Buffalo Pipeline Co. v. Bell

694 S.W.2d 592, 86 Oil & Gas Rep. 378, 1985 Tex. App. LEXIS 11644

• Court: Court of Appeals of Texas
• Decided: May 23, 1985
• Docket: 13-84-121-CV
• Status: Published

Opinions

DORSEY, Justice,

dissenting.

I concur in the Court’s analysis and con'clusions in response to appellant’s points of error 1 and 2. However, I disagree with the analysis and disposition of appellant’s third point involving the construction of the paragraph giving the lessee an option to renew the lease.

The critical sentence in the option paragraph is as follows:

Said renewal or five (5) year extension of this lease shall be considered as desired by Lessee upon the payment of the One Hundred Dollars ($100.00) annual rental payment in advance, prior to the expiration date of the preceding five (5) year period, unless Lessee on or before thirty (30) days prior to the expiration date of the five (5) year period, notifies Lessors, their heirs or assignees that it does not desire to extend or renew the lease for an additional five (5) year peri-od_ (Emphasis added.)

To aid our understanding of the sentence, if we reverse the principal dependant clauses and simplify the sentence, the result is as follows:

Unless Lessee ... notifies lessor ... that it does not desire to extend or renew the lease ..., said renewal or five year extension of the lease shall be considered as desired by lessee upon the payment of One Hundred Dollars as rental in advance ....

The paragraph from the lease that is quoted in the Court’s opinion is, by its own terms, a method by which the lessee exercises his option to extend or renew the lease. That paragraph gives the lessee the right to extend the term of the lease for an additional five-year period should the lessee desire. That desire is manifested by the payment of an annual rental in advance, unless the lessee notifies the lessor that it does not wish to renew the lease. The Court’s reading of that option provision gives the lease a perpetual term in the absence of any action by the lessee. I construe such construction to be counter to the language of the paragraph wherein the lessor is required to express his desire to renew by performing an act. Absent the performance of that act, the “desire” to renew was not manifested in accordance with the agreement of the parties.

This option to renew is distinguishable from a lessee’s option to terminate an automatically renewing lease, as in Sirtex Oil Industries, Inc. v. Erigan, 403 S.W.2d 784 (Tex.1966). The Sirtex lease expressly gave the lessor the right to end the lease should he desire prior to the expiration of the term, which was co-extensive with an oil, gas and mineral lease. It did not involve an option to extend or renew, but rather, the right of the lessee to terminate prior to the expiration of the lease. The Supreme Court properly held that a failure to pay rent could not be construed as the lessor’s exercise of its election to terminate.

Other cases relied on by the Court are “notice” cases, where, in order to extend or renew the lease, the lessee was required to notify the lessor. The Courts have uniformly held that, when only notice is required by the tenant, a holding over by the tenant serves to notify the lessor that the right is being exercised.

Jones v. Gibbs, 133 Tex. 627, 130 S.W.2d 265 (Tex.Comm’n.App.1939, opinion adopted), is not on point because of the equities of the parties. A timber deed was made giving the grantee the right to remove timber during a 10 year period, with the right to extend that period in annual increments for a total of five additional years. The consideration paid for the deed was $26,520 and the renewal extension fee was nominal — $205.68. The grantee made the renewal extension payments to a third party at the request of the grantor, but contrary to the express wording of the deed. The Court held that, as little of the standing timber that was bought by the grantee had been removed, and the renewal fee was nominal in relation to the value of the timber and the initial consideration, not to allow the renewal would be to work a forfeiture by the grantee of an estate for which he had previously paid.

There is no evidence of equitable considerations in the instant case that would bring it under the rule of Jones v. Gibbs. It is not a purchase of standing timber for a fair consideration paid at the inception, but, rather, a surface lease for a time certain with the option of the lessee to renew if he performed a certain condition. I would hold that, as the condition was not performed by the lessee, the lease was not renewed.

That the condition to be met in order to renew was the payment of annual rental in advance should not be confused with the tenant’s covenant to pay rent. The only portion of the lease to be construed is the quoted paragraph setting forth the means by which the tenant may exercise his option to renew or extend the lease. Indeed, the entire lease is not in evidence and its other terms, conditions or covenants are not germane to this decision.

The longstanding rule that an option is to be strictly construed, and the burden of meeting its condition is on the party wishing to exercise the option, is being disregarded by the Court’s decision. Zeidman v. Davis, 161 Tex. 496, 342 S.W.2d 555 (1961); Scott v. Vandor, 671 S.W.2d 79 (Tex.App. — Houston [1st Dist.] 1984, writ ref’d n.r.e.); Tidwell v. Lange, 531 S.W.2d 384 (Tex.Civ.App. — Waco 1975, no writ); White v. Miller, 518 S.W.2d 383 (Tex.Civ.App. — Tyler 1974, writ dism’d.).

The expiration of a leasehold estate under its own terms does not constitute a legal forfeiture in the absence of overriding equities.

Opinion ordered published. TEX.R.CIV.P. 452.