Title: Mohr Park Manor, Inc. v. Mohr
Citation: 424 P.2d 101
Docket Number: 5137
State: Nevada
Issuer: Nevada Supreme Court
Date: February 21, 1967

424 P.2d 101 (1967) MOHR PARK MANOR, INC., a Nevada Corporation, and James H. McGroarty, Appellants, v. Anna MOHR, Respondent. No. 5137. Supreme Court of Nevada. February 21, 1967. *102 Singleton, DeLanoy &amp; Jemison, of Las Vegas, for Appellants. Coulthard &amp; Smith, of Las Vegas, for Respondent. WILKES, District Judge: This is an appeal from a declaratory judgment annulling an option agreement. Anna Mohr, plaintiff, filed a complaint seeking a declaratory judgment on November 1, 1962. Mohr Park Manor, Inc., and James H. McGroarty, defendants, answered and thereafter trial was held before the court. Judgment was entered annulling the agreement on May 9, 1966. Appeal was commenced on May 23, 1966, by Mohr Park Manor, Inc., and James H. McGroarty, the appellants. We believe that the trial court erred and therefore reverse the judgment and remand for further proceedings. In late 1961 Mrs. Mohr and a friend contacted McGroarty at his office in Las Vegas in an effort to sell him her 150 acre tract in that city. Several meetings followed wherein the development of the tract as a senior citizens project was discussed. Contemplating the acquisition of the property McGroarty caused defendant Mohr Park Manor, Inc., to be incorporated in February of 1962. *103 On March 2, 1962, the parties executed the following instrument: This instrument was drafted by an attorney not presently involved in this case. The parties hold different views as to whether the attorney prepared the instrument *104 for Mrs. Mohr or for both parties. The trial court adopted a finding that the instrument was drafted on behalf of both parties. We must conclude that Mrs. Mohr was represented by counsel in the preparation of this instrument. After the execution of the instrument and between April and December 1962 appellants expended approximately $8,000.00 for engineering. McGroarty attended planning commission meetings and met with various persons regarding the obtaining of financing, architectural work, engineering, zoning, etc. The record is clear that both money and effort were expended by appellants in furtherance of the development of the property. Mrs. Mohr was aware of these expenditures and efforts and for a time at least was satisfied with the plans and progress. In June of 1962 Mrs. Mohr demanded a quitclaim deed from appellants which demand was not met. On November 1, 1963, she filed this suit. Respondent contends that no valid option or contract was created by the March 2, 1962, instrument because it is lacking in essential elements; that it is both uncertain and vague; that the instrument is unenforceable for lack of mutuality of obligation and consideration; that, if an option, it was not exercised timely or in accordance with its terms. Appellants contend that a valid and binding option was entered into between the parties; that the option is reasonably certain and definite and will support specific performance; that the option was repudiated by Mrs. Mohr prior to the expiration of the option period. The trial court held the instrument of March 2, 1962, to be a total legal nullity, a nudum pactum, for the reason that it does not specify any time for its acceptance, or any contingency upon the happening of which it could be exercised as an option. To be decided by this court is whether the instrument constituted a binding, legally enforceable option. We hold that an option does exist and remand for a determination of the period of its validity a reasonable time under the circumstances. An option to purchase property is a contract wherein the owner, in return for valuable consideration, agrees with another person that the latter may buy property within a specified time upon expressed terms and conditions. McFerran v. Heroux, 44 Wash. 2d 631, 269 P.2d 815, 819 (1954); Bowles v. Babcock &amp; Wilcox Co., 209 Ga. 858, 76 S.E.2d 703, 704 (1953). The option contract is distinct from the contract which is the underlying agreement and it must stand or fall on its own merits. Simpson, Contracts § 20 (1954); Restatement, Contracts § 24 (1932). This distinction is seen in Neely v. Denton, 260 Ala. 26, 68 So. 2d 537, 540 (1953) wherein it is stated: "An option in its inception, `is neither a sale nor an agreement to sell. It is simply a contract by which the owner of property agrees with another, that he shall have the right to buy the property at a fixed price within a time certain.'" [Citation omitted.]" See also Auslen v. Johnson, 118 Cal. App. 2d 319, 257 P.2d 664 (1953). In interpreting an agreement a court may not modify it or create a new or different one. A court is not at liberty to revise an agreement while professing to construe it. Reno Club, Inc. v. Young Investment Co., 64 Nev. 312, 323-24; 182 P.2d 1011, 173 A.L.R. 1145 (1947). On the other hand, a contract should be construed, if logically and legally permissible, so as to effectuate valid contractual relations, rather than in a manner which would render the agreement invalid, or render performance impossible. Reno Club, Inc. v. Young Investment Co., supra, 64 Nev. 325, 182 P.2d 1011. See also 4 Williston, Contracts § 620 (3d Ed. 1961) wherein it stated: "The Writing Will Be Interpreted If Possible So That It Shall Be Effective and Reasonable. An interpretation which makes the contract or agreement lawful will be preferred over one which would make it unlawful; an interpretation which renders the contract or agreement valid *105 and its performance possible will be preferred to one which makes it void or its performance impossible or meaningless; an interpretation which makes the contract or agreement fair and reasonable will be preferred to one which leads to harsh or unreasonable results." A court should ascertain the intention of the parties from the language employed as applied to the subject matter in view of the surrounding circumstances. It is contended that the agreement lacks consideration. We find this contention to be without merit. Corbin cites three ways in which a unilateral option contract can be made irrevocable: 1) By the giving of a written promise under seal; 2) by the giving of consideration; 3) by the subsequent action in reasonable reliance thereon. Corbin, Contracts § 263 (1963). Though any one is adequate, all three appear to have occurred in the instant case. It would appear that the bilateral contract which arises upon exercise of the option is also supported by consideration. The buyer is to pay $3,000.00 per acre for the land. It is unnecessary, however, for this court to consider the merits of the underlying agreement; that question is not before us today. As noted above, we are solely concerned with the validity of the option agreement. Respondent contends that the agreement lacks "mutuality of obligation" (sometimes referred to as "want of consideration"). This assertion misconstrues the very nature of an option contract which does not require mutuality of obligation. Witkin, Summary of California Law, Contracts § 74. An option so long as it remains unaccepted, is a unilateral writing lacking mutual elements of a contract, but when accepted by optionee, an executory contract, which is mutually binding on the parties, arises. Crane-Rankin Development Co. v. Duke, 185 Okl. 223, 90 P.2d 883 (1939); Davenport v. Doyle Petroleum Corporation, 190 Okl. 548, 126 P.2d 57, 61 (1942). We now turn to what we regard as the main issue to be decided. Respondent contends that the option is invalid because of uncertainty and indefiniteness as to time. The trial court held that the failure to specify a time within which the "option" could be exercised rendered the instrument a nullity, a nudum pactum, saying "The crux of the instant case is that no valid option agreement ever was executed the agreement of March 2, 1962, being a total nullity." Respondents and the trial court placed great stress upon a statement in C.J.S.: "An option for an indefinite term is a nudum pactum." 91 C.J.S., Vendor and Purchaser § 6 (1955). This statement first appeared in Corpus Juris and was later adopted and included in C.J.S., relying on Bristo v. Christine Oil &amp; Gas Co., 139 La. 312, 71 So. 521 (La. 1916). Close examination will reveal that the Bristo case involved a perpetual lease for mineral rights and that the option was invalidated for two reasons: 1) Under a Louisiana statute which provides that the price of a sale must not be out of proportion with the value of the thing sold there was failure of consideration; and, 2) the purported extension for an unlimited time was violative of the rule against perpetuities. We feel that the statements in C.J.S. and the holding in the Bristo case are not in point in this case for the reason that there they were concerned with an option for an unlimited[3] time whereas in this case we are concerned with an option for an indefinite but limited time.[4] According to the language of the agreement, that time was "as soon as financing has been obtained." *106 An option actually intended by the parties to run for an unlimited time (i.e., forever) is void. A court cannot save such an option by implying a reasonable time because such an interpretation would be exactly contrary to the intention of the parties. However an option which is to remain open for a limited time but in which no time is stated is valid because the law will imply a reasonable time for its duration. Restatements, Contracts § 46 (1932). This principle and general philosophy are illustrated by Shull v. Sexton, 390 P.2d 313, 316 (Colo. 1964) where the court states: Although the instrument of March 2, 1962, is no pearl of draftsmanship, we do not subscribe to the position that the court is being asked to rewrite the contract for the parties. Where possible, the court must supply those things which it is bound under the law to imply in order to carry out the intent of the parties so as to make the agreement lawful, effective and reasonable. That the parties have burdened the court with the necessity of establishing by law what is a reasonable time under the circumstances is true; however, this is a duty which the court cannot ignore. As we have determined that the trial court was in error in finding the option to be a nullity, this case must be remanded for the factual determination of what is a reasonable time within which the option may be exercised in the context of this case. Reversed. THOMPSON, C.J., and COLLINS, J., concur. [1] Deleted at this place in the instrument were the words "and not to exceed 40 acres." This deletion was initialed by both both parties. [2] At this point, the parties deleted the following: "it being further understood and agreed, however, that in the event Buyer has not exercised the right to buy all of said property within a period of five (5) years from the date hereof, the Seller herein shall be released from the obligation of selling the remaining balance of land to the Buyer. It is understood that the Buyer herein is only obligated to purchase such portions of said described real property as Buyer desires to purchase, and Buyer shall also have the right to determine which parcels it will purchase in what order." The contemporaneous nature of this deletion is evidenced by the parties failing to replace the now inapplicable comma after "price" with a period. This deletion was also initialed by both parties. [3] This is close to the term "unlimited option" used by Prof. Corbin in his article "The Effect of Options on Consideration", 34 Yale L.J. 571 (1925). There the unlimited option situation was treated as an illusory promise. [4] To the extent that the broad language quoted from C.J.S. above is, or seems to be, inconsistent with the holding in this case, we deem its authority as unpersuasive.