Nu-Way Serv. Stations, Inc. v. Vandenberg Bros. Oil Co.

• Decision Date: 04 April 1938
• Docket Number: No. 61,Oct. Term, 1937.,61
• Citation: 283 Mich. 551,278 N.W. 683
• Parties: NU-WAY SERVICE STATIONS, Inc. v. VANDENBERG BROS. OIL CO.
• Court: Michigan Supreme Court

283 Mich. 551

278 N.W. 683

NU-WAY SERVICE STATIONS, Inc.

v.VANDENBERG BROS. OIL CO.

No. 61, Oct. Term, 1937.

Supreme Court of Michigan.

April 4, 1938.

Action of ejectment by the Nu-Way Service Stations, Inc., against the Vandenberg Brothers Oil Company, wherein defendant claimed right to possession of the premises by virtue of an acceptance of an option right to purchase. From a judgment for plaintiff, defendant appeals.

Affirmed.

WIEST, C. J., and BUTZEL and BUSHNELL, JJ., dissenting.

Appeal from Circuit Court, Ottawa County; Joseph F. Sanford, judge.

Argued before the Entire Bench.

Diekema, Cross & Ten Cate, of Holland, for appellant.

Arthur W. Penny, of Muskegon, for appellee.

NORTH, Justice.

I am in accord with the opinion by Mr. Justice WIEST in so far as it holds that the option in question is valid and that it constitutes a covenant running with the land. But I cannot agree with his statement that ‘defendant had a right to accept the terms of the option when the sale was made to plaintiff.’ The contract sale to plaintiff was made October 27, 1936. The option held by defendant did not give it a right to purchase on that date. Instead the option was limited by its own terms to a period of 90 days beginning at the expiration of defendant's lease, February 1, 1937. The option reads: ‘* * * in case the said party of the first part desires to sell said property at the end of the term of this lease, * * * for a period of 90 days' defendant shall have ‘the first chance’ to purchase on the most favorable terms. Obviously defendant had only a limited or conditional option, so-called. Its rights as an optionee were limited first by the period of 90 days beginning February 1, 1937, and also by the contingency of whethed the optionor (or those in privity with him) desired to sell ‘at the end of the term of this lease.’ The undisputed testimony is that neither the optionor nor those standing in privity with him desired to sell the property at the expiration of the lease. The bank trustees did not have the power to sell at that time except subject to the contract rights of plaintiff. Plaintiff did not desire to sell. Therefore the condition under which the option might be enforced did not exist.

‘Acceptance of an option must be in strict compliance with the terms proposed, both as to the exact thing offered and within the time specified; otherwise the right is lost.’ (Syllabus) Bailey v. Grover, 237 Mich. 548, 213 N.W. 137.

The option in the instant case differs from those in the cases cited and relied upon in my brother's opinion. In those cases the option ran concurrently with the leasehold period. At any time during that period the optionee could have enforced his right to purchase. But in the instant case by its own terms the option was not enforceable until the expiration of the lease and during the next 90 days thereafter. The defendant company did not have an option which it could enforce prior to the expiration of its lease. Instead its lessor (optionor) and his grantees had the right to continue ownership of the property and to enjoy the profit by way of rents and income therefrom. In other words by its terms the option in no way limited the optionor's right to convey the title to someone other than the optionee during the leasehold period. With such a transaction the optionee had no concern. Instead, its only right was that, in event the optionor or those who stood in privity with him desired to sell the property within the period of 90 days next after the expiration of the lease, the defendant was to have ‘the first chance to buy said property.’

It developed that the property was not for sale during the period of the option and, therefore, defendant had no right to purchase under its terms. The situation would have been different if plaintiff had desired to sell the property during the option period. Then, and only then, would defendant under its option have possessed the right to purchase on the most favorable terms.

In La Dow v. E. Bement & Sons, 119 Mich. 685, 79 N.W. 1048, 1049,45 L.R.A. 479, this court was considering an option which provided for the repurchase of stock ‘at the end of two years.’ And we there said: ‘Clearly, plaintiff could not exercise the option until the complete expiration of the two years.’ The phrase ‘to sell said property at the end of the term’ means exactly what it says.

“At the expiration of three years' means, and was intended to mean, the day on which the period of three years expired. The meaning is as clear, we think, as it would be in the case of an ordinary promissory note for the payment of a sum of money at the expiration of three years from date.' Magoffin v. Holt, 1 Duv. 95,63 Ky. 95.

The power vested in an optionee to exercise a right at the end of a fixed period does not authorize him to exercise it prior to the time designated.

‘He had no right to make this election [to retain or return stock] before the expiration of the time. The time for such election expired at midnight on November 30, 1892, and it could not have been made until the full expiration of the time.’ Rogers v. Burr, 97 Ga. 10, 25 S.E. 339, 341.

The condition precedent to defendant's option being effective during the 90 days next after the termination of its lease did not exist. The owner of the property did not desire to sell it at that time. Hence defendant had no enforceable rights in the property under its conditional option. The court has no power to change for defendant's advantage the terms of its option.

Defendant's position is further complicated by the fact that the property which plaintiff purchased was not the identical property covered by defendant's option. Instead the property purchased by plaintiff was a substantially larger parcel of land, which included that covered by defendant's option. From the record in this case it cannot be said that either defendant's optionor or the plaintiff in this case ever desired to sell (separate and apart from the contiguous land) the parcel covered by the option. In consequence the record does not disclose on what terms the optioned parcel was ever offered for sale, if at all. To obviate this difficulty, defendant now offers to purchase from plaintiff all of the land which plaintiff holds as a contract purchaser. Obviously defendant has no enforceable rights in the property not covered by its option; and, further, neither it nor the optioned property was for sale during the option period.The judgment entered in the circuit court should be affirmed, with costs to appellee.

SHARPE, POTTER, and CHANDLER, JJ., concurred with NORTH, J.

FEAD, J., took no part in this decision.

WIEST, Chief Justice (dissenting).

This is an action of ejectment.

Defendant claims right to possession of the premises by virtue of acceptance of an option right to purchase.

January 8, 1927, Percy Ray, then the owner, leased the premises, in the city of Holland, to defendant for a term of 10 years. The lease provided:

‘It is further agreed that in case the said party of the first part desires to sell said property at the end of the term of this lease, that said party of the second part shall have the first chance to buy said property for a period of ninety days, by meeting the terms of any other previous offer. * * *

‘The covenants, conditions and agreements, made and entered into by the several parties hereto, are declared binding on their respective heirs, representatives and assigns.’

After execution of the lease and entry by defendant, the lessor, on November 11, 1927, mortgaged the premises to the First State Bank of Holland and, on July 16, 1930, deeded the premises to his wife. The mortgage was foreclosed and, upon sale, a circuit court commissioner's deed was issued to Paul E. Cholette on August 10, 1934, who took title merely as agent for the bank. The wife of the mortgagor gave Mr. Cholette a quitclaim deed on September 16, 1935. September 17, 1935, Mr. Cholette and wife deeded the premises to the trustees of the segregated assets of the First State Bank, such trust...