Petitioner, a gravel and sand company, held a right of first refusal in a particular parcel of land ("the Property"). The Lanes, who were the landowners and were co-respondents to this action, received from the Thomases, likewise co-respondents, an offer to purchase the Property. Added by hand-written addendum to the offer was a "no mining" clause which purported to forbid mining on the Property. When Petitioner attempted to exercise its right of first refusal, it omitted from its "matching" offer this prohibition on mining.
After the Lanes refused to convey to either Petitioner or the Thomases, the Petitioners filed suit seeking specific performance. Both the Lanes and Petitioner moved for summary judgment. The Circuit Court declared, inter alia, that Petitioner's purported exercise of the right of first refusal was ineffectual because the exercise was not made "on the terms of the intended sale," to wit, the omission from its exercise of the "no mining" provision. The Court of Special Appeals affirmed the grant of summary judgment.
The Court of Appeals opined in dicta regarding the nature of an option under Maryland law, but denied summary judgment due to an unresolved issue of fact, namely whether the "no mining" provision was added in bad faith in order to frustrate Petitioner's preemptive right in the Property.
The Court held that under Maryland contract law regarding good faith and fair dealing, a property owner may not insert into the triggering offer terms which it knows will be repugnant to the holder in order to discourage the exercise of a preemptive right including a right of first refusal. The Court found evidence in the record that, if believed, could lead a reasonable fact finder to conclude bad faith by the Lanes or the Thomases through the insertion of the "no mining" provision as a "poison pill." Among the facts noted by the Court were:
- The mining of adjacent property;
- Ms. Thomas' status as a registered real estate agent and concomitant likely knowledge of such adjacent mining; and
- The handwritten format of the "no mining" clause consistent with its possible after-the-fact insertion.
The full opinion is available here in PDF.