NO-PINK INC V JOHN A ELLISON
Annotate this Case
Download PDF
STATE OF MICHIGAN
COURT OF APPEALS
NO-PINK, INC., d/b/a THE MUSIC MENU,
UNPUBLISHED
February 27, 2001
Plaintiff-Appellee,
v
No. 215457
Wayne Circuit Court
LC No. 97-705122-CH
JOHN A. ELLISON and LEO ELLISON,
Defendants,
Cross-Defendants, Appellants,
and
GREEKTOWN PROPERTY L.L.C.,
Defendant,
Cross-Plaintiff, Appellant.
Before: Markey, P.J., and Murphy and Collins, JJ.
PER CURIAM.
This case involves a property dispute between three parties. At issue is whether plaintiffsublessee No-Pink, Inc. (No-Pink) had a vested right of first refusal that could defeat the
landlord/owners’ sale of a larger property, which included the leased property, to a third party.
The trial court found that plaintiff did have such a right and granted summary disposition,
pursuant to MCR 2.116(C)(10), in favor of plaintiff. Defendants now appeal as of right. We
reverse.
Defendants Ellisons (the Ellisons) owned three connected buildings at the corner of
Monroe and Beaubien streets in Detroit. On June 21, 1983, the Ellisons leased 511 Monroe to
tenant New Delmar, Inc. (New Delmar) for a ten-year period, the lease including a five-year
option. The lease also provided the tenant with a right of first refusal, stating as follows:
(39) In the event Lessor obtains a purchaser for the Leasehold premises, Lessor
shall first offer Lessee the right to purchase the premises, upon the same
termination and conditions, and Lessee shall have thirty (30) days from the date of
such offer to accept of reject.
-1-
On July 7, 1987, New Delmar subleased 511 Monroe to Lindos, Ltd. (Lindos). The sub-lease
agreement contained the following provision on the right of first refusal:
(39) In the event Lessor obtains a purchaser for the Leasehold premises and offers
Sublessor the right to purchase the premises, Sublessor shall first offer Sublessee
the right to purchase the premises, upon the same terms and conditions, and
Sublessee shall have thirty (30) days from the date of Lessor’s offer to Sublessor
to accept or reject.
Lindos, as part of a receivership proceeding, assigned its sublease to No-Pink. The Ellisons
executed written consent to this assignment on August 11, 1993, the documentation indicating
that the five-year option had been timely exercised and accepted. Defendant Greektown
Properties LLC (Greektown) purchased the entire property, including 511 Monroe, from the
Ellisons in 1997. On receiving notice of this sale, No-Pink initiated this action seeking equitable
relief of specific performance of the right of first refusal.
Defendants present several arguments on appeal. Because we find dispositive the issue of
whether the court properly interpreted the language of first refusal when it granted plaintiff
summary disposition, we address only two contentions.
First, defendants contend that plaintiff did not have a vested right of first refusal. We
disagree. This case deals with an assignment. An assignment occurs when the tenant transfers
his interest in all or part of the leased premised for the entire term. Darmstaetter v Hoffman, 120
Mich 48, 49-50; 78 NW 1014 (1899). When the Ellisons initially leased 511 Monroe, it was for
a ten-year period. Accordingly, the subsequent lease between New Delmar and Lindos (and later
No-Pink) was an assignment for all intents and purposes because it covered the remaining
duration of the initial lease. No language in the subsequent lease or in the “Consent to
Assignment” reserved any interest in the leasehold that could transform the assignment into a
sublease. See Lee v Payne, 4 Mich 106 (1856).
An assignee/subtenant shares privity of estate, but not privity of contract, with the owner,
and “succeeds to all the rights and liabilities of the original lessee.” Darmstaetter, supra at 4950. Under privity of estate, the parties are liable for covenants that run with the land. Buhl Land
Co v Franklin Co, 258 Mich 377, 379-381; 242 NW 772 (1932). Plaintiff’s right of first refusal
is one such covenant running with the land. Associated Truck Lines, Inc v Baer, 346 Mich 106,
112; 77 NW2d 384 (1956); Nu-Way Service Stations, Inc v Vandenburg Brothers Oil Co, 283
Mich 551, 552; 278 NW 683 (1938). The right of first refusal is a conditional option to purchase
that is dependent on the landlord’s willingness to sell. Ackerman Electrical Supply Co v
Koukious, 16 Mich App 527, 530; 168 NW2d 433 (1969). This first refusal right is assignable
and the purchase price is set when the landlord fixes the price at which he is willing to sell.
Brenner v Duncan, 318 Mich 1, 4; 27 NW2d 320 (1947); see also Berrien Co Fruit Exchange v
Pallas, 314 Mich 66; 22 NW2d 74 (1946).
Through privity of estate, plaintiff’s right of first refusal arose from the original lease
between defendants and New Delmar. Defendants contend that this right of first refusal was
conditioned upon defendants’ accepting an offer of purchase from New Delmar. We disagree.
We interpret rights of first refusal narrowly. LaRose Market v Sylvan Center, Inc, 209 Mich App
-2-
201, 205; 530 NW2d 505 (1995). Here, the contract does not state that the purchaser must be
New Delmar. Moreover, the changes in the first refusal provision of the subsequent lease do not
signal a limitation or reservation on the right of first refusal. We believe that the modified
language simply clarified that New Delmar, and then Lindos, having assigned its complete
interest to No-Pink, also had to pass along the first refusal. Otherwise, that right could
theoretically come to New Delmar via the privity of contract it still shared with the
owner/landlord.1 The language in the second lease, therefore, merely eliminated a loophole that
would have made No-Pink vulnerable to a sale and its right of first refusal worthless.
When the Ellisons accepted an offer of purchase in December 1996, No-Pink's right of
first refusal vested. The Ellisons admit that they failed to offer No-Pink first refusal before they
sold the property to Greektown. Therefore, No-Pink was entitled to relief for this breach and the
court did not err in its findings on this issue.
Nonetheless, the record shows that the parties vigorously contested the scope of the first
refusal provision. Specifically, No-Pink contended that the right extended to the entire threebuilding property, while defendants contended that the right covered only the leased space, 511
Monroe. Defendants also contended that the parties were mutually mistaken in their assumption
that 511 Monroe could be sold separately from the remainder of the complex.
We accordingly consider the language in the first refusal provision of the original lease.
Where such language is unambiguous, the interpretation of the parties' intent is a question of law
that the trial court could properly pass on. Brown v Schiappacasse, 115 Mich 47, 50; 72 NW
1096 (1897); City of Muskegon v Lipman Investment Corp, 66 Mich App 378, 381; 239 NW2d
375 (1976). However, when contract language is ambiguous, the parties’ intent must be
discerned from the situation of the parties, the subject matter involved, the object to be
accomplished, and the surrounding circumstances. See Harlow v Lake Superior Iron Co, 36
Mich 105 (1877).
As previously indicated, the original lease described the right of first refusal as follows:
(39) In the event Lessor obtains a purchaser for the Leasehold premises, Lessor
shall first offer Lessee the right to purchase the premises, upon the same
termination and conditions, and Lessee shall have thirty (30) days from the date of
such offer to accept of reject.
“A contract is ambiguous if the language is susceptible to two or more reasonable
interpretations.” D’Avanzo v Wise & Marsac, PC, 223 Mich App 314, 319; 565 NW2d 915
(1997). Ambiguity in contract language requires factual development to determine the intent of
the parties and summary disposition is, therefore, inappropriate. Id.; see also Longcor v Detroit
Homeopathic College, 210 Mich 575, 579; 178 NW 222 (1920). Only paragraph 39 of the lease
refers to the subject property as the “Leasehold premises.” Throughout the remainder of the
1
There is no evidence that the parties executed a novation releasing New Delmar. Therefore,
New Delmar remained in privity of contract with the Ellisons. Buhl, supra at 379-380; Plaza
Investment Co v Abel, 8 Mich App 19, 24-25; 153 NW2d 379 (1967).
-3-
lease, the property is variously referred to as the "said premises," "the premises," or “the leased
premises." We find, therefore, that the language is ambiguous and that the provision is subject to
either interpretation offered by the parties.
It is common for a commercial tenant to contract for a right of first refusal over its leased
space; it is also possible for the parties to agree that such a right extends to the entire property.
See Nowicki v Kapelczak, 195 Mich 678; 162 NW 266 (1917). Accordingly, it is reasonable to
assert either that the language limits the right to the leased space, 511 Monroe, or that it expands
the right to encompass the entire three-building property. Given that different reasonable
interpretations of the language in paragraph 39 are possible, an ambiguity exists. D’Avanzo,
supra at 319-320.
This ambiguity creates a disputed factual issue which must be resolved after receiving
evidence that assists the court in discerning the intent of the parties. Id. The trial court should
have allowed the parties to present additional evidence on the circumstances surrounding the
agreement, in order to accurately interpret the ambiguous contract language. Summary
disposition was improper.
Reverse and remanded for further proceedings. We do not retain jurisdiction.
/s/ Jane E. Markey
/s/ William B. Murphy
/s/ Jeffrey G. Collins
-4-
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
