Jones v. White Sulphur Springs Farm, Inc.
| Decision Date | 13 June 1980 |
| Citation | 605 S.W.2d 38 |
| Parties | John M. JONES and Ramona Jones, his wife, Appellant, v. WHITE SULPHUR SPRINGS FARM, INC., and J. B. Marston, Jr., Appellees. WHITE SULPHUR SPRINGS FARM, INC., Appellant, v. John M. JONES and Ramona Jones, his wife and J. B. Marston, Jr., Appellees. |
| Court | Kentucky Court of Appeals |
Nathan Elliott, Jr., Harbison, Kessinger, Lisle & Bush, Lexington, for John and Ramona Jones.
William A. Young, Frankfort, for J. B. Marston, Jr.
Peter M. Davenport, Lexington, for White Sulphur Springs Farm, Inc.
Before REYNOLDS, HOGGE and WILHOIT, JJ.
This appeal involves conflicting claims to certain real estate. John and Ramona Jones are the owners of certain property located on U. S. Highway 460 in Scott and Franklin Counties. Mr. Jones leased the property, with exception of four (4) acres on which a residence was located, to White Sulphur Springs Farm, Inc. The lease gave White Sulphur a right of first refusal in the event that Jones elected to sell the farm. Jones became interested in selling, and Mr. & Mrs. Jones accepted an offer from J. B. Marston, Jr. Their agreement was subject to the right of first refusal in the lease. White Sulphur attempted to exercise its right of first refusal. Marston, who contended that the right was not properly exercised, brought suit for specific performance on his contract with the Joneses. Judgment in favor of Marston was entered by the Franklin Circuit Court. Separate appeals from that judgment have been filed by White Sulphur and Mr. and Mrs. Jones.
The right of first refusal, as described in the lease to White Sulphur, read as follows:
11. In the event first party shall desire to sell said farm other than by public auction during the term of this lease or any renewals thereof, he shall require a written offer from a prospective purchaser and second party shall have the right of the first refusal to purchase said farm at the price set forth in said written offer. Second party shall have thirty (30) days after actual receipt of notice and a copy of such written offer to notify first party of his exercise of this option.
Marston's offer to purchase "that certain farm ... containing approximately 450 acres located on the north side of Highway 460 ... and ... 110 acres more or less located on the south side of Highway 460" for $800.00 per acre was made April 3, 1974. It was accepted by the Joneses April 8, 1974.
An addendum to the contract was executed which provided that in the event White Sulphur failed to exercise its first refusal option, "then upon payment of the initial payment of One Hundred Thousand Dollars" the Joneses agreed to convey a deed for residence and four acre lot. A second addendum required Mr. and Mrs. Jones to make certain repairs to the property due to tornado damage.
After execution of the documents, White Sulphur was informed that it had thirty (30) days within which to meet the offer. Within that time, White Sulphur's attorney, Robert Miller, notified Mr. Jones that it was exercising the option pursuant to the lease to purchase for the terms laid out in the documents representing the offer by Marston. Negotiations began between White Sulphur and the Joneses which resulted in the drafting of a contract which included terms in addition to or in variance with the Marston contract. These terms included a provision allowing substitution of an escrowed cash fund as security on the notes in lieu of a lien on the property itself and a provision nullifying the Joneses' obligation to make a $4,000.00 payment in lieu of repair of tornado damage.
Among the communications passing between Mr. Miller of White Sulphur and Mr. Bradley, attorney for Mr. and Mrs. Jones, was a letter dated June 26, 1974 which stated:
Attached hereto is a properly executed copy of the contract of sale you prepared and mailed to me in regard to the above transaction. We are hereby accepting the terms according to the contract or in the alternative if your clients decide not to execute said contract, we are hereby accepting the terms of sale according to the Marston offer and two addendums of offer.
Around the first of July, Marston contacted Mrs. Jones, tendered a certified check for $100,000.00 and demanded that a deed be delivered to him for the residence and 4 acres. Mrs. Jones refused, and the suit by Marston followed. It is agreed by the parties that White Sulphur has never tendered payment for the farm; in fact, White Sulphur was adjudged bankrupt on May 25, 1978.
The Franklin Circuit Court concluded that in exercising the option, White Sulphur became bound by all of the terms and conditions contained in Marston's written offer to purchase. The negotiations between White Sulphur and Jones which had the effect of modifying the terms of Marston's written offer to purchase, was a rejection of the right of first refusal. All rights which White Sulphur may have had terminated when White Sulphur failed to tender the $100,000.00 called for in Marston's written offer to purchase within 90 days of the April 3, 1974 offer. The Franklin Circuit Court further concluded that the total purchase price due from Marston was $800.00 per acre: the $100,000.00 downpayment was merely part of that amount.
The first issue before this Court is whether appellant White Sulphur properly exercised its right of first refusal. The resolution of this issue involves two questions: (1) did White Sulphur fail to properly exercise the right by reason of negotiating terms different from those in the Marston contract? and (2) did White Sulphur forfeit any rights which it may have had by failure to tender the price offered?
Although it is argued that a third party contracting to purchase property subject to an option has no legal right to demand that the option be exercised in a proper manner, we find authority that third parties do have such rights. In Coastal Bay Golf Club, Inc. v. Holbein, 231 So.2d 854 (Fla.App. 1970), it was recognized that a prospective purchaser had the right to require strict compliance of the lessee with the terms of the first refusal provisions of the lease.
One of the most recent Kentucky cases regarding exercise of an option is Brownies Creek Collieries, Inc. v. Asher Coal Mining Company, Ky., 417 S.W.2d 249 (1967). This controversy, involving optionor and optionee, arose in a slightly different...
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