First National Bank v. North Little Rock Funeral Home, Inc.
Docket: 75-46
Court: Supreme Court of Arkansas; June 9, 1975; Arkansas; State Supreme Court
Georue Rose Smith, Justice. The dispute involves a lease with two purchase options for the lessee. The lessee initiated a lawsuit for specific performance to exercise the first option to buy the property for $75,000, while the lessors argued that only the second option, with a price of $125,000, was valid. The court upheld the lessee's claim. The property, owned by Dr. and Mrs. Shelby Atkinson in 1954, was leased for ten years, with a subsequent ten-year extension. Paragraph 13 of the lease outlines the first option, effective twenty years from lease commencement, which requires a written notice at least ninety days before lease expiration. It also grants the lessee a right of first refusal at the highest bona fide offer if the lessors decide to sell. After Dr. Atkinson’s death in 1954, the appellants, his widow and a bank, became trustees. In 1973, the lessee sought approval to add to the funeral home and inquired about exercising the purchase option. The bank approved the addition but did not provide guidance on the purchase option. In January 1974, the property was listed for sale without informing the lessee. The lessee formally notified the bank of its intent to exercise the first option on February 18, 1974, and the bank acknowledged this on March 4, but stated it would pursue the second option. The lessee then filed for specific performance on March 21, and on September 6, the lessors claimed a $125,000 offer had been received, asking the lessee to either match it or withdraw its claim. The chancellor ruled in favor of the lessee's right to purchase the property for $75,000.
The chancellor's ruling favored the appellee, establishing that their position was logically and justly superior to the appellants. The appellee expressed intent to purchase the property over a year before the lease expired and, with the lessors' consent, invested $33,000 in improvements. Subsequently, the appellee provided the necessary written notice to convert their option into a binding executory contract, committing to purchase the property for $75,000. In contrast, the lessors had made no binding commitments, as their decision to list the property for sale was unilateral and revocable. Consequently, the appellee's definitive exercise of their purchase option nullified any rights the lessors might have had to pursue claims under an alternative clause in the lease. The ruling was affirmed, with Justice Fogleman not participating.
