In Estate of Nicholas v. The Cutler Group (2015 Pa. Dist. & Cnty. Dec. LEXIS 56), a trial court judge in Bucks County recently enforced a valuation guaranty contained in a right of refusal set forth in a land acquisition deal entered into between a developer and individuals who sold land to the developer.
In the summer of 2002, Frank and Elizabeth S. Nicholas entered into a written agreement of sale with the Cutler Group Inc. for it to purchase over 300 acres of land owned by them in Hilltown Township, Bucks County, the opinion said.
At the time of entering into the written agreement, the parties entered into an additional, related written agreement, pursuant to which the Cutler Group was to reconvey five parcels of land, to be subdivided out from the over 300 acres, on which buildings were located at the time, the opinion said. One of those parcels of land being reconveyed to the Nicholases was known as the Walden property, the opinion said.
This related agreement also contained a “valuation guaranty,” which provided that, in the event that the Nicholases received a bona fide offer on these parcels of land, which included the Walden property, and the sale price was less than the agreed-upon fair market value, the Cutler Group would have the right of first refusal...
The Nicholases eventually received an agreement for sale and purchase of the Walden property for $619,000, as compared to the valuation of $943,000 for the Walden property in the agreement they entered into when they sold their land to the Cutler Group.
...On Nov. 20, 2006, the Monday before the Thanksgiving holiday, Stephen P. Moyer, the attorney representing the Nicholases at the time, mailed a letter to McBride via overnight mail advising him that they had received a bona fide third-party purchase offer for the Walden property and that the date of settlement was scheduled for Nov. 30, 2006...
The Cutler Group did not respond to the letter... When the Cutler Group declined to make payment of the difference between what the Walden property was valued at in their agreement with the Nicholases and what it sold for, the Nicholases filed a breach of contract action against the Cutler Group seeking a judgment for the amount owed under the valuation guaranty...
Gilman entered judgment in favor of the Nicholases and against the Cutler Group for the amount owed to them under the valuation guaranty... Gilman stated that the terms and conditions of the Cutler Group’s right of first refusal were not clear and actually ambiguous... Gilman faulted the Cutler Group and McBride for failing to properly exempt holidays or weekends from the computation in the notice provision...
Gilman also concluded that, “given McBride’s long-established role on behalf of Cutler, and the fact that his office’s physical location is practically shared with Cutler... notice and letters mailed and/or faxed to McBride’s office were reasonably consistent with and indicative of the parties’ intentions...”
...Gilman bluntly stated that this argument was “disingenuous,” as the Cutler Group was timely informed of the settlement date change, and suffered no harm as a result thereof and “was given even more time to exercise its right of first refusal than the 10 days noted in the valuation guaranty.” In Gilman’s own words, the Cutler Group elected to “sit on its right.”
In the end, Gilman emphasized that “the various assertions made on behalf of Cutler may have been bolstered if the surrounding circumstances indicated the slightest inclination by [it] to specifically enforce its contractual right of first refusal for the purpose of purchasing the Walden property.”
Reprinted with permission from the August 18, 2015 edition of The Legal Intelligencer © 2015 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit www.almreprints.com.
Alan Nochumson