*1
EGBERT R SMITH TRUST
In re
R SMITH TRUST
(Calendar
5).
Argued
Decided
No. 133462.
December
No.
Docket
March
2008.
County
Phillips petitioned
Glen and Dale
the Sanilac
Probate Court
specific performance
first refusal contained in
for
of their
petitioners
original
the
the
trustee of the
a lease between
and
Homer,
Betty
Egbert
respondent,
R. Smith Trust. The
who is the
trustee,
petitioners
party’s
successor
had notified the
of a third
offer,
purchase the land but then declinеd the
notified the
offer to
offer,
petitioners that she had declined the
and refused to sell the
petitioners
they subsequently attempted
property to the
when
to
option
purchase
property.
petitioners
the
The
and
exercise their
to
court,
respondent
summary disposition. The
David
the
moved for
Clabuesch, J., granted summary disposition
respondent,
L.
for
concluding
respondent’s
gave
initial
letter
while the
optiоn,
petitioners
opportunity
respon-
to exercise their
countermanding
subsequent
precluded
dent’s
letter
the notice
petitioners
exercising
peti-
from
their
of first refusal. The
EJ.,
appealed.
Appeals,
tioners
The Court of
and Meter
Hoekstra,
JJ.,
Appeals
reversed. The Court of
held that when
Donofrio,
offer,
party’s
received notice of the third
their
option
respondent
of first refusal became an
thаt the
could not
specified
App
revoke
the time
in the lease. 274 Mich
(2007).
respondent applied
appeal,
for
The
leave to
which the
Supreme
granted.
Court
Clark & EC. Donald J. for the petitioners.
John respondent. S. Paterson for the Amicus Curiae: Barker) (by Moorman EC. T.
Berry Randolph for the Real Property Michigan. Law Section of the State Bar of
Weaver, J. granted appeal We leave to to consider whether a of first refusal is revocable once the holder of the right receives notice of a third offer and whether the petitioners-tenants are entitled to summary disposition and specific performance of the right of first refusal.
We affirm the judgment the Court of Appeals case, hold under the lease agreement this petitioners had an irrevocable buy the leased property respondent presented after the to the petition- ers bona fide offer from a third party (giving refusal) the petitioners and that agreement by breached lease failing option. Furthermore, honor the because real property R TRUST SMITH Opinion of the Court timely op- exercised their and the unique, performance is property, specific tion to in this case. remedy the proper AND PROCEDURAL HISTORY I. FACTS agreement for This case arises out of a residential lease the respondent-successor a 75-acre tract of land between 1980s, early In the trustee and the petitioners-tenants. owning By Smith died a 75-acre tract of farmland. Egbert will, of his became an asset of the terms testamentary May trust. In Donna Sutton Smith’s as the trustee of Smith’s trust. qualified trustee, As Sutton entered into a lease The lease Phillips, petitioners. with Glen and Dale period years, for a of five with an renew was years. an additional five under the same terms for the lease for a second term. timely renewed *3 executed 27,2001, On March the Sutton the lease. As ex- five-year an additional extension of tended, by its terms in 2005. expire the lease was to following lease contained the
Paragraph 15 of the first refusal: right of oрtion pur- hereby grants to Tenant the
Landlord premises upon following terms: chase the leased any of first refusal to match Tenant shall have regard purchase [sic] offer to made with bona fida subject property. exercise his In the event Tenant fails to following days presentment of said bona option within 30 granted purchase option herein shall [sic] fida offer to terminate. through
This shall continue any thereof. primary this lеase and extensions term of writing of his intent to Upon notifying Landlord in Tenant closing for said exercise his Opinion Court shall mutually agreeable be scheduled at a reasonable time parties. to the
Upon exercising purchase, Tenant’s his offer to Tenant pay purchase price shall to Landlord in cash less the deposit specified any herein pay- less and all rental ments made the lease term. respondent, Homer,
The Betty was appointed succes- sor trustee of the Egbert R. Smith Trust in In 2001. 2004, the respondent received an offer to purchase the $225,000. for She asserts that she never ac- cepted However, the offer. on July respon- attorney dent’s sent a letter to the stating pertinent part: Lease, required
Pursuant it you that have the any to match presented. bona fide offer This letter is you to inform that signed purchase Ms. Homer has a $225,000 with thе offer of for the farm. You notify your must our office of your decision to exercise days. thirty within 30 days expire The will on August 30, 2004. Your offer will be referred to Ms. Homer for Upon her review and expiration final decision. period, that time Ms. selling Homer will be the farm. 9, 2004, On August the respondent’s counsel wrote to stating that Ms. Homer had declined the original offer and was not selling the farm at that time. August 13, 2004,
On within 30-day period set forth in the lease and July 24, 2004, letter, but after the August 9,2004, lеtter informing petitioners that the offer to sell had been rejected, the petitioners gave written notice they were exercising their option to purchase the property. refused to sell the property to the
petitioners.
The
filed petition
a
in the Sanilac
County
Court,
Probate
seeking
compel
the sale of the
land pursuant
to the lease agreement. The probate court
R SMITH
TRUST
Opinion
Court
of the
for
cross-motions
parties’
on the
argument
heard oral
16, 2005, and granted
December
on
summary disposition
The
summary disposition.
for
motion
respondent’s
the
28, 2004,
July
respondent’s
that the
ruled
court
probate
to exercise
opportunity
petitioners’
the
triggered
letter
However, the court
property.
their option
9, 2004, letter
August
respondent’s
that the
determined
petition-
28 notice before
July
had countermanded
and therefore
first refusal
their
of
exercised
ers
their
of
exercising
from
precluded
held that no
result,
court
probate
As a
refusal.
first
entered
The
court
probate
existed.
enforceable
January
2006.
on
to that effect
an order
February
On
appealed.
The petitioners
judg-
reversing
opinion
issued an
Appeals
Court
Appeals
The Court of
court.1
probate
ment of the
notice of the
received
that after
reаsoned
the respondent,
from
offer on
original
that was
contract
first refusal became an
30-day
respondent
not revocable
lease.
period specified
appeal
leave to
for
application
filed an
appeal
leave to
granted
in this Court. This Court
(1)
issues,
brief, among other
parties
ordered the
the holder
revocable once
of first refusal is
whether
(2)
offer and
notice of a third
right receives
summary disposi-
are entitled to
the petitioners
whether
of first refusal.2
performance
tion and specific
OF REVIEW
II. STANDARD
summary
rulings on
de novo
This Court
reviews
light
in the
motions, viewing the evidence
disposition
(2007).
Trust,
283;
App
Egbert
III. ANALYSIS
interpretation
The resolution of this case involves
agreement
petition-
the contractual lease
between the
respondent.
interpreting
ers and the
In
contract,
it is
obligation
a court’s
to determine the intent of the
parties
examining
language
of the contract
according
plain
ordinary meaning.5
to its
If the
language
unambiguous,
contractual
is
courts
in-
must
terpret and enforce
written,
the contract as
because an
unambiguous
parties’
contract reflects the
intent as a
language
However,
matter of law.6
if the contractual
ambiguous,
presented
extrinsic evidence can be
to de-
parties.7
termine the intent of the
plain language
parties’
case,
In this
lease
agreement
petitioners’ right
characterized the
option.
refusal as an
The lease
stated:
hereby grants
Landlord
oрtion purchase
Tenant the
premises
upon
following
leased
terms:
Tenant
shall have the
any
to match
of first refusal
bona
[sic]
fida
offer to
regard
made with
to the
subject property. In the event Tenant
to exercise his
fails
3
Alpena
Comm,
Wilson v
Co Rd
161, 166;
474 Mich
This any extensions thereof. primary of this lease and term writing of his intent to Upon notifying Landlord Tenant closing for said his exercise mutually agreeable reasonable time be scheduled at a shall parties. exercising purchase, offer to Tenant Upon Tenant’s his *6 purchase price in the less the pay to Landlord cash shall any pay- specified less and all rental deposit herein during [Emphasis added.] the term. ments made lease granted the agreement expressly of the lease This section in the leased purchase premises an to option the land. The the decided to sell respondent the event that that agreement of the lease demonstrates plain language made a bona party intended that when a third parties the respondеnt and the property fide offer to the had the the petitioners, the offer to presented for the property to option the irrevocable days 30 of the notice. within purchase price basically agreement by which option “An is he shall agrees with another property owner of the price at a fixed within buy property have a Contracts, CJS, § As stated 17 specified time.”8 502: p promise enforceable nоt to option
An contract is an agreement continuing offer or revoke an offer. It is a specified period. It keep open irrevocable for a an offer keep right, optionor must the offer and the is a contract exercised, option optionor has the open. Until an option. the life duty the offer not to revoke Kalamazoo, Twp City App 257 NW2d Oshtemo v Opinion of the Court An option is an enforceable promise not to revoke an time, offer for a specified in this case 30 days. respondent’s July 28, 2004, triggered letter petitioners’ exercise their under agreement lease to purchase property. The letter expressly stated that respondent had received a bona fide offer for and would selling be property at the expiration petitioners’ Furthermore, period. the letter informed the рetition- ers that they notify “must [the office of the respon- dent’s attorney] your decision to your exercise within days” and that “thirty days expire will on August 2004.”
Once the respondent notified the petitioners of a offer the property, the option in the lease became operative. result, As a respondent did not have the to revoke her offer to sell the property until after the option period expired on August 30, Respondent’s 2004. argument that her July 2004, letter was nothing more than an offer to sell that could be withdrawn at any time before acceptance is incorrect.
Given
that the
breached the
agree-
lease
*7
by
ment
honoring
not
the petitioners’ option, we next
consider the appropriate remedy for the breach. Land is
presumed to have a unique
peculiar value,
and
and
contracts
involving
sale of land are generally subject
to specific performanсe.9 In
case,
this
petitioners
seek specific performance of their option
purchase
to
property
after the respondent
claimed to have
revoked her tender of the third-party offer after she
rejected
However,
it.
since the respondent could not
revoke the option in the lease once she presented the
Bell,
Kent v
IV CONCLUSION agreement, the lease under conclude We buy the leased option irrevocable had an presented petition- respondent after the property a third and party offer from a bona fide ers agreement the lease respondent that breached Furthermore, real since option. to honor the failing exercised timely the petitioners and unique, specific perfor- the property, their we Accordingly, in this case. remedy is the proper mance Appeals judgment. the Court of affirm Taylor, C.J., Corrigan, Young, Cavanagh, Kelly, WEAVER, J. MARKMAN, JJ., concurred with majority’s I in the concur {concurring). J. Corrigan, lease language parties’ result on the basis petitioners’ characterizes agreement. triggered be “option” as an that would a that she had received from by a notice There- buy property. fide offer to third-party bona holding err in fore, did not the lower courts buy respon- once an irrevocable right became a accept intended to that she dent notified clarify that a separately I offer. write an irrevo- always not become of first refusal does offer. third-party triggered once cable terms establish- case, the contract Rather, any given *8 28 Concurring Opinion by Corrigan, J.
ing right of first refusal will control whether the either becomes an or, irrevocable once triggered instead, may be revoked by the owner if he in good faith changes his mind —and withdraws his offer to sell— before the is еxercised.
This Court has long recognized that rights of first refusal and options are governed by the contract terms Therefore, established the parties.1 as the majority observes, 24, ante at the plain language of the contract determines the nature of those rights in a given case.2 Accordingly, the Court Appeals erred to the extent that it relied general on a proposition that, when owner notifies the holder of a right оf first refusal of a third party’s bona fide offer to purchase, the right of first refusal automatically into “transmutéis]” an irrevocable option. Trust, In re Egbert R Smith 274 283, Mich App 287-288; 731 NW2d (2007), 810 citing 17 CJS, Contracts, 56,§ p 503.
Generally, the
willingness
owner’s
to sell to anyone is
a condition precedent that must be present for a right of
first refusal to mature into a present option to buy. 17
CJS,
(“A
Contracts,
56,§
p 503
right of first refusal is a
conditional option which
dependent
upon the decisiоn
owner.”).3
to sell the property by its
may
Parties
agree
that, if the owner notifies the holder of
of the
1 See, e.g., Ridinger Ryskamp,
v
15;
(1962);
369 Mich