Opinion ID: 2321631
Heading Depth: 2
Heading Rank: 1

Heading: The Duties of Third-Party Purchasers

Text: [¶ 15] The Spicklers argue that because the Van Dams purchased Lot 25 with knowledge of the Spicklers' right of first refusal, the Van Dams were not bona fide purchasers and therefore incurred an equitable duty to convey, or to at least offer to convey, the property to the Spicklers. We agree that the Van Dams are not bona fide purchasers, but disagree that the Van Dams have consequently incurred an equitable duty to offer the property to the Spicklers. [¶ 16] Contrary to the Spicklers' argument, the equitable duty to offer property to a holder of a right of first refusal arises when an owner of property encumbered by the right contemplates a disposition of the property. See 25 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 67:85, at 502 (4th ed. 2002) (noting that a right of first refusal limits the right of the owner to dispose freely of its property by compelling the owner to offer it first to the party who has the first right to buy). The owner of the property who had that duty was Marco. Here, the Van Dams, as purchasers who then became owners subject to that duty, have not attempted to transfer the property to another party and have therefore not incurred an obligation to satisfy the extant right of first refusal by offering the property to the Spicklers. [¶ 17] The duty imputed to an owner contemplating the disposition of property encumbered by a right of first refusal is not the same as the duty imputed to a third-party purchaser of such property. Rather, a third-party purchaser who purchases property with knowledge of an extant right of first refusal ... must affirmatively inquire to determine whether the right holder wants to exercise its rights, and a failure to do so ... precludes `good faith purchaser' status, and subjects the purchaser to a decree of specific performance. Id. § 67:85, at 505. Thus, when the Van Dams discovered the Spicklers' right of first refusal, it was incumbent on them to affirmatively inquire whether the Spicklers wished to exercise their right before the Van Dams completed the purchase. Because the Van Dams failed to perform that inquiry, the Superior Court correctly concluded that they are not bona fide purchasers and are subject to the possibility of a decree of specific performance.