Sinclair Refining Co. v. Allbritton, A-1898.

• Decision Date: 19 January 1949
• Docket Number: No. A-1898.,A-1898.
• Citation: 218 S.W.2d 185
• Parties: SINCLAIR REFINING CO. et al. v. ALLBRITTON et ux.
• Court: Texas Supreme Court

Page 185

218 S.W.2d 185

SINCLAIR REFINING CO. et al. v. ALLBRITTON et ux.

No. A-1898.

Supreme Court of Texas.

January 19, 1949.

Rehearing Denied March 2, 1949.

Error to Court of Civil Appeals of Tenth Supreme Judicial District.

Suit by C. B. Allbritton and wife against Sinclair Refining Company and others, of trespass to try title to leased property wherein the named defendant by cross action sought specific performance of a contract to purchase the leased premises. Judgment for plaintiffs was affirmed by Court of Civil Appeals, 213 S.W.2d 139, and defendants bring error.

Judgment of Court of Civil Appeals reversed and judgment rendered denying plaintiffs relief sought, and awarding named defendant specific performance.

Cantey, Hanger, McKnight & Johnson, Alfred McKnight, Warren Scarborough, W. B. Thompson and Nat J. Harben, all of Ft. Worth, for petitioners.

Scott, Wilson & Cureton and Tom P. Scott, all of Waco, and Black & Stayton and Charles L. Black, all of Austin, for respondents.

GARWOOD, Justice.

The sole question for our decision is whether Sinclair Refining Co., defendant in the trial court and a petitioner here, is entitled to purchase for $12,000 a certain filling station property in Waco, Texas, under the option provisions of a lease made to it by respondents Allbritton and wife, who were plaintiffs below. The suit was in the form of trespass to try title against petitioner Sinclair and its subtenants in possession under the lease, who responded with a plea of not guilty and cross action for specific performance of the option which petitioner Sinclair had theretofore sought to exercise. On a trial to the court, involving no disputed facts, respondents were successful. The judgment was affirmed by the Court of Civil Appeals, Associate Justice Tirey dissenting. 213 S.W. 2d 139.

For convenience we refer hereafter to the defendant-petitioners as lessee and the plaintiff-respondents as lessors.

Lessee's option derives from article XIV of the lease, entitled "Purchase Option" and hereafter quoted in full. In brief, the article purports to give lessee "the exclusive option and privilege" to purchase the premises "at any time during the original or extended term of this lease" for $12,000 cash, "provided Lessee shall give Lessors not less than thirty (30) days' notice of Lessee's exercise of this option." Immediately following the "Purchase Option" article, the lease also contains, as article XV, a stipulation entitled "Purchase Refusal", likewise hereafter fully quoted. It provides substantially that, if "at any time during the term of this lease" lessors should get a bona fide offer for the leased premises from a third party and "decide to sell", they shall give notice of the terms of such offer to lessee, who will then have the refusal of the property on the same terms for ten days, after which period, if lessee fails to purchase, lessors will be at liberty to sell to the third party "subject, however, to the leasehold estate herein granted to Lessee."

On November 21, 1946, during, but over thirty days before the end of, the renewed term of the lease (which had been duly extended pursuant to an extension provision in article XIII), lessee delivered to lessors through the mail a proper form of notice stating that it exercised its purchase option. However, on November 25, 1946, lessors in turn notified lessee in due form that they had received a bona fide offer of $17,500 (or $5,500 more than the price stipulated in the "Purchase Option" article) for the premises from a third party, had decided to sell and accordingly tendered the lessee the refusal of the $17,500 offer under the "Purchase Refusal" article of the lease. Lessee thereupon notified lessors that it considered its notice of November 21st to have established a firm contract of purchase and sale for $12,000, which was not affected by the subsequent action of lessors under the "Purchase Refusal" article. This litigation followed.

The full text of the two articles in question is as follows:

"Article XIV.

"Purchase Option:

"In consideration of the premises and further considerations herein specified, Lessors hereby give and grant to Lessee the exclusive option and privilege of purchasing the demised premises and Lessors' right, title and interest in any facilities connected with said property at any time during the original or extended term of this lease for the sum of Twelve Thousand and No/100 ($12,000.00) Dollars in cash, provided Lessee shall give Lessors not less than thirty (30) days' notice of Lessee's exercise of this option. Upon Lessee's giving such notice, Lessors agree to furnish free of expense to Lessee abstract of title prepared by a competent abstractor and certified from title in the Government to the date of conveyance, showing good merchantable title to said premises vested in Lessors; and upon the payment of the purchase price herein specified, Lessors shall convey to Lessee or its nominee by general warranty deed a fee simple title in and to said premises and improvements and appurtenances thereunto 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 convey to Lessee or its nominee by bill of sale or other appropriate instrument with like covenants of warranty, all personal property embraced herein not ordinarily conveyed by deed.

"The giving of such notice by Lessee shall fix and determine the right of Lessee to purchase said premises and property and the obligation of Lessors to sell the same, and a reasonable time thereafter will be allowed Lessors to furnish abstract of title and to cure defects, if any, in said title preparatory to the delivery of the deed and other instruments of conveyance, and the payment of the purchase price. Such purchase shall serve to cancel the within lease in all particulars, and if Lessors shall have been paid rents subsequent to the date of delivery of deed, such payment shall be applied on and constitute a part of the purchase price of said properties.

"If at the time of purchase there shall be a valid mortgage, trust deed or like encumbrance against said premises, Lessee shall have the right to deduct from the purchase price and pay to the proper party the amount of the indebtedness evidenced by such instrument if such payment can then be made without having to pay a premium or bonus. If said indebtedness cannot be paid off or fully satisfied without premium or bonus, Lessee shall have the right to deduct from the purchase price and retain the amount of such indebtedness as of the date of delivery of the deed, and conveyance of said premises and property shall be made subject to said indebtedness, Lessee assuming the payment thereof." "Article XV.

"Purchase Refusal:

"In the event Lessors shall receive from a third party at any time during the term of this lease a bona fide offer to purchase the leased premises, and shall decide to sell the same for the amount named in said offer, Lessors shall promptly give to Lessee written notice of the terms of such offer and Lessors' willingness to sell for the price offered, and Lessee shall have the option and privilege of purchasing said premises at said price and shall notify Lessors in writing within ten (10) days after the date it receives notice from Lessors whether it will purchase said premises for the amount specified in said offer. In the event Lessee shall not elect within said ten-day period to purchase for the amount specified in said offer, Lessors may thereafter sell said premises to the party making the offer, subject, however, to the leasehold estate herein granted to Lessee. If for any reason said premises are not sold to such party, notice of any subsequent bona fide offers acceptable to Lessors shall be given to Lessee upon the same terms and conditions for acceptance or refusal as hereinabove provided.

"If Lessee elects to purchase said premises under this purchase refusal, Lessors shall furnish abstract of title and shall perfect title and shall convey as provided in the preceding Article upon the exercise of the option to purchase."

The phrase in the "Purchase Option" article "not less than thirty (30) days' notice of Lessee's exercise of this option" is, at least when considered alone, ambiguous in failing to state what date or event the thirty days in question is to precede. Surely it does not mean that lessee had to give two notices thirty days or more apart. But, except for this difficulty, it seems plain that when lessee delivered its notice form on November 21, 1946, this act established the relationship of vendor and purchaser between the parties, which could not be altered by any subsequent action of lessors under the "Purchase Refusal" article.

In Shell Oil Co. v. Blumberg, 5 Cir., 154 F.2d 251, involving a contract generally similar to that here in issue, the lessor gave notice of a third party offer (lessee having given no notice under the purchase option clause), and upon lessee's refusal to meet the third party offer, sold the premises accordingly. This was held to have terminated the lessee's rights under the purchase option so that it could not enforce the latter against the third party purc...