Uebe v. Bowman

Conley Byrd, Justice. This litigation is between two long-time friends and neighbors, appellant Frank Uebe and appellees Troy F. Bowman et ux. At issue are the questions whether Uebe’s holding over under a lease constituted an election to exercise an option to extend the lease, and whether the contractual requirement of advance payment of rental was waived by appellees. The lease contract was entered into on February 14, 1947, for the use of water from a spring to operate a canning factory. The clause in issue provides: “That for said consideration the right herein conveyed shall continue unto the party of the second part, his heirs and assigns for a fixed period of 16 years from this date, with the option to the party of the second part, his heirs and assigns, to continue said right in fall force and effect by the payment of the snm of $25.00 annually, payable in advance.” The facts show that Uebe and Bowman, in a neighborly fashion, have from time to time exchanged labor and assistance to each other. The Bowmans at times have borrowed money from Uebe, purchased feed from him, and used his hay baler. In addition, Bowman sometimes worked for Uebe at the canning factory, at which times Uebe paid Bowman by cash or check. All other dealings between the parties were settled annually. Both parties testified to a settlement of their dealings after February 4, 1963, the expiration date of the 16-year lease, without mentioning or giving credit for the $25 annual payment provided in the lease agreement. In fact, Uebe testified that he was not aware that the lease was up that year or that the payment was due. There is testimony by Bowman that a settlement was had again in 1964. There is also testimony by Uebe that Bowman owed for hay baling, a hay baler and other items for which Uebe considered himself entitled to a set-off against any of the $25 payments due under the contract. Bowman disputes some of the items and admits other items. He acknowledges that he owes $25 for the old hay baler vdiich he bought in December 1964, and that he owes for the use of a truck in hauling some hay. After February 4, 1963, the expiration date in the lease, Uebe continued to use the water from the spring as before, and Bowman made no complaint or comment about it until Uebe transferred the canning factory to a cooperative which he had organized in 1966. Sometime during the busy canning season of 1966, Bowman went by the canning factory to talk to Uebe about the spring, but Uebe suggested they discuss it at another time because he was too busy. Subsequently, on August 9, 1966, Bowman caused to be served upon Uebe a “Notice in Unlawful Detainer,” notifying Uebe to quit and deliver np the spring property occupied by bis pumping equipment. Uebe then filed this suit in chancery court making the contentions herein. In contending that his holding over amounted to an election to exercise his option to extend the lease, Uebe relies on Riverside Land Co. v. Big Rock Stone & Material Co., 183 Ark. 1061, 40 S. W. 2d 423 (1931). We think the Big Roch case is distinguishable from the facts here because in the Big Roch case the lessor continued to accept payments under the lease and, after the issue concerning increased rental arose, negotiated an increased rental which it continued to accept from sometime in 1923 until 1930, when Big Rock gave the required notice under the option to extend the lease. In Heyden v. Barnsdall Refining Co., 192 Ark. 789, 94 S. W. 2d 709 (1936), the lessor contended that Barnsdall, who held under a five-year lease, exercised its option of renewal by holding over a few months after the expiration of the five-year period. We there held that the holding over did not constitute an exercise of the option of renewal, and in distinguishing the Big Roch case, supra, pointed out that had the renewal clause “been a covenant to extend the lease without the performance of a condition precedent, a holding over may have extended same as a matter of law.” When the option to extend here involved is read in its entirety, we hold that the trial court properly construed the provision for a payment “of the sum of $25 annually, payable in advance” as a condition precedent to the exercise of the extension. Since Uebe admittedly did not perform the condition precedent prior to the expiration of the 16-year period on February 4, 1963, we hold that his mere holding over did not constitute an extension of the lease under the option. Nor can we find a waiver of the condition precedent to the extension of the lease. While the annual balancing of accounts between tbe parties for 1963 and 1964 depended to some extent on the recollection of each party with reference to time spent, material delivered, work done and payments made, neither party contends that the $25 payment was discussed or credit given or accepted for the same. Nor was the $25 payment subsequently accepted, as was the- situation in the Big Rock case, supra. Appellant makes the further contention that there was no repudiation or abandonment of the lease and that the nonpayment of rent is not a cause of forfeiture. We hold this contention to be without merit. The issue is not whether there is a repudiation or a forfeiture of the lease but whether in fact appellant had exercised his option to extend the written lease. We think there is a clear distinction between forfeiture of an existing lease for failure to pay the rental and failure to exercise an option of extension by failing to perform the condition precedent of paying the rental in advance. Affirmed. Harris, C. J., and Fogleman, J., dissent.