The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge
and Consolidated Actions.
Through the present action, Plaintiffs Gregory House and Jennifer House ("the Houses") seek specific performance against Defendants Paul Sandner Moller and Rosa Maria Moller ("the Mollers") pursuant to a right of first refusal contained within an agricultural lease entered into by the Houses with Paul Moller on February 25, 2002.
That lease contained a so-called "right of first refusal" which gave the Houses the option of purchasing the leased property, located in Dixon, California, at the same terms as any otherwise submitted offer during the pendency of their lease. The Houses allege that the Mollers in fact agreed to sell the property in April of 2007, prior to the time their lease expired on December 31, 2007, to Dana and Edward Foss ("the Fosses") without affording them the requisite right of first refusal.
Presently before the Court is the Houses' Motion for Preliminary Injunction, filed on October 30, 2011. Shortly after that Motion was filed, on November 2, 2011, the Houses filed a Motion for Temporary Restraining Order to block a Trustee's Sale concerning the property, scheduled at the behest of the Fosses and set to occur on November 15, 2011. In order to preserve their right to specific performance as to the property, the Houses moved to prevent any foreclosure sale from occurring until after the instant Motion for Preliminary Injunction has been adjudicated. The Houses' request for a temporary restraining order on those terms was not opposed and was granted by the Court on November 9, 2011. The Fosses, who filed their own lawsuit against the Mollers and the Houses concerning the property (as consolidated herein) have opposed the Houses' Motion for Preliminary Injunction. As set forth below, that Motion will be granted.
The Houses own and operate an organic farm on property adjacent to a parcel of agricultural land, owned by the Mollers, that is the subject of this lawsuit. On February 25, 2002, as indicated above, the Houses entered into an agricultural lease with Paul Moller in order to cultivate Moller's 35 acre adjacent parcel together with their own property. That lease expired by its terms on December 31, 2007, but contained a right to extend the lease for an additional six years, as well as a provision that should Moller decide to sell the parcel, the Houses would be "granted the right of first refusal" in purchasing the property. Agricultural Lease, Exh. 1 to the Decl. of Greg House, ¶ 24.
In early 2007, during the pendency of his lease with the Houses, Paul Moller decided to sell the property, apparently prompted by the need to raise cash to satisfy a stipulated judgment against him. He contacted the Fosses, both of whom are real estate agents, and listed the parcel with Ms. Foss. After an initial offer on the property brokered by Ms. Foss fell through, the Fosses submitted their own offer to purchase the parcel on or about April 9, 2007, for the sum of $1,250,000.00 Pursuant to that offer, the Fosses tendered a down payment in the amount of $225,000.00. That sum was sufficient to satisfy the aforementioned stipulated judgment, an immediate short-term capital need recognized by the Fosses as a result of Ms. Foss' own agency relationship with Paul Moller. The Fosses' offer was accepted by Paul Moller and Rosa Maria Moller a week later, on or about April 16, 2007.
As security for the $225,000.00 deposit, the Mollers executed a third deed of trust on the property, in favor of the Fosses, that was recorded on or about May 9, 2007.
All of this occurred without any knowledge on the part of the Houses. It was not until several weeks later, on or about May 21, 2007, that Paul Moller telephoned Greg House and left a message informing him of his intent to sell the property for financial reasons, as well as the fact that he intended to leave the country that day for a period of three weeks. Greg House called back and reminded Moller of the right of first refusal contained within the agricultural lease. Moller candidly admits that he had altogether forgotten about that provision. See Dep. of Paul Moller, Vol. 1, 62:2-10; 65:11-66:1.
The Mollers never provided the Houses with a copy of the Purchase Agreement entered into with the Fosses, but on May 21, 2007, Dana Foss faxed a copy of that Agreement to Greg House. Four days later, on May 25, 2007, the Houses sent Paul Moller a letter memorializing their intent to exercise the right of first refusal on the parcel in accordance with their agricultural lease. The Houses stated they would be "put[ting] together a package equivalent to the Foss's offer" and would meet with the Mollers when they returned from abroad. May 25, 2007 letter, Exh. 3 to the Decl. of Greg House.
On or about June 9, 2007, at a point in time apparently before the Mollers' return, the Fosses began moving into a rental house on the subject property. On June 13, 2007, Jennifer House went to the Mollers' residence and found Ms. Moller at home.
Ms. House ultimately did speak to Paul Moller, who again acknowledged that he had forgotten about the right of first refusal. At no point during this conversation did Moller discuss the terms of his Purchase Agreement with the Fosses.
On June 18, 2007, having heard nothing further from the Mollers, Jennifer House returned to the Moller residence and delivered to Ms. Moller a letter signifying the Houses' intent to purchase the subject property "on the same material terms set forth in the Standard Residential Purchase Agreement entered into by you and the Fosses in April 2007." A deposit in the amount of $1,000.00 was also tendered at that time.
On June 19, 2007, Paul Moller wrote to the Houses and informed them
that he required the sum of $225,000.00 in accordance with his
agreement with the Fosses and that, accordingly, the Houses' deposit
was rejected. The Houses claim that this was the first they knew that
and additional $224,000.00 had to be paid as an initial deposit ...