MCDONALDS CORPORATION v. ROSENFELD TRUSTEE et al

Filing 20

ORDER denying 9 Motion for Declaratory Judgment and denying 10 Motion for Judgment on the Pleadings. Ordered by US DISTRICT JUDGE CLAY D. LAND on 10/5/2021 (tlf).

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
COLUMBUS DIVISION
MCDONALD’S CORPORATION,

*

Plaintiff,

*

vs.

*

ROGER C. ROSENFELD REVOCABLE
TRUST OF 2005 and ROGER C.
ROSENFELD,

*

CASE NO. 4:21-CV-97 (CDL)
*

Defendants.

*
O R D E R

Plaintiff

McDonald’s

Corporation

operates

a

store

in

Columbus, Georgia on land leased to it by Defendants Roger C.
Rosenfeld Revocable Trust and Roger C. Rosenfeld.

The parties’

lease agreement includes two different options for McDonald’s to
purchase the leased property.

One is a straightforward option

with a designated purchase price.

The other, which is found in a

section of the lease captioned “right of first refusal,” gives
McDonald’s the right to purchase the property when a third party
has offered to buy it if McDonald’s pays the same price offered by
the third party.

These two provisions conflict when a third party

offers to buy the property for more than the price set in the
option agreement.

This conflict gives rise to the current action.

Defendants received an offer to purchase the property and
notified McDonald’s of this offer as is required by the parties’

lease agreement.

Instead of matching the third-party’s offer

pursuant to the right of first refusal, McDonald’s attempted to
exercise its option to purchase the property under a separate
section of the lease agreement which established a set price for
the property that was lower than the offer from the third-party.
McDonald’s seeks a declaratory judgment that it has the right
under the lease agreement to exercise its option to purchase the
property for the contractually-fixed price notwithstanding that
the third-party offer exceeds that amount.

Defendants maintain

that if McDonald’s wishes to purchase the property, it may only do
so

pursuant

to

the

right

of

first

refusal

provision

in

the

agreement which requires it to match the offer of the third-party.
Presently pending before the Court are motions by each party for
judgment as a matter of law declaring that their respective
interpretation of these provisions in the lease agreement are
correct.

As explained in the remainder of this Order, the Court

finds that the relevant terms in the lease agreement are ambiguous
and that the ambiguity cannot be eliminated using standard rules
of contract interpretation.

Therefore, the parties’ contractual

intent must be determined by considering evidence outside the
written agreement.

The present factual record does not illuminate

the parties’ intent and certainly does not establish that either
party is entitled to judgment as a matter of law.
the motions (ECF Nos. 9 & 10) are denied.

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Accordingly,

FACTUAL BACKGROUND
The relevant facts are largely undisputed.

McDonald’s operates

a store in Columbus on land leased to it by Defendants.

On April

22, 2021, Defendants informed McDonald’s that a third party offered
to purchase the property for $1.151 million dollars.
ECF No. 1.

Compl. ¶ 22,

On May 13, 2021, McDonald’s sent Defendants a letter

in which McDonald’s purported to exercise its Option to Purchase
the property for $770,000.00, which is the fixed price set in the
lease agreement.

Id. ¶ 23.

Defendants refused to sell the

property to McDonald’s for that price, arguing that McDonald’s
option to purchase the property for a fixed price was terminated
by Defendants’ notice of a third party’s offer to purchase the
property.

Id. ¶ 24.

Defendants maintain that once they notified

McDonald’s of this third-party offer, McDonald’s only had a right
to match the third-party offer pursuant to the contractual right
of first refusal. If the right of first refusal provision applies,
McDonalds must pay $1.151 million to obtain the property; if the
separate option to purchase provision applies, McDonalds has the
right to purchase the property for $770,000.
I.

Article 27 – Right of First Refusal
Article 27 of the lease agreement contains a right of first

refusal.1

It states in relevant part:

1

McDonald’s is referred to as the “Tenant” in the relevant lease
provisions.

3

Tenant shall have the first option to purchase the
Premises or the beneficial interest in the Premises by
giving written notice to Landlord of its intention to
purchase the Premises within 30 days after it receives
Landlord’s notice of an offer to purchase at the same
price (or, if the Premises are part of a larger parcel,
then the dollar amount allocated to the Premises) and on
the same terms as the offer, except as provided below.
If Tenant does not exercise the first option to purchase,
this Lease shall remain in full force and effect and
shall bind both Landlord and any purchaser or
purchasers, and Tenant shall have, as against Landlord
or any subsequent purchase, the continuing first option
to purchase the Premises or the beneficial interest or
any part, as described above, upon the terms of any
subsequent offer or offers to purchase.
. . . .
If there is any conflict between the provisions of this
Article and the terms contained in the offer to purchase,
then the terms of this Article shall control and
supersede those contained in the offer to purchase.
Neither notice to Tenant of any offers to which this
Article applies nor the sale of the Premises to a third
party shall terminate any other options or rights
presently or subsequently held by Tenant under this
Lease, except for Tenant’s Option to Purchase as set
forth in New Article 29, below.
Pl.’s Mot. for J. on the Pleadings Ex. A., 2009 Amendment to
Lease 12-13, ECF No. 10-2 (hereinafter “Contract”).
II.

Article 29 – Option to Purchase
Article 29 of the lease agreement provides McDonald’s

with an option to purchase the property for the set price of
$770,000 even if there has been no offer by a third-party.
But it does reference the right of first refusal in Article
27 as follows:
This Option to Purchase shall continue in full force and
effect for the entire term of this Lease and any
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extension or renewals of the term. Notwithstanding the
foregoing, if the premises are purchase by a third party
after Tenant fails to exercise its right of first refusal
on a sale to that third party, then this Option to
Purchase shall automatically become null and void. If
Tenant should receive notice of any offer pursuant to
any right of first refusal to purchase or to lease either
presently or subsequently held by Tenant, or if the
premises are sold to any third party, this Option to
Purchase shall be neither modified nor terminated.
Contract 15-16.
DISCUSSION
The parties ask the Court to determine whether notice of an
offer to buy pursuant to Article 27’s right of first refusal
terminates Article 29’s option to purchase the property at a fixed
price.

Contract construction involves three steps. “First, the

court must decide whether the plain language of the contract is
clear and unambiguous.”

Healthy-IT, LLC v. Agrawal, 808 S.E.2d

876, 882 (Ga. Ct. App. 2017). “If it is, the contract is enforced
as written according to its plain terms and no further construction
is needed or allowed.”

Id.

“However, if the language used in the

contract is ambiguous, the court must apply the rules of contract
construction to attempt to resolve any ambiguities.”

Id.

“And if

the ambiguities cannot be resolved by applying the rules of
contract construction, then a jury must resolve the issue of what
the ambiguous language means and what the parties intended.”
The

Georgia

courts

define

“ambiguity

to

mean

Id.

duplicity,

indistinctness, an uncertainty of meaning or expression used in a

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written instrument, and it also signifies being open to various
interpretations.”

Id.

(quoting Shepherd v. Greer, Klosic &

Daugherty, 750 S.E.2d 463, 465 (Ga. Ct. App. 2013)).

“Or to put

it more simply, ‘[a] word or phrase is ambiguous when its meaning
is uncertain and it may be fairly understood in more ways than
one.’”

Id. (alteration in original) (quoting Freund v. Warren,

740 S.E.2d 727, 730 n.4 (Ga. Ct. App. 2013)).
Articles 27 and 29 are ambiguous as to their application when
a third party makes an offer higher than the option purchase price
established in Article 29.
contradictory

and

In that context, they are directly

susceptible

to

different

interpretations.

Article 27 states “[n]either notice to Tenant of any offer to which
this Article applies nor the sale of the Premises to a third party
shall terminate any other options or rights . . . except for
Tenant’s Option to Purchase as set forth in New Article 29, below.”
Contract 13. One reasonable interpretation of this provision based
on the plain language is that when Defendants notified McDonald’s
of the third-party offer and thus McDonald’s right to match it
pursuant to the right of first refusal, this notification only
terminated McDonald’s option to purchase established in Article
29.

But this purported termination of the option to purchase in

Article 29 directly conflicts with the plain language in Article
29 which explicitly states that the Option to Purchase “shall be
neither modified nor terminated” if “Tenant should receive notice

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of any offer pursuant to any right of first refusal to purchase[.]”
Contract

16.

Thus,

one

Article

indicates

that

under

the

circumstances presented here the Article 29 option to purchase is
terminated and another Article indicates that the Article 29 option
survives.
The Court has struggled to interpret these provisions in a
manner that gives the greatest possible effect to all provisions
in the contract.

See VATACS Grp., Inc. v. HomeSide Lending, Inc.,

623 S.E.2d 534, 537 (Ga. Ct. App. 2005) (“[A] contract must be
interpreted to give the greatest effect possible to all provisions
rather than to leave any part of the contract unreasonable or
having no effect.” (quoting Vaughn, Coltrane & Assocs. v. Van Horn
Const., Inc., 563 S.E.2d 548, 550 (Ga. Ct. App. 2002))).
frankly, this cannot be done here.

But quite

Simply picking one conflicting

provision over the other and rendering the other one meaningless
achieves an arbitrary result, not an approximation of the parties’
intent.

The Court has likewise found the contract construction

rules listed in O.C.G.A. § 13-2-2 unhelpful in resolving the
conflict between these relevant provisions.
Finally, the Court is unpersuaded by Defendants’ contention
that the contract should be construed against McDonald’s because
it allegedly was the primary drafter of Articles 27 and 29.

It

appears from the present record that the lease agreement, including
Articles 27 and 29, was the product of negotiation between two

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sophisticated,

represented

parties.

Thus,

neither

side

is

entitled to have the lease interpreted for or against it when the
language is ambiguous.
Because

the

Court

cannot

resolve

the

ambiguity

through

application of the rules of contract interpretation, the Court may
consider extrinsic evidence to determine what the parties intended
when they drafted this contract.

Gans v. Ga. Fed. Sav. & Loan

Ass’n, 347 S.E.2d 615, 618-19 (Ga. Ct. App. 1986).

But the present

record does not permit the Court as a matter of law to determine
the true intention of the parties when they agreed to Articles 27
and 29.2

An evidentiary hearing is necessary for making that

determination.
In light of the need for an evidentiary hearing, discovery
may be necessary. Accordingly, the Clerk shall issue a Rules 16/26
order that requires the parties to confer and present the Court
with a scheduling order designed to accomplish all discovery prior
to an evidentiary hearing.

The parties should include in that

order whether they have a right to a jury trial for that hearing.

2

Defendants submitted an older version of the Contract, arguing that it
demonstrates that the current version of Article 27 was intended to
eliminate Article 29’s Option to Purchase.
But Defendants’ evidence
does not explain the explicit language in Article 29 purporting to
preserve the Option to Purchase in event of notice pursuant to Article
27.

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CONCLUSION
The parties pending motions for judgment as a matter of law
on their claims for declaratory relief (ECF Nos. 9 & 10) are
denied.

The Clerk shall issue a Rules 16/26 scheduling order.

When discovery is completed, this matter will be set down for an
evidentiary hearing.

A decision will be made later as to whether

the parties are entitled to a jury or bench trial on the issue of
contractual intent.
IT IS SO ORDERED, this 5th day of October, 2021.
S/Clay D. Land
CLAY D. LAND
U.S. DISTRICT COURT JUDGE
MIDDLE DISTRICT OF GEORGIA

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