R.H. Pierce Mfg. Corp. v. Continental Mfg. Co., Inc.

• Decision Date: 28 March 1984
• Docket Number: No. 13493,13493
• Citation: 106 Idaho 342,679 P.2d 142
• Parties: R.H. PIERCE MANUFACTURING CORPORATION, an Oregon corporation, Plaintiff-Respondent, v. CONTINENTAL MANUFACTURING CO., INC., an Idaho corporation, Defendant-Appellant, and Bill W. Nichols and Ramona Nichols, husband and wife; Charles Park and Billie Park, husband and wife; and Elma Lott, a divorced woman, dba Lott Enterprises, Defendants-Respondents. CONTINENTAL MANUFACTURING CO., INC., an Idaho corporation, Defendant-Counter Claimant-Appellant, v. R.H. PIERCE MANUFACTURING CORPORATION, an Oregon corporation, Plaintiff-Counter Defendant-Respondent. CONTINENTAL MANUFACTURING CO., INC., an Idaho corporation, Defendant-Cross Claimant-Appellant, v. Bill W. NICHOLS and Ramona Nichols, husband and wife; Charles Park and Billie Park, husband and wife; and Elma Lott, a divorced woman, dba Lott Enterprises, Defendants-Cross Defendants-Respondents. Bill W. NICHOLS and Ramona Nichols, husband and wife; Charles Park and Billie Park, husband and wife; and Elma Lott, a divorced woman, dba Lott Enterprises, Defendants-Counter Claimants-Respondents, v. R.H. PIERCE MANUFACTURING CORPORATION, an Oregon corporation, Plaintiff-Counter Defendant-Respondent. Bill W. NICHOLS and Ramona Nichols, husband and wife; Charles Park and Billie Park, husband and wife; and Elma Lott, a divorced woman, dba Lott Enterprises, Defendants-Cross Defendants-Cross Claimants-Respondents, v. CONTINENTAL MANUFACTURING CO., INC., an Idaho corporation, Defendant-Cross Complainant-Cross Defendant-Appellant.
• Court: Idaho Supreme Court

Page 142

679 P.2d 142

106 Idaho 342

R.H. PIERCE MANUFACTURING CORPORATION, an Oregon corporation, Plaintiff-Respondent, v. CONTINENTAL MANUFACTURING CO., INC., an Idaho corporation, Defendant-Appellant and Bill W. Nichols and Ramona Nichols, husband and wife; Charles Park and Billie Park, husband and wife; and Elma Lott, a divorced woman, dba Lott Enterprises, Defendants-Respondents.

CONTINENTAL MANUFACTURING CO., INC., an Idaho corporation, Defendant-Counter Claimant-Appellant, v. R.H. PIERCE MANUFACTURING CORPORATION, an Oregon corporation, Plaintiff-Counter Defendant-Respondent.

CONTINENTAL MANUFACTURING CO., INC., an Idaho corporation, Defendant-Cross Claimant-Appellant, v. Bill W. NICHOLS and Ramona Nichols, husband and wife; Charles Park and Billie Park, husband and wife; and Elma Lott, a divorced woman, dba Lott Enterprises, Defendants-Cross Defendants-Respondents.

Bill W. NICHOLS and Ramona Nichols, husband and wife; Charles Park and Billie Park, husband and wife; and Elma Lott, a divorced woman, dba Lott Enterprises, Defendants-Counter Claimants-Respondents, v. R.H. PIERCE MANUFACTURING CORPORATION, an Oregon corporation, Plaintiff-Counter Defendant-Respondent.

Bill W. NICHOLS and Ramona Nichols, husband and wife; Charles Park and Billie Park, husband and wife; and Elma Lott, a divorced woman, dba Lott Enterprises, Defendants-Cross Defendants-Cross Claimants-Respondents, v. CONTINENTAL MANUFACTURING CO., INC., an Idaho corporation, Defendant-Cross Complainant-Cross Defendant-Appellant.

No. 13493.

Supreme Court of Idaho.

March 28, 1984.

Richard Dale Greenwood, Twin Falls, for defendant-appellant.

Thomas H. Church, Church, Church, Snow & Tuft, Burley, Larson, McIntyre & Coleman, Twin Falls, for plaintiff-respondent.

HUNTLEY, Justice.

This appeal, while arising from a very complex series of transactions and events, presents a relatively simple question: Whether an optionor may properly refuse to tender its agreed performance under an option contract when:

(a) the optionees (or their successors) cannot agree and each seeks to exercise the option to the exclusion of the other; and

(b) the successor in interest of one of the optionees has executed on part (but not all) of the leasehold estate of the optionee?

We answer the question in the negative and reverse and remand for further proceedings.

In abbreviated form, the transactions and events in order of occurrence, are:

1. Lott Enterprises (as owner and lessor) executed a five-year lease to Wiser Enterprises, Inc. and Emery Wiser as lessees, of a parcel of land upon which lessees planned to (and later did) construct a building.

2. The lease contained an option to purchase either for $31,500 cash or under an installment option.

3. A money judgment was obtained against Wiser Enterprises, Inc., by R.H. Pierce Manufacturing Co., which judgment was duly recorded.

4. The two lessees assigned the lease and option to Continental Manufacturing Company.

5. Pierce levied on the real estate at the execution sale and bid in its judgment amount seeking to purchase the Wiser Enterprise, Inc. interest, in which levy and sale, the notices described a portion (but not all) of the leased premises.

6. Continental gave timely notice of intent to exercise the option in its own (sole) behalf, tendering the cash purchase price.

7. Pierce gave timely notice of intent to exercise the option in its own (sole) behalf under the time contract option.

Pierce filed an action for declaratory judgment against Continental and Lott, which resulted in counterclaims and cross-claims. Pierce moved for summary judgment on its complaint seeking a declaration that its exercise of the option was valid and enforceable, which motion was denied. Lott moved for summary judgment on its counterclaim and cross-claim for quiet title, which motion was granted, and this appeal followed. Lott contends its obligation to sell the property under the option was excused by the above-described events. We disagree. The power of an option holder is the power of acceptance, and by giving notice of exercise of the option within the agreed time limit, an offer is accepted. 1A Corbin on Contracts (1963 ed.) § 264, p. 508. Moreover, "notice by ... [an optionee] is not merely the acceptance of an offer; it is also the performance of a condition precedent to ... [an optionor's] duty of immediate performance." Id. at 509. Therefore, once Lott received notice of exercise of the option by one of the optionees, its offer under the option contract was accepted and it was obligated to perform. The fact that the second optionee did not join, and in fact attempted to initiate its own exercise of the option, did not excuse Lott's performance. Whatever the rights of Continental and Pierce are, vis a vis one another, Lott's proper action was to tender its agreed performance by way of interpleader, leaving it to the trial court to resolve the dispute as between Pierce and Continental. RESTATEMENT (SECOND) OF CONTRACTS § 339 comment d (1979).

As guidance to the trial court on remand, we would note that "the rights of promisees of a single performance are determined in accordance with the rules of equity," 4 Corbin on Contracts, supra, § 939, pp. 785-86, and that when one of two co-optionees exercises an option, he cannot do so in derogation of the rights of the other. His exercise of the option is impressed with a trust in favor of the second and if the second thereafter, and in a timely manner on being notified to close, tenders his share of the option price, he is entitled to participate equally in the purchase.

We further note that we are unable to determine from this record whether Pierce accomplished a proper and complete execution on the interest of Wiser Enterprises, Inc. in the option. The option is a contract right which might require execution or levy on something other than the land itself. Since the facts on this issue were not fully developed below, and the issue not adequately briefed on appeal, we leave it for determination by the trial court on remand.

Accordingly, the judgment of quiet title is reversed and the case remanded for further proceedings consistent herewith, including trial on the merits as to the rights of Continental and Pierce inter se regarding the option, and whether the attempted exercise of the option by either Pierce or Continental was procedurally correct in accordance with the terms of the lease agreement and the applicable statutes.

Costs to appellant. No attorney's fees awarded.

DONALDSON, C.J., and BISTLINE, J., concur.

BAKES, Justice, dissenting:

I disagree with the majority opinion's characterization of the issue presented here. In order to see the issue clearly, it is necessary to look more closely at the factual situation presented.

Prior to the events outlined herein, Lott Enterprises (Lott) was the owner of a parcel of real property described as follows:

"Lot 4, Block 1; Lot 1, Block 2; Lot 3, Block 4, of the Midway Subdivision in the County of Minidoka, State of Idaho, as the same is platted in the official plat now of record in the office of the county recorder of the County of Minidoka, State of Idaho."

In 1974, Lott entered into a lease/option agreement with two co-lessees, Wiser Enterprises, Inc. (Wiser, Inc.), and Emery Wiser (Wiser) as an individual. The agreement was titled "Lease of Real Property with Option to Purchase." It outlined numerous rights and duties of each of the parties, both the lessor and the co-lessees, including the "grant unto the lessees an option to purchase ...."

On March 15, 1976, a judgment was entered in favor of Pierce Manufacturing Company (Pierce) against Wiser, Inc., on an unrelated matter. ¹ The judgment was recorded on the same day it was obtained, and thus became a lien on all real property owned by Wiser, Inc. Then, on September 6, 1978, Pierce obtained a writ of execution, and a sheriff's sale was held of Wiser, Inc.'s interest in a portion of the real estate described in the lease/option, consisting of Lot 1, Block 2, and part of Lot 3, Block 4, of the previously noted legal description. Pierce then bid in the amount of its judgment. Thus, Pierce was substituted as a co-lessee for any interest owned by Wiser Inc., as of the date of filing its judgment, in that real property subject to the execution sale.

On September 30, 1977, Wiser, Inc., and Wiser, as an individual, with the consent of Lott, made an assignment of their interests in the lease/option to Continental Manufacturing Company (Continental). Continental thus became substituted for Wiser and any interests of Wiser, Inc., that had not been transferred by operation of law to Pierce by virtue of its lien and execution sale.

On November 22, 1978, Continental attempted to exercise the option by giving notice to Lott of its desire. On December 19, 1978, Pierce also gave notice to Lott that it was exercising the same option. Because of the conflicting claims, Lott refused to accept either notice of exercise of option. Pierce then filed a three-count complaint seeking a declaratory judgment decreeing that it had acquired the right to exercise the option, seeking to foreclose the interests of unknown defendants who might claim interest in the property, and demanding an accounting of rentals paid by a sub-lessee to Continental. Named as defendants in the suit were both Lott and Continental. Continental answered and counterclaimed against Pierce and crossclaimed against Lott for specific performance of the option. Lott answered, counterclaiming against Pierce, and crossclaiming against Continental, seeking to quiet title in it as against Pierce and Continental. Both Pierce and Lott then moved for summary judgment. The court denied Pierce's motion and granted Lott's motion, quieting title to the property in Lott and declaring Lott entitled to rentals from the sub-lessee as of April 1, 1979. Continental has appealed. ²

The precise question of law presented on...