On July 30, 2019, the New Hampshire Supreme Court issued its opinion in Donald Toy, et al. v. City of Rochester and Michael and Stacy Philbrook, Appeal No. 2018-0172.

This case involved the sale of land by the City of Rochester by sealed bid. In the bid notices, the City reserved the right to reject “any and all” bids that it deemed were not in its best interest and required bidders to disclose their intended use of the parcel. The bid notices were later revised to also give abutters a right of first refusal at the highest bid price. Both the Toys and the Philbrooks owned abutting parcels. The Toys owned a manufactured housing park nearby and an abutting parcel and bid on the subject property for access purposes. Manufactured housing parks are not permitted on the subject parcel under the City’s Ordinance. The Philbrooks also submitted a bid, hoping to build a single-family home on the lot. The Toys were the highest bidder. The Philbrooks submitted the lowest bid but offered to match the second highest bid if selected by the City. The City offered to sell the property to the Toys, but only if they agreed to a restrictive covenant prohibiting any development or expansion of the manufactured home park. The Toys rejected this condition. The City then accepted the Philbrooks’ bid without requiring the Philbrooks to agree to the same restrictive covenant.

The Trial Court granted the Toys injunctive relief, ruling in relevant party that the City had “improperly and materially amended the Conditions of Sale with regard to the Toys” by requiring the restrictive covenant and by not awarding the property to them as the highest bidder. The lower court further ordered the City to repurchase the subject property and sell it to the Toys and awarded the Toys their attorney’s fees.

On appeal, the New Hampshire Supreme Court reversed the trial court’s decision, holding that the City had not “improperly or materially” amended the Conditions of Sale because it had expressly reserved the right to reject any and all bids it deemed not in the best interest of the City. The Court also held that the City did not violate the bidding requirements by then selling the property to the Philbrooks as an abutter at the next highest price, after the Toys rescinded their offer. The Court also vacated the award of attorney’s fees. However, the Court did rule that omitting the restrictive covenant for the Philbrooks was a violation of the bidding process and remanded the issue to the Trial Court to resolve. The Supreme Court suggested that a second bidding process, which included the restrictive covenant for all parties, might be the proper solution.

The key takeaways for municipalities are 1) that a reservation of rights to decline offers not in the best interest of the municipality will be upheld; 2) that any conditions placed on the sale in a negotiation after the bid must be placed on all subsequent offers; and 3) that if a municipality finds, after bidding has commenced, that restrictive covenants are in its best interest, the New Hampshire Supreme Court favors a new round of bidding, which includes notice of these restrictions.

Jonathan Boutin