Tadros v. Middlebury Medical Center, Inc
In Tadros v. Middlebury Medical Center, Inc. (Conn. 2003) 263 Conn. 235, 820 A.2d 230, the holder of a mortgage brought an action for foreclosure against the debtor and the court appointed a committee to administer the foreclosure sale.
The trial court held that because of a right of first refusal retained by the party who conveyed the property to the debtor, that party's assignee was entitled to purchase the property from the successful bidder at the foreclosure sale.
The Connecticut Supreme Court reversed:
"Under the plain language of the terms of the agreement . . ., the original grantor, and thereafter, his assignee, SNEMS, could exercise the right of first refusal only if one of two conditions were met. First, SNEMS' right would be triggered if the grantees 'formed the intention' of selling the premises. Second, SNEMS could exercise its right of first refusal if the grantees accepted a bona fide, written offer to purchase the property. Neither of these conditions was met in the present case. The first condition was not met because there is no evidence that the debtor formed the intention to sell the property. The debtor did not sell the property; rather, the court- appointed committee was the seller for the purpose of the foreclosure action brought by the mortgage holder. Moreover, common sense dictates that, because the mortgage holder was forced to bring a foreclosure sale for nonpayment, the sale was not voluntary and the debtor had no intention to sell the property. The second condition to the exercise of the right of first refusal, namely, the acceptance of a bona fide, written offer to sell the premises, also was not met. The committee did not accept a bona fide, written offer to purchase the property; rather, it sold the property in accordance with a court order to conduct a foreclosure sale. Thus, because the committee did not accept any bona fide, written offer to purchase the property, the second condition to the exercise of SNEMS' right of first refusal did not occur. On the basis of the plain language of the deed retaining the right of first refusal, therefore, the right did not apply within the context of the foreclosure sale conducted by the committee." (Id. at p. 235.)
The court in Tadros further explained that "as a policy matter, acceptance of the argument that the holder of a right of first refusal can exercise that right in the context of a foreclosure sale, would interfere with the process of liquidation established in our procedures for foreclosures by sale." (820 A.2d at p. 236.)
This is because "the existence of a right of first refusal could detrimentally affect the number of bidders at the sale and thus potentially affect the bid price obtained for the property. Similarly, potential bidders likely would be discouraged from bidding at auctions when they are aware that any successful bid can be matched by a holder of a right of first refusal after completion of the auction." (Ibid.)