Shugar v. H. B. Real Property, Inc.

MORRIS, Judge. Plaintiff contends that the trial court failed to find facts sufficient to support its conclusion that defendant did not breach the lease agreement. Specifically, plaintiff maintains that the [651] trial court erred in its finding that defendant had relinquished ownership prior to the 1978 “Season.” Plaintiff, noting that an option contract is not a sale, argues that defendant was the “owner” at the time plaintiff attempted to exercise his renewal option. We disagree. Essentially, the issue presented for our consideration is what in fact constitutes the loss of ownership of fealty “. . . within [the] purview of [a] clause in [a] lease making renewal . . . inoperative in [the] event of such contingency.” 15 A.L.R. 2d, Renewal of Lease in Case of Sale, p. 1040. In an analogous case, the plaintiff and defendant had entered into a seven-year lease arrangement whereby the “ ‘ [¶] irst party (lessor) grants to second party [i.e. lessee] the right to renew this lease at its expiration for a like period upon like terms; providing, however, that this renewal clause shall be inoperative in event first party shall sell said building at the expiration of this lease.’ ” Fox v. Adrian Realty Co., 327 Mich. 89, 41 N.W. 2d 486, 487, 15 A.L.R. 2d 1037, 1039 (1950). Prior to the expiration of the lease, the original lessor contracted for the sale of the particular building to plaintiff under a “land contract” ■ and conveyed the property by deed to the plaintiff after the expiration of the then outstanding lease agreement with defendant lessee. The Michigan Supreme Court, though recognizing the general rule that a vendor retains legal title under a “land contract,” held that under the facts presented, an executory land contract constitutes a “sale” and thus rendered the renewal clause under the prior- lease inoperative. Id. at 488. We consider the reasoning in Fox persuasive in this case and note that “ [i] t seems settled by well-reasoned authority that the execution of an enforceable contract for the sale of leased premises is sufficient to terminate the rights of the lessee under a lease covenant granting the privilege of renewal if the lessor shall not sell, or abrogating the privilege in the event of a ‘salé.’ ” 15 A.L.R. 2d, supra, at 1040-1041. Moreover, this rule is applicable where there is no evidence, as in this case, of anything less “. . . than a good-faith transfer of ownership or title embracing the entire premises.” Id. at 1042. Here the plaintiff knew when he executed the lease in 1972 that defendant was contemplating listing his hotel property for sale and knew or should have known that a sale would effectively abrogate and nullify the basic renewal provisions under their lease. [652] Indeed, the renewal clause in this case clearly reflected this potentiality and was obviously designed to give defendant the necessary flexibility in any future sales negotiations. We are of the opinion and so hold that the language “should the present owners still own this property at that time” contemplated a contract for sale as well as a completed sale and conveyance of the property. No error. Judges Hedrick and Arnold concur.