LACASCATA HOMEOWNERS ASSOCIATION, INC. v. DANIEL RIIFF

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2914-03T22914-03T2

LACASCATA HOMEOWNERS ASSOCIATION, INC.,

Plaintiff-Respondent,

v.

DANIEL RIIFF,

Defendant-Appellant,

and

GLOUCESTER TOWNSHIP HOUSING AUTHORITY,

Defendant.

______________________________________________

 

Argued September 28, 2005 - Decided

Before Judges Conley and Weissbard.

On appeal from Superior Court of New Jersey,

Chancery Division, General Equity Part, Camden

County, Docket No. C-109-03.

Andrew J. Karcich argued the cause for appellant

(Lynch & Karcich, attorneys; Mr. Karcich and

JoAnne Eskin Sutkin, on the brief).

Gary J. Zangerle argued the cause for respondent.

PER CURIAM

Defendant Daniel Riiff appeals from an order of summary judgment in favor of plaintiff LaCascata Homeowners Association, Inc. (LHA), enforcing a right of first refusal embodied in a restrictive covenant contained in deeds to two properties in plaintiff's development which were owned by the Gloucester Township Housing Authority (GTHA) and purchased by defendant at a public auction. We affirm.

GTHA wished to sell three properties that it owned in the LaCascata development by auction, pursuant to the Public Bidding Laws, N.J.S.A. 40A:12-13. GTHA contacted LHA in May of 2003, requesting any forms related to the Association's right of first refusal. GTHA printed notices in local newspapers announcing the auction, set for July 31, 2003.

Defendant, who was bidding on behalf of his son Louis, was the high and sole bidder at the auction for two of the properties, at prices of $25,000 and $27,500. Defendant presented GTHA with the deposit required for the purchase of the subject properties at the close of the sale. Closing was scheduled for August 28, 2003.

On August 5, 2003, plaintiff wrote to GTHA advising that it would be exercising its right of first refusal and would purchase the properties bid on by defendant, at the prices established by the auction. GTHA did not respond to plaintiff's demand. Subsequently, plaintiff contacted defendant and sought to have defendant assign his bid to plaintiff, which defendant declined to do.

On August 28, 2003, plaintiff filed suit against defendant and GTHA. Plaintiff sought judgment: (1) restraining GTHA from conveying title to the units to defendant; (2) ordering that the plaintiff be allowed to exercise its right of first refusal; (3) setting a date for the closing; (4) ordering that the plaintiff take over the property from the date of settlement with the defendant, i.e., August 28, 2003; (5) imposing fines against defendant for failure to honor the plaintiff's right of first refusal; (6) awarding attorney's fees and costs to the plaintiff; and (7) ordering GTHA to accept as the purchase price defendant's bids of $27,500 and $25,000.

On August 27, 2003, after a telephone conference, plaintiff's request for a temporary restraining order was denied due to lack of irreparable harm. However, the judge ordered defendants to show cause at a hearing scheduled for September 12, 2003, why the sale of the properties should not be permanently stayed. He allowed the sale to go forward on condition that defendant assumed any risk of an adverse judgment and would not be allowed to recover from plaintiff any rehabilitation costs he may incur in the meantime. Lastly, the judge dismissed GTHA from the case after the transfer of the properties to defendant.

On October 24, 2003, the judge heard oral argument, concluded that there were no material facts in dispute, and granted plaintiff's enforcement of the restrictive covenant, ordering the sale of the property by defendant to plaintiff for the auction price, if plaintiff chose to enforce the covenant.

On appeal, defendant presents the following arguments:

(1) plaintiff's first right of refusal does not run against a buyer, but is actionable only against a seller; (2) the first right of refusal clause contained in the declaration is void as against public policy and the court's order recognizing it as enforceable against defendant Riiff should be reversed; (3) plaintiff should have been barred from recovery by reason of waiver and estoppel.

The restrictive covenant in the deeds to the subject properties reads as follows:

Any lot owner who receives a bona fide offer for the purchase of his lot, or a bona fide offer for the lease of his lot (hereinafter called an "Outside Offer"), which he intends to accept shall give notice to the Board of Trustees of ASSOCIATION of such offer and of such intention, the name and address of the proposed other party to the transaction and such other information as the Board of Trustees may reasonably require, and shall offer to sell or lease such lot, to the Board of Trustees, or its designee, corporate or otherwise, on behalf of the owners of all other lots, on the same terms and conditions as contained in such Outside Offer.

Defendant argues that since the right of first refusal only applies to a "lot owner" and he was a buyer, not an owner, the restriction simply does not apply to him. GTHA was the owner of the properties and, although initially named as a party-defendant in plaintiff's suit, GTHA was dismissed from the suit at the time of the TRO hearing. From that fact, defendant argues as follows:

Plaintiff declined to appeal the dismissal of GTHA, and in so doing failed to protect its interest in its right of first refusal. In fact, once GTHA was dismissed from the case, the only party against whom the right could be enforced was no longer a "party" to the litigation. Plaintiff's failure to protect its interests in the right does not justify the improper enforcement of that right against Defendant Riiff.

On its face, defendant's argument appears dispositive of the controversy. However, plaintiff contends that defendant is judicially estopped from taking that position, and we agree. At the conclusion of the TRO hearing, after the judge had denied interim relief on the basis that plaintiff had failed to demonstrate irreparable harm, the following colloquy took place:

GTHA COUNSEL: Does this -- does everybody agree that the Authority is now out of the suit?

THE COURT: Once it makes -- once it conveys the --

GTHA COUNSEL: The property.

THE COURT: -- well, I guess the answer to that, [defense counsel], is yes, because Mr. Riiff takes ownership, and then any order of the court to convey would, of necessity, be directed to him, not to the Authority.

GTHA COUNSEL: Thank you, Your Honor.

PLAINTIFF'S COUNSEL: Will we --

THE COURT: Very well. That's all. Thank you.

Clearly, counsel for defendant acquiesced in the dismissal of GTHA in the face of the judge's statement that any subsequent order to convey the property, if the restriction were upheld, would "be directed to him, not to the Authority." We understand this to mean that, for purposes of the litigation, defendant stepped into the shoes of the GTHA. As plaintiff correctly points out, at the TRO hearing, "defendant argued that there would be no harm in permitting the sale but now argues that there is harm, because the only one who could be compelled to honor the right of first refusal is the seller. These are two contrary positions." Defendant's present position is inconsistent with the one he successfully advanced in the earlier proceeding. Judicial estoppel bars such conduct. State Dep't of Law & Public Safety v. Gonzales, 142 N.J. 618, 632 (1995); Kimball Int'l, Inc. v. Northfield Metal Prods., 334 N.J. Super. 596, 606-07 (App. Div. 2000), certif. denied, 167 N.J. 88 (2001).

Turning to the merits, defendant argues "that GTHA technically did not receive a 'bona fide offer' from defendant Riiff." (emphasis added). We disagree. The highest bidder at an auction is making a "bona fide offer" to purchase. While the auction bid scenario may not be the most common route to property ownership, we see no basis on which to exclude such a purchase offer from the terms of the restriction.

Nevertheless, defendant contends that the restriction is contrary to the public policy, and therefore void, when applied to the public auction scenario. Specifically, defendant argues that the right of first refusal contradicts the Public Bidding Law: "To compel the sale of publicly bid property to someone other than the highest bidder upsets the purpose of the State's bidding law." We do not agree. Rather, as Judge Vogelson found, the two laws can operate in pari materia. Contrary to defendant's position, recognition of the right of first refusal does not undercut the bidding process and render it "meaningless," nor does it "discourage[] parties from bidding on public property . . . affect[ing] property values, causing bid values to drop and competition to disappear."

Clearly, all bidders, including defendant, were on notice of the right of first refusal. The Resolution authorizing the sale provided that the units were being sold, "subject to all restrictions and easements of record, if any," thereby placing any buyer/bidder on constructive notice of the first refusal right. Further, defendant appears to have had actual notice of the restriction. Concerning defendant's argument that a right of first refusal will discourage bidders, we agree with plaintiff that "the exact opposite is true." While the restriction may discourage a bidder who hopes to "steal" the property with a low bid, it will not deter someone who is willing to pay full value for the property since the holder of the refusal right may not wish to match such a bid. The existence of the refusal right is, thus, more likely to encourage higher bids, thereby serving the purposes of the Public Bidding Law.

In any event, as Judge Vogelson pointed out, to find the first refusal in conflict with the bidding law would mean that plaintiff's right would be eliminated with respect to any of its units which were publicly owned. Such a determination would render plaintiff's master deed and bylaws meaningless in the context of publicly owned units, an improper result.

As the judge further noted, defendant is not damaged by having participated in the auction, "[a]t best he's disappointed." We reject, as without merit, defendant's argument that he was damaged by virtue of having "prepared for, attended, bid on the properties at the public auction, and made financial arrangements to honor his bid, if he was successful as the high bidder." These actions do not, in our view, constitute damage. In any event, defendant was on full notice that his bid might be trumped by plaintiff's exercise of its right. It was his choice to participate or not. He was not damaged by plaintiff's exercise of its right.

Nor do we agree that plaintiff "waived" its right by sitting back and awaiting the outcome of the auction. Until the auction took place, there was no "offer" to match and no right to exercise. There was no waiver.

We have carefully considered all of defendant's arguments, and to the extent they have not been addressed in this opinion, they are without sufficient merit to warrant discussion. R. 2:11-3(e)(1)(E).

 
Affirmed.

(continued)

(continued)

9

A-2914-03T2

November 2, 2005