Summary
In Redmond v. Sinclair Refining Co., 204 Ga. 699 (7) (51 S.E.2d 409), it is held: "An option founded on a consideration is a unilateral agreement binding from the date of its execution on the party who executes it; and after notice by the optionee to exercise his option rights, it becomes a bilateral contract binding on both parties."
Summary of this case from Crawford v. BakerOpinion
16449.
JANUARY 12, 1949.
Specific performance. Before Judge Moore. Fulton Superior Court. September 21, 1948.
R. B. Lambert and Noah J. Stone, for plaintiff in error.
Alex M. Hitz, contra.
1. To support an action for specific performance by the optionee of a contract, it must appear that the option to purchase is certain, fair in all its parts, is based on an adequate consideration, and capable of being performed.
2. The payment of a monthly rental under a contract is sufficient consideration to support an option to purchase which is a part of the same contract.
3. Where a party to an option contract in the notice to exercise the option suggests a departure from the terms of a provision of the contract made for his benefit, but later waives such provision in its entirely, the other party can not complain on the ground that the offer to exercise was not made in accordance with the terms of the option.
4. A notice by the lessor to the lessee, fixing the date for the beginning of the lease, is not ineffectual for this purpose although the contract providing for such notice contemplates that both parties will sign the notice (or subsequent agreement), where it appears that both parties have acted upon, and acquiesced in, the notice for a period of ten years.
5. The allegations of the petition as to tender were sufficient.
6. The uncertainty of provisions of a contract applicable only to the leasehold interest conveyed by the contract, the lease contract having been fully performed, can not be asserted as a defense to an offer to purchase under option provisions of the same contract.
7. An option founded on a consideration is a unilateral agreement binding from the date of its execution on the party who executes it; and after notice by the optionee to exercise his option rights, it becomes a bilateral contract binding on both parties.
8. Provisions applicable only to the terms of a lease provision in a contract, which lease has been fully performed, can not be urged as a defense to an option clause in the same contract, to which clause such provisions have no application.
9. The description contained in the amendment seeking reformation is legally sufficient to support an action for specific performance.
10. The petition, as amended, set forth a cause of action for both reformation and specific performance of the contract, and the judgments overruling the general demurrers are without error.
No. 16449. JANUARY 12, 1949.
Sinclair Refining Company (defendant in error in this court), hereinafter referred to as the plaintiff, brought an equitable petition in the Superior Court of Fulton County against L. E. Redmond (plaintiff in error), hereinafter referred to as the defendant. The petition was amended three times, and following each such amendment the defendant renewed his former grounds of demurrer and included additional ones. As finally amended, the petition is for the reformation of the description of the property set forth in a certain contract and for the specific performance of a provision thereof claimed by the plaintiff to be an option to purchase the property.
A copy of the contract, dated May 11, 1937, is set forth in the petition, and provides for the leasing of a part of the property described therein, by the defendant to the plaintiff, to be used for the sale and distribution of gasoline, for a period of 10 years from such time as the premises are made ready for occupancy by the plaintiff, and another part of the premises is included therein as an easement for passageway purposes for the use and benefit of the plaintiff, its successors and assigns, agents, employees and sublessees, and the public generally. The contract provides that a stipulated minimum monthly rental is to be paid by the plaintiff to the defendant, plus an additional sum contingent upon the volume of gasoline sold by the plaintiff. The contract contains a purchase option provision as follows: "For the considerations herein named, Lessor hereby gives and grants to Lessee the exclusive option and privilege of purchasing the leased premises, including all, if any, of Lessor's improvements and property thereon, whether real, personal or mixed, free and clear of all liens and encumbrances, for the sum of ten thousand and 00/100 ($10,000.00) dollars in cash at any time during the original term of this lease, provided Lessee shall give Lessor not less than thirty (30) days' notice of Lessee's election to exercise this purchase option. Upon Lessee's giving such notice, Lessor shall comply with the requirements of the second succeeding Article, entitled `Conveyance Requirements.'"
The provisions entitled "Conveyance Requirements," are in part as follows: "The giving by Lessee of notice of the exercise of any purchase option hereinbefore granted, shall fix or determine the right of Lessee to purchase the property included in the option which Lessee elects to exercise, and the obligation of Lessor to sell the same. Lessor shall furnish, free of expense to Lessee, within fifteen (15) days after the receipt of said notice, a complete Abstract of Title certified from title in the Government, Title Statement, or Title Guarantee Policy prepared and issued by a financially responsible title abstract company, or Title Certificate commonly referred to as a `Torrens Certificate of Title,' showing good merchantable title in Lessor as of a date not earlier than the date of said notice. A reasonable time will be allowed Lessee to examine such abstract or other evidence of title, and if the same does not then show good merchantable title in Lessor, a reasonable time will be allowed Lessor to cure defects and clear the title preparatory to delivery of deed and any other instruments required to effect the transfer and conveyance. Upon acceptance by Lessee of said title, and payment to Lessor of the purchase-price herein specified, Lessor shall convey to Lessee or its nominee, by General Warranty Deed, a fee-simple title in and to said real estate and the appurtenances thereunto belonging, free and clear of all liens, encumbrances, and charges of whatsoever character, with release of dower, courtesy, homestead, and all statutory rights; and shall also deliver to Lessee, free of expense to Lessee, such abstract or other evidence of title, showing good merchantable title to said premises in Lessor at the time of delivery of deed."
The notice of the election to exercise the option to purchase, copy of which was made a part of the petition, is in part as follows: "This is to notify and advise you that the undersigned, Sinclair Refining Company, elects to and does hereby, exercise the option to purchase the demised premises and improvements and appurtenances described in that certain lease dated May 11, 1937, between you, as Lessor, and the undersigned, as Lessee, situate at the intersection of Lakewood Avenue and McDonough Boulevard, Atlanta, Georgia, and more fully described in said lease; said purchase option being contained in said lease of May 11, 1937, and being of record in Book 1624, page 535, Office of the Clerk of the Superior Court of Fulton County, Georgia. The undersigned contemplates employing Mr. Alex Hitz, Attorney, Citizens Southern National Bank Building, Atlanta, Georgia, to examine title to the property in question, on its behalf. For that reason, you are advised that the undersigned is willing to waive the requirement imposed upon you under the terms of said purchase option of furnishing the undersigned with an abstract of title relating to the property in question, provided you are willing to contribute to this Company's title examination expense in an amount equal to the sum you would have been required to expend in having such abstract prepared. Mr. Hitz will get in touch with you within the next few days and upon completion of title examination, you will be advised of any defects, if any, that must be corrected, and if none, Mr. Hitz will be glad to arrange with you for a date for the closing of the purchase."
The petition alleges that, following the giving of this notice, dated June 23, 1947, the plaintiff caused its attorney to write letters to the defendant, and to call him on the telephone before the expiration of the contract, and advise the defendant that the title had been examined and a deed prepared for his signature. The petition, as amended, alleges that agents of the plaintiff unconditionally tendered to the defendant the sum of $10,000 in cash; that the defendant refused to accept this sum, and stated in effect that he would not comply with the contract until forced to do so.
The petition as originally filed contained a definite prayer for specific performance of the contract, and a general prayer for "such other and further relief as the court may deem proper." The description of the property forming the basis of the action for specific performance in the original petition was not in accord with the description of the property in the lease and option contract. The defendant demurred to the description, pointing out that it was at variance with the lands as described in the contract. By amendment the plaintiff struck the original description and inserted in lieu thereof a description of the lands as described in the contract between the parties. The defendant demurred to the amended description on the ground that it was inconsistent with the prayers of the petition, there being no prayer in the petition, as amended, seeking a conveyance of the property as described in the amended petition, and upon the further ground that the description was too vague, indefinite, and uncertain to form the basis for a decree of specific performance. The plaintiff further amended by withdrawing the description set out in its prayer for specific performance and substituting the description contained in the contract, it being alleged in this amendment that on May 11, 1937, the defendant owned, and has at all times since owned, a tract of land the four corners of which were then, and are now, marked by iron pins, that the plaintiff put the defendant in possession of the lands so definitely marked and laid out, which lines were agreed upon between the parties, and that the lines were acquiesced in by both parties, as clearly marked and defined, from May, 1937, and November, 1937, to the date of the filing of the petition. The plaintiff further amended by setting out an alleged exact description, it being alleged in part in the amendment as follows: "Petitioner shows that the description contained in Prayer No. 7, hereto added, is a correct description of the exact tract, lot or parcel of land intended by petitioner and defendant to be embodied and written into the aforesaid contract of lease and option to purchase, as mutually agreed upon orally by the parties prior to and at the time of execution of the same; that said lot or parcel of land was actually measured and staked off, and all lines marked and agreed upon by both petitioner and defendant in accordance with the above description prior to the execution of said contract; that due entirely to mutual inadvertence, mistake of fact, and lack of understanding of the legal effect and significance of the same, petitioner and defendant failed to inform the draftsman who prepared said contract of sale and option to purchase with the full, complete, and exact legal description of said lands as aforesaid, and for that reason the same was omitted from said written contract at the time of preparation and execution thereof." This second amendment contained a prayer that the contract be reformed to contain the correct description of the property as mutually agreed to, measured, and staked off by the parties.
The trial court overruled all of the general demurrers of the defendant on each and every ground, and these judgments are assigned as error.
1. The demurrers of the defendant contend that the petition sets forth no cause of action, sets forth no equitable grounds entitling the plaintiff to the relief for which it prays, and that the contract is too vague, indefinite, uncertain, and indistinct to support a decree of specific performance.
The option to purchase in the instant case appears to be certain, fair in all its parts, based on an adequate consideration, and capable of being performed. In Chance v. Beall, 20 Ga. 142, the following is held: "Where a contract for the sale of land is in writing — is certain — and fair in all its parts — is for an adequate consideration, and capable of being performed, it is just as much a matter of course for a Court of Equity to decree a specific performance of it as it is for a Court of Law to give damages for it in other cases." See also Forsyth v. McCauley, 48 Ga. 404; North Ga. Mining Co. v. Latimer, 51 Ga. 47 (3); Jackens v. Nicolson, 70 Ga. 198 (3); Dunton v. Mozley, 42 Ga. App. 295 (3) ( 155 S.E. 794).
2. The payment of the monthly rental stipulated in the contract over a period of approximately 10 years is sufficient consideration to support the option to purchase. See Walker v. Edmundson, 111 Ga. 454 ( 36 S.E. 800); Turman v. Smarr, 145 Ga. 312 (3), 314 ( 89 S.E. 214); Crawford v. Smith, 151 Ga. 18 ( 105 S.E. 477); Pope v. Read, 152 Ga. 799, 802 ( 111 S.E. 382); McKown v. Heery, 200 Ga. 819 ( 38 S.E.2d 425).
3. It is contended that the provision contained in the notice to exercise the option to purchase, to the effect that the plaintiff contemplates employing its attorney to examine the title to the property in question, offering to waive the provision of the contract contained in the clause, "Conveyance Requirements," and conditioned upon the defendant paying the plaintiff's attorney for this service, renders the alleged offer to exercise the option ineffective, as being at variance with the terms of the contract.
All negotiations with reference to an exercise of the option by the plaintiff were had prior to the expiration of the lease contract, and at no time did the defendant complain that the offer to exercise the option was not in accordance with the contract because it contained the proposal that the defendant pay counsel for the plaintiff for the examination of the title instead of financing the examination thereof in accordance with the terms of the contract. On the other hand, it appears that the plaintiff not only waived the title examination requirements as contained in the contract, but that he also waived the proposal contained in the notice to exercise the option to purchase, that the defendant pay the plaintiff's counsel for this service. From the allegations of the petition it appears that this examination of the title was made by counsel for the plaintiff at no cost to the defendant. If there is any variation between the notice to exercise the option, and the terms of the contract, it amounts only to a waiver by the plaintiff of some of the provisions of the contract inserted therein for its benefit, and is a matter about which the defendant has no cause for complaint.
4. It is contended that the offer to purchase was not made during the term of the contract. The contract is dated May 11, 1937, and the option to purchase contains provisions that it must be exercised by the giving of not less than 30 days' notice during the original term of the lease. The contract further provides as follows: "When said premises are delivered to and accepted by Lessee ready for occupancy, the parties hereto shall sign a written memorandum, supplemental to this lease, fixing and specifying such date as the date of the commencement of the term for all matters in connection with this lease."
An agreement, dated December 7, 1937, and signed by the defendant, fixes November 12, 1937, as the date for the commencement of the lease. Although this notice is not signed by any officer or agent of the plaintiff as contemplated by the contract, the petition discloses that, pursuant to the execution of this memorandum by the defendant, the plaintiff entered upon the premises and continued to pay rent thereon for approximately 10 years, which was accepted by the defendant. The notice was signed by the defendant, and it is immaterial to any issue in this case that it was not signed by some duly authorized agent of the plaintiff. The effect of the notice was to fix the expiration of the lease 10 years from November 12, 1937. The offer to exercise the option was made during the term of the lease contract.
5. The demurrers of the defendant also contend that the tender of the purchase-price was insufficient, in that it was not made in accordance with the terms of the contract. As amended, the petition alleges that a tender of $10,000 was made by duly authorized agents of the defendant unconditionally. The allegations of the petition as to tender were sufficient. See Groover v. Brandon, 200 Ga. 153 ( 36 S.E.2d 84), and cases cited.
6. The demurrers of the defendant attack that part of the contract providing for the erection of a suitable building or buildings on the premises as being too uncertain to be the basis of a contract between the parties, because the plans or specifications, the dimensions of the building, the date within which it is to be constructed, the nature of the driveway, approaches, plumbing, electric fixtures, and the sewer and water connections are not specified, and no key is given whereby it may be made definite.
This provision of the contract relates to the lease agreement, which has been fully performed. It has no connection with the part of the contract relating to the option to purchase, and however vague and indefinite it may be, this provision affords no defense against the specific performance of the option to purchase the property.
7. The demurrers of the defendant also contend that the part of the contract providing for the option to purchase is unilateral, in that the defendant could not under its terms require the plaintiff to exercise the option to purchase, and is therefore null and void.
13 C. J. 336, § 183, defines an option as follows: "An option founded on a consideration is a unilateral agreement binding, from the date of its execution, on the party who executes it; and it becomes a contract inter partes when exercised according to its terms." See Floyd v. Morgan, 60 Ga. App. 504 ( 4 S.E.2d 91). In Black v. Maddox, 104 Ga. 164 ( 30 S.E. 723), this court quotes with approval from Waterman on Specific Performance, § 200, as follows: "But it is well settled that an optional agreement to convey, or to renew a lease, without any covenant or obligation to purchase or accept, and without any mutuality of remedy, will be enforced in equity if it is made upon proper consideration, or forms part of a lease or other contract between the parties that may be the true consideration for it; though such an agreement can perhaps scarcely be called an exception; for, being in fact a conditional contract, when the condition has been made absolute by a compliance with its terms, the contract becomes mutual and capable of enforcement by either party. A contract for the sale of real estate at the option of the vendee only, upon election and notice, may not only be specifically enforced, but the refusal of the vendor to accept the purchase money will not destroy the mutuality, though the vendee could thereupon withdraw his election." The option to purchase after notice of the plaintiff to exercise it was a bilateral contract and binding on both parties.
8. The contract contains a provision as follows: "If Lessor now owns or controls, or shall acquire during the term of this lease, any real estate adjacent to the premises covered hereby, Lessor further covenants and agrees that, without Lessee's written consent, it will not use or permit to be used such adjacent premises for the storage, sale, distribution or advertisement of petroleum products."
The demurrers of the defendant assert that the contract is null and void because this provision violates the Constitution of this State, art. 4, sec. 4, par. 1 (Code, Ann. § 2-2701), which provides that "All contracts and agreements which may have the effect, or be intended to have the effect, to defeat or lessen competition, or to encourage monopoly, shall be illegal and void."
The provision of the contract complained of applies only to the lease. The lease has now been fully performed and, accordingly, this provision of the contract has expired. Conceding, but not deciding, that this provision is offensive to the Constitution, it can not now be urged as a defense to the option clause of the contract, to which it has no application.
9. It is contended by the defendant that the description of the property as contained in the contract is insufficient to constitute the basis of an action for specific performance. The petition, as finally amended, discloses that the plaintiff does not seek the conveyance of the property as described in the contract. After final amendment, it appears that the plaintiff seeks the specific performance of the contract after it has been reformed by including therein the description of the property as it contends it was mutually agreed between the parties that the contract would specify. The plaintiff contends that by mutual mistake of the parties the correct description was left out of the contract, and the description of the property as disclosed by the contract was inserted therein.
The description as contained in the amendment seeking reformation is legally sufficient, and since the plaintiff no longer seeks the specific performance of the contract containing the description under attack, it becomes unnecessary for this court to decide whether or not that description is legally sufficient.
10. The demurrers attacked that part of the petition seeking reformation of the contract, on the grounds that it fails to set forth a cause of action for reformation, and that the action for reformation is barred by the statute of limitations and by laches, in that the petition was filed more than ten years from the date of the contract.
In Collier v. Lanier, 1 Ga. 238, it was held: "Where an instrument is drawn, and executed, which professes and is intended to carry into execution, an agreement, whether in writing or by parol, previously entered into, but which, by mistake of the draftsman, either as to fact or law, does not fulfill, or which violates the manifest intention of the parties to the agreement, equity will correct the mistake, so as to produce a conformity of the instrument to the agreement." See also Richardson v. Perrin, 137 Ga. 432, 436 ( 73 S.E. 649); Harper v. Gleaton, 170 Ga. 40, 45 ( 152 S.E. 70); Martin v. Oakhurst Development Corp., 197 Ga. 288, 293 ( 29 S.E.2d 179).
Clearly, under the allegations of the petition, the contract did not accurately describe the land which formed the basis of the lease and option agreement, and upon which the defendant had collected rentals for a period of approximately ten years. The petition alleges that the property as described in the prayer for reformation is the same property which the defendant delivered possession of to the plaintiff and upon which the defendant has received rentals for ten years. Under the allegations of the petition, no other property could have been contemplated by the parties at the time of the execution of the contract other than that actually delivered by the defendant to the plaintiff; and it appearing that the contract did not describe the property in conformity with the agreement of the parties, a cause of action for reformation of the contract was made by the petition. See the Code, §§ 37-105, 37-205, 37-215.
In Richardson v. Perrin (supra), at page 437, it was held: "It was urged, that, because the time for asserting the option had expired, there was no contract to reform, and the equitable petition seeking reformation was therefore demurrable. We can not concur in this position. If the contract should be reformed, it would stand as if originally so written, as between the parties. It was alleged that within the time prescribed by the contract the plaintiff elected to purchase the land, and tendered payment therefor, and that the defendant refused to carry out the contract. It is the exercise of the option, not the reformation of the contract, which must take place within the time limited, if the contract fixes a limit."
The notice, given by the plaintiff to the defendant under the option provision of the contract, was not too late, the effective date of the lease having been established by the defendant's notice to the plaintiff in December, 1937, and the rights of the optionee under the contract not having expired, the action for reformation of the contract was not too late.
The petition, as amended, set forth a cause of action for both reformation and specific performance of the contract, and the judgments overruling the general demurrers are without error.
Judgment affirmed. All the Justices concur.