Gates Rubber Co. v. Ulman

In 1963, Gates Rubber Co. (plaintiff) leased the subject property from Louis Lesser Enterprises, Inc. (Lesser) for 20 years with four successive options to extend the terms for five years each. Lesser also gave Gates an option to purchase the property during the twentieth year of the lease. Both the lease and the option were not recorded. Lesser and Gates did record a short-form lease stating the basic terms of the agreement. The document referenced the long-form lease, stating that it was the sole agreement of the lease between the parties. It did not mention the purchase option. The lease required Lesser to build an office and warehouse building on Gates’s behalf. In 1969, Charles Ulman took present ownership of the property through a series of conveyances starting from Lesser. None of these deeds referred to the option agreement. In 1983, Gates exercised its option to purchase, but Harry Ulman (defendant), administrator and executor of Charles Ulman’s estate, refused to convey the property because there was no evidence that Charles was ever aware of the purchase option when he purchased the property in 1969. Gates sued to seek specific performance of the option, declaratory relief, and damages. The trial court ruled in favor of Ulman, holding that Gates’s possession of the property, while open, notorious, and exclusive, was insufficient to impose on Charles a duty of inquiry because Gates’s possession was wholly consistent with the recorded title and lease. Gates appealed.