Myers v. Cornelius

• Decision Date: 23 April 1974
• Docket Number: No. 19811,19811
• Court: South Carolina Supreme Court
• Parties: Herbert G. MYERS et al., Respondents, v. Helen T. CORNELIUS et al., Appellants.

Page 180

205 S.E.2d 180

262 S.C. 417

Herbert G. MYERS et al., Respondents, v. Helen T. CORNELIUS et al., Appellants.

No. 19811.

Supreme Court of South Carolina.

April 23, 1974.

J. M. Long, Jr., Conway, for appellants.

H. E. McCaskill, Conway, for respondents.

LITTLEJOHN, Justice:

This action was instituted pursuant to South Carolina Code § 10--2001 et seq. (1962) for a declaratory judgment construing a recorded lease agreement affecting property situate in Myrtle Beach, South Carolina. The lease was assignable, and it is only necessary here to refer to the plaintiffs-respondents as the lessees and to the defendants-appellants as the lessors, although the former own their leasehold by virtue of a series of assignments. It is stipulated that the plaintiffs bought the lease for $230,000 in 1970 and have succeeded to all the rights enjoyed by the original lessees.

On October 4, 1958, the lessors leased three lots to the lessees for a term of twenty years ending October 3, 1978, with 'the option of renewing this lease for an additional ten (10) year period.' The property was leased as vacant land, and the rental schedule set forth in the agreement for the original term was based upon its value as vacant land. The rent was $1,500 per year for the first three years and thereafter increased in $500 per year increments until the tenth year, when the rent became $5,000 annually for the tenth through the twentieth years.

The lease further provided that the lessees 'shall construct upon these premises a building or buildings of masonry construction according to plans and specifications of their choice, provided that the same is in keeping with the surrounding community and conforms to the building code of the Town of Myrtle Beach,' in which they 'will maintain and operate a motel, apartment house or motel business.' In fulfillment of these provisions, the lessees have constructed and are presently operating a motel upon the demised property.

It was also provided that the lessors should pay the property taxes upon the land, and that the lessees shall pay the property taxes upon the building or buildings and upon the personal property located therein, and keep the buildings and furnishings adequately insured.

This controversy focuses upon the provision of the lease which grants unto the lesees an option to renew the lease for an additional term of ten years. It provides as follows:

'The lessees are hereby given the option of renewing this lease for an additional ten (10) year period and the same may be exercised by the giving of written notice to the lessors on or before October 1, 1978, the rent for the additional ten (10) year period shall be agreed upon by the lessors and lessees, but in the event that they fail to agree upon said rent, then the same shall be submitted to three arbitrators, one of whom shall be selected by the lessors, one by the lessees and the third by the two thus selected. The findings of these arbitrators shall be final and binding.'

The lessors do not dispute the lessees' right to have the lease renewed for the additional ten-year period. The only question here involved is the method by which the rental for the additional term is to be determined should the option be exercised. The lessees contend that the fair meaning of the quoted portion of the lease is that the renewal rental is to be based upon the value of the land alone. The lessors take the position that when considered in its entirety, the lease requires that said rental be based upon the value of the buildings, furnishings, fixtures, appliances, and all other personal property located in or on the premises and used in the operation of the motel situate thereon, in addition to the value of the land.

By agreement of counsel for both sides, the case was submitted upon a stipulation of facts to the trial judge. His order, from which the lessors have appealed, adopted the view of the lessees and held that the rent should be based on the land value only.

Some courts make a distinction between a provision in a lease for a renewal and a provision in a lease for the extension of the term at the option of the lessee. A renewal is treated as a new and distinct tenancy; a new lease is contemplated. Where an extension is involved, the lessee holds for the additional term under the original lease. A lease with an option to extend is treated, upon the exercise of the option, as a present demise for the full term to which it may be extended. 50 Am.Jur.2d Landlord and Tenant § 1156 (1970).

The lease before us uses the word 'renew' several times, but it also refers to 'any extension or renewal' two times. We cannot say that the parties intended a renewal as contrasted with an extension.

'Even in jurisdictions in which a distinction obtains, it has been judicially recognized that considerable difficulty sometimes arises in deciding whether in different leases a provision is one for a renewal or an extension. In the final analysis, whether a contractual provision involves a renewal or an extension is determined by the intention of the parties as disclosed by the whole instrument and the parties' interpretation and practical construction thereof; and the use of the word 'renewal' or 'extension' is not conclusive.' 51C C.J.S. Landlord & Tenant § 54 (1968).

To the same effect is the case of Mutual Paper Co. v. Hoague-Sprague Corp., 297 Mass. 294, 8 N.E.2d 802 (1937), wherein the court stated:

'The use of the word 'renewal' alone in a lease provision is not enough to prevent such a provision from being...