Opinion
No. COA08-691.
Filed June 16, 2009.
Dare County No. 06 CVS 801.
Appeal by defendants from order entered 31 March 2008 by Judge J. Richard Parker in Dare County Superior Court. Heard in the Court of Appeals 3 December 2008.
Hornthal, Riley, Ellis Maland, L.L.P., by M. H. Hood Ellis and Robert B. Hobbs, Jr., for plaintiffs-appellees. Aycock Butler, PLLC, by Charlie Aycock and Betsy Butler, for defendants-appellants.
Defendants Thomas P. and Hilda R. Sagun and James and Susan Hilldrup appeal from the trial court's order granting summary judgment to plaintiffs Emil S. and Robin M. Nazzaro. On appeal, defendants primarily contend that the Nazzaros did not timely exercise their right to purchase the Saguns' co-ownership interest in a vacation home, and, therefore, no contract was created and the Saguns were free to sell their interest to the Hilldrups. Based upon our review of the governing Declaration of Covenants, Conditions and Restrictions, we hold that the Nazzaros provided notice of their intent to purchase within five days after the date that the Saguns' notice of their intent to sell the property was deemed given under the Declaration. That notice was timely under the Declaration and created an enforceable contract. Although the Saguns further contend that they were free to sell to the Hilldrups because the Nazzaros did not tender the purchase price within 30 days, we need not decide whether the Declaration included such a requirement because, given the Saguns' position that they were not required to sell to the Nazzaros, any tender would have been futile and, therefore, not required. Accordingly, we hold that the trial court properly entered summary judgment for the Nazzaros and affirm.
Facts
The Nazzaros and the Saguns were owners of separate co-ownership interests in the Ferdinando House located in Ship's Watch in Dare County, North Carolina. Ship's Watch is an oceanfront community of houses in which there are 10 interests available in each house, with the owner of each interest holding a certain number of annual weeks for occupancy of the house.
The co-ownership interests owned by the Nazzaros and the Saguns in the Ferdinando house were subject to the Declaration of Covenants, Conditions and Restrictions for Co-Ownership Interests in Ship's Watch. Article II, Section 9(c) of that Declaration provides as follows:
If an Owner has negotiated the sale of his Co-ownership Interest and settled on a final purchase price with a prospective buyer who is anyone other than an existing Co-owner in the same house, such Owner shall, in writing and prior to closing with the prospective buyer, first offer to sell the Co-ownership Interest to the other Co-owners of the same house by mailing a notice to each of them simultaneously setting out the purchase price, terms and conditions of sale. Any Co-Owner wishing to accept the offer must do so in writing within five (5) days of said notice and consummate said sale within thirty(30) days of said notice. If more than one Co-owner accepts within the five (5) day time period, the Co-owner whose acceptance is received first shall have first right to purchase. If one or more of the Co-owners do not accept and agree to purchase said Co-ownership Interest within five (5) days of said notice and to consummate said sale within thirty (30) days, then and in such event, the Co-owner wishing to sell his Co-ownership Interest may thereafter, and, for a period of ninety (90) days following the expiration of said five (5) day period, sell his Co-ownership Interest upon terms no more favorable than and at a price no less than those offered to the other Co-owners. In the event that the Co-ownership Interest is not sold within the said ninety (90) day period and the Owner continues to desire to sell that Co-ownership Interest he must continue to comply with the provisions of this section in effecting the sale. The sale of any Co-ownership Interest shall operate to transfer to the new Owner the Interest of the prior Owner in all funds in the hands of the Managing Agent without further instrument of transfer.
(Emphasis added.)
On 24 August 2006, the Saguns entered into a contract with the Hilldrups in which the Hilldrups agreed to purchase the Saguns' interest in the Ferdinando house. On 25 August 2006, James Hilldrup mailed a letter, dated 26 August 2006 and signed by Thomas Sagun, to the Nazzaros and the other co-owners of the house, notifying them of their rights pursuant to Section 9(c) of the Declaration. The letter informed the co -owners that the Saguns had received an offer from the Hilldrups to buy their interest for $162,000.00 and that the co-owners had five days in which to notify the Saguns if they wished to exercise their right to purchase the interest from the Saguns instead.
Upon receiving this letter, the Nazzaros sent the Saguns a letter by UPS Next Day Air Service on 31 August 2006 that arrived at the Saguns' house on 1 September 2006. The letter notified the Saguns that the Nazzaros wanted to exercise their right of first refusal and stated that they were prepared to close the transaction within the next 30 days.
After Thomas Sagun opened the letter on 3 September 2006, he called Emil Nazzaro and notified him that he thought the notice was not within the five days specified in Section 9(c). Nazzaro disagreed and suggested contacting the Ship's Watch Association for guidance in resolving the issue.
On 16 September 2006, the Board of Directors of Ship's Watch met to discuss the dispute. The Saguns sent a letter to the Board contending that the Nazzaros' acceptance was untimely and that they did not think they were obligated to sell their interest to the Nazzaros. Emil Nazzaro attended the meeting and presented his contrary position. In a letter dated 22 September 2006, the Board notified the Nazzaros and the Saguns that it agreed with the Nazzaros that the Saguns were required to sell their interest to them. On 2 October 2006, realtor Woody West sent the Saguns a letter with an offer to purchase and a contract that had been signed by the Nazzaros. The Saguns received the letter on 4 October 2006 and responded by letter on 13 October 2006. In their letter, the Saguns contended that the Nazzaros were required to have sent the offer and closed on the property no later than 2 October 2006, and as that deadline had passed, the Saguns could sell the interest to the Hilldrups. The Saguns subsequently conveyed their interest to the Hilldrups, and the deed was recorded on 20 November 2006.
On 15 November 2006, the Nazzaros filed suit against the Saguns for breach of contract. On 9 August 2007, the trial court granted the Saguns' motion to add the Hilldrups as parties to the suit. All parties moved for summary judgment, and on 31 March 2008, the trial court granted summary judgment in favor of the Nazzaros. Defendants timely appealed to this Court.
Discussion
An appeal from an order granting summary judgment is reviewed by this Court de novo. Howerton v. Arai Helmet, Ltd., 358 N.C. 440, 470, 597 S.E.2d 674, 693 (2004). A court should grant summary judgment if it finds "`there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.'" Fairview Developers, Inc. v. Miller, 187 N.C. App. 168, 170, 652 S.E.2d 365, 367 (2007) (quoting Draughon v. Harnett County Bd. of Educ., 158 N.C. App. 208, 212, 580 S.E.2d 732, 735 (2003), aff'd per curiam, 358 N.C. 131, 591 S.E.2d 521 (2004)), disc. review denied, 362 N.C. 176, 658 S.E.2d 484 (2008). The burden is on the movant to establish that there are no triable issues of fact. Id. "`If the granting of summary judgment can be sustained on any grounds, it should be affirmed on appeal .'" Id. at 171, 652 S.E.2d at 367 (quoting Shore v. Brown, 324 N.C. 427, 428, 378 S.E.2d 778, 779 (1989)).
I
Defendants first contend that there is no enforceable contract between the Nazzaros and the Saguns because the Nazzaros' letter in response to the Saguns' notice was untimely. Defendants argue the Nazzaros had five days from the date on which the Saguns' letter was mailed — 25 August 2006 — to accept the offer. According to defendants, the Nazzaros had to mail their acceptance letter by 30 August 2006. Defendants contend that since the Nazzaros' letter accepting the Saguns' offer was mailed on 31 August 2006, it was, therefore, untimely.
In support of this argument, defendants rely on South park Mall Ltd. P'ship v. CLT Food Mgmt., Inc., 142 N.C. App. 675, 679-80, 544 S.E.2d 14, 17 (2001), in which the landlord contended that the tenant had failed to pay the amount due on a commercial lease within five days after the notice of default, as required by the lease. The lease in that case provided that notice of default "`shall be deemed to have been given, made or communicated, as the case may be, on the date the same was deposited in the United States mail.'" Id. at 676, 544 S.E.2d at 15.
In this case, however, the Declaration contains a significantly different notice provision. Section 6 of Article VI in the Declaration provides that "[n]otices provided for in this Declaration shall be in writing and shall be deemed sufficiently given when delivered personally or forty-eight (48) hours after deposit in the United States mail, postage prepaid, addressed to an Owner at the last address such Owner designates to the Managing Agent for delivery of notices." Thus, unlike the lease agreement in Southpark, which provided that notice was deemed given on the date it was deposited in the mail, under the Declaration in this case, notice is deemed given as of 48 hours after the notice is deposited in the mail.
The parties agree that the Saguns' offer to sell was deposited in the mail on 25 August 2006. Under the Declaration, notice of the offer to sell was deemed given 48 hours after that date, on 27 August 2006. The Nazzaros had five days from 27 August 2006 — up to and including 1 September 2006 — to accept. Although the parties do not specifically address whether the Nazzaros' response had to be mailed or received by that date, it is immaterial since the response was received on 1 September 2006 and was, therefore, timely under either view.
II
Defendants argue that even if the Nazzaros' notice was timely, no contract existed unless the Nazzaros also tendered the purchase price within 30 days of the Saguns' notice. Defendants argue that because the Nazzaros did not tender the purchase price within the required time period, the Saguns were free to sell their interest to the Hilldrups. In Winders v. Kenan, 161 N.C. 628, 632-33, 77 S.E. 687, 689 (1913), our Supreme Court explained that with a unilateral contract, such as we have here, "[i]f no conditions are imposed upon the prospective purchaser, and it is a simple proposition giving the right to buy, upon notice of acceptance it becomes a contract of sale and is obligatory on both parties, and it is then the duty of the seller to tender his deed and of the purchaser to pay according to its terms." On the other hand, the offer or has "the right to impose conditions which must be performed precedent to the exercise of the right to buy, and among these is the payment of the agreed price." Id. at 633, 77 S.E. at 689.
When conditions are imposed, "[t]he acceptance must be according to the terms of the contract, and if these require the payment of the purchase money or any part thereof, precedent to the exercise of the right to buy, the money must be paid or tendered, and a mere notice of an intention to buy or that the party will take the property does not change the relations of the parties." Id. at 633-34, 77 S.E. at 689. Thus, in the absence of acceptance in accordance with the conditions of the offer — including, if required, tender of payment — no binding contract arises.
As an initial matter, we note that while defendants argue the Nazzaros were required to tender the purchase price as a condition precedent of their right to purchase the Saguns' interest, Section 9(c) of the Declaration does not explicitly say that tender of the purchase price was required. Section 9(c) provides instead that "[a]ny Co-Owner wishing to accept the offer must do so in writing within five (5) days of said notice and consummate said sale within thirty (30) days of said notice." (Emphasis added.) Requiring the Nazarros to "consummate the sale" is not synonymous with tendering the purchase price. In contrast to Section 9(c), the agreements in each of the cases cited by defendants contained specific language requiring payment of the amount due. See Parks v. Jacobs, 259 N.C. 129, 130, 129 S.E.2d 884, 885 (1963) (per curiam) (holding that option requiring purchaser to make down payment on or before certain date and to execute purchase money notes for balance before buying property could only be exercised when purchaser made down payment and executed notes); Wachovia Bank Trust Co. v. Medford, 258 N.C. 146, 149-50, 128 S.E.2d 141, 143-44 (1962) (holding that purchaser's rights terminated where he failed to accept option and tender payment within 30 days from date specified, where option contract specifically required both acceptance and tender of payment); Winders, 161 N.C. at 636, 77 S.E. at 691 (holding that plaintiff was entitled to specific performance when contract required both acceptance of offer and tender of payment).
We need not, however, decide whether the requirement in Section 9(c) that the sale be consummated implies a requirement that payment be tendered because our appellate courts have repeatedly held that a party is not required to tender payment if it would be futile to do so. For example, in Smithfield Oil Co. v. Furlonge, 257 N.C. 388, 393, 126 S.E.2d 167, 171 (1962), the evidence established that "the defendants disavowed the contract before the option expired." Our Supreme Court held that "[n]otice from defendants that they would not carry out the terms of the option made unnecessary a tender of payment by the plaintiff." Id. See also Kidd v. Early, 289 N.C. 343, 361, 222 S.E.2d 392, 405 (1976) ("Where the option requires the payment of the purchase money or a part thereof to accompany the optionee's election to exercise the option, tender of the payment specified is a condition precedent to a formation of a contract to sell unless it is waived by the optionor." (emphasis added)); Millikan v. Simmons, 244 N.C. 195, 198, 93 S.E.2d 59, 62 (1956) (holding that defendant's notice of cancellation of option made tender unnecessary); Penny v. Nowell, 231 N.C. 154, 155, 56 S.E.2d 428, 429 (1949) ("The plaintiff's disavowal of the contract relieved the defendant of the necessity of tendering the purchase price within the period of the option . Such a tender would have availed nothing according to the testimony of record. The law does not require the doing of a vain thing. The disavowal was a waiver of the requirement.").
Here, the record establishes that the Saguns denied the existence of a contract between the parties immediately following receipt of the Nazzaros' first letter notifying the Saguns of their intent to purchase the co-ownership interest. The parties stipulated that upon receiving the Nazzaros' written notice of their intent to exercise their right of first refusal, the Saguns orally stated that they did not believe the acceptance was timely. They also stipulated that on 11 September 2006, Thomas Sagun wrote a letter to Emil Nazzaro disagreeing with the Nazzaros' calculation of the timeline for written notice and contending that the Nazzaros' letter was untimely. Thomas Sagun also wrote a letter to the Ship's Watch Association contending that the notice was not timely .
Although Mr. Sagun stated that "he had no problem" with Mr. Nazzaro contacting the Ship's Watch Board, he did not indicate that he would be bound by the Board's determination, and subsequent correspondence established that he did not believe himself bound.
These statements constituted a repudiation by the Saguns of the existence of any contract between the Nazzaros and Saguns. See Millis Constr. Co. v. Fairfield Sapphire Valley, Inc., 86 N.C. App. 506, 510, 358 S.E.2d 566, 569 (1987) ("Repudiation is a positive statement by one party to the other party indicating that he will not or cannot substantially perform his contractual duties."); Dixon v. Kinser, 54 N.C. App. 94, 101, 282 S.E.2d 529, 534 (1981) (explaining that "when a party to a contract gives notice that he will not honor the contract, the other party to the contract is no longer required to make a tender or otherwise perform under the contract because of the anticipatory breach of the first party"), disc. review denied, 304 N.C. 725, 288 S.E.2d 805 (1982). See also Restatement (Second) of Contracts § 255 cmt. a (1979) ("No one should be required to do a useless act, and if, because of a party's repudiation, it appears that the occurrence of a condition of a duty would not be followed by performance of the duty, the non-occurrence of the condition is generally excused .").
After asserting that the Nazzaros' acceptance was untimely and therefore no contract arose, the Saguns subsequently asserted that there was no contract because of the Nazzaros' failure to consummate the sale within 30 days. We note that the Nazzaros could not consummate any sale without the cooperation of the Saguns. In any event, under the Saguns' construction of the contract, the Nazzaros were required to close within 30 days. The Saguns have asserted that the most generous calculation of that deadline would require closing no later than 2 October 2006. The Saguns did not, however, do or say anything prior to that date to indicate that they had changed their position regarding the timeliness of the Nazzaros' notice of acceptance and were willing to proceed with the sale. Without a timely retraction of the prior repudiation of the sale, any obligation of the Nazzaros to tender payment or consummate the sale within 30 days was waived. See Restatement (Second) of Contracts § 256 ("The effect of a statement as constituting a repudiation under § 250 or the basis for a repudiation under § 251 is nullified by a retraction of the statement if notification of the retraction comes to the attention of the injured party before he materially changes his position in reliance on the repudiation or indicates to the other party that he considers the repudiation to be final.").
In sum, the evidence was undisputed regarding the Saguns' repudiation of the contract prior to expiration of the deadline for consummation of the sale and the Saguns' failure to retract that repudiation. Because we have already concluded that the Nazzaros timely notified the Saguns of their intent to purchase the Saguns' interest in the home and because any condition requiring consummation of the sale or tender of payment was waived, we hold the trial court properly concluded that a binding contract existed between the Nazzaros and the Saguns.
III
Defendants, however, argue that because the letter with the Proposed Offer to Purchase and Contract sent to them by the Nazzaros' realtor, Woody West, contained provisions inconsistent with the requirements set out in the Declaration, there was no "meeting of the minds" and, therefore, no enforceable contract. The only specific difference that defendants point to is the lack of a "time is of the essence" clause in the Nazzaros' Proposed Offer.
Prior to the date of the West letter, however, a binding contract had already been created. In Cap Care Group, Inc. v. McDonald, 149 N.C. App. 817, 822-23, 561 S.E.2d 578, 582, disc. review denied, 356 N.C. 611, 574 S.E.2d 676 (2002), the defendants similarly argued that a valid agreement should not be enforced because subsequent to the formation of the contract, there was "no meeting of the minds" on an issue . In upholding the contract, this Court held that "it is well -established in North Carolina that a failure to agree on some issues does not invalidate the underlying agreement." Id. See also Pee Dee Oil Co. v. Quality Oil Co., 80 N.C. App. 219, 341 S.E.2d 113 (holding that when binding contract already existed between parties, failure to sign subsequent document regarding additional issues was immaterial as to enforceability of contract), disc. review denied, 317 N.C. 706, 347 S.E.2d 438 (1986). In this case, we have held that there was a binding contract prior to the date that West sent his letter. Any lack of a meeting of the minds arising out of the West letter is, therefore, immaterial.
IV
Defendants' last contention on appeal is that the right of first refusal in Section 9(c) of the Declaration is an invalid restraint on alienation. In making this argument, defendants do not specifically address the law regarding the validity of restraints on alienation, but instead argue that "[w]here a preemptive right fails to adequately delineate the specific person or persons entitled to exercise the right and /or fails to provide an equitable method for potential buyers to exercise their right, such right is unreasonable, fails to achieve a permissible goal, and, as a result, should be held per se invalid." According to defendants, the Declaration's designation of all of the co -owners of the Ferdinando house is not sufficiently specific as to the persons entitled to exercise the right and, therefore, the right of first refusal is invalid.
Defendants, however, cite no authority invalidating a right of first refusal for failure to specifically identify the owner of the right. Instead, they simply recite the definition of a preemptive right set out in Smith v. Mitchell, 301 N.C. 58, 61, 269 S.E.2d 608, 610 (1980) (internal quotation marks omitted): "A preemptive right requires that, before the property conveyed may be sold to another party, it must first be offered to the conveyor or his heirs, or to some specially designated person ."
In Smith, our Supreme Court went on to address when a preemptive right constitutes an unreasonable restraint on alienation, holding that "[t]he general rule is that as long as the price provision in a preemptive right provides that the price shall be determined either by the marketplace or by the seller's desire to sell, a preemptive right is reasonable if its duration does not violate the rule against perpetuities ." Id. at 66, 269 S.E.2d at 613. Defendants do not, however, make any argument that the Declaration is invalid under this rule.
We also believe the Declaration sufficiently defines the holders of the preemptive right. Only "co-owners of the same house" hold the right. Since each house has only 10 co-ownership interests available, the Declaration grants the right to a limited number of readily identifiable people. The holders of the right are thus "specially designated person[s]."
Defendants nonetheless point to several ambiguities in the Declaration, arguing that the Declaration is silent as to what would happen if more than one co-owner chose to exercise his or her right and both acceptances arrived on the same day. Additionally, defendants note that a co-owner who lives closer to the selling owner might have an advantage because he or she might receive the selling owner's notice before other co-owners. Or, if a co-owner is out of town during the five -day period during which notice would be received and responded to, that co-owner might miss the opportunity to exercise his or her option.
Defendants cite no authority to support their argument that such ambiguities and possible scenarios render the covenant invalid. Moreover, none of the scenarios defendants envision are at issue in this case. Only one person ultimately chose to exercise the right of first refusal; there was no dispute over who was first to accept the offer. Defendants have, therefore, failed to demonstrate that Section 9(c) is an invalid restraint on alienation. Because, as we have held above, the undisputed evidence establishes that the parties created an enforceable contract under the Declaration, we affirm the trial court's entry of summary judgment.
Affirmed.
Judges McGEE and BRYANT concur.
Report per Rule 30(e).