Rosenthal v. Shapiro , 333 Mich. 302 ( 1952 )

Boyles, J.

Plaintiffs filed a bill of complaint in the circuit court for Oakland county in chancery to compel specific performance of an option to purchase certain land in the city of Berkley. Issue was joined and the case submitted to the trial court on stipulated facts and issues of law. The court, after a written opinion, entered decree for the plaintiffs and the defendants appeal.

On November 24,1947, the then-owners of the land in question entered into a written lease of said land to the plaintiffs at a rental of $175 per month, for a term of 5 years, with privilege of renewal for a like term, in which lease the parties agreed as follows :

“It is further agreed between the parties hereto that the parties of the second part (plaintiffs herein) shall have an option to purchase said premises within 1 year from the date first above mentioned, for the purchase price of $25,000i And it is further agreed that if parties of the second part shall exercise their option to purchase the parties of the first part shall furnish to them an abstract of title or a title policy to said premises. The down payment is hereby fixed at of the purchase price, and the balance to be paid in monthly instalments of 1% of the balance due and owing, with interest at 6% per annum.”

Said lease, after 2 further covenants concerning the assignment of lease and keeping the premises in repair, continued:

“And the said parties of the first part do covenant that the said parties of the second part, on paying the aforesaid instalments and performing all of the covenants aforesaid, shall and may peacefully and quietly have, hold and enjoy the said demised premises for the term aforesaid.”

Shortly after the execution and delivery of the above instrument the then owners (lessors) sold and conveyed said land to the defendants herein, subject to the said lease and to the rights of the plaintiffs thereunder. On October 30, 1948, plaintiffs, by their attorney, notified defendants Shapiro of their desire to exercise their option to purchase and requested the defendants to furnish the abstract of title or a title policy to said premises. On November 11, 1948, while said option was still in effect, plaintiffs’ attorney again wrote the defendants Shapiro as follows:

“On October 30,1948, as per your request, I wrote you and made formal demand for the abstract of title to the property at 3223, 3225 and 3229 West Twelve Mile Road, Berkley, Michigan, in response you called me and informed me that I would have to talk to your attorney, Mr. Samuel Shapero. He has stated, in effect, that the option given my client's in the lease to said premises, would not be honored.

“In order that there may be no question about our intention to insist upon specific performance of that option, letters are being sent to you and your wife and to Mr. Irving Zeff and Mrs. Pearl Zeff, his wife. I have been employed by Philip Rosenthal and Philip Weiner to notify yon that they elect to exercise their option, in accordance with the terms thereof, and to make demand upon you for delivery to me, as their attorney, of the abstract of title to said property.

“In event that you persist in your refusal to carry out the terms of the option, suit for specific performance will be instituted without further notice.”

The instant suit was begun, and after it had been submitted, as aforesaid, the trial court entered a decree that the option was valid, that plaintiffs were entitled to specific performance, that the plaintiffs had properly exercised their option to purchase, that the' defendants be required to furnish an abstract of title or a title policy, that the relationship of landlord and tenant terminated October 30, 1948, when plaintiffs had exercised their option to purchase; and the decree directed the defendants to execute a land contract conforming to the terms and provisions of said' option. The provision in the decree terminating the relationship of landlord and tenant at the time when plaintiffs exercised the option October 30, 1948, is the principal hone of contention in the present case.

The defendants claim that the right of the plaintiffs to possession of the premises ended when the option was exercised, and that the right of possession thereafter was with the sellers (the defendants) under the option until full payment of all of the instalments had been made in full by the plaintiffs. Their claim on the appeal is stated by the defendants in their brief as follows:

“Where a written option to purchase title to property on an instalment basis fails to stipulate that possession of such property shall he delivered to the purchaser while the title is paid for on the instalment basis, such possession is reserved to the owners of the property until the full payment of the purchase price.”

Under that claim, the plaintiffs would pay $166.67 per month, the 1% per month, of the balance of the purchase price, instead of $175 per month rent, and if the lease was terminated October 30, 1948, as the defendants now claim, said defendants having the right of possession of the property could oust the plaintiffs as of October 30, 1948, and lease the property to some other tenant, unless the plaintiffs came to their terms as to the future right to possession, or payment of rents.

Defendants rely on a line of decisions in this Court holding that the vendors or owners of the property continue to be entitled to possession of the property until paid in full, in the absence of any provision in the contract giving the vendees or optionees the right of possession during payments. With the exception of Polczynski v. Nowicki, 227 Mich 415, and Emmons v. State Land Office Board, 305 Mich 406, in none of the cases relied upon by defendants was the vendee or optionee in possession of the optioned premises at the time the option was exercised. We agree with the defendants that under the option, standing alone, the optionees (plaintiffs) would not be entitled to possession of the property. Druse v. Wheeler, 22 Mich 439; Gault v. Stormont, 51 Mich 636; Brin v. Michalski, 188 Mich 400; Walsh v. Oakman, 199 Mich 688; Barton v. Molin, 219 Mich 347; Janiszewski v. Shank, 230 Mich 189; Emmons v. State Land Office Board, supra.

However, the trial court was in error in holding that the relationship of landlord and tenant was terminated when plaintiffs exercised their option, and that the lease itself ended at that time. Under the express terms of the lease, of which the option was a part, plaintiffs’ right to possession, under the circumstances of this case, continued under the lease and did not revert to the defendants merely because the plaintiffs exercised their rights under the option. The lease did not terminate October 30, 1948, when plaintiffs exercised their option to purchase.

In the Polczynsld Case, supra, as in the instant case, the plaintiff-lessee filed a bill for specific performance of an option clause in a 6-year lease in which the plaintiff was the lessee and optionee. The defendant, the landlord and owner, refused to sell. The main issues in the case were (1) whether the option clause was complete, (2) whether the plaintiff had made a proper tender, and (3) whether the defendant had understood she was signing an option instead of a lease. The Court resolved those issues in favor of the plaintiff and then turned to the 4th and final question, which arose out of the fact that the option itself, as in the case at bar, contained no provision for possession by the optionee. The plaintiff was in possession of the premises as lessee under a lease, at the time he made the tender and sought to exercise the option. The plaintiff claimed that his obligation to pay rent ceased when he gave the notice of his desire to exercise the option. In holding that the lease was not‘thus terminated, the Court said (p 429):

“The two further contentions are made for defendant that the option is incomplete because no interest on deferred payments is specified, and no provision for delivery of possession, in which case this Court has held that the purchaser is not entitled to possession until the full purchase price is paid. This Court has also held that failure to specify interest does not invalidate the contract. Elbom v. Pavsner, 225-Mich 213. Plaintiff was in possession when he made tender on February 1, 1921, and has so continued without paying rent since that time, apparently on the theory that the tender changed the character of his possession as a tenant to that of purchaser. His contract does not so provide and it is a well-settled rule that if not otherwise provided in the agreement the right to possession of a contract purchaser does not become operative until full payment of the purchase price. Gault v. Stormont, 51 Mich 636; Way v. Root, 174 Mich 418; Brin v. Michalski, 188 Mich 400; Barton v. Molin, 219 Mich 347. Though in default for past due rent defendant has not dispossessed him nor forfeited his lease, and he is entitled upon payment of rent in arrears to continue his tenancy under the lease. Her claim that the lease is at an end because of plaintiff’s attitude in this litigation is not tenable. He is entitled to a land contract from her according to the terms of the option.”

While we agree with defendants that under the option clause the defendants would have the right to possession of the property until the payments are made in full, we do hot reach the conclusion that the option clause is the only contract before the court. The Polczynslci Case is not authority for so holding. The option is a clause of the lease, and the contract must be considered in that light. Nor do we agree with defendants that their right to possession, under the option clause, would be a ground for denying plaintiffs the right of specific performance of the option. It should be noted that in the Polczynslci Case, as well as in Brin v. Michalski, supra, also relied upon by defendants, specific performance of the option was decreed.

Defendants claim that: “Under the option as written, plaintiff is not entitled to possession until full payment of the purchase price.” (Italics supplied.)

That claim seeks to by-pass and ignore the express provisions of the lease itself, of which instrument the option clause is a part. The lease and the option clause' constitute ■ the contract, and it must be considered in its entirety with every valid part given effect. As hereinbefore noted, said contract expressly provides that: “The said parties of the first part do covenant that the said parties of the second part (plaintiffs herein)-, on paying the aforesaid instalments and performing all of the covenants aforesaid, shall and may peacefully and quietly have, hold and enjoy the said demised premises for the term aforesaid” (Italics supplied.)

The trial court held that the lease was terminated when the right to exercise the option was exercised by the plaintiffs. On the contrary, the lease and the option clause when read together plainly express the intent of the parties, that under the contract plaintiffs should continue to be in possession of the premises under the lease “on paying the aforesaid instalments,” and otherwise complying with the lease. It was the intention of the parties, in the execution of the lease and option clause, that the plaintiffs should have the right to occupy the premises as tenants under the lease for a term of 5 years, with the privilege of an extension for a like term by complying with the provisions of the lease, and that the plaintiffs should also have the right to a contract from the defendants for purchase of said premises by the plaintiffs, under and in accordance with the terms of the option clause. It was the duty of the defendants, on demand, to furnish plaintiffs with an abstract of title or a title policy. Notwithstanding the exercise of the option, the plaintiffs continue to have the right of occupancy of the premises under the lease by compliance with the requirements of the lease and option when read together. Under the contract, plaintiffs have properly exercised their option to purchase and may continue in possession under the lease, their obligation being to pay the instalments and interest under the option, and to pay the rent and otherwise comply with the covenants under their lease. Thus the plaintiffs may ultimately acquire ownership of the property instead of reaching the end of their rights entirely by expiration of their lease. Obviously, the right of the plaintiffs both as to occupancy and ownership otherwise would expire if- they should not exercise their option to purchase or continue to comply with the requirements of the. lease.

Plaintiffs in their brief propose:

“If this Court feels that the plaintiffs are not entitled to possession unless the full purchase price is paid, we stand ready, able and willing, and hereby offer and tender the full amount of the purchase price, and this Court may fix a time within which the money deed and abstract may be exchanged.”

That question was definitely settled contrary to their proposal, in the Polczynski Case, supra, when the Court said (pp 429, 430):

“ITe [plaintiff] now offers to pay the purchase price in full with interest on all deferred payments since the time of the tender. That is a matter between the parties. Courts cannot make contracts for them.”

Certain other questions apparently were settled by the trial court in entering the decree, which have not been raised or questioned on this appeal and are not inconsistent with the foregoing conclusions herein, and consequently they need not be referred to. As already indicated, the defendants’ main contention is that the plaintiffs did not become entitled' to possession under the option in the absence of an express provision to that effect. Defendants’ claim in that regard is in accord with our previous decisions hereinbefore cited. In Emmons v. State Land Office Board, supra, Mr. Justice Butzel, writing for the Court, said:

“Without some provision by rule or in the contract, plaintiff would not have become entitled to possession of the property until he paid for it and it would be subject to taxes levied after the date of the bid. The general rule is that unless the contract provides for possession, the right of a contract purchaser to possession does not become operative until full payment of the purchase price. Polczynski v. Nowicki, 227 Mich 415.”

In said Emmons Case, supra, the plaintiff was in possession of the premises as a tenant at the time he exercised his option for a land contract on January 20, 1942, having paid the rent to February 6th. We held that his possession as a tenant continued and that he was liable for rent until he subsequently received a land contract with express provisions for possession.

A decree should be entered in this Court conforming to the decree entered below except as modified by the foregoing conclusions, and remanding for enforcement thereof. No costs should be awarded, each party prevailing only in part.

Carr and Sharpe, JJ., concurred with Boyles, J.