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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Castle Properties, Inc. v. Wasilla Lake Church of the Nazarene (4/10/2015) sp-6996

Castle Properties, Inc. v. Wasilla Lake Church of the Nazarene (4/10/2015) sp-6996

         Notice:  This opinion is subject to correction before publication in the PACIFIC  REPORTER .  

         Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,  

         303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email  

                                                                                        

         corrections@akcourts.us.  



                    THE SUPREME COURT OF THE STATE OF ALASKA  



CASTLE PROPERTIES, INC.,                                    ) 

                                                            )    Supreme Court No. S-15381  

                                                            )  

                            Appellant,                      )    Superior Court No. 3PA-11-02112 CI  

                                                            )  

         v.                                                 )    O P I N I O N  

                                                            )  

WASILLA LAKE CHURCH OF                                      )    No. 6996 - April 10, 2015  

THE NAZARENE,                                               )  

                                                            )  

                            Appellee.                       )  

                                                            )  



                   Appeal from the Superior Court of the State of Alaska, Third  

                               

                   Judicial District, Palmer, Eric Smith, Judge.  



                   Appearances:  Kenneth D. Albertsen, Palmer, for Appellant.  

                   Ronald L. Baird, Office of Ronald L. Baird, Anchorage, for  

                                                                         

                   Appellee.  



                   Before:  Fabe, Chief Justice, Winfree, Stowers, Maassen, and  

                                                                        

                   Bolger, Justices.  



                   BOLGER, Justice.  



I.       INTRODUCTION  



                   Castle Properties, Inc. held a right of first refusal on approximately 2.4  



acres of unimproved land owned by the Wasilla Lake Church of the Nazarene (Church).  

                                                   



The City of Wasilla (City) offered the Church another parcel of approximately 17 acres  

                                                                                      



in exchange for this property.   Having learned of the City's offer, Castle Properties  

                                                                                                 


----------------------- Page 2-----------------------

requested a copy of the purchase and sale agreement memorializing the exchange.  The  



                                                                                 

Church, apparently unaware of the right of first  refusal, denied this request.  Castle  



                          

Properties then informed the Church that it was exercising its right of first refusal and  



submitted a cash offer, which the Church rejected.  



                     Castle  Properties  filed  suit,  and  the  superior  court  found  that  Castle  



Properties received adequate notice when it obtained the city ordinance approving the  



City's  offer  and  that  the  Church  acted  reasonably  in  rejecting  Castle  Properties'  



                                    

competing cash offer.  We conclude that the superior court did not clearly err in finding  



                                                                                                              

that Castle Properties received adequate notice, that Castle Properties exercised its rights  



                                                             

by making a competing offer, and that the Church's response did not violate the covenant  



of good faith and fair dealing.  



II.        FACTS AND PROCEEDINGS  



                                                                                             

                     The   property   underlying   this   dispute   is   located   in   the   Lakebrook  



                                                                                                                              

Subdivision in Wasilla, near the Cottonwood Creek Mall.   Castle Properties seeks to  



purchase the southern portion of Tracts 3 and 4 (Property), bounded by the Palmer- 

Wasilla Highway to the north and Cottonwood Creek to the south.1  



                                    

                     In  1984  the  Baugh  Construction  and  Engineering  Profit  Sharing  Trust  



                                       

(Trust) began acquiring property in the Lakebrook Subdivision.  Gary Baugh, the trustee,  



                                                               

believed that if the Trust could acquire contiguous properties across Tracts 1 through 5,  



                                       

they would present "an attractive piece of real estate for a developer."  The Trust first  



                                                                                                   

acquired the southern portions of Tracts 1 and 2 and then set its sights on the southern  



portions of Tracts 3, 4, and 5.  



           1         The Palmer-Wasilla Highway was relocated in the 1980s so that it laterally     



bisected  Tracts   3   and   4,  as  well  as  adjacent  Tracts  1,  2,  and  5.    References  to  the  

"northern" and "southern" portions of these tracts refer to the areas north and south of       

the Palmer-Wasilla Highway.  



                                                                   -2-                                                            6996
  


----------------------- Page 3-----------------------

                                                                             

                    At this time, title to Tracts 3 and 4 was held by the "Alaska District, Church  



                                                                                    

of the Nazarene."  But the church association that would eventually become the Wasilla  



Lake  Church  of  the  Nazarene  negotiated  with  the  Trust  and  executed  the  relevant  



                                       

transaction.  Tract 5 was owned by the Church's pastor, John Vaughn, and his wife.  



                               

Vaughn wanted the Church to purchase the northern portion of Tract 5.  And according  



                      

to Baugh, the Trust was interested in acquiring the southern portion, contingent on the  



possibility of someday acquiring the adjacent portions of Tracts 3 and 4.  



                                                                                                    

                    The parties therefore crafted the following exchange. The Trust purchased  



                                                                                  

the entirety of Tract 5 from the Vaughns for $310,000. The Trust then kept the southern  



                                             

portion for itself, but sold the northern portion to the Church, in exchange for $100,000  



and a right of first refusal to purchase the southern portions of Tracts 3 and 4 - the  



Property.  The end result was as follows:  the Vaughns sold Tract 5 for $310,000; the  



Church acquired the northern portion of Tract 5; and the Trust, in essence, paid $210,000  



for  the  southern  portion  of  Tract  5  plus  the  opportunity  to  purchase  the  adjoining  



Property at some point in the future. 



                      The  document  memorializing  the  right  of  first  refusal  stated  that  the  



                              

Church  "grant[ed]  the  .  .  .  Trust  First  Right  of  Refusal  on  any  future  sale"  of  the  



                                                      

Property.  There is no evidence that the parties agreed to more detailed terms regarding  



                                                             

the duties owed by either party pursuant to this right.  The Trust recorded this document  



                                       

in 1996.  In 2002 Castle Properties purchased all of the Trust's interests in Tracts 1  



through 5 - including the right of first refusal to purchase the Property.  



                    As early as 2004 the Church's board began discussing the shortcomings of  



the Church's facilities and the need to relocate to a larger and more suitable site.  The  



Church decided to sell the Property as part of this relocation strategy, and in 2010 the  



Church listed the Property for $600,000.  Gary Lundgren, Castle Properties' owner,  



                                                                            

submitted two cash offers for the Property through his agent, Kevin Baker.  These offers  



                                                              -3-                                                        6996
  


----------------------- Page 4-----------------------

were made in April and July 2010 for $265,000 and $300,000, respectively.  The Church  



rejected both offers, but the Church's real estate agent, Tammy Ervin, inquired whether     



                                          

Lundgren had 20 acres of land available for an exchange instead.  Baker told Ervin that  



Lundgren  was  not  interested  in  a   property  exchange.    He  did  not  mention  Castle  



Properties' right of first refusal at this time.  



                                                                                                                      

                     Around the same time the Church signed a non-binding letter of intent with  



                                                                                                                      

the City to exchange the Property for approximately 20 acres of City land.  On April 11,  



                                                    

2011, a draft ordinance ratifying this exchange was introduced.  The ordinance identified  



the  City  property  to  be  traded  (City  Trade  Land)  and  its  approximate  acreage.  The  



                                                                                            

accompanying staff report specifically noted the Church's "desire to relocate onto a large  



                                                                                                         

parcel."  And attached to the ordinance was a title report with the tax-assessed value of  



the parcel encompassing the City Trade Land.  



                     Castle Properties was unaware of the City's offer until April 2011, when  



                                                                  

Baker attended a City Council meeting where the exchange was discussed.  Having  



learned of the potential conveyance to the City, Baker tried to acquire a copy of the  



                                                                                                         

Purchase and Sale Agreement (Purchase Agreement) between the City and the Church,  



                                                 

but his requests were denied.  Baker testified that he also attempted to set up a meeting  



with the Church but that the Church declined to participate.  



                                                                               

                     On May 18, 2011, Castle Properties recorded a document entitled "Notice  



                                                                                               

of Exercise of First Right of Refusal."  This notice stated that, having learned of the  



City's  offer,  Castle  Properties  was  exercising  its  right  to  purchase  the  Property  on  



"equivalent  terms,"  which  Castle  Properties  deemed  to  be  $153,000.    There  was  



                                                                                                      

testimony at trial suggesting that the then-current Church leaders were unaware of Castle  



Properties' right of first refusal until this document was recorded.  



                                                                      

                     On May 27 Castle Properties' attorney sent the Church a letter reiterating  



                                                                 

Castle Properties' election to exercise its right of first refusal by purchasing the Property  



                                                                  -4-                                                            6996
  


----------------------- Page 5-----------------------

for $153,000, noting that "[a] real estate broker has confirmed that this is the upper end  



                                                    

of fair market value for the [City] Trade Land."  Castle Properties informed the Church  



that  it  had  placed  $153,000  in  escrow,  urged  that  "time  [was]  of  the  essence,"  and  



requested a closing by June 7, unless "alternative arrangements" had been made.  The  



                                                                                                               

Church responded with a letter informing Castle Properties that its right of first refusal  



appeared unenforceable and that unless Castle Properties could show legal authority to  



the contrary, the Church intended to close the transaction with the City on August 11.  



                    Castle Properties filed suit on August 9, seeking specific performance of  



                                                                                                           

its right of first refusal.  Castle Properties also recorded a lis pendens on the Property.  



                                                

The  Church  counter-claimed,  seeking  a  decree  quieting  title  to  the  Property  and  a  



declaratory judgment to the same effect.  



                    In analyzing the duties owed under a right of first refusal, the superior court  



                                                                              2 

                                                                                provides the relevant framework.  

first noted that our decision in Roeland v. Trucano 



                                                                                                                            

The court found that, under Roeland , Castle Properties received "adequate notice" of the  



                                                                                                                   3 

                                                                                                                      Next, the  

City's offer through the City ordinance outlining the proposed land exchange. 



                                                                             

superior court noted that the City Trade Land was a "unique" offer, which served as an  

                                                                                                                4  At trial, the  

invitation to Castle Properties to submit a "commercially equivalent offer." 



Church's expert appraiser placed the value of the City Trade Land at $250,000, and  



                            

Castle Properties offered no rebuttal expert.  Given the Church's interest in "obtain[ing]  



                                                                                   

an affordable parcel of land that was suitable for a new church," the superior court found  



          2         214 P.3d 343 (Alaska 2009).  



          3         See id. at 348 ("The general rule is that when an owner receives an offer to                         



purchase an interest in a property burdened with a right of first refusal, the owner must                    

provide adequate notice of the terms of the offer to the holder of the right.").  



          4         See id. at 349.  



                                                               -5-                                                         6996
  


----------------------- Page 6-----------------------

                                                                                                                         

that Castle Properties' $153,000 cash offer was not commercially equivalent to the City's  



                                                                       

offer.  Accordingly, the court expunged the lis pendens on the Property and quieted title  

free of any interest related to Castle Properties' right of first refusal.5  



                      Castle Properties now appeals.  



III.       STANDARD OF REVIEW  

                     "Questions  regarding  the  adequacy  of  notice  are  questions  of  fact."6  



                                                                                                 

"Under [Alaska] Civil Rule 52(a), factual findings shall not be set aside unless they are  



clearly erroneous.  A finding is clearly erroneous only if the reviewing court is left with  



                                                                                                          7  

                                                                                                             "When reviewing  

a 'definite and firm conviction that a mistake has been made.' " 



                                                                        

factual findings, we view the evidence in the light most favorable to the prevailing party  



             8  

                                                                                                     

below."   "We review questions of law using our independent judgment and will adopt  

'the rule of law that is most persuasive in light of precedent, reason and policy.' "9  



IV.        DISCUSSION  



                      On appeal Castle Properties does not argue that the Church should have  



accepted  its  $153,000  cash  offer.    Rather,  Castle  Properties  contends  that  it  lacked  



           5         The superior court also considered the Church's argument that the right of     



first  refusal  was  unenforceable.    The  Church  offers  this  argument  on  appeal  as  an  

alternative basis for affirming  the  superior court's decision.  Because we affirm the  

superior court's decision based on its Roeland analysis, we do not need to reach the  

                                                                                             

Church's unenforceability argument.  



           6  

                                      

                     Roeland , 214 P.3d at 348 (citing Jensen v. Alaska Valuation Serv., Inc. , 688  

P.2d 161, 164 (Alaska 1984)).  



           7  

                                                                                                               

                     Id. at 347 (quoting Municipality of Anchorage v. Gregg , 101 P.3d 181, 186  

(Alaska 2004)).  



           8         Id.  



           9  

                                                                                           

                     Id. at 347-48 (quoting Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979)).  



                                                                   -6-                                                             6996
  


----------------------- Page 7-----------------------

adequate information to formulate an "equivalent" offer.  Accordingly, Castle Properties  



now asks to purchase the Property either for the appraised value of the City Trade Land  



($250,000) or the "Church-determined" value of the Property ($291,000).  



          A.        Castle Properties Received Adequate Notice Of The City's Offer.  



                                

                    Castle  Properties  argues  that  the  Church  failed  to  provide  the  legally  



                                                                       

required notice of the City's offer to purchase the Property.  In Roeland , we outlined the  



duties owed under a right of first refusal:  



                                                                                                     

                    The general rule is that when an owner receives an offer to  

                    purchase an interest in a property burdened with a right of  

                                                                  

                    first refusal, the owner must provide adequate notice of the  

                    terms of the offer to the holder of the right.  Adequate notice  

                    is notice sufficient to enable the holder of the right of first       

                    refusal  (the  right-holder)  to  decide  whether  to  attempt  to  

                    match  the  terms.    Once  the  seller  has  made  reasonable  

                                                             

                    disclosure of the material terms, the right-holder has a duty to  

                                      

                                                                                                            [10] 

                    further investigate any terms that he or she finds unclear.  



        

We  further stated that "[t]he offer's terms must be sufficiently definite to evaluate, and  



all essential terms in the third-party offer must be communicated to the right-holder.  



                                                                                                                                  11  

                                                                           

Generally, this means a written copy of the offer or agreed terms should be provided." 



                                                                                   

                    Like this dispute, Roeland involved an  effort to enforce a right of first  



                                                                            12  

                                                                                There, the owners of the property  

refusal where the competing offer was "unique." 



                                                      

burdened by the right received the following offer:  a retailer would "purchase" 25% of  



the property by granting the owners a 25% interest in any stores he operated in the  



          10        Id. at 348 (citations omitted).  



          11        Id. (citations omitted).  



          12        Id. at 346, 349.  



                                                                -7-                                                         6996
  


----------------------- Page 8-----------------------

              13  

building.           The  property  owners  memorialized  this  offer  in  a  memorandum  of  



                                                                                                 14  

                                                                                                    Although the right- 

understanding (MOU) and provided the right-holders with a copy. 



                                                            

holders "provide[d] an extensive list of details missing from the MOU," we concluded  



                                                                 

that "the absence of these details [did] not leave the essential terms of the transaction  



              15  

                  We therefore affirmed the superior court's finding that the sellers had not  

unclear."                                                                                      

breached the right of first refusal.16  



                                                          

                    Here, the superior court found that Castle Properties received adequate  



notice of the City's offer through the ordinance adopted at the Wasilla City Council  



                                                               

meeting on April 25, 2011 (Ordinance).   Although the Church refused to give Castle  



Properties a copy of the Purchase Agreement, the superior court concluded that the  



                                                                                    

Ordinance was sufficient to inform Castle Properties of the offer's "material" terms -  



                                                          

namely, "what land was involved." As the court reasoned, any provisions contained only  



in the Purchase Agreement pertained merely "to implementation and related matters."  



                                                                                                                 

                    As an initial matter, the superior court was correct to note that the Church  



                                                                                               

had no duty to notify Castle Properties about its  negotiations  with the City.  Under  



                                                                                                                     

Roeland , the duty to provide notice arises only once "an owner receives  an  offer to  



                                                                                                         17  

                                                                                                             Accordingly,  

purchase an interest in a property burdened with a right of first refusal." 



          13        Id. at 346.  



          14        Id.   



          15        Id. at 348-49.  



          16        Id.  



          17        Id. at 348; see also  H.G. Fabric Disc., Inc.   v. Pomerantz, 515 N.Y.S.2d  



823, 825 (App. Div. 1987) (holding that a conditional offer did  not t  rigger a right o                                f first  

refusal).  



                                                              -8-                                                        6996
  


----------------------- Page 9-----------------------

the Church's duty to notify did not arise until April 25, 2011, when the Wasilla City     



Council actually approved the proposed land exchange with the Church.  



                                                                                             

                     Castle   Properties   contends,   however,   that   the   Ordinance   provided  



                                                

inadequate notice of the City's offer.  Its arguments are essentially two-fold.  First, Castle  



                                                                         

Properties argues that the Church should have disclosed its "criteria" for suitable trade  



                                                                                                  

land.   Second, Castle Properties claims that it was entitled to a copy of the Purchase  



Agreement because the Ordinance omitted certain terms of the transaction.  



                              

                     With regard to the Church's criteria for suitable trade land, the process  



                                                       

Castle Properties seeks is beyond the scope of what its right of first refusal ensured.  



                                      

Citing  testimony  from  Church  members,  Castle  Properties  alleges  that  the  Church  



deemed 10 acres to be an acceptable size; approved a "4-mile radius" as a relocation  



                                                                                                                        

range; and established criteria for "items such as city water and sewer, access, price, and  



'not  swampland.'  "    But  it  is  not  evident  from  the  record  that  the  Church  ever  



memorialized such specific criteria for a relocation site.  For instance, one Church board  



                                                                              

member described the process of finding a site for relocation as "very fluid," explaining  



                                                                                     

that "as opportunities have presented themselves, [the Church has] evaluated each one  



                                                   

on its own merits."  Moreover, Castle Properties itself points out that the City Trade  



Land did not meet all of the "criteria" alluded to in the Church's testimony.  



                                                                                                  

                     It is true that because the City's offer of land was a "unique offer," Castle  



                                                                                                                     18  

                                                                                                                           But  we  

Properties  was  not  in  a  position  to  precisely  "match  the  [City's]  terms." 



expressly addressed this issue in Roeland , noting:  



                                                                      

                     Where a commercial seller has received a unique offer that a  

                                                                    

                     right-holder could not exactly duplicate, we agree with courts  

                                                                                      

                     characterizing the submission of the offer to the right-holder  

                     as an invitation to the right-holder to submit a commercially  



          18         See Roeland, 214 P.3d at 348-49.  



                                                                 -9-                                                              6996  


----------------------- Page 10-----------------------

                    equivalent offer.  The right-holder may propose comparable  

                                                   

                    terms to the original offer which are possible for him to meet  

                                                                                                       [19] 

                    and which would meet the seller's commercial interests.  



                                                                             

The adoption of the Ordinance therefore served as an invitation to Castle Properties to  



                                                                                        

propose "comparable terms."  It did not obligate the Church to formulate specific criteria  

that would govern the Property's sale.20  



                    Castle Properties was, however, entitled to "adequate notice" of the material  



                                    21  

terms of the City's offer.              Castle Properties argues that, "[a]t a minimum," this required  



the Church to provide Castle Properties with a copy of the Purchase Agreement.  But  



                                                                                                          

under Roeland and other relevant authority, the Church was obligated to disclose only  



                                                          22  

the "material terms" of the City's offer.                     Castle Properties contends that the Ordinance  



          19        Id. at 349-50 (citations omitted).  



          20        See id. at 350 ("[T]he owner of property subject to a right of first refusal  



remains master of the conditions under which he will relinquish his interest, as long as  

                             

those conditions are commercially reasonable, imposed in good faith, and not specifically  

designed  to  defeat  the  preemptive  rights."  (alteration  in  original)  (quoting  W.  Tex.  

Transmission, LP v. Enron Corp., 907 F.2d 1554,1566  (5th Cir. 1990) (internal quotation  



marks omitted)).  



          21        See id. at 348.  



          22        See id. at 348-49 (concluding that the absence of certain "details [did] not  

                                                                                             

leave the essential terms of the transaction unclear" (emphasis added)); see also Dyrdal  

                                               

v.  Golden Nuggets, Inc., 672 N.W.2d 578, 584 (Minn. App. 2003) ("In most cases, a  

                                                                         

copy of the purchase agreement provides reasonable notice of a bona fide offer, even if  

                                                                                                              

the agreement does not disclose all of the terms of the sale." (emphasis added) (citing  

                               

Koch Indus. v. Sun Co. , 918 F.2d 1203, 1212-13 (5th Cir. 1990))); but see Gyurkey v.  

Babler , 651 P.2d 928, 931 (Idaho 1982) ("[T]he holder of such a right of first refusal  

                    

cannot  be  called  upon  to  exercise  or  lose  that  right  unless  the  entire  offer  is  

communicated  to  him  in  such  a  form  as  to  enable  him  to  evaluate  it  and  make  a  

                            

decision.") (emphasis in original)).  In Gyurkey, the court also appeared skeptical about  

                                  

the accuracy of a key  material term - the sales price.  Id. at 932 (noting that "it is  

                     

                                                                                                            (continued...)  



                                                             -10-                                                        6996
  


----------------------- Page 11-----------------------

                                                                                            

"omitted many relevant factors" that the Purchase Agreement contained, including the  



                                                                                          

City Trade Land's "actual description," its "actual acreage," and "closing deadlines or  



extension thereof, allocation of closing costs, joint payment of sales commissions, and  



joint payment of survey fees."  We conclude that some of these terms were adequately  



covered in the Ordinance and that the others were immaterial.  



                                                                                                                

                    With  respect  to  the  "actual  description"  of  the  City  Trade  Land,  the  



                                                                                         

Ordinance admittedly characterized it only as "a portion [of] Tax Parcel A6, Section 16,  



                                                                                                              

Township 17 North, Range 1 West Seward Meridian, Alaska."  (Emphasis added.)  But  



an arrow on the map appended to the Ordinance identified the City Trade Land as that  



portion bounded by West Riley Avenue, South Center Point Drive, and the parcel's  



boundaries.  The Ordinance thus adequately expressed the "actual description" of the  



                            

City Trade Land.  Similarly, Castle Properties points out that the Ordinance omitted the  



                                   

"actual acreage" of the City Trade Land.  The Ordinance indeed described the City Trade  



Land  as  "approximately  20  acres"  when  its  actual  acreage,  according  to  a  City  



subdivision map, was 17.33.  But neither the Ordinance nor the Purchase Agreement  



                                              

identified the exact acreage of the City Trade Land, and it appears that this information  



was publicly available.  



                                   

                    Nor does Castle Properties explain how knowing the exact acreage of the  



City Trade Land would have helped Castle Properties better match the City's terms.  



                                                                   

Castle Properties crafted its cash offer based on the assumption that the Church would  



receive "half" of a 40-acre parcel - 20 acres.  Accordingly, the likely effect of knowing  



                                                                                              

the "actual acreage" of the City Trade Land would have been a downward adjustment  



          22        (...continued)  



simply impossible for a preemptive rightholder to verify the precise price . . . at which  

                                                                                                               

he is entitled to purchase the property").  



                                                            -11-                                                       6996
  


----------------------- Page 12-----------------------

in Castle Properties' valuation, and Castle Properties' offer of $153,000 already fell  



significantly short of the Property's appraised value.  



                                                      

                     As for the remaining items Castle Properties mentions - closing deadlines  



                                                                                                            

and costs, payment of sales commissions, and survey fees - it was not clear error to  



characterize  these  as  "pertain[ing]  to  implementation  and  related  matters."    Castle  



                                                                                                                         

Properties does not develop its argument as to why these terms were material, and there  



                                                                                        

is no evidence that knowledge of these terms would have helped Castle Properties decide  



                              

whether  to  match  the  City's  offer.  It  was  therefore  not  clear  error  to  find  that  the  



Ordinance constituted adequate notice of the City's offer to purchase the Property.  



                                                                                      

          B.	        The  Church  Did  Not  Deprive  Castle  Properties  Of  A  Reasonable  

                     Opportunity To Meet The City's Offer.  



                     Castle  Properties  argues  it  should  have  been  given  a  "reasonable  time  



                                                    23  

                                                        Specifically, Castle Properties contends that "time  

period" to match the City's offer.  



                                                         

was not of the essence" because the Church had been working on relocation since 2004  



and  no  closing  deadline  was  stated  in  the  Purchase  Agreement.    The  document  



                                   

memorializing Castle Properties' right of first refusal was silent as to how long the right- 



                                                                             

holder would have to exercise, and we have held that where a contract does not specify  



                                                                                                         24  

a time limit for performance, a "reasonable period" may be implied.                                           



          23         In this portion of its brief, Castle Properties also claims that the Church   



"refused to dialogue or communicate," "would not cooperate to enable Castle Properties   

to exercise its Right of First Refusal," and could have purchased suitable relocation  

property with the cash value of the City Trade Land.  But because these arguments are  

                                                                                           

more closely related to the covenant of good faith and fair dealing, we address them in  

                                                                                      

Part IV.C.  



          24         See, e.g., Hall v. Add-Ventures, Ltd. , 695 P.2d 1081, 1089 (Alaska 1985)  



                                                                                                               

("Where no provision is made as to time of performance, a reasonable time is implied,  

to be determined upon consideration of the subject matter of the contract, what was  

                                                                                                                 (continued...)  



                                                                -12-	                                                         6996
  


----------------------- Page 13-----------------------

                    But given the course of events, we conclude that Castle Properties had  



reasonable time to exercise its right of first refusal after discovering the City's offer at  



a City Council meeting in April 2011.  The superior court found that  



                                                  

                    [t]here is no reason why [Castle Properties] could not have  

                                                                                        

                    testified at the City Council meeting in April, or sent a letter  

                                            

                    to the City and Church prior to that meeting that explicitly  

                                                                          

                    notified them of the existence of the right of first refusal . . . .  

                    Such a step undoubtedly would have had an impact on the  

                    Council's        deliberations,        and     given      [Castle      Properties]  

                    adequate time to develop an offer.  



We see no clear error in the superior court's finding that Castle Properties itself could  



have taken steps to secure additional time.  



                    Rather  than  attempting  to  slow  down  the  City's  consideration  of  the  



                                                                 

proposed land exchange, Castle Properties instead took the time to craft a formal offer  



                          

with a deadline.  Castle Properties then submitted an offer to purchase the Property for  



                                                                        

$153,000 and unequivocally indicated that it was exercising its right of first refusal.  And  



                                     

in  its  letter  dated  May  27,  2011,  Castle  Properties  itself  urged  that  "time  is  of  the  



               

essence"  and  requested  a  closing  by  June  7,  2011.    Accordingly,  Castle  Properties  



received a reasonable opportunity to exercise its right of first refusal.  



          24        (...continued)  



contemplated at the time the contact was made, and other surrounding circumstances.");  

                                                                      

see  also  Firebaugh  v.  Whitehead ,  559  S.E.2d  611,  616  (Va.  2002)  (noting  that  a  

                                                                         

"reasonable  time"  is  implied  in  the  context  of  a  right  of  first  refusal);  see  also  

                                                                               

R 

                                                                                                                   

   ESTATEMENT (THIRD) OF PROPERTY (SERVITUDES)  4.3 cmt. c (2000) (noting that once  

                                                                                                             

a right of first refusal ripens into an option to purchase, the duration of the option is  

limited to a "reasonable time").  



                                                             -13-                                                       6996
  


----------------------- Page 14-----------------------

            C.         The Church Did Not Breach Its Duty Of Good Faith And Fair Dealing.   



                       Under Alaska law, every contract has an implied covenant of good faith and  



                    25 

                                                                           

fair dealing           requiring "that neither party . . . do anything which will injure the right of  



                                                                                       26  

the other to receive the benefits of the agreement."                                        As we noted in Roeland ,  



                                                                       

                       [b]ad faith in right of first refusal transactions is not found  

                       where a party undertakes an act permitted by the contract,  

                                                                                           

                       even if the motivations are unpleasant.  Rather, it is typically  

                       found where the seller does not have a legitimate interest in  

                       the terms of the third-party offer, deliberately omits terms in  

                                         

                       relaying the offer to the right-holder, or does not deal at arms  

                                                      

                       length with the third-party offeror.[27                                         ]  



                       Here,  Castle  Properties  argues  that  "[e]verything  .  .  .  [the  Church]  did  



between  2010  and  the  present"  was  either  calculated  toward  or  had  the  effect  of  



                               

depriving  Castle  Properties  of  the  benefit  of  its  right  of  first  refusal.    But  Castle  



                                                                                                                                            

Properties does not appear to argue that the Church lacked a "legitimate interest" in the  



                                                                                                           

City Trade Land or failed to deal at arms-length with the City.  Instead, Castle Properties  



                                                                                                   

highlights the Church's alleged failure "to provide notice of the offer" and its refusal "to  



provide information when requested."  



                       Castle  Properties  also  contends  that  the  Church  acted  in  bad  faith  by  



                                                                                                

denying  the  validity  of  the  right  of  first  refusal.                               In  response  to  Castle  Properties'  



"exercise" of its right of first refusal, the Church indeed expressed its opinion that the  



right  was  unenforceable,  a  position  that  the  Church  has  maintained  throughout  this  



                                                                                                                                      

litigation.  But Castle Properties does not further develop its argument as to why this  



            25         Alaska Pac. Assurance Co. v. Collins , 794 P.2d 936, 947 (Alaska 1990).  



            26         Jackson v. Am. Equity Ins. Co. , 90 P.3d 136, 142 (Alaska 2004) (quoting  



Guin v. Ha, 591 P.2d 1281,1291 (Alaska 1979) (internal quotation marks omitted).  



            27         214 P.3d at 351 (citations omitted).  



                                                                       -14-                                                                 6996
  


----------------------- Page 15-----------------------

position constitutes bad faith.   And even if the Church's view informed its rejection of  



Castle Properties' offer, Castle Properties does not argue that the Church was obligated     



to accept the $153,000 that Castle Properties offered for the Property.  Accordingly,   



Castle Properties has not shown that the Church's denial of the right's validity "injure[d]     

the right of the other to receive the benefits of the agreement."28  



                         The superior court did not make a separate conclusion of law on Castle  

                                                                                                                                                       



Properties' good faith and fair dealing claim.  But the court did find that "the members  

                                                                                                                                



of the Church hierarchy had no knowledge that the right of first refusal existed" until  

             



May 2011, when Castle Properties recorded its "Notice of Exercise."  The court also  



credited testimony from the Church's real estate agent that she was unaware of Castle  



Properties' right of first refusal until "[a]round the third week of May 2011."  



                         Castle Properties characterizes the Church's asserted ignorance as "difficult  



to  believe."    As  Castle  Properties  correctly  points  out,  the  right  of  first  refusal  was  



                                                                     

recorded in 1996.  The Church also had in its files a 2006 "Property Profile" prepared  



                                     

by a title company, which included a copy of the right of first refusal along with several  



other recorded documents.  



                                                                                                                                          

                         But as the superior court observed, the Church's files were "a mess," a view  



                                                     

supported by the testimony of Brian Thomas, who served as the Church's pastor from  



                                                                    

2005 to 2010.  Thomas testified that there was not an "organized filing system" when he  



arrived, and that although Church members tried to "track down stuff as best [they]  



could," the lack of "central record keeping . . . was a source of great frustration."  



                         Moreover, three witnesses who participated in Church decision-making  



during the relevant time period testified that they were personally unaware of the right  



             28          See Jackson, 90 P.3d at 142 (internal quotation marks omitted) (citation  



omitted).  



                                                                             -15-                                                                             6996  


----------------------- Page 16-----------------------

            

of first refusal until Castle Properties exercised it in May 2011.  Thomas testified that he  



                                      

first learned of the right of first refusal when contacted for this litigation.  Paul Hartley  



                

served as the Church of the Nazarene's Alaska District superintendent from June 2010  



onward and chaired the Church's board after Thomas resigned.  Hartley testified that  



                                                                                                         

although he could not recall exactly when he learned of the right of first refusal, it was  



                                                             

probably at the Church's May 22, 2011 board meeting, and that the Church's board had  



                                                              

previously been unaware of it.  Michael Messick, a Church board member serving from  



2005  through  the  date  of  the  trial,  similarly  stated  that  he  was  unaware  of  Castle  



Properties'  right  until  the  May  22,  2011  board  meeting,  and  that  it  came  as  a  "big  



surprise."  



                                                                                                                         

                    It is true that after learning of the proposed land exchange, Baker asked to  



meet with the Church and requested a copy of the Purchase Agreement.  But Castle  



                                                                                              

Properties does not specifically allege - and there is nothing in the record to suggest -  



                                                             

that Baker actually brought the right of first refusal to the Church's attention in making  



these inquiries.  The superior court found that Castle Properties learned of the City's  



                                                                                                      

offer in April 2011, yet "chose not to bring the right of first refusal to the attention of the  



                                                                                                      

Church or the City until the end of May" - a point that Castle Properties does not  



                 

appear to dispute.  Based on this record, we see no clear error in the superior court's  



                                                                                        

finding that the Church was unaware of the right of first refusal until Castle Properties  



                                                                                      

attempted to exercise it in May 2011. And in light of the Church's ignorance as to Castle  



                                                                                                               

Properties' legal interest in the Property, we cannot say that the Church's refusal to meet  



with Baker or respond to his inquiries was in bad faith.  



                    Castle  Properties  argues  that,  "even  assuming  [the  Church's]  claim  of  



                                                                                                                       

earlier ignorance to be true, [the Church's] actions from May 2011 onward were not  



                                                               -16-                                                         6996
  


----------------------- Page 17-----------------------

                                                                     29  

                                                                         

what a reasonable person would consider fair."                           But in light of Castle Properties' own  



                     

conduct, the  Church's actions were not objectively unreasonable.  Castle Properties  



                                             

unequivocally expressed that it was exercising its right of first refusal through recorded  



                                                            

documents and Castle Properties' May 27, 2011 letter to the Church.  And all of these  



                                                                      

documents expressed Castle Properties' intent to purchase the Property for a particular  



                             

cash value.  It was therefore reasonable for the Church to treat these communications as  



an offer to purchase the Property for $153,000.  



                                                                                         

                    At oral argument before us, Castle Properties attempted to recast its May  



27 letter as an invitation for further dialogue.  The letter stated:  



                                                                                 

                              Although my client is determined to exercise its rights  

                                                                                    

                    under the First Right of Refusal to buy the Property, it is not  

                    my client's desire to hinder the Church from acquiring the  

                                                                                               

                    Trade Land.  We believe that a win/win solution should be  

                    possible in which my client acquires the Property from the  

                    Church, the Church acquires the Trade Land from the City of  

                                                                                                 

                    Wasilla, and the City of Wasilla receives fair market value for  

                    its sale of the Trade Land to the Church.  



                                                                                                   

The letter then noted Baker's prior request to meet with the Church and stated that Castle  



Properties "remain[ed] willing to cooperate in working toward a solution that ideally  



would leave everyone satisfied."  



                                                                                   

                    But Castle Properties' letter also stated that $153,000 plus closing costs had  



been deposited with McKinley Title, advised that "time [was] of the essence in this  



                                      

matter,"  and requested a closing by June 7, 2011 unless "alternative arrangements [had]  



been made."  The letter did not specifically request a meeting, further information, or  



          29        The  implied   covenant  of  good  faith  and  fair  dealing  requires  not  only  



subjective good faith, but also that both parties "act in a way that a reasonable person  

would consider fair."  Hawken Nw., Inc. v. State, Dep't of Admin., 76 P.3d 371, 381  

                                                                                                       

(Alaska 2003).  



                                                             -17-                                                        6996
  


----------------------- Page 18-----------------------

more time in which to formulate an offer.  Nor is there any evidence that the Church  



unreasonably rejected Castle Properties' "win/win solution."  The Ordinance suggests  



                                                                                                

that the City was interested in acquiring the Property to "provide parking and access" to  



                                                                                             

a greenbelt development "located directly across Cottonwood Creek."  And in a letter  



                 

dated July 8, 2011, the Church informed Castle Properties that "[i]t appears that the City  



of Wasilla is not interested in the cash payment you proposed in your letter."  



                    Having received Castle Properties' offer, the Church's only remaining duty  



                                                                                                           30  

was  to  employ  "commercially  reasonable  standards"  in  evaluating  it.      Roeland 's  



requirement that sellers use "commercially reasonable standards" to evaluate unique  



competing  offers  is  tied  to  the  seller's  "invitation  to  the  right-holder  to  submit  a  



                                               31  

commercially equivalent offer."                     



                                              

                    Castle Properties represented to the Church that its offer of $153,000 was  



                                                                                                                  

"equivalent" to the City's offer. Although Castle Properties based its offer on the land's  



                                                           

tax-assessed value, we have previously recognized that a tax assessment is "notoriously  

                                                        32  And Castle Properties never had the City Trade  

                                                                             

unreliable as  a criterion of true value." 



Land commercially appraised, which likely would have revealed that the Property was  



worth  more  on  the  open  market  than  the  tax  appraisal  of  $153,000.    Thus,  Castle  



                 

Properties should have known that its cash offer of $153,000 based on the tax-assessed  



          30         See Roeland, 214 P.3d at 349-50 (stating that after a right-holder submits  



an  offer,  "[t]he  seller  then   has  a  duty   to   use  commercially   reasonable  standards  to  

evaluate the two offers").  



          31  

                     Id.  



          32  

                                                                       

                    Disotell v. Stiltner , 100 P.3d 890, 895 n.10 (Alaska 2004) (quoting State  

v. 45,621 Square Feet of Land, 475 P.2d 553, 557 (Alaska 1970)) (internal quotation  

marks omitted).  



                                                             -18-                                                       6996
  


----------------------- Page 19-----------------------

                                                       

value of the City Trade Land may not have been "commercially equivalent" to the City's  



offer.   



                           

                   The Church's expert witness testified at trial that the fair market value of  



                                                              

the City Trade Land was $250,000.  And notably, Castle Properties' request for relief  



from this court asks for a judgment requiring the Church to sell the Property "for the  



appraised value of the City Land at $250,000 or for the Church-determined value of  



                                                                                

$291,000," which suggests that Castle Properties does not dispute that the market value  



                                                                   

of the City Trade Land was at least $250,000.  There was also testimony suggesting that  



$153,000 would have been inadequate for the Church to purchase suitable relocation  



land.  Accordingly,  the  superior  court  could  reasonably  conclude  that  the  Church's  



rejection of Castle Properties' offer was neither unreasonable nor in bad faith.  



                                                     

                   Castle Properties also appears to argue that the Church acted in bad faith  



                                                             

by favoring a land trade over a cash offer. Castle Properties contends this preference was  



motivated by the Church's "desire to avoid [] or at least indefinitely defer" paying one- 



half of the sale proceeds to the Ocean Park Community Church under the terms of a deed  



restriction  negotiated  with  the  Property's  original  donor.  But  the  Church  had  also  



                                                                                                    

encountered serious problems in finding suitable property that would meet its needs.  On  



                                           

balance, the record supports the superior court's conclusion that it was commercially  



                                                                             

reasonable for the Church to favor a land trade over cash payment, given the problems  



the Church had encountered in finding affordable property.  



V.        CONCLUSION  



                   We therefore AFFIRM the superior court's judgment.  



                                                            -19-                                                      6996
  

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