SIXTH DIVISION

February 28, 2003

No. 1-02-1289

JUSTICE GALLAGHER delivered the opinion of the court:

Plaintiff Universal Scrap Metals, Inc. (Universal), appeals from the trial court's dismissalof its complaint against defendants J. Sandman & Sons, Inc., Albert Sandman, Martin Vasquez,City Scrap Metal, L.L.C., and Glenn Thompson. Universal sued defendants for breach ofcontract and tortious interference with contract after J. Sandman & Sons, Inc. (S&S), sold a largeportion of its assets to City Scrap Metal, L.L.C. (City Scrap). Universal alleged that the sale toCity Scrap violated an agreement that granted Universal the right of first refusal to purchase,manage or operate S&S. The central issue in this appeal is whether the absence in the agreementof an express method of determining the price Universal would pay for S&S renders the right-of-first-refusal provision unenforceable. For the reasons that follow, we affirm the judgment of thetrial court.

Universal, S&S and City Scrap were in the business of purchasing and resellingnonferrous scrap metals. On July 6, 1996, Universal and S&S executed a document titled"UNDERSTANDING BETWEEN J. SANDMAN & SONS, AND UNIVERSAL SCRAPMETALS." At that time, Albert Sandman was the majority shareholder of S&S. Vasquez was aminority shareholder. Pursuant to the document, Universal was to provide S&S with a line ofcredit for use in purchasing scrap metals, and S&S was to sell its nonferrous scrap metal toUniversal.

Paragraph 6 of the document stated:

"6. If at some future time the principal(s) of J. SANDMAN & SONSdecide to sell, relinquish or limit participation in the business, it is agreed thatUniversal will have the 'right of first refusal' to purchase, manage, or otherwiseoperate Sandman's business under mutually agreed upon conditions."

Universal's complaint alleged that the document constituted a valid and enforceablecontract and that in March 2001, S&S breached paragraph 6 by selling virtually all of itsoperating assets to City Scrap without offering Universal a right of first refusal. Universal alsoalleged tortious interference with contract against City Scrap, Thompson and Vasquez.

S&S moved to dismiss Universal's complaint under section 2-615 of the Code of CivilProcedure (735 ILCS 5/2-615 (West 2000)), arguing that the right of first refusal is unenforceableas a matter of law because it does not contain a method to determine the price and terms of a saleof S&S to Universal but instead states that the terms would be "mutually agreed upon." Furthermore, S&S contended, the document was not a contract but rather a memorialization of itsbusiness association with Universal that could be terminated at any time. Vasquez adoptedS&S's motion to dismiss. City Scrap and Thompson also moved for dismissal of the complaint,contending that paragraph 6 was too indefinite to be enforced.

In granting the motions to dismiss with prejudice, the trial court stated that the right offirst refusal did not expressly state the method by which the parties could determine the terms ofa sale. Acknowledging Universal's argument that a majority of courts have held that a right offirst refusal does not need to expressly provide the price to be paid, the trial court noted thatIllinois has not adopted the view that a right of first refusal implicitly means that the right is to beexercised based on the terms of a third-party offer. The trial court held that a right of first refusal"must contain some language which asserts the method of determining price" and noted thatparagraph 6 provided for circumstances other than an outright sale of S&S to Universal. Thecourt found the indefiniteness of the right-of-first-refusal provision to be dispositive and did notaddress the parties' remaining arguments.

After the trial court granted S&S and City Scrap's motions to dismiss, Universal filed amotion to reconsider and sought to amend its complaint to allege that the parties had orallyagreed that Universal would be given the opportunity to match any purchase offer made by athird party. Universal's motion was denied. On appeal, Universal asks this court to reverse thetrial court's rulings and remand for further proceedings.

A motion to dismiss under section 2-615 tests the legal sufficiency of a pleading, with allwell-pleaded facts taken as true and reasonable inferences from those facts drawn in favor of theplaintiff. U.S. Fire Insurance Co. v. Zurich Insurance Co., 329 Ill. App. 3d 987, 1001-02, 768N.E.2d 288, 299 (2002). The issue on appeal from the granting of a section 2-615 motion iswhether the allegations in the complaint, viewed in a light most favorable to the plaintiff, aresufficient to state a cause of action upon which relief can be granted. U.S. Fire Insurance, 329Ill. App. 3d at 1002, 768 N.E.2d at 299. The sufficiency of a complaint is a question of law,which we review de novo. U.S. Fire Insurance, 329 Ill. App. 3d at 1002, 768 N.E.2d at 299.

We first address the dismissal of Universal's breach of contract counts.⁽¹⁾ Universalalleged that it entered into a valid and enforceable contract with S&S. For a contract to beenforceable, its terms and provisions must enable the court to ascertain what the parties haveagreed to do. Pritchett v. Asbestos Claims Management Corp., 332 Ill. App. 3d 890, 896, 773N.E.2d 1277, 1282 (2002). As noted in Miller v. Bloomberg, 26 Ill. App. 3d 18, 19, 324 N.E.2d207, 208 (1975), "price is an essential ingredient of every contract for the transfer of property andmust be sufficiently definite and certain or capable of being ascertained from the contractbetween the parties, in order to make the contract capable of enforcement."

A right of first refusal need not specify the price and terms, as long as it provides amethod whereby those factors may be ascertained. Kellner v. Bartman, 250 Ill. App. 3d 1030,1035, 620 N.E.2d 607, 610 (1993). At the outset, we strongly reject Universal's contention thatthe placement of "right of first refusal" in quotation marks "was an express means of indicatingthat [the parties] intended to define that phrase as a term of art as it is known and used in thebusiness world." A term of art is defined as "a word or phrase having a specific signification in aparticular art, craft or department of knowledge; a technical term." Webster's Third NewInternational Dictionary (1993). Terms such as "negligence," "attorney fees" and "dismissal withprejudice" need not be set off in quotation marks to carry legal meanings; rather, those meaningsare implied. Conversely, the placement of a word or group of words in quotation marks does notmagically create a term of art.

Universal points out that Illinois courts have not specifically addressed whether a right offirst refusal must expressly state a method of determining price and asks this court to join thejurisdictions that hold that a right of first refusal implicitly means that the holder of the right isobligated to pay the price offered by a third party. See, e.g., Steinberg v. Sachs, No. 3D01-2429(Fla. App. January 15, 2003); Roy v. George W. Greene, Inc., 404 Mass. 67, 533 N.E.2d 1323(1989).

S&S responds that the trial court correctly found the right of first refusal in this case wasunenforceable because it does not indicate a method of determining a price and terms of a sale ofits assets to Universal. City Scrap raises essentially the same contentions. S&S and City Scrappoint to our supreme court's decision in Folsom v. Harr, 218 Ill. 369, 75 N.E. 987 (1905), whichheld that when a contract gives a party an opportunity to buy, it is not necessary that the contractstate the price to be paid; however, the contract must provide a method to determine the price andterms of the sale. Folsom, 218 Ill. at 374, 75 N.E. at 989.

The agreement in Folsom provided that if the first party should sell the property, thesecond party should have the first chance to purchase it. Folsom, 218 Ill. at 372, 75 N.E. at 987. The court held that it could not grant specific performance because the contract "fixed no priceand fixed no mode of determining the price" for the property. Folsom, 218 Ill. at 374, 75 N.E. at989. Folsom distinguished the terms in that case from those in Hayes v. O'Brien, 149 Ill. 403, 37N.E. 73 (1894), which involved a contract specifying that the right of first refusal could beexercised on the terms offered by a third party. Folsom, 218 Ill. at 373-74, 75 N.E. at 988-89. Universal argues that more recent cases from other jurisdictions espouse the modern viewand should be followed despite Folsom. We decline to do so. The agreement between Universaland S&S should not be read to render any portion inoperative or superfluous. Divane v. Smith,332 Ill. App. 3d 548, 553, 774 N.E.2d 361, 365 (2002). The agreement gives Universal, amongother things, the right of first refusal to purchase S&S "under mutually agreed upon conditions." If "right of first refusal" inherently meant that the right could be exercised on the terms of a third-party offer, as Universal contends, any further description of the right of first refusal, such as thephrase "under mutually agreed upon conditions," would be superfluous. Indeed, the term "undermutually agreed upon conditions" indicates that the parties contemplated negotiations beyondtheir initial agreement. Had the parties intended to expressly base their selling price on a third-party offer, they could have provided so in the agreement.

Furthermore, the agreement refers not only to the sale of S&S but also discussesUniversal's possible management or operation of S&S, which might occur without theinvolvement of a third party. Universal asserts that only the sale provision would be subject tothe terms of a third-party offer and asks this court to find the remainder of paragraph 6 irrelevant. However, reading paragraph 6 as a whole, as we must, we again note that the parties agreed thatUniversal could "purchase, manage, or otherwise operate [S&S] under mutually agreed uponconditions." The parties' language indicates that any transaction between them, be it a sale orother arrangement, was to occur under agreed terms and not under conditions proposed byunknown third parties or by this court.

Universal also argues that because the price term is implicit in the use of the phrase "rightof first refusal," the "mutually agreed upon conditions" mentioned in paragraph 6 refer tononessential terms of a sale, such as a date and place of closing. Universal relies on White HenPantry, Inc. v. Cha, 214 Ill. App. 3d 627, 634, 574 N.E.2d 104, 108 (1991), to argue thatnonessential terms can be implied by custom or implication. Because we have rejectedUniversal's contention that a price term is inherent in the phrase "right of first refusal" and haverecognized that we must give effect to all portions of the agreement, we do not acceptUniversal's argument that the phrase "mutually agreed upon conditions" refers only tononessential terms of a sale. Paragraph 6 indicates that the parties intended to mutually agree onall conditions, not just nonessential ones. Moreover, we do not find White Hen Pantryanalogous. That case involved a lease for real estate with an option to purchase the real estate for$100,000. The purchase option ran with an option to renew the lease for a five-year period. White Hen Pantry, 214 Ill. App. 3d at 630, 574 N.E.2d at 105. Unlike that lease, the agreementhere involves the possible purchase, management or operation of S&S by Universal and lacks amethod by which the price and terms of the agreement can be ascertained.

Universal's position fails to recognize that all situations in which a right of first refusalcould be exercised do not involve third-party buyers. In Kellner, this court described the right offirst refusal as preemptive, stating:

"A right of first refusal is not an option in that the holder of the rightcannot force the sale of the property at a stipulated price. [Citation.] Instead, theright does not arise until the grantor notifies the holder of a desire to sell or untiloffering or contracting to sell to a third party without first giving the holder of theright of first refusal the opportunity to buy. [Citations.] Oftentimes a right of firstrefusal is a right to elect to take specified property at the same price and on thesame terms and conditions as are contained in a good-faith offer to purchase madeby a third party. [Citations.]" Kellner, 250 Ill. App. 3d at 1034-35, 620 N.E.2d at610.

Although a right of first refusal often does involve a third-party offer, Kellneracknowledges the right can also arise when a grantor notifies the holder of the right "of a desireto sell." Kellner, 250 Ill. App. 3d at 1034, 620 N.E.2d at 610. In that circumstance, the grantorcould offer the property to the holder at the grantor's preferred price. Numerous Illinois caseshave described rights of first refusal in greater detail and with options that are unrelated to third-party offers. See, e.g., Drayson v. Wolff, 277 Ill. App. 3d 975, 981, 661 N.E.2d 486, 491 (1996)(right could be exercised either at proposed selling price, agreed price or price determined byimpartial appraisal); In re Estate of Halas, 175 Ill. App. 3d 180, 182-83, 529 N.E.2d 768, 770(1988) (holder of right must pay "greater of the price originally offered by the other party, or thenet fair market value per share, as determined by three appraisers"); National Aircraft Leasing,Ltd. v. American Airlines, Inc., 74 Ill. App. 3d 1014, 1019, 394 N.E.2d 470, 475 (1979)(describing conditions of right of first refusal triggered upon third-party offer); Miller, 26 Ill.App. 3d at 19-20, 324 N.E.2d at 208 ("fair market value," "reasonable value" or "current marketvalue" sufficiently certain methods of determining price.)

For a contract to be enforceable, its terms and provisions must enable the court toascertain what the parties have agreed to do. Pritchett, 332 Ill. App. 3d at 896, 773 N.E.2d at1282. The agreement here indicates the parties would negotiate Universal's purchase,management or operation of S&S if and when those discussions were necessary and that anytransaction would take place "under mutually agreed upon conditions." Paragraph 6 representsthe parties' intent to engage in further negotiations in the future. We affirm the trial court'sruling that paragraph 6 was not sufficiently definite and therefore unenforceable.

Universal next contends that if we find the agreement unenforceable due to theindefiniteness of the right of first refusal provision, the trial court erred in not allowing Universalto amend its complaint to allege that before, during and after the execution of the agreement,Sandman and Universal's president, Philip Zeid, orally agreed that Universal could exercise itsright of first refusal and purchase S&S at the same price contained in a third-party offer.

In the trial court, Universal presented its request to amend its complaint as part of amotion to reconsider. In a motion to reconsider, a party should bring before the court newlydiscovered evidence, changes in the law or errors in the court's prior application of existing law. Chelkova v. Southland Corp., 331 Ill. App. 3d 716, 729, 771 N.E.2d 1100, 1111 (2002). "Trialcourts should not permit litigants to stand mute, lose a motion, and then frantically gatherevidentiary material to show that the court erred in its ruling." Gardner v. Navistar InternationalTransportation Corp., 213 Ill. App. 3d 242, 248, 571 N.E.2d 1107, 1111 (1991). Whether togrant or deny such a motion is within the trial court's discretion and will be not reversed absentthe abuse of that discretion. Chelkova, 331 Ill. App. 3d at 729, 771 N.E.2d at 1111. BecauseUniversal offered no new evidence or legal bases for its motion, the trial court's denial of themotion to reconsider was well within its discretion.

Assuming that Universal had presented a proper motion to amend its pleadings, inreviewing the denial of such a motion, this court analyzes whether (1) the proposed amendmentwould cure the defective pleading; (2) the proposed amendment would cause prejudice orsurprise to the defendant; (3) the proposed amendment is timely; and (4) previous opportunitiesto amend the pleadings could be identified. Zubi v. Acceptance Indemnity Insurance Co., 323 Ill.App. 3d 28, 40, 751 N.E.2d 69, 80 (2001). The trial court's ruling on the amendment ofpleadings will not be overturned absent an abuse of discretion. Zubi, 323 Ill. App. 3d at 40, 751N.E.2d at 80. Universal argues that the second, third and fourth factors in Zubi have been metand that, regarding the first factor, the proposed amendment would cure its pleading by expresslyproviding the missing price term. We first note regarding the third and fourth factors, however,that a plaintiff generally is not allowed to file an amended complaint if the facts the plaintiffseeks to add were known at the time of the original pleading. Universal does not claim that it didnot know about the oral agreement when it filed its initial complaint.

Regarding the proposed amendment's potential to cure the pleading, Universal assertsthat Sandman and Zeid's oral agreement provides the missing price term. A party may notintroduce parol, or extrinsic, evidence of a prior or contemporaneous agreement to showadditional terms of a written agreement unless the writing is incomplete or ambiguous. Eichengreen v. Rollins, Inc., 325 Ill. App. 3d 517, 521-22, 757 N.E.2d 952, 956 (2001). Ambiguity exists if terms of an agreement are capable of more than one reasonable construction. Owens v. McDermott, Will & Emery, 316 Ill. App. 3d 340, 348, 736 N.E.2d 145, 153 (2000). Paragraph 6 memorializes the parties' intention to agree upon conditions of any purchase,management or operation of S&S by Universal. Universal argues that because price is not a"condition" of sale, the oral agreement does not contradict paragraph 6. However, we havealready rejected Universal's assertion that "mutually agreed upon conditions" refers only tononessential terms and not to price. Although paragraph 6 is indefinite for the lack of a priceterm, that does not create ambiguity; paragraph 6 states that the parties were to agree on a price.

We note that parol evidence also can be admitted if the writing is not a completeintegration of the parties' agreement. Eichengreen, 325 Ill. App. 3d at 522, 757 N.E.2d at 956. Here, paragraph 6 indicated the parties would proceed under agreed conditions to be decidedwhen and if the principal of S&S decided to sell or limit participation in the business. Thereference to future discussions does not render paragraph 6 an incomplete expression of theparties' agreement; it represents the parties' complete agreement at that time. Because paragraph6 is neither ambiguous nor incomplete, the trial court properly denied Universal's request toamend its complaint to include parol evidence.

For all of the foregoing reasons, we affirm the judgment of the trial court.

Affirmed.

O'BRIEN, P.J. and O'MARA FROSSARD, J. concur.

1. For the purpose of brevity, we refer to S&S and Sandman simply as "S&S." In additionto S&S's arguments, City Scrap and Thompson have filed a brief with this court contending thatthe trial court properly dismissed plaintiff's claims of tortious interference with contract.