Southern Region Indus. Realty, Inc. v. Chattanooga Warehouse and Cold Storage Co., Inc.

• Decision Date: 23 July 1980
• Citation: 612 S.W.2d 162,27 A.L.R.4th 259
• Parties: SOUTHERN REGION INDUSTRIAL REALTY, INC., Plaintiff-Appellee, v. CHATTANOOGA WAREHOUSE AND COLD STORAGE COMPANY, INC., Defendant-Appellant.
• Court: Tennessee Court of Appeals

Page 162

612 S.W.2d 162

27 A.L.R.4th 259

SOUTHERN REGION INDUSTRIAL REALTY, INC., Plaintiff-Appellee, v. CHATTANOOGA WAREHOUSE AND COLD STORAGE COMPANY, INC. Defendant-Appellant.

Court of Appeals of Tennessee, Eastern Section.

July 23, 1980 Permission to Appeal Denied by Supreme Court Feb. 23, 1981.

Thomas, Mann & Gossett, Chattanooga, for defendant-appellant.

Hall, Haynes, Lusk & Foster, Chattanooga, for plaintiff-appellee.

OPINION

FRANKS, Judge.

Defendant-lessee has appealed the trial court's determinations that lessee did not exercise its option to renew a five-year lease and plaintiff-lessor is entitled to possession of the property, defendant being a tenant at will.

Lessor, a Georgia corporation, owns a large tract of land, improved by a warehousing facility, comprising the 1300 block of Market Street in Chattanooga; its principal office is in Washington but it maintains an office in Atlanta. Lessee is a Tennessee corporation engaged in a general warehousing business.

On May 22, 1974, the parties entered the lease for the warehousing facility, which includes a cold storage plant. The relationship of landlord-tenant had existed between the parties since 1963, with prior written leases.

The lease provided a primary term of five years commencing October 1, 1973, with a right to renew for an additional five years, beginning at the expiration of the primary term provided "Lessee shall give Lessor a written notice of its election to renew said lease at least 90 days prior to the expiration of said primary term;". In order to properly exercise the option, defendant was required to give notice in writing on or before July 2, 1978.

W. C. Hudlow, president of lessee corporation, testified that on June 22, 1978, he dictated a recording instructing his secretary to prepare a letter advising plaintiff of the intended renewal and to address the letter to plaintiff at its Atlanta office. The letter was prepared by his secretary and, on June 26, Hudlow signed the letter and his secretary testified that in the ordinary course of business on that date the letter was stamped and put in the office mail box at the office switchboard. Another employee of defendant testified that it was his duty to pick up the mail at 4:30 p. m., each day from the box and deliver it to the post office. He collected the mail from the box on that date and placed it in the post office mail bag, secured it and delivered it by automobile to the Main Street post office. The letter was not returned to the sender but lessor's agents testified that a search was made but the letter was not found and there was no record of the letter ever having been received by the Atlanta office.

The property manager in the Atlanta office wrote defendant on August 1, advising the lease was terminated as of September 30, since the defendant had failed to timely exercise its option to renew. On August 3, 1978, Hudlow responded by letter, enclosing a copy of the notice of renewal of June 23, and on August 9, the property manager responded by letter to lessee reiterating that no timely notice had been received and that the lease would terminate on September 30, 1978. Lessee refused to vacate the premises and this suit was filed on October 2, 1978.

The chancellor concluded that under the terms of the lease a written notice prior to the final 90-days of the lease was a condition precedent to renewal and defendant failed to renew the lease according to its terms. He further concluded the agreement mandated that the written notice be sent to plaintiff's Washington, D.C., address. In this regard, the lease, after providing that certain notices should be sent to the industrial property manager in Atlanta, states "Any other notice to be given by Lessee hereunder shall be sufficient if addressed to Lessor at Post Office Box 1808, Washington, D.C., 20013, and any notice to be given by Lessor hereunder shall be sufficient if addressed to Lessee at the above mentioned premises." We agree with the chancellor's conclusion that the giving of the notice by defendant of its election to renew the lease was a condition precedent to renewal, since it is the law of this state that where a lessee has a right of renewal, provided he gives the lessor notice by a specified time that he intends to exercise such privilege, the giving of the notice is a condition precedent which must be complied with in the stipulated time. American Oil Co. v. Rasar, 203 Tenn. 37, 308 S.W.2d 486 (1957). However, we differ with his conclusion that "the contract says written notice must be made and it must be sent to the Washington, D.C., office." We do not read the language of the lease as requiring lessee to send written notice of its election to renew to the Washington office. It merely suggests a permitted place and method of giving notice and does not preclude sending notice to other offices of the lessor. See 17 C.J.S., Contracts, § 42.

Defendant was required to "give" written notice at least 90 days prior to the expiration of the primary term. Defendant contends, however, that it complied with the notice requirement by mailing the letter to lessor's Atlanta office and that it makes no difference the letter was not, in fact, received. We cannot agree.

A presumption of the due receipt of a letter arises upon proof that such letter was deposited in the post office, properly stamped and correctly addressed. W. E. Richmond & Co. v. Security Nat. Bk., 16 Tenn.App. 414, 64 S.W.2d 863 (1933); 29 Am.Jur.2d, Evidence, § 194. And a presumption that a letter was mailed may arise from the testimony of an officer of a corporation that he dictated and signed the letter and placed it in the regular course for mailing. Myers v. Moore-Kile Co., 279 F. 233 (5th Cir. 1922). See also 29 Am.Jur.2d, Evidence, § 193; McCormick, Law of Evidence, Habit and Custom, § 162.

The chancellor did not accord the defendant any of these presumptions and stated there was no "proof positive that the letter was seasonably mailed, ..." The rule that notice is operative on mailing does not extend to notices of acceptance in already binding option contracts. Compania De Astral, S. A. v. Boston Metals Co., 205 Md. 237, 107 A.2d 357, 49 A.L.R.2d 646 (1954). Also see 17 Am.Jur.2d, Contracts, § 60.

Professor Corbin states the rule thusly as to option contracts:

But when, by the terms of an already consummated contract it is provided that one party shall have power to produce certain legal results by giving notice, it is usually held that this means notice received in fact and not merely notice mailed...

If in option contract the duty of the promisor is conditional on "notice within 30 days", does this mean notice...