Cinmark Investment Co. v. Reichard

JEFFERSON, J.

In 1958, appellant Cinmark Investment Company entered into an agreement leasing with option to purchase, for an 11-year term, approximately 15 acres of unimproved farming land owned by respondents Donald and Alta Reiehard. Thereafter, a portion of the property subject to the lease and option agreement, about 4 percent or .6 acres, was condemned for highway purposes by the city. Appellant and respondents were both named as party defendants in the condemnation proceedings. An award of $12,489 was subsequently made. Appellant, by a cross-complaint in the same proceedings, instituted this action seeking a declaration of its rights under the part of the agreement providing the option to purchase. Respondents brought a cross-action, with a ‘ ‘ crosseross-complaint”, alleging entitlement under the terms of the lease, to the full condemnation award rather than the usual apportioned amount compensating the lessee for the loss of its leasehold interest. The matter was tried and the trial court entered a judgment, in appellant’s favor, ordering that the $12,489 award be apportioned pursuant to Code of Civil Procedure section 1246.1, appellant to receive $2,150 and respondents $10,339. The trial court, however, did not render the declaration of rights sought by appellant.

There is no argument with respect to the court’s decision as to the apportionment of the condemnation award. Appellant brings this appeal contending that the trial court erred in failing to declare its rights under the option agreement.

The lease-option agreement provided that any time during the period the lease was in effect, the lessee (appellant) had the option to purchase the approximately 15 acres of leased land, in parts at $17,500 per acre, or for a total price not to exceed $210,000 for all of the land—an amount considerably less than the per-acre price. The contract contains intricate provisions for fixing the terms of the trust deeds to be given to secure portions of the purchase price.

Appellant, in its prayer for declaratory relief, asked the court below to declare that, in the event it should exercise the option to purchase the entire leased land, it would be entitled to an offset on the $210,000 total option price equal to the

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amount of the condemnation award received by respondents. Appellant contended that this declaration is necessary in order to preserve the original intention and true agreement of the parties. It was argued that, without the set-off, appellant would have to pay $210,000 for a lesser parcel of land— diminished by the amount taken by the condemnation—while respondents would have a windfall, for they would receive the full option price of $210,000, plus the amount of the apportioned option award, namely $10,339, or a total of $220,339.