Halpern v. Smith

219 N.E.3d 364

Stacie HALPERN, Trustee of the Stacie Halpern Trust U/A July 11, 1989, Plaintiff-Appellant,

v.Derek SMITH, et al., Defendants-Appellees.

No. 111896

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

Released and Journalized: April 27, 2023

Sonkin & Koberna, LLC, Mark R. Koberna, Cleveland, Sean T. Koran, Rodd A. Sanders, and Christopher S. Battles, for appellant.

Meyers, Roman, Friedberg & Lewis, Peter Turner, Ronald P. Friedberg, Cleveland and Kathryn E. Meloni, for appellees.

JOURNAL ENTRY AND OPINION

SEAN C. GALLAGHER, J.:

{¶ 1} Plaintiff-appellant Stacie Halpern, Trustee of the Stacie Halpern Trust U/A July 11, 1989 ("Halpern"), appeals the decision of the trial court that granted summary judgment in favor of appellees Derek L. Smith and Rebecca Smith ("the Smiths"). Upon review, we affirm the trial court's decision.

I. Facts and Procedural History

{¶ 2} At the outset, we must emphasize that this is not a case involving a right of first refusal. It involves a right of first offer. They are decidedly different as the analysis below will show.

{¶ 3} This case stems from an agreement between the parties for a "Right of First Offer" (also referred to as an "ROFO"). We have reviewed the evidence in the record and include a brief overview of some of the facts herein.

{¶ 4} In 2018, the Smiths owned a large parcel of land in Moreland Hills, Ohio. Halpern resided with her husband, Jeffrey Halpern, on property adjacent to the Smiths’ property. In March 2018, Halpern purchased approximately 14.5 acres of land abutting her property from the Smiths, and the Smiths retained their remaining property. Along with the purchase agreement, the parties entered a "Right of First Offer Agreement" on the Smiths’ remaining land, which is referred to as the "option parcel."

{¶ 5} Section 1 of the ROFO Agreement sets forth the "Right of First Offer" and provides as follows:

1. Right of First Offer . If at any time during the Term [defined in Section 2 of the ROFO agreement] Owner shall desire to sell the Option Parcel (or sell the direct or indirect ownership interests of Owner) to any third party (whether or not such third party is an affiliate of Owner) or a Family Member (collectively, the "Third Party"), prior to discussing, soliciting or negotiating any such sale with any Third Party, Owner shall notify Halpern in writing of its intention to sell. Following delivery of such notice, which notice shall include Owner's proposed terms of the sale, Halpern may, but shall have no obligation to, make an offer to Owner with respect to a potential purchase of the Option Parcel, and for a period of forty-five (45) days thereafter, Owner and Halpern shall discuss and negotiate in good faith regarding Halpern's Offer. If the parties fail, despite good faith efforts, to reach agreement on such purchase within such forty-five (45) day period, then Owner shall thereafter be free to negotiate with any Third Party. If Owner fails to sell the Option Parcel within six (6) months of the date of notice to Halpern, then before again marketing the Option Parcel to a Third Party, Owner shall again give notice to Halpern of Owner's intent to sell in accordance with the terms of this Section 1.

{¶ 6} Additionally, among other provisions of the ROFO Agreement, Section 5 includes a waiver of compliance when a party fails to require performance of any provision thereunder and Section 11 entitles a party to seek an injunction to prevent breaches when a party has not performed in accordance with the specific terms of the ROFO Agreement.

{¶ 7} The record shows that in October 2019, the Smiths executed an exclusive "Right to Sell Agreement" with real estate agent Craig Cantrall. Jeffrey Halpern was verbally informed that the Smiths intended to list the option parcel for $2,750,000, and the Halperns verbally declined to exercise the ROFO at that price, which was later followed by an email stating the Halperns had decided not to exercise the "First Right of Offer to negotiate for the property." As stated by Halpern in her deposition, "they came to us through Craig and were wanting to sell the property at 2.75 and that was a nonstarter."

{¶ 8} Thereafter, the property was marketed at the same price offered to Halpern, and real estate developer Jason Friedman expressed interest in purchasing the option parcel through his company, JAF Acquisitions ("JAF"). The Smiths began negotiations with JAF, and a purchase agreement was executed between the Smiths and JAF on January 30, 2020. The purchase agreement with JAF included a provision that conditioned the buyer's obligation to close upon a signed written waiver of the ROFO by Halpern. However, the Smiths’ obligation to close as the seller was not conditioned upon such a waiver.

{¶ 9} After the Smiths entered the purchase agreement with JAF, the Smiths sought to obtain a formal, signed waiver of Halpern's rights under the ROFO. On March 17, 2020, the Smiths sent a written notice with proposed terms to Halpern, which stated it "memorializes the prior notice and email communications" of the parties. On March 18, 2020, Halpern executed a statement indicating she had decided not to exercise the ROFO.

{¶ 10} The Smiths and JAF entered multiple amended purchase agreements, but they did not close the sale within six months of the March 17, 2020 notice to Halpern. In November 2020, the Smiths and JAF reached a tentative agreement to an "Amended and Restated Purchase Agreement," which included a purchase price of $1,500,000, a change to the portion of the option parcel being sold, and other terms. On December 9, 2020, the Smiths sent Halpern a new written "Notice of First Right of Offer" that included proposed terms, which were consistent with the Smiths’ tentative agreement with JAF.

{¶ 11} On December 10, 2020, Halpern elected to exercise the right of first offer, initiating the 45-day negotiation period set forth in Section 1 of the ROFO Agreement. The Smiths and Halpern engaged in some negotiations. However, JAF informed the Smiths of its intent "to proceed under the existing purchase agreement documents (up through the Third Amendment)" for the purchase of the sale property, effective June 30, 2020. As a result, on December 21, 2020, the Smiths sent Halpern a letter purporting to revoke the December 9, 2020 notice and provided an "Updated Notice of First Right of Offer." After Halpern's attorney responded with a letter disputing whether the Smiths had the right to revoke the December 9, 2020 notice, the Smiths’ attorney represented in an email that the December 21 notice was rescinded and that the Smiths intended to discuss and negotiate in good faith to reach an agreement. The negotiations continued, and Halpern sent draft transaction documents with regard to Halpern's proposed purchase, which the Smiths returned with revisions.

{¶ 12} The record reflects that in January 2021, Jason Friedman's attorney sent a letter to the Smiths’ attorney indicating that JAF was prepared to move forward to closing and that the Smiths had a binding purchase agreement with JAF. The Smiths included preclosing conditions with Halpern that required the receipt of a release from JAF and a guarantee there would be no litigation with JAF, with whom the Smiths were under contract to sell the property.

{¶ 13} Halpern and the Smiths were not able to successfully negotiate a purchase agreement, and Halpern determined it was necessary to file a lawsuit. Derek Smith attests in a supplemental affidavit that after the lawsuit was filed, the Smiths entered into a settlement agreement with JAF and JAF no longer has any rights or claims in the property under the purchase agreement with the Smiths. He also attests that the Smiths still own the property and acknowledges that the ROFO Agreement remains in effect.

{¶ 14} Halpern's complaint, which was filed on February 12, 2021, raises claims for breach of contract, specific performance, and injunctive relief. The Smiths filed counterclaims for declaratory judgment and for abuse of process. After the completion of discovery, the Smiths filed a motion for summary judgment on Halpern's complaint and on their counterclaim for declaratory judgment. Halpern filed a motion for partial summary judgment on her claim for breach of contract as to liability and on the Smiths’ counterclaims.

{¶ 15} On July 18, 2022, the trial court magistrate issued a decision with findings of fact and conclusions of law. Halpern filed objections to the magistrate's decision, and the Smiths filed a response. On August 22, 2022, upon consideration of the objections and after an independent review, the trial court issued an order that adopted the magistrate's decision, implicitly overruled the objections, and entered a ruling on the summary judgment motions.¹

{¶ 16} In part, the trial court determined that "the parties did not enter a binding and enforceable agreement for the sale and purchase of the option parcel as essential and material terms were not agreed upon and the terms not agreed to cannot be defined by the Court because said terms are uncertain and indefinite."

Additionally, the trial court found "any breaches by [the Smiths] as to the [ROFO Agreement] were immaterial as [Halpern] eventually exercised the right and the parties attempted to negotiate an agreement." Also, the trial court found that "[Halpern] did not demonstrate compensatory damages" and that Halpern was "not entitled to specific performance or an injunction." Ultimately, the trial court (1) granted the Smiths summary judgment as to the affirmative claims brought by Halpern and as to the Smiths’ counterclaim for declaratory judgment, and (2) granted Halpern summary judgment as to the Smiths’ counterclaim for abuse of process, which was unopposed and granted, and denied the remainder of Halpern's motion. The trial court further declared that "the Right of First Offer is a valid and enforceable contract that remains in place between the parties to the...