Riverside Land Co. v. Big Rock Stone & Material Co.

• Decision Date: 22 June 1931
• Docket Number: 46
• Citation: 40 S.W.2d 423,183 Ark. 1061
• Parties: RIVERSIDE LAND COMPANY v. BIG ROCK STONE & MATERIAL COMPANY
• Court: Arkansas Supreme Court

40 S.W.2d 423

183 Ark. 1061

RIVERSIDE LAND COMPANY v. BIG ROCK STONE & MATERIAL COMPANY

No. 46

Supreme Court of Arkansas

June 22, 1931

Appeal from Pulaski Chancery Court; Frank H. Dodge, Chancellor affirmed.

STATEMENT OF FACTS.

Appellee brought this suit in equity against appellant to quiet its title and right of possession in certain leased premises against appellant. The suit was defended on the ground that the term of the lease had expired, and that appellee was occupying the leased premises as a tenant from month to month, and judgment was asked for the recovery of the possession of the premises by appellant by way of cross-complaint.

Both appellant and appellee are domestic corporations. Appellant is lessor and appellee is lessee by virtue of successive assignments of the leased premises. Appellee is engaged in the business of selling sand for building purposes, and in connection therewith maintains a plant upon the premises described in the lease.

The lease in question was a written one duly executed on the first day of January, 1910. The leased premises consist of 4 1/2 acres of ground bordering on the Arkansas River on the one side and the right-of-way of a railroad on the other. The lease contemplated that a switch track should be laid on the premises to connect with the railroad above referred to, and that the sand was to be excavated from the bed of the Arkansas River. In one clause of the lease, there was an agreement that the 4 1/2 acres of land was valued at $ 7,500 and that the lessee agreed to pay six per cent. of that value, amounting to $ 450 a year, payable monthly in advance during the continuance of the lease, at the rate of $ 37.50 per month. The lessee also agreed to pay as part of the rent all taxes on the leased premises. The lease expressly provided that it was for a period of ten years from the first day of January, 1910, to the last day of December, 1919. The lease also contained a provision that it might be extended for a further period of ten years under the same terms and conditions except that it contained a clause looking to an appraisal of the property and for fixing the rental at six per cent. of its appraised value for the extended period. This rental was also to be payable in advance. The lease further provided that the parties should share equally in the making of said appraisal, and that the lease might be extended as many times as the lessee or assigns should desire, not to exceed in all ninety years, each extension being for a period of ten years, and that new appraisals as specified in the lease should be made at the time of each extension. The lease contained a clause that, in case the lessee wished to extend the lease, he should give thirty days' notice in writing before the expiration thereof to the lessor that he desired such extension and name in said notice an appraiser who should act for him in appraising the property. Then provision is made for the lessor to appoint an appraiser within ten days thereafter. When the lease expired all buildings and fixtures were to become the property of the lessor, but the lessee might remove the machinery.

The lease was originally executed by the Riverside Land Company to Mord Roberts. On July 16, 1916, Roberts assigned said lease to the Southern Sand Company. In 1924 that company by A. C. Butterworth, its president, assigned the lease to the Southern Material & Construction Company. In 1926, the latter company assigned it to appellee, Big Rock Stone & Material Company, which is now in possession of the leased property. No written or verbal notice was given by the lessee prior to the expiration of the original term on December 31, 1919, of an intention to exercise the option for an extension of the lease for an additional period of ten years.

The Southern Sand Company, as assignee of the original lessee was in possession of the leased premises and remained in possession thereafter, continuing to pay the original monthly rental of $ 37.50 per month, and nothing was said or done by either party about the matter until sometime in December 1920. At that time A. C. Butterworth, president of the Southern Sand Company, spoke to Moorhead Wright, secretary of appellant company, with regard to an extension of the lease. He told Wright that he had not examined the lease closely and did not know that its terms expired on the last day of December, 1919. This conversation occurred at a club house of which they both were members, and Wright told Butterworth to write him a letter in regard to the matter. Butterworth wrote him a letter dated December 18, 1920, to the effect that the Southern Sand Company desired an extension of the lease and suggested a rental of $ 40 per month, instead of $ 37.50, which was being paid at that time. The matter dragged along by proposals and counter proposals from the parties until the latter part of the year 1921. At that time appellant had received a proposition from other parties to rent the property at $ 75 per month. The directors of appellant company except Wright believed that the lease had expired. At the suggestion of Wright, however, it was agreed that the Southern Sand Company, being in possession, should first be given the refusal at that price. Wright notified Butterworth that the rent would be $ 75 per month thereafter. This increase in rent was acceptable to the Southern Sand Company; and beginning on January 1, 1922, that company began paying rent at $ 75 per month, which was continued by its assigns until the first of January, 1930.

At the end of this extension period, written notice was given as prescribed by the lease that the lessee desired a second ten-year extension of the lease from January 1, 1930, according to the provision of the lease and designated an appraiser to act for it. On December 3, 1929, appellant replied to appellee, who was then in possession of the lease by assignment, that the lease had expired long since, and that appellee and its predecessors in title had been occupying the property on a month to month rental basis since the first of January, 1920. Other facts relating to this branch of the case will be stated or referred to in the opinion.

The chancellor found the issues in favor of appellee, and it was decreed that appellant should be enjoined from interfering with the quiet enjoyment of appellee under the lease including its right to such extended period from January 1, 1930, to January 1, 1940; and it was decreed further that the rate of monthly rental for the extended period should be fixed as provided in the lease. The case is here on appeal.

Decree affirmed.

Frauenthal, Sherrill & Johnson and Donham & Fulk, for appellant.

Rose, Hemingway, Cantrell & Loughborough, for appellee.

OPINION

HART, C. J., (after stating the facts).

Counsel for appellant seek a reversal of the decree under the common-law rule adhered to by this court that a tenant under a lease for a term of years by holding over at the end of the term without any new agreement, and paying rent according to the terms of the lease, which has been accepted by the lessor, becomes a tenant from year to year. Belding v. Texas Produce Co., 61 Ark. 377, 33 S.W. 421; Lamew v. Townsend, 147 Ark. 282, 227 S.W. 593; and Jonesboro Trust Co. v. Harbough, 155 Ark. 416, 244 S.W. 455.

We do not think the principle of law announced in these cases has any application under the terms of the lease under consideration. In these cases the leases were for a fixed term, and contained no provision looking to their renewal or the extension of their term. Here the parties provided for the continuance of the lease upon the compliance with certain conditions prescribed therein. This distinction is expressly recognized in Lamew v. Townsend, supra.

This court has also recognized that there is a difference between a stipulation for the renewal of a lease and one for its extension. The reason is that where a renewal is provided for, a new lease should be executed or at least the lessee should do everything required of him to procure the execution of a new one so that the failure of the lessor to execute a new lease would work an estoppel against him. In the case of an extension clause, the execution of a new lease is not necessary, and the parties continue under the provisions of the original lease by complying with the extension agreement. Neal v. Harris, 140 Ark. 619...