surrender the premises before the end of the holdover year. In its opinion reversing the circuit court's judgment, this Court analyzed a number of cases, including Scott v. Beecher, supra, and concluded:

'[A] presumption arises from the holding over by the tenant and acceptance of rent by the landlord, in a case of a lease for a term of years, that the parties intend to renew the tenancy for a period of one year. There is no implication that the lease itself as a binding contract is to be continued in force. Its provisions may be inquired into, to determine the terms under which the tenant holds and the nature of his tenancy. In an action to recover the rent, the liability would not be predicated upon the agreement of the tenant to pay as embodied in the lease, but upon the implied contract to pay according to the terms of the lease.' 212 Mich. pp. 221-222, 180 N.W. p. 499.

See, also, Longyear v. Jennings, 222 Mich. 647, 649, 193 N.W. 216. Thus the law in this State is not that the terms on which a holdover tenant holds are necessarily the same as those of the lease, but rather that the terms of the original tenancy may be inquired into to determine the terms of the holdover tenancy. ¹ The most obvious illustration of the fact that all terms of the lease are not necessarily applicable to the holdover tenancy is that, although the lease may provide for a term of serveral years, each holdover tenancy is for only one year. The lease in Faraci, for example, was for two years, but the holdover tenancy was for one year. ²

Our Court in its opinions has distinguished between the nature and terms of a renewal tenancy and those of a holdover tenancy. When a lease contains an option to purchase during its term and an option to renew the lease 'on the same terms', a renewal of the lease carries with it the right to exercise the purchase option during the renewed term. Meadow Heights Country Club v. Hinckley, 229 Mich. 291, 201 N.W. 190. However, an option to purchase which expiores at the end of a lease term, or at the end of a renewal thereof, cannot be exercised during the holdover tenancy. Cox v. McGregor, 330 Mich. 260, 267-268, 47 N.W.2d 87, 91, 24 A.L.R.2d 1067:

'[T]he right to exercise the option ceased upon the expiration of the renewal term of the lease and it could not be exercised during the month to month holding over. Napper v. Rice, 127 W.Va. 157, 32 S.E.2d 41; 163 A.L.R. 714; an Wright v. Barclay, 151 Neb. 94, 36 N.W.2d 645.'

Cox, like the instant case, involved an option to purchase at a fixed price. The holdover tenancy was from month to month, rather than from year to year as plaintiffs here claim, but since the conditions of all such holdover tenancies are determined from the terms of the expired lease, our conclusion in Cox relating to the expiration of the option upon commencement of the holdover tenancy is equally applicable in this case of Glocksine. See, generally, Burby, Real Property, § 117 (2d ed., 1954).

Napper v. Rice, the West Virginia case rilied upon in Cox, involved a two-year lease containing an option to purchase within the lease term for a fixed price. In denying specific...