November 8, 2007
CARLOS MOURA AND SIMAO PEREIRA, PLAINTIFFS-APPELLANTS,
VINCENT LUONGO, DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Chancery Division, Essex County, Docket No. C-0027-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted September 18, 2007
Before Judges Fuentes and Chambers.
Plaintiffs, Carlos Moura and Simao Pereira, appeal from the judgment of the Chancery Division, General Equity Part, dismissing their cause of action for enforcement of an alleged unilateral option to purchase real property contained in a commercial lease agreement. The court reached its decision after considering the evidence presented by the parties in a bench trial.
It is undisputed that the lease contained a paragraph which provided plaintiffs with a right of first refusal to purchase defendant's property for $110,000. Plaintiffs argued before the trial court that a clause in this paragraph also gave them a unilateral option to purchase the property after the expiration of the lease. Defendant argued that this interpretation is erroneous and the lease was only intended to provide a right of first refusal.
In deciding in defendant's favor, the trial judge acknowledged the ambiguity in the paragraph at issue. Applying well-settled principles of contract interpretation, the judge resolved the ambiguity against the drafter, in this case plaintiffs, and found that the parties intended to create only a right of first refusal. After reviewing the record, and in light of prevailing legal standards, we agree with the trial court and affirm.
These are the salient facts. Plaintiffs own the Spanish Manor Restaurant and several surrounding properties which border on Defendant's property at 23 Rose Avenue in Newark. On June 30, 1997, counsel for defendant wrote a letter to plaintiff's counsel enumerating several proposed modifications to a commercial lease agreement involving defendant's property at 23 Rose Avenue in Newark. Specifically, defendant made the following proposal as to paragraph 30:
The Landlord and Tenant agree that in addition to the terms and conditions herein contained that Tenant shall also have the right of first refusal to purchase the property in which the rental space occupies a portion and commonly known as 23 Rose Avenue, City OF Newark, County of Essex, New Jersey, for the purchase price OF ONE HUNDRED TEN THOUSAND DOLLARS ($110,000.00).
Tenant shall have 14 days in which to exercise his right hereunder from the date that notice is served upon Tenant. If the Tenant exercises his rights under this paragraph all Rents paid in consideration of this Lease shall be applied to the purchase price and same shall be reduced by that amount. Property shall be sold in AS IS condition. If Tenant elects to exercise his rights under this paragraph he must so notify the Landlord within the FOURTEEN (14) days referred to herein. (Emphasis added).
On August 7, 1997, plaintiff's counsel responded, indicating, in pertinent part, that the amendment to paragraph 30 was acceptable, although a thirty day response and notification period would be preferable. The final version of paragraph 30 read as follows:
Right of Tenant to Purchase. The Landlord and Tenant agree that in addition to the terms and conditions herein contained that Tenant shall also have the right of first refusal to purchase the property, in which the rental space occupies a portion, commonly known as 23 Rose Avenue, Newark, NJ for the purchase price of $110,000.00. If Tenant exercises his rights under this paragraph all Rent paid in consideration of this Lease shall be applied to the purchase price and same shall be reduced by that amount. If Tenant elects to exercise his rights under this paragraph he must so notify the Landlord within thirty days from the date written confirmation of a bona fide offer is received from the Landlord. In the alternative, if no offers are made Tenant must so notify the Landlord of his intention to exercise this option within thirty days prior to the expiration of this lease. (Emphasis added).
The parties finally reached an agreement on the remaining issues and entered into a commercial lease for three years, commencing on May 1, 1997, and ending on April 30, 2000, for a $250 monthly rent.
At trial, defendant testified that based on discussions he had with his attorney prior to signing the lease, he understood that the lease only gave plaintiffs a right of first refusal, not a unilateral option to purchase the property. The $110,000 purchase price was just a number defendant came up with in the event that he wanted to sell the property. According to defendant, plaintiffs never expressed a desire to purchase the property prior to the execution of the lease.
Moura testified that the lease was intended to include a unilateral option to purchase when the lease expired. According to Moura, defendant wanted the original lease to be for three years and then he wanted to sell the property because he planned to retire and move to the shore. It is undisputed that plaintiffs' counsel prepared the final draft of the lease, including paragraph 30.
On February 25, 2000, plaintiffs' attorney wrote a letter notifying defendant of plaintiffs' intention to exercise their option under paragraph 30 of the lease to purchase the property for $110,000, less credit for rent paid. From this communication, the record shows that plaintiffs' attorney wrote to defendant on May 19, 2000, attempting to confirm that the parties had reached the following agreement: (1) the lease would be extended for one year at the same monthly rent; (2) the monthly rental on the lease extension would not be applied toward the purchase price; and (3) at the end of the extension, defendant would sell the property to plaintiffs for $110,000, minus $9,000 in rent paid during the original lease period.
Defendant denied accepting this proposal, and a formal lease reflecting these changes was never executed. Despite this, plaintiffs continued to pay $250 per month to lease the property up until the date of trial. Thus, it appears that the parties continued their landlord/tenant relationship in a de facto month-to-month capacity.
In 2004, defendant discussed selling the property to plaintiffs; no formal agreement was reached. It is undisputed that defendant did not solicit offers for the property until 2004. At some point in 2004, defendant entered into a contract to sell the property to someone other than plaintiffs for $220,000. Moura claimed that he only discovered the existence of this contract at trial on July 18, 2006.
Sitting as the trier of fact, Judge Klein found defendant's interpretation of paragraph 30, limiting plaintiffs' right to purchase contingent upon defendant's decision to sell, to be more reasonable under the circumstances. Judge Klein held that the words "if no offers are made" in the fourth sentence of paragraph 30, "implie[d] a process of marketing the property and solicitation of offers by the owner." Absent affirmative steps to market the property, this language did not obligate defendant to sell the property to plaintiffs.
Although the language in paragraph 30 could have an alternative meaning, Judge Klein found insufficient evidence to support plaintiffs' interpretation. Moreover, plaintiffs' attempt to exercise the option on February 25, 2000, was outside the thirty days from the expiration of the lease on April 30, 2000. Finally, Judge Klein found that plaintiffs' attempt to negotiate a one-year extension of the lease with a clearly-defined unilateral option to purchase belied their position that they had an enforceable right to purchase at the end of the original lease.
It is well-settled that "we do not disturb the factual findings and legal conclusions of the trial judge unless we are convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interest of justice." Daidone v. Buterick Bulkheading, 191 N.J. 557, 561 n.1 (2007) (quoting Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974)).
Against this standard of review, we discern no basis to interfere with the trial court's factual findings and ultimate legal conclusions. We thus affirm substantially for the reasons expressed by Judge Klein.
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