Bridgestone/Firestone, Inc. v. Wilmington Mall Realty Corp.

GREENE, Judge. Wilmington Mall Realty Corporation (Landlord) appeals from a judgment entered in the Superior Court of New Hanover County, pursuant to a declaratory judgment action filed by Bridgestone/ Firestone, Inc. (Tenant), granting Tenant the right to renew its lease for four successive five-year terms at the same rental rate as its original lease. On 7 June 1972, Tenant entered a lease with Lat W. Purser and Ruth B. Purser to lease property in the Long Leaf Shopping Center in Wilmington, North Carolina. Sometime subsequent to the lease, the Landlord acquired title to the leased property. The lease, drafted by Tenant, extended from 1 June 1973 until 31 May 1993, and provided for a fixed rental rate during the twenty-year term. The lease provided the following renewal provisions: 33. Renewal Tenant shall have the right to renew or extend the within lease for a period of five (5) years following the expiration of the original term hereof, at a rental rate the same as for the original term hereof, and under the same terms and conditions as for the original term as set out herein, except for this option. In the event Tenant exercises this option to renew or extend, written notice thereof shall be given Landlord at least six (6) months prior to the commencement of such renewal or extension period. [537] [34-36 contain language identical to 33, but each provides that the right will become effective at the expiration of the renewed term under the respective, preceding paragraphs.] 37. First Refusal to Lease. During Tenant’s occupancy under this lease, or its renewal or extension, Tenant shall have first refusal option to lease the demised premises only for an additional term upon the same terms and conditions as contained in any valid, acceptable, bona fide lease offer Landlord, or any subsequent Landlord, may receive. Tenant shall have fifteen (15) days after receipt from Landlord of written notice of such offer (with certified full written statement of such offer or certified copy thereof) within which time to exercise said option and accept any such lease. On 5 October 1992, prior to the expiration of the original term, the Landlord gave notice that it had received bona fide offers to lease the property from third parties, and its intention to relet the property at a higher rate. On 11 November 1992, before receiving any specific terms from the Landlord, the Tenant notified Landlord of its intention to renew the lease, on the original terms, under paragraph 33 of the lease. Landlord then filed this declaratory judgment action, seeking a determination of the parties respective rights under the lease. The trial court determined that the language in paragraph 37 of the lease was “not a limitation of the Tenant’s rights, but... an extension of Tenant’s rights” and declared that the Tenant was therefore entitled to renew the lease “under the same terms and conditions” as set forth in the original lease. The sole issue is whether the lease gives the Tenant the option to renew the lease on the basis of the same rental rate as “for the original term.” The Landlord argues that the language in paragraph 37 of the lease “shows a clear intent of the parties to limit Tenant’s rights under paragraph 33 through 36.” Therefore, the Landlord contends, the Tenant, if it receives written notice from the Landlord of a bona fide third-party offer, can renew the lease for an additional term “only . . . upon the same terms and conditions” contained in the third-party offer. We disagree. We have been unable to locate, nor have the parties cited, any North Carolina cases specifically addressing the issue presented in this appeal. There are cases addressing the effect of “right of first [538] refusal” and “fixed price” clauses in the context of purchase options and we believe they can be appropriately used to guide our decision in this lease option case. E.g., Texaco, Inc. v. Creel, 310 N.C. 695, 704, 314 S.E.2d 506, 511 (1984). In the Texaco case, our Supreme Court held that a lease agreement granting the lessee the right to purchase the leased property at a “fixed price” accompanied by a “right of first refusal” option entitles the lessee to purchase at the “fixed price” even if the lessee fails to meet a bona fide offer to purchase made to the lessor for a larger sum. The relevant provisions in the lease presented to the Texaco Court provided: (11) — Option to Purchase. Lessor hereby grants to lessee the exclusive right, at lessee’s option, to purchase the demised premises, free and clear of all liens and encumbrances, including leases, (which were not on the premises at the date of this lease) at any time during the term of this lease or any extension or renewal thereof, (a) for the sum of Fifty Thousand dollars; it being understood that if any part of said premises be condemned, the amount of damages awarded to or accepted by lessor as a result thereof shall be deducted from such price, (b) On the same terms and at the same price as any bona fide offer for said premises received by lessor and which offer lessor desires to accept. Upon receipt of a bona fide offer, and each time any such offer is received, lessor (or his assigns) shall immediately notify lessee, in writing, of the full details of such offer, including the name and address of any offeror, whereupon lessee shall have thirty (30) days after receipt of such notice in which to elect to exercise lessee’s prior right to purchase. Texaco, 310 N.C. at 697, 314 S.E.2d at 507 (1984) (emphasis in original). The Court in evaluating the obvious conflict in the two provisions, noted that a Rhode Island Supreme Court opinion, Butler v. Richardson, 60 A.2d 718 (R.I. 1948), had concluded that the “fixed price” option provision controlled because it was “clear, explicit, and not coupled with or conditioned upon any other agreement.” Texaco, 310 N.C. at 703, 314 S.E.2d at 510. The Court quoted with approval from the Butler opinion that the “first refusal” provision “has no effect whatever” upon the “fixed price” option and that the “fixed price” option “remains unimpaired.” Id. Applying the principles of the Texaco case to this case, we hold that the “fixed price” option grant [539] ed to the Tenant in paragraph 33 of the lease agreement controls and is not conditioned or modified in any manner by the “first refusal” option granted in paragraph 37 of the lease. Thus, the judgment of the trial court is Affirmed. Judge JOHNSON concurs. Judge LEWIS dissents