Opinion ID: 2185180
Heading Depth: 1
Heading Rank: 5

Heading: Did the Filing of Wagshal's Judgment Create a Lien on the Option Held by Chateaux?

Text: D.C.Code 1973, § 15-102, provides that as of the date it is recorded a final judgment of the Superior Court constitutes a lien on all the freehold and leasehold estates, legal and equitable, of the defendants bound by [such judgment,] . . . in any land, tenements, or hereditaments in the District of Columbia, whether the estates are in possession or are reversions or remainders, vested or contingent.. . . (Emphasis supplied.) The trial court reasoned that the option was an equitable estate or interest under section 15-102 because it permitted the conversion of a leasehold interest into a freehold interest at the expiration of the lease. Whether an option to purchase real property is correctly classified as an equitable or legal freehold or leasehold estate is a question of first impression in this jurisdiction. We answer it in the negative. We have looked to the law of other jurisdictions for guidance on this issue. In State v. New Jersey Zinc Co., 40 N.J. 560, 193 A.2d 244 (1963), the Supreme Court of New Jersey was called upon to determine whether the owner of an unexercised option on property had standing to participate in a condemnation action. To have such status, a party was required to show an interest [22] in the property. In concluding that the unexercised option did not amount to such a property interest, the court examined the nature and effect of an option to purchase realty, and stated: [The optionee] has nothing but a continuing, irrevocable proposal to sell him the property, which will not ripen into anything more unless and until he exercises it, which he may do or not entirely as he pleases. An option does not create any interest in the land, 3 American Law of Property § 11.17 (1952) . . . . [40 N.J. at 576, 193 A.2d at 252.] Other eminent domain cases have similarly denied the holder of an unexercised option the status of one possessing an interest or estate in the condemned property. See, e. g., Haney v. Denny, 135 Ind.App. 317, 193 N.E.2d 648 (1963); Cornell-Andrews Smelting Co. v. Boston & P. R. Corp., 209 Mass. 298, 95 N.E. 887 (1911). In the latter case a leaseholder with an option to purchase sought compensation for the diminution in value of all his rights under the lease including the option. The court stated: . . . [T]he real objection to this contention is that although the insertion in a lease of an option giving to the lessee at his option a right to buy the fee adds to the value of the lessee's rights under the lease, it is no part of the lessee's estate in the land. It is a contract right and nothing more, although contained in the lease[ [23] ] and although it is a contract right which passes to an assignee of the lease. . . . The lessee's rights under such an option are rights which lie in contract and do not create in the lessee any estate in the land. . . . [209 Mass. at 306, 95 N. E. at 890.] Although the preceding cases arose in the context of eminent domain proceedings, we are persuaded by the presence of similar language in other contexts that they correctly state a general rule suitable for application in the instant case. In deciding that the holder of an unexercised option was not an equitable owner entitled to a tax exemption, for example, the court in Gautier v. Lapof, 91 So.2d 324 (Fla.1956), relied upon 32 Am.Jur. Landlord and Tenant § 300 in stating: [U]nder a lease with option to purchase the relation of the parties is merely that of landlord and tenant until the option is exercised, and the tenant has no estate in the land beyond the lease until he elects to purchase. [91 So.2d at 326.] In another tax case, Helvering v. San Joaquin Fruit & Investment Co., 297 U.S. 496, 498-99, 56 S.Ct. 569, 80 L.Ed. 824 (1936), the Supreme Court was faced with the task of determining the date on which respondent acquired certain property. Although the point was not dispositive of the case, the Court rejected the contention that ownership of an option created an interest in land, even when the option was embodied [24] in a lease. Similarly, the court in Coons v. Baird, 148 Ind.App. 250, 255, 265 N.E.2d 727, 731 (1970), quoting Butsch v. Swallow, 78 Ind.App. 101, 106, 134 N.E. 877, 878 (1922), stated with approval the following general rule: It has been many times held that an option to purchase gives no right of property in and to the thing which is the subject of the option. It is not a sale. It is not even an agreement for a sale. At most, it is but a right of election in the party receiving the same to exercise a privilege, and only when that privilege has been exercised by an acceptance does it become a contract to sell. . . . In light of the above authorities, we conclude that the trial court erred in holding that an option accompanying a lease was embraced by the statutory language of section 15-102, which applies to legal and equitable estates in land.