Court: Supreme Court of Arkansas; February 27, 1967; Arkansas; State Supreme Court
Bobby J. Lawson and Lawson Lyon Hotel, Inc., as lessees of the Southern Hotel, sought specific performance of a lease option to purchase the hotel. The chancellor denied their request due to their failure to pay two months' rent, which precluded them from exercising the purchase option. The lease, originally between Taylor Hotels, Inc. and Omar Greene, included a purchase option contingent upon assuming a mortgage and paying an additional $10,000. After acquiring the leasehold, the lessees attempted to negotiate a separate purchase with Mrs. Taylor following the death of her husband, but negotiations broke down, especially after the hotel was destroyed by fire. Despite the fire, the lessees remained obligated to pay rent, which they did not. On December 1, they attempted to exercise their purchase option and filed for specific performance, offering part of the purchase price and a promissory note. The chancellor ruled that their prior default on rent payments barred their right to specific performance, emphasizing that a party seeking specific performance must demonstrate readiness and ability to perform their contractual obligations. The court affirmed the chancellor's decision, noting that the lessees' default disqualified them from pursuing the option.
In the lease at issue, the only consideration for the purchase option was the lessees' commitment to pay rent. The lessees did not tender back rent during the over thirteen months the case was in trial court. The appellants claimed they were excused from making a tender because they believed the lessor would not accept it. This reasoning was flawed for two reasons. First, it was uncertain whether the lessor would reject the tender, as there was no discussion between the parties regarding this. Although negotiations for a sale were terminated by Mrs. Taylor on October 14, the outcome of the tender was still in question, especially since she had engaged legal counsel whose advice was not documented. Second, tendering the overdue rent of $1,050 would have demonstrated the lessees' good faith, which was questionable given their delayed actions until after the lessor committed to using insurance proceeds for the mortgage. The lessees' declaration to exercise the purchase option appeared opportunistic, as it was structured to avoid financial risk. Unlike the purchase option, the rental obligation was legally due, which meant the lessor could accept the rent while still contesting the purchase right. The chancellor deemed the lessees' reluctance to pay rent significant. Concerns were raised during oral arguments regarding potential interpretations of the final decree that could imply a money judgment against the appellants for overdue rent; however, the appellees' attorney clarified there was no such understanding. The court's decision was affirmed, with Justice Byrd disqualified.
