IN THE SUPREME COURT OF TENNESSEE AT JACKSON

MAX NORTON and LONG ) FOR PUBLICA TION OUTDOOR ADVERTISING, ) ) Plaintiffs/Appellees, ) Filed: February 14 , 2000 ) v. ) Madison Chancery ) JOHN A. McCASKILL, d/b/a ) Hon. Joe C. Morris, CITY SIGN COMPANY, ) Chancellor. ) Defendant/Appellant. ) No. W1997-00151-SC-R11-CV

For Plaintiffs-Appellees : For Defendant-Appellant : Larry A. Butler James T. Ryal, Jr. Spragins, Barnett, Cobb & Butler, PLC Adams, Ryal & Flippin, PC Jackson, Tennessee Humboldt, Tennessee Justin S. Gilbert The Gilbert Firm Jackson, Tennessee


## O P I N I O N

TRIAL COURT AND COURT OF APPEALS AFFIRMED. DROWOTA, J. We granted this appeal to determine the time frame w ithin which a lessee must exercise the opti on to renew a lease that does not desi gnate a specific time frame for renewal but requi res that the option be exerc ised “at the end of” or “at the termination of” the origi nal lease term. We have concluded that in the absence of a specific time design ation in the lease, an option to renew remains



# FILED February 14, 2000 Cecil Crowson, Jr. Appellate Cou rt Clerk-2-

effective only during the term of the lease. Accordingly, when a lease merely stipulates that it must be renewed at the end of its term, the lessee must exercise the option on or before the day the lease expires. W e find that the lease in this case was not renewed because the lessee did not exe rcise the option until after the lease had expired. We therefore affirm the judg ments of the trial court and Court of Appeals.

FACTUAL BA CKGROUND

On June 12, 1985, Richard D. N orton, Jr., who rented bi llboard space, entered into a lease with City Sign Company

(City Sign), w

hich was owned by James H. McCaskill. The lease involves bi llboard space on commercial property adjacent to the Highway 45 by-pass in Jackson, Tennessee. Under the terms of the lease, City Sig n, as lessee, agreed to pay monthly rent in exchang e for the right to maintain bill board advertising on the property. The lease w as for a period of ten years begin ning on July 1, 1985 , and ending on Ju ne 30, 1995. Alt hough the lease was a printe d form, C ity Sign ins erted a typ ewritten “o ption to renew” provision withi n the form that stated: “City Sign Company reserv

es an option to renew this lease at the end of 10 years for a like period.”
On July 5, 1995, Max Norton, who had become the owner of the subject property, notifie d City Sign b y letter th at the te n-year lea se had exp ired five days earlier, on June 30, 1995. No rton further advised that s ince City Sign had no t exercised its option t

o renew, the lease was no longer in force. Shortly thereafter Norton leased the subject pr operty to Long Outdoor Adv ertising (LOA), an appellee in this action. N onetheless, on July 10, 1995, John McCaskill, w ho had become the owner of City Si gn, notified Norton by l etter that City Sig n intended to exercise its option t

o renew the lease. He enc losed a check to pay the Jul y 1995-3-

rent. Norton rejected the check, maintaining that the l ease and the option to renew had expired. Since then, McCaskill has continued to tender the monthly rent in accordance with the terms of the disputed lease. Norton has rejecte d each payment.
On September 11, 1995, Norton and LOA fil ed suit in the Madison County Chancery Court agai nst McCaskill and Ci ty Sign alleging

breach of contract and trespass based upon City Sign’s refusal to remov e its billboard from the leas ed premises. The complaint further al leged that City Sig n’s failure to leave the premises has interfered wi th Norton’s ability

to fulfill his contractual o bligations to LOA and has prevented LOA from obtai ning sign permits and us ing the leased premises for its own pur poses. In addition to all monet ary damages arising

from City Sign’s acti ons, Norton and LOA also soug ht an order ejecting Ci ty Sign from the premises.
Norton and LOA then moved for part ial summary judgment on F ebruary 13, 1996, asserting that there was no dispute that the leas e terminated on June 30, 1995, and that the “only remai ning issue to be tried i s damages.” City Si gn then filed its own motion for summary judgment, maintaining that the lease was effectively “renewed within a reasonable period of time following June 30, 1995.”
On August 1, 1996, the trial court granted Norton’s and LOA’s motion for partial summary judgment and denied City Sign’ s motion. The parties then entered into a consent judgment stipulating the amount of damages to be awarded should the trial court’s decision be affirmed on ap peal. City Sign then perfected this appeal to determine w hether it had effectively ex ercised its option to renew the lease with the appellee, Max Nort on.-4- The Court of Appeals affirmed th e trial court’s award of partial summary judgment to Norton and LOA becaus e it concluded that City Sign had failed to effectively exercis

e its option to renew the lease. The intermediate court r elied on the fact that City Sign d id not exercise the opti on until ten days after the l ease had expired and five days

after receiving a let

ter from Norton notifying City Sign that the lease had terminated and that the option was no longer v alid.

STANDARD OF REVIEW

The standards governing an appellate court's rev iew of a motion for summary judgment are w ell settled. Since our i nquiry involv es purely a question of law, no presumption of correc tness attaches to the lower court’s judgment, and our task is confined to rev iewing the record t

o determine whether the req uirements of Tenn. R. Civ. P. 56 have been met. See Cowden v. Sovran B ank/Central South , 816 S.W.2d 741, 74 4 (Tenn.1991). Tennessee Rule of Civil Procedure 56.03 provides that summary judgment is appropriate w here: (1) there is no genuine issue with regard to the material facts relevant to the claim or defense contained in the motion, see Byrd v. Hall , 847 S.W.2d 208, 210 (Tenn.1993); and (2) the moving party

is entitled to a judgment as a matter of law on the undisputed facts. See Anderson v. Standard Reg ister Co. , 857 S.W.2d 555, 559 (Tenn.1993). The moving party has the burden of proving t hat its motion satisfies these requirements. See Downen v. Allstate Ins. Co. , 811 S.W.2d 523, 524 (Tenn.1991). When the party seeking summary judgment makes a properly supported motion, the burden shifts to the nonmoving party to set forth specific facts establishing the ex istence of disputed, material facts which must be resolv

ed by the trier of fact. See Byrd v. Hall , 847 S.W.2d at 215.-5- The standards governing the assessment of evidence in the summ ary judgment context are als o well established. C

ourts must view the ev

idence in the light most favorable to the nonmoving party and must also draw all reasonable inferences in the nonmoving party's favor. See Byrd v. Hall , 847 S.W.2d at 210-11. Courts should gr ant a summary judgment only when both the facts and the inferences to be drawn from the facts perm it a reasonable person to reach only one conclusion. See id.

EXERCISE OF THE RENEWA L OPTION

An option to renew a lease i s a unilateral contract un der which the lessee retains an irrevocabl e right to extend the l ease during the option peri od. See American Oil Co. v. R

asar , 203 Tenn. 37, 45, 308 S.W .2d 486, 490 (Tenn. 1957); Abou-Sakher v. Humphrey s County , 955 S.W.2d 65, 68 (Tenn. Ct. App. 1997). The right to renew will be lost, however, if the lessee fails to give timely notice in accordance with the terms of the option. See American Oil Co. v. R asar , 203 Tenn. at 45, 308 S.W.2d at 490; Corim, Inc. v. Sam Blair Co., Inc. , 721 S.W.2d 256, 260-61 (Tenn. Ct. App. 1986).

The lease in th is case did not sp ecify a time perio d within which City Sign was required to exercise the option to renew. The renewal provision merely provided that City Sign could renew the l ease “at the end of 10 years.” The parties pro perly rec

ognize tha

t no Tennessee case has cla rified the r equisite t ime frame within which an op tion must be exercised if the lease provides only for renewal “at the end of” the original lease term. As the Court of Appeals acknowledged, a split

of authority exists i n other jurisdictions c oncerning construction of the option lang uage in these types of leases

.1 See gen erally 49 Am. Jur. 2d Landlord and Tenant § 168, at 1 73 n.96 ( 1995) (c iting cases ). -6- Relying on one line of cases, City Sign argues that the renewal provision’s phrase “at the end of 10 years” does not mean “prior to the end,” an d permitted it to exercise the option within a reasonable time after the expiration of the lease’s original term. Because it exercised the optio n within ten days after the ten-year term of the lease had expired, C ity Sign contends that it complied with the “reasonable time” requi rement and effectively renew ed the lease.
Citing a separate line of cases, No rton and LOA ass ert that the lan guage “at the end of 10 years” required City Sign to exercise the renewal option within the original term of the lease. They assert that since City Sign did not give notice of renewal prior to the ter mination of the lease, the option to r enew expired with the lease and was never properly exerci sed. After reviewi ng the cases espousing this view, we agree.

OTHER JURISDICTIONS

Most jurisdictions r

ecognize that absent unusual circumstances, the option to renew a lease must be ex ercised prior to the ex

piration of the lease. 1 However provisions designat ing a time frame within w hich notice to renew must be given are strictly const rued. See American Oil Co. v. R asar , 308 S.W.2d at 490. When a lease requires the les see to exercise the optio n “at the end of” or “at the termination of” the original lease, courts addressing the issue have adopted one of two views on the time frame for renewal. At least two courts have interpreted this language to require that the option be exercise d before the expiration of the original lease. See Music Tree, Inc. v. Tallman Piano Store, Inc. , 608 P.2d 1228, 1230 (Or. Ct. App. 1980) (hol ding that under an option req uiring renewal “ at the expiration” of the lease but providing no more spec ific time requirement, the-7-

lessee had a reasonable time to ex ercise the option within the term of the lease); I.X.L. Furniture & Car

pet Installment House v. Ber ets , 91 P. 279, 282 (Utah 1907) (holding that under an optio n requiring renew al “at the expiration”

of the lease, the lessee was requir

ed to exercise the option o n or before the last day of the le ase). The reasoning behind this v iew is that the option to renew is part of the lease and therefore expires at the same time the lease expires. See Douglass v. Jones , 422 So.2d 352, 354 (Fla. Dist.Ct. App. 1982); I.X.L. Furniture & Car pet Installment House v. Bere ts , 91 P. at 282.
A separate group of courts hav e concluded that such an option may be exercised within a reasonable time after the expi ration of the lease. See Maddox v. Hobbie , 152 So. 222, 224-25 (Ala. 1934) (holding that an option to r enew at the expiration of the original lease was effectively exercised because the lessee’s holding over, wi

thout express notification of renewal, was deemed an el ection to renew the lease); Heritage Square Invs v. Trouard , 406 So.2d 309, 311-12 (La. Ct. App. 1981 ) (acknowledging t hat if a lease does not exp ressly de signate a t ime frame for renewal, the lessee mus t exercise the option w ithin a time which, under all the circumstances, the lessor intended to giv e the lessee to communicate the intent to renew); Kearney v. Hare , 144 S.E.2d 636, 639 (N.C. 1965) (stating that with a lease containing a renewal option that did not require specific noti ce from the lessee, a presumption ex isted that the option was ex ercised where the less

ee held over after the orig inal term and continued to pay rent); Caito v. Ferri , 116 A. 897 (R.I. 1922) (recogni zing that a lease prov iding for renewal at the “termination” of the lease did not require the lessee to exercise the option befo re the lease expired, nor did it r

equire renewal at the precise hour of termination, but gave the lessee “a reasonable time after the termination of the lease in which to make his election”). Cf. Coulter v. Capitol F in. Co. , 146 S.E.2d 97, 100 (N.C. 1966) (recognizing tha

t a lessee’s holding ov

er, without giv

ing the prescribed notic e of-8-

renewal, gave ri se to a presumption that the less ee was exercising

the option to renew, but also recog nizing that in such a situation the lessor coul d elect to treat the lessee as a trespasser or to waive the notice requirement and treat the lease as having been extended.)

TEN NES SEE LAW
After considering the tw o prominent views espo used by the courts confronted with this is

sue, we con clude that i n the absence of a specific time designation in the lease, an option to renew remains effe ctive only during the term of the lease. Accordingly , we agree with those courts concluding th at when a lease stipulates that an optio n to renew must be exerc ised “at the end of” or “at the termination of” the lease, the lessee must exercise the option on or before the day the original leas

e term expires. Obv

iously, parties are free to negotiate any number of other arrangements for ren ewal options by incl uding specific and pertinent language in the lease agreement. Our holding is confined to those leases that require ren ewal “at the end of” or “a t the termination of” the lease or that contain similar lang uage conveying the same requirement.

Applying this rule

to the instant case, we c onclude that City Sig n did not effectively renew its lease with Norton because it did not exercise the option within the original term of the leas e. As discussed, the renew al provision stipul ated that City Sign could renew the lease “at the end of 10 years for a like period.” McCaskill, acting

on behalf of City Sign, did not notify Norton of the intent to exercise the option to renew the lease until July 10, 1995, ten days after the lease had expired and five day s after Norton had informed McCas kill that the option to renew, like the lease, had expired. We agree with Norton that aft er the lease-9-

terminated on June 30, 1995, the option was no longer in fo rce and McCaskill’s attempt to renew was i neffective.
City Sign next ar

gues that even if it did not comply with the renew al option, it is nonetheless entitled to equitable relief. As s upport for this contention, City Sign relies upon South Region Indus., Inc. v. Chattanooga W arehouse & Cold Storage Co., Inc. , 612 S.W.2d 162, 164-65 (Tenn. Ct. App. 1981), in w hich the Court of Appeals concluded that a c ommercial lease had been renew ed despite the lessee’s failure to comply with an option provi sion requiring noti ce of renewal at least ninety days p rior to the expirati on of the lease. Although the l essee prepared and mailed a letter ex pressing an intent to rene w in a timely fashion, receipt by the lessor was delayed through no fault of the lessee. The intermediate court determined that equitabl e relief was warr anted because the lessee had made a good faith effort to comply w ith the option requirement an d because the lessor was not prejudi ced by the delay. C ity Sign also dir ects us to the unrepor ted case of Chen Corp. v. Kiyono Corp. , No. 84-137-II, slip op. at 5 (Tenn. Ct. App. 1981), for the proposit ion that equitable relief s hould be afforded lessees when the failure to timely exercise the renew

al option does not result from the lessee’s actions or w

hen the failure stems from mere negl igence on the part of the lessee.

We have considere

d these cases

and recogni ze that unde r some circumstances a failure to timely exercise a renewal option may warrant equitable relief. However no such circumstances exi st in the instant case. Ci ty Sign has not offered a reason for waiting ten days until after its lease had expired to exercise the renewal option. In fact, City Sign did not give notice of its intent to renew until after Norton had informed it that the lease and option to renew had expired. Moreover, affording equitable relief to City Sign would prejudice Norton because2 Tennessee Rule of Appellat e Procedure 36(a), whi ch concerns an appell ate court’ s power to grant relief, provides , in pertinent p art: “Not hing in this ru le shall be co nstrued as requi ring rel ief be grant ed to a party responsibl e for an error or who fail ed to take whate ver acti on was r eas ona bly ava il able to preven t or nullify the harm ful effect o f an error .” -10- he has entered into another lease agreement with LOA for the s ame property. We conclude

that thi s is not

a case w

arranti ng equitable r

elief.

AUTOMA

TIC RENEWAL P ROVISION

Although this appeal concer ns the option provision r equiring renewal

“at the end of 10 years,” the lease co ntains another provisi on that may have affected the outcome of this case. An automatic renewal clause in the lease pro vides: After the original term her eof, this lease shall continue in force from year to year for a period of seven (7) consecutive years unless terminated at the end of the origi nal term, or any additional year thereafter, upon written noti ce of termination to Lessor by Lessee, served not less than thir ty (30) days before the e nd of such term or additional year. Despite its potential significance in this suit, neither party addressed this clause in the trial cour

t or during the intermedi ate appeal. In its opinion, the Court of Appeals, sua sponte, asserted that pursuant to Tenn. R. App. P. 36(a) the parties had waived th e issue. 2 We agree with the Court of Appeals that the issue of the automatic renewal provision has been waived and will not be considered in this appeal because neither party raised the issue at trial. See Simpson v. Frontier Community Credit Union , 810 S.W.2d 147, 153 (Tenn. 1991); Lawrence v. Stanford , 655 S.W.2d 927, 929 (Tenn. 1983); Harrison v. Schrader , 569 S.W.2d 822, 828 (Tenn. 1978).

CONCLUSION-11- For the foregoing reasons, we affirm the judgment of the Court of Appeals upholding the trial cour t’s grant of partial summar y judgment in favor of the appellees, Max Norton an d Long Outdoor Advertis ing. Costs are tax ed to the appellant, John A. McCaski ll, d/b/a City Sig n.

_________________________________ Justice Frank F. Drow

ota, III Concur: Anderson, C. J. Birch, Holder, Barker, JJ.