Van Dam v. Spickler
| Decision Date | 07 April 2009 |
| Docket Number | Docket: Was-08-235 |
| Citation | 968 A.2d 1040,2009 ME 36 |
| Parties | Brian VAN DAM et al. v. Olive SPICKLER et al. |
| Court | Maine Supreme Court |
Theodore A. Small, Esq. (orally), Peter J. Van Hemel, Esq., Bernstein, Shur, Sawyer & Nelson, Portland, for Olive and Robert Spickler.
David J. Fletcher, Esq. (orally), Fletcher & Mahar, Calais, for Brian M. and Jane H. Van Dam.
Panel: SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, MEAD, and GORMAN, JJ.
[¶ 1] Olive and Robert Spickler appeal from a judgment entered in the Superior Court (Washington County, Hunter, J.) following a non-jury trial. The court determined that the Spicklers' claim for specific performance of a right of first refusal contained in a deed is barred by laches. We affirm the judgment.
[¶ 2] The trial record, reviewed in the light most favorable to the judgment, supports the following facts. See Stickney v. City of Saco, 2001 ME 69, ¶ 13, 770 A.2d 592, 600. Robert Spickler is an experienced real estate broker, developer, and instructor who purchased a large tract of coastal land in the Town of Roque Bluffs in 1967. He subsequently conveyed the land to his corporation, Chamber's Point, Inc., which subdivided the property and, in 1978, sold an undeveloped oceanfront parcel, Lot 25, to Marco, Inc. The deed to Marco contained a covenant prohibiting Marco from selling Lot 25 "without previously offering it to Chamber's Point, Inc. at the same price and terms."
[¶ 3] In 1986, Marco sold Lot 25 to Brian and Jane Van Dam for $39,000. The purchase and sale agreement required the Van Dams to make a $5500 down payment; the $33,500 balance was to be financed through Marco for five years. Marco did not notify Chamber's Point of the sale. Although the Van Dams were aware of the covenant containing a right of first refusal in favor of Chamber's Point, they believed that it only affected them "going forward" and that it did not affect their title.1 The Van Dams did not inquire whether Marco had satisfied the covenant by offering Lot 25 to Chamber's Point prior to closing with the Van Dams. In 2007, the still undeveloped lot had a value of at least $100,000.
[¶ 4] Unaware that Marco had sold Lot 25 to the Van Dams, Chamber's Point conveyed all of its interest in Lot 25 to Olive Spickler, Robert's wife, in 1990, thus transferring the right of first refusal to her. The deed was not recorded until September 1998. Chamber's Point was subsequently dissolved. Although Olive held the right of first refusal, she deferred to Robert regarding any decisions involving that interest.
[¶ 5] The Spicklers first learned of the sale of Lot 25 to the Van Dams in March 1999, when Brian Van Dam telephoned Robert to request a key to a gate that Robert had erected across the access road to Lot 25. During this call, Brian explained that he owned Lot 25. Robert responded that the Van Dams did not have "good title to the lot" and that Marco was the owner. In the same conversation, Robert informed Brian that the Van Dams owed money for repairs to the access road, that Robert would send an invoice, and that upon payment of the invoice Robert would send them a key. Robert also stated that he would give the Van Dams a waiver if they provided him copies of the closing documents from the sale. Robert never sent an invoice, and the Van Dams never paid the road fees or provided the closing documents.
[¶ 6] Brian and Robert had several more conversations over the next several months in which they discussed the right of first refusal. On at least one occasion, Robert demanded to know the price and terms under which the Van Dams purchased Lot 25. Brian told Robert that he "paid $35,000 for it but didn't tell [him] the terms." Robert suggested that the Van Dams hire a lawyer to resolve the matter. When the Van Dams refused that advice, Robert indicated that the Spicklers would file a notice in the Registry of Deeds declaring their rights in Lot 25. In September 2000, Olive recorded a document titled "Claims of Lien" in the Washington County Registry of Deeds referencing Lot 25 and her right of first refusal.2 The Spicklers did not notify the Van Dams of this action.
[¶ 7] In November 2001, the Van Dams wrote to Robert again requesting a key to the gate and restating their ownership interest in Lot 25. Robert replied and reiterated that the Van Dams did not have marketable title. In September 2003, the Van Dams received an invoice for road repairs, which they paid by check. However, Robert returned the check, explaining that the Van Dams were not the owners of Lot 25. The Van Dams have paid all real estate taxes on Lot 25 since their purchase in 1986.
[¶ 8] The Van Dams filed suit against the Spicklers in February 2004, seeking damages for slander of title and a declaratory judgment establishing the rights of the parties.3 The Spicklers filed an answer as well as a five-count counterclaim that sought, among other things, the establishment of a constructive trust and an order of specific performance compelling the Van Dams to offer Lot 25 to the Spicklers. The Van Dams answered the Spicklers' counterclaim and raised the doctrine of laches as an affirmative defense.
[¶ 9] The Spicklers filed a motion for a summary judgment that asserted that the Van Dams "have only a possessory interest in the subject property, and hold the property in constructive trust for the benefit of [the Spicklers]." The court granted the motion in part and denied the motion in part. Specifically, the court concluded that the Van Dams held more than a possessory interest in Lot 25 and, in fact, held valid title to the property. The court also concluded that the Spicklers held a valid right of first refusal. The court found that the Van Dams were therefore subject to the "risk that circumstances warrant the imposition of a constructive trust and a subsequent order of specific performance." However, the court found that a question of material fact still remained regarding whether or not the doctrine of laches barred the Spicklers from securing an order of specific performance. An evidentiary hearing was held on this question pursuant to M.R. Civ. P. 56(d).
[¶ 10] In its final decision, the court found that the Spicklers first learned of the sale to the Van Dams in March 1999 and "did nothing thereafter." Responding to the Spicklers' argument that they could not assert their rights in the property until the Van Dams disclosed the terms of the purchase, the court concluded that Robert, who was a "person of some sophistication" in real estate, had both the financial means and the ability to determine the sale terms by initiating a lawsuit and conducting discovery. The court further concluded that the right of first refusal was a right that belonged to the Spicklers, and that it was up to them, not the Van Dams, to "turn to the court in aid of their rights."
[¶ 11] Finding that the Spicklers were responsible for unreasonable delay—the first element of the laches doctrine—the court next examined whether the Van Dams had also established the second element, prejudice resulting from the delay. The court concluded that the Van Dams were unfairly prejudiced by the delay because: (1) they had continued to pay the real estate taxes on the property during the five-year period; (2) they had lost the opportunity to invest and obtain a return on the amount the Spicklers would have had to pay to exercise the right of first refusal; and (3) Lot 25 had increased in value. Having determined that both elements of the laches doctrine had been established, the court concluded that the Spicklers' claim for specific enforcement of the right of first refusal was barred by laches. This appeal followed.
[¶ 12] Laches will bar a claim of specific performance where "the omission to assert a right for an unreasonable and unexplained length of time ... has been prejudicial to an adverse party, [such that] it would be inequitable to enforce the right." Northeast Harbor Golf Club, Inc. v. Harris, 1999 ME 38, ¶ 19, 725 A.2d 1018, 1023 (quotation marks omitted). Additionally, "[a] party is as much open to the charge of laches for failure to prosecute a case diligently as for undue delay in its institution." Kelley v. Bhd. of R.R. Trainmen, 148 Me. 95, 99, 90 A.2d 717, 720 (1952) (quotation marks omitted). Whether the equitable doctrine of laches bars a claim is an issue of law that we review de novo. Longley v. Knapp, 1998 ME 142, ¶ 10, 713 A.2d 939, 943. However, we review a trial court's factual findings for clear error. Estate of Martin, 2008 ME 7, ¶ 18, 938 A.2d 812, 819.
[¶ 13] The Spicklers argue that laches does not require a holder of a right of first refusal to initiate a lawsuit in order to assert his or her right. They contend that a holder of a right of first refusal has no duty to act before being offered the opportunity to exercise the right, and that the Van Dams had an equitable duty to offer the property to them. The Van Dams respond that a holder of a right of first refusal must make a prompt and diligent investigation of the terms of a sale. They further assert that laches bars a claim where a case is not prosecuted diligently, and that the court correctly concluded that the Spicklers' failure to initiate suit constituted unreasonable delay.
[¶ 14] This case requires us to answer three questions. First, we examine what duties are incurred by third-party purchasers, such as the Van Dams, who purchase property with actual knowledge of a right of first refusal. Second, we examine what duties belong to a holder of a right of first refusal who discovers, as the Spicklers did, that property has been conveyed in violation of their right of first refusal. Third, in light of the previous two questions, we determine whether the Spicklers are barred by laches from enforcing their right of first refusal against the Van Dams.4
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