Lewis v. Lockhart

• Decision Date: 20 February 1963
• Docket Number: No. 207,207
• Citation: 379 P.2d 618
• Parties: Water W. LEWIS and Sadie M. Lewis, Appellants, v. Jimmie D. LOCKHART and Bettye J. Lockhart, Appellees.
• Court: Alaska Supreme Court

Page 618

379 P.2d 618

Water W. LEWIS and Sadie M. Lewis, Appellants, v. Jimmie D. LOCKHART and Bettye J. Lockhart, Appellees.

No. 207.

Supreme Court of Alaska.

Feb. 20, 1963.

Albert Maffei, Anchorage, for appellants.

Charles E. Tulin, Anchorage, for appellees.

Before NESBETT, C. J., and DIMOND and AREND, JJ.

AREND, Justice.

This is an appeal from a judgment of the superior court ordering the appellants as defendants below to specifically perform an option agreement to transfer certain real property.

On January 13, 1959, the appellants, by written agreement, leased two lots and the house thereon to the appellees for 120 days at a monthly rental of $200. Included in the lease agreement was an option which gave the appellees the right to purchase the leased premises during the term of the lease for a total purchase price of $15,000. Rentals paid under the lease were to apply on the purchase price, the balance of which was to be 'payable in cash on such terms and conditions as the parties hereto shall mutually agree upon at the time of exercising said option.'

On March 31, 1959, the parties executed an instrument designated an earnest money receipt, which recited that consideration in the sum of $600 was given at that time as part payment of the $15,000 purchase price for the same property described in the lease and option and that the balance of the price would be obtained 'from an F H A [Federal Housing Administration] secured loan.' This latter instrument does not establish any time limit for the procuring of the loan mentioned or for the passing of title.

The appellees made application for the loan and had it approved by the local FHA office; but the loan was never procured mainly because the appellants refused to pay to FHA the required commitment fee of $113.25 for offering the loan for sale to the Federal National Mortgage Association, hereinafter referred to as FNMA. The seller had to pay this fee, under FHA regulations, before the loan would be further processed. ¹ A letter from the FHA office requesting such payment was in fact received by the appellants.

Although the appellees remained in possession of the premises until they were evicted therefrom by the appellants on July 4, 1959, they paid their rent only to May 13, 1959, the expiration date of the original lease. In the court below, they prayed for specific performance of the option contract or, in the alternative, for damages in the sum of $8,000. They also asked judgment against the appellants in the sum of $150 per month as rent actually paid for other living quarters occupied by them during the time that the appellants deprived them of the possession of the premises in question. ² The appellants answered, denying the claims of the appellees and alleging nonperformance of the lease and option agreement by the appellees, and then cross-complained for certain sums of money they claimed due to them from the appellees in connection with the latters' occupation of the subject premises.

The case was tried to the court sitting without a jury. After hearing the evidence proffered by each side, the court rendered an oral opinion in which it set forth its findings of fact and conclusions of law. The court gave leave, to appellants' counsel, for use of the opinion as the findings and conclusions in the case by having a transcript made of the oral opinion and filed with the court. It appears that counsel took advantage of the leave so granted, for we find no written findings of fact or conclusions of law in the record.

The pertinent findings and conclusions of the trial court, as gleaned from the oral opinion, are set forth below in the order in which they appear in that opinion:

1. The appellees paid to the appellant, Walter Lewis, money in the sum of $600 at the time the earnest money receipt was signed on March 31, 1959.

2. Consideration from the appellees to the appellants for the earnest money receipt consisted of the $600 payment just mentioned and a binding obligation to purchase the leased premises. Under the option agreement, the appellees were not bound 'to buy the property at all.'

3. The earnest money receipt was sufficiently definite in its terms to constitute a legally enforceable agreement of sale by the appellants (sellers) and of purchase by the appellees (buyers). Any uncertainty or indefiniteness as to the time for the payment of the balance of the purchase price from an FHA secured loan is removed by the fact that it can be made reasonably certain inasmuch as 'it is common knowledge that FHA insured loans can be processed in about 90 days to 120 days.'

4. The earnest money receipt was an exercise of the option agreement and modified that agreement to the extent that it changed the mode of payment of the purchase price; and on the day of the execution of the earnest money receipt, March 31, 1959, the lease terminated and the appellees became purchasers of the leased premises.

5. The appellants elected not to proceed with reference to the loan, took the position that the option had not been exercised, and demanded that the appellees quit the premises.

6. The $113.25 required for the FNMA commitment fee had to be paid physically by the sellers and would not have been accepted from the buyers. However, 'there was no restriction as to where the Defendants [sellers] should get the money to make that payment,' and they might even have requested it from the buyers.

7. On July 4, 1959, the appellants wrongfully took possession of the property, which has a rental value of 'at least $150.00 a month,' and have wrongfully retained that possession ever since.

8. The appellees did not abandon the agreement.

On the basis of the foregoing findings of fact and conclusions of law the trial court ruled that the appellees were entitled to a decree calling for specific performance of the agreement for sale of the property. Such a decree in writing was entered and filed on December 1, 1961. Also included in the decree was a provision that, if the appellees desired to secure FHA financing to perform their agreement of purchase, ³ they should have four months' time from the date of the decree in which to pay the purchase price of $15,000, less the following sums: (1) $600 and $800 paid by the appellees as earnest money and as rental money, respectively; (2) $3,900 for rental value of the property from July 4, 1959, to October 4, 1961, and $150 per month thereafter until surrender of possession of the property to the appellees; and (3) $80 for an inconsequential item.

We consider the principal issue in this case to be whether there existed between the parties a contract sufficiently definite and certain in its terms to be specifically enforceable. When we speak of 'a contract' or 'the contract' in this opinion we are referring to the lease with option to purchase (hereinafter designated option agreement) as supplemented by the earnest money receipt.

The appellants first contend that the earnest money receipt was not an exercise of the option agreement and that the trial court committed error in so holding. They insist that the relationship of landlord and tenant was meant to continue until the full purchase price under the option agreement had been paid. This they say is evidenced by the fact that the appellants made two rent payments after the execution of the earnest money receipt, procured no fire insurance, paid no taxes and performed no other acts indicative of ownership.

We cannot accept such argument for several reasons. In the first place, the 'option to purchase' clause in the lease purports a clear intent that the relationship of landlord and tenant between the parties might be terminated before the purchase price had been fully paid and that other arrangements might then be made between the parties for the payment of the balance of the price, after allowance of credit thereon for rentals paid. In that respect the option clause reads:

'[R]entals paid under the lease as of the date of the exercise of the option shall be applied towards the total purchase price hereinabove set forth. The balance due after applying said rentals as aforesaid shall be payable in cash on such terms and conditions as the parties hereto shall mutually agree upon at the time of exercising said option.'

Secondly, the earnest money receipt itself evidences an exercise of the option to purchase and the creation of a contract of purchase and sale, for it recites the receipt from the appellees of $600 'as deposit and part payment of the purchase' ⁴ of the subject property, which is specifically described, and states that the appellants agree to buy the property for $15,000, 'on which sum the above deposit shall apply, the balance to be paid as follows: Balance of purchase price to be obtained from an F H A secured loan[.]' The appellants signed their approval and confirmation of the sale 'on the terms and conditions stated.'

Finally, on this point it is to be noted that both of the appellants in their dealings with the appellees after the execution of the earnest money receipt, seemed to recognize the fact that the appellees had exercised the option, for they testified that about the middle of April and again in May, 1959, the appellee, Jimmie Lockhart, told them individually that he was not going to go through with the purchase and sale. The appellant, Mrs. Lewis, even stated that it was her understanding that the earnest money receipt was to tie in with the lease. That is our understanding, too, and we agree with the trial court that the earnest money receipt constituted an exercise of the option to purchase appended to the lease.

The next point raised by the appellants is that the earnest money receipt, if it may be considered an exercise of the option, is not sufficiently definite and certain to lend itself to specific performance. We have already stated that we consider this to be the main issue in the case. The appellants claim that the...