Urban Research Studies and Development, Ltd. v. Teruya & Sons, Ltd.

• Decision Date: 02 February 1982
• Docket Number: No. 7834,7834
• Citation: 639 P.2d 1115,3 Haw.App. 5
• Parties: URBAN RESEARCH STUDIES AND DEVELOPMENT, LTD., a Hawaii corporation, Plaintiff-Appellant, v. TERUYA & SONS, LIMITED, a Hawaii corporation, Defendant-Appellee.
• Court: Hawaii Court of Appeals

Page 1115

639 P.2d 1115

3 Haw.App. 5

URBAN RESEARCH STUDIES AND DEVELOPMENT, LTD., a Hawaii corporation, Plaintiff-Appellant, v. TERUYA & SONS, LIMITED, a Hawaii corporation, Defendant-Appellee.

No. 7834.

Intermediate Court of Appeals of Hawai'i.

Feb. 2, 1982.

Syllabus by the Court

1. Where an option is silent as to the method and manner of exercise, the intention of the parties is paramount in ascertaining how the option was to be exercised.

2. Where there is a genuine issue of material fact as to the intention of the parties as to how an option is to be exercised and the option agreement is silent with respect thereto, summary judgment cannot be granted.

Richard F. Dvonch, Honolulu, for plaintiff-appellant.

Ton Seek Pai, Okumura, Takushi, Funaki & Wee, Honolulu, for defendant-appellee.

Before HAYASHI, C. J., and PADGETT and BURNS, JJ.

PADGETT, Judge.

The action below was one for specific performance of an alleged agreement to extend an option for the lease of land. Summary judgment was granted in favor of defendant-appellee, the optionor, on the ground that plaintiff-appellant had exercised the option and there thus was no occasion for an extension of the same. In addition, the court below denied appellant's motion to amend its complaint by adding a second count which, in effect, alleged the frustration of the option agreement by breaches thereof on the part of the appellee. The transcript of the hearings indicates that the motion to amend was denied because the court felt that in view of its ruling on the motion for summary judgment, appellant could not prevail upon its second count in any event.

Both parties at oral argument agreed that for the purposes of this appeal, we could consider all correspondence between the parties and/or their attorneys attached to their various motions and memoranda as genuine. These include the letters of March 21, April 18, April 19 and July 10, 1978. Of course, we must also consider the depositions in the record. Ottensmeyer v. Baskin, 2 Haw.App. 86, 625 P.2d 1069 (1981).

The decision of the court below appears to turn upon its construction of the letter of April 18 as an exercise of the option.

However, both the option agreement and its extension are silent as to the manner in which the option is to be exercised. Appellant urges us that in such a situation, we should hold that an option is only exercised when the optionee tenders the purchase price and does the other things necessary to perform the purchase. Appellant is supported in this by the case of Hurd v. Cormier, 358 Mass. 736, 267 N.E.2d 116 (1971), where the Massachusetts court said:

In addition it is the rule in Massachusetts that where an option speaks in terms of purchase within a specified time, without reference to notice by the option holder of his intention to exercise the option, acceptance can be only by tender of the specified price. Notice of intention to exercise, without tender of payment, does not bind the owner to convey.

267 N.E.2d at 118.

Appellee, on the other hand, urges that the sending of the letter of April 18 was legally an acceptance of the offer. Appellee cites Doolittle v. Fruehauf Corp., 332 So.2d 107 (Fla.App.1976), where the court stated:

From the outset, it should be noted that the lease did not specify the manner in which the option was to be exercised nor did it set forth any time or procedure for closing the purchase in the event the option was exercised.

It is not necessary to tender purchase money as a condition precedent to exercising an option, if this condition is not expressly stated in the option....

The two steps which are necessary to exercise an option are: (1) there must be a decision by the optionee to purchase the property under the terms of the option; (2) the optionee must communicate the decision to the optionor within the life of the option....

332 So.2d at 109.

In this case, curiously enough, the optionee is urging that its letter was not an exercise of the option while the optionor is urging that it was. Normally, as in the two cases cited, the positions would be reversed because normally, the problem comes up in a situation where the optionee is claiming that it exercised the option and the optionor is claiming that it did not. Here, the optionee is claiming that it did not exercise the option and that therefore, it had a right to tender payment for an extension as provided in the amended option agreement, while the optionor contends that the optionee did exercise the option by the letter of April 18, 1978, and that therefore, the option agreement was terminated and could not be extended.

We are unwilling to adopt either the Massachusetts or Florida rule for the reason that in this jurisdiction:

The intention of the parties to a contract is paramount to the manner chosen to effect it. The courts of Hawaii have long followed this axiom that the intention of the parties governs the meaning of legal instruments in the construction of contracts.

In Re Taxes, Aiea Dairy, Ltd., 46 Haw. 292, 298, 380 P.2d 156, 160 (1963).

This case comes before us on a summary judgment. Since the option agreement and its amendment are silent as to the manner and method of exercise of the option, we think the manner and method of exercise must depend upon the intention of the parties which is to be gathered from the documents and depositions before the court below. We think there was a genuine issue of material fact as to that intention and accordingly, reverse.

The letter of April 18, 1978 to appellee from appellant's attorney appears to be, on its face, an exercise of the option. No question is raised about the authority of the attorney to act on behalf of the appellant. However, the next day, April 19, the attorney by letter attempted to clarify the previous letter by stating that:

This is to clarify the notice as to the effective date thereof.

Please be advised that the effective date the option will be exercised is July 28, 1978.

Under the extension agreement, appellant had until July 29, 1978 to exercise the option. The letter of April 19, 1978, standing alone, could be construed to be a mere notice of intent to exercise the option at a future date rather than a notice of the exercise itself.

The letter of July 10, 1978 to Hampton, who was the person handling the matter for appellant, from appellee's attorney purports to be in reply to a letter of June 26, 1978 (which is not attached either in certified and sworn to or in uncertified and unsworn to form by any party). In the July...