H &G HARDWARE, INC. v. JOSEPH COHEN, IRVING COHEN

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0667-04T2667-04T2

H&G HARDWARE, INC.,

Plaintiff-Respondent,

and

SAMMY HWANG,

Plaintiff,

v.

JOSEPH COHEN, IRVING COHEN,

Defendants-Respondents,

and

JESUS JIMENEZ and EDWARD

JIMENEZ,

Defendants-Appellants.

 

Argued: November 2, 2005 - Decided:

Before Judges Stern and Fall.

On appeal from the Superior Court of New Jersey, Chancery Division, Middlesex County, Docket Number C-172-03.

David M. Hutt argued the cause for appellants Jesus Jimenez and Edward Jimenez (Hutt & Shimanowitz, attorneys; Mr. Hutt, of counsel and on the brief).

Louis Cohen argued the cause for respondent H&G Hardware, Inc. (Brigiani, Cohen & Schneider, attorneys; Elias L. Schneider, on the brief).

Norman L. Kline argued the cause for respondents Joseph Cohen and Irving Cohen (Kline & Gast, attorneys; Mr. Kline, on the brief).

PER CURIAM

Defendants Jesus Jimenez and Edward Jimenez (Jimenez) appeal from a final judgment entered on July 12, 2004, after a non-jury trial, finding that plaintiff H&G Hardware, Inc. had been provided no meaningful opportunity to consider and exercise its right of first refusal for the purchase of certain property owned by defendants Joseph and Irving Cohen (Cohen), and directing that any proposal for the sale of the subject property must be submitted to H&G Hardware in accordance with paragraph 44 of the lease agreement between Cohen and H&G Hardware as long as said agreement remained in effect. Jimenez also appeal from an order entered on August 27, 2004, denying their motion for reconsideration. We affirm. The following factual and procedural history informs our decision.

On November 1, 1996, defendants Cohen, owners of D. Cohen and Sons, Inc., sold their hardware store business located at 711 State Street, Perth Amboy, along with the business name of D. Cohen and Sons, Inc., to Sook Hwang, plaintiff Sammy Uijin Hwang, Donald Ok Garrett, and plaintiff H&G Hardware, Inc. for the sales price of $275,000. Cohen also owned the real property on which the hardware store was located.

Upon the sale of the business, Cohen entered into a lease of that portion of the building housing the hardware store, "exclusive of the apartments in said building[,]" with plaintiff H&G Hardware, Inc. for a term of ten years, commencing November 1, 1996. Paragraph 44 of the rider to that lease, entitled "Right of First Refusal[,]" provided in pertinent part:

1. If [the Cohens] desire to sell the property . . . and receive[] a bonafide offer in writing, they hereby agree to forward a true copy of said written offer to [plaintiff], within thirty (30) days following their receipt of the offer, by certified mail, return receipt requested. [Plaintiff] shall have thirty (30) days after its receipt of a true copy of the written offer within which to elect to purchase the property on the same terms. Said election shall be made by written notice by [it] to [Cohen], accompanied by a check equal to ten (10%) percent of the sales price of the property, which ten (10%) percent shall be considered a deposit to be applied against the purchase price at closing.

* * * *

3. If [plaintiff] fails to give notice of [its] acceptance and tender the deposit as provided in Paragraph 1, [Cohen] shall be relieved of all responsibility to [plaintiff] under this Agreement and may dispose of the property to the third party making said bonafide offer. . . .

The building located on the subject property contained mixed commercial and multi-family residential uses. Plaintiffs H&G Hardware, Inc. and Sammy Hwang operated H&G Hardware Store on the first floor of the building, and there were three residential apartments on the second and third floors maintained and leased to tenants by Cohen.

On June 3, 2002, Cohen entered into a contract for the sale of the subject real property and appurtenances to defendants Jimenez at a purchase price of $290,000. Notably, there is no reference in the contract between Cohen and Jimenez concerning the right of first refusal contained in the lease between Cohen and H&G Hardware. However, apparently pursuant to the right of first refusal contained in paragraph 44 of the lease, the contract was presented to plaintiffs.

By letter to counsel for Cohen dated July 30, 2002, counsel for plaintiffs requested certain amendments to the contract, which were unacceptable to Cohen. In a letter to counsel for Cohen dated August 1, 2002, counsel for plaintiffs stated, in pertinent part:

My client advises that the realtor, J.J. Elek, tells him that the other buyer is willing to purchase the building "as is". That is, the seller will not evict the second floor tenant, will not make building repairs and will not apply for a variance regarding third floor tenant.

My client is not willing to purchase the building under those conditions and will not exercise his option at this time.

However, if the terms of the contract with the alternate purchaser are changed, so that the seller will be doing repairs of any of the other issues raised by my client, then the building should be offered to my client again under the new terms and conditions.

[Emphasis added.]

Thereafter, the City of Perth Amboy Housing Inspector performed an inspection of the subject property and determined that the residence on the third floor was illegal and had to be terminated. The Housing Inspector issued a notice to Cohen dated December 27, 2002, detailing various code violations that needed to be corrected before he would issue a certificate of code compliance, most notably discontinuance of the third-floor apartment and certain repairs. The Housing Inspector also stated that a fire code inspection would also be required. Thereafter, negotiations concerning a contract price adjustment ensued between Cohen and Jimenez concerning this new development, as it was evident that the required repairs would require the expenditure of significant funds. Cohen did not inform plaintiffs of those negotiations.

In a letter to counsel for Jimenez dated January 13, 2003, counsel for Cohen stated, in relevant part:

This will confirm my conversation with your secretary and Jim Elek of J.J. Elek, wherein all parties have agreed as follows:

Sellers shall give Buyers a credit of $15,000.00 at closing and thereafter, buyers will be responsible for all repairs and for eviction of the 3rd floor tenants. Buyers will accept a Temporary Certificate of Occupancy, as they will be making the repairs.

However, in a letter to counsel for Cohen dated January 21, 2003, counsel for Jimenez stated he had reviewed the contents of the January 13 letter with his clients, and stated, in pertinent part:

The Buyers will accept a credit of $15,000.00 at closing, be responsible for all repairs, and accept a Temporary Certificate of Occupancy.

However, as to the eviction of the 3rd floor tenants, the Buyers will not accept responsibility for their eviction. This shall remain the responsibility of the Sellers. Furthermore, the Buyers will not close title until after the 3rd floor tenants have been evicted and removed from the premises.

* * * *

We are looking into the "Fire Inspection" requirement and will advise further as to same.

Counsel for Cohen replied to counsel for Jimenez by letter dated January 23, 2003, stating his clients had agreed that the $15,000 credit "would also include buyer evicting the 3rd floor tenants[,]" and that "[i]n view of the foregoing, we are not in agreement with the second paragraph of your [January 21] letter."

In a letter to counsel for Cohen dated January 30, 2003, counsel for plaintiffs inquired as to the status of the sale of the property, stating that plaintiffs remained interested in purchasing, and if there were any changes in the terms of the offer by Jimenez, those changes should be communicated to plaintiffs for their consideration.

Counsel for Jimenez sent a letter dated February 11, 2003, to counsel for Cohen, stating his clients' agreement to certain provisions, requesting other items, and requiring a closing before February 28, 2003, to avoid his clients losing their mortgage commitment.

On February 13, 2003, the Fire Prevention Bureau of the City of Perth Amboy issued Cohen a "Notice of Violations and Order to Correct" with respect to the subject property, listing thirteen separate fire code violations and directing they be corrected, some immediately, and others by March 13, 2003.

The results of the fire code inspection generated additional negotiations between Cohen and Jimenez. In a letter to counsel for Cohen dated March 13, 2003, counsel for Jimenez stated, in pertinent part:

This will conform our conversation that the parties have agreed to a reduced sale price of $250,0000.00, and that the Seller will provide a separate loan to our client for $10,000.00 at an interest rate of 8%, secured by a second mortgage on a different property owned by our client.

All other conditions of the Contract remain the same, and we intend to close by the end of the month.

We still have to resolve the problems as to the 3rd Floor tenant leasing the 2nd Floor.

By letter directly to Cohen dated March 13, 203, new counsel for plaintiffs stated, in pertinent part:

Please be advised that I now represent H & G Hardware, Inc. who rents space from you at 711 State St., Perth Amboy. As you know, my client has a right of first refusal entitlement in the Rider to the lease signed with you. I further understand that you offered my client the opportunity to purchase the property for $290,000 which my client rejected as being excessive in amount.

It has since come to my client's attention that there has been an offer of a far lesser amount to purchase the property from you by another. As you know, my client's right of first refusal is an entitlement to purchase the property at the cost to which you are willing to offer that property to another and not just at some inflated amount. Therefore, if it is true that another has been offered a right to purchase the property at a lesser amount, my client demands that they be afforded the opportunity to purchase the property at that same reduced amount. It is my client's further understanding that you have made other concessions due to a myriad of requirements necessary to obtain an appropriate certificate of occupancy. Again, my client further requires that the very same dollar concessions made to another for whatever purpose are offered to my client.

In another letter to counsel for Cohen dated March 17, 2003, counsel for plaintiffs stated, in relevant part:

This letter is sent following our telephone conversation at the end of last week. Firstly, you advised me that the purchase price for the above referenced property was reduced to $250,000 upon the condition that the Buyer be responsible for necessary repairs to obtain a certificate of occupancy and to effectuate the movement and/or eviction of tenants. Although my client was not willing to pay the originally offered $290,000 purchase price, he is very strongly interested in considering the $250,000 reduced purchase price since he has the availability of contractors to perform repair work at a reduced expense.

However, my client still seeks verification of the purchase price agreed to by the prospective Buyer as set forth above. I, therefore, request that you please forward to me a copy of the prospective Buyer's contract with Messrs Cohen and all correspondence between you and the prospective Buyer's attorney regarding any revisions to the terms of the contract including but not limited to setting forth the final $250,000 purchase price plus the obligation of the Buyer to make repairs, obtain a certificate of occupancy, and be responsible for the eviction and/or movement of the tenants.

As soon as I receive this information, my client is prepared to enter into a binding contract with the Cohens.

In a letter to counsel for Cohen dated March 19, 2003, counsel for Jimenez stated, in relevant part:

In connection with the above referenced matter, we are in receipt of letters sent to you by Howard W. Weber, Esq., representing H&G Hardware. To state it clearly, our client has a great deal of reliance and moneys invested in the transaction. There is no contingency in the Contract for a First Right of Refusal to anyone. We entered the Contract on representations that the property was free and clear from all encumbrances. In fact we were not provided with any Contract Language regarding the Right of Refusal until March 18, 2003. Our client is not willing to release the Contract to anyone. Therefore, if it were not for the misrepresentations regarding the number of units and the problems obtaining the municipal Certificate of Occupancy, we would have been closed by now.

My client has instructed that we proceed to closing. Should Mr. Cohen break the contract at this state, we are instructed by our client to institute an appropriate action for specific performance and damages.

In a letter to counsel for Cohen dated March 20, 2003, counsel for plaintiffs stated, in pertinent part:

This letter will advise that my client, H & G Hardware, will almost definitely agree to purchase the above referenced property under the terms and conditions to which you offered it to Messrs Edward and Jesus Jimenez subject to verification of the documents which you provided me plus the initial contract which you have not yet provided me.

Please advise if there is any other relevant information regarding the proposed transaction with Messrs Jimenez of which I ought to be aware before making a final offer on behalf of my client to purchase.

Follow-up correspondence dated March 21, 2003, from counsel for plaintiffs to counsel for Cohen stated:

This letter will confirm that my client is interested in purchasing the property at the $250,000 purchase price. I apologize for not having had the time to yet review all of the documents which you forwarded to me but should be able to complete this review by the early part of next week and will then contract you about executing an appropriate contract allowing my client his contractual right of first refusal.

By letter to counsel for plaintiffs and Jimenez dated March 21, 2003, counsel for Cohen stated that because Cohen was facing substantial fines for failure to complete the repairs, Cohen had contracted for the repair of the fire-code violations, but would seek reimbursement from the purchaser of the property. Cohen's counsel further advised Cohen was unwilling to close until the issue of the right of first refusal was resolved.

By letter to counsel for plaintiffs dated March 28, 2003, with a copy to counsel for Jimenez, counsel for Cohen stated that due to the contracted cost of completing the mandatory repairs $20,100 the purchase price for the property would be $270,100.

In a letter to counsel for Cohen dated April 10, 2003, counsel for plaintiffs advised his client would be able to have the same repairs completed for the sum of $8,700, and agreed to purchase the property for the sum of $250,000, plus $8,700, stating that "[i]f this is acceptable to your clients, please confirm same in writing and prepare an appropriate contract."

By letter to counsel for plaintiffs dated April 11, 2003, counsel for Cohen stated:

In reply to your letter dated April 10, 2003, my client[s] have rejected your client's offer to purchase the property, [in view] of the fact that it is less than the offer by Jimenez. Mr. Jimenez has agreed to purchase the property for $270,100.00, which includes the repairs of $20,100.00, (see prior letter dated March 29, 2003).

Additionally, Mr. Jimenez, has agreed to repair the roof in the sum of $6,900.00.

Since you client's offer is less than the Jimenez offer we are now prepared to close Title with Mr. Testino's client.

Therefore, any and all rights by your client under the Right of First Refusal has been satisfied and now declared "null and void".

Additional correspondence between counsel for plaintiff and counsel for Cohen expressed their disagreement over the position taken by Cohen. On May 15, 2003, Cohen and Jimenez entered into an amendment to their original contract, under which the purchase price was changed to $270,100; the parties acknowledged that Cohen had paid for the costs of the repairs and remediation of violations in order to obtain a temporary certificate of occupancy; and that Jimenez agreed to remedy the remainder of the violations in order to obtain a final certificate of occupancy.

On June 23, 2003, plaintiffs filed a complaint in the Chancery Division against Cohen and Jimenez seeking judgment voiding the contract between Cohen and Jimenez, and compelling Cohen to sell the property to plaintiffs for the contract price of $250,000. In count two, plaintiffs contended that the repair work commissioned by Cohen was performed in a shoddy manner, and that should the court determine that Cohen was entitled to some recompense for the work performed by its contractor, plaintiffs should not be required to pay for that shoddy work. In count three of the complaint, plaintiffs sought compensatory damages against Jimenez for their purported actions in preventing plaintiffs' purchase of the property. In count four, plaintiffs sought an order rescinding the sale of the property by Cohen to Jimenez. Compensatory damages, interest, costs of suit and attorneys fees were also sought.

As a result of motions argued on June 11, 2004, the trial court entered orders on June 14, 2004, that dismissed the claims of plaintiff Sammy Hwang; denied defendants' motions to dismiss the claims of plaintiff H&G Hardware, Inc.; granted defendants' motion to dismiss counts two and four of the complaint; and denied defendants' motion to dismiss the complaint for failure of plaintiffs to join an indispensable party.

A non-jury trial on the remaining issues was conducted in the Chancery Division on June 14, 15, and 16, 2004. On June 21, 2004, the judge received summations and delivered an oral opinion. In concluding that H&G Hardware, Inc. had been provided no meaningful opportunity to consider and exercise its right of first refusal, and that any proposal for the sale of the subject property must be submitted to H&G Hardware, Inc. in accordance with paragraph 44 of the lease as long as the lease agreement is in effect, the trial judge stated, in pertinent part:

In retrospect, obviously what should have been done was that, when [Jimenez] made his offer to purchase the property, there should have been a document prepared setting forth all of the terms and conditions of that offer and it should have been sent to [plaintiff] with all of the conditions there. And [plaintiff] would have the right to meet the offer or not. That's not what happened. And we have to deal with the facts as they exist.

* * * *

There came a time when the contract [between Cohen and Jimenez] fell apart. And there was a period, beginning in January 2003, where there was a renegotiation.

There are letters going back and forth . . . with regard to price reduction, repairs, tenancy problems, and things of that nature. It was clear that there was no agreement between [Cohen] and [Jimenez] in January 2003.

With regard to the January 2003 correspondence, [plaintiff] was not advised as to those negotiations. And I see no obligation on the part of [Cohen] to keep [plaintiff] abreast of all negotiations with regard to a possible [sale] of the property. The obligations that [Cohen] had was to advise [plaintiff] when there was a final offer that [Cohen] wished to accept. And, at that point in time, to communicate the offer to [plaintiff], to give [plaintiff] a right to purchase on the same . . . terms and . . . conditions in accordance with paragraph 44 of [the] lease agreement.

* * * *

In any event, moving on into February of 2003, it is clear that [Cohen] and [Jimenez] are still negotiating.

* * * *

On March the 12th, 2003, [counsel for Jimenez] writes to [counsel for Cohen] to confirm a conversation to a reduced sale price of $250,000. . . . [Both counsel] say that that conversation never took place. I believe them. But still the fact that the conversation [did not take] place, does not mean that people weren't talking about a sale at 250,000 as is.

As [counsel for plaintiff] argues, what we're really talking about is 250,000 to [Cohen] and the buyer, whoever it may be, being responsible for the repairs. And 250,000, with the buyer doing the repairs, is the same as $270,100 with the seller doing the repairs.

So . . . , although the defense attorneys seem to try to . . . distance themselves from . . . that fact, it clearly is a fact that . . . those prices are really equivalent.

So, we have the . . . letter [from counsel for Jimenez] of March 12, which confirms a conversation that never took place. And, as I said, I think that probably the conversation never did take place. But that doesn't mean that [Cohen was] not willing to sell for 250,000 as is.

* * * *

Then there is the meeting of March 18th at the store. Mr. Hwang says that . . . Irving Cohen said, that . . . I'm selling the . . . property . . . at [$250,000] as is, the buyer has to do the repairs, or something to that effect. Mr. Cohen does not recall.

That is a factual discrepancy that I have to resolve. And I resolve it in Mr. Hwang's favor. I think the conversation did take place.

Also, to the extent that I have to resolve the factual discrepancy between [counsel for Cohen's] testimony and [counsel for plaintiff's] testimony about whether the 250,000 as is was mentioned in a telephone conversation, I . . . believe [counsel for plaintiff] in his testimony. The . . . documentary evidence supports [counsel for plaintiff]. He confirmed the telephone conversation in writing and the other party to the conversation did not immediately object, as one would expect.

* * * *

Now, [counsel for plaintiff] has been told that it looks as though the price is [going] to be 250,000 as is. And he is embarking upon an effort to try to find out what the other terms and conditions are. He knows a price term, but he is unable to advise his client, because he doesn't know anything else. . . .

* * * *

So, we have this time I would say from March the 12th, which was the time that the [$250,000], as is, first surfaced in the . . . letter [from counsel for Jimenez], until March the 21st, when things are very indefinite and uncertain.

Then, on March the 21st, [counsel for Cohen], now dealing with both [counsel for plaintiff and counsel for Jimenez], writes to say, look, my client is faced with possibly paying very substantial fines. I'm telling you that we can't wait any longer. We're [going to] do the repairs and we will seek reimbursement from the purchaser for the cost of the repairs. So, he's saying that well, heretofore, we may have well been offering the property as [$250,000] as is, but we can't do that anymore. Time is moving on and my client is feeling the pressure from Perth Amboy and we've got to move on the repairs.

Then, on March the 24th or 25th, [Cohen] engage[s] Leonardo's Construction to do repairs at a cost of 20,100.

And, on March 28th, 2003, [counsel for Cohen] writes to [counsel for plaintiff], with a copy of [counsel for Jimenez], and says that the repairs cost $20,100. Therefore, the cost of the property is 270,100.

As of this time, that is March 28th, 2003, I find and conclude that [Cohen] had not fairly and effectively notified [plaintiff] as to the terms of the offer from Jimenez, which would give rise to [plaintiff's] right of first refusal.

I also find that [plaintiff] never exercised, at this point up to March 28th, 2003, its right of first refusal. A sufficient offer with all terms had not been communicated to [plaintiff]. And, although [plaintiff] says it exercised its right of first refusal at 250,000 as is, I don't find that to be so, because one term, that is a price term, however important it is, does not a contract [make]. There are many other terms and conditions. So, by saying I accept [Cohen's] statement I'll sell you the property at [$250,000] as is, does not, in my view, amount to an exercise of a right of first refusal.

Also, [counsel for plaintiff] says we never exercised our right of first refusal. That was his testimony here in court.

[Counsel for plaintiff] was trying to get information, so that he could advise his client as to the economics of the transaction. He thought there may have been some hidden terms. And he admitted that [plaintiff] never exercised its right of first refusal, because we never found out what the Jimenez deal was.

* * * *

Also, it is noteworthy that as the parties proceeded into April and even May, there still was not a clear understanding of the terms as between [Jimenez] and [Cohen]. So, clearly [plaintiff] never had an opportunity to know what the terms of the deal were between [Cohen] and [Jimenez].

And [counsel for Jimenez], in his testimony, said that May 15th was the date we reached agreement on all terms. That's when we came to conclusion. Up to then, we were negotiating. Now this is [counsel for Jimenez] saying that, up until May 15th, 2003, [Jimenez] and [Cohen] were still negotiating.

* * * *

So, as I say, during this time from February through May, there is much uncertainty. There is nothing that's firm. And there certainly is nothing that's substantial enough, that one could reasonably and fairly sit down and determine what one's rights and obligations were. . . .

* * * *

So, I think, in any event, the owners are entitled to the [$20,100] extra that they put in, which increased the value of the property. If [plaintiff] were ultimately to get the property, it would be unjust for the owners not to be paid for that expense. . . .

I find that [plaintiff] never had a proper offer submitted to it, where it could intelligently decide to exercise or not to exercise its right of first refusal. There terms, as between [Cohen] and [Jimenez] were just too amorphous, hard to get your hands on, it was always slipping and sliding. And, in that . . . circumstances did not give [plaintiff] a fair opportunity with regard to its rights.

After the trial court entered the final judgment on July 12, 2004, H&G Hardware filed a motion for reconsideration, seeking a ruling that it had the right to exercise first refusal within thirty days. Jimenez filed a cross-motion, seeking an order vacating the court's finding that H&G Hardware had never been provided an opportunity to exercise its right of first refusal. In the alternative, Jimenez sought damages against Cohen for breach of contract. The motions were argued in the Law Division on August 27, 2004, and by orders issued on that date the trial judge denied both motions.

 
On appeal, Jimenez and Cohen argue that the trial court erred in holding that plaintiff did not have an opportunity to exercise its right of first refusal. After analyzing the record in the light of the written and oral arguments advanced by the parties, we affirm substantially for the reasons articulated by Judge Messina in his oral opinion delivered on June 21, 2004. The findings and conclusions of the judge are supported by adequate, substantial, credible evidence contained in the record on appeal. Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974); R. 2:11-3(e)(1)(A).

Affirmed.

Although they did not file a notice of appeal or cross-appeal, defendants Joseph and Irving Cohen have filed a brief joining in the arguments advanced by appellants.

A copy of the referenced March 29, 2003 letter is not contained in the record on appeal.

(continued)

(continued)

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A-0667-04T2

January 6, 2006