Odyssey Glass Corp. v. Simenaur

Couch, J., delivered the opinion of the Court. ⁶⁴⁶ On November 23, 1977, the appellant Odyssey Glass Corporation (Odyssey) and the appellee Alfred Simenaur entered into a five-year lease agreement (Lease), term commencing on January 15, 1978. The leased real property is located at 5218 Monroe Place, Hyattsville, Maryland and consists of .702 acres of land improved by an office/warehouse building. Paragraph 25 of the Lease states: "25. OPTION TO PURCHASE.

The lessee shall have the exclusive option to purchase PARCEL "Q”, of which the demised premises are a part, during the first eighteen months of this lease for a price of TWO HUNDRED SIXTY FIVE THOUSAND and 00/100 DOLLARS, ($265,000) All Cash, or during the period of July 15, 1979 to July 15, 1980 for a price of $278,250.00 All Cash.” Odyssey notified Mr. Simenaur, by letter dated July 12, 1979, that: "Pursuant to paragraph 25 of the lease Odyssey Glass, Inc., leasee [sic] hereby exercises its option to purchase Parcel Q of which the above property is a part pursuant to the terms therein. Please submit a formal contract at your earliest convenience, settlement to be held sixty (60) days from the date hereof. If you have any questions, please contact our attorney, James K. Foley, at 589-5750. Check in the amount of $2,500.00 (Two thousand five hundred dollars) enclosed as DEPOSIT for said purchase.

ODYSSEY GLASS, INC.” Mr. Simenaur’s realty agent acknowledged receipt of Odyssey’s letter and deposit on July 12,1979. The appellee, however, advised Odyssey, by letter dated July 13, 1979, that the price of the subject property would be $278,250.00 unless full settlement occurred on or before July 15,1979, in ⁶⁴⁷ which case the price would be $265,000.00. The deposit check was eventually returned to Odyssey. Correspondence between the parties during subsequent weeks failed to remove the impasse concerning the purchase of the leased property.

The appellant believed that the option to purchase had been properly exercised by notification. The appellee insisted upon payment of $265,000.00 on or before July 15, 1979, or payment of $278,250.00 on or before July 15, 1980. On July 31, 1979, Odyssey filed a suit in equity seeking a declaratory judgment that it had properly exercised the option on July 15, 1979 entitling Odyssey to purchase the property for $265,000.00. Additionally, Odyssey sought a court order requiring the appellee to convey the property 1 and to pay damages to the appellant.

On October 23, 1979, the appellant filed a motion for summary judgment on all issues but damages, alleging that it properly exercised the option to purchase. The appellee opposed appellant’s motion and filed a cross-motion for summary judgment, contending that the lease provision required payment of the purchase price, and not mere notice of intent. On December 3, 1979, the motion and cross-motion were argued in the Circuit Court for Prince George’s County. The trial court denied appellant’s motion for summary judgment, and granted appellee’s cross-motion.

Final judgment was entered on May 1, 1980, dismissing Odyssey’s suit with prejudice. On appeal Odyssey asks: I. Did the trial court err in granting the appellee’s cross-motion for summary judgment, and in dismissing the appellant’s case with prejudice?

II

Did the trial court err in holding that the appellant had not properly exercised the option to purchase the real estate pursuant to the terms of ⁶⁴⁸ the option, and in denying the appellant’s motion for summary judgment? For the reasons set forth in this opinion we hold that the trial court did not err in any of its rulings in the present case. I. Granting of the appellee’s cross-motion In its motion for summary judgment filed on October 23, 1979, the appellant stated "that there is no genuine dispute between the parties as to any material fact.” In support of its motion Odyssey cited Katz v. Pratt Street Realty, 257 Md. 103, 120 , 262 A.2d 540 (1970), for the proposition that "where the language of the option is clear and unambiguous, the true test of what is meant is not what a party to the contract intended it to mean but what a reasonable person in the position of the parties would have thought it to mean.” In its brief Odyssey renounces its previous positions concerning the existence of a dispute as to material facts, and concerning an ambiguity in the Lease. The appellant now argues that the trial court erred in granting the appellee’s cross-motion and dismissing the appellant’s case without hearing evidence on the issue of when settlement should have taken place for purchase of the subject property.

The appellant contends that the option provision of the Lease is ambiguous because the provision fails to state that settlement must have occurred on or before July 15, 1979 in order for the appellant to purchase the property for $265,000.00. After our review of the pleadings and the hearing transcript we find that the appellant has not previously alleged that the Lease’s option provision is ambiguous. To the contrary, the appellant relied on the clear language of Paragraph 25 in support of its own motion for summary judgment. At the hearing on December 3, 1979, Odyssey argued, albeit unsuccessfully, that the terms of the option provision supported the interpretation that by notification the option could be replaced by an executory bilateral contract.

The appellant did not attempt to introduce ⁶⁴⁹ testimony concerning the intent of the parties toward the Lease. In fact, the trial court sustained Odyssey’s objection when counsel for the appellee tried to introduce an affidavit which related the parties’ intentions. Thus the clarity of the option provision was not specifically addressed by the trial court in its rulings or its written opinion. Nevertheless, the trial court, by its decision to interpret the provision, implicitly found the language to be unambiguous.

Bankers & Shippers Ins. v. Urie, 38 Md. App. 232, 240 , 380 A.2d 243 (1977), cert. denied, 282 Md. 729 (1978). When, as here, the terms of a lease are unambiguous, the trial court should state its interpretation of the lease through a declaratory judgment, or a directed verdict. H & R Block, Inc. v. Garland, 278 Md. 91 , 359 A.2d 130 (1976). Because the trial court found no ambiguity in the Lease, there was no need for additional evidence as to the intent of the parties.

Likewise there is no need for us to apply the various rules concerning extrinsic evidence that are suggested by the appellant. Walker v. Associated Dry Goods Corp., 231 Md. 168 , 189 A.2d 91 (1963). Nothing in the record leads us to disagree with the trial court’s action in granting appellee’s cross-motion for summary judgment, and in dismissing the appellant’s case with prejudice. Washington Homes v. Interstate Land Development, 281 Md. 712 , 382 A.2d 555 (1978).

II

Exercise of the Option to Purchase Odyssey states in the second argument in its brief that the "language of the option is clear, there is no requirement that the exercise of the option by the plaintiff [Odyssey] required the tender of the purchase price prior to July 15, 1979; nor does it state that settlement must be had on or before July 15, 1979.” The appellant then argues that in the absence of a specific option provision requiring settlement within a definite time, time is not of the essence in the contract formed by the exercise of the option, and the parties need only settle within a reasonable time. ⁶⁵⁰ Having heard the appellant’s contention, the trial court found that Odyssey had not properly exercised its option to purchase the leased property. Thus no contract for the sale of the property was ever formed, and no contract was subject to specific performance. The trial court ruled that in order to be effective, an option must be performed strictly according to its written terms. Straley v. Osborne, 262 Md. 514 , 278 A.2d 64 (1971).

The trial court focused on the option’s terms which granted Odyssey an "exclusive option to purchase” the subject property during a specified time period for a set amount "all cash”. By these terms Odyssey’s purchase of the property for $265,000.00 depended upon how soon Odyssey chose to exercise its option to purchase, and that proper exercise required tender of the set amount "all cash”. It "seemed logical” to the trial court that the Lease restricted the time period that the property would be available for $265,000.00 in order to encourage the appellant to purchase the property. This purpose would be frustrated, according to the chancellor’s opinion, if the appellant could obtain the discount price by notification of intent, and then delay the tender of the purchase price.

The appellant requests that we look beyond the terms of the Lease, and apply the "general” principle that notice of acceptance and a willingness to perform constitute proper exercise of an option. Supporting this proposition Odyssey cites Straley, supra, and Foard v. Snider, 205 Md. 435 , 109 A.2d 101 (1954). By our reading of these Maryland cases, and by their application to the specific terms of Paragraph 25, we hold that the appellant did not properly exercise its option to purchase. In Straley, supra, the Court of Appeals held that a lessee with a first option to purchase the leased property did not properly exercise the option by merely offering to purchase the property for less than its apparent value.

The Court in Straley, supra, 262 Md. at 521 , quoted its earlier definition of an option as: "* * * a continuing offer to sell during the