Court Opinion

ID: 9524971
Source: CourtListenerOpinion
Date Created: 2023-08-07 02:58:50.395235+00
Date Added: 2024-06-11T13:12:25.301004
License: Public Domain

HENDERSON, Justice
(dissenting).
Under the majority opinion, the thirty-day requirement under (ll)(b) is meaningless. If, indeed, it is meaningless, then why did the parties place it in the lease agreement?
The contracting parties placed 40 words in (ll)(a) and 114 words in (UXb). Reasonably, I must conclude that the parties attached equal significance to (ll)(a) and (ll)(b), if not more to (UXb). Under the majority’s rationale, the lease is entirely for the benefit of Texaco. I cannot believe that this is fair as the lease was supported by valid consideration with mutual benefits.
I do not believe that (ll)(b) can be disregarded. Texaco had a dual option. At anytime during the initial term or any renewals of the lease agreement, it could have purchased the property for $22,000 under (ll)(a). If Texaco did not exercise the (ll)(a) option, it still could have used (ll)(b) to meet the terms of a bona fide offer, providing it agreed to meet the terms of that offer within thirty days after receipt of the notice required to be given it by the owners of the property. The facts reveal that Texaco did not act until after a sixty day notice was given by the owners. Notice of the bona fide offer was given on January 7, 1980, and Texaco did nothing until March 12, 1980.
Furthermore, Texaco refused to meet the terms of the bona fide third party and elected to offer $22,000 under (ll)(a). The option does not give Texaco an absolute right to purchase for $22,000 at any time it chose. Texaco was required to timely act under its option, and this it failed to do. This being an option contract, time was of the essence, and failure to meet the notice requirement is to be construed against the party failing to timely exercise the option granted. The option is lost if not timely exercised. Hanschka v. Vodopich, 20 S.D. 551, 108 N.W. 28 (1906); Herman v. Winter, 20 S.D. 196, 105 N.W. 457 (1905).
In a strikingly similar factual setting, the Supreme Court of Iowa reached a result contrary to the majority holding here. The same type of an option as is involved in this case, that is a dual option as it has been called, was interpreted by the Iowa Supreme Court in Imperial Refineries Corporation v. Morrissey, 254 Iowa 934, 119 N.W.2d 872 (1963). In Morrissey, the option terms were as follows:
“If this lease be in effect to March 1, 1961, Lessee shall either have the option, right and privilege to purchase the following described property situated in Jefferson County, Iowa, to wit: (land described) at a mutually satisfactory price not to exceed the sum of $22,000 cash or Lessee shall have the right and privilege to renew this lease for a further period of *876four years commencing the first day of March, 1961, upon the same terms and conditions as are set out in this lease.
“If during the period and term of this lease and any extensions thereof, lessor, successors or assigns shall have the opportunity to sell the property last above described at a bona fide sale, lessee shall have the right and privilege of the first refusal thereof at the same price and terms as any bona fide offer for said last above described property.”
Id., 119 N.W.2d at 874.
The Iowa court held that the oil company’s failure to exercise its option at the $22,000 price prior to the time when a bona fide offer was communicated to them constituted a waiver of its right to exercise the option, and in doing so the court stated:
... This type of dual option containing both an option to purchase at a specified price during a specified period and the right to purchase at a price offered by a third person is not unusual and has posed many interesting legal problems. As the wording varies in each contract, the specified provision must be examined to determine the intention of the parties. The annotation found in 8 A.L.R.2d 604 presents a review of the cases in which this problem has been involved. As we hold plaintiff [oil company] waived the right to exercise the option to purchase at a specified price, it is not necessary for us to determine the exact effect of these dual options upon each other.
Id., 119 N.W.2d at 875.
I would affirm the judgment of the trial court.
I am authorized to state that Justice DUNN joins in this dissent.