U.S. Enterprises, Inc. v. Mikado Custom Tailors

• Decision Date: 30 November 1982
• Docket Number: No. 39114,39114
• Citation: 297 S.E.2d 290,250 Ga. 415
• Parties: U.S. ENTERPRISES, INC. v. MIKADO CUSTOM TAILORS.
• Court: Georgia Supreme Court

Page 290

297 S.E.2d 290

250 Ga. 415

U.S. ENTERPRISES, INC. v. MIKADO CUSTOM TAILORS.

No. 39114.

Supreme Court of Georgia.

Nov. 30, 1982.

Rehearing Denied Dec. 14, 1982.

Edward E. Carriere, Jr., Decatur, for U.S. Enterprises, Inc.

B.J. Smith, Decatur, for Mikado Custom Tailors.

SMITH, Justice.

Appellant U.S. Enterprises leased certain premises to appellee Mikado Custom Tailors for a period of one year commencing September 1, 1980, and ending August 31, 1981. ¹ A clause of the lease provided "Lessee has first right of refusal to renew lease at renewal day for a two (2) year period with 10% increase in rental." On August 31, 1981, Mikado remained in possession and tendered a check for the next month's rent in an amount 10% greater than its monthly rental payment for the previous year. U.S. Enterprises moved to dispossess Mikado, which asserted that it was in lawful possession pursuant to the above quoted clause. The trial court granted summary judgment for Mikado on grounds that it had an option to renew for two years. The Court of Appeals 163 Ga.App. 306, 293 S.E.2d 533 reversed, holding the language of the lease to be ambiguous and declaring that construction of the provision must be left for resolution by a jury. We granted certiorari to consider two questions: (1) whether the lease clause is ambiguous, and (2) whether, if ambiguous, it is to be construed by the court or by a jury. We reverse the Court of Appeals on the first question and need not decide the second.

U.S. Enterprises contends that the lease is unambiguous. It argues that Mikado has no option to renew, and that U.S. Enterprises has no obligation to lease the premises to anyone. U.S. Enterprises concedes that if it wishes to lease the property to a third party, it must first give Mikado the opportunity to take up the lease for an additional two year period. Mikado submits that it has a sole and exclusive right in the nature of an option to extend the lease for an additional two year period.

In beginning our analysis we recognize the principle of law embodied in Ga.Code Ann. § 20-701. "The construction of a contract is a question of law for the court. Where any matter of fact is involved, the jury should find the fact." This has been interpreted to mean that construction of a contract is a matter of law for the court so long as the contract is unambiguous. Early v. Kent, 215 Ga. 49, 108 S.E.2d 708 (1959); Bress v. Keep Safe Industries, 155 Ga.App. 544, 271 S.E.2d 867 (1980).

Ga.Code Ann. § 20-704 sets out rules of construction which courts are to apply in construing contracts. No jury question is raised unless after application of the pertinent rules of construction the ambiguity remains. Davis v. United American Life Ins. Co., 215 Ga. 521(2), 111 S.E.2d 488 (1959). Only if after applying these rules of construction it is unclear which of two or more possible meanings represents the true intent of the parties should the issue be declared ambiguous and delivered to the jury. McCann v. Glynn Lumber Co., 199 Ga. 669, 34 S.E.2d 839 (1945); Erquitt v. Solomon, 135 Ga.App. 502, 218 S.E.2d 172 (1975).

We find no Georgia decisions directly on point construing a "first right of refusal" to re-lease the demised premises, although this question has arisen in other states. The general, majority, view is that a "first right of refusal" grants the lessee no right or assurance of a new term of lease, but constitutes only an offer to lease conditioned upon the lessor's decision to lease to anyone. It does not bind or obligate the lessor to lease the premises at all, and the lessor retains the privilege of withholding the property from the rental market altogether. See the cases collected at 6 A.L.R.2d 823. We accept the majority view of "first right of refusal" and conclude that no option is thereby granted to the lessee.

Looking at the contract to lease as a whole we do not find its meaning to be doubtful, nor do we find the contested clause to be ambiguous. We do not see two meanings in the term "lessee has first right of refusal to renew the lease." The meaning is clear. Lessor may, or he may not as he desires, lease the property in question. If U.S. Enterprises decides to lease, Mikado has the right to take up the lease at the terms specified before U.S. Enterprises may offer to lease to any other party. Mikado has no other rights, and U.S. Enterprises has no other obligations, in relation to re-leasing. As a result of our decision on the first certiorari question, we need not reach the second.

Judgment reversed.

All the Justices concur, except HILL, C.J., and WELTNER, J., who concur specially, and CLARKE and BELL, JJ., who dissent.

HILL, Chief Justice, concurring specially.

The majority of the Court of Appeals found that the words "at renewal...