Stuart Kingston, Inc. v. Robinson

• Decision Date: 14 May 1991
• Parties: STUART KINGSTON, INC., a Delaware corporation and St. Lawrence and Grant Venue Trust, a Delaware trust, Defendants Below, Appellants, and Carriage House Associates, Inc., a Delaware corporation, Defendant Below, v. Stephen D.M. ROBINSON and Marjorie Hirschland Robinson, his wife, Plaintiffs Below, Appellees. . Submitted:
• Court: United States State Supreme Court of Delaware

Page 1378

596 A.2d 1378

STUART KINGSTON, INC., a Delaware corporation and St Lawrence and Grant Venue Trust, a Delaware trust Defendants Below, Appellants and Carriage House Associates, Inc., a Delaware corporation Defendant Below, v. Stephen D.M. ROBINSON and Marjorie Hirschland Robinson, his wife, Plaintiffs Below, Appellees.

Supreme Court of Delaware.

Submitted: May 14, 1991.

Decided: Aug. 12, 1991.

Appeal from Court of Chancery. Affirmed.

Edward M. McNally (argued), and Daniel P. Johnson, Morris, James, Hitchens & Williams, Wilmington, for appellants.

Eric L. Grayson (argued), Robinson & Grayson, P.A., Wilmington, for appellees.

Before MOORE, WALSH and HOLLAND, JJ.

WALSH, Justice:

This is an appeal from a Court of Chancery decision granting specific performance of a contract for the sale of real estate. The court ruled the buyer had standing to challenge a right of first refusal and that the seller was not bound by the right sought to be exercised by a third party because the right was void as violative of the rule against perpetuities. We agree with the Court of Chancery that the buyer had standing to seek a determination that the right of first refusal was void and that, as a matter of law, the right was not enforceable. Accordingly, we affirm the grant of summary judgment.

I

The facts underlying this matter are essentially undisputed. On December 29, 1988, Stephen D.M. Robinson and Marjorie H. Robinson, his wife, (the "Robinsons") entered into an agreement of sale for the purchase of a property known as the "Carriage House" located at 1100 Grant Avenue in the City of Wilmington for the sum of $628,945.00. The seller, Carriage House Associates, Inc., a Delaware corporation ("Carriage House Associates"), had purchased the property in 1983, from Stuart Kingston, Inc. ("Stuart Kingston"). ¹ The basis for the present controversy is an agreement of sale dated January 18, 1983 which culminated negotiations between Stuart Kingston and Payne/Betty. Paragraph 10 of that agreement provided:

10. Right of First Refusal

10.1 If at any time after settlement hereunder, Buyer receives a bona fide written offer to purchase all or part of the Property, the easement area and/or the parcel shown on Exhibit B, which offer Buyer desires to accept, Buyer shall immediately notify Seller of such offer, sending Seller a copy of same together with Buyer's written conditional acceptance. Upon receipt of such notification, Seller shall thereupon have the first right and privilege to purchase the property described in said offer on the same terms and conditions stated in that offer, provided that within twenty (20) days after receipt of such notification, Seller shall send written notice to Buyer of Seller's intent to so purchase the property. Failure of Seller to give such notice shall be deemed an election by Seller not to purchase the property.

10.2 At the time of settlement hereunder, the parties shall execute and acknowledge a memorandum of this right of first refusal, which memorandum shall be recorded at Buyer's expense.

Despite the language of Paragraph 10.2, the "memorandum" of first refusal was not executed at settlement nor was any such document recorded in the Office of the Recorder of Deeds for New Castle County. Thus, at the time the Robinsons entered into their agreement with Carriage House Associates, they were unaware of the existence of Stuart Kingston's right of first refusal and Carriage House Associates, or their negotiating agents, did not dispel their ignorance.

The Robinsons first became aware of Stuart Kingston's right of first refusal on January 16, 1989, the date of their proposed settlement with Carriage House Associates, when Stuart Kingston's attorney provided them with a copy of the 1983 agreement. A title search of the property had not revealed the existence of Stuart Kingston's right of first refusal. On that same day, counsel for Carriage House Associates notified counsel for Stuart Kingston that "[w]ithout waiving any rights we may otherwise have, this letter will serve as formal notice to Stuart Kingston, Inc. that Carriage House Associates, Inc. has received an offer to purchase its property at 1100 North Grant Avenue." A copy of the Robinsons' contract was attached and Stuart Kingston's counsel was requested to indicate "your client's decision as to the right of first refusal at your earliest convenience." On February 6, 1989, Stuart Kingston, through counsel, exercised its right of first refusal "upon the same terms and conditions" as those set forth in the Robinsons' contract. In the face of this development, Carriage House Associates refused to proceed to settlement with the Robinsons who thereupon filed an action in the Court of Chancery for specific performance.

Upon the filing of the Chancery action, Stuart Kingston sought to intervene and that effort led to the execution by the seller and by both prospective purchasers of a document entitled "STIPULATION AND ORDER OF SETTLEMENT" ("Stipulation"). It provided, inter alia, for the following course of events:

(1) Carriage House Associates would proceed to settlement with Stuart Kingston, subject to a judicial determination of the validity of the right of first refusal and Carriage House Associates would be released of "all claims" asserted against it.

(2) Stuart Kingston would accept title to the property, subject to a judicial determination of the validity of its right of first refusal and, in the event that right is ruled "not enforceable," Stuart Kingston would be deemed to be holding the property "pursuant to a resulting trust" for the benefit of the Robinsons.

(3) In the event the Robinsons succeeded in their suit for specific performance, they would be entitled to a conveyance of the property from Stuart Kingston, subject to the payment of certain out-of-pocket expenses incurred by Stuart Kingston in the acquisition and operation of the property.

(4) Stuart Kingston agreed to "abide by the terms of the Stipulation as well as any order entered by this court, or the Delaware Supreme Court, against or on behalf of Kingston." The Robinsons' "rights and legal arguments [would] not be prejudiced by the settlement for ... the Property."

One result of the Stipulation was to leave the litigation to the disputing purchasers, the Robinsons and Stuart Kingston. Both parties subsequently moved for summary judgment and the Court of Chancery ruled that, as a matter of law, Stuart Kingston's right of first refusal violated the rule against perpetuities and was accordingly void.

II

Initially, we confront the claim asserted by Stuart Kingston in the Court of Chancery that the Robinsons' lack standing to pursue their claim because, upon being made aware of the outstanding right of first refusal, they executed an addendum to their original agreement which extended the settlement date and required Carriage House Associates to "timely notify Buyer of Stuart Kingston's decision regarding its right of first refusal for the Property." Settlement was to take place within three days of notification of Stuart Kingston's decision. ² In effect, Stuart Kingston argues that the Robinsons' right to enforce their agreement against Carriage House Associates was contingent on Stuart Kingston's surrender of its right of first refusal and, upon the exercise of that right, the Robinsons lost standing to seek specific performance of their contract with Carriage House Associates. The Court of Chancery in rejecting this argument ruled that the Robinsons suffered distinct prejudice to preexisting contractual rights by reason of the exercise by Stuart Kingston of its purported right of first refusal and thus had standing to sue. We agree.

The concept of "standing," in its procedural sense, refers to the right of a party to invoke the jurisdiction of a court to enforce a claim or redress a grievance. 59 Am.Jur.2d Parties § 30 (1989). It is concerned only with the question of who is entitled to mount a legal challenge and not with the merits of the subject matter of the controversy. Game Com'n v. Dept. of Env. Resources, 521 Pa. 121, 555 A.2d 812 (1989); Manchester Environmental Coalition v. Stockton, 184 Conn. 51, 441 A.2d 68 (1981). In order to achieve standing, the plaintiff's interest in the controversy must be distinguishable from the interest shared by other members of a class or the public in general. Sprague v. Casey, 520 Pa. 38, 550 A.2d 184 (1988). Unlike the federal courts, where standing may be subject to stated constitutional limits, state courts apply the concept of standing as a matter of self-restraint to avoid the rendering of advisory opinions at the behest of parties who are "mere intermeddlers." Crescent Park Tenants Assoc. v. Realty Equities Corp. of New York, 58 N.J. 98, 275 A.2d 433 (1971).

Stuart Kingston argues that the Robinsons in agreeing to await the exercise of Stuart Kingston's right of first refusal recognized the superior right therein represented and thus have no standing to complain of its exercise. The addendum executed on the date of the intended settlement, however, did not concede the validity of the right of first refusal. It merely deferred the settlement date until three days after notice by Carriage House Associates "of Stuart Kingston's decision." In all other respects, the "terms and conditions of the [original] Agreement of Sale remain unchanged." In effect, the Robinsons and Carriage House Associates agreed to abide events, a necessary posture since a right of first refusal must be exercised in order to trigger the mutual responsibilities of the parties to the grant as well as the contractual rights of third parties. Wilgus v. Salt Pond Investment Co., Del.Ch., 498 A.2d 151 (1985). Nothing in the addendum suggests that the Robinsons conceded the validity of Stuart Kingston's right of first refusal and no inference of lack of standing may be drawn from their execution of that writing.

In support of...