Old Henry Healthcare Real Estate, LLC v. Jewish Hospital & St. Mary's Healthcare, Inc. ( 2021 )

RENDERED: SEPTEMBER 24, 2021; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2019-CA-0832-MR
OLD HENRY HEALTHCARE REAL
ESTATE, LLC APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE MITCH PERRY, JUDGE
ACTION NO. 17-CI-006805
JEWISH HOSPITAL & ST. MARY’S
HEALTHCARE, INC. APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: ACREE, CALDWELL, AND K. THOMPSON, JUDGES.
THOMPSON, K., JUDGE: Old Henry Healthcare Real Estate, LLC (Old Henry),
appeals from the Jefferson Circuit Court’s grant of summary judgment to Jewish
Hospital & St. Mary’s Healthcare, Inc. (Jewish Hospital), regarding Old Henry’s
claim that Jewish Hospital breached its contract regarding Old Henry’s right of
first opportunity to repurchase property Old Henry previously sold to Jewish
Hospital. Because Old Henry never negotiated to buy the property during the
period of its right of first opportunity, it could not establish that Jewish Hospital
did not negotiate in good faith. Therefore, summary judgment was appropriately
granted to Jewish Hospital.
The core relevant facts are essentially uncontested. In 2011, Old
Henry sold about thirty acres of land in Jefferson County, Kentucky, to Jewish
Hospital for roughly $420,000 per acre.1 The sale was subject to the following
restrictions:
A. If Jewish Hospital elects to allow any of the
property . . . to be sold or developed for a non-clinical
use, Jewish Hospital will give Old Henry Real Estate
written notice sent by certified mail . . . (“Jewish Hospital
ROFO Notice”) of such intention, and Old Henry Real
Estate shall have a one time right of first opportunity (the
“Old Henry Right of First Opportunity”) to purchase or
to develop such property. Within five (5) business days
of such notification (the “ROFO Deadline”), Old Henry
Real Estate shall notify Jewish Hospital in writing . . .
that Old Henry Real Estate elects to exercise its Right of
First Opportunity. . . . In the event Old Henry Real
Estate exercises its Right of First Opportunity, Jewish
Hospital shall negotiate exclusively with Old Henry for
thirty (30) days to reach agreement on the purchase price
to be paid by Old Henry Real Estate or the development
plans to be utilized by Old Henry Real Estate[.] . . . If
the parties have not fully executed a contract of sale or
development contract within such period (the “ROFO
Negotiating Deadline”), Jewish Hospital shall be free to
sell the applicable property to a third party or to have the
1
By agreement, the deed was not issued for several years after the sales terms were reached.
-2-
applicable property developed by a third party, subject to
the Old Henry Right of First Refusal[.]
B. Subsequent to the ROFO Negotiating Deadline,
if Jewish Hospital makes or receives an offer acceptable
to Jewish Hospital to sell or purchase the applicable
property to a third party or otherwise makes or receives
an offer acceptable to Jewish Hospital to allow a third
party to develop the applicable property (the “Third Party
Offer”), Jewish Hospital shall give Old Henry Real
Estate written notice of the terms and conditions of such
offer(s), and Old Henry Real Estate shall thereafter have
the right to purchase or develop, as applicable, the
applicable property upon the same terms and conditions
as set forth in the applicable Third Party Offer[.]
In 2017, it became known that Jewish Hospital’s parent company had
placed most of its Louisville assets for sale, though the property at issue was not
then for sale. Old Henry’s representative, Kevin Cogan, met with Jewish Hospital
officials and reminded them of Old Henry’s rights. About two months later, Old
Henry’s attorney sent Jewish Hospital a letter offering to buy the property for
$120,000 per acre. Roughly a week later, Jewish Hospital sent a response stating
that it did not intend to sell the property but was aware of Old Henry’s contractual
rights.
Meanwhile, Jewish Hospital was debating whether to sell the property
and had engaged in discussions with a real estate broker, CBRE. CBRE prepared a
broker’s opinion of value for the property of $400,000 to $425,000 per acre. And,
-3-
at some point, Jewish Hospital had received at least one unsolicited offer to buy the
property for more than double the per acre amount offered by Old Henry.
In early November 2017, Jewish Hospital sent a letter to Old Henry
and its counsel stating that Jewish Hospital intended to sell the property and
inquiring whether Old Henry wished to exercise its right of first opportunity. That
letter from Jewish Hospital did not contain a proposed sales price. Old Henry soon
responded that it wanted to exercise its right of first opportunity. Old Henry’s
letter did not contain a proposed sales price; instead, it merely asked Jewish
Hospital to contact Old Henry’s attorney “so that we may commence in good faith
the negotiations[.]”
Jewish Hospital entered into an agreement with CBRE to make it
Jewish Hospital’s sales agent for the property, but the property was not listed on
the open market. A November 21, 2017, letter from CBRE to Jewish Hospital
memorializing their agreement notes that the property would have an initial listing
price of $400,000 per acre.
On November 29, 2017, CBRE sent Old Henry and its counsel a letter
stating that CBRE represented Jewish Hospital in the right of first opportunity
“negotiations” and CBRE had “determined that the fair market value for the
Property is $410,000.00 per acre.” The letter did not specifically ask for
counteroffers, instead it closed by stating “[i]f you are interested in purchasing the
-4-
Property at the stated offer price, or have any questions about the Property, please
contact the undersigned.”
Cogan, on behalf of Old Henry, informally met with a representative
of CBRE in early December 2017, but apparently only generalities were discussed,
and Cogan did not make any counteroffers. On December 19, 2017, CBRE sent
Old Henry and its counsel another letter opining that “the market does not support
selling the property for $120,000 per acre at this time.” That letter also stated that
“[a]s a courtesy to Old Henry,” Jewish Hospital was willing to extend the thirty-
day exclusive negotiations window under the right of first opportunity until
December 31, 2017. Id. The letter asked Old Henry and its counsel to contact
CBRE “as soon as possible to continue the good faith negotiations[.]” Id.
But the next contact from Old Henry to Jewish Hospital came on
December 21, via the filing of this lawsuit. Old Henry’s complaint characterizes
the November 29, 2017 letter from CBRE as an ultimatum, stating that Jewish
Hospital would only sell the property for the per-acre price listed. Old Henry
argues as a result “no negotiations were undertaken, even though Old Henry
attempted to negotiate with Jewish Hospital in good faith.” Old Henry alleged
Jewish Hospital had not honored the right of first opportunity and had not
negotiated in good faith.
-5-
In addition to filing its answer, in January 2018, Jewish Hospital sent
a letter to Old Henry and its counsel stating that “to avoid long and needless
litigation” Jewish Hospital was “putting its $410,000 [per acre] offer back on the
table, and will engage in exclusive negotiations with you [Old Henry] for the sale
of the Property for the next thirty (30) days. . . . Accordingly, the ball is in your
court to either accept Jewish Hospital’s $410,000 offer or to make a counter
proposal.” However, since Old Henry alleged in the complaint that Jewish
Hospital had not negotiated in good faith, Jewish Hospital asked any counteroffer
to be made in writing. Cogan responded via a letter saying he had “several ideas
about how the property might be developed, and would love to sit down with you
and discuss these ideas in detail.” But Old Henry never made a counteroffer.
Jewish Hospital filed its first motion for summary judgment in
February 2018; the circuit court ordered the parties to attend mediation, which
proved to be unsuccessful. The circuit court then denied the motion and discovery
ensued.
Jewish Hospital filed its second motion for summary judgment in
January 2019. The circuit court granted the motion a few months later, explaining
that the record “establishes as a matter of law that Jewish Hospital’s actions were
taken in good faith, and that it was actually Old Henry that refused to negotiate. . . .
-6-
The Court finds that Jewish Hospital did exactly what the deed restrictions
required of it.” Old Henry then filed this appeal.
As an initial matter, Jewish Hospital correctly notes that the argument
section of Old Henry’s opening brief fails to contain the preservation statements
required by Kentucky Rule of Civil Procedure (CR) 76.12(4)(c)(v). However,
though we caution counsel to comply scrupulously with the applicable rules
governing briefs in the future, we decline to impose any sanctions because Jewish
Hospital has not shown (or even directly argued) that Old Henry’s core arguments
on appeal were not preserved. And even a cursory glance at the record shows that
the issues before us are essentially the same as those contested in circuit court.
We now turn to the propriety of granting summary judgment to
Jewish Hospital. Under Kentucky’s familiar standards:
Summary judgment is appropriate “if the pleadings,
depositions, answers to interrogatories, stipulations, and
admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment as a
matter of law.” CR 56.03. An appellate court’s role in
reviewing a summary judgment is to determine whether
the trial court erred in finding no genuine issue of
material fact exists and the moving party was entitled to
judgment as a matter of law. Scifres v. Kraft, 916
S.W.2d 779, 781 (Ky.App. 1996). A grant of summary
judgment is reviewed de novo because factual findings
are not at issue.
Feltner v. PJ Operations, LLC, 568 S.W.3d 1, 3 (Ky.App. 2018).
-7-
In other words, “to avoid summary judgment, the party opposing its
entry [Old Henry here] must present at least some affirmative evidence to show
that there exists a disputed issue of material fact to be resolved at trial.” Bailey v.
Kentucky Lottery Corp., 542 S.W.3d 305, 307 (Ky.App. 2018). In determining the
propriety of granting summary judgment, “[w]e must also view the record in a
light most favorable to the nonmoving party and resolve all reasonable doubts in
that party’s favor.” Peterson v. Foley, 559 S.W.3d 346, 348 (Ky. 2018).
We begin our analysis with the question at the heart of this appeal:
Did the circuit court err when it granted summary judgment to Jewish Hospital?
Old Henry’s vehement arguments to the contrary notwithstanding, the answer is
no.
The crux of Old Henry’s argument is that Jewish Hospital violated the
covenant of good faith and fair dealing which is implicit in all contracts. Bailey,
542 S.W.3d at 309. That covenant “embraces, among other things, an implied
obligation that neither party will do anything to injure or destroy the right of the
other party to receive the benefits of the agreement.” 23 WILLISTON ON
CONTRACTS § 63:22 (4th ed. 1993). In short, “contracts impose on the parties a
duty to do everything necessary to carry them out.” Bailey, 542 S.W.3d at 309.
Of course, the implied covenant of good faith and fair dealing “does
not prevent a party from exercising its contractual rights.” Id. “[T]here is a
-8-
presumption that all parties act in good faith[.]” 23 WILLISTON ON CONTRACTS §
63:22. Thus, “bad faith cannot be inferred from the expected course of business,
that is, from the parties performing under the contract as the contract requires them
to do.” Id. Consequently, “there can be no breach of the implied promise or
covenant of good faith and fair dealing where the contract expressly permits the
actions being challenged, and the defendant acts in accordance with the express
terms of the contract.” Id.
We recognize that, as a general abstract principle, “whether particular
conduct violates or is consistent with the duty of good faith and fair dealing
necessarily depends upon the facts of the particular case and is ordinarily a
question of fact to be determined by the jury or other finder of fact.” Id. The
specific germane facts at hand, however, are not subject to reasonable dispute.
An analysis of whether a party complied with its contractual
obligations must begin with scrutinizing the contract at issue. Here, the right of
first opportunity clause required Jewish Hospital to do only two discrete things.
First, it had to send written notice of its intent to either sell or allow the property to
be developed for a non-clinical use to Old Henry.2 It is undisputed that Jewish
2
At times, Old Henry seems to be arguing that it, not Jewish Hospital, had the right to choose
whether to buy or develop the property. However, the right of first opportunity clause only
applies “[i]f Jewish Hospital elects to allow any of the property . . . to be sold or developed for a
non-clinical use[.]” (Emphasis added.)
-9-
Hospital complied with that obligation. Old Henry was then obligated to respond
in writing as to whether it intended to exercise its right of first opportunity. Again,
it is undisputed that Old Henry satisfied that obligation.
Second, the only other obligation imposed upon Jewish Hospital
under the right of first opportunity was to “negotiate exclusively with Old Henry”
for thirty days to try to “reach agreement on the purchase price[.]” Jewish
Hospital, via its agent CBRE, sent a letter to Old Henry offering to sell the
property for $410,000 per acre. Old Henry never counteroffered. Therefore, the
lack of negotiations lies at the feet of Old Henry, not Jewish Hospital.
Old Henry argues, essentially, that Jewish Hospital violated the
implied covenant of fair dealing and good faith by asking too much for the
property. But we do not perceive any actionable lack of good faith by Jewish
Hospital.
The restrictions do not require Jewish Hospital to obtain an appraisal
prior to offering the property to Old Henry. The restrictions do not require Jewish
Hospital to offer the land at any specific price. For example, the restrictions could
have required Jewish Hospital to offer the property to Old Henry at the price an
independent appraiser assigned the land. We will not “add terms not included by
the parties.” Snowden v. City of Wilmore, 412 S.W.3d 195, 208 (Ky.App. 2013).
Accordingly, the restrictions give Jewish Hospital the discretion to choose an
-10-
initial asking price. No bad faith can be demonstrated from Jewish Hospital setting
an initial asking price higher than Old Henry believes was reasonable.
An initial asking price simply allows a starting place for negotiations,
nothing more. Jewish Hospital had no obligation to set its initial asking price at
the price it was willing to sell the property, or to set its initial asking price for Old
Henry at the same asking price it planned to list the property, or to even offer any
initial asking price at all. Instead, Jewish Hospital apparently provided an initial
asking price which was tied to the broker’s valuation in an attempt to demonstrate
that the price Old Henry had offered earlier (before Jewish Hospital was willing to
sell the property) was outside the range it would consider. We cannot know for
sure the final sales price Jewish Hospital would have been willing to accept
because Old Henry never negotiated.
All the right of first opportunity required of Jewish Hospital was to
offer the property exclusively to Old Henry for thirty days. Jewish Hospital did so.
A party cannot be deemed to have broken its implied duty of good faith and fair
dealing by taking acts permitted by the contract. Bailey, 542 S.W.3d at 309.
And, crucially, for reasons it has never sufficiently explained, Old
Henry made no counteroffers whatsoever. It is peculiar for a party who declined
repeated entreaties to negotiate to later claim the other party refused to negotiate.
Maybe Jewish Hospital would have insisted on the price it offered, or maybe it
-11-
would have accepted a substantially lower price. We cannot know because Old
Henry never took any steps whatsoever to find out.
If Old Henry believed the sales price to be grossly inflated, it could
have waited and exercised its right of first refusal. That clause, after all, only was
triggered if the parties could not agree on a sales price during the thirty-day right of
first opportunity window and then only if Jewish Hospital agreed to accept an offer
from a third party. See 3 CORBIN ON CONTRACTS § 11.3 (2021) (explaining that
“the right [of first refusal] is subject to an agreed condition precedent, typically the
owner’s receipt of an offer from a third party and the owner’s good-faith decision
to accept it.”).
Thus, there is an implicit understanding that Old Henry would be able
to buy the property at fair market value pursuant to the right of first refusal clause.
If Old Henry was correct that Jewish Hospital’s valuation was too high, the market
would have demonstrated Old Henry’s wisdom to Jewish Hospital. After all, the
best way to determine a fair market price for anything is to see what a buyer is
willing to pay. But Old Henry short circuited the process envisioned by filing suit
before Jewish Hospital had the opportunity to try to sell the property to others.
Of course, Jewish Hospital was entitled to summary judgment on any
claims by Old Henry based upon Jewish Hospital’s allegedly violating the right of
first refusal because the conditions precedent to that clause being triggered were
-12-
not allowed to occur since Old Henry filed this action before Jewish Hospital was
able to seek, and accept, any offers from third parties. In other words, this action is
premature and unripe as to any claims that Jewish Hospital violated the right of
first refusal clause.
Finally, we find no error in the trial court’s requiring Old Henry to
release its lis pendens filed pursuant to Kentucky Revised Statute (KRS) 382.440.
Old Henry’s lis pendens did not create a lien against the property. Strong v. First
Nationwide Mortg. Corp., 959 S.W.2d 785, 788 (Ky.App. 1998). Instead, the
purpose of a lis pendens is “to give notice to subsequent purchasers of a cloud on
the title and to warn creditors of the need to seek other sources of security for their
debts.” Id. Here, however, the entirety of Old Henry’s action was resolved in
favor of Jewish Hospital. Old Henry still enjoys the right of first refusal but has no
current reason to keep a cloud on the title of the property.3
We deem all other arguments made by the parties to be redundant,
irrelevant, or unnecessary for a proper resolution of this appeal.
For the foregoing reasons, the Jefferson Circuit Court’s grant of
summary judgment to Jewish Hospital & St. Mary’s Healthcare, Inc. is affirmed.
3
This conclusion is consistent with Wood v. MEW Providential Tr., No. 2015-CA-000265-MR,
2017 WL 5045611, at *2 (Ky.App. Nov. 3, 2017) (unpublished), in which we also rejected the
argument, albeit without explanation, that the lis pendens should not have been ordered to be
released prior to the conclusion of the appellate process.
-13-
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Donald L. Cox Byron E. Leet
William H. Mooney Christopher W. Brooker
Louisville, Kentucky Sean G. Williamson
Louisville, Kentucky
-14-