Tantleff v. Truscelli

• Decision Date: 30 September 1985
• Citation: 493 N.Y.S.2d 979,110 A.D.2d 240
• Parties: Julius TANTLEFF, etc., et al., Respondents, v. Anthony TRUSCELLI, et al., Appellants.
• Court: New York Supreme Court — Appellate Division

Page 979

493 N.Y.S.2d 979

110 A.D.2d 240

Julius TANTLEFF, etc., et al., Respondents, v. Anthony TRUSCELLI, et al., Appellants.

Supreme Court Appellate Division,

Second Department.

Sept. 30, 1985.

Philip J. Fitzpatrick, P.C., Staten Island, for appellants.

Jacobi, D'Alessandro, Jacobi & Sieghardt, P.C., Staten Island, (Robert N. Glazer of counsel), for respondents.

Before GIBBONS, J.P., and BROWN, WEINSTEIN and NIEHOFF, JJ.

GIBBONS, Justice Presiding.

The question raised on this appeal is which of two purchase options set forth in a lease is to be given precedence where a tenant seeks to invoke his right to purchase the premises for a fixed price after the landlord has given him notice of a bona fide third-party offer in conformity with the tenant's contractual right of first refusal. Under the circumstances of this case, we believe that the right-of-first-refusal option must be given precedence, and that the proper rendition of the aforementioned notice extinguished the tenant's right to purchase the premises under the fixed price option. We therefore reverse.

On April 6, 1957, a lease covering some 30,000 square feet of vacant land adjacent to New Dorp Lane in Staten Island was executed between the Jules Construction Corporation on one had, and Lillian Robinson and Mary Truscelli, the title holders of the property on the other. Subsequent to that time, defendant Anthony Truscelli acquired ownership of the property and thereafter transferred ownership to his 11 children, who, for tax purposes, formed the defendant T-Eleven Partnership to hold title to the land. Sometime after November 2, 1981, the Jules Construction Corporation assigned the lease to its president, plaintiff Julius Tantleff.

With the exception of the two paragraphs containing the purchase options at issue here, the remainder of the lease contains only terms and conditions affecting the leasehold and are not relevant to this appeal. However, the options paragraphs, the priority of which is in issue, provide as follows: ^*

The Right-of-First-Refusal Option

"20th. It is understood and agreed that:

"(a) In the event that the landlord shall desire to sell the demised premises and the landlord receives an offer from a prospective bona fide purchaser on the landlord's terms, the landlord shall give the tenant an opportunity first to meet such price and terms for which the landlord would be willing to sell to such prospective bona fide purchaser.

"(b) In the aforesaid event the landlord shall notify the tenant by registered mail that the landlord has a prospective purchaser and shall set forth the price and terms on which the prospective purchaser is willing to purchase and the landlord is willing to sell, and informing the tenant that if the tenant is ready, willing, able and prepared to meet the same terms, that a contract will be prepared in accordance therewith which the tenant shall be ready and prepared to execute at a time and place to be designated by the landlord, said time and place to be designated in said 'notice and information.'

"(c) Within five (5) days from the date that such aforesaid 'information and notice' is mailed to said tenant, the tenant shall notify the landlord in writing by registered mail that the tenant is ready, willing, able and prepared to purchase the demised premises on the same terms and conditions set forth in the 'notice and information' referred to and that the tenant will appear at the time and place designated in said 'notice and information' to enter into a contract on the said terms referred to in said 'notice and information', and if the tenant shall fail to appear at the time and place therein designated and/or fail to enter into said contract at the time and place designated, on the terms hereinabove referred to, then this provision of this lease pursuant to which the landlord is to give the tenant the opportunity to meet the price and terms of a prospective bona fide purchaser, on the landlord's terms, shall cease and terminate and be and become null and void without any further notice or process" (emphasis added).

The Fixed-Price Option

"22nd. It is understood and agreed that the tenant herein shall have the option to purchase the demised premise for ONE HUNDRED THOUSAND ($100,000) DOLLARS cash, at any time while this lease is in force and effect, and provided further that the premises have not prior thereto been sold in accordance with the provisions contained in paragraph numbered '20th (a), (b) and (c)' above, and it is not intended that the provisions of this paragraph numbered '22nd' shall survive the termination or cancellation of this lease. If said lease is terminated or cancelled before its expiration date, by reason of default on the part of the tenant in carrying out its terms or provisions, as hereinabove set forth, or for any other reason, then the provisions of said paragraph numbered '20th (a), (b) and (c) and 22nd' shall also cease and expire at the same time as such termination or cancellation" (emphasis added).

It is undisputed that Jules Construction Corporation validly exercised both of the renewal options available to it under the lease, and that in 1976 the parties executed an agreement granting the lessee the options to extend the lease for three additional 10-year periods upon modified terms of the original lease. At the end of that extension agreement the parties stipulated that "All other terms of [the] lease above referred to [i.e., the lease of April 6, 1957] except as heretofore and herein modified, are to remain in full force and effect".

On December 5, 1981, the defendant owners, pursuant to the "right-of-first-refusal option" provisions of paragraph 20 of the lease, sent a "Notice and Information" to the plaintiffs, informing them of a bona fide offer from defendant Heil to purchase the property for $300,000. Shortly thereafter, the landlord and tenant executed a supplemental agreement extending plaintiff's time to respond to the December 5th Notice and Information to December 15, 1981, but on December 14, 1981, plaintiff attempted to invoke the "fixed-price option" by sending a letter containing the following notice to the defendant owners.

"Please be advised that Julius Tantleff as assignee of Jules Construction Corp. and Jules Construction Corp., hereby exercises its option to purchase property, Tax Block 3960, Lots 90, 95 and 125, for the amount of $100,000.00, pursuant to the provisions of Paragraph 22 of the lease dated April 6, 1957 between Jules Construction Corp., lessee and Lillian Robinson and Mary Truscelli, lessors.

"Please advise as to the date, time and place for the closing of title."

Significantly, plaintiffs' summons and complaint in this action are also dated December 14, 1981, and were apparently served upon the defendants on or about December 15, 1981, together with an order temporarily restraining the performance of the contract between T-Eleven Partnership and Heil, and ordering them to show cause on December 23, 1981, why a preliminary injunction should not be issued. This preliminary injunction was subsequently granted and extended at plaintiffs' request, and a notice of pendency was filed against the property.

By notice of motion dated April 6, 1983, plaintiffs moved for summary judgment in their favor on the complaint, and for an order directing specific performance of the "fixed-price option". In summary form, it was plaintiffs' contention that they had the right to exercise the "fixed-price option" at any time until the property has actually been sold by the defendants and title transferred. By notice of cross motion dated May 17, 1983, defendants' cross-moved for summary judgment in their favor dismissing the complaint on the ground that plaintiffs' receipt of the "Notice and Information", invoking defendants' rights under the "right-of-first-refusal option" terminated any right which plaintiffs may have had to exercise the "fixed-price option" and that plaintiffs' failure to exercise the former option in a timely fashion has terminated their rights thereunder as well.

Special Term found in favor of the plaintiffs on the ground, inter alia, that

"The lease provide[d] that [the fixed-price] option would be valid while the lease was in full force and effect, and provided that the property ha[d] not been 'sold' prior thereto under the first refusal provision. The question is, therefore, was the property sold when a contract of sale was executed between defendants and the bona fide purchaser. The Court holds that it was not. A contract of sale is indicative of an intent to sell. A sale of property implies the passage of title from seller to buyer. There are any number of reasons why title to real property does not pass even though the parties [may] have contracted to do so. Plaintiffs' option...