University Realty & Development Co. v. Omid-Gaf, Inc.

• Court: Arizona Court of Appeals
• Writing for the Court: KRUCKER; HATHAWAY, C.J., and HOWARD
• Citation: University Realty & Development Co. v. Omid-Gaf, Inc., 508 P.2d 747, 19 Ariz.App. 488 (Ariz. App. 1973)
• Decision Date: 11 April 1973
• Docket Number: CA-CIV,No. 2,OMID-GA,INC,2
• Parties: UNIVERSITY REALTY & DEVELOPMENT COMPANY, an Arizona corporation, Frank Mills, Jr., and his wife, Marge E. Mills, Glenn Koepke anid his wife, Lou Ann Koepke, and Albyn G. Wolfe, Appellants, v., an Arizona corporation and Donald Von Tress, a single man, Appellees. 1268.

Page 747

508 P.2d 747

19 Ariz.App. 488

UNIVERSITY REALTY & DEVELOPMENT COMPANY, an Arizona corporation, Frank Mills, Jr., and his wife, Marge E. Mills, Glenn Koepke anid his wife, Lou Ann Koepke, and Albyn G. Wolfe, Appellants, v. OMID-GAF, INC., an Arizona corporation and Donald Von Tress, a single man, Appellees.

No. 2 CA-CIV 1268.

Court of Appeals of Arizona, Division 2.

April 11, 1973.

Rehearing Denied May 16, 1973.

Bilby, Thompson, Shoenhair & Warnock by Albert D. Noe, Tucson, for appellants.

Lesher & Scruggs by James M. Sakrison, Tucson, for appellees.

KRUCKER, Judge.

This is an appeal from a judgment in a forcible detainer action entered against plaintiffs-appellants and in favor of defendants-appellees ordering plaintiffs as lessors to enter into a new lease for an additional period of five years.

The pertinent facts, which are not in dispute, are as follows. On October 22, 1971, the above-mentioned parties entered into a lease agreement under the terms of which plaintiffs as lessors leased to defendants as lessees certain premises for a term ending June 1, 1972. Under the terms of paragraph VIII of said lease, defendants had the right to renew the lease for a period of five years (or another term not herein applicable) provided notice of intent to exercise said option of renewal was given to the lessors on or before sixty days prior to the end of the leasehold term. Paragraph VIII further provided, with respect to this option, the following:

'. . . before this option can be exercised either for additional five year periods or on a new lease in the FHA Project for twenty-five (25) years, the Lessees will have to present financial statements or post a surety bond for at least Three Hundred Thousand Dollars ($300,000). If Lessees' financial statements are documented and shown to have the financial strength to enter into a long term Lease, the Lessor will then grant to the Lessees the additional five year periods if the project fails to be completed, or if completed, a twenty-five (25) year lease in the new project.'

On March 28, 1972 appellees' attorney hand-delivered a copy of a letter stating appellees' intention to exercise this option to renew together with a financial statement, prepared by a certified public accountant, of the assets of William H. and Katherine Daily. The letter also stated that the Dailys agreed to guarantee all rental payments called for under the lease renewal. In response to the letter, lessors' attorney wrote a letter to inform defendants that they had failed to exercise their option under the lease and requested them to vacate the premises by June 1, 1972. The financial statement showed assets in excess of $900,000. After a trial to the court sitting without a jury, the court entered judgment for the tenants-defendants, stating:

'. . . defendants have substantially complied with the tenor of Paragraph 8 of the lease in question and thus have in fact and in law exercised their option.'

Findings of fact were neither requested nor made.

The sole question we are called upon to decide is whether the defendants have exercised the option to renew.

A lease provision giving the lessee an option to extend or renew the lease is merely an offer by which the lessor binds himself in advance to make a contract if the lessee accepts upon the terms designated. Cicinelli v. Iwasaki, 170 Cal.App.2d 58, 338 P.2d 1005 (1959); Hofmann v. McCanlies, 76 N.M. 218, 413 P.2d 697 (1966). As stated in Hayward Lumber & Investment Co. v. Construction Prod. Corp., 117 Cal.App.2d 221, 226, 255 P.2d 473, 478 (1953):

'Since the optionor is bound while the optionee is free to accept or not as he chooses, courts are strict in holding an optionee to exact compliance with the terms of the option.'

This rule of 'strict compliance' has been followed by our Supreme Court in Oberan v. Western Machinery Co., 65 Ariz. 103, 174 P.2d 745 (1946); See also, Richardson v. Casey, 6 Ariz.App. 141, 430 P.2d 720 (1967).

Appellants initially contend that an application of this principle supports their position that the option was not exercised for it was hand-delivered rather than sent by registered mail. While it is true that there must be strict compliance with the terms of an option agreement, generally speaking any method of transmission of notice of renewal of a lease may be employed which is effective to bring such notice home to the lessor and serves the same function and purpose as the authorized method. Woods v. Cities Service Oil Co., 142 So.2d 168 (La.App.1962). This is true although the lease requires notice to be made in a particular way. 51C C.J.S. Landlord and Tenant § 62(2)(d), and cases cited therein. Although our research has not disclosed any cases where hand-delivery of written notice is made in contrast to the method designated in the lease agreement, and the parties have not cited any, in applying the aforementioned principles we are of the opinion that the notice was sufficient.

Appellants next urge that there was...