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Attorney(S)

Benjamin W. Grim, for plaintiff. Pettine De Pasquale, for defendant.

Judges

STEARNS, J.

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Smart Summary

Case Summary: Francesco Caito v. Vincent J. Ferri (Supreme Court of Rhode Island, May 5, 1922)

Factual and Procedural Background

This is an action in trespass and ejectment to recover possession of premises in Providence. Defendant (tenant) occupied the premises pursuant to a written five-year lease from November 1, 1916 to November 1, 1921, and defendant operated a drug store there. Plaintiff purchased the property in 1920 subject to that lease.

The lease granted the lessee an option "for a renewal of the lease for a further term of five years" with a clause stating that if the lessee "should ask for a renewal of this lease at the termination of five (5) years from the date hereof ... the conditions governing the extended period shall be the same with the exception that the rent therefor, shall be six hundred ($600) dollars per year payable in equal monthly payments of fifty ($50) dollars each." The original rental was $540 per year, payable in equal monthly installments on the first business day of each month, and the lease further provided that upon failure by the lessee to pay any installment within five days after the first of the month, the landlord could enter, declare the lease at an end, and take immediate possession. The lease also included the usual covenant to surrender possession at expiration.

On November 3, 1921 (two days after November 1, 1921), defendant orally told plaintiff he wished to continue as tenant for the additional five-year period. Plaintiff refused, contending defendant should have given notice by November 1 and that the November 3 notice was too late; plaintiff treated defendant as a trespasser. On November 4 defendant tendered $50 for November rent; plaintiff refused to accept it and served notice to quit by December 1.

At the conclusion of the trial, the trial justice (on motion) directed a verdict for the defendant. Plaintiff excepted. The Supreme Court considered plaintiff's exception, reviewing whether the tenant's election to continue was valid and whether the directed verdict was appropriate.

Legal Issues Presented

Whether a lessee's oral election, made two days after the expiration of a five-year lease, to exercise an option to continue the tenancy for a further five years was effective.
Whether the election to continue the tenancy (the option) had to be made in writing or could be made orally.
Whether the agreement for the additional five-year period constituted an extension of the original lease (continuation of the same tenancy) or a renewal requiring a new lease and stricter timing for notice.
Whether failure to give the landlord notice by the exact termination date authorized the landlord to treat the tenant as a trespasser and to refuse the tendered rent.

Arguments of the Parties

Plaintiff's Arguments

Plaintiff contended defendant's notice of election given on November 3 was too late because the election should have been given no later than November 1 (the termination date).
Plaintiff asserted that, because the defendant failed to give the required notice in time, the landlord was entitled to treat defendant as a trespasser and to refuse the tendered rent.

Defendant's Arguments

Defendant asserted he exercised the option to continue tenancy when he orally told plaintiff on November 3 that he wished to continue as tenant for the further five-year term.
Defendant tendered the monthly rent on November 4, within five days after the first of the month (the grace period specified in the lease), and thus complied with the lease's payment terms.
Implicit in the defense (as accepted by the trial justice and Supreme Court) was the position that the required act to obtain the extended term was an election to continue, which was not required to be in writing and could reasonably be made shortly after the lease's termination.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
1 Taylor, Landlord & Tenant, 406 (treatise)	Authority supporting the proposition that where a tenant elects to continue under an option, the tenant holds under the original lease for the extended term.	The court relied on this authority to support its conclusion that the agreement operated as an extension of the original lease and that the tenant, having elected to continue, holds for the full term under the original lease.
16 R.C.L., § . 389 (treatise)	Textual authority cited concerning the same point: extension of tenancy under an option and holding under original lease.	Used by the court as supporting legal literature for its characterization of the option as an extension rather than creation of a new relationship requiring a new lease.
Holley v. Young, 66 Me. 520	Case law cited in support of the principle that election by tenant under option leads to continuation under the original lease terms (with specified changes).	The court cited this case as one of the authorities consistent with its holding that the option produced an extension and that the tenant's election was effective.
Delashman v. Berry, 20 Mich. 292	Case law supporting the legal principle that election to continue under an option results in possession for the full extended term under the original lease.	The court cited this case among the authorities to affirm its conclusion about the nature of the option and the effect of the tenant's election.

Court's Reasoning and Analysis

The Court began by identifying what the lease required to obtain the additional five-year term: only an election by the lessee to continue the tenancy. The opinion states that this election was not required to be made in writing and, because the lease specified that the lessee should "ask for a renewal ... at the termination of five (5) years," an election necessarily follows the termination in point of time. Thus the lessee could not be compelled to elect prior to the lease's termination.

The Court rejected a narrow construction that would confine the right to the precise hour of expiration. Because the lease did not fix the length of any post-termination period during which the election could be made, the Court applied a construction that the tenant was entitled to a reasonable time after termination to make the election. Under the facts, an oral election two days after termination was deemed within a reasonable time.

The Court observed factual markers supporting reasonableness: the landlord made no inquiries about the tenant's intentions; the tenant continued to carry on business as usual; and the tenant tendered the monthly rent within the five-day grace period provided in the lease. The Court contrasted short, reasonable post-termination possession and prompt tender with the circumstance of remaining in possession for a "considerable length of time" without notice, which might then justify treating occupancy as wrongful.

On the legal characterization of the option, the Court held that although the option was phrased as a "renewal," the agreement operated as an extension of the original lease rather than the creation of a new lease relationship. It emphasized that the option provided for continuance of an existing and established relationship, subject only to the specified change in rental. Because this was an extension at the lessee's option and the lessee made the requisite election within a reasonable time, the lessee held the premises for the full extended term under the original lease.

Finally, the Court applied the authorities cited (treatises and cases) to support its conclusion that an election to continue under such an option results in holding under the original lease for the additional term.

Holding and Implications

Holding: The plaintiff's exception was overruled. The Supreme Court affirmed the trial justice's direction of a verdict for the defendant and remitted the case to the Superior Court with direction to enter judgment on that verdict.

Implications:

Direct effect: The defendant's oral election made two days after the lease's termination was held timely and effective; the defendant was entitled to possession for the extended term under the original lease (subject to the terms of that extension, including the altered rent).
The Court did not purport to announce a novel rule of law beyond applying established authorities; it treated the matter as an application of standard principles (as reflected in the cited treatises and cases) that an option to extend results in continuation under the original tenancy when the tenant makes the required election within a reasonable time.

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FRANCESCO CAITO vs. VINCENT J. FERRI.

( 1) Landlord and Tenant. Renewal of Lease. Extension of Lease. Election to Renew. A lease provided that lessee should have an option for a renewal for a further term and that if lessee "should ask for a renewal at the termination of five years from the date hereof, the conditions governing the extended period shall be the same with the exception" of the rent, and also provided that upon failure of lessee to pay any installment of rent within five days after the first of the month lessor should be at liberty to take immediate possession of the premises. Lessee two days after the original termination of the lease stated orally to lessor that he wished to renew the lease for the further period: — Held, that the only act that lessee was required to do was an election to continue the tenancy which he was not called upon to make prior to the termination of the lease, and a fair construction of the lease gave lessee a reasonable time after the termination of the lease to make such election, and the election within two days was within a reasonable time. Held, further, that the election was not required to be in writing. Held, further, that the agreement was one for the extension of the original lease rather than for a renewal of a lease to be evidenced by a new lease, although the option was expressed to be a renewal.

( 2) Landlord and Tenant. Extension of Lease. Where a lease provided for its extension at option of lessee, the tenant having made his election holds the premises for the full term under the original lease.

STEARNS, J.

The action is trespass and ejectment to recover possession of certain premises on Atwell's avenue in Providence.

Defendant maintained a drug store on the premises and held the same under a written lease for a period of five years from November 1, 1916 to November 1, 1921. Plaintiff, the owner of the premises, bought the same in 1920 subject to the lease. By the terms of the lease it was provided that the lessee should have an option for a renewal of the lease for a further term of five years subject to the condition specified therein. The lease also contains the following clause: "Should said lessee ask for a renewal of this lease at the termination of five (5) years from the date hereof as hereinbefore stated, the conditions governing the extended period shall be the same with the exception that the rent therefor, shall be six hundred ($600) dollars per year payable in equal monthly payments of fifty ($50) dollars each in the same manner as aforesaid." The rental was $540 a year, payable in equal monthly installments on the first business day of each month and it was further provided that upon failure of the lessee to pay any instalment within five days after the first of the month, the landlord, without making any demand for the rent, should be at liberty to enter upon the premises, declare the lease at an end and take immediate possession of the premises. There was also the usual covenant that the lessee at the expiration of the lease would quietly and peaceably surrender possession of the premises.

On the 3rd of November, 1921, defendant went to plaintiff's house and stated to plaintiff that he wished to continue as a tenant in the store for the further period of five years. Plaintiff refused to permit this and claimed that defendant should have given notice of his election to continue not later than November 1st, and that the notice given was too late. On the following day, November 4, defendant tendered to plaintiff $50 in payment for his rent for November. Plaintiff refused to receive the rent and served written notice upon defendant to quit on or before December 1st. The claim is that defendant having failed to give the required legal notice of his election, the landlord was entitled to treat him as a trespasser.

At the conclusion of the testimony, the trial justice, on motion made, directed a verdict for the defendant. Plaintiff's exception to this action is the sole question now raised by his bill of exceptions.

The lease contains all of the terms of the agreement between landlord and tenant for the tenancy for five years and for the subsequent tenancy. To entitle the tenant to the additional term of years but one act was required on his part, namely, an election to continue his tenancy, which was not required to be made in writing. As the election was to be made at the termination of the lease the lessee could not be called upon to make an election prior to the termination of the lease. Neither do we think it was the intent of the parties to restrict the right of the tenant to elect, to the precise hour of the termination of the lease. By the terms of the agreement the termination of the lease was to precede in point of time the election by the tenant. As the tenant was to have some time in which to elect, and as the length of this period is not expressly provided for, a fair construction of the agreement is that it was the intent of the parties that the tenant was to have a reasonable time after the termination of the lease in which to make his election, and in the circumstances we think the election within two days was made within a reasonable time. The landlord had made no inquiries in regard to the tenant's intentions; the tenant was carrying on his business as usual and continued to do so. He was bound to pay his rent within five days, under penalty of losing his lease. By the terms of the lease the tenant covenanted to surrender possession to the lessor at the expiration of the lease. If he had remained in possession for any considerable length of time without notice to the landlord, it might perhaps fairly be argued that the landlord could properly consider such conduct as an election by him to continue as a tenant according to the terms of the agreement rather than in violation of the agreement. The agreement is one for the extension of the original lease rather than for a renewal of a lease to be evidenced by a new lease. It provides for the continuance of an existing and established relationship between the parties rather than for the creation of a new relationship. It is true that the option is expressed to be a renewal but it is also provided that should the lessee ask for a renewal the conditions governing the extended period shall be the same with the exception of the specified change in rental. As this is an extension of the tenancy at the option of the lessee, the tenant having made his election, holds the premises for the full term under the original lease. 1 Taylor Landlord Tenant, 406; 16 R.C.L., § . 389, and cases cited; Holley v. Young, 66 Me. 520; Delashman v. Berry, 20 Mich. 292.

Plaintiff's exception is overruled and the case is remitted to the Superior Court with direction to enter judgment on the verdict.

CAITO v. FERRI