OPTION TO PURCHASE: MASTERSON V. GEORGE (COA 8/10/2007)

MASTERSON V. GEORGE
PROPERTY: LEASES AND OPTIONS TO PURCHASE 
2006-CA-001265
PUBLISHED: VACATING AND REMANDING
PANEL: VANMETER PRESIDING; STUMBO AND ROSENBLUM CONCUR
COUNTY: MARION
DATE RENDERED: 8/10/2007

Masterson appeals a directed verdict granted to Gloria George.  Masterson and George enter into a 2 year lease of George’s farm with an option to purchase.  Lease expired in 1992 but Masterson continued to holdover.  Masterson claims he exercised the option to purchase the property in 1994 by oral notice to George’s two sons (once in June and another time in December).  In 1995 George’s son advised Masterson that they were going to auction the farm and he was welcome to bid on the farm.  Masterson did not pay rent for 1995 (due in January 1996).  In April 1996 George’ son expressly refused to honor Masterson’s previous requests to purchase the farm.  Masterson sued.

Issue is whether option was viable in 1994 or 1995 and whether Masterson effectively exercised the option.

Trial court erred by ruling that the option was not viable due to: (1) the option to purchase was severable from the other terms of the lease and was not extended during the holdover terms and (2) Masterson materially breached the lease by failing to name Gloria as "loss payee" on a liability insurance policy.  The lease gave Masterson the right to purchase the farm "at any time during the continuance of this Lease."   The Court of Appeals said that language can only be interpreted as granting the option not only at any time during the original term of the lease but also at any time during the
continuance of the lease.  As for not naming George as the loss payee, George waived default (not receiving notice of the insurance policy) by accepting rent payments.

Whether the notice by Masterson to George’s sons was sufficient for exercising the option is a question of fact for the jury to determine.

DIGESTED BY PAUL C. O’BRYAN

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