Imperial Refineries Corp. v. Morrissey

• Decision Date: 12 February 1963
• Docket Number: No. 50799,50799
• Citation: 119 N.W.2d 872,254 Iowa 934
• Parties: IMPERIAL REFINERIES CORPORATION, Appellant, v. Lila MORRISSEY, Appellee.
• Court: Iowa Supreme Court

Page 872

119 N.W.2d 872

254 Iowa 934

IMPERIAL REFINERIES CORPORATION, Appellant, v. Lila MORRISSEY, Appellee.

No. 50799.

Supreme Court of Iowa.

Feb. 12, 1963.

Mahoney, Jordan, Statton & Smith, Boone, for appellant.

Frank J. Karpan, Albia, for appellee.

STUART, Justice.

This is a suit for specific performance of an option to purchase, contained in a lease. The controversy involves a 40 acre tract abutting U. S. Highway 34 in Jefferson County just west of Fairfield. The land is owned by defendant, an elderly widow. Although her activity is somewhat impaired by age and for convenience much of her business is transacted through her son and her attorney, the record is clear that the defendant is competent to transact business. There is no claim that either defendant's son or her attorney acted except as authorized.

At the time of trial defendant was living in Melrose, Iowa with her son, John J. Morrissey, a Catholic priest.

Defendant acquired ownership by inheritance, the land having been owned in her family for 100 years. She would like to have it retained as a family asset. For a number of years there have been two oil stations on the land owned by defendant, the Home Oil and the Imperial Refineries Corporation, plaintiff herein.

On March 4, 1954 the tract of land now used by plaintiff, Imperial Refineries Corporation, was leased by defendant to Hassett Imperial Oil Company. On April 1, 1955 the Hassett Company assigned the lease to plaintiff. By exercise of a renewal option the lease was extended to March 1, 1961. The lease contained the following provisions:

'If this lease be in effect to March 1, 1961, Lessee shall either have the option, right and privilege to purchase the following described property situated in Jefferson County, Iowa, to wit: (land described) at a mutually satisfactory price not to exceed the sum of $22,000 cash or Lessee shall have the right and privilege to renew this lease for a further period of four years commencing the first day of March, 1961, upon the same terms and conditions as are set out in this lease.

'If during the period and term of this lease and any extensions thereof, lessor, successors or assigns shall have the opportunity to sell the property last above described at a bona fide sale, lessee shall have the right and privilege of the first refusal thereof at the same price and terms as any bona fide offer for said last above described property.'

The lease as typewritten contained the following additional clause 'but in no event shall the cost to lessee exceed the sum of $22,000.' This was scratched out before signature.

On November 16, 1960 a realtor wrote defendant that he had an offer to buy her land at $1200 per acre. What, if anything, was done about this offer does not appear. Plaintiff was not informed of this offer at any time prior to trial.

On January 16, 1961 plaintiff notified defendant by letter that plaintiff 'does hereby elect to exercise its option to purchase' the 40 acre tract for $22,000 as provided in the lease.

On February 15, 1961 plaintiff mailed defendant a check for $600 designated as one year's rental commencing March 1, 1961. Defendant's attorney returned the check by letter dated February 25, 1961. At the trial plaintiff claimed this check was mailed in error. The lease expired March 1, 1961 and the option to renew had not been exercised.

On February 20, 1961, Harley F. McIntire, made a bona fide offer to purchase the 40 acre tract for $45,000

On February 21, 1961 defendant's attorney by letter notified plaintiff of this offer.

On February 24, 1961 plaintiff wrote defendant that it had deposited $22,000 in the First National Bank of Fairfield to be paid to defendant upon delivery of warranty deed conveying the land to plaintiff.

On February 24, 1961 defendant's son, Reverend Father John J. Morrissey, addressed to defendant a written offer to buy the 40 acre tract for $60,000, payable $3,000 per year plus interest.

On February 27, 1961 defendant's attorney by letter notified plaintiff of this offer. On the same day by previous appointment, but before learning of this last offer, a field representative of plaintiff and plaintiff's attorney met with defendant's attorney and defendant's son. Plaintiff's representatives were told of and were shown the various offers. Plaintiff's representative and attorney stated they would like to check on the McIntire offer. There was general conversation but no firm agreements.

The next day the same people met again. Plaintiff's attorney in behalf of his client offered to meet the McIntire offer of $45,000. A proposed contract and a cashier's check in the amount of $4,500, down payment, were tendered. There was no acceptance in behalf of defendant. Plaintiff reserved no rights in the $22,000 option previously exercised.

Plaintiff's counsel rejected the Morrissey bid as not a legal or bona fide offer. There was much discussion but no conclusion. It is clear, however, that plaintiff made a definite offer to meet the McIntire offer and buy the property for $45,000. There was no acceptance. Defendant's attorney said they relied on the higher offer of $60,000. There is no evidence defendant claimed she could refuse to sell to anyone at this time. There is nothing in the record to show that defendant has ever accepted any of the offers. All that appears is her notice to plaintiff that she had received the offers.

On March 1, 1961 defendant, by her attorney, gave plaintiff notice to quit, stating that plaintiff's lease had expired. This suit followed.

Plaintiff seeks specific performance of its claimed option to purchase for the sum of $22,000. In the alternative plaintiff says it is entitled to purchase for $45,000 if it is not entitled to purchase under its option for $22,000. The trial court denied specific performance. Plaintiff appeals.

I. This suit is in equity and triable de novo here. We give weight to the findings of the trial court but are not bound by them. Rule 344(f)(7) R.C.P., 58 I.C.A.

II. This type of dual option containing both an option to purchase at a specified price during a specified period and the right to purchase at a price offered by a third person is not unusual and has posed many interesting legal problems. As the wording varies in each contract, the specific provision must be examined to determine the intention of the parties. The annotation found in 8 A.L.R.2d 604 presents a review of the cases in which this problem has been involved. As we hold plaintiff waived the right to exercise the option to purchase at a specified price, it is not necessary for us to determine the exact effect of these dual options upon each other.

Plaintiff's claim that it is entitled to specific performance of its option provision at $22,000 is based upon four of the propositions set out in its brief and argument.

'I. The lower court erred in finding that the option was dependant upon defendant's willingness to sell.

'II. The court erred in finding plaintiff failed to timely exercise its option and failed to give proper notice of its election to exercise said option.

'III. When plaintiff gave defendant notice on January 16, 1961, that it was exercising its purchase option for $22,000, said option became a bilateral contract obligating defendant to sell and plaintiff to buy for $22,000.

'VI. By offering to match the $45,000 offer under threat of loss of business location and precuniary loss, plaintiff did not waive its rights to enforce its contract of purchase for $22,000.'

We need not discuss the first three propositions hereinabove set out as we hold that plaintiff did not plead nor prove the doctrine of business compulsion and therefore did waive any rights it may have had to enforce the $22,000 option provision.

After representatives of the plaintiff had investigated the McIntire offer of $45,000 and concluded that it was genuine, they tendered defendant's counsel and her son, who were authorized to represent her, a contract in substantially identical form to the offer and a down payment of $4500. The record is void of any evidence indicating they were reserving any rights under the $22,000 option figure. The contract itself is silent as to any such reservation. Mr. Reed, the representative of the company present with the company attorney at the time the contract was tendered testified:

'You (attorney for plaintiff) made some statements to the effect that you definitely wanted both of them to understand the purpose of our presenting this paper and check, that it was a definite effort to be certain that we complied with the matching offer which had been presented by the McIntire Company.'

On cross examination Mr. Reed testified:

'Q. Well, what I mean Mr. Reed, there were no conditions or strings attached to that offer and that contract that was made in my office? A. No, sir, it was presented to you as an offer to match the other, the McIntire offer.'

The notice of the McIntire offer to plaintiff by defendant's counsel in a letter labeling it a bona fide offer to purchase is an offer to sell for that figure which plaintiff accepted by the tender made above.

'A provision in a lease giving the lessee the first opportunity to purchase the property for a price the lessor would receive from other parties does not, until the lessor gives notice to the lessee, constitute an 'option' as that term is usually understood. This conditional or contingent right is sometimes called a right of 'premption' or of 'first refusal.' However, when the lessor sends out notice pursuant to such provision, the two, the provision and the notice, become an option.' 51 C.J.S. Landlord and Tenant § 80, p. 632; Chournos v. Evona Investment Co., 97 Utah 335, 93 P.2d 450; King v. Dalton Motors, Inc., 260 Minn 124, 109 N.W.2d 51.

This contract which was inconsistent with the option to purchase for $22,000 rescinded the former contract, if one did exist. No rights to assert the former were reserved....