Radio WEBS, Inc. v. Tele-Media Corp.

• Decision Date: 30 June 1982
• Docket Number: No. 38516,TELE-MEDIA,38516
• Citation: 292 S.E.2d 712,249 Ga. 598
• Parties: RADIO WEBS, INC. v.CORPORATION, et al.
• Court: Georgia Supreme Court

Page 712

292 S.E.2d 712

249 Ga. 598

RADIO WEBS, INC. v. TELE-MEDIA CORPORATION, et al.

No. 38516.

Supreme Court of Georgia.

June 30, 1982.

William B. Gunter, Thomas C. Shelton, Kilpatrick & Cody, Atlanta, James Beverly Langford, Calhoun, for Radio Webs, Inc.

Robert Jones, Cofer, Brauchamp, Hawes & Brown, Atlanta, William P. Bailey, Calhoun, John R. Previs, Secretary, Buchanan, Ingersoll, Rodewald, Kyle & Buerger, Pittsburgh, Pa., for Tele-Media Corp., et al.

HILL, Presiding Justice.

Radio Webs, Inc., sued to enjoin the sale of WEBBS Cable TV, Inc., by its owners, the Stocks family, ¹ to Tele-Media Corp. In its suit against the Stocks and Tele-Media plaintiff sought to enforce paragraph 17 of its contract with the Stocks giving it a right of first refusal on the sale of WEBBS Cable TV. The trial court denied a temporary restraining order, and, upon stipulation by plaintiff that the controlling issue in the case was the construction of the contract, also denied an interlocutory injunction. Plaintiff appeals.

On August 1, 1980, plaintiff had purchased from the Stocks family all of the issued common shares of New Echota Broadcasting, Inc., owner and operator of a Calhoun radio station. The purchase agreement as to the radio station contained the paragraph here in dispute granting plaintiff a right of first refusal to purchase WEBBS Cable TV, which, in pertinent part, is quoted below:

"17. Right of First Refusal to Purchase Stock or Assets of WEBBS Cable TV, Inc. Sellers warrant that Sellers are presently the owners of all of the issued and outstanding capital stock of WEBBS Cable TV, Inc., a Georgia corporation ('WEBBS'), which is the owner and operator of a cable television system in Calhoun, Georgia. As part of the consideration for the transactions contemplated herein, Sellers hereby grant to Buyer the following right of first refusal to purchase the business and all or substantially all of the assets ('the assets of WEBBS') or the stock of WEBBS ('the stock of WEBBS'), said right of first refusal to continue for a period of twenty (20) years from and after the Closing Date: Sellers agree that if, at any time during said twenty-year period, Sellers receive an offer to purchase the stock of WEBBS or WEBBS receives an offer to purchase the assets of WEBBS, Sellers or WEBBS, as appropriate (the 'Offeree'), shall offer to sell the stock of WEBBS or the assets of WEBBS to Buyer upon the following terms and conditions: The Offeree shall deliver a notice in writing to Buyer of Sellers' or WEBBS' desire to sell the stock of WEBBS or the assets of WEBBS, which notice shall contain a signed copy of the bona fide offer to purchase the same, stating the price and other terms and conditions of the offer and the full name and address of the proposed purchaser. Buyer or its assignee shall have thirty (30) days from the receipt of the notice within which to elect to purchase either the stock of WEBBS or the assets of WEBBS, as the case may be, for the price shown in the bona fide offer and upon the same terms and conditions set forth in the bona fide offer. In the event that such an election is made to purchase the stock of WEBBS or the assets of WEBBS by Buyer or its assignee, Buyer or such assignee shall deliver written notice of such election to the Offeree, designating the closing date of the purchase not more than thirty (30) days thereafter. If no notice is received by the Offeree from Buyer or its assignee within the said thirty-day period, Buyer shall be deemed to have consented to the sale of the stock of WEBBS or the assets of WEBBS to the party which made the bona fide offer in accordance with the terms thereof." (Emphasis supplied.) ²

On November 17, 1981, the Stocks delivered a letter purporting to activate plaintiff's right of first refusal under this purchase agreement. The letter, which is included in the record, makes clear that the proposed sale included more than just the sale of WEBBS Cable TV to Tele-Media: "As you will note, the sale contemplates a 'package-transaction' involving in addition to the stock of Webbs Cable TV, Inc., the stock of Fairmont Cable TV, Inc., the office building presently owned by Emma Jo Stocks and the personal home of Ms. Stocks. It should be further noted that the transactions contemplated herein, are not severable and consist of the various employment agreements, consultancy agreements, non-competition agreements, and other aspects of the transaction as set forth in the offer. The agreement between yourselves and the stockholders provide for acceptance within thirty days of this date." (Emphasis supplied.) ³

Within thirty days plaintiff notified the Stocks that it considered such an offer to be a violation of its contractual right of first refusal and that Tele-Media's offer was incomplete and would not be binding if accepted. The Stocks indicated their intention to accept Tele-Media's offer after plaintiff's 30 day contract period expired. Plaintiff then filed this action to enjoin the consummation of the sale of WEBBS Cable TV to Tele-Media by the Stocks.

The trial court denied a temporary restraining order, and upon plaintiff's stipulation "that in view of the court's construction of the contract, the presentation of additional evidence and argument at an interlocutory injunction hearing would serve no purpose ...", denied an interlocutory injunction "based on its construction of the contract". Plaintiff appeals. The defendants urge that because the sale to Tele-Media was concluded following denial of the interlocutory injunction, this appeal is moot. The question of mootness will become clearer after discussion of the merits and will be considered in the second division of this opinion.

1. Plaintiff argues on appeal that Tele-Media's offer to the Stocks does not satisfy plaintiff's right of first refusal under its agreement with the Stocks because the proposed sale to Tele-Media includes more than merely the assets or stock of WEBBS Cable TV, which is the sole subject matter of the right of first refusal. ⁴

The contractual right of first refusal contemplates the sale of the assets or stock of WEBBS Cable TV. The Stocks and Tele-Media argue that their proposal fits within the broad parameters of the phrase "other terms and conditions" emphasized in the quoted portion of paragraph 17 of the agreement, while plaintiff asserts that this language must necessarily be limited by the context of the agreement itself to the sale only of WEBBS Cable TV.

Code Ann. § 20-702 provides that "[t]he cardinal rule of construction is to ascertain the intention of the parties...." It is manifestly clear that both the Stocks and the plaintiff contemplated only the sale of the assets or stock of WEBBS Cable TV when the right of first refusal was negotiated. The right of first refusal contained no specified price. The parties agreed that the price and other terms and conditions, such as possible deferred payments and security for those payments, were to be supplied by the offer of a third party, here Tele-Media. To now add "terms and conditions" such as those embodied in the Tele-Media offer that are wholly unrelated to the purchase of WEBBS Cable TV does not satisfy plaintiff's right of first refusal and is not a bona fide offer within the meaning of paragraph 17 of the agreement. See Illges v. Dexter, 77 Ga. 36(b) (1886).

This problem arises most frequently in leases, where the lessee has a right of first refusal entitling the lessee to purchase the leased premises, and the lessor-owner receives an offer to purchase a larger tract including the leased premises. "All the cases agree that the lessee can obtain an injunction forbidding the lessor from selling the demised property to anyone except the lessee. New Atlantic Garden v. Atlantic Garden Realty Corp. (1922) 201 App.Div. 404, 194 N.Y.S. 34 (affirmed without opin ion in (1923) 237 N.Y. 540, 143 N.E. 734); American Oil Co. v. Eastern Market Co. (1945) 60 York Leg Rec (Pa.) 33." Anno.: Lessee's option to purchase as affected by lessor's receipt of offer for, or sale of, larger tract which includes the leased parcel, 170 A.L.R. 1068 (1947). When this annotation was written in 1947 there were only a few cases on the subject. However, the uniformity which existed then appears to have continued until today.

In Myers v. Lovetinsky, 189 N.W.2d 571, 575 (Iowa 1971), the court found: "This is a case in which landlords sell the whole farm including the demised premises to purchasers without separately pricing the demised premises and the rest of the farm. The decisions recognize in this kind of case, apparently without exception, that the landlord breaches the tenant's preferential right by so doing. [Citing numerous cases]."

Applying Myers v. Lovetinsky, supra, in Berry-Iverson Co. of N.D., Inc. v. Johnson, 242 N.W.2d 126, 127 (N.D.1976), the court (in its syllabus) held: "Failure of the owner to provide the tenant with an opportunity to exercise the preferential right to purchase with reference to the sale of the leased premises, where the leased premises are sold as part of a larger parcel, is a breach of the contractual agreement between the parties." ⁵

In C&B Wholesale Stationery v. S. De Bella Dresses, 43 A.D.2d 579, 349 N.Y.S.2d 751, 753-754 (1973), the court had this to say concerning a situation similar to that presented here: "The lessor's sale of the leased premises as part of the larger parcel violated the first refusal clause of the lease (New Atlantic Garden v. Atlantic Garden Realty Corp., 201 App.Div. 404, 194 N.Y.S. 34, affd., 237 N.Y. 540, 143 N.E. 734; Costello v. Hoffman, 30 A.D.2d 530, 291 N.Y.S.2d 116).... The right which plaintiff enjoyed by virtue of the first refusal clause cannot be rendered nugatory by the device of attaching additional land to the leased premises and finding a buyer for the entire parcel (Guaclides v. Kruse, 67 N.J.Super. 348, 359, 170 A.2d 488). Normally, the remedy of one...