KDAB, L.L.C., v. Gordon

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KDAB, L.L.C., v. Gordon. Filed April 8, 1999 IN THE UTAH COURT OF APPEALS


Plaintiff and Appellant,


Margaret Jane Gordon,
Defendant and Appellee.

(Not For Official Publication)

Case No. 981236-CA

April 8, 1999
  1999 UT App 110 -----

Third District, Tooele Department
The Honorable Leon A. Dever

Craig S. Cook, Salt Lake City, for Appellant
N. George Daines, Logan, for Appellee


Before Judges Billings, Davis, and Orme.


Plaintiff KDAB, L.L.C. (Appellant) appeals from a grant of summary judgment entered in favor of defendant Margaret Jane Gordon (Appellee) denying its option rights under a real estate contract. We affirm.

In February of 1992, Appellee granted Gordon Farms, Inc. an option to purchase certain real property located in Tooele, Utah. On June 17, 1994, the option agreement was assigned to Appellant. Appellant alleges it exercised the option on August 16, 1994, by sending a letter via regular mail to the home of Appellee. Appellant concedes that it failed to send the letter by certified mail as was required by the contract. Appellee denies receiving any notice from Appellant. In May of 1996, Appellant notified Appellee that it wished to purchase additional property. Appellee responded that the option was no longer viable since Appellant had not properly extended the Option Agreement.

Paragraph Twelve of the Agreement requires Appellant's exercise of the option be sent by certified mail. In Geisdorf v. Doughty, 345 Utah Adv. Rep. 16 (Utah 1998), the Utah Supreme Court found the nature of option contracts required strict and exact performance of the terms and manner in which the option is to be exercised: This court has previously held that "'[w]hen the optionee decides to exercise his option he must act unconditionally and precisely according to the terms of the option.'" Upland Indus. Corp. v. Pacific Gamble Robinson Co., 684 P.2d 638, 640 (Utah 1984) (quoting Williston on Contracts § 61D (3d ed. 1957)). Actual exercise of the option must be "in accordance with its terms." J.R. Stone Co. v. Keate, 576 P.2d 1285, 1288 (Utah 1978); see also Nance v. Schoonover, 521 P.2d 896, 897 (Utah 1974); Equitable Realty, Inc. v. Nielson, 30 Utah 2d 433, 435, 519 P.2d 243, 244 (1974) (stating that an option, once granted, "must be exercised strictly according to its terms"). Id. at 18 (additional citations and footnote omitted) (alterations in original).

However, Appellant argues that Paragraph Twelve of the Agreement required Appellee to give Appellant notice that it had failed to properly exercise the option and allow Appellant thirty days to cure the default. Paragraph Twelve provides: [N]o right, title or interest of Buyer [KDAB] under this Agreement shall be impaired, terminated or forfeited, including, without limitation, the Option or the right to extend the Term, unless and until Seller [Gordon] has given Buyer written notice, describing in reasonable detail the default or failure concerned (including, without limitation, that Buyer has failed to timely pay to Seller any consideration for the extension of the Term), and Buyer has failed to cure or remedy any such default or failure within thirty (30) days after the receipt by Buyer of such notice. Appellant is correct that the "without limitation" language imposes a broad affirmative duty on Appellee to notify it of any "default or failure" in its exercise of the "right to extend the Term." However, there is no way for Appellee to issue such a notice to "cure" or "correct" a "default" or "failure" if she had no notice of an attempt to exercise the extension rights. Having received no notice whatsoever as opposed to a notice that was ambiguous or otherwise deficient, Appellee was free to assume that Appellant had chosen not to exercise its option rights under the Agreement, not that any "default" or "failure to exercise" had occurred.

Assuming using regular mail would constitute giving deficient notice, on a motion for summary judgment, Appellant's proffered evidence must be at least sufficient to give rise to an inference that the alleged mailing occurred. See Litster v. Utah Valley Community College, 881 P.2d 933, 939 (Utah Ct. App. 1994). Appellant must establish by competent evidence that the notice of its intention to exercise the option was properly addressed and deposited in the United States mail, postage prepaid. See id. In Litster, we held that an "inference of mailing arises when the evidence proffered (1) establishes an office mailing custom, and (2) gives rise to the inference that the particular mailing in question occurred pursuant to the established custom." Id. at 940.

In this case, Appellant provided the trial court with a copy of the letter purporting to send notice and the affidavit of Mathew Arbshay (part owner and manager of KDAB), who stated only that he "extended the option by written notice on August 26, 1994." We conclude that Appellant's proffered evidence is legally insufficient to give rise to the inference. In short, we have no direct evidence whatsoever pertaining to mailing of the letter. See id. Consequently, viewed in a light most favorable to Appellant's claim, the facts before the trial court were insufficient to establish a material issue of fact as to whether a notice of intent to exercise the option was mailed to Appellee, let alone whether she received it. The only competent evidence before the trial court was that Appellee received no notice of Appellant's intention to exercise the option. Appellant simply did not meet its burden to demonstrate that there was a material issue of fact as to whether Appellee received the alleged letter giving notice of its intent to exercise the option and thus triggering Appellee's obligations under Paragraph Twelve of the contract.

Thus, we conclude that since Appellee received no notice concerning extension, the notice-and-cure provision contained in Paragraph Twelve of the Agreement was never triggered. Consequently, we affirm the trial court's summary judgment in favor of Appellee.

Judith M. Billings, Judge



James Z. Davis, Judge

Gregory K. Orme, Judge