Rappaport v. Banfield

Rappaport v. Banfield, No. 80-2-03 Wncv (Teachout, J., May 1, 2003)

[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original.
The accuracy of the text and the accompanying data included in the Vermont trial court opinion
database is not guaranteed.]

STATE OF VERMONT
WASHINGTON COUNTY, SS.

JEROME RAPPAPORT )
)
VS. ) Washington Superior Court
) Docket No. 80-2-03 Wncv
LAURA BANFIELD AND )
DUANE WELLS )

Findings and Conclusions
Motion for Preliminary Injunction

Plaintiff Jerome Rappaport, holder of a right of first refusal on a portion of the lands
owned by Defendant Laura Banfield, seeks to enjoin the sale of all her real estate to a
prospective purchaser, Defendant Duane Wells, on the grounds that the price allocation between
the two contracts for the sale of her property (portions of her holdings which are and are not
subject to his right of first refusal) is unjustifiable, and deliberately and wrongfully designed to
defeat his exercise of the right he holds. He seeks a preliminary injunction and court
intervention to correct the alleged disproportionate price allocation.

This matter came before the court for hearing on the request for a preliminary injunction
on April 7, 8, and 17, 2003. Plaintiff is represented by Michael Marks, Esq. Defendant Laura
Banfield is represented by Oreste V. Valsangiacomo, Esq., and Defendant Duane Wells is
represented by Bernard D. Lambek, Esq.

Plaintiff Jerome Rappaport is a resident of Florida, and the owner of approximately 600-
700 acres of farmland located in East Montpelier, Vermont, which he has acquired in various
purchases starting in 1970. He is a 1949 graduate of Harvard Law School who has been a
successful lawyer and real estate developer in Boston. He has maintained farming operations on
his East Montpelier lands, and has cherished the time he spends in Vermont for a variety of
reasons. A portion of his property is adjacent to lands and a house that was owned by Ed and
Laura Banfield until Ed Banfield died some time ago, and is now owned solely by Laura
Banfield. He met Ed Banfield in 1963 when he was a student working on a Masters in Public
Administration at the Littauer Center (now the Kennedy School of Government) in Cambridge,
Massachusetts, and Ed Banfield was his professor. A strong relationship developed, and Mr.
Rappaport visited the Banfields in Vermont regularly at their second home property in East
Montpelier over many years. For several years he lived in the Banfields’ Vermont house for part
of each year. Mr. Rappaport and the Banfields shared a love for their properties in Vermont and
held other interests in common as well as having a long term friendship.

Defendant Laura Banfield is a resident of New York, New York, and the present owner
of the property in East Montpelier, Vermont that is the subject of this suit. She is the surviving
spouse of Ed Banfield. It has become difficult for her to travel to Vermont to enjoy the
property, and she wishes to sell it. The property consists of a house on a 1.8 acre parcel (Parcel
4), an adjacent 1.0 acre parcel (Parcel 3), another adjacent parcel of 25.1 acres (Parcel 2), and a
fourth parcel across the road consisting of 50.4 acres (Parcel 1), for a total of 78.3 acres. The
house is an elegant 1790 federal house and is situated about 60-75 feet away from the boundary
line of the 25.1 acre parcel. From the house one looks out over the 25.1 acre piece, which is
open land in agricultural use, toward spectacular long distance views of open land with the
Worcester range, Camel’s Hump, and other mountains in the background. There is also a pond
on the 25.1 acre piece. The 50 acres across the road and on the opposite side of the house is
mostly woods and there is no view in that direction. Ed and Laura Banfield spent considerable
time at the property over the years. They purchased the house parcel in 1951, the 50 acres across
the road in 1953, the one acre adjacent to the house parcel in 1955, and the 25.1 acres which
provides the spectacular views in 1963. While the acreages and boundaries can now be
identified because of a recent survey, none of the parcels were surveyed before November 2002.
The property was listed in town records as consisting of 84 acres.

Defendant Duane Wells is a resident of East Montpelier, Vermont. He grew up and
attended school and college in central Vermont, and liked the Banfield property from the time he
was a child, when he called it the “Captain Kidd place.” He was an elementary school principal
before becoming a builder in 1975, which has been his occupation since. He met the Banfields
in approximately 1980 when he did some work for them on their house. He was employed by
them between 1980 and 2002 to work on their house and pond at various times. He shared with
them their attachment to the property and became friends with them. He found them interesting
people and enjoyed their guests. The Banfields rented their house to his present wife for a short
period of time when she was in transition, and she is also fond of the property. He had expressed
to the Banfields his interest in buying their property at some point.

In 1963, the Banfields bought the 25.1 acre piece (then unsurveyed) from Alfred
Knowles, a local farmer who used it for animals and crops. Mr. Knowles conveyed it to the
Banfields subject to a reserved right of first refusal and agricultural easement. The conveyance
from Knowles to Banfield is dated October 31, 1963 and recorded in Volume 20 at Page 499 of
the East Montpelier Land Records. The reservation of the right of first refusal is set forth in the
following language:

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 In the event of the sale of this property by the grantees, their heirs
or assigns, the grantors and their heirs and assigns are to have the
first right to purchase said property at the highest price offered to
the grantees and their successors and assigns, said right to be
exercised within thirty days after notice in writing of any offer to
purchase.

The conveyance also reserved the following easement interest:
The grantors herein for themselves and their heirs, successors and
assigns, reserve the right to grow and harvest crops and to pasture
cattle on the land hereby conveyed . . .The right of grantors and
their heirs and assigns to grow and harvest crops and to pasture
cattle shall not be interpreted to prevent the erection by the
grantees or their heirs or assigns of a permanent structure on the
land so conveyed.

In 1969 or 1970, the Banfields learned that a real estate developer was seeking to buy the
balance of the Knowles farm, adjacent to their 25.1 acres, and they approached their friend Mr.
Rappaport with the opportunity to buy the Knowles farm. In a warranty deed dated March 23,
1970, and recorded in the Town of East Montpelier Land Records, Alfred W. and Pearl M.
Knowles conveyed to Jerome Rappaport certain land and premises in the Town of East
Montpelier adjacent to the Banfields’ lands. Included in this conveyance was the Knowles’
previously reserved right to harvest crops and pasture cattle on the land that the Banfields had
bought in 1963 adjacent to their house, and the right of first refusal on the same lands. Thus, Mr.
Rappaport held, and still holds, the right of first refusal on the 25.1 acre parcel, as well as the
right to use that parcel to harvest crops and pasture cattle. He has done so and continues to do
so. During the 1980's, his farms were used for the breeding of cattle, and his animals fetched
very high prices at auctions, although overall the farms were not profitable. He takes good care
of his farmlands, and the 25.1 acres has remained open and in active agricultural use. The
Banfields benefitted from Mr. Rappaport’s ownership in that his agricultural use not only
maintained the views by keeping the land open, but it maintained the agricultural character of the
landscape surrounding their property.

Mr. Rappaport erroneously believed that he held a right of first refusal on all of the
Banfield property (which, as noted above, was unsurveyed), and not just the acreage that the
Banfields acquired in 1963. He had always been interested in acquiring the entire Banfield
property at such time as they no longer wished to own it. Not only did he have personal and
emotional attachments to the Banfield property itself, but he was deeply attached to his East
Montpelier land, and the Banfield property would link up two separate farms he had, creating
continuity in his holdings. The 25.1 acre parcel in particular had previously been part of the
Knowles farm, of which he owned the remainder.

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 In 2002 (which the court infers was after Ed Banfield had died and when Laura Banfield
was not using the property as much), Mr. Rappaport hired James Thetford, an experienced
central Vermont appraiser, to do an appraisal of the entire Banfield property. Mr. Thetford
appraised it as of February 22, 2002 at $300,000. Mr. Rappaport offered to buy it for that
amount.

In August of 2002, Laura Banfield told Mr. Wells of Mr. Rappaport’s offer, and asked
him what he thought. He said he thought it was worth more than that, and suggested that she
obtain an appraisal or market information on her own behalf to determine its value. Laura
Banfield contacted real estate broker Virginia Andrews of Century 21 Jack Associates. Ms.
Andrews suggested listing it for $450,000, to which Laura Banfield agreed, and Ms. Andrews
prepared a single listing agreement covering all of the Banfield land. There was no separate
listed price established for the 25.1 acres that was subject to the Rappaport right of first refusal
and agricultural easement. An addendum to the listing agreement, dated August 23, 2002,
provided that three potential purchasers would have the opportunity to purchase the property
prior to the property being submitted to the Multiple Listing Service at a reduced commission of
3%. The three potential purchasers listed were Jerry Rappaport, Danis Regal, and Duane Wells.

Following the execution of the listing agreement, Ms. Andrews called the three to notify
them that they had until September 30th to make an offer before the property would be listed with
the Multiple Listing Service. This date was later extended several times. Danis Regal never
became involved in making a bid.

Ms. Andrews and Mr. Rappaport had their first direct conversation on September 19,
2002, although messages were exchanged prior to that date through Mr. Rappaport’s assistant.
Ms. Andrews mentioned needing to locate Mr. Knowles because of the outstanding right of first
refusal, and Mr. Rappaport was the one who informed her that he had acquired that right from
the Knowles. Mr. Rappaport understood from the conversation that Ms. Andrews intended to
obtain the highest possible offer from one of the three initial offerees, and then take that price to
the holder of the right of first refusal. While he wished to buy the property, he believed that he
had the right to buy the entire property at the highest offer anyone else would make, and he did
not want to bid against himself, and increase the price unnecessarily by bidding too high. He
also knew that any third person buying the property would take it subject to his agricultural
easement on the open fields, and would only be able to locate one structure on that portion and
not have full control over it, and he calculated that the easement substantially affected the market
value of the property. He did not believe that the property was worth the $450,000 for which it
was listed. He told Ms. Andrews that he was interested but not at $450,000, and he noted that
the house needed work, the property was on a back road, and the agricultural easement allowed
only one structure to be built. At this time, the property had not yet been surveyed. He said he
was willing to pay $400,000. He mailed Laura Banfield a copy of the appraisal from Mr.
Thetford showing a fair market value of $300,000, as well as a summary of the fact of the
restrictions, his right of first refusal, and his interest in buying the property, recognizing that it
was his obligation to match the highest offer. At that time he erroneously believed that he held a

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right of first refusal on the entire Banfield property. This misunderstanding was confirmed, not
dispelled, by the fact that Ms. Andrews invited offers on the whole property as a single unit, and
not just a particular portion. Thus he continued to assume that once an offer was received for the
whole Banfield property, he would have an opportunity to exercise his right of first refusal.

Mr. Rappaport received a letter dated September 30, 2002 from Laura Hoguet, Laura
Banfield’s daughter and a New York attorney, who notified him that the sale was being handled
on Laura Banfield’s behalf by Vermont attorney Thomas Koch under a power of attorney and
Ms. Andrews as realtor, and she asked him not to contact Laura Banfield, but to deal with Mr.
Koch and Ms. Andrews.

In the meantime, when Duane Wells was notified of the availability of the property for
sale, he went to the land records to research Laura Banfield’s holdings. He discovered that an
agricultural easement and right of first refusal applied only to one portion of the land, between
10-30 acres in size. At that time he did not know that it was held by Mr. Rappaport. He
suggested that the property be surveyed, and during September and October, the Banfield
property was surveyed.

On October 10, 2002, Mr. Rappaport and Ms. Andrews had a telephone conversation.
Mr. Rappaport wanted to know Laura Banfield’s response to his $400,000 offer. Ms. Andrews
told him that of the three parties contacted, one other was interested and she expected to receive
an offer once the survey was completed. Mr. Rappaport then said that his $400,000 offer was off
the table. He questioned whether the other person knew that only one structure could be built on
the land on which he held an easement, and he stated that he intended to exercise his right of first
refusal. At this time, he continued to believe that he held a right of first refusal on all of the
Banfield property. He noted to Ms. Andrews that she would have to send him any offer that was
received. Ms. Andrews replied that she was aware that he had a right of first refusal. It is
unclear whether she clarified in that conversation that his right only applied to a portion of the
acreage, and not to the remainder, or whether she was even clear about that herself.

In early November of 2002, Mr. Wells received a preliminary draft of a survey of the
parcel. Following discussions with the surveyor, Mr. Wells understood that the Rappaport right
of first refusal and agricultural easement only applied to the 25.1 acre parcel that is shown as
Parcel 2 on the survey. Mr. Wells also understood that the1.0-acre parcel with a house, a 1.8-
acre parcel, and a 50.4-acre parcel were not subject to the right of first refusal or agricultural
easement. Mr. Wells knew that he had to make two offers because of the right of first refusal—
one for the 25.1 acres subject to the right of first refusal, and another for the balance of the
property. Ms. Andrews was away, but Mr. Wells left a message with her colleague that he
wanted to make an offer for $400,000 under two separate contracts, one for the 25.1 acres and
the other for the remainder. When Ms. Andrews returned, based on the message, she prepared
two separate purchase and sale agreements, one for the 25.1 acres and the other for the balance
of the property, prior to a scheduled meeting with Mr. Wells. She left the lines for the purchase
prices blank on both drafts.

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 Mr. Wells met with Ms. Andrews on November 18, 2002. He said he was making a total bid
of $400,000.00, with an allocation of $150,0000 to the land that was subject to the Rappaport
right of first refusal and agricultural easement, and $250,000 allocated to the remaining 53.2
acres, including the house. He had calculated that he would put improvements of approximately
$200,000 into the house, and he based his bid for the house partially on a calculation that
$450,000 would be a reasonable value for it once the house was improved, even without the 25.1
acres. He also determined that if Mr. Rappaport exercised his right of first refusal, Mr.
Rappaport would own both the easement and the land, and therefore the land could possibly no
longer be subject to an agricultural easement. Because the local zoning was 3 acres, the 25.1
acres could potentially be subdivided into eight building lots. The enjoyment and value of the
house to the Wells would be much greater if the 25.1 acres were left open. He wanted to make
the price on the 25.1 acres as high as he could to prevent Mr. Rappaport from exercising his right
of first refusal to protect the house and 53.2 acres. Mr. Wells had discussed this offer with his
wife. His wife did not want to live in the house without adequate protection from development
on the 25.1 acre parcel. Thus, Mr. Wells decided to try to make the proposal on the 25.1 acre
parcel high enough so that Mr. Rappaport might not match it. Mr. Wells believed that the market
value of the 25.1 acres was only $100,000.00 as a stand-alone parcel, and he knew that it was
subject to the agricultural easement and that only one house could be built on it, yet the value to
him was greater because of his attachment to the Banfield property as a whole, and the protection
the 25.1 acres would provide to the investment that he and his wife would be making in the
house and 53.2 acres.

Mr. Wells told Ms. Andrews of the terms he was offering, which was a total of $400,000 on
the two separate contracts. Ms. Andrews knew that Laura Banfield had not accepted Mr.
Rappaport’s oral offer of $400,000. Therefore, she telephoned Laura Banfield, who said she
would agree to sell to Mr. Wells if Ms. Andrews could get a total of $425,000 from him. Ms.
Andrews told Laura Banfield that the offer was in two parts, but Ms. Banfield said nothing about
the allocation of the $425,000 she was willing to accept. Ms. Andrews then advised Mr. Wells
that if the price were improved by $25,000.00 to $425,000.00, Ms. Banfield would accept his
offer. She said nothing about how the additional amount might be allocated between the two
contracts.

Mr. Wells believed that he had pushed the amount that could be allocated to the 25.1 acre
parcel to the limit, since $150,000.00 was $50,000.00 more than its market value in his own
mind. Nonetheless, he was willing to increase his overall offer by $25,000. In addition, he
decided that he was still willing to pay $275,000 for the house and 53.2 acres, even if he did not
wind up owning the 25.1 acre piece. Thus, he decided to add the requested $25,000 to his offer
for the house and remaining land, knowing that this would be the price for it whether or not he
was also able to purchase the 25.1 acres. He directed Ms. Andrews to prepare written offers on
that basis, which he signed. At no time did Ms. Andrews suggest what the allocation should be,
nor did she question the allocation that Mr. Wells made. At no time did Mr. Wells have any
discussion with Laura Banfield or Mr. Koch about allocating the total offer between two

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contracts. Mr. Wells did not make the contract to purchase the house and 53.2 acres contingent
on his ability to purchase the 25.1 acres. Mr. Wells signed the two offers to purchase. They
were both contingent on Mr. Wells’ ability to obtain financing on specified terms, and contingent
on the property appraising at or above the purchase price. Each contract provided for the closing
to take place within three weeks from approval for financing. The contract on the 25.1 acres
stated that the property was subject to a right of first refusal. It did not state that it was subject to
an agricultural easement, even though the seller agreed to provide a warranty deed and
marketable title. The buyer had the burden of searching the title and notifying the seller of any
objections to marketable title. Mr. Wells already knew about the agricultural easement at the
time he made the offer. On November 21, 2002, Thomas Koch signed both purchase and sale
agreements on behalf of Laura Banfield pursuant to his power of attorney.

Mr. Wells never requested a separate appraisal for the 25.1 acres. Instead, he requested a
single appraisal of the combined parcels.

On or about November 25, 2002, Thomas Koch, Esq., on behalf of Laura Banfield, wrote a
letter to Mr. Rappaport stating that Ms. Banfield had entered into a purchase and sale contract
subject to Mr. Rappaport’s right of first refusal, for the purchase of a 25.1 acre parcel of land.
The letter further recited that the agreed purchase price was $150,000.00, subject to a financing
contingency of 75% of the purchase price for a term of 30-years with interest not more than
6.25%. No copy of the purchase and sale agreement was included with the notice. It also stated
that closing was to be within 3 weeks of the purchaser’s receipt of a financing commitment. Mr.
Rappaport was asked to respond within 30 days to advise whether he would be exercising his
right of first refusal, and he was invited to contact Mr. Koch for additional information.

On December 3, 2002, Mr. Rappaport replied in a faxed letter questioning whether the
contingent offer satisfied the requirements of his right of first refusal, and stating that when
proper notice was given to him, he would respond. He wrote: “When you have an unconditional
offer from a buyer who is ready, willing and able to acquire said property or one that has
provided evidence of financing I will expeditiously respond to your communication.” He also
asked to see a copy of the survey, which he had not yet seen.

In response, on December 5, 2002, Mr. Koch faxed a letter to Mr. Rappaport stating that it
was Ms. Banfield’s position that the notice was adequate and that a survey would be provided.
He also wrote: “You are entitled under the terms of the right of first refusal to purchase the
property in question on the same terms agreed to in the offer which Mrs. Banfield accepted.”
Still, however, Mr. Koch did not provide a copy of the purchase and sale agreement.

On December 6, 2002, Ms. Andrews sent Mr. Rappaport the survey, and he received it on
December 7 or 8, 2002. Before he received it, the information he had was that there was a
contract for the sale of a 25.1 acre parcel for $150,000. He was not sure what was included,
specifically whether or not the house was on the 25.1 acre parcel. He assumed that it must be,
because the appraisal he had obtained was for a $300,000 value for the entire Banfield property,

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which was much larger, and he could not imagine that a buyer in central Vermont would offer
$150,000 for a 25.1 acre parcel of land that was subject to a right held by someone else to use it
for pasturing cattle and growing crops. When he received the survey, he was still not quite sure,
because of the manner in which the survey was drawn. It was unclear to him whether the 25.1
acre parcel being offered to him included all of the land north of Davis Road as shown on the
survey.

The marking of the survey is unclear because it shows two small parcels north of Davis Road
that have separate boundary lines but may also be within the boundary lines for what is marked
as the 25.1 acre parcel. Had that been the case, the house would have been included in that
parcel. Although there are labels that say Parcel 3 and Parcel 4 for the 1.0 acre piece next to the
house and the 1.8 acre piece on which the house is located, with recording references, they are
separated from the 25.1 acre piece only by dotted lines rather than continuous lines. It is difficult
to tell from looking at the survey map alone, without additional external information, whether or
not Parcels 3 and 4 are preexisting separate parcels from the 25.1 acre piece, or whether they are
included within it, and perhaps proposed to be subdivided from it. This court, when first
presented with this survey in conjunction with a preliminary motion, was unable to determine
whether the house was or was not located on the 25.1 acre parcel. Apparently a professional
appraiser interpreting the survey map concluded that the total acreage was 75.5 acres rather than
78.3 acres, assuming that the 1.0 and 1.8 acre parcels were subsumed within the 25.1 acre parcel.

Mr. Rappaport, still not sure exactly what was included but aware that the clock was running
on the 30 days Mr. Koch had given him to respond, and knowing that he had a “desperate and
significant interest in the land and house,” wrote to Mr. Koch on December 18th. At this time,
neither Mr. Koch nor Ms. Andrews had provided a copy of the purchase and sale agreement.
Mr. Rappaport had requested one from both of them, and had been told by Ms. Andrews that Mr.
Koch said no. Nonetheless, Mr. Rappaport stated the following in his letter to Mr. Koch:
“Pursuant to your letter of November 25, 2002 and your request therein, this is to inform you that
I intend to exercise my right of first refusal. Would you contact me at my Boston office in
writing or by phone as to the next steps that need to be taken.”

In response to Mr. Rappaport’s December 18th letter, Mr. Koch tendered a proposed warranty
deed and survey with a letter dated December 27, 2002. The proposed warranty deed stated that
it was “in full satisfaction” of the terms of a right of first refusal. At this time, Mr. Rappaport
still believed that he held a valid right of first refusal on all of the Banfield property, meaning
that his exercise on just a portion would not extinguish the right altogether, so he objected to a
deed that stated that by acceptance of it, his right of first refusal was fully satisfied. The
proposed warranty deed also made no mention of the easement interest already held by Mr.
Rappaport in the parcel of land, nor did it refer to the house. The letter also states: “Please
review these documents and advise whether you find them acceptable or feel that any changes
are necessary.” It also asked whether Mr. Rappaport intended to have Vermont counsel, and
offered to close the transaction either at Mr. Rappaport’s convenience or through the mail. Mr.
Rappaport received this correspondence on January 2, 2003.

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 Mr. Rappaport then retained Vermont counsel. In a letter dated January 15, 2003, Michael
Marks, Mr. Rappaport’s attorney, raised an issue concerning the deed description, and asked for
a copy of the purchase and sale agreement for the 25.1-acre parcel and the agreements for any
related parcels. In the letter he questioned the basis for the sale price of $150,000.00, stating that
the price appeared not to take into account the agricultural easement that encumbered the
property. In response, on January 17, 2003, Mr. Koch for the first time provided a copy of the
purchase and sale agreement for the 25.1-acre parcel, but declined to provide copies of any other
purchase and sale agreements entered by Laura Banfield to sell the balance of her contiguous
property in East Montpelier on the grounds that Mr. Rappaport did not have any legitimate
interest in them. Mr. Koch also wrote that the attorney for Mr. Wells believed that “if Mr.
Rappaport does not close within a reasonable time after his notice of exercise of the right of first
refusal, his right will expire, and Mr. Wells will once again be entitled to consummate the
purchase. I don’t want to express a view on that, except to say that I, too, would like to resolve
this quickly and satisfactorily.”

On January 28, 2003, counsel for Mr. Rappaport again wrote Mr. Koch requesting the second
contract and questioning the allocation.
On February 5, 2003, Matthew Colburn, attorney for Mr. Wells, provided written notice to
both Mr. Koch and Mr. Rappaport’s lawyer Michael Marks that Mr. Wells had obtained a written
commitment for financing and that a closing needed to be scheduled in three weeks. Thus, the
time for closing under the Wells contract was approximately February 26th.

As of February 6th, Mr. Rappaport still incorrectly believed that he held a right of first refusal
on the entire Banfield property; he only held a deeded right of first refusal on the 25.1 acre
parcel. By this time he knew that the house was not on the 25.1 acre piece, and that he was being
asked to match an offer for $150,000 on a parcel of land burdened by his agricultural easement.
He was also being denied information about a contract for the remainder of the Banfield land.
He knew that the entire Banfield property had appraised at $300,000 as a single unit, which was
the way it was being offered for sale. He reasonably believed that there was a second contract
for the remainder of the Banfield property, and that there may have been a disproportionate
allocation of value to the 25.1 acre parcel to inflate its price in order to deter him from exercising
the right of first refusal.

On February 7, 2003, Mr. Rappaport filed this suit, and sought a preliminary injunction of
the sale of all the Banfield land until the case could be adjudicated. He obtained an appraisal
from James Thetford on the 25.1 acres as a separate parcel. James Thetford did an updated
appraisal of the market value of the 25.1 acres as a separate parcel, sold alone, subject to the
agricultural easement. Mr. Thetford’s opinion is that its fair market value as of March 20, 2003
as a freestanding parcel subject to the agricultural easement is $58,000. He also opines that
factors that are personal to a particular buyer can induce a buyer to pay more for a particular
parcel than its fair market value as a separate parcel. His opinion of $58,000 assumes that the
property would be subject to an agricultural encumbrance which severely restricted the use that a

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potential buyer (other than Mr. Rappaport) would be able to make of the property. Having an
interest in adjacent property, and having a personal connection with a particular property,
constitute factors that can increase the amount an individual is willing to pay for a particular
parcel above its fair market value, and are not considered components of fair market value since
they cannot be translated into what a willing buyer and willing seller, without additional factors,
would pay for a particular parcel. His opinion did not include consideration of the enhanced
value that an abutter who wants to protect his own property would pay, nor the amount that
might be offered by a person with an emotional attachment to the particular property. He
acknowledged that a right of first refusal can result in an increased sales price if there is a
“bidding thing” going on between potential buyers who both have special reasons for wanting
the property. He also acknowledged that an owner of the Banfield house and 53.2 acres would
probably pay a premium for the 25.1 acre parcel, above its market value, and in that case he
would not consider such a premium a component of value in doing a fair market value appraisal.
Mr. Rappaport’s right of first refusal does not give him a right to buy at fair market value, but
rather “at the highest price offered” to Laura Banfield.

At no time did Mr. Koch notify Mr. Rappaport that his right of first refusal would expire by a
specific date unless Mr. Rappaport accepted the warranty deed that Mr. Koch had tendered. At
no time prior to filing suit was Mr. Rappaport given a copy of the second Wells contract.

The damage that would be suffered by Mr. Wells if a preliminary injunction is granted, and
then dissolved after a final hearing on the merits, is a possible increase in interest rates associated
with a loan to finance his acquisition. He has submitted figures showing possible losses
depending on various interest rates, but no information from which the court can reach an
informed decision about future changes in interest rates.

Mr. Rappaport’s position is that the price assigned to the 25.1 acre parcel under Laura
Banfield’s contract with Mr. Wells is disproportionately high, and he requests the court to
determine a reasonable price for the 25.1 acre parcel, and permit him an opportunity to choose
whether to exercise his right of first refusal at that price. His position is that because the contract
with Mr. Wells did not state that the property was subject to the agricultural easement, including
a restriction that only one structure could be built on it, he had no way of knowing whether the
price offered by Mr. Wells took those restrictions into account. Similarly, he had no means of
investigating his suspicion that the situation was set up so that Mr. Rappaport would fail to
exercise his right because the price was so high, and then the contract would be terminated by
Mr. Wells because the seller could not deliver marketable title, resulting in Mr. Rappaport’s right
of first refusal having been extinguished and leaving Mr. Wells or someone else free to negotiate
for a lower price free from the pressure of the right of first refusal.

Mr. Wells’s position is that Mr. Rappaport had an opportunity to exercise his right of first
refusal, and that when he filed suit on February 7, 2003, he repudiated his right to exercise the
right of first refusal, and he therefore no longer has the legal ability to exercise his right of first
refusal. His alternative position is that Mr. Rappaport did not perform within a reasonable time,

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and his right to perform has expired. Ms. Banfield’s position is that Mr. Rappaport has not
shown that he made an unconditional acceptance of the right to purchase within the 25.1 acres
within the required thirty days.

Conclusions

Mr. Rappaport held a right of first refusal on 25.1 acres, which was already subject to his
agricultural easement. Mr. Rappaport had the right to match the highest offer made for the
purchase of that parcel. Ms. Banfield, when she chose to sell the parcel, had the responsibility to
offer it in a manner that would not impair Mr. Rappaport’s right of first refusal.

It is true that in preparing to market the property, Laura Banfield, and Ms. Andrews as her
agent, did nothing to structure offers on the various parcels in a manner that would honor Mr.
Rappaport’s right of first refusal. That does not, however, mean that they attempted to impair or
defeat it, or that Laura Banfield could not offer her entire holdings for sale just because only one
of four parcels was subject to a right of first refusal. She or Ms. Andrews may not have fully
appreciated the need to structure offers and contracts in a manner to accommodate Mr.
Rappaport’s right to match a market offer. Inattention or lack of understanding, if present, were
immaterial because Mr. Wells understood the necessity of making two independent market offers
to properly honor the right of first refusal, and he did so in a manner fully consistent with fair
dealing as to that right. As a consequence of his two independent offers, there was never any
single contract in which Parcel 2 was bundled together with the other parcels for a single
unallocated price, nor was there an artificial price allocation made without reference to market
factors and designed only to defeat the exercise of the right of first refusal.

The price for the 25.1-acre parcel is justified by the factors about which Mr. Wells testified,
which are logical and consistent. Mr. Wells was committing himself to purchase the house and
53.2 acres in any event, with or without the additional 25.1 acres. His offer to purchase the
house and 53.2 remaining acres was not contingent on obtaining the right to purchase the 25.1
acre piece. Given that his contract to buy the house, if accepted, would give him an equitable
interest in the house property, he had valid reasons for bidding high on the 25.1 acres to prevent
Mr. Rappaport from acquiring the fee to the 25.1 acres. Part of this was to obtain a guaranty that
the 25.1 acres would remain open and undeveloped to retain the spectacular views from the
house parcel. The views constitute a prominent and valuable feature of the house, without which
its use would occur differently and its value would be impaired. Part was to keep the property
intact, as it had been during the Banfields’ ownership, when Mr. Wells developed personal and
emotional ties to the property, increasing his childhood attachment to it. Part was to acquire the
land itself, so as to control it. While the existence of the agricultural easement might diminish
the market value of the 25.1 acres as a freestanding parcel, since it would limit the use of the
land, it had no such impact for Mr. Wells. On the contrary, he saw ownership of the agricultural
easement by the same owner who held the right of first refusal as a danger, since it represented
more, not less, potential development on that land. Since he planned to invest an additional

11
$200,000 in value in the house, it was worth a lot of money to him to prevent the merger of the
agricultural easement and the purchase of the fee, and $150,000 was a reasonable price in order
to protect the significant investment he was planning to make in the house.

Mr. Wells structured his offer to purchase the Banfield property as two independent offers,
neither of which was conditioned upon his ability to acquire the other piece. He took into
account in a rational way the factors that affect the value of each as a separate parcel. His
explanation of why he offered $275,000 for the house and 53.2 acres is sound: although that
price may appear low as a proportion of the total of $425,000, the property would be worth only
$275,000 as long as it carried the risk that the views would be destroyed, or if they were
destroyed. Furthermore, the house needs $200,000 worth of work to be renovated in a manner
consistent with its character and current standards. Since the appraisal showed an overall value
of $300,000, attribution of $275,000 to the house and that portion of the acreage that does not
provide the pond or views is not unreasonably low.

Similarly, his explanation of why he offered $150,000 for the 25.1 acres is sound: it would be
worth that much to guaranty the spectacular views on a residential property in which he would
have a $475,000 investment (after improvements), even though a normal buyer would not pay
that much for that particular parcel as a freestanding lot subject to an agricultural easement. Mr.
Rappaport’s argument of lopsided allocation might be a valid one if the allocation were further in
the extreme, such as $75,000 for the house and 53.2 acres, and $350,000 for the 25.1 acres. The
facts as developed at trial, however, are consistent with Mr. Wells’ own testimony: that the
minimum that could in good faith be attributed to the house, based on market value information,
was $275,000. He knew that Laura Banfield would accept an aggregate offer of $425,000, and
she apparently had no reasons of her own to negotiate the allocation. It was worth it to him to
pay $150,000 for the 25.1 acres to protect the house.

These considerations reflect market forces and an honest “bidding thing” between two eager
buyers, rather than an attempt to subvert Mr. Rappaport’s right of first refusal with artificial price
manipulation. The reasonableness of this position is demonstrated by the example that if a buyer
purchased only the house and 53.2 acres because Laura Banfield would sell no more, and then
had the chance to buy the 25.1 acres one year later, and by doing so could prevent Mr. Rappaport
from acquiring the fee and merging it with his agricultural easement to make the land eligible for
development as three acre lots, it would not be an unreasonable investment to pay $150,000
under such circumstances, even though a nonabutter, or total stranger, is not likely to make such
an offer.

Therefore, the evidence does not support a factual finding that the price allocation was
padded, manipulated, or unreasonably inflated, as in the cases Plaintiff relies on. The court in
Gleason v. NorWest Mortgage, Inc., 243 F. 3d 130 (3rd Cir. 2001), remanded to the trial court for
a determination of whether the price at which property was offered to the holder of the right of
first refusal was padded, but this court has already heard the evidence and made the factual
finding that it was not. The court in Pantry Pride Enterprises, Inc. v. Stop & Shop Companies,

12
806 F. 2d 1227 (4th Cir. 1986) remanded to the trial court because the allocation was artificial
and would result in a windfall unless the court did the apportionment based on market factors,
but in this case there is no circumstance of windfall and the court has found as fact that market
factors support the prices of both the contracts. In Gyurkey v. Babler, 103 Idaho 663 (1982), the
allocation of $50,000 for the parcel at issue, Lot 13 (one of several lots in a package deal), when
the lot was offered to the holder of right of first refusal was determined to be artificial. The lot
was originally priced, and later transferred to the buyer, at a value of $30,000. The court
concluded that the holder had been denied the right to purchase on the same terms as the actual
ones at which the property was made available to the buyer, and for a remedy enjoined the sale
of Lot 13 to give the holder the opportunity to match a bona fide market offer for it.

There is no evidence of any attempt to use a manipulated price when Mr. Rappaport was
given the opportunity to purchase under his right of first refusal, or any attempt to avoid selling
the 25.1 acres to Mr. Rappaport. Mr. Koch acted to facilitate such a sale. The facts in the cases
Plaintiff cites are unlike those here. In this case, there was never any contract to sell the 25.1
acre parcel bundled together with other property for a single unallocated price. Furthermore, the
Plaintiff has not proved that the price of $150,000 was artificial or is unsupported by market
factors, or that the price of $275,000 for the house and 52.3 acres is inconsistent with market-
based information. Thus, Plaintiff has not proved facts showing that he is likely to prevail on the
merits of his claim that the Defendants were seeking to force him to forego his preemptive right
through the device of selling the 25.1 acres bundled with other parcels and subject to an artificial
and unsupportable allocation.

Mr. Rappaport argues that the Wells purchase and sale agreement also required that the sale
was contingent upon the 25.1 acres appraising at or above the purchase price of $150,000, and
that this contingency was not satisfied because Mr. Wells never obtained an appraisal on this
portion of the property. While that is true, the contract provision made Mr. Wells’ obligation to
perform contingent on satisfaction of that condition, but did not make it a condition precedent to
the contract as a whole. Mr. Wells could waive that contingency if he so chose, just as he could
waive the financing contingency, as could Mr. Rappaport. It is also true that the benefit of this
contract term was never offered to Mr. Rappaport. However, that seems a moot point, since the
court has concluded that there is nothing improperly disproportionate about the allocation of
overall price between the two contracts entered into between Laura Banfield and Mr. Wells, and
therefore nothing improper about the $150,000 price under the contract for the 25.1 acres. Mr.
Rappaport could decline to purchase the 25.1 acres based on an insufficient appraised value if he
wished, but if he did so, he would lose the property he wishes to buy to Mr. Wells, who stands
ready to buy without invoking the right to back out of the contract on that ground. The existence
of that protection for the buyer does not invalidate the contract. The contract remains valid, and
thus Mr. Rappaport must either exercise or not exercise his right to match its terms.

Defendant Wells contends that injunction is not an appropriate remedy, because Mr.
Rappaport could have purchased the property and then sued for damages. Under Vermont law,
injunctive relief is available to protect interests in real property where such relief is necessary to

13
avoid irreparable harm. If Mr. Rappaport is wrongfully prevented from exercising a valid right
to purchase a particular parcel, the harm will be irreparable because of the uniqueness of the
characteristics of the parcel. The question, therefore, is whether Mr. Rappaport, having failed to
prove a likelihood of prevailing on the merits of his claim for disproportionate pricing sufficient
to enjoin the sales to Mr. Wells under both contracts, is entitled to enjoin the conveyance of the
25.1 acre parcel to Mr. Wells in order to give himself time to complete his exercise of his right of
first refusal as to the 25.1 acres.

Defendant Wells contends that an injunction should be denied because Mr. Rappaport agreed
to the terms offered by Mr. Wells for the purchase of the 25.1 acres, and then repudiated that
right by filing suit on February 6th. The facts do not support this conclusion. The facts show
that Mr. Rappaport consistently acted with every intention of exercising his right of first refusal.
There is no factual basis for concluding that prior to February 6th, he had repudiated the contract.
The question, then, is whether he did so by filing suit. The facts show that his purpose in filing
suit was not to repudiate his right, but to enforce it. He was not tardy on closing, as there were
more than two weeks remaining during which he could close, as measured by Mr. Wells’ receipt
of a financing commitment.

Although Mr. Koch encouraged him on January 17, 2003 to proceed to close within a
reasonable time, Mr. Koch never took a position that his time for performance had expired or
would expire by a specified date. Moreover, the facts demonstrate that as of February 6th, Mr.
Rappaport reasonably saw before him a valid prime facie case of price manipulation: the
Banfield property had been offered as a single unit, yet he was not permitted to see the contract
on the balance even though he had asked for it several times. He had not even been permitted to
see the written contract on the 25.1 acres until his Vermont counsel requested it, even though it
constituted the complete terms of Laura Banfield’s irrevocable offer to sell that he had the right
to accept. Cameron v. Double A. Services, Inc., 156 Vt. 577 (1991). He was not provided with
the survey until he requested it, although it was provided to Mr. Wells earlier. The terms of the
contract on the remaining property were being concealed from him, the contract price for the
25.1 acre piece was at least $50,000-100,000 higher than fair market value as determined by a
recent appraisal, and the agricultural easement was not mentioned as an exception in the Wells
contract, indicating that it may not have been taken into consideration when the price was set.

These facts were sufficient to lead a reasonable person to conclude that a buyer had offered
to buy the whole Banfield property for a single price, and had artificially shifted value to the 25.1
acre contract in order to subvert the exercise of Mr. Rappaport’s right of first refusal. Under
those circumstances, in order to assure that he was not being wrongfully induced to exercise his
right at an improper price, or wrongfully induced to extinguish a valid legal interest which he
wished to exercise, he had no choice but to seek redress by appropriate legal means, including
filing suit. This did not amount to repudiation as a matter of fact or law, but an attempt to
exercise the right on a valid lawful basis. Thus, the court concludes that Mr. Rappaport has not
repudiated his right to exercise the right of first refusal; on the contrary, he has acted consistently
with his stated intent to exercise it. Although discovery and a court hearing have subsequently

14
revealed that Plaintiff has not shown a likelihood of success on his claim that Laura Banfield and
Mr. Wells acted wrongfully with respect to his right or that the price allocation was manipulated
artificially, this could not have become known to Mr. Rappaport without invoking legal process.
Therefore, he remains entitled to complete the exercise of his right as to the 25.1 acres.

The time for closing under the contract was defined as three weeks from the receipt of the
buyer’s financing commitment. In exercising his right of first refusal, Mr. Rappaport is bound
by this term. The purpose of such a provision is to provide a three week period from the date
upon which contingencies are satisfied or waived to complete preclosing tasks. This gives time
for searching the title, responding to proposed conveyancing documents, and other preparations
for closing. It is reasonable for Mr. Rappaport to have this amount of time to close on the 25.1
acres, prior to it becoming available for conveyance to Mr. Wells under his contract. The
evidence is clear that unless the court enjoins a sale to Mr. Wells for a three week period, there is
a likelihood that the Defendants will take the position that Mr. Rappaport’s time for exercise of
the right has expired due to the passage of time, since they have declared in this proceeding that
this is their position.

For the foregoing reasons, the Plaintiff has shown a valid basis for a preliminary injunction,
in that he has shown that he is entitled to three weeks to close on the purchase of the 25.1 acres,
and that without an injunction he will be irreparably harmed in that there is a reasonable
likelihood that the property would be conveyed by Defendant Banfield to Defendant Wells. A
preliminary injunction will be issued enjoining the sale of the 25.1 acres for three weeks from the
date of this order.

V.R.C.P. 65 (c) grants the court the discretion to establish security in an amount to secure the
costs and damages incurred if the injunction is found to be wrongful. The evidence introduced
by Defendant Wells concerning the possibility of damages in the form of increased interest rates
is not sufficiently reliable for the court to conclude that security is needed, particularly for a
period only three weeks long. Therefore, the court declines to require security.

ORDER

For the reasons set forth above,

Plaintiff’s motion for preliminary injunction is granted as to the 25.1 acres for a
period of three weeks, and

Defendants’ request for security is denied.

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Dated at Montpelier, Vermont, this _____ day of April, 2003.

____________________________

Mary Miles Teachout

Superior Judge

16
 STATE OF VERMONT
WASHINGTON COUNTY, SS.

JEROME RAPPAPORT )
)
VS. ) Washington Superior Court
) Docket No. 80-2-03 Wncv
LAURA BANFIELD AND )
DUANE WELLS )

Preliminary Injunction

Defendant Laura Banfield is hereby enjoined from conveying to defendant Duane Wells
her interest in the lands and premises in East Montpelier, Vermont shown as Parcel 2 on the
survey dated December 13, 2002, consisting of 25.1 acres, and conveyed at Book 20, Page 499
of the East Montpelier Land Records. This preliminary injunction shall be in effect for a period
of three weeks from the date it is entered, at which time it shall expire. This preliminary
injunction shall be binding upon the defendants, their agents, servants, employees and attorneys,
and upon those persons in active concert or participation with them who receive actual notice of
the order by personal service or otherwise.

Dated at Montpelier, Vermont, this _____ day of April, 2003.

_____________________________________
Mary Miles Teachout
Superior Judge

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