Bridgestone/Firestone, Inc. v. Wilmington Mall Realty Corp. , 117 N.C. App. 535 ( 1995 )

Judge Lewis

dissenting.

I respectfully dissent. The majority relies on Texaco, Inc. v. Creel, and I do not believe that case is controlling here. In Texaco, the Supreme Court construed two provisions dealing with an option to purchase, not an option to renew or re-lease. Several aspects of the Texaco case serve to distinguish it from the case before us.

First, the Court in Texaco found it important that, by the terms of the lease, any option granted was “continuing and pre-emptive” and “the failure of [the tenant] to exercise same in any one case shall not affect [the tenant’s] right to exercise such option in other cases thereafter arising during the term of this lease or any extension or renewal thereof. [Emphasis added.]” 310 N.C. at 700, 314 S.E.2d at 508-09. The Court agreed with the South Dakota Supreme Court that a proper interpretation of the lease would give effect to each provision in the lease. Id. at 703, 314 S.E.2d at 510. The Court further agreed that the quoted language would be nullified if the tenant’s failure to meet a bona fide offer could result in a termination of the tenant’s right to exercise the fixed price option. Id. at 703-04, 314 S.E.2d at 510-11. The lease in the present case, however, contains no such language.

Second, the Court based its conclusion in part on the fact that the continuing viability of the first refusal provision would be beneficial to the landlords in that it would allow them to induce the tenant to buy the property at a price lower than the fixed price, should the landlords no longer wish to have their asset tied up in a long-term lease. Id. at 705, 314 S.E.2d at 511. This analysis is not apposite to the case at hand, however, as the lease at issue in this case involves options to renew or re-lease, not options to purchase.

Finally, the Court in Texaco stated that it was probable that the landlords viewed the fixed price of $50,000 as being reasonable even at the end of the lease. Id. In this case, the majority’s conclusion would, in effect, allow the tenant to lease the premises for forty years for the same monthly rental fee. I do not believe the landlord or any one else could view that proposition as reasonable. I believe that the result reached by the Missouri Court of Appeals in Nigro v. Firestone Tire & Rubber Co., 641 S.W.2d 180 (Mo. Ct. App. 1982) should be followed in this case. In Nigro, the court was presented with a lease which contained virtually identical provisions to those at issue here, and which was drafted by the same tenant as in this case. In that case, the original term was for fifteen years and there were three consecutive renewal provisions. The final renewal provision was followed, as here, by the right of first refusal provision. The issue before the court was the same as that of this case. That court concluded that the tenant’s rights under the renewal provisions were limited and conditioned by the first refusal provision. Id. at 186.

One key to the court’s decision was the language in the first sentence of the right of first refusal provision, which began, “During Tenants occupancy under this lease, or its renewal or extension ... .” This language made the first refusal provision operable during the term of the lease itself or any of its extensions. Id. at 185. The only reasonable construction of the first refusal provision, when read with the entire lease, was that the tenant’s option to extend the lease was conditioned by the first refusal provision. Id. Thus, as the landlord contended, the parties intended the following: If the landlord received a bona fide offer to lease from a third party during the original term and the term under the offer was to begin at the end of the tenant’s original term, the tenant had only one option and that was a first refusal option to lease the property as set out in the first refusal provision. Id. at 184. If no such other offer was received, then the tenant had the option of a five-year renewal under the first renewal provision. Id. If, during the renewal period, no bona fide offer was received, the same procedure would be followed. Id.

I believe the construction given the lease in Nigro is the proper one. I cannot agree with the majority’s construction in the case at hand which, in effect, allows the tenant to lease the premises for forty years without an increase in rent. It is inconceivable that any business person, much less a freeholder or owner of real property such as the landlord, would make such a commitment. For the foregoing reasons, I respectfully dissent.