Opinion ID: 1161420
Heading Depth: 1
Heading Rank: 3

Heading: agreement of june 19, 1957

Text: June 19, 1957, Corinthian and W & B entered into an 8-page agreement entitled Option Agreement. We believe it is significant that the words option, optionor, and optionee are used in the instrument more than 100 times. The words buyer, seller, vendor, or vendee are not used. [1] An option to purchase property is a contract wherein the owner, in return for a valuable consideration, agrees with another person that the latter shall have the privilege of buying the property within a specified time upon the terms and conditions expressed in the option. McFerran v. Heroux, 44 Wn.2d 631, 638, 269 P.2d 815 (1954), and authorities cited. Since the written agreement of June 19, 1957, is the nucleus of this controversy, we find it necessary to set forth its salient provisions, numbered as they appear in the agreement. The whereas clause is this: Optionee [W & B] has requested Optionor to grant an option to purchase certain real property of Optionor [Corinthian], and Optionor is willing to grant such option on the terms hereinafter provided.... The granting clause is this: (1) Optionor grants to Optionee the option to purchase as hereafter set forth certain real estate in King County, Washington, described as follows: [Parcel A and Parcel B]. (2) For the sake of brevity we paraphrase the recited consideration. During the existence of the agreement, W & B agreed to pay all of the real estate taxes on Parcels A and B, although it would own only that part of the property upon which it had exercised its option and had received a deed; and to pay the interest accruing upon Corinthian's contractual rights in its acquisition of all of the land (see note 3, supra ). Paragraph 5 of the option agreement acknowledges that the taxes and interest to be paid were the consideration for the option. W & B was to advance the amount of any real estate sales tax which may apply to any purchase under the agreement, the tax to be repaid by Corinthian by crediting W & B with the amount thereof at the time the purchase price becomes due from W & B. (3) W & B was granted the option to purchase the land in 40-acre parcels; in Parcel A the 40 acres had to be a governmental subdivision. After designation of the first 40-acre parcel, subsequent options had to be of a 40-acre tract adjoining a tract previously conveyed to W & B. (4) Execution of the agreement constituted the exercise by W & B of its option to purchase the first 40-acre parcel, and Corinthian was bound to deed it to W & B. (5) The purchase price per acre for the total land purchased by exercise of options hereunder up to termination of this agreement shall be $2,000.00 per acre, increased by 50% of the net profit realized by Optionee [W & B] with respect to property purchased and resold hereunder to the extent hereafter provided. (Italics ours.) The method of payment may be old-hat to an expert in real estate transactions or to an expert accountant; but, as set forth in the option agreement, it is a wonderful and fearful thing for an appellate court called upon to consider the record. The contractual plan of payment by W & B to Corinthian was completely deferred. W & B was to pay $1,200 per acre for the first 40 acres, payable on or before July 1, 1958; $1,400 on the second 40 acres upon which it exercised its option; $1,600 per acre for the third 40 acres; $1,800 for the fourth 40 acres; $2,199.50 per acre for each additional parcel upon which it exercised its option. W & B did not have to pay the basic purchase price of each 40-acre parcel, other than the first, until March 5 following the exercise of the option. Thus, it would seem that Corinthian would not receive its basic sales price of $2,000 per acre until W & B had optioned and had paid for the last parcel in the tract. This, however, is subject to adjustment should the agreement be cancelled by either Corinthian or W & B. In addition, however, Corinthian was to be entitled to 50 per cent of the net profit realized by W & B upon its resale of lots in each parcel. It is not necessary that we set forth the method of determining W & B's net profit. The first accounting of net profit was to be made after W & B's purchase and resale of 200 acres; the second accounting after purchase and sale of the second 200 acres; and a final accounting after a purchase and resale of the remainder. This, however, is subject to adjustment should the agreement be cancelled by either Corinthian or W & B. (6) W & B could not exercise an option until it had paid Corinthian the basic price of the land involved in previous options it had exercised. (7) Upon receipt of written notice designating the parcel of land, Corinthian must forthwith deliver a deed to W & B. (8) This is one of the paragraphs upon which the trial court placed great emphasis in support of its conclusion. We quote the pertinent portions. Optionee [W & B] agrees to exercise at least one option during each calendar year of the existence of this agreement, commencing with 1957. Optionee agrees to exercise options covering all of parcels A and B above within seven and one-half years from the date of this agreement.... In the event any option is not exercised by Optionee by the date required hereunder, Optionor [Corinthian] shall have the right to cancel this agreement, provided, however, that Optionee, [W & B] on written notification to Optionor, shall have the right to extend the time for exercise of one option for a period of six months. (9) Optionee [W & B] agrees to pay before delinquency all assessments levied or becoming due against the property described in paragraph 1, provided, however, that if this agreement is terminated, Optionor [Corinthian] shall thereupon reimburse Optionee [W & B] for the amount of assessments previously paid by Optionee [W & B] which are allocable to property not purchased by Optionee. (10) This paragraph of the agreement has no application to the instant case. (11) Optionee [W & B] agrees to diligently pursue the development and resale of property purchased under this agreement and Optionee further agrees not to undertake any other major development until 75% completion of the development contemplated by Optionee [W & B] with respect to the property subject to this agreement. (Italics ours.) Paragraphs 12, 13, 14, 15 and 16 have no bearing upon this litigation. (17) Time is of the essence of this agreement. If Optionee shall fail to exercise any option or make any payment promptly at the time the same shall become due, or promptly perform any covenant, agreement or obligation hereunder, Optionor may elect to cancel this agreement by notice in writing and thereupon all rights of Optionee hereunder shall cease and any payments theretofore made shall be retained by Optionor as liquidated damages, provided, however, that Optionee shall not be relieved of paying $2,000.00 per acre due or to become due with respect to land previously purchased, including 50% of the net profit realized therefrom, nor shall Optionee be relieved of the obligation to pay interest accrued to the date of cancellation and real estate taxes due on a pro rata basis at the date of cancellation.... In the event of any default, Optionor may bring an action for recovery of any amounts due from Optionee. Any action for the recovery of money shall be considered as if the promise to pay had been expressed in a different instrument, and no such action shall constitute an election not to proceed otherwise as to any subsequent or continuing default, and no waiver by the Optionor of any default on the part of Optionee shall be construed as a waiver of any subsequent or continuing default. (18) Optionee shall have the right to cancel this agreement by giving Optionor sixty days' advance notice in writing and paying Optionor $2,000.00 per acre with respect to all options theretofore exercised, less all moneys previously paid by Optionee for such acreage, excluding percentage of net profit, if any, previously paid. In the event of such cancellation, the rights of the parties shall be terminated except that Optionee shall pay any interest which may have accrued as herein agreed up to the date of cancellation, together with real estate taxes due on a pro rata basis at the date of cancellation. (19) In any suit or action to enforce any provision of this agreement or to collect any payment or any charge arising therefrom, Optionee agrees to pay a reasonable sum as attorneys' fees together with costs and disbursements in connection with such action, including the reasonable cost of searching records. Subsequent to the execution of the option agreement, Corinthian and W & B agreed that it would be beneficial in the development of Newport Hills to build recreational facilities for those building homes. This was done at a total cost of $169,632.18, and borne equally. By reason of later developments, the trial court found it necessary to adjust the cost of these facilities to Corinthian. In September, 1962, W & B acquired approximately 100 acres of land from other owners, and developed it along with land acquired from Corinthian, using the same organization to develop and sell lots and homes in the two neighboring developments. It used the same advertising, sewer facilities, roads to service the two developments generally, and the recreational facilities (to which we have alluded). Corinthian objected to this, but to no avail. The trial court found that the additional land was a major development which breached paragraph (11) supra, of the option agreement. W & B had not exercised its option to purchase 75 per cent of Corinthian's land. We agree. In 1963 and early 1964, W & B terminated its engineering staff; ceased clearing of land, installing of utilities, and engineering work. It curtailed its builders-financing program. By June 29, 1964, W & B had, for all practical purposes, ceased its efforts to develop and resell the property. About July 1, 1964, it disbanded its sales force. With Corinthian's knowledge but strenuous objection, W & B, in July, 1964, sold to Corley its remaining real property (developed, partly developed, and undeveloped) previously acquired from Corinthian, except the shopping center and recreational facility. The latter had been previously conveyed by W & B, without Corinthian's consent, to Newport Hills Association, a nonprofit organization. The transaction with Corley also involved the sale of a tract known as Division 14, a valuable portion of Corinthian's remaining property, to which W & B did not have title, but which it had requested under its option agreement. The sale was at a wholesale price and did not equal the amount that would have been received by W & B had it continued its activities as contemplated in the original option agreement. W & B had breached its agreement, at least in the following respects: (1) it had ceased to develop diligently and to resell the property it had acquired from Corinthian; (2) it had acquired and promoted a competing development prior to acquiring, developing, and selling 75 per cent of the Corinthian property; (3) it had sold in bulk to Corley the property it owned, at a price which was not equal to the price it would have received had it continued to operate as required. Corinthian, therefore, was justified in refusing to convey Division 14 to either W & B or Corley. November 13, 1964, Corinthian notified W & B of its intention to terminate the option agreement of June 19, 1957, within 60 days, unless the breaches were remedied. On November 13, 1964, Corinthian filed its complaint in this action. An amended complaint was filed April 21, 1965. W & B having failed to remedy its defaults, Corinthian gave notice of termination of the option agreement on January 18, 1965.