On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, C-318-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Parker, Yannotti and LeWinn.
Defendants 239 Broad Avenue, L.L.C. (Broad), 12 Brinkerhoff, L.L.C. (Brinkerhoff), Golden Eagle Diner, Inc. (Golden Eagle), and Golden G, Inc. (Golden G) appeal from a judgment entered by the Chancery Division on March 9, 2007. Plaintiff Nicholas Kalogeras and intervenors Myinho Hahn (Hahn) and Golden Eagle Management, L.L.C. (GEM) cross-appeal from the judgment. For the reasons that follow, we reverse the judgment and dismiss the cross-appeals as moot.
We briefly summarize the relevant facts. In 1976, plaintiff and his brother Konstantinos "Gus" Kalogeras (Gus) purchased the Golden Eagle diner in Palisades Park, New Jersey. Golden Eagle owned the diner and its liquor license. Plaintiff and Gus also acquired an adjoining lot located at 12 Brinkerhoff Avenue and used it as a parking lot. They transferred ownership of the realty to Broad and Brinkerhoff, entities that they owned jointly.
In 2002, the relationship between the brothers deteriorated and Gus decided to purchase plaintiff's interests in the diner and the property. They agreed that the assets had a value of about $4 million. Gus agreed to pay plaintiff one-half of the amount remaining after deductions for the mortgage and business debts. To finance part of the purchase price, plaintiff agreed to accept a note in the amount of $950,000, which Gus would repay in equal, monthly installments over ten years, at an interest rate of 8 per cent per annum.
Plaintiff and Gus were represented by counsel in the negotiations for the buyout. Anthony G. Rathe represented Gus and Socrates Lambrinides represented plaintiff. Rathe and Lambrinides drafted two agreements, one for the sale of the real property and one for the sale of Golden Eagle.
Plaintiff was apparently concerned that Gus would purchase his interests and then sell the business and property for a higher profit. Plaintiff and Gus agreed that if Gus sold the business within two years after he purchased plaintiff's interests, Gus would pay plaintiff one-half of any sales proceeds over $4 million.
On October 18, 2002, Lambrinides sent Rathe a letter summarizing the terms that had been agreed upon by plaintiff and Gus. The letter contained the following provision:
So long as your client is obligated on the Note, my client shall have a right of first refusal to purchase the above named entities.
Rathe signed the letter, agreeing to all of the stated terms. Plaintiff and Gus signed the agreements on October 24, 2002.
The parties closed on the transaction in November 2002. After the closing, Gus transferred an ownership interest in Broad and Brinkerhoff to his son, Stellios. In December 2002, Gus formed Golden G and transferred the business to the entity, but not the liquor license.
Between 2003 and 2005, a commercial real estate broker presented Gus with various offers to purchase the diner and real property at amounts ranging from $5 million to $6.1 million. In July 2005, the broker presented Gus with an offer from Byung Kim (Kim) to purchase ...