No. 12 W.D. Appeal Docket 1983, Appeal from the Order dated July 30, 1982 of the Superior Court at No. 153 Pittsburgh, 1981, affirming the Order of the Court of Common Pleas, Civil Action - Equity, of Mercer County at No. 9 EQ 1979, entered January 20, 1981,
Nix, C.j., and Larsen, Flaherty, McDermott, Hutchinson, Zappala and Papadakos, JJ. Zappala, J., filed a dissenting opinion which McDermott, J., joined.
This is a case of first impression in this jurisdiction involving the interpretation of a lease for commercial property which contains two purchase option provisions, one in which the lessee may initiate a purchase of the property at any time during the lease for a fixed price, and the other in which the lessee, after notice of an offer made by a third party, may purchase the property at the same price and on the same terms and conditions as the third party. The question is whether the lessee who has not exercised his fixed price option prior to notice of a third party offer, may purchase the property for the fixed price, after he has been notified of a third party offer for an amount greater than the fixed price, or whether he must purchase -- if he is to purchase at all -- by matching the offer of the third party.
Appellants (hereafter the "Snyders") own a lot measuring 90' X 100' in Greenville, Pennsylvania, on which is located a service station, which they, with others then having an interest in the property, leased to American Oil Company in 1968. This lease superseded a previous lease between the same parties executed in 1948. After execution of the 1968 lease, American Oil Company was purchased by Amoco Oil Company (hereafter "Amoco"), which is the successor in
interest of American Oil Company, the drafter of the lease in question. The term of the lease was ten years, with the lessee having two optional five year renewal periods.
The purchase option provisions of the lease at issue are as follows:
3. (a) Lessee shall have, and is hereby given, the option of purchasing said demised premises for the sum of FORTY-FIVE THOUSAND DOLLARS ($45,000), provided Lessee shall give Lessor notice in writing of its election to exercise said option to purchase at any time during the original term or any extension or renewal thereof. If any part of the demised premises or any interest therein shall be taken by right of eminent domain or by any conveyance in lieu thereof or in connection therewith, the purchase price set forth herein, if the purchase option is exercised, shall be reduced in the same proportion that the area immediately prior to such taking is reduced by the taking.
(b) It is further agreed that should Lessor, or Lessor's heirs, executors, grantees, successors or assigns, at any time during the term of this lease or any extension thereof, receive an offer to purchase the demised premises, or any part thereof, or any premises which includes the demised premises, and desires to accept said offer, or should Lessor during any such time make an offer to sell the demised premises, or any part thereof, or any premises which includes the demised premises, Lessor shall give Lessee ninety (90) days notice in writing of such offer, setting forth the name and address of the proposed purchaser, the amount of the proposed purchase price, and all other terms and conditions of such offer, and Lessee shall have the first option to purchase the premises which are the subject of the offer by giving written notice to Lessor of its intention to purchase within said ninety (90) day period at the same price and on the same terms of any such offer, it being understood that in the event Lessee does not give notice of its intention to exercise said option to purchase within said period, this
lease and all of its terms and conditions shall nevertheless remain in full force and effect and Lessor and any purchaser or purchasers of the demised premises, or any part thereof, or any premises which includes the demised premises, shall be bound thereby, and in the event that the premises set forth in the offer are not sold for any reason, Lessee shall have, upon the same conditions and notice, the continuing first option to purchase the demised premises, or any part thereof, or any premises which includes the demised premises, upon the terms of any subsequent offer or offers to purchase.
(c) In the event any of said options is exercised, Lessor will convey a merchantable title in fee simple to said real estate by good and sufficient warranty deed, with release of dower, homestead, curtesy and other rights of the respective spouses, if any, and free from all encumbrances whatsoever.
In November of 1978, while Amoco continued to pay rent under the lease, but after it had closed its service station, Snyders entered into an agreement with a third party to sell the property, subject to the terms and conditions of the lease, including lessee's right to purchase the property, as stated in the third-party sales agreement, "under the same terms and conditions set forth in this agreement." Snyders gave notice to Amoco, as required by paragraph 3(b) of the lease, of the third party offer to purchase the property for $75,000, a price $30,000 more than Amoco's fixed price option of $45,000. Amoco did not give notice of its intention to purchase the property at the same price and under the same terms and conditions as those agreed to by the third party, but instead, in January of 1979, prior to the expiration of the original term of the lease, gave notice of its intention to purchase the property under the fixed price ...