Roy v. George W. Greene, Inc.
| Decision Date | 09 February 1989 |
| Citation | 404 Mass. 67,533 N.E.2d 1323 |
| Parties | Maurice A. ROY 1 v. GEORGE W. GREENE, INC., et al. 2 |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
Mark G. Cerel, Medfield, for plaintiff.
Richard D. Maciolek (Stephen J. Kenney with him), Medway, for Kevin J. Carlow.
Before HENNESSEY, C.J., and WILKINS, ABRAMS, LYNCH and O'CONNOR, JJ.
Since 1971, the plaintiff has been a tenant under an oral agreement and has operated an automobile repair shop on premises owned by the defendant George W. Greene, Inc. (Greene). At the outset of the tenancy and on subsequent occasions, Greene's principals represented to the plaintiff that, if the property were to be sold, the plaintiff would have "a right of first refusal." In reliance on that repeated representation, the plaintiff substantially improved the property during the course of the tenancy. On several occasions during the tenancy, Greene offered to sell the premises to the plaintiff for $100,000, and the plaintiff counter-offered the sum of $75,000.
When Greene received an oral offer from the defendant Carlow in June, 1984, Greene again offered the premises to the plaintiff for $100,000 and again the plaintiff refused the offer and made a counter-offer of $75,000. Other than Greene's serving the plaintiff on September 28, 1984, with a notice to vacate the premises, the parties had no further communication prior to October 18, 1984, when Greene signed a purchase and sale agreement with Carlow. Shortly thereafter, the plaintiff commenced this action in which he seeks a court order requiring Greene to sell the premises to him on the same terms and conditions as provided in Greene's agreement with Carlow.
The case was tried before a judge of the Probate and Family Court sitting by designation in the Superior Court. The judge denied the requested relief, and the plaintiff appealed. The Appeals Court affirmed the judgment by an unpublished memorandum and order under its summary disposition rule 1:28. 25 Mass.App.Ct. 1109, 517 N.E.2d 1303 (1988). We allowed the plaintiff's application for further appellate review. We now reverse the judgment entered in the Superior Court and remand to that court for the entry of a new order consistent with this opinion.
We accept the parties' framing of the issue presented for review. That issue is whether the trial judge erred in refusing to order that Greene specifically perform its agreement granting the plaintiff a "right of first refusal to purchase" the premises of which the plaintiff was a tenant. The parties agree that the plaintiff had a right of first refusal. The question is whether, by responding to Greene's offers to sell for $100,000 with $75,000 counter-offers, the plaintiff exercised that right. In answering that question, we make the assumption that the agreement between Greene and Carlow provided for a purchase price of at least $100,000, that is, that the plaintiff had been given the opportunity to purchase the property for a price no less favorable to him than the price Greene ultimately accepted from Carlow. We must decide whether, in the absence of definition or explanation in the parties' agreement, the term "right of first refusal" has legal meaning and, if so, what that meaning is. Until now we have not directly addressed those questions.
The parties agree that the term "right of first refusal," in the absence of explanatory context or contractual definition, has legal meaning, but they disagree as to what that meaning is. The defendants assert that the holder of the right is entitled to nothing more than an opportunity to purchase the property on terms as favorable to him as the terms of any purchase and sale agreement previously or subsequently entered into by the owner and a third person. Here, the defendants say, the plaintiff was given that opportunity and rejected it, thereby exercising his right of refusal (waiving any right to purchase). If we were to accept the defendants' argument, of course, there would be no call for a specific performance order.
The plaintiff argues that, in the absence of contractual definition or explanation, the holder of a right of first refusal is entitled to be presented by the owner with a third person's bona fide offer to purchase, and then, having been informed about that offer, to elect whether to meet it. According to the plaintiff's construction of the terms in question, once a person with a right of first refusal is presented with a third person's offer, the right of first refusal ripens into an option to purchase in accordance with the terms of that offer. The plaintiff argues, however, that, until an existing offer has been made known to the holder of the right, the holder of the right realistically and fairly is not in a position to exercise it.
A right of first refusal necessarily implies a right to choose between purchasing and not purchasing the premises if the owner elects to sell them. An owner cannot truly elect to sell until he has an opportunity to do so, that is, until he has received a bona fide and enforceable offer to purchase. See Tamura v. DeIuliis, 203 Or. 619, 626, 281 P.2d 469 (1955). Therefore, the right that a person with a right of first refusal has to choose either to purchase or not to purchase cannot be exercised before the owner has received a bona fide and enforceable (written) offer from a third party. Accordingly, courts from other jurisdictions that have considered the matter appear to have accepted the principle that, unless the context of the agreement dictates otherwise, the term "right of first refusal" and expressions of similar import refer to a right that arises only after the owner has received an enforceable offer to buy. See Tamura v. DeIuliis, supra at 625, 281 P.2d 469 (...
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In re Corbett
.... . .] may enforce the right in an action of specific performance against a third party who purchased with notice of the option"); Roy, 404 Mass. at 71; Parkhurst v. Maynard, 285 Mass. 59, 62-63 (1933). "'Specific performance, being an equitable remedy, must be asserted promptly unless ther......
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Schwanbeck v. Federal-Mogul Corp.
...offer to buy by January 15, 1981, the expiration date of Schwanbeck's right of first refusal. 12 See Roy v. George W. Greene, Inc., 404 Mass. 67, 70, 533 N.E.2d 1323 (1989). Cf. Stone v. W.E. Aubuchon Co., 29 Mass.App.Ct. 523, 526, 562 N.E.2d 852 (1990). The trial judge concluded that a fir......
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Stone v. W.E. Aubuchon Co., Inc.
...19 Mass.App.Ct. 155, 159, 472 N.E.2d 966 (1985). 1A, Corbin, Contracts § 261 at 472-473 (1963). See also Roy v. George W. Greene, Inc., 404 Mass. 67, 69-70, 533 N.E.2d 1323 (1989). A completed sale to a third party does not extinguish the lessee's right of first refusal. Rather, the lessee ......
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