John D. Stump & Associates, Inc. v. Cunningham Memorial Park, Inc., 20208

Citation187 W.Va. 438,419 S.E.2d 699
Decision Date21 July 1992
Docket NumberNo. 20208,20208
CourtSupreme Court of West Virginia
PartiesJOHN D. STUMP & ASSOCIATES, INC., and John D. Stump, Appellees, v. CUNNINGHAM MEMORIAL PARK, INC., Smith Company, William E. Smith, D. Ray Smith, and William E. Rowe, Defendants Below Smith Company, William E. Smith and D. Ray Smith, Appellants.

Syllabus by the Court

1. "A pre-emptive right involves the creation of the privilege to purchase only on the formulation of a desire on the part of the owner to sell; and the holder of the right must purchase for the price at which the owner is willing to sell to a third person." Syllabus Point 1, Smith v. VanVoorhis, 170 W.Va. 729, 296 S.E.2d 851 (1982).

2. A pre-emptive right does not give the pre-emptioner the power to compel an unwilling 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 the pre-emptive right at the stipulated price.

3. The owner of property burdened by a pre-emptive right, also known as a right of first refusal, must, before selling such property to a third party, give written notice to the rightholder of the third party's offer and of the owner's intention to accept such offer. The rightholder is then required to advise the owner that he is willing to purchase the property on the same terms.

4. "An option to purchase is not a sale nor agreement to sell: it becomes an executory contract only when properly accepted within the stipulated time." Syllabus, Tate v. Wood, 169 W.Va. 584, 289 S.E.2d 432 (1982).

5. A right of first refusal becomes an option once the holder of such right is notified by the property owner of the terms of a third-party offer to purchase the property. In order to properly exercise the resulting option, the rightholder's acceptance must be unequivocal and must not vary from the proffered terms.

6. The primary purpose of notice to the holder of a right of first refusal of a third-party offer to purchase is to provide the rightholder with sufficient information to determine whether he is interested in exercising the right. If there is some ambiguity in the terms set out in the notice, the proper recourse for the rightholder is to request additional information. Once such a request is made, the owner must respond or assume the burden of showing that the notice was reasonably accurate. If no such request is made by the rightholder and he rejects the offer, he may not later contest the reasonableness of the notice.

7. " 'While the general rule is that the construction of a writing is for the court; yet where the meaning is uncertain and ambiguous, parol evidence is admissible to show the situation of the parties, the surrounding circumstances when the writing was made, and the practical construction given to the contract by the parties themselves either contemporaneously or subsequently. If the parol evidence be not in conflict, the court must construe the writing; but if it be conflicting on a material point necessary to interpretation of the writing, the question of its meaning should be left to the jury under proper hypothetical instructions.' Syl. Point 4, Watson v. Buckhannon River Coal Co., 95 W.Va. 164, 120 S.E. 390 (1923)." Syllabus Point 1, Buckhannon Sales Co. v. Appalantic Corp., 175 W.Va. 742, 338 S.E.2d 222 (1985).

8. " 'It is error to give inconsistent instructions, even if one of them states the law correctly, inasmuch as the jury, in such circumstances, is confronted with the task of determining which principle of law to follow, and inasmuch as it is impossible for a court later to determine upon what legal principle the verdict is founded.' Opinion, State Road Commission v. Darrah, 151 W.Va. 509, 513, 153 S.E.2d 408, 411 (1967)." Syllabus Point 2, Burdette v. Maust Coal & Coke Corp., 159 W.Va. 335, 222 S.E.2d 293 (1976).

Robert A. Goldberg, Robert B. Allen, Thomas P. Larus, King, Betts & Allen, Charleston, for appellees.

Rudolph L. DiTrapano, DiTrapano & Jackson, Charleston, Rebecca A. Baitty, Sarasota, Fla., for appellants.

MILLER, Justice:

This is an appeal from a final order of the Circuit Court of Kanawha County, dated August 30, 1990, which entered judgment in favor of the plaintiffs below, John D. Stump & Associates, Inc., and John D. Stump, individually, in a civil action for breach of contract. The contract in question granted Mr. Stump an "exclusive option" to purchase a cemetery owned by the defendants and the right to commissions on sales of certain cemetery items.

A number of errors are asserted. With respect to the "exclusive option" claim, we believe this case can be resolved by reference to several key legal principles concerning the nature of a contract provision granting a right of first refusal to purchase property. We conclude for reasons set out in Part II that plaintiff John D. Stump failed to properly exercise his right of first refusal. We address the sales commission controversy in Part III, and, for the reasons stated therein, we reverse the judgment and award a new trial.

I.

Defendants William E. and D. Ray Smith are brothers and were the sole officers and shareholders of the corporate defendant, Cunningham Memorial Park, Inc., through which they owned and operated a St. Albans cemetery. 1 In November 1983, the Smiths hired Mr. Stump as an independent contractor to solicit sales of cemetery items, such as grave plots and markers, on their behalf. A written agreement (the Agreement) purporting to memorialize the understanding of the parties was executed in November 1984. The Agreement gave Mr. Stump the "exclusive right" to sell "pre-need" cemetery items for use in the cemetery in exchange for a commission on each such sale. In addition, the Agreement gave Mr. Stump an "exclusive option" to purchase the assets of the corporation if the Smiths desired to sell them while the Agreement was in effect.

In November 1983, Mr. Stump began soliciting pre-need sales on behalf of the corporation through advertising, direct mailings, telephone solicitations, and home visits by his sales staff. These efforts increased pre-need sales. In 1984, Mr. Stump formed John D. Stump & Associates, Inc., a corporate entity to which he assigned his contractual rights with regard to such sales. Mr. Stump personally retained the option rights under the Agreement. 2

In March of 1985, the Smiths offered to sell Mr. Stump all of the cemetery assets for $3.5 million or all of the cemetery's corporate stock for $3.0 million. Both offers were for cash transactions. Mr. Stump rejected the offer, but stated that he would be interested if the property were offered at a lower price.

In the early months of 1986, the Smiths received an offer to purchase the cemetery from William E. Rowe. By letter dated February 25, 1986, the Smiths offered to sell Mr. Stump all of the corporate stock at a price of $1.5 million. By letter dated March 7, 1986, Mr. Stump rejected the offer, but reserved the right to make a counteroffer. Subsequently, in a letter dated March 19, 1986, Mr. Stump's attorney advised the Smiths that Mr. Stump claimed that over $77,000 in commissions were due him under the pre-need sales provisions of the Agreement.

The Smiths notified Mr. Stump through a March 25, 1986 letter that the previous offer to sell the cemetery stock had been withdrawn. They offered to sell him the assets of the cemetery corporation for $1.1 million upon condition that he assume the liabilities of the corporation and pay an additional $400,000 for a ten-year covenant not to compete. 3 This letter was the result of a second offer from Mr. Rowe.

By letter dated April 3, 1986, Mr. Stump responded that he was willing to accept the offer "subject to my being able to secure suitable financing[.]" Mr. Stump also stated, however, that he had "no need of a non-competitive agreement. Under the language of the [Agreement] there was no contemplation of any payment for a non- competitive clause and such clause cannot be considered an asset of the corporation."

The Smiths responded in an April 7, 1986 letter advising Mr. Stump that the Agreement did not provide for conditional acceptance of an offer and repeated that the covenant not to compete was "an integral part of the offer and of the proposed transaction[.]" This letter concluded that as a consequence of Mr. Stump's position, the Smiths did not view his response as an acceptance and that they had sold the corporate assets to Mr. Rowe.

On April 7, 1986, the Smiths and Mr. Rowe executed an asset purchase contract which transferred all the assets of the cemetery corporation, except the pre-need sales contract with Mr. Stump, to Mr. Rowe. The contract specified that payment was to be made by a cash downpayment of $200,000 and the issuance of promissory notes payable over a period of years. Mr. Rowe further agreed to assume all liabilities of the corporation, except those under the pre-need sales contract, and to pay the Smiths $400,000 over a period of ten years, without interest, for the covenant not to compete.

On December 22, 1986, Mr. Stump filed suit in the Circuit Court of Kanawha County against the Smiths and Mr. Rowe. The complaint charged that the Smiths had failed to honor Mr. Stump's exclusive right to sell pre-need items by failing to pay him commissions on sales of such items. It also alleged that the Smiths had interfered with his "exclusive option" to purchase the cemetery by refusing his "acceptance" of the March 25, 1986 offer and by selling to Mr. Rowe on more favorable terms. Finally, the complaint charged Mr. Rowe with tortious interference with Mr. Stump's contract rights and with unjust enrichment. 4 Mr. Rowe subsequently settled with Mr. Stump and was dismissed from the case.

Trial commenced in the circuit court on July 9, 1990. The jury found for Mr. Stump and, by verdict dated July 19, 1990,...

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