Oshtemo Tp., Kalamazoo County v. City of Kalamazoo

• Court: Court of Appeal of Michigan
• Writing for the Court: D. E. HOLBROOK
• Citation: Oshtemo Tp., Kalamazoo County v. City of Kalamazoo, 257 N.W.2d 260, 77 Mich.App. 33 (Mich. App. 1977)
• Decision Date: 18 July 1977
• Docket Number: Docket No. 29044
• Parties: TOWNSHIP OF OSHTEMO, KALAMAZOO COUNTY, Michigan, a Municipal Corp., and Kenneth P. Nedervelt, Plaintiffs-Appellees, v. CITY OF KALAMAZOO, a Home Rule City, Defendant-Appellant. 77 Mich.App. 33, 257 N.W.2d 260

Page 260

257 N.W.2d 260

TOWNSHIP OF OSHTEMO, KALAMAZOO COUNTY, Michigan, a Municipal Corp., and Kenneth P. Nedervelt Plaintiffs-Appellees, v. CITY OF KALAMAZOO, a Home Rule City, Defendant-Appellant.

Docket No. 29044.

77 Mich.App. 33, 257 N.W.2d 260

Court of Appeals of Michigan.

July 18, 1977.

Released for Publication Sept. 2, 1977.

[77 MICHAPP 34] James F. Bishop, City Atty., Robert H. Cinabro, Asst. City Atty., Kalamazoo, for defendant-appellant.

Bauckham, Reed, Lang & Schaefer by John H. Bauckham, Kalamazoo, for plaintiffs-appellees.

Before R. B. BURNS, P. J., and D. E. HOLBROOK and BREIGHNER, ^* JJ.

D. E. HOLBROOK, Judge.

On November 12, 1975, a nonjury trial was held in the Kalamazoo County Circuit Court. Following presentation of briefs and stipulation of facts, the court issued an opinion dated May 7, 1976, in which it found that the defendant City of Kalamazoo was not the owner of the property in question at the time the city passed a resolution annexing the same. The court held that the outstanding option granted by defendant to James W. Kersten and Ben C. Morris, Jr. prevented the city from having sufficient ownership to annex the property pursuant to M.C.L.A. § 117.9; M.S.A. § 5.2088. Defendant City of Kalamazoo appeals. This is a case of first impression.

[77 MICHAPP 35] The City of Kalamazoo acquired the subject property from James W. Kersten and Ben C. Morris, Jr. by way of warranty deed dated May 7, 1970, and recorded May 8 1970. ¹ Also, on May 8, 1970, the parties executed an option giving James W. Kersten and Ben C. Morris, Jr. the option to repurchase the property. The option was later extended until May of 1976. On January 6, 1975, the Kalamazoo City Commission voted to annex the land under option. A new resolution was passed by the city commission on February 17, 1975, correcting the legal description of the property contained in the January 6, 1975, resolution. ² The optionees gave written notice of their intent to exercise the option by letter dated April 22, 1975. The parcel was then conveyed by the city back to James Kersten and Ben C. Morris, Jr. and their wives by warranty deed dated June 24, 1975, which was properly recorded on June 16, 1975. On February 3, 1975, the instant action had been commenced.

[77 MICHAPP 36] The trial court in its opinion stated the issue involved in the case as being: "(C)an the City of Kalamazoo annex land situated in the Township of Oshtemo under Subparagraph 8 of M.C.L.A. § 117.9; M.S.A. § 5.2088, under the circumstances existing in this case?" The statute referred to reads in part as follows:

"Where the territory proposed to be annexed to any city is adjacent to the city and consists of a park or vacant property located in a township and owned by the city annexing the same, and there is no one residing thereon, such territory may be annexed to the city solely by resolution of the city council of said city. * * * ." ³

The trial court found that the city was not the owner of the property in question at the time it passed the resolution annexing the same. The basis for this ruling was that the land was subject to an outstanding option and thus during the term of the option the city was not at liberty to dispose of the land "according to the will of the owner". The trial court qualified its statement by stating that the city was not in a position to dispose of the property without liability.

The question before this Court is whether or not the trial court committed error when it determined that defendant was not the owner of the [77 MICHAPP 37] property because of the outstanding option on the land in question.

The option in question provided that the City of Kalamazoo agreed any time prior to May 8, 1971, to sell and convey an "unencumbered, marketable title to the land situated in the Township of Oshtemo, County of Kalamazoo, State of Michigan" to James W. Kersten and Ben C. Morris, Jr., when and if they chose to exercise said option. The option further provided that "(t)his option may be exercised by the purchaser only by accepting the same in writing". It further provided that "(f)ailure of the purchaser to exercise this option and consummate a sale within the time and in the manner herein provided shall extinguish the purchaser's right to said land and all payment made". The acceptance of the option, according to its terms, would be consummated by the delivery of a warranty deed by the City of Kalamazoo to the purchasers conveying an unencumbered marketable title to the land.

An option is a preliminary contract for the privilege of purchase and not itself a contract of purchase. Greenwald v. Veurink, 37 Mich.App. 700, 702, 195 N.W.2d 305 (1972). An option is basically an agreement by which the owner of the property agrees with another that he shall have a right to buy the property at a fixed price within a specified time. An option is, in effect, only an offer which requires strict compliance with the terms of the option both as to the exact thing offered and within the time specified. Failure to so comply results in loss of the rights under the option. Bailey v. Grover, 237 Mich. 548, 213 N.W. 137 (1927); Bergman v. Dykhouse, 316 Mich. 315, 25 N.W.2d 210 (1946). See Grasman v. Jelsema, 70 Mich.App. 745, 246 N.W.2d 322 (1976).

[77 MICHAPP 38] The holder of an option to purchase land does not have any interest in the premises prior to exercising the option. Windiate v. Leland, 246 Mich. 659, 225 N.W. 620 (1929). See Hague v. DeLong, 292 Mich. 262, 290 N.W. 403 (1940). An offer to sell land does not create any interest in that land. Board of Control of Eastern Michigan University v. Burgess, 45 Mich.App. 183, 206 N.W.2d 256 (1973). The interest attaches only when the condition is performed. Gustin v. The Union School-District of Bay City, 94 Mich. 502, 54 N.W. 156 (1893).

In Cameron v. Shumway, 149 Mich. 634, 640-641, 113 N.W. 287, 290 (1907), our Supreme Court quoted the following language from Myers v. J. J. Stone & Son, 128 Iowa 10, 102 N.W. 507:

"Generally an option may be defined as a contract by which the owner agrees with another person that he shall have the privilege of buying his property at a fixed price within a limited time. * * * It is neither a sale of land nor an agreement to sell, but merely the disposal of a privilege of electing to buy at a fixed price within the time limited. The other party acquires no lands, nor interest in land, not even a chose in action, prior to his election, but he does obtain, what is often of much value, the privilege, at his election, to demand and receive the conveyances of land."

More recently the Court quoted from Keogh v. Peck, 316 Ill. 318, 147 N.E. 266, 38 A.L.R. 1151 (1925), stating: " 'An option to purchase does not create an estate in land. No title, legal or equitable, is granted to the holder of the option by an option agreement.' " Windiate v. Leland, supra, 246 Mich. at 665, 225 N.W. at 621.

We hold on the basis of the foregoing authority that the holder of an option does not have an "interest" as contemplated by the plaintiffs. No interest arises until the option has been accepted and there are no legal or equitable rights in the [77 MICHAPP 39] property given to the optionee. This Court concludes that the option did not give any interests in the property, subsequently annexed, to the holders of the option, and, therefore, did not take any of the ownership rights of the City of Kalamazoo. The trial court was in error in concluding that defendant city was not the owner of the annexed property as contemplated by the statute because of the outstanding option which had not been exercised as of the date of annexation. Defendant city owned the property which was annexed within the meaning of that term and in the context in which it is used under the statute, M.C.L.A. § 117.9; M.S.A. § 5.2088.

Finally, there is no merit to plaintiff's contention that the land annexed was not "vacant property" within the scope of M.C.L.A. § 117.9; ...