The clock on a 10-day right of first refusal to purchase the Clover Lanes Inc. bowling alley property in Brighton began ticking when Mario and Flora Daniele received their first notice of a potential sale, not when it was mailed, a judge has ruled.
The decision in Daniele v. Clover Lanes Inc., signed Monday by Monroe County Supreme Court Justice Matthew A. Rosenbaum, will allow the Danieles to exercise their right of first refusal and purchase the property from Clover Lanes.
At the time, Clover Lanes was considering a purchase offer from Delta Sonic Carwash Systems Inc., which would have competed with the nearby Daniele-owned Royal Car Wash. Clover Lanes is at 2750 Monroe Ave. and Royal Car Wash is at 2875 Monroe Ave.
“The Danieles are very much looking forward to closing on the transaction and future development plans,” said attorney Edward P. Hourihan Jr., managing member of the Rochester office of Bond Schoeneck & King PLLC, who is representing the Danieles.
“It’s unfortunate and puzzling that Clover didn’t convey the offer sooner and in a more neighborly way, but that was their prerogative and obviously, the court found in favor of the Danieles,” Hourihan said.
Clover Lanes and its president, Dan Morgenstern, are represented by David Rothenberg, of the Rochester law firm Geiger and Rothenberg LLP. Rothenberg declined to comment, other than to say Clover Lanes will not be appealing. He also said the owners did not know the Danieles were out of town.
Delta Sonic is represented by James S. Grossman, a partner in the Rochester office of Hiscock & Barclay LLP, who could not be reached for comment Tuesday morning.
Morgenstern said Clover Lanes simply complied with the letter of the right of refusal. He said there was a question of interpretation, which the court decided in favor of the Danieles. He said the deal with Clover Lanes is the same, whether it came from Delta Sonic or the Danieles.
“We didn’t particularly care one way or the other,” he said. “Clover Lanes had no interest in the outcome. As the saying goes, we have no dog in this fight.”
Hourihan said Mario and Flora Daniele entered into the right-of-first refusal agreement with Clover Lanes on July 18, 1994, when they purchased the adjacent property where they opened Mario’s Italian Restaurant, 2740 Monroe Ave.
The agreement provided that if Clover Lanes received a purchase offer, it gave the Danieles 10 days “written notice via certified mail” to match the offer and buy the property. If the Danieles did not respond within 10 days, they gave up their right to first refusal.
Clover Lanes, according to court documents, received a purchase offer Feb. 12 from Grossman, acting as an agent of “an entity formed or to be formed.” That entity turned out to be Delta Sonic. Clover, in accordance with the right-to-first-refusal agreement, sent a letter to the specified Pittsford address by certified mail.
The Danieles, however, were at their Florida condominium. They received a notice from the local post office on Feb. 25 that it was holding a piece of certified mail which they picked up the following day. Clover, according to the decision, was immediately contacted by email of the Danieles’ intent to exercise their right of first refusal, which was followed up with a certified letter on Feb. 27.
Clover maintains the notification from the Danieles was not received within the required 10-day time frame.
The Danieles filed suit on Feb. 27. Justice Rosenbaum allowed Delta Sonic to intervene as an interested party, even though the Danieles argued the dispute was between them and Clover Lanes; that Delta Sonic was not a party to the original 1994 agreement.
The Danieles and Delta Sonic each sought summary judgment. Clover Lanes did not respond, prompting Justice Rosenbaum to conclude it would not defend the suit so it would also not be defending Delta Sonic’s interest, although Morgenstern did submit an affidavit in support of Delta Sonic’s motion for summary judgment.
Morgenstern and Delta Sonic claimed the 10-day notice provision was triggered on Feb. 13, the day Grossman sent the certified letter to the Danieles at their Pittsford address, as specified in the right-of-refusal agreement. The letter included the requirement, not stated in the 1994 agreement, that a response had to be received “within 10 days from the date of this notice.”
The Danieles countered that Clover Lanes and Delta Sonic misinterpreted the original agreement, contrary to the rules of contract construction. They claimed the contract should be read “as a whole” with each part interpreted in reference to the whole and no portion rendered meaningless.
“Delta Sonic argues that the exercise of the right of first refusal was untimely as it was not done within 10 days of the mailing of the notice,” Justice Rosenbaum wrote in his eight-page decision. “That interpretation would render the requirement of certified mail ineffective. The right of first refusal gives plaintiffs 10 days in which to consider the offer. Limitations on the time or unreasonable expectations of delivery of notice have been held invalid.”
He noted Delta Sonic would have the right of first refusal expire before the Danieles ever received notice of the purchase offer.
“Plaintiffs cite cases, which while not factually exact, do discuss notice provisions and the absurd result if notice is complete upon mailing,” Justice Rosenbaum wrote. One of the cases, Application of Finest Restaurant Corp., 52 Misc. 2d 87 (Supreme Court, New York County 1966), found that service by mail was effected on the date postal authorities deliver or first attempt to deliver the registered or certified mail.
Delta Sonic cited a Connecticut case, Scoville v. Shop-Rite Supermarkets Inc., 86 Conn. App. 426, a 2004 case in which that court found the plaintiff’s absence from the designated address, whether intentional or not, was overridden by the importance of a lease renewal letter that a postal carrier had tried to deliver to the correct address on the last day renewal would be allowed.
Justice Rosenbaum said the Daniele case differed from Scoville in that the court designated the contract an option contract effective under Connecticut law. He noted the contract between the Danieles and Clover Lanes was one of the right of first refusal in which the holder may choose to buy or not buy, “but the choice exists only after he receives an offer from the owner,” Metropolitan Transportation Authority v. Bruken Realty Corp., 67 NY2d 156 (1986).
“Delta Sonic cites to a line of cases claiming that New York courts, concerned that a party may try to avoid notice by ignoring certified mail, have held notice is effective upon mailing,” Justice Rosenbaum noted. “Each of those cases can be distinguished, however, as there were multiple forms of service in each case (i.e. regular and certified mail, or posting of notice and certified mail).
“The court is mindful of the risk which arises where a party intentionally ignores certified mail in an effort to avoid service. However, to have the right of first refusal expire before plaintiffs could even be aware of it is also not reasonable. The only logical interpretation of the right of first refusal is to conclude that delivery of the notice occurs at the time the postal authorities first give notice of the certified mail, meaning at that time plaintiffs effectively became aware of the pending offer and the requirement to take action.”
Hourihan said the Danieles had notified Morgenstern several times of their interest in the property and that he could have walked out the door, taken a right and walked a couple of hundred feet to their restaurant or picked up the phone and told them he had an offer.
“That would have been the right thing to do,” Hourihan said. “It would appear they went out of their way to avoid the Daniele’s right of first refusal for no apparent reason. The Danieles are the bona fide purchasers. Delta Sonic is out.”
He said if either choses to appeal, he would seek posting of a significant appeal bond to cover monetary damages the Danieles suffered in attorneys’ fees, financing and other costs and would continue to suffer.