Rice v. Sinclair Refining Co.

• Court: Alabama Supreme Court
• Citation: Rice v. Sinclair Refining Co., 256 Ala. 565, 56 So.2d 647 (Ala. 1952)
• Decision Date: 17 January 1952
• Docket Number: 5 Div. 523
• Parties: RICE et al. v. SINCLAIR REFINING CO.
• Writing for the Court: STAKELY; LIVINGSTON

Page 647

56 So.2d 647

256 Ala. 565

RICE et al. v. SINCLAIR REFINING CO.

5 Div. 523.

Supreme Court of Alabama.

Jan. 17, 1952.

Walker & Walker, Opelika, for appellants.

Denson & Denson and Yetta G. Samford, Jr., Opelika, for appellee.

STAKELY, Justice.

The question for decision is whether Sinclair Refining Company, complainant in the lower court and appellee here, is entitled to purchase for $9,750 a certain filling station property in Auburn, Lee County, Alabama, under the option provisions of a lease made to it by John Edwin Rice and his wife Gussie Y. Rice, respondents in the lower court and appellants here. The question is presented by the decree of the court in overruling the demurrer of appellants to a bill for specific performance filed by the appellee. The appeal here is from this ruling on demurrer.

The allegations of the bill show the following. On January 8, 1936, the parties entered into a written contract, whereby appellants leased certain property in Auburn, Lee County, Alabama, to appellee for a period of ten years, with an option set forth therein to extend the term of the lease for an additional term of five years and with an exclusive purchase option 'at price of $9,750.00, to be exercised at any time during the granted term of this lease or any extension thereof.' The contract provided for the making of certain improvements on the property and the fixing of the date on which the lease term should begin. Such date was fixed by subsequent written agreement as June 9, 1936. The rental provided for in the lease contract was $70 per month. Under the terms of the lease contract the appellants agreed to erect and did erect on the described lot a gasoline and oil filling and service station according to the plans of the appellee at a cost not to exceed $4,000.

As pertinent to this case we set out Article XIV of the lease contract. 'Purchase Option: For the consideration herein named, Lessor hereby gives and grants to Lessee the exclusive option and privilege of purchasing the leased premises, including all, if any, of lessor's improvements and property thereon, whether real, personal or mixed thereon, free and clear of all liens and incumbrances for the sum of Nine Thousand, Seven Hundred Fifty and No/100th ($9,750.00) Dollars in cash at any time during the granted term of this lease or any extension thereof, provided Lessee shall give Lessor not less than sixty (60) days' notice of Lessee's election to exercise this purchase option. Upon Lessee's giving such notice, Lessor shall comply with the requirements of the second succeeding article, entitled, 'Conveyance Requirements."

We also set out so much of Article XVI as we deem pertinent to the present controversy.

'Conveyance Requirements: The giving by Lessee of notice of the exercise of any purchase option hereinbefore granted, shall fix or determine the right of Lessee to purchase the property included in the option, which Lessee elects to exercise and the obligation of the Lessor to sell the same. Lessor shall furnish, free of expense to Lessee, within fifteen (15) days after the receipt of this notice, a complete abstract of title certified from title in the Government, Title Statement, or Title Guaranty Policy prepared and issued by a financially responsible title abstract company * * * showing good merchantable title in Lessor as of a date not earlier than the date of said notice. A reasonable time will be allowed Lessee to examine said abstract or other evidence of title, and if the same does not show good merchantable title in Lessor, a reasonable time will be allowed Lessor to cure defects and clear the title preparatory to delivery of deed and any other instruments required to effect the transfer and conveyance.

'Upon acceptance by Lessee of said title and payment to Lessor of the purchase price herein specified, Lessor shall convey to Lessee, or its nominee, by general warranty deed a fee simple title in and to said real estate and the appurtenances thereto belonging, free and clear of all liens, encumbrances, and charges of whatsoever character with release of dower, curtesy, homestead and all statutory rights; and shall also deliver to Lessee, free of expense to Lessee, such abstract or other evidence of title showing good merchantable title to said premises in Lessor at the time of the delivery of the deed.

* * *

* * *

'If at the time of purchase there shall be a valid mortgage, trust deed, or like encumbrance against said premises or any part thereof, which cannot be then paid and satisfied without payment of penalty or bonus, the amount of indebtedness evidenced by such instrument shall by withheld by Lessee from the purchase price and conveyance shall be made subject to said indebtedness, Lessee assuming payment thereof.'

On January 26, 1938, the same parties entered into a written agreement which recited that the lessee desired the lessors to construct an additional wash room or stall on the premises for the purpose of washing and servicing automobiles according to its plans at a cost to lessors of an amount not exceeding $800. The lessors agreed to do this and it was stipulated that the monthly rental under the lease would amount to $77 per month, the increase of rental to become effective when the lessors completed the contemplated improvement, the effective date to be determined by subsequent memorandum.

The aforesaid agreement of January 26, 1938, contains the following provisions: 'It is further understood and agreed by and between the Lessors and Lessee that the terms, covenants, conditions and obligations imposed upon Lessors and Lessee by said original lease agreement, bearing date of December 28, 1935, shall in no way be altered or changed, or the rights and privileges of Lessors and Lessee in any way prejudiced by the execution of this agreement except as herein expressly set forth, and shall remain in full force and effect and binding upon each of the parties hereto as if this agreement was never entered into, so long as said terms, covenants and conditions do not conflict with the covenants of this supplemental agreement.'

On June 11, 1938, an agreement was signed by the lessors signifying that the additional improvements had been completed on May 15, 1938, and the increased rental was to begin on that date.

On December 27, 1945, the lessee exercised its option to extend the term of the lease for an additional period of five years to June 8, 1951.

On February 8, 1951, the lessee served on lessors a notice referring to the lease between the parties dated December 28, 1935. The notice recites that the lease contains an option in favor of the lessee 'of purchasing the demised premises and improvements at any time during the term or extension thereof for the sum of $9,750.00 in cash'. We set forth the following provisions of the notice.

'This is to notify and advise you that the undersigned, Sinclair Refining Company, elects to, and does hereby exercise, the option contained in said lease of December 28, 1935, to purchase for the sum of Nine Thousand Seven Hundred Fifty and No/100ths ($9,750.00) Dollars in cash, the demised premises and improvements located thereon described as follows: (Here follows description of the property.)

'You are further notified, that the undersigned stands ready and willing to comply with all the terms and conditions of said purchase option upon it imposed, upon your complying with all the terms and conditions of said purchase option upon you imposed;

'And you are further notified that pursuant to the obligations imposed upon you under the terms and conditions of Article XVI (Conveyance requirements) of said lease of December 28, 1935, you are to furnish the undersigned a complete abstract of title of said premises, compiled. extended and certified down to the date hereof, showing fee simple title, without liens or encumbrances, vested in you. In lieu of furnishing an abstract of title, it will be satisfactory for you to furnish a title guaranty policy issued by a title insurance company acceptable to the undersigned. In the event you are unable to furnish a satisfactory abstract of title or title insurance policy, the undersigned will employ an attorney of its choice to examine the public records provided you will pay a reasonable amount of such attorney's fee.

'Upon receipt of this notice, please advise H. P. Ragland, Attorney, Sinclair Refining Company, Post Office Box 1710, Atlanta, Georgia, whether you will furnish an abstract of title or title insurance policy of the character above mentioned or whether you will pay a reasonable attorney's fee, covering title examination by an attorney of the undersigned's choice.'

The bill thereupon alleges in substance that upon receipt of said notice and on towit March 1, 1951, the respondents pursuant to the terms of Article XVI of said contract or lease prepared an abstract of title to the premises involved and mentioned in the contract or lease and delivered the same to the attorneys for complainant in Opelika, Alabama, but failed to carry out any of the other obligations imposed upon them by the terms of Article XVI of the contract or lease, but on the contrary on March 5, 1951 informed and notified complainant through their attorneys of Opelika, Alabama, that they declined to comply with complainant's said demand that they convey said property in response to the aforesaid notice and terms of said contract or lease.

On March 22, 1951, lessors were served with another notice from lessee. This notice insisted upon any and all rights under the previous notice, repeated the lessee's then determination to exercise the option to purchase 'the property, rights and title mentioned and described in said lease' and which by the terms of said lease 'you agreed to convey to said Sinclair Refining Company'. The latter instrument notified lessors that 'it does now call upon you to comply with all of the terms and conditions of...