UNION COUNTY — Last week Union, Kean University, Merck and the developer trying to purchase the 50-acres fronting Morris Avenue came together in court to argue over a conveyance made in 1925 that may or may not hold legal merit today.
Right before Union County Superior Court Judge Katherine Dupuis ruled she would not stop Kean University and Merck from moving forward with negotiations involving the purchase of this parcel of land, attorney’s representing the university agreed to halt all discussions. Any final answer, though, will have to wait until after a trial in the fall.
The concession by Kean was based solely on the unanswered question of whether the last will and testament of John Kean, Stewart B. Kean and Mary Alice Reynolds, dated Jan. 16, 1925, to Schering Corporation in 1986 and transferred to Merck, is unenforceable. In that will the Kean family executed a “covenant” to ensure that Kean heirs would always have the right to buy back the property if it was being sold.
This “right of first refusal” means any seller has to go back to Kean heirs to see if they want the property. Where things became legally complicated involved the Kean heirs right to assign this Right of first refusal to whomever they wanted.
In this case, John Kean, who now lives in Florida, assigned the right over to the Kean Board of Trustees, which threw a wrench in John Russo’s negotiations with Merck. Russo is the owner of Russo Acquisitions, the developer that filed the lawsuit.
Complicating matters even further was that in May the owner of Russo Acquisitions served a lawsuit on Kean, the board of trustees and the township, citing the fact his negotiations with Merck fell apart because of a clause that gave the Kean family “the first right of refusal” to buy back the acreage.
Russo, though, who spent a year in negotiations with Merck to finalize the purchase of the 50 acres for $6.2 million, believes the covenant died after the termination of the Kean Trust in 1997.
Russo’s legal representation also contended that because this trust was terminated, anything contained in the will from 1925 is not legally applicable today. Russo further suggested the “purported assignment of the First Right of Refusal on April 8, 2014, a full 17 years after termination of the Kean trust, is beyond suspect.”
Meanwhile, Union, armed with their own legal representation in court, sided with Russo’s defense that the first right of refusal is no longer legally applicable.
“The township further agrees that the perpetual, restrictive covenants identified by Russo in its papers with respect to the permitted uses … are not enforceable as they unlawfully prevent, chill and interfere with the unfettered development of the real property which is the subject of this action,” said the township’s brief presented to the judge prior to the court hearing.
The township also has other concerns that involve taking this property permanently off the tax rolls.
“If a contract of sale is executed by Merck and the board, the public interest represented by the township of Union may suffer irreparable harm because the subject property may be diverted to the expansion of state-owned university property,” the township‘s legal brief noted, asking the court to stop all further negotiations until the issue of whether the first right of refusal actually can be transferred.
However, Union admitted that while they do not want the property sold to Kean, they do not have any plan or use for the acreage in question at this time. Their concern is based on the impact on public interests and tax ratables, as well as how this purchase would affect surrounding areas.
For example, in the township’s brief, they point out there are issues of traffic and circulation alone from resulting development at Kean that could have a broad impact on the township and county roads such as the heavily traveled Morris Avenue.
“These are all examples of variables that must be considered before the township will sanction any development or redevelopment use of the property,” the legal brief said.
While the township does not have any plan for this particular acreage, they expressed concern for how it is developed and an interest in being involved at some point.
“When appropriate and properly designated parties are identified, the township will meet its responsibility to assure that the development or redevelopment of the property is undertaken in a manner that benefits the public,” the brief indicated.
They also strongly suggested there should be the “appropriate imposition of real estate taxes, or payments in lieu of such taxes,” upon the party seeking to develop the 50 acres.
The township also made it very clear they would continue this fight to see the property in the right hands.
“The township cannot permit the use or property to be dictated by Byzantine and antiquated restrictions and rights of first refusal that run contrary to public policy and applicable law,” the brief went on.
Union also indicated they did not support the Kean Board of Trustees being able to “utilize outdated restrictive covenants and the right of first refusal to affect a selfish conveyance of the property to the board and the property’s detriment.”
“If it has its way, the Board of Trustees would see that the property be acquired by Kean University pursuant to the right of first refusal, immediately removing the property from the township’s tax rolls and rendering it wholly tax exempt,” the brief said, adding that this is contrary to the public’s interest “and likewise unlawful.”
Late last week Union Mayor Clifton People Jr. admitted he was upset about what happened at the hearing, telling LocalSource “it was a bad experience for me.”
People explained that he expected the outcome to be different, noting the judge wanted “more documents” to support all sides of the issue, which will drag things out considerably.
The mayor’s sole concern, he said, was how the sale of this property to Kean would affect township resident’s wallet.
“That bothers me because 57,000 people in our town will be greatly affected by what happens,” People said, adding that the township can do nothing but wait until a trial takes place.
Kean’s brief indicated the validity of the right of first refusal established Dec. 16, 1986, between the Kean family and Schering Plough fully supports the will drafted in 1925, and provided legal evidence from the 1986 conveyance to support this claim.
“Grantee covenants and agrees, for itself and heirs, successors in interest and assigns, not to dispose of all or any part of the property without first giving written notice,” the brief noted.
They pointed out that Kean family heirs had 30 days after receiving notice of the impending sale to Russo to decide whether they wanted the property or not. This, they said, supports the “first right of refusal” clause or the notice would not have been sent.
Attorney’s representing the university maintained in their brief that at the core of the developer’s lawsuit is a dispute between Russo and the university over the “valid enforceable right” Kean was assigned.
The university suggested that while Russo may not agree with the enforceable right of first refusal, it remains legally enforceable.
Kean did agree with the developer, Russo and Merck that the purpose of a temporary halt to negotiations for a sale would permit further investigation and legal substantiation of the 1925 conveyance and right of first refusal.
Finally, although Russo’s agreement of sale specifically noted that should the sale not go through, he would be entitled to not only his deposit but also all out-of-pocket costs up to $200,000, the university did not support that as a “remedy” in this case.
Kean did agree there should be a status quo until an investigation and court proceeding take place.