February 4, 2008
SLAVIK GOFMAN AND JENNIFER GOFMAN, PLAINTIFFS-RESPONDENTS,
JOSEPH DELL'AQUILA AND MAUREEN DELL'AQUILA, DEFENDANTS-APPELLANTS.
On appeal from the Superior Court of New Jersey, Law Division, Bergen County, L-454-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 26, 2007
Before Judges Wefing, Parker and R. B. Coleman.
Defendants Joseph and Maureen Dell'Aquila appeal from a January 3, 2007 order denying reconsideration of two earlier orders, dated June 8, 2006, that (1) granted summary judgment in favor of plaintiffs Slavik and Jennifer Gofman, declaring that plaintiffs had lawfully exercised their right of first refusal (ROFR) and were entitled to compel defendants to sell land to plaintiffs and (2) denied defendants' cross-motion for summary judgment. For the reasons set forth below, the orders of the trial court denying reconsideration and disposing of the cross-motions for summary judgment are reversed.
Defendants owned a two-acre parcel of land located in Alpine on which a single-family residential dwelling was situated. In 2000, defendants listed that property for sale. Plaintiffs expressed an interest in the property but could not afford to purchase it in its entirety. Upon plaintiffs' suggestion, the parties entered into a contract pursuant to which defendants subdivided the land into two separate lots of approximately one acre each. The lot on which the dwelling was located was designated Lot 10.01. That lot was purchased by plaintiffs. Defendants retained ownership of the vacant lot designated Lot 10.02. Additionally, the parties agreed that defendants would extend to plaintiffs a ROFR in connection with the vacant lot. The terms and conditions of the ROFR, memorialized in the January 29, 2001, deed that transferred title to Lot 10.01, were as follows:
RIGHT OF FIRST REFUSAL
Together with a right of first refusal to Grantees [plaintiffs] regarding the adjacent vacant parcel of land now owned by Grantors [defendants] know [sic] as Lot 10.02, Block 71 in the Borough of Alpine, New Jersey upon the following conditions:
1. Grantors shall leave a notice of receipt of a bona fide offer to purchase Lot 10.02 at Lot 10.01 by posting same upon the door with any individual inside the structure and by simultaneously faxing a copy of the same to fax number: .
2. Grantees shall have 5 business days from the posting and/or faxing of Grantees' notice to advise Grantors in writing of their intention to exercise said option at the stated offer price together with a bank or certified check payable to Grantors in the amount of 10% of the purchase price agreeing to close at the offices of Grantors' attorney within 60 days to the next nearest business day. There shall be no conditions to closing other than Grantors conveying clear title.
3. Grantees shall deliver the balance of the purchase price within the time frame listed herein. Grantees' failure to perform shall entitle the Grantors to retain the deposit and thereafter there shall be no further obligations between the parties and this Right of First Refusal shall expire.
4. Time shall be of the essence for all periods referred to herein.
5. This Right of First Refusal shall be extinguished without further documentation upon Grantors' execution or recording of a deed to Lot 10.02.
6. In the event, Grantors fail to consummate a sale of Lot 10.02 with any bona fide purchaser that Grantee has not elected to exercise, this option shall remain in full force and effect.
In or around December 2005, defendants listed the vacant lot for sale, and on or around December 23, 2005, they advised plaintiffs that they had received an offer from a third party in the amount of $1,475,000. According to defendants, the offer "was considerably lower than the listed price for the Property." Nevertheless, in accordance with the procedure established for the ROFR, defendants' real estate attorney, Steven Delinko, faxed and delivered a letter to plaintiffs advising plaintiffs of the following:
Pursuant to the terms and conditions set forth in the Right of First Refusal contained in a  deed . . . between [defendants], as Grantor, and [plaintiffs], as Grantee, please be advised we have received a bona fide offer to purchase the Property for a price of One Million Four Hundred Seventy-Five Thousand and 00/100 ($1,475,000.00) Dollars with One Hundred Forty-Seven Thousand Five Hundred and 00/100 ($147,500.00) Dollars down and closing to occur within sixty (60) days. Pursuant to the ROFR, you have until 5:00 p.m., January 3, 2006 to advise [defendants] in writing of your intention to exercise said option at the stated offer price[.]
On December 28, 2005, during a conversation between Delinko and plaintiffs' real estate attorney, Justin DeCrescente, DeCrescente indicated that he intended to send Delinko a check constituting the ten percent down of the amount offered for the purchase of the Property. Delinko responded that DeCrescente could send the check but that Delinko would hold it until defendants determined whether they would accept the third-party offer. On January 3, 2006, the parties' counsel spoke again and DeCrescente stated that he wanted to immediately deliver a check payable to defendants. Delinko advised DeCrescente that he should make the check payable to Delinko's law firm so that it could be held in escrow pending the execution of a contract for the sale of the vacant lot. Later that day, however, Delinko called DeCrescente advising him that defendants had decided to reject the third-party's offer to purchase the vacant lot. At approximately 1:40 p.m. on January 3, 2006, Delinko faxed a letter to DeCrescente confirming their earlier conversation. The letter read in pertinent part:
Please allow this letter to confirm our telephone conversation of this morning wherein I informed you that our client, [defendants], [are] not interested in accepting that bona fide offer to purchase the Property for $1,475,000., as such offer was communicated to your client . . . in my letter dated December 23, 2005 in accordance with the terms of the ROFR . . . between [defendants], as Grantor, and [plaintiffs], as Grantee . . . . [S]aid notice is hereby rescinded.
We acknowledge, on behalf of our client, that the ROFR remains in full force and effect, and shall be applicable with respect to any future bona fide offer to purchase the Property.
Despite the earlier communications between Delinko and DeCrescente, at approximately 4:00 p.m. on January 3, 2006, DeCrescente arrived at Delinko's office attempting to exercise the ROFR. At that time, Delinko delivered to DeCrescente a copy of the letter he had earlier faxed. In return, DeCrescente handed Delinko a check for $147,500, together with a letter expressing plaintiffs' intention to exercise the ROFR:
As you are aware, I represent [plaintiffs], the Grantees of a [ROFR] to purchase the above-referenced Property. Pursuant to the notice contained in your letter of December 23, 2005, and pursuant to the terms of the ROFR . . . my clients are exercising their right of first refusal, and hereby tender the downpayment of $147,500.00[.]
After reading the letter, Delinko explained to DeCrescente that defendants were not interested in accepting the third-party offer to purchase the vacant lot. Delinko took the check, but he advised DeCrescente that he would soon return it because the third-party offer was not acceptable to defendants.
At approximately 5:14 p.m., after DeCrescente left Delinko's office, Delinko returned the check to DeCrescente via Federal Express. Along with the check, Delinko sent a letter that he also faxed to DeCrescente. The letter acknowledged receipt of plaintiffs' check but stated the following:
As we discussed this morning and while you were here, on behalf of my client, I am returning the check to you herewith. My client has not and will not accept the third party bona fide offer. I communicated this to you orally last week, this morning, this afternoon and restated it in the letter I faxed to you earlier today. There is, therefore, no bona fide offer acceptable to my client for which your client may exercise its right of first refusal. The Property remains on the market for sale. If your client is interested in purchasing the Property, please contact me with an offer. Subsequent to the events of January 3, 2006, plaintiffs filed suit against defendants, seeking a declaratory judgment requiring defendants to sell the vacant lot to plaintiffs as per the ROFR and alleging breach of contract. Plaintiffs moved for summary judgment and defendants filed a cross-motion for summary judgment. Defendants later filed a Notice of Motion to Amend their Answer and Counterclaim.
On June 8, 2006, after hearing oral argument, the trial court rendered three orders: (1) an order granting summary judgment in favor of plaintiffs and directing the parties to move expeditiously to complete the closing of the sale of the vacant lot to plaintiffs; (2) an order denying defendants' cross-motion for summary judgment; and (3) an order denying defendants' Motion to Amend their Answer and Counterclaim. In an accompanying written decision, the trial court, without citing legal authority, rejected defendants' argument that their acceptance of a bona fide third-party offer was necessary before the ROFR would be effective. The court observed "[t]he course of conduct required by the deed document would truly be a sham if the Defendants would be permitted to send notification and cause Plaintiffs to muster hundreds of thousands of dollars, within days, only for Defendants to be given the latitude to call it all off if they desired." Hence, the court rejected defendants' argument that the acceptability of a third-party's bona fide offer is necessary, concluding that "[t]he language controlling such circumstances, . . . would be a sham in and of itself if Defendants were permitted to 'test the waters' with the Plaintiffs every time they chose." The court further determined that the letter of December 23, 2005, informing plaintiffs of the third-party offer, demonstrated that defendants "were going to accept [the third-party offer] unless the Plaintiffs matched it with [sic] the timeframe dictated."
Thereafter, defendants filed a motion for reconsideration. On December 8, 2006, after oral argument, the court denied defendants' motion and issued another written decision explaining its reasons. The court, again without citation to legal authority, stated that "Defendants did not make 'an offer' to plaintiffs which, under ordinary contract principles, might be revocable." Instead, the court reiterated that "[o]nce a bona fide offer was received from the 3rd party that caused Defendants to give notice to Plaintiffs, revocation by Defendants was no longer a valid option."
As a result of the trial court's decision denying their motion for reconsideration, defendants filed this appeal. On appeal, defendants present the following issues:
POINT I: THE DECISION OF THE TRIAL COURT MUST BE REVERSED BECAUSE IT ERRONEOUSLY HELD THAT THE PROVISION IN THE GOFMAN DEED GRANTED THE PLAINTIFFS AN "OPTION" TO PURCHASE REAL ESTATE EVEN THOUGH THE PROVISION CLEARLY AND UNAMBIGUOUSLY GRANTED THE PLAINTIFFS ONLY A "RIGHT OF FIRST REFUSAL," WHICH IS WHAT THE PLAINTIFFS ADMIT THE PARTIES INTENDED.
POINT II: THE DECISION OF THE TRIAL COURT MUST BE REVERSED AND SUMMARY JUDGMENT SHOULD BE GRANTED IN FAVOR OF THE DELL'AQUILAS BECAUSE THE DELL'AQUILAS' FIRST REFUSAL OFFER TO THE PLAINTIFFS WAS, AS A MATTER OF LAW, A REVOCABLE OFFER AND WAS, BASED UPON THE UNDISPUTED FACTS OF THIS CASE, REVOKED BY DELL'AQUILAS BEFORE IT WAS ACCEPTED BY THE PLAINTFFS AND, THEREFORE, THERE WAS NO BINDING CONTRACT BETWEEN THE DELL'AQUILAS AND THE PLAINTIFFS.
1. The Dell'Aquilas' First Refusal Offer to the Plaintiffs was, as a matter of law, an offer which was legally capable of being revoked both orally and in writing prior to its acceptance by the Plaintiffs.
2. The Dell'Aquilas' First Refusal Offer to the Plaintiffs was, based upon the undisputed facts of this case, revoked both orally and in writing prior to the Plaintiffs' attempted acceptance of the First Refusal Offer and, therefore, there was no binding contract between the Dell'Aquilas and the Plaintiffs.
POINT THREE: THE DECISION OF THE TRIAL COURT MUST BE REVERSED AND THE DELL'AQUILAS ARE ENTITLTED TO SUMMARY JUDGMENT BECAUSE THE TRIAL COURT MADE ERRONEOUS UNSUPPORTED FINDINGS OF FACT ABOUT THE MOTIVES OF THE DELL'AQUILAS AND, BASED ON SUCH FINDINGS, WRONGFULLY TREATED THE DELL'AQUILAS' FIRST REFUSAL OFFER AS AN IRREVOCABLE OPTION INSTEAD OF A REVOCABLE RIGHT OF FIRST REFUSAL.
POINT IV: SUMMARY JUDGMENT IN FAVOR OF THE DELL'AQUILAS IS A PROPER REMEDY BECAUSE THERE IS NO GENUINE ISSUE OF MATERIAL FACT AND, THEREFORE, THE DELL'AQUILAS ARE ENTITLED TO JUDGMENT AS A MATTER OF LAW.
"Reconsideration is a matter within the sound discretion of the Court, to be exercised in the interest of justice." D'Atria v. D'Atria, 242 N.J. Super. 392, 401 (Ch. Div. 1990). "Reconsideration should be utilized only for those cases which fall into that narrow corridor in which either (1) the court has expressed its decision based upon a palpably incorrect or irrational basis, or (2) it is obvious that the court either did not consider, or failed to appreciate the significance of probative, competent evidence." Ibid. Rule 4:46-2 provides that a motion for summary judgment shall be granted "if the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." Appellate courts employ the same standard when reviewing summary judgment orders. Prudential Property Ins. v. Boylan, 307 N.J. Super. 162, 167 (App. Div. 1998). Thus, a reviewing court must decide whether there was a genuine issue of material fact. Ibid. If there is no genuine issue of fact the court will decide whether the trial court's ruling of law was correct. Ibid. In the present case, the material facts are not in dispute; thus, we will consider the merits of defendants' arguments.
Our case law recognizes that there are significant distinctions between a ROFR and an option, most notably, that a ROFR does not compel an owner of property to sell once the event triggering the ROFR occurs. In Tantum v. Keller, 95 N.J. Eq. 466 (Ch. 1924), aff'd, 96 N.J Eq. 672 (E & A 1924), the court, acknowledging previous cases on point, interpreted a provision granting a lessee a "first privilege" to renew a lease. The court held that "the lessee [was] not given an absolute right to such renewal, but only a right to the first opportunity to renew if the landlord is then willing to lease to any one." Id. at 469. In Wellmore Bulders, Inc. v. Wannier, we made a similar observation:
An ordinary option gives the optionee the power to compel the owner of the property to sell it . . . whether he be willing to part with ownership or not. On the other hand, a privilege of first refusal or preemption does not give the preemptioner the power to compel the owner to sell; it merely requires the owner, when and if he decides to sell, to offer the property first to the person entitled to preemption . . . and the preemptioner may then elect whether he will buy.
[49 N.J. Super. 456, 464 (App. Div. 1958) (emphasis added).]
Wellmore held that the plaintiff's right of preemption was dependent on defendants' desire to sell. Ibid. Applying Wellmore, in Madison Indus. v. Eastman Kodak Co., 243 N.J. Super. 578, 587 (App. Div. 1990), we found that a ROFR did not create an unconditional obligation on the defendant to sell its byproduct to plaintiff.
Furthermore, Mazzeo v. Kartman, stated that there is a "clear and classic distinction" between an ROFR and an option:
The option compels performance within the time limit specified, or if none is mentioned, then within a reasonable time, whereas the right of first refusal has no binding effect unless the offeror decides to sell.
The right of first refusal, or first right to buy, is not a true option but is a valuable prerogative. It limits the right of the owner to dispose freely of his property by compelling him to offer it first to the party who has the first right to buy. Nor may the owner accept an offer made to him by a third party. [234 N.J. Super. 223, 229 (App. Div. 1989) (internal citations omitted).]
In addition, Mazzeo noted that a ROFR may be in various forms, including the type in the present case, in which a bona fide offer from a third-party acts as a triggering event. Ibid. Mazzeo then quoted Corbin on Contracts to describe what results under these circumstances:
Very often it is clearly provided that B shall have a Right of First Refusal at the same price and on the same terms as those of an offer by a third person that O is willing to accept. Here, the price at which O must make an offer to B is made definite by the terms of third person's offer or by the terms on which O has expressed a willingness to sell. O is not under a duty to sell to anybody or to accept anybody's offer; and B gets no power of acceptance if O merely reports the terms of such an offer without indicating his own willingness to accept it. [1A Corbin on Contracts, § 261 at 470 (1963) (footnote omitted)].
[Id. at 229-30. (emphasis added).]
Thus, the language of the aforementioned cases makes it clear that if the parties negotiated an ROFR rather than an option, defendant was not obligated to sell the vacant lot to plaintiffs upon defendants' receipt of a bona fide offer.
Recognizing the critical difference between a ROFR and an option, we must determine what was created by the provision accompanying the deed. Schnakenberg v. Gibraltar Sav. & Loan Ass'n, 37 N.J. Super. 150, 155 (App. Div. 1961), sets forth the rules of contract interpretation:
The court will not make a different or better contract than the parties have seen fit to make for themselves. In the interpretation of a contract the intention of the parties is to be gathered from the language used in the instrument as a whole. Washington Construction Co., Inc., v. Spinella, 13 N.J. Super. 139 (App. Div. 1951), aff'd, 8 N.J. 212 (1951). The situation of the parties, the attendant circumstances, and the objects they sought to attain are all necessarily to be considered by the trial court in its inquiry as to the intention of the parties.
"[E]vidence of the situation of the parties and the surrounding circumstances and conditions is admissible in aid of interpretation," even if a contract is free from ambiguity. Ibid.
In the present case, the plain language of the contract, as well as the intent of the parties, demonstrate that the parties created an ROFR, rather than an option. First, the document attached to the deed is entitled "Right of First Refusal" and that term is used throughout the document to describe its contents. Second, the language used in the ROFR does not provide plaintiffs with an invitation to purchase the property so long as plaintiffs meet specified criteria, which would support that the provision is an option. Instead, the provision restricts defendants' freedom to sell to a third party before plaintiffs are provided with the opportunity to match any bona fide offer. This type of language evidences a ROFR rather than an option. See Wellmore, supra, 49 N.J. Super. at 464. The plain language does not create an unconditional option that can be exercised by plaintiffs at any time; rather, it creates an obligation on the defendants to inform plaintiffs of a bona fide offer and then allow plaintiffs to match the offer to purchase the vacant lot at the same price.
The language of the provision fits the description of an ROFR set forth in Mazzeo, supra, 234 N.J. Super. at 229 ("The right of first refusal . . . is not a true option . . . . It limits the right of the owner to dispose freely of his property by compelling him to offer it first to the party who has the first right to buy."). The pertinent language of the provision states that defendants will "leave notice of receipt of a bona fide offer to purchase [the vacant lot]" and that "[plaintiffs] shall have 5 business days from the posting and/or faxing of [plaintiffs'] notice to advise [defendants] . . . of their intention to exercise said option at the stated offer price . . . ." Plaintiffs make much of the fact that the provision also refers to the agreement as an "option." However, the language of the provision, when read as a whole, AXA Assurance, Inc. v. The Chase Manhattan Bank, 339 N.J. Super. 22, 26 (App. Div. 2001), is unquestionably indicative of an ROFR.
Additionally, the evidence in the record further demonstrates that the parties intended the provision to be an ROFR. Defendants certified that "[plaintiffs] wanted to be certain that the Property would not be sold to a third party without [plaintiffs] first having the opportunity to purchase the Property on the same terms" and that all of defendants' discussions with plaintiffs "about [the ROFR] dealt with their right to purchase the Property only after we received an acceptable offer." Defendants further certified that the parties did not discuss "the idea that the ROFR would enable [plaintiffs] to force us to sell the Property without our acceptance of an offer for sale." Plaintiffs do not dispute defendants' assertions.
Next, DeCrescente's deposition testimony evidences that the intent of the parties was to create an ROFR, not an option. DeCrescente explained that his sense was the "defendants would receive an offer. [Defendants] would notify [plaintiffs] of that offer and [plaintiffs] would have a right to say whether or not they chose to purchase the property rather than that third party purchase the property." DeCrescente also made the following statements: "it was always the plan to obtain a right of first refusal"; and "[m]y understanding is what was written and attached to the deed is the right of first refusal. That is a 100 percent accurate statement." DeCrescente's admission that he had never heard of an ROFR being enforceable without an owner first accepting a third-party offer, further demonstrates that DeCrescente, and therefore his clients, cannot have expected that plaintiffs could mandate a sale of the vacant lot even if defendants did not desire to sell. Thus, plaintiffs intended and attempted to create a ROFR, not an option. See Wellmore, supra, and Mazzeo, supra.
Accordingly, to the extent that the trial court imputed to defendants an improper motive and treated the rendition of notice agreement as an irrevocable commitment to sell the property, the trial court erred. That the price was unacceptable is sufficient reason for defendants not to sell to anyone. The relevant case law and intent of the parties reveals that an ROFR does not allow the holders to compel the owners to sell their property. Rather, it limits the rights of the owners by requiring them to offer the property to the holders of the ROFR before selling to a third party. The trial court's remedy of specific performance, directing defendants to sell the property to plaintiffs, was palpably incorrect. Cummings v. Bahr, 295 N.J. Super. 374, 384 (App. Div. 1996). In light of that determination, it is unnecessary for us to discuss defendants' remaining arguments.
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