Opinion
1 Div. 841.
December 17, 1959.
Appeal from the Circuit Court, Mobile County, W. V. McDermott, J.
Caffey, Gallalee Caffey, Mobile, for appellant.
The option by express terms of the agreement between appellant and appellee could be exercised during the first year of the lease by paying the full year's rental, but after the first year it could be exercised at any time during the five year period constituting the primary term, that is, at any time within the next four years. Tantum v. Keller, 95 N.J. Eq. 466, 123 A. 299; Lancaster Malleable Castings Co. v. Dunie, 365 Pa. 95, 73 A.2d 417; Cerbo v. Carabello, 376 Pa. 571, 103 A.2d 908; Signor v. Keystone Consistory, 277 Pa. 504, 121 A. 320; 51 C.J.S. Landlord and Tenant § 84, p. 643. The option being for a definite period fixed by the date of its beginning and at the date of its expiration was necessarily independent of the continued exercise of the lease, and granted the unqualified right to exercise the option at any time during the period so fixed for its exercise. Union Oil Co. of California v. Hale, 163 Wn. 503, 2 P.2d 87; Mathews Slate Co. v. New Empire Slate Co., C.C., 122 F. 972; Prout v. Roby, 15 Wall. 471, 82 U.S. 471, 21 L.Ed. 58; Superior Portland Cement Co. v. Pacific Coast Cement Co., 33 Wn.2d 169, 205 P.2d 597.
Vincent F. Kilborn, Mobile, for appellee.
Prior negotiations between the parties are merged into a written contract covering their entire transaction. W. T. Rawleigh Co. v. Cone, 232 Ala. 127, 167 So. 274. As long as a contract is executory the parties may modify it at pleasure without any consideration other than their mutual assent and the new agreement takes the place of the old. Spencer v. Richardson, 234 Ala. 323, 175 So. 278; E. T. Gray Sons v. Satuloff Bros., 213 Ala. 526, 105 So. 666; Bankers Shippers Ins. Co. of New York v. Blackwell, 255 Ala. 360, 51 So.2d 498; Grady v. Williams, 260 Ala. 285, 70 So.2d 267; Mobile Electric Co. v. City of Mobile, 201 Ala. 607, 79 So. 39, L.R.A. 1918 F, 667; American Agr. Chemical Co. v. Lowery, 227 Ala. 96, 148 So 849; Milwaukee Merchanics Ins. Co. v. Maples, 37 Ala. App. 74, 65 So.2d 159. Under such circumstances as shown by this bill Exhibit A, the final agreement, completely supplanted Exhibit B, the original offer and acceptance, and became the contract of the parties in toto. The month-to-month options for purchase, conditioned on prompt payment of rent and observance of all lease conditions during the prior month, were wholly month-to-month options dependent upon the lease observance and were not in any manner independent or supported by a different consideration flowing to appellee other than payment of rent and observance of lease conditions. Mooney v. Weaver, 262 Ala. 392, 79 So.2d 3; Brown v. Larry, 153 Ala. 452, 44 So. 841.
The agreement between the parties is in part as follows:
"3) For one month (through August 31, 1955), the owner hereby grants the tenant an option to repurchase the properties conveyed to the owner this date and which are the subject of this lease, at and for the sum of Twenty Five Thousand Six Hundred and No/100ths ($25,600.00) Dollars cash. The option shall expire August 31, 1955. If, on expiration of the option, the tenant shall pay the next month's rent within five days from August 31, (on September 1, or September 2, 3, or 4 or 5), and if further the tenant has, during August, kept and performed strictly according to all the terms thereof, this lease in its entirety, then an additional option is granted for the month of September (through September 30, 1955) to purchase the property for Twenty Five Thousand Six Hundred and No/100ths ($25,600.00) Dollars; in like manner, each month, upon the same conditions as above set forth, a new option shall be granted for the succeeding month, to purchase the property for the same amount. The intent hereof is that a month-to-month option is granted to repurchase the property conditioned upon prompt payment within the first five days of a month, of the rents due for that month and conditioned upon the faithful observance of each covenant of the lease during the preceding month. Receipt of rent after the fifth day of any month shall not be deemed an extension of the option for any additional time, it being expressly understood that a condition precedent to an option in any month is that the rent for that month be paid on or before the fifth day of that month and further that, during the previous month, all terms and conditions of the lease have been strictly observed. If any default occurs under the lease, or any event occurs which by the terms of the lease might work a forfeiture thereof, such default shall vitiate the option grant for any subsequent month after such default or event occurs, and there shall be no further purchase options concerning the property, for if any month's option is once lost there shall not exist any further options at any time.
"4) If the tenant has faithfully paid the rents each month and observed each condition of the lease and the purchase options have been renewed by the terms of this instrument, month by month for a total of twelve consecutive months, then, on and after August 1, 1956, the monthly options shall extend month to month thereafter to purchase the property for Twenty Three Thousand and No/100ths ($23,000.00) Dollars instead of Twenty Five Thousand Six Hundred and No/100ths ($25,600.00) Dollars.
"5) Not as a modification of the previous paragraphs hereof but merely by way of reduction of the amount of purchase price in the first twelve months, if the options are in force from month to month as above provided, the purchase price is to be Twenty Five Thousand Six Hundred and No/100ths ($25,600.00) Dollars if repurchased within twelve months and Twenty Three Thousand and No/100ths ($23,000.00) Dollars if repurchased thereafter during the term of this lease. If the repurchase options month to month, are taken up within the first twelve months of this lease there shall be credited against the Twenty Five Thousand Six Hundred and No/100ths ($25,600.00) Dollars purchase price all rentals paid during the preceding months prior to exercise of the option, so as to reduce the Twenty Five Thousand Six Hundred and No/100ths ($25,600.00) Dollars purchase price by those amounts. However, after such first twelve month period no credits on the purchase money shall be made for rents previously paid the purchase price will be a flat Twenty Three Thousand and No/100ths ($23,000.00) Dollars cash, and if the tenant does not exercise the purchase option on or before July 31, 1960, then all repurchase options shall expire and even though the lease itself may be renewed there shall be no option of purchase during the renewal period or periods.
"If during any time an option is granted by this agreement to repurchase the property, it may be exercised only by notifying the owner in writing of desire to exercise the option and depositing with Title Insurance Company, Mobile, Alabama, on the same date the full purchase money in cash in escrow. Promptly upon this being done and being so notified by Title Insurance Company, the owner will execute and deliver to Title Insurance Company a statutory warranty deed conveying the property to the tenant. When such delivery of the deed is made to Title Insurance Company, Title Insurance Company will forthwith deliver the purchase money to the owner, Mrs. Louise S. Hirs, and deliver the deed to the tenant Laurie Virginia Long. Owner will furnish, in such event, the deed, but no title insurance policy. Taxes and insurance shall be prorated as of the date of the delivery of the deed reconveying the property from the owner to the tenant.
"An option of renewal of the lease, conditioned upon faithful and prompt performance of all obligations under the original lease is granted the tenant provided notice in writing is given the owner of desire to renew the lease not earlier than forty-five days prior to the expiration date of the original lease term nor later than thirty days prior to that time. If the tenant renews the lease all terms of the original lease, including monthly rentals, shall apply except that in no event will the tenant have any purchase options during any renewal term of this lease."
This is an appeal by Laurie Virginia Long from a decree of the Circuit Court of Mobile County, in Equity, sustaining demurrer to that aspect of her bill as last amended which seeks enforcement of an option to repurchase certain property from the respondent, Mrs. Louise B. Hirs.
Mrs. Long owned a lot and the building thereon known as 1662 Government Street, Mobile, Alabama, subject to a vendor's lien held by one Evans.
Evans pressed Mrs. Long for payment. She made efforts to borrow money with which to satisfy Evans. To that end she approached one Doney, a real estate broker. Doney apparently contacted the respondent, Mrs. Hirs, who on July 8, 1955, directed a communication to Doney, which is made Exhibit B to the bill as last amended.
In Exhibit B Mrs. Hirs agreed to pay Mrs. Long $22,000 for the suit property; to lease the property to Mrs. Long for a primary term of five years, with an option to re-lease for a secondary term of five years, at a monthly rental of $300; and to grant an option to Mrs. Long "to re-purchase the above premises for Twenty Three Thousand ($23,000.00) Dollars cash at any time after one year of the primary lease period has run, or within the first year of the primary lease period, on payment of the rental under the lease for that period remaining in the first year under the primary lease period."
Mrs. Long accepted the offer on July 9, 1955.
Thereafter, Mrs. Hirs' attorney prepared a warranty deed for Mrs. Long's execution and a written agreement which embodied a lease and option to re-purchase. The deed was executed by Mrs. Hirs on August 3, 1955. Contemporaneously with the execution of the deed Mrs. Long and Mrs. Hirs executed the said written agreement which was made Exhibit A to the bill as last amended. Paragraphs 3, 4 and 5 of the said written agreement (Exhibit A) will be set out in the report of the case.
Mrs. Long paid the rent within the first five days of every month of the first year of the lease and observed each condition of the lease during that year, so that her right to repurchase during that year was maintained.
But Mrs. Long apparently defaulted in August, 1956. In September, 1956, Mrs. Hirs went into possession of the property and her possession continued to the time of the filing of the original bill on August 27, 1957.
Mrs. Long wants her property back. In her bill as last amended she sought to achieve that end on two theories. First, she sought to have the deed of August 3, 1955, and the said written agreement executed simultaneously therewith declared to be a mortgage and that she be permitted to redeem. Second, in the alternative, she sought a decree of "specific performance by respondent of the option provided in Exhibit B, hereto attached as the same is embodied in Exhibit A."
Demurrers addressed to the amended bill as a whole and to that aspect seeking to have the deed and written agreement of August 3, 1955, declared to be a mortgage were overruled and, of course, Mrs. Long cannot complain of such rulings.
Mrs. Long's complaint here, as shown at the outset of this opinion, is with that part of the decree of the trial court which, in effect, sustained Mrs. Hirs' demurrer addressed to that aspect of the amended bill which sought specific performance of the option to repurchase.
The bill as last amended must be construed as showing that Exhibit B was wholly extinguished by the execution of Exhibit A, the written agreement of August 3, 1955, which is the final agreement between the parties and the only one upon which Mrs. Long is entitled to rely. The rule declaring all prior negotiations merged into the written contract purporting to cover the entire transaction has application here. W. T. Rawleigh Co. v. Cone, 232 Ala. 127, 167 So. 274.
The whole tenor of Exhibit A requires prompt payment within the first five days of a month of the monthly rental and faithful observance of all lease provisions during the prior month, as the essence of Mrs. Long's right to renew the "month-to-month purchase options."
Paragraph 3 of Exhibit A, in our opinion, deals with the conditions on which month-to-month options are granted during the entire primary term.
Paragraph 4 of Exhibit A, upon which Mrs. Long places emphasis, deals with the purchase price. It says that if the first year's month-to-month options have been continued until August 1, 1956, then, on and after August 1, 1956, the monthly options shall extend month-to-month thereafter to buy at $23,000 instead of $25,600.
We do not think it can be logically argued that Exhibit A gave a continuing option for the last four years of the lease wholly apart from the obligation to pay rent promptly on or before the fifth day of each month of each year of the lease. There were no monthly options except those granted on prompt payment of the rent for that month.
No allegations of the bill as last amended show the options were kept in force by payment of rent in the prescribed manner. No allegations are made that rent was paid for the month of August, 1956, and subsequent months, or that the lease conditions were observed for August and later months.
We hold, therefore, that the trial court correctly sustained the demurrer addressed to that aspect of the bill as last amended, which sought specific performance of the option to repurchase.
The decree of the trial court is affirmed.
Affirmed.
LIVINGSTON, C. J., and STAKELY and MERRILL, JJ., concur.