260 P. 559 | Cal. Ct. App. | 1927
This is an action in unlawful detainer. On July 2, 1923, appellant and respondent entered into a written contract, drawn by appellant, wherein W.W. Glenn leased to Henry Bacon certain premises in the city of Los Angeles in the following words: ". . . said party of the first part do hereby lease, demise and let, unto said party of the second part (certain premises, describing them) for the term of one year, with option of four more years commencing on the 19th day of July, 1923, and ending on the 18th day of July, 1924 (which clause is hereafter referred to as Clause 1) . . . (Here follows considerable matter extraneous to the issues presented herein.) It is expressly agreed and understood that the said lease shall run at the option of theparties hereto for five years from date hereof (which clause we shall hereafter refer to as Clause 2), the rental for the firsttwo years and six months shall be forty-five dollars per month, after which the rental shall be rated in accordance to the condition of the rents in that community. . . . That said W.W. Glenn agrees after the first year to have constructed in said house a bath tub and fixtures at his own expense. . . . And that, at the expiration of said term . . . the party of the second part (Bacon) will quit and surrender. . . . And if said party of the second part shall hold over the said term . . . such holding shall be construed to be a tenancy only from month to month . . ." (Italics ours.)
Before the expiration of the first year Bacon gave Glenn notice that he, Bacon, elected to exercise his option to continue the lease for the period of four years more. On August 15, 1924, Glenn notified Bacon that he, Glenn, would not permit said Bacon to occupy said premises after September 18, 1924, and demanded the possession thereof. On October 30, 1924, Glenn served on Bacon a demand for possession, alleging, among other things, that "your tenancy at said premises has been legally and rightfully terminated *60 heretofore" — evidently referring to said notice of August 13, 1924.
Plaintiff raises two contentions:
1st: That the lease by its terms has expired. Defendant denies the expiration of the lease and contends that it had and has four years to run after July 18, 1924.
2d: During the trial the court overruled plaintiff's objections and permitted evidence to be introduced to show the intentions of the parties at the time of and in the execution of the lease. This action of the court is assigned as error in that it is claimed that the evidence tended to vary the terms of a written instrument and was not responsive to any issues pleaded.
These are the only points in the case.
The trial court found and adjudged that by error of the scrivener of the lease the words, "It is expressly agreed and understood that the said lease shall run at the option of the parties," were used instead of "at the option of the party of the second part," and that it was intended by the lessor and lessee that said option for a further term of four years should, by theterms of the lease, be given to Bacon, and that the plaintiff was entitled to no relief. From said judgment and rulings plaintiff appeals.
[1] Let us first consider Clause 1: ". . . said party of the first part do hereby lease, demise and let, unto said party of the second part (certain premises, describing them) for the term of one year, with option of four more years commencing on the 19th day of July, 1923, and ending on the 18th day of July, 1924." Had the lease stopped there no question would have arisen but that the option was to be exercised by Bacon only. (35 C.J. 1012, sec. 130 [2] [a]; Sheppard v. Rosenkrans,
"Mitchell, the owner in fee of the property in question, entered into an agreement with one Pearce to let the same to Pearce for five years from the 1st September, 1905, to be used as a drug-store and dwelling. The agreement sets out certain terms, and finishes thus: `And the lessor further *61 agrees with the said lessee that he will at the end of the term of five years give the said lessee the option of a further term of five years and the lessor further agrees that in case of sale he will give the said lessee the first option to purchase.' Pearce accepted this, and entered into possession. In July, 1907, Mitchell sold and conveyed the property to the plaintiff; before doing so, however, he offered the land to Pearce, but Pearce refused to buy. Pearce, in August, 1907, assigned all his interest in the agreement to one Smuck; and he, in October, 1908, assigned all his interest in the property to the defendants, who entered and paid rent to the plaintiff until the end of August, 1910. On the last day of August, 1910, the defendants wrote the plaintiff: `We hereby give you notice that we accept the lease for a further term of five (5) years, as provided in the said lease.' On the 1st September, 1910, the plaintiff demanded possession, which was refused. Action was brought on the 18th October, 1910, and the case came on for argument upon the admitted facts.
"The interpretation and legal effect of the last clause is the crux of the case. I think it clear that what is meant is: (1) that, upon sale by Mitchell, the lessee, Pearce, was to have the first chance to buy — this was done, and nothing turns upon that provision; (2) the lessee was, at the end of the period, to have an option of a renewal of the lease for five yers longer. `Option' is used here, I think, with a somewhat different connotation from that of its previous use — and I read the clause as though it said `give the said lessee a renewal of this lease for a further term of five years at his option.' It was argued that all that was meant was, that the lessee should have an opportunity of making arrangements with the lessor for a new lease for five years, upon terms which would be satisfactory to both; but that, it seems to me, is not what the parties meant. If, then, the clause contained an `option' for a renewal for five years, it is clear that the lessee had a right to a term of five years, beginning at the end of the previous term, and upon the same terms with the exception of the right to renew." (Affirmed in 24 Ont. Law Rep. 486.)
Whatever uncertainty there is in the instant case comes from Clause 2, which, as we have seen, follows Clause 1, but with other matter intervening the two clauses. Clause 2 *62 provides: "It is expressly agreed and understood that said lease shall run at the option of the parties hereto for five years from date hereof." The uncertainty occurs from the use of the words "at the option of the parties," which is interpreted by the appellant to mean that the additional term should only become effective upon the joint agreement of Glenn and Bacon. Appellant cites the following language from 35 C.J. 1012: "It is of course permissible to provide by contract that the lessor shall be given the privilege to extend or renew the lease, in which event he cannot be required to do so." Unless otherwise limited by contract, the landlord always had and has that right. To so state in the contract gives no additional right to him. This is apparent from the following decisions.
In the case of Gray v. Maier, etc.,
Supplementing the language of our own appellate court above quoted is the very apt wording of Owen, J., in Nelson v.Nelson,
"The plaintiff contends that from February 10, 1916, to February 10, 1917, defendants were tenants from year to year, under the statute, resulting from a holding over after their term under the lease had expired. The defendants claim that they were holding over under the lease. The character of their possession, as to whether they were tenants holding over under the statute or tenants under the lease is the principal question to be considered. This involves, first, a construction of the marginal clause appearing on the lease in the following words: `It is further agreed and made a part of this contract that at the option of the party of the first part or the party of the second part this lease can be extended for one (1) year and at the end of each year leased for a period of five years from the date of this lease.' The plaintiff contends that this option is meaningless and void, because it gives the same option to either party and the exercise of the option by one party automatically destroys the option accorded to the other. The word `option' is defined by lexicographers as the right, power or liberty of choosing; liberty to elect between alternatives; election; choice; preference. It is apparent that, if the word `option' isto be accorded its literal meaning, the exercise of the option byeither party, either to continue or not to continue the lease fora further period, would nullify the exercise of a contrary optionon the part of the other. It is obvious that both parties cannotexercise the option unless they both exercise it in the sameway. If the lessee desires to continue the lease, and the lessor desires to discontinue it, both options cannot be *64 exercised. One must give way to the other. This makes it very apparent that the word `option,' in the marginal clause, was not used by the parties in its literal sense. That clause, manifestly, was inserted for a purpose. To accord to the term `option' as therein used, its literal meaning would be toconstrue the acts of the parties in inserting it, aspurposeless, and would be an abandonment of all effort to ascertain and to give effect to the intention of the parties.
"It is fundamental that in construing contracts the intention of the parties should be ascertained and enforced. We have little doubt that this marginal note was inserted for the purpose of giving to either party the right or privilege of continuing the lease as therein provided. A provision in a lease according to one or both of the parties a right of continuing the same is not at all unusual. This, it seems clear to us, is the thought that the parties to this lease had in mind, and it was to accomplish this purpose that the clause was inserted. We so construe it." (Italics ours.)
In the instant case we are of the opinion that to accord to the term "option," as used in Clause 2, the meaning as claimed for it by appellant, would be to construe the acts of the parties in inserting it as purposeless, and would be an abandonment of all effort to ascertain and to give effect to the intention of the parties.
The case of Stetler v. North Branch Transit Co.,
"The lease contemplated the use and improvement of the land as a place of entertainment and amusement for the public, and it contained the following clause: `It is further agreed and understood that if at the expiration of this lease the party of the second part, its successors and assigns shall desire to re-lease the said premises for a further period of ten years it or they shall have the first privilege of re-leasing the same at the rental and upon the terms herein contained.' The controversy turns upon the construction to be given to the words `first privilege' in the above clause. Counsel for plaintiff contends the words mean that at the end of the ten-year term, the lessee has *65 nothing more than the first right to re-lease the premises for another term, provided the lessor was willing at that time to lease to anyone. . . . But as the court below well says: `If the plaintiff's theory as to the meaning of the paragraph is to be accepted, it would, so far as the lessee is concerned, become wholly meaningless, and might as well have been omitted.'
"We are not to suppose that the parties intended such a result. An inspection of the clause shows that if the word `first' had not been used in connection with the word `privilege,' the right of the lessee to a renewal could not be questioned. Did the privilege of renewal then become any the less a privilege by being termed a `first' privilege? The expression is awkward and perplexing, but we think it is more consistent with the expressed purpose of the lease to hold that the renewal was dependent upon the desire of the lessee, and that the expression of that desire was to give to it the first privilege of re-leasing, that is, priority of privilege over anyone else. The thought was not well expressed, but we feel that the words `first privilege' in this connection should not be so construed as to nullify a valuable right in the hands of the lessee, which, under the paragraph as a whole, was evidently intended to be created. It was of nopossible use to make provision merely that one party should enjoya certain right, if the other party should consent thereto. The settled rule of construction is that any uncertainty as to the meaning of a clause in a lease is to be determined in favor of the lessee." (Italics ours.)
See, also, the case of Pause v. City of Atlanta,
"Nor was it competent upon the part of the leaseholder to prove that she had an option upon the premises for a term of years longer than three, it appearing that the option was not to be exercised at her will alone, but was dependent likewise upon the concurrence of the landlord. Such testimony would be irrelevant, as, under the peculiar terms of the option claimed in the present case, the leaseholder acquired no interest, but only a privilege of making a new contract with her landlord at the termination of her lease, the new contract being dependent upon the consent of the landlord; and this she would have had the right to *66 have done with or without the alleged option." (Italics ours.) (See, also, Winston etc. Co. v. Union Guano Co.,
Mr. Tiffany, in his work on Landlord and Tenant, has this to say: "An `option' in the lessee to renew on such terms as may be satisfactory to both parties is obviously nugatory, it giving him merely the right to enter into a new contract with the owner of the reversion, which right he would have had without any such privilege." (2 Tiffany on Landlord and Tenant, 1521.)
We therefore conclude that Clause 2, "that said lease shall run at the option of the parties for five years," is nugatory and "meaningless" in so far as it attempts to confer any rights upon the appellant, Glenn, to nullify the option previously given to respondent, Bacon, in Clause 1.
Appellant relies on the case of Gardella v. Greenburg,
Now compare the foregoing with Burgener v. O'Halloran, 111 Misc. Rep. 203 [181 N.Y. Supp. 235], where the court was construing the following clause in a lease: "That the said tenant shall notify the said landlord one month before the expiration of the term, if he desires to renew the lease." The court said: "The appellants contend that, lacking, as it does, the words `covenant,' `grant,' `option,' `refusal,' or `privilege,' the clause in question is a mere statement that the tenant shall notify the landlord 30 days in advance, if he wants to remain in the premises, and they claim that it is elementary law that `a landlord is not bound to renew a lease without an express covenant to do so,' citing McAdam on Landlord and Tenant (2d Ed.), p. 254. This same authority, however, says that no particular form of words is necessary to constitute a covenant for renewal, and the general rule for the construction of leases is that they must be construed most favorably to the lessee, andthis especially when the clause to be construed is claimed to beone destroying or defeating the estate of the lessee. . . . The lease in question is upon a printed form known as the `Gilsey Form.' It is partly printed and partly typewritten; it contains a number of mutual covenants, some 13 in all, and the words under construction by us appear to have been specially incorporated into the lease, in typewriting, in a blank space between the seventh and eighth paragraphs of the lease in question. The clause immediately follows the covenant on the part of the tenant, wherein he agrees to allow the landlords permission to show the premises to persons wishing to hire or purchase the same, and wherein the tenant further agrees that on or before the 1st of September, 1919, the landlords or their agent shall have the right to put up signs `To Let' or `For Sale' upon the property. Then follows the clause under discussion.
"As I look upon this proposition, the pertinent and cardinal questions to be asked here are: What is the meaning of the clause in question? and why was it thus put in the agreement under consideration? If it does not mean that this tenant was to have the option of the renewal of the lease for one year, upon his giving one month's notice, what does it mean, and why was such a clause put into the lease at all? If it is to be given the construction claimed for *68 it by the appellants, then the phraseology is absolutely meaningless. And my deduction is that, taking into consideration the situation of the parties, their relationship to each other, and other outstanding features of this controversy, and applying the well-known canons of construction to contracts of this nature, it clearly can be held that the tenant is given the privilege of a renewal of this lease for one year upon his giving the landlords 30 days' notice. Any other construction would be repugnant to common sense. There are many cases in the books, but none that I can find with the precise phraseology of this case; the decisions of the court, however, as I read them, are to the effect that, whatever ambiguity there may be in the words of the covenant, the intention of the parties absolutely must prevail, and this, even though the intention of the parties is in opposition to the strict letter of the contract, when such intention is clearly ascertained. As courts have said in construing certain of these covenants, more apt language might have been used; but the intent is clear and must prevail. (Citing cases.) . . . The present lease was prepared by the landlords, and was tendered to the tenant, and hence, under all known principles of construction, it must be construed, if its meaning is doubtful, most strongly against the landlords. A clause capable of two different interpretations should be construed in a sense which will have some operation. An instrument should beconstrued most strongly against the party who drew it, and shouldbe given the meaning he ought reasonably have understood that theperson to whom he delivered the instrument should put upon it. (Citing cases.)" (Italics ours.)
We prefer to follow the reasoning of the Burgener case, particularly with reference to the interpretation of the word "desire." We do not think the Gardella case is controlling, not only because the language of its clause is so entirely different from that in the instant lease, but because the question ofintent in the Gardella lease was clearly defined, as the court in that case said: "Not only is provision made for the manifestation of this wish, but it is declared with equal definiteness that the failure to give notice shall be `regarded as an intention' that the lease shall not be renewed. The negative intent manifested by failure to give *69 notice is on the equal footing with the desire declared by giving one." (Page 106.)
[2] At this point it may also be well to consider the whole sentence in which Clause 2 occurs. It is worded as follows: "It is expressly agreed and understood that the said lease shall run at the option of the parties hereto for five years from the date hereof, the rental for the first two years and six months shall be forty-five dollars per month, after which the rental shall be rated in accordance to the condition of the rents in that community, if rents are advanced in said community then rents on said building shall be advanced, if lower, then the rents on said building shall be diminished; all of which shall be decided between the parties hereto."
It might seem that the final phrase "all of which shall be decided between the parties hereto" would tend to support the previous phrase, "it is expressly agreed and understood that said lease shall run at the option of the parties hereto for five years from date hereof," but we think not. On the contrary, we are of the opinion that said final phrase refers only to fixing the rental rate — that is to say, whether it was to be raised or lowered or remain the same. It may further be argued that if the parties could not agree upon the rental rate for the the last two and a half years the lease would terminate. This is not true, and has been so decided in various cases where the fixing of the rental rates has been left to the parties or to arbitrators or to appraisers. It has been held that such an appraisal provision is neither indefinite nor uncertain. See Nakdimen v. Atkinsonetc. Co.,
In the case of United Woolen Mills Co. v. Honaker,
"The suit was, as here, to compel specific performance of the renewal covenant. The chief defense was that the covenant was too uncertain and indefinite to constitute the basis of a specific performance decree, but the court held: `Equity will hear evidence, fix amount of rent, and decree specific performance, or hold the covenantor liable in damages for the breach of his covenant to renew a lease, providing that the amount of rent for the renewal is to be ascertained by what responsible parties would agree to pay for the use of the premises, as that fixes the rent with as much certainty as though it were to be determined by appraisers, and only means the highest market value of the premises at the time of renewal or valuation.' . . . There is a principle of long standing that equity will not compel parties, specifically, to perform an agreement to submit to arbitration, but, in these renewal cases, Jones, Landlord Tenant, sec. 346, says: `However, there seems to be a doctrine, in the later cases, that equity will to prevent a failure of justice, apply its own remedies, and thus, where the substantial terms of a contract are agreed upon, arrive approximately at the minor details and then specifically enforce the contract. In the case of a covenant of this kind, it is obvious that it is not of the essence of the contract that the valuation should be made by appraisers rather than by a court of equity.' And so, in this case, it does not seem to us that it is material whether the rental value of the premises be fixed by the offers of third parties or by the court. See accord on this general proposition, 24 Cyc., p. 1006. The only phase of the renewal lease not made certain by the express terms of the original contract can thus be rendered certain in a manner not abhorrent to the agreement of the parties."
Many phases of this question have been passed upon by the courts. In the two cases cited, and in the following decisions, there was a failure to agree in some respects and the courts stepped in, took evidence and fixed the rental rates. We have classified the cases as follows:
Where one party refused to arbitrate: Atkinson etc. Co. v.Nakdimen,
[3] Furthermore, if there be any doubt about the meaning of the two clauses in the instant case — if there be any ambiguity or uncertainty — that ambiguity or uncertainty must be resolved in favor of the lessee, the lessor being the scrivener. (Sec.
Hence, any "conflicting terms" in the instant lease should be construed most strongly against Glenn, the appellant. As the supreme court of Pennsylvania has well said in Kaufmann v.Liggett,
This being so, it remains unnecessary to consider the rulings of the court in the admission of evidence.
Judgment affirmed.
Works, P.J., and Craig, J., concurred.