Mills v. Brody

• Decision Date: 12 December 1996
• Docket Number: No. 960186-CA,960186-CA
• Citation: 929 P.2d 360
• Parties: 305 Utah Adv. Rep. 23 Robert M. MILLS and Donna H. Mills, Plaintiffs and Appellees, v. Jana Jean BRODY, Defendant and Appellant.
• Court: Utah Court of Appeals

Page 360

929 P.2d 360

305 Utah Adv. Rep. 23

Robert M. MILLS and Donna H. Mills, Plaintiffs and Appellees, v. Jana Jean BRODY, Defendant and Appellant.

No. 960186-CA.

Court of Appeals of Utah.

Dec. 12, 1996.

Matthew W. Driggs, Driggs, Osborne and Huang, P.C., Salt Lake City, for Defendant and Appellant.

Jeffrey Swinton, Salt Lake City, for Plaintiffs and Appellees.

Before BENCH, GREENWOOD and WILKINS, JJ.

OPINION

BENCH, Judge:

Jana Brody appeals the trial court's entry of summary judgment in favor of Robert and Donna Mills. We affirm.

FACTS

On February 3, 1993, Brody entered into an agreement to lease the Millses' condominium. The lease agreement contained an option to purchase the condominium. Brody's husband drafted the option, which provided in pertinent part "Purchaser" [Brody] shall retain for a period of twenty[-]four months, commencing February 15th, 1993, an option to purchase the real property located at 1593 East 6430 South, Holladay, Utah, for the sum of One Hundred Fifty[-]Five Thousand and no/100....

Payments made during the term of the lease shall be applied, in the event that the purchase is completed, $50 towards the principal and $1,150.00 towards rental to include interest, taxes, insurance, and association fees.

In June 1994, Brody called the Millses, who had moved out of state for two years, to express her interest in exercising the option. Robert Mills then notified the Brodys of the name, address, and telephone number of the attorney the Millses had authorized to act on their behalf. Although Mills suggested that the Brodys contact the attorney, they never did so. In December 1994, Brody's husband called the Millses and said that he was trying to secure financing and planned to purchase the condominium in January 1995. At some point, the Brodys attempted to sell the condominium to obtain the purchase price. The Millses claim that in early February 1995, Brody's husband contacted them and explained that he could not obtain financing to purchase the condominium.

On February 9, 1995, Brody's husband again called Robert Mills. Brody claims that, during that conversation, her husband orally exercised the option on her behalf. She asserts that Robert Mills acknowledged the exercise of the option and asked to postpone closing the transaction until mid-March, when the Millses would return to Salt Lake City. On February 13, 1995, Brody's husband sent the Millses a letter, which stated that "we will be exercising our option to purchase the condominium," but made no reference to the earlier telephone conversation.

The Millses received the letter on February 14, 1995. The following day, their attorney sent Brody a letter stating that the option had expired unexercised because Brody had not paid the purchase price before the close of the option period. After the lease period expired, Brody continued to occupy the condominium without paying rent. Brody never tendered the purchase price of the condominium.

The Millses filed an action seeking Brody's eviction from the condominium, treble damages for holding over, attorney fees, and costs. Brody filed a counterclaim, demanding the Millses' performance of the option agreement. The Millses moved for summary judgment, claiming that Brody failed to exercise the option by the close of the option period. The trial court granted the Millses' motion for summary judgment, ordering Brody to vacate the condominium and pay treble damages, attorney fees, and costs.

On appeal, Brody raises the following issues: (1) whether tender of payment was required to exercise the option to purchase; (2) whether Brody exercised the option orally and in writing; (3) whether the Millses orally extended the option period; and (4) whether the Millses should be estopped from refusing to sell their condominium.

STANDARD OF REVIEW

Summary judgment is appropriate only where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Utah R.Civ.P. 56(c). Because summary judgment presents only questions of law, we review the trial court's decision under a standard of correctness, according no deference to the trial court's legal conclusions. Cook v. Zions First Nat'l Bank, 919 P.2d 56, 59 (Utah App.), cert. denied, 925 P.2d 963 (Utah 1996). "We determine only whether the trial court correctly held that no disputed issue of material fact exists and whether the trial court properly applied the governing law." Id. In reviewing the trial court's decision, we view the facts in the light most favorable to the losing party. Hamilton v. Parkdale Care Ctr., Inc., 904 P.2d 1110, 1112 (Utah App.1995).

ANALYSIS

Where an option agreement contains the terms "purchase" or "buy," and particularly where no other mode of exercise is specified, courts have interpreted the agreement to require payment to exercise the option. See Christian v. Giard, 3 Mass.App.Ct. 770, 330 N.E.2d 855, 856 (1975) (requiring tender of payment to exercise option containing no provision for notice); Shellhart v. Axford, 485 P.2d 1031, 1034 (Wyo.1971) (stating that "an essential step in the exercise of a purchase option is payment of the purchase price"). In Shellhart, while recognizing that the option also required notice to exercise, the court emphasized that

the option granted to [plaintiff] was an option "to purchase" real estate "for the sum of $12,000.00." When these terms are given meaning and effect, it becomes clear the intent of the parties was for payment of the purchase price to be a necessary part of the "exercise" of the option.

485 P.2d at 1034. Similarly, in Rogers v. Jones, 126 Ariz. 180, 613 P.2d 844 (1980), the court reviewed an agreement providing "an option to purchase the leased premises on or before termination of this lease, for the sum of [$950.00] per irrigable acre." Id. at 846 (alteration in original) (emphasis omitted). The court held that the agreement itself required "full payment in cash on or before the termination date" and that requirement "was an integral part of the option." Id. Finally, in Nance v. Schoonover, 521 P.2d 896 (Utah 1974), the agreement provided an "option and right to purchase" property by a certain date. Id. at 896. The option stated in relevant part: "The agreed purchase price for said real property is $18,000. If parties of the Second Part exercise this option and purchase said property, they shall be entitled to credit for the option price of $1000.00 making the remaining purchase price to be paid in cash $17,000.00." Id. The Utah Supreme Court interpreted the agreement to require "plaintiffs to pay the $17,000 in cash within the period specified." Id. at 897 (emphasis added).

In this case, the parties' agreement gave Brody an "option to purchase the real property ... for [$155,000]" by February 14, 1995. The agreement contemplates no method of exercise other than "purchasing" the property for $155,000. Therefore, under the terms of the agreement, the only way Brody could properly exercise the option was to purchase the property. Because Brody failed to tender the purchase price before the close of the option period, she did not exercise the option. See id. ("This court has long adhered to the rule that an option must be exercised in accordance with its terms."); Coombs v. Ouzounian, 24 Utah 2d 39, 41, 465 P.2d 356, 357 (1970) (holding tender of payment necessary where option requires payment for exercise).

Furthermore, the Utah Supreme Court has held that, unless otherwise provided in the option agreement, the law implies that tender of payment is required at the time of exercise of the option. Hofmann v. Sullivan, 599 P.2d 505, 508 (Utah 1979); see also Greenbaum v. Cortez, 644 S.W.2d 510, 511 (Tex.Ct.App.1982) ("Where a contract provides for a fixed sum but has no provision concerning time or method of payment, the general rule is that the consideration is to be paid in cash upon the exercise of the option."). In Hofmann, the supreme court reviewed a trial court's decision holding an option clause unenforceable for ambiguity since the clause failed to provide the method and time of payment. 599 P.2d at 507. In reversing the trial court, the supreme court stated that "[t]he option price was fixed, and as to that there was no dispute. In general, such [an option] provision calls for a payment of cash at the time of the exercise of the option." Id. at 508 (emphasis added). The court concluded that "as a matter of law, there was no ambiguity as to how and when payments would be made." Id. Therefore, although Brody contends the option agreement is ambiguous regarding time of payment, the option agreement is unambiguous because, under Utah law, payment was due before the close of the option period.

The Hofmann court cited Ferris v. Jennings, 595 P.2d 857 (Utah 1979), in support of the principle that contracts not specifying time of payment are unambiguous and enforceable. Hofmann, 599 P.2d at 508. The Ferris court held that "the failure to designate the time of payment does not make the contract a nullity. Courts universally read into such contracts an obligation of payment within a time 'reasonable' in the context of the transaction and circumstances of the parties." Ferris, 595 P.2d at 860. While the times of payment expressed in Hofmann and Ferris may appear inconsistent, both cases simply hold that contracts failing to provide a time of payment are unambiguous and will be enforced by the courts. Hofmann, 599 P.2d at 508; Ferris, 595 P.2d at 860. Because the narrow issue in Hofmann was whether the absence of an express time of payment nullified the contract, 599 P.2d at 508, the difference in the ultimate time of payment is not material to the issue in this case. ¹ The dissent erroneously uses Hofmann 's quotation of Ferris to suggest that the Hofmann court embraced for option agreements Ferris 's "reasonable time" rule. As stated above, the Hofmann court relied on Ferris only to support the court's...