Court Opinion

ID: 9530160
Source: CourtListenerOpinion
Date Created: 2023-08-07 03:57:50.804033+00
Date Added: 2024-06-11T13:28:00.686077
License: Public Domain

Mr. PRESIDING JUSTICE SULLIVAN, dissenting: I disagree with the conclusion of the majority. Under the agreement in question, National leased two aircraft from American and, at the expiration of the lease term, exercised an option under paragraph 6 to purchase them for a specific price. In paragraph 20 of the agreement, National was granted the further right to lease eight more of the same type of aircraft (the Option planes) and to purchase them at the end of the lease under the same terms and conditions applying to the original two aircraft. At that time, American owned eight additional planes of the same type and model and, in paragraph 21, National was given the right of first refusal in the event that American desired to sell those planes. This paragraph required American to notify National of any bona fide offer to sell and provided that National “shall thereafter notify American of its agreement to buy or lease such airplanes under the same terms and conditions as such offer within fifteen (15) calendar days of its receipt of such notice.” These eight aircraft were termed Rights planes, and paragraph 21 contained also what is termed the “roll over” or “shift” clause, which provided that when National exercised its right under paragraph 20 with respect to one or more Option planes, a similar number of Rights planes would become Option planes subject to the provisions of paragraph 20. It appears that prior to July 18, 1973, National, in addition to the purchase of the original two aircraft, had exercised its right granted by paragraph 20 as to three of the eight Option planes, and it is uncontradicted that by this action three of the Rights planes became Option planes under the “roll over” provision of paragraph 21. Thus, there remained five Rights planes on July 18, 1973, when American notified National under paragraph 21 that it proposed to make a bona fide offer to sell two of the remaining five Rights planes to a third party, and National was invited to exercise its right of first refusal by notifying American within 15 days that it would acquire those two planes on the same terms as the offer. National did not do so; but, instead, on July 26, 1973, informed American it was exercising its paragraph 20 right as to the five remaining Option planes. It is the position of National that when it exercised this right, the five remaining Rights planes by virtue of the “roll over” provision of paragraph 21 became Option planes and were not available for sale by American. The majority opinion, however, has accepted the position of American that when notification was given to National of a bona fide offer to sell two of the Rights planes, the subsequent exercise by National of its paragraph 20 right as to the five remaining Option planes caused only three of the remaining five Rights planes to be “rolled over” into the Option category, but not the two Rights planes which were the subject of American’s offer to sell. As a basis for this holding, the majority concluded that because there was no statement in the agreement that the rights of one party were superior to those of the other, “the rights must be considered to be equal . and American, as the first to assert its paragraph 21 rights, fixed the corresponding rights of both parties with regard to the Rights planes involved.” From this conclusion, they reason that because American gave a paragraph 21 notification to National of an offer to sell two Rights planes before National exercised its paragraph 20 right as to the Option planes, that those two Rights planes were not “rolled over” and that National could only acquire those planes by exercising its right of first refusal under paragraph 21. There appears to be no justification for this position, for several reasons. First, while there is no statement in the agreement that the rights of either party are superior to the rights of the other, neither is there any statement that American’s notification of an offer to sell would preclude or suspend the operation of the “roll over” clause. Second, there is no provision in the agreement to support the conclusion of the majority as to equal rights and, as a matter of fact, the agreement does not specifically provide any rights to American which initially owned all 18 of the planes involved in the agreement and, of course, could have sold any or all of them. However, it restricted this right to sell by entering into the agreement in which it gave National the right in paragraph 6 to lease-purchase two of those planes and agreed in paragraph 20 that eight of its planes be categorized as Option planes — with National given the right to lease-purchase them. Then, in paragraph 21, American gave National a right of first refusal before it would sell any of the remaining planes which were called Rights planes and, in the same paragraph 21, American agreed that when National exercised its paragraph 20 right as to any of the Option planes, a similar number of Rights planes would then become Option planes and thus not be subject to sale. Third, because the “roll over” clause immediately follows the notification provision in paragraph 21, with nothing stated in that paragraph or anywhere else in the agreement that notice of an offer to sell would preclude or suspend the “roll over” of Rights planes when National exercised its paragraph 20 right as to the Option planes, it would appear that the parties did not intend any such preclusion or suspension. There is no question that paragraph 20 of the agreement gives National the right to lease-purchase the Option planes and, because there was no other provision specifically qualifying that right, it seems incongruous to read into the agreement, as the majority in effect does, that the parties intended a suspension or preclusion of the “roll over” clause as to any Rights planes included in American’s notification under paragraph 21. Rather, because the “roll over” clause is also in paragraph 21 and follows immediately after the notification provision, it appears to me that the parties intended that the exercise by National of its paragraph 20 right as to any Option plane or planes would shift the same number of Rights planes to the Option status and that this shifting would occur even though American had notified of a proposed offer to sell two of the Rights planes. Thus, when National did exercise its right as to the five Option planes, the remaining five Rights planes, including the two which were the subject of American’s notice, became Option planes and were not subject to sale by American during the time provided for in the agreement. From this reasoning, it follows that the trial court erred in granting judgment to American at the close of National’s case, and I would reverse and remand for further proceedings.