Court Opinion

ID: 1057212
Source: CourtListenerOpinion
Date Created: 2013-10-09 16:42:48.517721+00
Date Added: 2024-06-11T12:35:28.328264
License: Public Domain

2010 VT 49

Bischoff v. Bletz,
Sr., Van Guilder and White (2009-192)
 
2010 VT 49
 
[Filed 21-May-2010]
 
NOTICE:  This opinion is
subject to motions for reargument under V.R.A.P. 40 as well as formal revision
before publication in the Vermont Reports.  Readers are requested to
notify the Reporter of Decisions, Vermont Supreme Court, 109 State Street, Montpelier, Vermont05609-0801 of any errors in order
that corrections may be made before this opinion goes to press.

 
 

2010 VT 49

 

No. 2009-192

 

William Bischoff, David Bischoff

Supreme Court

and Peter Bischoff

 

 

On Appeal from

     v.

Rutland Superior Court

 

 

 

 

Donald L. Bletz,
  Sr., Bruce Van Guilder

 March Term, 2010

and Rodney White

 

 

 

 

William D. Cohen, J.

 

Andrew M. Carter and Erin H. Gallivan
of Meub Gallivan Carter
& Larson, Attorneys, P.C.,
  Rutland, for Defendant-Appellant White. 
 
Charles D. Hickey of Law Office of Charles D. Hickey, PLC,
St. Johnsbury, for 
  Defendant-Appellee Van
Guilder.
 
John J. Welch, Jr. of John J. Welch, Ltd., Rutland, for
Defendant-Appellee Bletz.
 
 
PRESENT:  Reiber, C.J.,
Dooley, Johnson, Skoglund and Burgess, JJ.
 
 
¶ 1.            
DOOLEY, J.   Rodney White appeals from a superior court
judgment requiring that he pay the full purchase price offered by third-party
purchasers William, David and Peter Bischoff (the Bischoffs)
as a requirement of exercising his right of first refusal for certain real
property owned by sellers Donald L. Bletz, Sr. and
Bruce Van Guilder (sellers).  We affirm.  
¶ 2.            
This is the second appeal to arise from this real property
dispute.  Most of the salient facts are set forth in our earlier ruling in
Bischoff v. Bletz, 2008 VT 16, 183 Vt. 235,
949 A.2d 420, and may be summarized as follows.  In 1978, White acquired a
deeded right of first refusal in two parcels, a large parcel and a smaller
parcel, owned by sellers’ predecessors in interest.  Their agreement
required that sellers provide written notice upon receipt of any bona fide offer
for the properties, and that White then file within twenty days “written
acceptance of such offer on the same terms and conditions as the original bona
fide offer” or the right of first refusal would “be deemed to be null and
void.”  Id. ¶ 2.
¶ 3.            
In 2003, with no notice to White, sellers agreed to sell the subject
properties to the Bischoffs.  The sale did not
close, but the parties subsequently entered into option agreements for both
properties.  The agreements provided that, if the options were exercised,
the option payments would be credited toward the purchase price.  The Bischoffs ultimately made option payments totaling $26,220
and $3798 respectively for the two properties before exercising their purchase
options in April 2006.  Consistent with the option agreements, each of the
purchase and sale contracts credited the option payments towards the purchase
price, which was $215,000 for the larger property and $31,000 for the smaller
property.  This left a balance to be paid at closing of $188,780 for the
former and $27,202 for the latter.  Each contract also provided that, in
the event of sellers’ default, the Bischoffs could
terminate the agreement and “receive back all monies previously paid pursuant
to this Purchase and Sale Agreement and the Option Agreement entered into by
and between the parties pertaining to the property” in addition to pursuing all
other legal and equitable remedies provided by law.
¶ 4.            
White received notice of the contract for sale tendered by the Bischoffs in April 2006 and informed sellers of his intent
to exercise his right of first refusal but “sought immediate clarification
. . . regarding the actual purchase price” in view of the
credits to be received at closing.  Id. ¶ 7.  Sellers
apparently planned to go forward with the sale to White, but before any closing
could occur, the Bischoffs filed a complaint for
breach of contract and misrepresentation against sellers, alleging—among other
claims—that White had waived his right of first refusal by failing to meet
their offer.  At sellers’ request White was joined as a necessary party to
the suit.
¶ 5.            
The trial court ultimately granted the Bischoffs’
motion for summary judgment, ruling that White had not validly exercised his
right of first refusal because he had not accepted the third-party offers on
identical terms.  We reversed on appeal, however, holding that the Bischoffs lacked standing to seek a declaration of White’s
rights under his agreement with sellers’ predecessors in interest.  Id.
¶ 16.  We remanded for further proceedings, noting that disputes
remained as to whether White had effectively exercised his right of first
refusal.  Id. ¶¶ 24-25.
¶ 6.            
On remand, the trial court granted White’s motion to bifurcate the proceedings
and resolve the issues relating to the right of first refusal before addressing
the Bischoffs’ claims against sellers. 
Thereafter, the court upheld White’s right of first refusal and ruled that he
was required to offer the full purchase price for the two properties of $31,000
and $215,000 respectively.  Although the dispute between the Bischoffs and sellers remained to be resolved, the trial
court granted a motion to enter final judgment.  Sellers have not appealed
the court’s decision that White properly exercised his right of first
refusal.  White appeals the decision that he must pay the full purchase
price for each parcel.
¶ 7.            
White contends that he was required to match only the “net price” to be
tendered at closing, i.e., the purchase price less the option payments, in
order to effectively exercise his right of first refusal.  Sellers
maintain that the trial court correctly concluded that nothing less than the
full purchase price was sufficient to match the Bischoffs’
offer.  Although the parties devote considerable attention to the policies
and equities underlying their respective positions, the issue essentially
turns—in our view—on the meaning and intent of the right-of-first-refusal
agreement, a question of law which we review de novo.  See Dep’t of
Corr. v. Matrix Health Sys., P.C., 2008 VT 32, ¶¶ 11-12, 183 Vt. 348,
950 A.2d 1201 (we review “the trial court’s interpretation of the parties’
contract de novo” and seek, “[i]n construing a
contract, . . . to implement the parties’ intent”); see
also St. George’s Dragons, L.P. v. Newport Real Estate Group, L.L.C.,
971 A.2d 1087, 1098 (N.J. Super. Ct. App. Div. 2009) (“[T]he terms of a right
of first refusal are to be construed employing the same rules of construction
applicable to any other type of contract.”).
¶ 8.            
A right of first refusal becomes an option to purchase once a purchaser
makes an offer acceptable to the seller.  See Cameron v. Double A. Servs., Inc., 156 Vt. 577, 583, 595 A.2d 259, 262
(1991).  The holder of the right of first refusal must exercise the option
according to its terms in order to generate a binding contract to
purchase.  Bricker v. Walker, 139 Vt. 361, 364, 428 A.2d 1129, 1130
(1981).  As in this case, the price term can be a requirement that the
holder of the right of first refusal match the price from the prospective
purchaser.  Krupinsky v. Birsky, 129 Vt. 400, 405, 278 A.2d 757, 760
(1971).  As we set out above, the right of first refusal required White to
purchase the properties “on the same terms and conditions as the original bona
fide offer.”
¶ 9.            
The trial court held that White would purchase the properties “on the
same terms and conditions” as the Bischoffs’ offer
only if he paid the full price.  We agree.  White focuses on the net
cost to the Bischoffs, but ignores all of the terms
and conditions of the offer.  The Bischoffs
agreed to the full price of the parcels, using the option payments as part of
the price, as the option agreement allows.  In essence, the option
payments became down payments on the purchase.  White seeks to purchase
without the down payments.  Without paying full price, his purchase will
not match the terms and conditions of the Bischoffs’
offer.  See W. Tex. Transm’n, L.P. v. Enron
Corp., 907 F.2d 1554, 1564 (5th Cir. 1990) (noting that the
right-of-first-refusal agreement did “not define the phrase ‘terms and
conditions’ to mean only the price suggested by a prospective purchaser” and
holding that other terms must be complied with as well).  Sellers’ argument
would be stronger if the agreement here had simply stated, as others have, that
White’s obligation was to match the “price” of any bona fide offer.  See,
e.g., Kroehnke v. Zimmerman, 467 P.2d
265, 266 (Colo. 1970) (lease granted “the privilege of purchasing [the
property] for the same price for which the lessors . . . would
be willing to sell to any other person”); Schmidt v. Downs, 775 P.2d
427, 428 (Utah Ct. App. 1989) (contract granted right of first refusal to
purchase property “at whatever price the [owners] determine to sell said
property at” (emphasis omitted)); Wilson v. Whinery,
678 P.2d 354, 355 n.1 (Wash. Ct. App. 1984) (agreement granted “right to
purchase the property . . . for a price not to exceed
$3,500.00, or for such lesser price as may be offered to Grantors by a bona
fide purchaser”).  Such language is notably absent from the agreement
here, and we are not at liberty to redefine its terms.  See W. Tex. Transm’n, 907 F.2d at 1564 (explaining that some
contracts require merely that the holder match the “price” offered by a
third-party and observing that, had the parties “intended to restrict the
phrase ‘terms and conditions’ to mean only price, the parties could have
executed an agreement similar to those construed in these other cases”); Milton
Bd. of Sch. Dirs. v. Milton Staff Ass’n, Local 130
VEA/NEA, 163 Vt. 240, 244, 656 A.2d 993, 995-96 (1995) (court must enforce
contracts as written and not rewrite them).  The language of White’s
agreement with sellers’ predecessors, therefore, supports the conclusion that
their intention was to require that White provide an offer equivalent to any
third-party offer incorporating all of its terms and effects, including the
option-payment set-off.
¶ 10.        
White argues that we should treat the option payments like a broker’s
commission that would have to be paid in the case of a sale to a new purchaser
but not in the case of the exercise of a right of first refusal.  The
principal case from which White argues is Reef v. Bernstein, 504 N.E.2d
374 (Mass. App. Ct. 1987), where the contract of sale of the property to the
prospective purchaser included a provision that required the seller to pay a
broker’s commission of $34,000 out of the proceeds, but the court found that
the seller was not obligated to pay the broker if the holder of the right of
first refusal purchased the property.  The court held that the holder of
the right of first refusal could deduct the broker’s commission from the price
in the third-party offer since the “normal expectation[] of the seller and the
holder of the first refusal right” is “that the seller should be put in the same
position as if he had accepted the triggering offer.” (emphasis
added).  Id. at 376-77.  As one court has explained, the
parties generally assume that if the holder tenders “a proposal to exercise the
right of first refusal which was exactly the same in net effect to the
[seller] as the triggering offer, the right of first refusal would be deemed
exercised.”  C. Robert Nattress & Assocs.
v. Cidco, 229 Cal. Rptr.
33, 43 (Ct. App. 1986) (emphasis added).  Thus, in Nattress
the court held that “it could not reasonably have been anticipated by any party
that to meet the [third-party] offer would require an offer more
favorable in net effect to the owner than the [third-party] offer
itself.”  Id. (emphasis added).  We note, however, that many
courts have not followed this rationale.  See David Meyers, Inc. v.
Anderson, 739 P.2d 102, 105 & n.10 (Wash. Ct. App. 1987) (citing
contrary decisions and holding that a tenant’s deduction of the amount of a
broker’s commission precluded his offer from constituting a proper exercise of
his right of first refusal).
¶ 11.        
We need not decide whether we would follow the broker’s commission cases
relied upon by White because they would not suggest a different result in this
case.  In the part of this case that is unresolved, the Bischoffs have sought damages, including the return of
their option payments, from sellers.  Sellers have conceded that they will
be required to return the option payments to the Bischoffs
when the sale to White is finalized.  Therefore, if White were allowed to
deduct the option payments in this case, sellers would receive less than
they would have received from a sale to the Bischoffs,
contrary to the normal expectation of the parties that the “net effect” of the
two offers should be “the same.”  Nattress,
229 Cal. Rptr. at 43.  The courts in the
analogous broker commission cases recognized this potential anomaly in holding
that, “if a seller is obligated to pay a brokerage commission and remains
liable for the commission after a right of first refusal is exercised, the
exercise should include the amount of the commission.”  Reef, 504
N.E.2d at 376; accord Nattress, 229 Cal. Rptr. at 43 (noting that the question may turn on whether
the seller remains obligated to pay a commission even if the third-party sale
falls through).  
Affirmed.
 

 

 

FOR THE COURT:

 

 

 

 

 

 

 

 

 

 

 

Associate
  Justice