Ramsey County District Court File No. 62-HG-CV-11-1623
Kenneth H. Fukuda, Chris E. Royal, Lorenz F. Fett, Sapientia Law Group, PLLC, Minneapolis, Minnesota (for respondent A&M Market)
Kevin S. Sandstrom, Eckberg, Lammers, Briggs, Wolff & Vierling, PLLP, Stillwater, Minnesota (for respondents West Side Groceries and Hamza Abualzain)
Chad D. Lemmons, Kelly & Lemmons, P.A., St. Paul, Minnesota (for appellants)
Considered and decided by Ross, Presiding Judge; Peterson, Judge; and Chutich, Judge.
Three disputing parties appeal after a trial over their interests in real property. Former commercial-property owners Khaffak and Tawfiq Ansari appeal from the district court's finding that they breached the terms of their lease with tenant Hamza Abualzain when they withheld information he needed to exercise his contractual right of first refusal to purchase the property before they sold it to A&M Market. New owner A&M Market argues that the district court erred by holding that the antimerger clause in the quitclaim deed it received from the Ansaris is not effective and that it therefore could not foreclose its mortgage on the property. And Abualzain argues that the district court erred by denying his posttrial motions for a corrected remedy. Because the evidence supports the district court's finding that the Ansaris withheld information necessary to allow Abualzain the opportunity to exercise his right of first refusal, we affirm in part. But we reverse in part and remand because the district court failed to recognize that A&M Market had no contractual obligation to provide the information to Abualzain; ordered unsuitable specific performance; erroneously construed the quitclaim deed's antimerger clause and also failed to address whether the release of the Ansaris' debt terminated the mortgage; and erred by finding that the Ansaris and A&M Market were unjustly enriched.
In March 2011, Khaffak and Tawfiq Ansari tried to sell their convenience store business. Two potential buyers-Hamza Abualzain, owner of West Side Groceries, and Ahmad al-Hawwari, owner of A&M Market-expressed interest. The Ansaris decided to sell to Abualzain. The terms of the business sale included a ten-year lease to Abualzain on the real property, an option for him to purchase the real property, and a right of first refusal allowing him the opportunity to purchase the property by matching the terms offered by any putative buyer. At the time, the Ansaris' title to the real property was subject to a $200, 000 mortgage held by Central Bank and nine judgment liens totaling about $59, 000.
Al-Hawwari began aggressively trying to acquire the business on behalf of A&M Market despite the sale to Abualzain. He first bought the mortgage from Central Bank for $120, 000. He next called Abualzain and threatened to evict him unless he gave him half ownership in the business. When Abualzain refused, al-Hawwari sought to purchase title to the property from the Ansaris, planning to foreclose on his own mortgage to eliminate the junior interests like the judgment liens and Abualzain's lease, effectively taking over the business. On April 7, 2011, he provided a purchase agreement in which he offered the Ansaris the release from their debt on the mortgage, $60, 000 cash, and a $20, 000 promissory note in exchange for a quitclaim deed. Khaffak Ansari gave Abualzain a copy of the yet-unexecuted purchase agreement on April 13.
Abualzain immediately attempted to exercise his right of first refusal to purchase the property, declaring that he wanted to match the offer. But he was unsure how to do so because the purchase-agreement offer to release the debt on the mortgage did not specify the payoff amount for the mortgage. He met with Khaffak Ansari, complaining that he had not been able to exercise his right of first refusal because of the lack of a clear price in the purchase agreement. Ansari replied that he had already accepted the A&M Market offer because he needed cash quickly before leaving the country.
Abualzain continued in vain trying to exercise his right of first refusal. Abualzain's attorney asked the Ansaris four times for the mortgage payoff amount. Four days after the first inquiry, the Ansaris' attorney referred Abualzain's attorney to A&M Market's attorney. But A&M Market's attorney also did not disclose the amount. On April 22, A&M Market's attorney contacted the Ansaris' attorney to schedule a closing, stating that Abualzain "has not duly exercised the option/right of first refusal for the property." The closing occurred on April 26. The Ansaris tendered a quitclaim deed that included an antimerger clause, providing that A&M Market's acquired fee interest and preexisting mortgage interest "shall be kept and held separate and distinct" and that "the Mortgage [will] remain fully withstanding and enforceable in accordance with [its] terms."
A&M Market acted immediately after the closing to evict Abualzain by sending him a letter demanding that he vacate the premises and denying that it had any obligation under his lease with the Ansaris. It next filed an unlawful detainer action in district court. Abualzain answered with a counterclaim and crossclaim, alleging that the Ansaris breached his lease right of first refusal and that both parties had been unjustly enriched. ...