Court Opinion

ID: 6473278
Source: CourtListenerOpinion
Date Created: 2022-06-26 22:32:41.774638+00
Date Added: 2024-06-11T09:11:41.509421
License: Public Domain

SLOAN, J.
The appellant, James D. Monihon, is the owner of a building in the city of Phoenix known as the “Monihon Block.” On the first day of May, 1893, Monihon leased to J. A. Kurtz and E. S. Wakelin the corner storeroom in said building for the term of five years, at the rental of one hundred dollars per month. The lease was in writing, and contained the following provision: “The lessees by giving lessor six months’ written notice, shall have privilege to renew this lease at end of term for same purposes, and rate of rent and manner of payment, as above.” This lease was, during the term, assigned to Wakelin & Co., a firm composed of E. S. Wakelin and Amanda Kurtz. Subsequently, Amanda Kurtz withdrew from the firm, and Wakelin continued in possession of the leased premises, and paid- the rent as it became due. The original term of the lease expired May 1, 1898. On October 28, 1897,—two days before the expiration of the time within which, by the terms of the lease, the lessees might exercise their option of renewal,—Wakelin was thrown from his horse, and so severely injured that he was taken to the hospital, where he remained physically and mentally incapacitated for business until November 22, 1897. On this day he was taken by his physician to his store, where he wrote out a notice of his intention to claim a renewal of the lease, and had this notice served upon Monihon. In the meanwhile Monihon had entered into negotiations with one Keifer for *231the renting of his storeroom at one hundred and forty dollars per month, but no binding agreement had been entered into for the renting of the storeroom to Keifer prior to service of the notice of Wakelin’s intention to renew. Monihon refused to renew the lease to Wakelin at the expiration of the term, •claiming that the latter had forfeited his right of renewal because of his failure to give notice of his intention within the time specified in the lease, whereupon Wakelin brought this suit to compel Monihon to specifically perform the covenant of renewal, and execute a new lease. A decree was entered by the court below in favor of Wakelin, as prayed for in the complaint.
The findings of the court upon what we consider the central and controlling facts in the case were as follows: 1 ‘ That the court further finds that on October 28, 1897, more than six months before the expiration of said lease, plaintiff had elected and determined to exercise his option to renew said lease, and had then determined and intended to give the defendant notice in writing of such intention and determination six months prior to the expiration of the term of said lease, but because of an accident that happened to plaintiff without his fault, and which he could not prevent, the plaintiff was so injured as to render him physically and mentally incapacitated from giving such notice at any time between the said 28th day of October, 1897, and on the 22d day of November, 1897, the plaintiff did give the defendant written notice of his election and determination to demand renewal of said lease for the term of five years from its expiration; ■and the court further finds that at the time said notice was given, on November 22, 1897, the defendant, J. D. Monihon, had made no contract for the letting of said premises to any other person, and was in the same position respecting said premises, and the use or leasing thereof, as on November 1, 1897.” Appellant attacks these findings of the court, and particularly the one that on November 22d, when the notice was given by Wakelin of his intention to renew, Monihon had made no contract for the letting of the premises to any other person, and was in the same position respecting the premises and its leasing as on November 1, 1897, when, by the strict letter of the contract, Wakelin’s option to renew expired. An examination of the testimony upon this point *232discloses that while it is very probable that Monihon could have rented the premises to Keifer at the expiration of the lease for one hundred and forty dollars per month, yet it was not shown that he had entered into any binding agreement of lease with Keifer or any one else; and hence the finding is supported by the evidence. The question, therefore, becomes one of law, which may be stated thus: Will a court of equity decree specific performance of a contract of renewal in a lease, where the lessee, by reason of unavoidable accident causing his disability, failed to give notice of his intention to renew within the time specified in the lease for the giving of such notice, and the notice is actually given at the first opportunity offered the lessee, and where it appears that the lessor, by reason of the delay in giving notice, is not put in a worse position than he would have been in had the notice been given in time ? It is contended by counsel for appellant that the covenant to renew the lease was nothing more than a naked option—a unilateral agreement. If this contention be sound, it has an important bearing upon the question under consideration. An option to purchase, or to renew a lease, standing alone, unsupported by any' consideration which has passed, both in law and equity is regarded differently from a covenant to convey, or to renew a lease forming an integral part of a contract or lease, containing several distinct covenants, and founded upon an adequate consideration. The latter is treated as more than a mere privilege, and as having all of the elements of a mutual contract. Hall v. Center, 40 Cal. 63; Souffrain v. McDonald, 27 Ind. 269; House v. Jackson, 24 Or. 89, 32 Pac. 1027. Such covenant to convey or to renew a lease, unless it be otherwise declared in the instrument itself, is properly held to constitute a substantial part of the whole contract, because it might well be considered as a material inducement which led to its execution. In the case at bar this is illustrated by the testimony of Wakelin. In effect, he testified that, had no covenant to renew been inserted in the written lease, he would not have agreed to it, for the reason that the premises at the time had a prospective value as a place of business greater than it then possessed, and he therefore agreed to pay the stipulated rent for the term, because of the privilege of leasing the premises for a further term when the premises, through the growth of the town and the exten*233sion of trade, should be made more valuable to him as a business stand. We view the covenant to renew in the lease as a mutual contract, founded upon an adequate consideration, and will therefore give attention to the law applicable to contracts of renewal, rather than to mere options to renew.
It is contended that time is of the essence of such a contract of renewal, and that, therefore, equity cannot, without making a new contract between the parties, relieve against its forfeiture, even if occasioned solely by unavoidable accident, and may not decree specific performance of such contract under such circumstances. That time is of the essence of such a contract is doubtless true. Covenants of renewal in written leases, where the 'giving of notice of intention within a specified time is made a condition precedent to such,renewal, are generally so understood and treated by the parties themselves, and so regarded by the courts. The reason why they are so regarded is that a failure to give notice might result in serious loss and inconvenience to a lessor, and, when such a result is apt to follow a failure to comply with the terms of a contract calling for the performance of any act within a particular time, time is then regarded as of the essence of such contract. It is therefore required of a party to such a contract that he keep his contract with literal strictness, or suffer the consequences of his failure. The distinction between a contract in which time is of the essence and a contract in which time is not made of the essence is that strict performance is required of the terms of the former within the time specified, where such performance is possible, and the latter is regarded only as requiring that its terms be performed within a reasonable time. While the law so regards and treats a contract in which time is of the essence, it is not true that a court of equity will refuse in every instance to specifically enforce a contract in which time is of the essence, and where its terms in this respect were not literally complied with; nor is it strictly true that in so doing a new contract is made between the parties. It is rather true that a court of equity, in relieving against the consequences of unavoidable failure to perform the contract within the time specified, does so upon the theory that it is enforcing the contract in the true intent'and meaning of the parties; for it will not be regarded that anything more is intended by such a contract than that *234there should be perfect good faith and utmost diligence to perform its terms within the time specified. Anything short of the utmost good faith and diligence on the part of the party seeking to be relieved from the consequences of a failure to conform strictly to the terms of such contract will not be regarded as sufficient; but where it appears that by the act of the other party, or by unavoidable accident of such character as could not be foreseen and guarded against, the performance of the contract with the exercise of due diligence was rendered impossible, and the party at the earliest opportunity performed his part of the contract, the court will enforce it, provided this can be done, and the parties be left in the same relative position they would have been in had no delay occurred in the performance of the contract according to its terms. In determining whether the contract can, under such circumstances, be enforced without injury, the test is not that the one party may be able to profit by the failure of the other, but rather that he does not lose an advantage which he would have had had no failure occurred.
Applying these principles to the case at bar, the court found that the giving of notice by Wakelin within the time specified in the contract was rendered impossible by reason of his accident and misfortune, that he availed himself of the earliest opportunity to give the notice which his situation permitted, and that Monihon did not suffer loss by reason of the delay. It is such a case as warranted a court of equity in enforcing the contract, notwithstanding the failure of Wakelin to comply literally with the terms of the covenant of renewal. Want of good faith or diligence could not be predicated upon the fact that Wakelin did not give notice prior to his accident, for to do so would be to inflict a penalty upon him for availing himself of a right given him by the contract. Had Wakelin waited until the last moment, and then was prevented by accident from giving notice, his conduct might then have properly been characterized as culpable negligence. But the fact was that Wakelin had two whole days within which to serve the notice upon Monihon, who, as it appears, was at the time in Phcenix; and hence, in the ordinary course of things, there was ample time remaining within which he could have been reached and served with notice. We conclude therefore, under the findings, that no equitable principle was violated by *235tlie trial court in decreeing specific performance of the covenant to renew the lease in question, and the judgment is accordingly affirmed.
Davis, J., and Doan, J., concur.