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LEO COLAROSSI AND SHIRLEY COLAROSSI v. ERNEST N. FABER AND FRANCIS J. FABER (12/03/86)

SUPERIOR COURT OF PENNSYLVANIA


filed: December 3, 1986.

LEO COLAROSSI AND SHIRLEY COLAROSSI, HIS WIFE, APPELLANTS,
v.
ERNEST N. FABER AND FRANCIS J. FABER, CO-EXECUTORS OF THE ESTATE OF CECILIA T. FABER AND EMERYVILLE TRUCKING, INC., A CORPORATION, APPELLEES

Appeal from the Decree entered July 16, 1985 in the Court of Common Pleas of Allegheny County, Civil No. GD 78-14396

COUNSEL

Joseph J. Bonistalli, Pittsburgh, for appellants.

Michael R. Ford, Pittsburgh, for Faber, appellees.

Emilio P. Fastuca, Pittsburgh, for Emeryville, appellee.

Brosky, Kelly and Roberts, JJ.

Author: Kelly

[ 359 Pa. Super. Page 260]

This is an appeal from the trial court's determination as to which of two leases presents a superior right to possession of the leasehold property. Appellants claim right of

[ 359 Pa. Super. Page 261]

    possession by way of a lease entered into in 1968 by the owner/lessor and appellant's assignors-in-interest. Appellees claim not merely the superior right of possession, but also right of first refusal, by way of a 1958 lease agreement between the owner's attorney-in-fact and appellee's assignors-in-interest. This appeal arises from a July 16, 1985 Order dismissing appellants' exceptions, and entering as final, on August 3, 1983, the Decree Nisi awarding appellees the right of first refusal to buy the leasehold.

The action commenced when Leo and Shirley Colarossi, appellants herein, filed a complaint in equity claiming superior right to possess certain real property situated in Marshall Township, Allegheny County. Appellees, Ernest and Francis Faber, are the sons of Cecilia T. Faber, the deceased owner of the disputed property. Appellee Emeryville Trucking, Inc., was the assignee of a leasehold interest in the property. Appellees denied appellants' claims of superior interest in the property. After a bench trial, the Honorable Ralph H. Smith, sitting as chancellor, entered an adjudication and Decree Nisi, which were embodied in the court's Order of August 3, 1983, dismissing appellants' complaint. Appellants' exceptions were denied on July 5, 1985 and the final decree entered on July 16, 1985. Appeal to this court timely followed.

The chancellor found the following to be the dispositive facts in this matter. Cecilia T. Faber was the owner of record of the previously mentioned plot of real estate in Allegheny County. On April 9, 1958 Farber signed a written power of attorney, appointing Clarence G. Barth, hereinafter Barth, as her attorney-in-fact. The pertinent portions of this agreement read as follows:

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I, Cecilia T. Faber, have made, constituted, and appointed, and by these presents do make, constitute and appoint Clarence G. Barth of Ross Township, Pennsylvania, Attorney-at-law, my true and lawful attorney, for me, and in my

[ 359 Pa. Super. Page 262]

    name, place and stead, to let and demise my real estate in Marshall Township, Allegheny County, Pennsylvania, for the rental of $200.00 per month; Giving and granting unto my said attorney full power and authority to do and perform all and every act and thing whatsoever, requisite and necessary to be done in and about the premises, as fully to all intents and purposes as I might or could do, if personally present; hereby ratifying and confirming all that my said attorney shall lawfully do or cause to be done by virtue hereof.

(Emphasis added).

On May 12, 1958 Faber, by Barth, entered into a lease with West Penn Forwarding Company, hereinafter West Penn, to lease for a period of 25 years the property in question. Attached to the lease was a piece of paper entitled "Exhibit B" which provided that the lease agreement could be sublet or assigned. It further provided that:

In consideration of the execution of this lease and rentals to be paid hereunder lessor agrees that at all times during the term of this lease or extension thereof, lessee shall have the right to buy the leased property in the event lessor wishes to sell it. Before selling the property to anyone else, lessor will first offer to sell it to the lessee at the price lessor is willing to accept, such offer to be made in writing and mailed to lessee's last known address.

(Emphasis added). Both documents were signed by Barth, "attorney-in-fact for Cecilia T. Faber."

Thereafter, in 1965, West Penn, by written document, assigned its lease to Wexford Motor Sales, Inc., hereinafter Wexford. The assignment agreement further stated:

5. It is a condition of THIS AGREEMENT:

     c. That both the written Power of Attorney, and the Lease and Exhibit "B", being Schedule "A" hereof, will be accepted by the Recorder's Office of Allegheny County, Pennsylvania, for recording, prior to the consummation

[ 359 Pa. Super. Page 263]

    of this agreement on or before August 1, 1965.

The lease, Exhibit "B" and assignment were never recorded. (Trial Ct.Op. 8/3/83 at 7).*fn1

The leasehold interest changed hands yet again. Wexford, by written agreement, assigned its interest to Frank Rezzetano on April 15, 1971. Rezzetano elected, as per the original agreement, to extend the lease period to April 30, 1978. Rezzetano died on September 30, 1976, and his estate assigned his interest to appellee Emeryville.

On April 25, 1978, just prior to the termination of the leasehold, Faber, by way of Barth's successor, offered to sell to Emeryville the subject property for the price of $175,000. The offer was accepted on April 27, 1978, and the parties entered into a written agreement of sale and purchase on April 28.

However, approximately ten years prior to this, Faber, on November 11, 1968, entered into a lease for the same property with the Sun Oil Company, hereinafter Sun, for a term of fifteen years with options to renew for five-year periods. A rental fee of $50.00 was to be paid monthly commencing February 1, 1969, until thirty days after Sun received possession of the premises. Once possession was received, the rental fee was to increase to $250.00 monthly. Sun knew of the existence of the prior Faber-West Penn lease and had seen a copy of that lease including Exhibit B [which gave the lessee the right of first refusal to purchase the property in question.] (N.T. 172). The Sun Oil lease contained a right-of-first-refusal clause as well as an option-to-purchase clause:

(c) that Company shall have the option to purchase at any time during the term of this lease or any renewal or extension thereof, the said leased premises, including any and all rights, privileges and easements on adjoining lands as herein set forth, for the sum of ONE HUNDRED

[ 359 Pa. Super. Page 264]

FIFTY THOUSAND AND 00/100 Dollars ($150,000.00) . . .

(d) In the event the Lessor desires to sell the within demised premises or other property owned by Lessor of which the demised premises are a part at any time during the term hereof or any renewal or extension thereof, and receives therefore a bona fide offer of purchase acceptable to Lessor, Lessor shall notify Company in writing of said offer and attach thereto a photostatic copy of offer of purchase and Company shall have the right to meet said bona fide offer by giving Lessor notice in writing of its intention so to do within sixty (60) days after receipt of said offer in writing. . . .

(Emphasis added). This lease was recorded in the Deed's office of Allegheny County on January 30, 1969. Sun assigned the lease to the appellants on April 1, 1974. This assignment also was recorded in the Deed's office. All rental payments under this lease were paid and accepted by Faber.

The trial court further found as fact that:

11. Emeryville had, prior to April 1, 1978, both actual and constructive knowledge of the Faber-Sun lease and its terms and conditions.

12. Plaintiffs [the Colarossis], at all times since the date of said assignment to them of the Faber-Sun lease, had performed all conditions precedent incumbent upon them and have been and still are ready and willing to comply with the terms of the lease if the defendants comply.

Appellant/plaintiffs, the Colarossis, at trial, and now on appeal, contend that theirs is the superior right of possession and that, therefore, they are entitled to immediate possession of the leasehold property, and are entitled to dispossession damages for the intervening months they have been denied possession. The trial court, however, found that appellee Emeryville, as assignee of the West Penn lease, had the superior right to possession and to purchase the premises.

[ 359 Pa. Super. Page 265]

Appellants raise several issues on appeal. We shall address these issues by analyzing each transaction in the chain of title.

I. Power of Attorney

The chancellor concluded that the power of attorney granted Barth by Faber included the power to grant any lessee the right of first refusal of the leased premises. The chancellor also questioned the standing of the appellants as third parties to challenge the agreement.

We note initially that:

Our scope of review of an adjudication in equity is well established. A chancellor's findings of fact, affirmed by the court en banc, have all the force and effect of a jury's verdict and will not be disturbed on appeal if there is sufficient evidence to sustain such findings. Piercing Pagoda, Inc. v. Hoffner, 465 Pa. 500, 351 A.2d 207 (1976) . . . It is equally well settled that a chancellor's conclusions, whether of law or ultimate fact, are always reviewable as they are no more than his reasoning from the underlying facts. Chambers v. Chambers, 406 Pa. 50, 176 A.2d 673 (1962).

Village Beer and Beverage, Inc. v. Cox and Co., Inc., 327 Pa. Super. 99, 102, 475 A.2d 117, 118 (1984).

First, as potential successors to the leasehold, appellants are clearly real parties in interest. Secondly, the scope and effect of the authority granted by Faber to Barth by virtue of the power of attorney is an issue worthy of closer scrutiny than afforded by the trial court.

Our analysis of the chain of title of possessory interests in this property must necessarily begin with determination of the scope of Barth's authority as attorney-in-fact. Therefore, our analysis revolves around agency principles of law. The specific agency relationship presented herein involved the grant to Barth of a power of attorney. Such powers are to be strictly construed; the existence of a limitation upon the authority conferred will also be strictly construed. Fierst v. Com. Land Title Ins. Co., 499 Pa. 68, 451 A.2d 674 (1982). Nonetheless, "[p]owers expressly granted will not

[ 359 Pa. Super. Page 266]

    be restricted by implication nor will a construction be made which will effectively defeat the very purpose of the agency." Nuzum v. Spriggs, 357 Pa. 531, 533, 55 A.2d 402, 403 (1947).

In creating the agency relationship herein, Faber granted Barth the power to "let and demise" the subject property. A demise is defined as:

A conveyance of an estate to another for life, for years, or at will; most commonly for years; a lease, 1 Steph. Comm 475. Priddy v. Green, Tex.Civ.App., 220 S.W. 243, 248. Originally a posthumous grant; commonly a lease or conveyance for a term of years; sometimes applied to any conveyance, in fee for life, or for years. Pub.St.Mass. 1882, p. 1289.

Black's Law Dictionary 388. (5th ed. 1979). Thus to "let and demise" is synonymous with "to lease".*fn2 Barth did lease the premises to West Penn and thus acted within the permissible scope of his authority.

Barth, however, in addition to giving West Penn a lease agreement, also gave West Penn a contract, "Exhibit B", purporting to give West Penn a right of first refusal.*fn3 A grant of the right of first refusal is a contract contemplating the eventual or potential sale of the leased premises.

[ 359 Pa. Super. Page 267]

A similar "right of refusal," as it is commonly called, has been analyzed by Professor Corbin in the following terms: "This contract created no option in either party. If [a third party] should make an offer the owner of the land was privileged not to accept it, and also not to make any offer to the promisee. But the owner was bound by duty not to accept the offer of the [third party] without first giving an option to the promisee." Corbin, op. cit. at p. 363.

Gateway Trad. Co. v. Children's Hospital of Pittsburgh, 438 Pa. 329, 265 A.2d 115 (1970). By contrast, under an option to purchase, the optionholder has acquired the power to accept an offer (irrevocable during the option period) by an appropriate means, thereby effecting a binding contract. See Corbin, Contracts (1952), Chap. 11; Restatement (Second) of Contracts, § 25 (1979). The irrevocable offer is usually for a fixed amount, open for a fixed and specified option period. An examination of "Exhibit B" reveals that there was no certainty of terms, either as to price or as to option period, that would transform the language into an option to purchase.

Although this particular "right of refusal" does not mention the existence of any third party making a first offer, it is clear that Barth was purporting to make a promise on Faber's behalf, to offer to sell the property to the leaseholders before selling to any other party. Appellant argues that the language of Exhibit B created an option to buy and that this option is too vague to be capable of specific performance. We disagree with appellant's interpretation. Exhibit B grants a right of refusal, not an option to buy; such a right of refusal is capable of being enforced by a court as a valid grant of property interest. See Atlantic Refining Co. v. Wyoming National Bank, 356 Pa. 226, 51 A.2d 719 (1947).

Regardless of whether Exhibit B grants a right of refusal or an option to purchase, we must narrowly construe the language of the grant of authority in the power of attorney. We cannot expand the specific purpose for the grant, to let

[ 359 Pa. Super. Page 268]

    and demise the property, to include an agreement to also negotiate the property's potential sale. Power to lease and power to sell are necessarily separate and distinct.*fn4 We conclude that Barth's action of granting West Penn a right of first refusal was unauthorized by Faber.

We must next determine whether this unauthorized act was ratified by Faber. When a contract is entered into by parties lacking authority to contract, that agreement may be voided; however, a principal may ratify an act of an agent, or may modify the original agency relationship, by acquiescing to the new exercise of authority.

A modification of an agency relationship may occur where a principal acquiesces in conduct not included in the original authorization. See Restatement (Second) of Agency, supra, §§ 43, 94. The Comment to Section 43 adds: 'Persons ordinarily express dissent to acts done on their behalf which they have not authorized or of which they do not approve.' Restatement (Second) of Agency, supra, at 133.

Scott v. Purcell, 264 Pa. Super. 354, 363, 399 A.2d 1088, 1093, aff'd 490 Pa. 109, 415 A.2d 56 (1979). See also Restatement (Second) Contracts §§ 7, 12. However, ratification is conditioned on the premises that the act to be ratified is lawful and that the principal is fully informed by the agent as to the particulars of the act. Scott, supra, 264 Pa. Superior Ct. at 366 n. 4, 399 A.2d at 1094 n. 4; Restatement (Second) Agency § 98.

We conclude that Faber ratified Barth's actions in granting a right of refusal to West Penn. First, Faber never disavowed Barth's actions during his lifetime;*fn5 silence on

[ 359 Pa. Super. Page 269]

    her part signifies acquiescence. See Turnway Corp. v. Soffer, 461 Pa. 447, 336 A.2d 871 (1975). Secondly, Faber had knowledge of the terms of the West Penn lease in 1968 when she and Barth conducted negotiations with the Sun Oil Company. (N.T. at 158-162). Third, Faber clearly was aware of, and endorsed Barth's actions when, in 1978, she offered the premises for sale to assignee, Emeryville.

Faber had knowledge of the facts of her agent, and the acts of her agent were lawful. Faber's actions over a twenty year span are inconsistent with any purpose other than ratification of the contract; accordingly, we find Faber ratified the actions of her agent, Barth. Thus, while we find the chancellor did misconstrue the power of attorney, as appellant claims, nonetheless that misconstruction is harmless error due to our finding of ratification.

II. Assignment of Lease to Wexford Motors

Appellant next contends that the assignment of the lease from West Penn to Wexford Motors was improper and without effect because of failure of a condition precedent. Specifically, appellants argue that the failure of Wexford to have the lease and Exhibit B recorded defeated the transfer of interest in the leasehold. We are thus called upon to construe the operative language of the assignment: "It is a condition of this agreement . . . that both the written power, and the lease and Exhibit B . . . will be accepted by the Recorder's Office of Allegheny County . . . prior to the consummation of this agreement on or before August 1, 1965." None of the documents were ever recorded by Wexford.

The general rule remains that where an act or event mentioned in a contract is not expressly made a "condition precedent," it will not be construed, unless such clearly appears to be the intention of the parties . . . . As our Supreme Court has held, the actions of the parties pursuant to an agreement between them are significant and substantial evidence in determining whether they intended to be bound by the agreement.

[ 359 Pa. Super. Page 270]

Q. No. I meant Mr. Rezzetano's, a sale to Mr. Rezzetano [the tenant in possession under the West Penn lease].

You said that was not an issue with you?

A. No, sir.

Q. It was not an issue with you because you didn't think he had the ability to go through with the sale, correct?

A. That's correct.

Q. Because he was financially strapped?

A. Yes, sir.

(N.T. at 188). Sun apparently overlooked the possibility that the West Penn lease could be assigned to a party capable of purchasing the property. To Sun's misfortune, this possibility became reality; the prior lease did not expire, but rather, the right of refusal was exercised. Consequently, the Sun lease never became executory.

This is the only interpretation consistent with the language of both lease documents, the intent of the parties, and Sun's knowledge of the prior lease. Appellants, as Sun's assignees, had both constructive and actual knowledge of West Penn's lease. Appellants' interest in the leased premises were subject to the superior rights contained in the West Penn lease.

IV. Faber's Offer of Sale to Emeryville

Appellants argue that Faber's grant of the right of first refusal to Sun under the second lease signifies her repudiation of the previous West Penn lease. We disagree. As previously noted, Faber did not draft the agreement; Sun drafted the lease. Thus we cannot impute to Faber any such intention of repudiation. Rather, as stated previously, Faber signed a lease with ambiguous provisions, which, construed against the draftor, Sun, never became executory due to the sale of the premises to Emeryville. West Penn Realty Co. v. Acme Markets, Inc., 224 Pa. Super. 202, 303 A.2d 836 (1973).*fn6

[ 359 Pa. Super. Page 273]

Appellants also argue that Faber should be estopped from executing the agreement of sale with Emeryville in light of the "intervening, fully paid, recorded rights of Sun Oil Company and its successors." Appellant's Brief at 27. However, because we hold that Sun's intervening rights were conditional and never became executory, we find no need to discuss the issue of estoppel. As to appellants' contention that they are entitled to dispossessory damages, we find this argument moot, in light of the determination that Sun had no right to enter into possession of the premises.

Accordingly, we affirm the decree of the trial court.

Disposition

Accordingly, we affirm the decree of the trial court.


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