Court Opinion

ID: 9569570
Source: CourtListenerOpinion
Date Created: 2023-08-21 20:15:13.127678+00
Date Added: 2024-06-11T12:03:30.731392
License: Public Domain

McLaughlin, J.,
dissenting. The trial court held it would be unconscionable to extend the lease for an additional twenty years at the same rental rate. One definition of unconscionable, found in The Random House Dictionary 1541 (1966), is “. . . not in accordance with what is just or reasonable . . . .”
Generally, mere inadequacy of price or a change in the value of property from the date the parties entered into the contract to the time of the action will not preclude enforcement of the contract as inequitable. Hochard v. Deiter, 219 Kan. 738, 742, 549 P.2d 970 (1976); Sutherland v. Sutherland, 187 Kan. 599, 605, 358 P.2d 776 (1961); Torluemke v. Abenarthey, 174 Kan. 668, 670, 258 P.2d 282 (1953); Greenwood v. Greenwood, 96 Kan. 591, 594, 152 Pac. 657 (1915); Niquette v. Green, 81 Kan. 569, 106 Pac. 270 (1910). Many *192opinions state the rule that inadequacy of consideration by itself does not amount to sufficient justification for preventing specific performance. See Sutherland v. Sutherland, 187 Kan. at 605; Annot., 11 A.L.R.2d 390, 406; 81 C.J.S., Specific Performance § 20, pp. 741-742; 5A Corbin on Contracts § 1165 (1964); 11 Williston on Contracts § 1428 (3rd ed. 1968); 71 Am. Jur. 2d, Specific Performance § 83, pp. 112-113.
A consequence to the foregoing is the rule that inadequacy of price is considered as of the date the parties entered into the contract and the circumstances then existing, not in the light of subsequent events. Eakin v. Wycoff, 118 Kan. 167, 174, 234 Pac. 63 (1925); 81 C.J.S., Specific Performance § 47, p. 824; 71 Am. Jur. 2d, Specific Performance § 81; 11 A.L.R.2d at 397. See Haase v. Richmond, 570 S.W.2d 341 (Mo.App. 1978), applying these two rules to specifically enforce a lease purchase option.
Kansas cases, however, recognize that a court of equity may refuse specific performance if the consideration given for the agreement is so inadequate that it works a substantial hardship on one of the parties or if enforcement of the agreement would be unjust. Hochard v. Deiter, 219 Kan. 738; Sinclair Prairie Oil Co. v. Worcester, 163 Kan. 540, 550-551, 183 P.2d 947; Young v. Schwint, 108 Kan. 425, 430, 195 Pac. 614 (1921). In Sinclair the court specifically cited and approved the Restatement provision which in its current form reads:
“(1) Specific performance or an injunction will be refused if such relief would be unfair because
“(c) the exchange is grossly inadequate or the terms of the contract are otherwise unfair.” Restatement (Second) of Contracts § 364 (1981).
11 A.L.R.2d at 399 states:
“Despite the general rule that in determining the right to specific performance, the court will look to the circumstances as they existed at the inception of the agreement rather than in the light of subsequent events, many of the cases contain statements recognizing that where such a change of circumstances has taken place that specific enforcement would work peculiar hardship, equity may refuse to grant that remedy.”
And, more specifically, at 411:
“Although the majority of the cases support the rule that an increase in the value of the property, standing alone, will not justify the denial of specific performance, occasional holdings and dicta may be found supporting a contrary rule, especially where the accompanying circumstances suggest unusual hardship.”
*193The important inquiry in the present case is whether there was such a drastic change in circumstances, which could not have been foreseen by the parties at the time the lease was executed, as to require the intervention of a court of equity when the time for the option to renew the lease arrived. The lease was executed on January 3, 1958, for twenty years at a rental rate of $200 per year with an option to renew for an additional twenty years on the same terms. It must be remembered that in 1958 and for some years thereafter the country was enjoying a stable economy and a very modest inflation rate. It would be beyond the comprehension of reasonable persons at the time of the execution of the lease to expect that by the time the first twenty years had expired, the country would be experiencing runaway inflation and skyrocketing real estate values with a corresponding increase in taxes.
81 C.J.S., Specific Performance § 20, states:
“Subsequent events or a change in conditions which the parties cannot reasonably be supposed to have had in mind when the contract was made, and which work a hardship on defendant, have frequently furnished a sufficient reason for refusing specific performance. On the other hand, specific performance of the contract will not be refused because of difficulties or hardships caused by subsequent events or changed circumstances where these were or should have been within the contemplation of the parties as possible contingencies when they entered into the contract. Where neither party is at fault in the matter, the changed circumstances must directly affect the subject matter of the contract before the hardship caused thereby will be held to excuse specific performance.” (Emphasis supplied.) p. 741.
5A Corbin on Contracts § 1162, pp. 207-11 (1964), states:
“There are cases, also holding that facts subsequent to the making of the contract, unforeseen by the parties, affecting values of property or of the consideration given, may be considered, and that specific performance may be refused except upon adjustment of payments in accordance with new facts. The remedy should not be refused, however, merely because of the rise or fall of market values that is within the usual contemplation of contractors and the risk which is usually intended to be assumed when the contract is made. Specific performance will not be refused merely because the contract turned out to be a losing one.
“Specific performance should seldom be refused on the ground of changed conditions if nothing has occurred since the making of the bargain that was not within the actual contemplation of the parties when they were bargaining.” (Emphasis supplied.)
71 Am. Jur. 2d, Specific Performance § 82, states:
“Many cases may be found stating that, as a general rule, in determining the availability of specific performance to enforce a contract, equity will view the fairness or equity of the agreement in the light of the facts as they existed at the *194inception of the contract, ignoring subsequent events. On the other hand, there is considerable authority for the proposition that where subsequent events have worked great and unexpected hardship, equity may refuse to intervene, remitting the parties to their legal rights. These rules are not necessarily inconsistent, if the former is regarded as the general principle, and the latter an exception thereto, although some of the cases apparently announce one or the other as absolute. In several instances, the rule that a change in circumstances working hardship might justify a denial of specific performance has been limited to the situation where the subsequent events relied upon were such as not to be within the reasonable contemplation of the parties at the time of the execution of the contract.” (Emphasis supplied.) p. 111.
See also 11 A.L.R.2d at 436; Barr v. Deiter, 190 Pa. Super. Ct. 454, 154 A.2d 290 (1959).
I believe that the recent decision of Jensen v. Southwestern States Management Co., 6 Kan. App. 2d 437, 629 P.2d 752, rev. denied 230 Kan. 818 (1981), controls the present case, despite the difference in the elapsed time involved in the two cases.
In Jensen, suit was filed to quiet title to land owned by the plaintiffs except for mineral rights to the coal underlying the land. The defendants owned the mineral rights through six mineral deeds, each over fifty-five years old. In five of the six mineral deeds there were clauses giving the grantee the right to use the surface also, upon payment of $70 or $75 per acre. The trial court held that the price for use of the surface was now inequitable and should the defendant exercise its option to take any surface, it must pay the reasonable value at the time of its use. The defendant, Southwestern States Management Company, appealed from that part of the decision. This court affirmed the decision. The following is applicable to the present case:
“To condition a grant of specific performance upon paying an adequate price rather than a price set before the value of money has eroded by inflation is common. 71 Am. Jur. 2d, Specific Performance § 88, p. 120. Of many circumstances calling for a price adjustment in cases, the following are noted: The contract price would work a hardship not within contemplation of the parties at the time of making the contract. Munchak Corp. v. Caldwell, 46 N.C. App. 414, 265 S.E.2d 654 (1980), aff’d as modified 301 N.C. 689, 273 S.E.2d 281 (1981). When specific performance is denied, the court is allowed considerable latitude in making orders to obtain equity between the parties. Schaefer & Associates v. Schirmer, 3 Kan. App. 2d 114, 590 P.2d 1087 (1979). Specific performance is properly denied when land is worth about $1,000 or $1,500 per acre and the contract price is only $361.72. Hodge v. Shea, 252 S.C. 601, 168 S.E.2d 82 (1969). A contract will not be specifically enforced if it ‘drives too hard a bargain for a *195court of conscience to assist.’ Campbell Soup Co. v. Wentz, 172 F.2d 80 (3rd Cir. 1948).” Jensen at 443.
In conclusion, I would point out that three disinterested appraisers appointed by the court found the present fair rental value of the property to be three and one-half times the amount paid during the original term of the lease. This finding portrays a change in values not reasonably foreseeable by the parties at the time the lease was executed, which results in a hardship situation. To enforce the option to renew under the original terms of the lease would be unconscionable and inequitable.
In my opinion the trial court properly exercised its equitable powers and I would affirm its decision reforming the rental provision in the lease.