Peters v. Smolian
12 N.Y.S.3d 824
N.Y. Sup. Ct.2015Background
- Plaintiffs (Peters and Sasfox entities) own vacant parcels in Amagansett and contracted to sell them to the Town of East Hampton for $3.6M.
- Earlier deeds conveying the parcels to plaintiffs recited a right of first refusal (ROFR) in favor of four members of the Smolian family (named individuals).
- Plaintiffs later quitclaimed one parcel to a successor LLC and reaffirmed the ROFR in that deed; Peters sought waivers from the Smolians (only Richard signed) and ran a publicity campaign to secure waivers.
- Peters never gave the Smolians the contractual notice/opportunity to match the Town offer before executing the sale contract; instead he sought waivers and later added a rider to the Town contract.
- Plaintiffs sued for declaratory relief seeking (1) that the ROFR is void under the “stranger to the deed” rule and (2) if not, that any exerciser must match all terms of the Town contract.
- Court denied summary judgment as to defaulting defendant Richard (no answer) and granted reverse summary judgment for the answering Smolian defendants, holding the ROFR enforceable and not void under the stranger-to-the-deed rule; the second cause of action was dismissed for lack of a justiciable controversy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a ROFR in the deeds is invalid under the stranger-to-the-deed rule | Peters: ROFR creates an interest in a stranger to the deed and is therefore void | Smolians: ROFR is a contractual preemptive right, not a reservation/exception creating an easement or life estate | Court: ROFR is contractual, not a reservation/exception; stranger-to-the-deed rule does not apply; ROFR enforceable |
| Whether the ROFR constitutes an interest that runs with the land (real covenant) | Peters: ROFR gives an interest in land akin to future interest | Smolians: ROFR is personal/contractual, does not run as a real covenant | Court: ROFR is a personal/contractual right (dormant until triggered), not a real covenant that invokes the stranger rule |
| Whether plaintiffs satisfied statute of frauds or needed Smolians’ signatures | Peters: signatures by Smolians required to enforce | Smolians: plaintiffs (party to be charged) signed deeds; recorded instrument satisfies statute of frauds | Court: Statute of frauds satisfied; absence of Smolians’ signatures is legally insignificant where grantor signed the deed |
| Whether court should adjudicate plaintiffs’ claim that any exerciser must match all Town contract terms (second cause) | Peters: declaratory relief that rightholder must match all contract terms, including rider, should be granted | Smolians: Peters failed to give them an offer; plaintiff’s request is premature/advisory | Court: Dismissed second cause—no justiciable controversy; relief would be advisory because defendants were never afforded the contractual offer to exercise the ROFR |
Key Cases Cited
- LIN Broadcasting Corp. v. Metromedia, Inc., 74 N.Y.2d 54 (N.Y. 1989) (defines ROFR as a preemptive right that requires offering holder the chance to match a third-party sale)
- Matter of Estate of Thomson v. Wade, 69 N.Y.2d 570 (N.Y. 1987) (articulates stranger-to-the-deed rule invalidating reservations/exceptions in favor of non-grantees for easements)
- Cipriano v. Glen Cove Lodge #1458, B.P.O.E., 1 N.Y.3d 53 (N.Y. 2003) (grantor’s failure to afford ROFR holder the opportunity to exercise constitutes a breach)
- Morrison v. Piper, 77 N.Y.2d 165 (N.Y. 1990) (ROFR characterized as a dormant contingent right; analysis of perpetuities and vesting issues)
- Wildenstein & Co. v. Wallis, 79 N.Y.2d 641 (N.Y. 1992) (reasonableness of preemptive rights and restraints on alienation)
- Lanza v. Wagner, 11 N.Y.2d 317 (N.Y. 1962) (standard for granting summary judgment/reverse summary judgment)