McCREIGHT ET UX v. Girardo

287 P.2d 414, 280 P.2d 408, 205 Or. 223, 1955 Ore. LEXIS 323

• Court: Oregon Supreme Court
• Decided: September 9, 1955
• Status: Published

Opinions

LATOURETTE, J.

Declaratory judgment proceeding to construe a lease.

On March 10, 1950, Clarence Gibbs leased the premises upon which there is a gasoline filling station to defendant John Girardo. On January 10,1951, Gibbs sold the property to plaintiffs. The lease was for a period of one year at a rental of $250 a month, payable monthly in advance on the 10th day of each calendar month. The controversy revolves around the following clauses of the lease:

“Lessee shall have the option of renewal of this lease, on the same rental basis and on the same terms, from year to year, for a like period of one year.

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“The Lessee shall have an option to purchase the above described premises during the term of this lease or renewal thereof, for the purchase price of Twenty Six Thousand Dollars ($26,000.00), upon terms which will be mutually agreed upon by the parties hereto at the time of said purchase. It being understood that Lessee will be given credit.on said purchase price of the amount of $100.00 per month for each month of rental paid to Lessor during the life of this lease or any renewal thereof.

“Lessee agrees to purchase from Lessor all machinery, equipment and inventory of merchandise now on hand and situated upon the premises, at a price to be mutually agreed upon (approximately $2500.00) and will make a cash down payment on said purchase price in the amount of $500.00 at the time of execution of this agreement.

“The contract balance due and owing to Wiggins & Co. for equipment, in the amount of approximately $650.00, shall be paid by Lessee at the rate of $50.00 per month plus accrued interest on the unpaid balance at 6 per cent per annum, until paid.”

Plaintiffs contend that under the provisions of the lease defendant is entitled to only one renewal of said lease for a period of one year and that the purchase clause is too indefinite to be enforceable, whereas defendant claims that the lease may be renewed for successive terms of one year each and that the purchase clause is definite and certain. The trial court took the defendant’s view. Plaintiffs appeal.

It is a well-recognized rule that perpetual leases are not favored and that a perpetual renewal clause will not be upheld unless the renewal provision be clear and unambiguous. 51 CJS 606, Landlord and Tenant, § 61; 32 Am Jur 813, Landlord and Tenant, § 968.

Plaintiffs contend that if defendant’s theory is adopted, the clause “from year to year” would create a perpetual renewal in conflict with the above-established rule. If these words stood alone in the lease plaintiffs’ position might be tenable. However, we must look to the entire lease to determine the intent of the parties. The Texas Co. v. Butler, 198 Or 368, 376, 256 P2d 259. That the lease is not in perpetuity is evidenced by the purchase clause of the lease which gives the defendant the option to buy the premises for $26,000, defendant to be given credit of $100 a month from the rental on the purchase price. This forecloses the idea that the lease is in perpetuity because at the end of 21 years and 8 months the property would be paid for and the lease terminated.

The fact that the clause “for a like period of one year” follows the clause “from year to year” has in our opinion marked significance. If the clause “from year to year” were excluded, the sentence would read:

“Lessee shall have the option of renewal of this lease, on the same rental basis and on the same terms, * * * for a like period of one year.”

Obviously, under such rearrangement there would be only one year’s renewal. Therefore the language “from year to year” in onr opinion means more than one year’s extension and would indicate an intention on the part of the parties to grant defendant an option to rent the premises for successive years not exceeding 21 years and 8 months.

Bearing on the intention of the parties is a clause in the lease providing for the purchase of the machinery, equipment and inventory of merchandise situate on the premises for the sum of approximately $2,500. The reason the figure was made approximate was that obviously at the time of the execution of the lease it was not known how much was owing from Gibbs to Wiggins & Co. It is not reasonable to assume that defendant would buy the equipment, machinery and inventory for the $2,500 and at the end of the second year find himself “out on the street.”

No case in Oregon on this point has been cited by counsel although each side has supplied cases from other jurisdictions. In each case cited the factual situation was different from that in the instant case. For that reason they are not helpful in determining the question before us.

The trial court held that the option to purchase, as written in the lease, was definite and certain. Plaintiffs contend that this ruling was error. Unquestionably, the clause “upon terms which will be mutually agreed upon by the parties hereto at the time of the purchase” is indefinite and unenforceable. See Alexander v. Alexander, 154 Or 317, 58 P2d 1265; Slayter v. Pasley, 199 Or 616, 264 P2d 444. However, the remainder of the option to purchase clause is definite. If the parties are unable to mutually agree upon the terms there is nothing to prevent the defendant from paying the $26,000 in cash or let the lease run for 21 years and 8 months, at the expiration of which, if they keep up the payments on the lease, they will be entitled to a deed to the property. It therefore appears that the “upon terms ’ ’ clause is of no importance, is harmless and in no wise detracts from the other provisions of the option to purchase.

Affirmed.