APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY (D.C. Civil No. 77-1252)
The major question for decision in this diversity case tried non-jury under New Jersey law is whether the district court erred in determining that a right of first refusal in a land sale contract had expired. The litigation arose out of the Atlantic City Housing Authority's attempts to redevelop a large parcel of Boardwalk property with appellant Barco Urban Renewal Corporation in 1969 and with appellee Resorts International, Inc., in 1977. The district court denied Barco's request for specific performance of the right of first refusal or any other relief, denied Resorts International's and the Housing Authority's counterclaims, and dismissed Resorts' cross-claim as moot. Barco has appealed and Resorts and the Housing Authority have cross appealed. We affirm the district court in all respects.
In 1965, appellee Atlantic City Housing Authority acquired an eighty-acre tract fronting on the Boardwalk in central Atlantic City called the Uptown Urban Renewal Project using $30 million in loans and grants from the United States Department of Housing and Urban Development.*fn1 HUD conditioned its financial assistance on approval of the local urban renewal plan adopted by the city the same year. Under that plan, once the land was cleared, redevelopment would be carried out by private concerns who would be permitted to buy the property at a low price on conditions assuring that it would be developed in a specified manner. HUD regulations require redevelopment to conform to the local agency's approved urban renewal plan and bar final conveyance of the land to the redeveloper until the local agency is satisfied that the redeveloper is prepared to move forward expeditiously.*fn2
In the summer of 1968, Gustave Amsterdam and Goldie Hoffman, two experienced urban redevelopers with substantial financial resources, became interested in undertaking the project. Amsterdam was then president and chairman of the board of Bankers Securities Corporation, a Philadelphia-based holding and financial management company with substantial assets, and also chairman of the Philadelphia Redevelopment Authority, a public agency with responsibility for urban renewal in that city. Hoffman was a member of the Philadelphia Redevelopment Authority and a prominent businesswoman with substantial real estate holdings in Philadelphia and Lancaster, Pennsylvania, and in Atlantic City. She was then engaged in redevelopment of downtown Lancaster.
Impressed by Hoffman's and Amsterdam's financial credentials and experience in urban redevelopment, Mrs. Pauline Hill, executive director of the Housing Authority from 1962 to 1972, met with the pair on several occasions in July 1968 to discuss the Uptown Project. Amsterdam proposed that Bankers Securities Corporation and Mrs. Goldie Hoffman be preselected as sponsors and redevelopers of the Uptown Project, promising to "go forward with the preparation of an overall scheme of development" as soon as the preselection was approved. App. at 460e. The Housing Authority accepted Amsterdam's proposal on August 30, 1968, subject to HUD approval. Bankers Securities and Hoffman, in turn, formed the Barco Urban Renewal Corporation, the plaintiff and appellant in this case, to undertake the Uptown Redevelopment Project.*fn3 HUD approved the parties' proposed land sale contract with certain modifications,*fn4 "provided the Disposal Contract is fully executed within 3 months and all land is conveyed within 63 months from the date of this letter." App. at 4e. The Authority and Barco accepted HUD's modifications and executed the contract on April 22, 1969.
The contract consisted of two parts. Part I included the terms negotiated by the parties, and Part II consisted of a standard HUD form required to be made a part of all such redevelopment contracts. The contract provided for immediate conveyance of one parcel,*fn5 but because the existing Urban Renewal Plan did not permit the type of use and development that was contemplated by the parties, it did not contain a precise schedule for conveyance of the remaining property within the Uptown Project. The order, time of acquisition, and purchase price for the remaining parcels were left for future negotiations once the Authority secured the necessary amendments to the Urban Renewal Plan. Thereafter, the parties were obligated to enter into a supplemental agreement settling these terms. The contract required conveyance of all properties no later than April 22, 1974, five years from the date of its execution.
In addition to provisions permitting termination for default, the agreement provided that either party could terminate the agreement if the parties failed to achieve the projected supplemental agreement within a reasonable time. This term provided, however, that if the Housing Authority exercised its right to terminate, Barco would have a right of first refusal on subsequent offers to develop the property:
(T)he Agency shall ... give written notice to the Redeveloper of the terms of any bona fide offer or offers to redevelop any portion or all of the Property which the Agency is willing to accept and the Redeveloper shall have the exclusive right for a period of thirty (30) days after receipt of each such notice to submit an offer in writing to the Agency on the same terms as set forth in the notice, which offer shall be accepted by the Agency.
App. at 29e-30e. According to testimony of Mrs. Helen Chait, the attorney who negotiated the contract on behalf of Barco, the genesis of the provision was Barco's apprehension about committing itself to this substantial venture before the urban renewal plan was amended to allow it. Barco feared that an unreasonable refusal by the Authority to agree to supplemental terms would squeeze it out or force it to accept unfavorable terms after it had expended large sums preparing plans and arranging for construction to begin. Moreover, Barco did not yet know the total price for the property-although the Authority suggested a figure somewhat higher than $6 million-or the details of the Authority's final plan. Originally proposed as Barco's right alone, the Authority asked that the right to terminate for failure to reach a supplemental agreement be made mutual. This was done with the addition of "this right of first refusal in the event the authority terminated without cause." App. at 590-91. The district court credited Chait's testimony, and in addition found that the right of first refusal provision "was a trade-off for Barco's prompt development of, and extensive investment in, Parcel 1, the Beachgate property," the first parcel conveyed under the agreement. District court op. at 27, app. at 1897.
The parties never discussed how long Barco would retain the right of first refusal, and nothing in the contract specifically limited its duration. "Unfortunately, and perhaps ironically, it is the inattention to this particular detail which gave rise to this litigation." District court op. at 28, app. at 1898. The district court carefully reviewed the testimony and concluded "that the right of first refusal was to endure for a reasonable time ...," id. at 30, app. at 1900, a holding not challenged on appeal. Rather, the controversy is focused on the court's further determination that a reasonable period under the contract would not extend beyond April 22, 1974, the contractual deadline for conveyance of all property subject to the agreement.
Unfortunately, once the contract was executed a state of serenity did not long prevail. The district court found that "Amsterdam's original zeal and enthusiasm for the project was dampened" by discouraging sales of the condominiums built on the first tract (Beachgate) and other problems on the project. Id. at 23, app. at 1893. "Evidently, Barco sought to delay further commitments and postpone moving forward until the climate changed." Id. First manifesting itself in June 1969, the Authority expressed increasing dissatisfaction with the pace of Barco's development of the tract. Pressures from the mayor and citizen groups mounted. According to Amsterdam's testimony, Barco felt that the Authority did not promptly furnish the information it needed to permit Barco to move ahead. The Authority and citizen groups, on the other hand, blamed Barco for failing to submit the construction plans, evidence of financing, and timetables required by the contract.
The controversy erupted over the second parcel to be conveyed and improved. First scheduled for July 1971, Barco was granted an extension to January, 1972 to "take down" the tract. Despite requests by the Authority, Barco neglected to provide information required under the contract for the conveyance. In late November, Barco threatened to abandon the project because of community and Housing Authority pressures unless given assurances of the Housing Authority's cooperation. Barco promised to submit a proposed timetable for development upon receipt of the requested assurances, but with an important reservation:
Because our experience to date indicates beyond any question, that many things outside our control (Governmental action, Civic cooperation, financial support in an area shunned by all normal financing sources) will dictate the timetable by which the redevelopment proceeds, we would not be willing to guarantee specific dates, except subject to all contingencies which have in the past, and may in the future, affect this timetable.
App. at 125e-26e. The Authority responded on December 3 by adopting unanimously a resolution assuring Barco of "its maximum cooperation, with the proviso that the Barco Urban Renewal Corporation furnish to the Housing Authority, the timetable ...