Summary
In Brauer, the grantors entered into a purchase agreement with the plaintiff for the sale of one parcel of land, and for the "indefinite" option to purchase a second parcel for $40,000 if the grantors ever decided to sell it.
Summary of this case from Cucchiara v. CucchiaraOpinion
Docket No. 80036.
Decided May 20, 1986.
Coupe Van Allsburg, P.C. (by William W. Coupe and Jon A. Van Allsburg), for plaintiff.
Scholten, Fant Marquis (by D. Scott Stuart), for defendant.
Before: R.M. MAHER, P.J., and BEASLEY and SHEPHERD, JJ.
Plaintiff appeals as of right from a judgment of no cause of action in this suit for breach of contract.
In 1976, Glenna Wilson and her husband, Leonard Wilson, were the owners to two parcels of land located on the Kalamazoo River in Saugatuck. In April, 1976, they executed a purchase agreement for the sale of one of the parcels to plaintiff and George Wigglesworth for $35,500. The purchase agreement stipulated that plaintiff and Wigglesworth would be given an option to purchase the second parcel.
On May 7, 1976, the parties executed a document entitled "OPTION TO PURCHASE REAL ESTATE" which stated:
In consideration of the sum of $10.00 Dollars, Glenna Wilson and Leonard Wilson grant unto Robert Brauer and George Wigglesworth an option to purchase the following described real estate and improvements, to wit:
[Description]
for the sum of Forty Thousand Dollars ($40,000.00). The term of this option shall be indefinite and can be called by the option Grantors at anytime subsequent to execution.
In 1977, plaintiff assigned his interest in the purchased parcel to Wigglesworth, who in turn assigned his interest in the optioned parcel to plaintiff.
Leonard Wilson died in August, 1980. In March, 1981, plaintiff received a letter from Mrs. Wilson's attorney which stated that Mrs. Wilson was cancelling and/or revoking the option agreement. In response, plaintiff filed a "Notice of Exercise of Option" and a notice of lis pendens.
Plaintiff brought this action seeking specific performance of the option agreement. Mrs. Wilson filed a counterclaim to quiet title. Of the original parties, only plaintiff and Wigglesworth were available to testify at trial; Mrs. Wilson was too ill to testify. Following trial, the court rendered an oral opinion finding no cause of action as to plaintiff's claim and granting defendant's request to quiet title. The court made the following findings and conclusions: (1) the agreement was not an option contract; (2) the agreement was void because it lacked mutuality of assent; and (3) the agreement was void because by its terms it was for an indefinite period of time. A trial court's findings of fact will not be set aside unless they are clearly erroneous. A finding is clearly erroneous when, although there is evidence to support it, the reviewing court is left with a definite and firm conviction that a mistake has been made. Carney v Dep't of Transportation, 145 Mich. App. 690; 378 N.W.2d 574 (1985).
Mrs. Wilson died during the pendency of this appeal. Kathryn M. Hobbs was appointed personal representative of the Estate of Glenna I. Wilson and was substituted as the party defendant by order of this Court dated March 26, 1986.
Before we can determine whether the trial court's findings are clearly erroneous, we must determine the nature of the contract. We acknowledge the trial court's effort to identify the nature of the contract and recognize that the document herein is no "pearl of draftsmanship". Although the agreement is laden with ambiguities, its ambiguous nature should not preclude its enforcement. "Ambiguity in a contract focuses and intensifies the court's duty to ascertain the intent of the parties in order that the agreement be carried out. . . ." Stine v Continental Casualty Co, 419 Mich. 89, 112; 349 N.W.2d 127 (1984). In cases calling for construction of a contract, interpretation requires knowledge of the entire context, facts as well as words. 1A Corbin on Contracts, § 261, p 476. Extrinsic evidence, including parol evidence, is admissible to clarify the meaning of any ambiguous contract. Stine, supra. In no event is an ambiguity to result in a declaration that the contract is void. Id. According to well-settled principles of contract law, any ambiguities in the instant agreement will be construed against plaintiff, as the agreement was drawn up by an attorney on plaintiff's behalf. Keller v Paulos Land Co, 381 Mich. 355, 362; 161 N.W.2d 569 (1968); Brown v Considine, 108 Mich. App. 504, 508; 310 N.W.2d 441 (1981).
Mohr Park Manor, Inc v Mohr, 83 Nev. 107, 114; 424 P.2d 101 (1967).
We disagree with the trial court's conclusion that the agreement lacks mutuality of assent. The evidence adduced at trial leads to but one conclusion: the parties understood the agreement to mean that when the Wilsons were ready to sell the lot, plaintiff (and at one time, Wigglesworth) would have an option to by the lot for $40,000. Despite the arguments to the contrary, the testimony at trial reveals that there was a meeting of the minds. Plaintiff testified as follows:
Mrs. Wilson said that at such time as she felt unable to drive back and forth from Dayton and couldn't use the property, at that time they were ready to sell it.
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At such time that they didn't want to use the property.
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Mr. Mrs. Wilson, in my opinion, the way I understood what I signed, are obligated to offer me the opportunity to buy this or give me the option to buy when they get ready to leave, that's their obligation.
John Diepenhorst, a licensed real estate agent who brought the parties together, testified that he knew from numerous conversations with Mrs. Wilson that the Wilsons understood the agreement to mean that plaintiff would have an option to buy the lot "when [they] wanted to get rid of it." George Wigglesworth testified that he understood the agreement as providing plaintiff with the first opportunity to buy the lot when Mrs. Wilson decided to sell.
From the evidence adduced at trial, we agree with the trial court that the agreement is not an option contract. The agreement contains no offer nor does it create the power of acceptance. Plaintiff, as the potential buyer, did not have a legal power of acceptance to purchase the lot, nor did the Wilsons have a correlative legal duty to sell. Corbin, supra, § 259, pp 459-460. The Wilsons merely promised that when they were ready to sell the lot (i.e., when they decided they could no longer "use" it), they would not sell to anybody until they had made an offer to sell to plaintiff and Wigglesworth. We construe this agreement to be nothing more than a right of first refusal.
On two prior occasions, Michigan courts were called upon to enforce similar agreements and, in doing so, labeled them option contracts rather than first refusal agreements. See Glocksine v Malleck, 372 Mich. 115, 118; 125 N.W.2d 298 (1963), and Bennett v Eisen, 64 Mich. App. 241; 235 N.W.2d 749 (1975). Both decisions cite Corbin, supra, with approval. Therefore, with the principles of contract law set forth by Corbin as authority, we choose to distinguish between the two types of agreements.
In this case, plaintiff sought an action for specific performance of the agreement. Mrs. Wilson, however, had no obligation to sell her land and could not be compelled to do so. Thus, specific performance is not an available remedy. Plaintiff argues, by implication, the doctrine of anticipatory breach. He claims that he commenced the instant lawsuit in response to the March, 1981, letter in which Mrs. Wilson "revoked" the agreement. Under the doctrine of anticipatory breach, if a party to a contract, prior to the time of performance, unequivocally declares the intent not to perform, the innocent party has the option to either sue immediately for the breach of contact or wait until the time of performance. Jackson v American Can Co, Inc, 485 F. Supp. 370, 375 (WD Mich, 1980). As a general rule, the doctrine will only apply to bilateral contracts, those which embody mutual and interdependent conditions and obligations. Jackson, supra, pp 374-375; 11 Williston on Contracts (3d ed), § 1326, p 146. In the case of first refusal agreements, there is no mutuality of obligation. Corbin, supra, § 261, p 476. Therefore, the doctrine of anticipatory breach does not apply and plaintiff is not entitled to immediate relief. The question remains whether the trial court properly granted defendant's request for quiet title.
While Mrs. Wilson's promise was not an offer, it was not revokable. Corbin, supra, § 261, p 476.
We disagree with the trial court's conclusion that the agreement was void because it was for an indefinite period of time. "A well-established principle of contract law is that it is essential to the validity of any contract, including an option agreement, that a definite time for performance either be stated in the contract to be ascertainable from the contract's expressed or implied provisions." 31 ALR3d 525. "[A]n option to purchase is of such a nature that it is nearly always intended to be of limited duration." Glocksine v Malleck, 372 Mich. 115, 118; 125 N.W.2d 298 (1963). First refusal agreements, by the terms of which the optionee is entitled to purchase at any time that the property is to be sold, have been sustained as sufficiently definite in several jurisdictions, even though the time when the option right came into being was necessarily left dependent upon the time of the proposed sale to another. See, e.g., Fleischman v Zimmermann, 258 Wis. 194; 45 N.W.2d 616 (1951); Price v Town of Ruston, 171 La. 985; 132 So. 653 (1931); Pearson v Horne, 139 Ga. 453; 77 S.E. 387 (1913); Cummings v Nielson, 42 Utah 157; 129 P. 619 (1912).
In Michigan, however, it appears that first refusal agreements, like option agreements, must be for a definite period of time. The absence of specific time limits will not render the agreement void. Rather, the courts will construe the agreement to be for a reasonable period of time. In Glocksine v Malleck, supra, p 117, a lease agreement contained the following provision:
It is agreed that if first party desires to sell the property at any time that second parties, or either of them, shall have the first option to purchase the same and the right to meet any offer.
It is further agreed that in the event of the death of the first party, second parties may purchase the property from the estate of first party for the sum of $5,000 cash. In the event of a purchase by second parties under either one of the above options the lease shall terminate. [Emphasis added.]
Although the Court construed the agreement to be an option, it held that the agreement expired at the end of the lease:
That a lessor would bind himself to a tenant indefinitely by such an agreement, beyond the normal term of his lease, thereby depriving his estate of any potential increase in property values, is unlikely. [ Glocksine, supra, p 119.]
In Bennett v Eisen, 64 Mich. App. 241, 242; 235 N.W.2d 749 (1975), the parties drafted the following agreement:
This is to advise that in accordance with our understanding of this date, regarding the sale of the Black Lake property, you are to have the first option to purchase the 200 feet immediately west of the property sold to you at this time in the event that I decide to sell said parcel at any time in the future.
The purchase price is not to exceed Two Thousand ($2,000.00) Dollars if the property remains unimproved. Should buildings be erected on this site, we are to determine a fair market value of the buildings at the time of sale. [Emphasis added.]
Once again, this agreement was labeled an option. Although this Court found the agreement void for lack of consideration, it held that the agreement had not been exercised within a reasonable period of time. Thus, such agreements are not void simply because they lack a specific time for performance. Rather, they are valid for a reasonable period of time. Ordinarily, we would remand this case to the trial court for a determination of what period of time is reasonable under the circumstances. In this case, however, the death of Mrs. Wilson renders remand unnecessary. We hold that the right of first refusal agreement terminated upon her death for the reason stated in Waterstradt v Snyder, 37 Mich. App. 400, 402-403; 194 N.W.2d 389 (1971):
[The agreement] terminated on the death of the [grantor] because it required her personal volitional act in her lifetime. We cite with approval, as did the Supreme Court in [ Old Mission Peninsula School Dist v French, 362 Mich. 546, 551; 107 N.W.2d 758 (1961)], the general rule:
"There is a strong tendency to construe an option or pre-emption to be limited to the lives of the parties, unless there is clear evidence of a contrary intent."
In the instant case, there is no clear evidence of contrary intent. If plaintiff intended to bind the Wilsons' heirs, he should have so provided.
The judgment of the circuit court granting defendant's request for quiet title and denying plaintiff's request for specific performance is affirmed.