HERTZ EQUIPMENT RENTAL CORPORATION v. Evans

397 S.E.2d 692, 260 Ga. 532, 1990 Ga. LEXIS 439

• Court: Supreme Court of Georgia
• Decided: November 15, 1990
• Docket: S90A0971
• Status: Published

Opinion

Benham, Justice.

This appeal follows the trial court’s dismissal of appellant/ lessee’s complaint for specific performance of an option to purchase real property, and the grant of summary judgment to appellee/lessor.

In 1964, appellee and her husband leased certain real property to appellant’s predecessor for a ten-year term, with an option to extend the lease for an additional five-year term. The 1964 lease also contained an option to purchase the real property for $75,000, which option provided

In the event that the term of this lease is renewed, as herein provided, after the expiration of the first year of said extended term, Lessee shall have the right and option to purchase the premises hereby leased. Such option may be exercised at any time by Lessee giving ninety days written notice thereof to Lessor. . . .

Lessee exercised the option to extend the lease for five years and, on July 15, 1979, the parties executed a document entitled “EXTENSION OF LEASE” in which they extended the term of the 1964 lease for three years for a specified monthly rent and gave appellant options to extend the lease for two additional three-year terms at specified increased monthly rents. The 1979 document also provided

Except as amended and modified herein, all the terms, covenants and provisions of [the 1964] Lease remain unchanged and in full force and effect.

In February 1988, more than 90 days before the expiration of the last three-year term provided for in the 1979 extension, appellant gave written notice of its desire to exercise the option to purchase contained in the 1964 lease. Appellee refused to acknowledge the option and refused to convey title, precipitating this litigation.

The 1964 lease, containing an option to extend the term for five years, bound appellee, at appellant’s election, to a 15-year term of all the terms contained therein, including the option to purchase. Chosewood v. Byars, 201 Ga. 805 (1) (41 SE2d 530) (1947). The issue before us is whether the 1979 lease extension bound appellee to honor the option to purchase contained in the 1964 lease.

Decided November 15, 1990. Sutherland, Asbill & Brennan, William D. Barwick, for appellant. Kidd & Vaughan, Charles M. Kidd, Gwenn Dorb Holland, for appellee.

Where the tenancy is continued not by virtue of any provision in the original lease, but by subsequent agreement, the continuance of the option depends upon the construction to be placed upon that agreement. Where it refers to and continues the original lease, the option has been held extended subject to the terms and conditions of the original lease.

15 ALR3d 470 § 5 [a]. The 1979 lease extension was a subsequent agreement that referred to and extended the term of the 1964 lease. While the parties agreed that all the other terms and provisions of the 1964 lease were to remain unchanged and in full force and effect during the term of the 1979 lease extension, the option to purchase, by its own terms, had viability only through the expiration of the lease extension provided for in the 1964 lease, i.e., the five-year extension that was exercised in 1974 and which expired in 1979. 1 Thus, the two documents created an ambiguity concerning whether the option to purchase was among those terms, covenants and provisions that were to be extended by the 1979 lease extension.

“The construction of a contract is a question of law for the court.” OCGA § 13-2-1. Under the statutory rules of contract construction, if a contract is capable of being construed two ways, it will be construed against the preparer and in favor of the non-preparer. OCGA § 13-2-2 (5). Since appellant prepared the 1979 lease extension, the trial court did not err in construing the contractual ambiguity in favor of appellee and in granting appellee’s motion for summary judgment and dismissing appellant’s complaint for specific performance. See Claussen v. Aetna Cas. &c. Co., 259 Ga. 333 (1) (380 SE2d 686) (1989).

Judgment affirmed.

All the Justices concur, except Weltner, J., not participating.

1 Compare eight other provisions of the 1964 lease in which the parties agreed to the terms thereof “during the term of this lease or any extension thereof.”