Schlaegel v. Howell

• Citation: 42 N.E.3d 771
• Decision Date: 16 October 2015
• Docket Number: No. 2014–CA–37.,2014–CA–37.
• Parties: Jerry SCHLAEGEL, et al., Plaintiffs–Appellants v. Terry HOWELL, et al., Defendants–Appellees.
• Court: United States Court of Appeals (Ohio)

42 N.E.3d 771

Jerry SCHLAEGEL, et al., Plaintiffs–Appellants

v.Terry HOWELL, et al., Defendants–Appellees.

No. 2014–CA–37.

Court of Appeals of Ohio, Second District, Champaign County.

Oct. 16, 2015.

James M. Hill, James M. Hill Co., L.P.A., Beavercreek, OH, Attorney for Plaintiffs–Appellants.

Rick Brunner, and Peter Contreras, Columbus, OH, Attorneys for Defendants–Appellees.

OPINION

HALL

, J.

{¶ 1} The plaintiffs, Jerry Schlaegel; J & J Champaign, LLC; and J & J Schlaegel, Inc., appeal the entry of summary judgment for the defendants, Terry Howell and Howell Land Development, LLC, on the plaintiffs' claims for breach of joint venture, breach of fiduciary duty, quantum meruit, unjust enrichment, conversion, and tortious interference. Finding no error, we affirm.

I. Background

{¶ 2} Jerry Schlaegel owns J & J Schlaegel—a construction company that does site development, underground utilities, bridges, roads, and the like—and also owns J & J Champaign, a holding company. Terry Howell owns Howell Land Development, LLC, a general contracting company that does business under the name Howell Buildings Company.

{¶ 3} Schlaegel alleges that in December 2011 he and Howell entered into a joint venture to build and lease a research facility for Pioneer Hi–Bred International. Specifically, Schlaegel claims, they agreed that

• they would prepare and submit a proposal for the Pioneer project;

• J & J Schlaegel would provide the bid for the site-preparation work;

• Howell Land Development would provide the bid to construct the facility;

• J & J Schlaegel would do the site-preparation work and Howell Land Development would construct the facility, if the proposal was accepted;

• they would jointly obtain financing for the project;

• at the end of the joint venture, J & J Champaign and Howell Land Development would form a limited-liability company that would own and lease the facility.

{¶ 4} In January 2012, Howell Buildings Company submitted a proposal to Pioneer to build and lease the facility. The proposal's cover letter states in part that “Howell Buildings Company will build the project, and will partner with J & J Schlaegel to form an ownership LLC for a partnership with Pioneer in this venture.” The letter also says:

Your site, as I explained does not have municipal or county water or sewer readily available. However we have consulted a local Professional Civil Engineer, who has worked locally in the Champaign County area for over thirty years, and he has extensive experience with EPA and local health department regulations. Both we and he are extremely confident of obtaining local permits for on-site septic and/or mound treatment.

Our partners in this venture, J & J Schlaegel, have extensive experience in on-site treatment installation. They are also ODOT contractors in site, roadway, and bridge construction in addition to installation and maintenance of such sewage treatment installations.

{¶ 5} The proposal gives the total cost to build the facility as $1,766,432 plus the cost of the land on which the facility would be built ($85,000). The cost breakdown shows the site-work cost as $339,650, which includes installing a storm water detention area, paving the parking area, and an $85,000 allowance for utilities to service the site. J & J Schlaegel had given Howell a bid for the site work, but according to Howell, the site-work cost included in the proposal to Pioneer is not based on J & J's bid but on a bid from another company. Howell says that he did not use J & J's bid because it was too high. J & J's bid was $329,999, but that did not include the $85,000 site-utility allowance or the cost of paving the parking area, which Howell estimated would be $35,000. Consequently, J & J's bid would have increased the site-work cost (and the entire proposal) by $110,349 ($329,999 + $85,000 + $35,000 - $339,650).

{¶ 6} Pioneer accepted Howell's proposal. In February, Howell filed articles of organization for A & C Land Development LLC (named for Howell's and Schlaegel's sons, Andy Howell and Chris Schlaegel). (The articles bear only Howell's name and signature.) A & C and Pioneer then executed a lease agreement for the facility. (Only Howell signed for A & C.) One provision of the lease (Article XVI) pertinently provides that “Lessor [A & C] hereby represents and warrants that it is the owner of the Property and that it has the right and authority to enter into this Agreement without the joinder or approval of any other person.” Pioneer owned an option to purchase the land on which the facility was to be built, and in early March, it assigned A & C its interest in the option. The option expired on March 31, however, so A & C had to purchase and close on the property by then or seek an extension of time. Howell and Schlaegel received an email in mid-March telling them that their joint application for lease financing had been approved. But the approval notice states that the lease will not close if certain conditions are not satisfied. The conditions include a “[s]igned copy of lease/rent agreement with Pioneer Hy–Bred [sic] International, Inc.” and “[s]atisfactory entity documents.”

{¶ 7} On March 14, Howell emailed Schlaegel asking for input on what their respective roles would be in A & C. Schlaegel responded with his thoughts for an operating agreement, which he said should include a provision that J & J Schlaegel would perform all site work except paving, as identified in J & J's bid. Howell responded with a draft operating agreement, dated March 15, 2012. Among the provisions in Howell's draft agreement is one stating that Howell Land Development will serve as general contractor for the Pioneer project “and have the full discretion to hire whoever it makes the most economical sense to provide those construction services.” Another provision states in part that “J & J Champaign LLC shall have the site work responsibility for the execution and risk associated with such projects and pledges to provide the most economical pricing to be competitive with all functions associated.” On March 19, Schlaegel sent Howell an email in which he proposed several revisions to the draft agreement. One change Schlaegel wanted was the phrase “most economical” removed from the just-quoted provision. Schlaegel also notes in the email that they “still need an agreement between J & J Champaign or J & J Schlaegel for site work and Howell Buildings as general contractor.” On the same day, Schlaegel sent Howell another email that sets forth numerous “action items” that he thought needed to be done for A & C. Among these were completing the operating and buy-sell agreements and writing up the Pioneer agreement between Howell Land Development and J & J Schlaegel.

{¶ 8} Howell never responded to Schlaegel's proposed revisions or “action items.” Instead, sometime before the end of March, Howell told Schlaegel that he (Schlaegel) would no longer be part of the Pioneer project. According to Howell, the problem was his and Schlaegel's inability to agree on who would do the site work. The expiration of A & C's unexercised land-purchase option, on March 31, says Howell, violated Article XVI of A & C's lease agreement with Pioneer, so Pioneer terminated the agreement. With no signed leased agreement and no operating agreement, the lease financing would not close. Moreover, without the land on which the facility was to be built, the project could not move forward. For these reasons, Howell decided to continue with the Pioneer project without Schlaegel doing the site work. Howell hired the other company, whose site work costs had been included in the Pioneer proposal, and he formed Howell Bros. Development, LLC, to own and lease the facility.

{¶ 9} In February 2013, Schlaegel (and his companies) filed suit against Howell (and his company). The amended complaint asserts six claims for relief. The first claim alleges the breach of joint venture and/or partnership agreements. The second claim alleges that the defendants breached their fiduciary duty to the plaintiffs by negotiating with Pioneer and others to exclude the plaintiffs from the Pioneer project. The third claim for relief alleges that the defendants breached their contract with the plaintiffs by not hiring J & J Schlaegel to perform the site work for the Pioneer facility. The fourth claim is for quantum meruit and unjust enrichment, alleging that the plaintiffs expended considerable time, money, and goodwill in support of the Pioneer project and that the defendants have been unjustly enriched as a result of the plaintiffs' expenditures. The fifth and sixth claims are for conversion and tortious interference. These two claims allege that the defendants wrongly interfered with or exercised control over the plaintiffs' business relationships with A & C, Pioneer, and the defendants.

{¶ 10} The defendants moved for summary judgment on all of the claims. They contended that the parties never entered into an enforceable joint-venture contract. Howell contended that he never agreed to hire J & J Schlaegel to perform the site work on the Pioneer project. The trial court sustained the motion. The court concluded, based on the evidentiary material presented, that there was no “meeting of the minds” on the two essential terms of the alleged joint-venture contract—who would do the site work and the ownership of the facility. The parties, said the court, agreed only to a framework for further negotiation, which is an unenforceable “agreement to make an agreement.”

{¶ 11} The plaintiffs appealed.

II. Analysis

{¶ 12} The plaintiffs assign seven errors to the trial court's entry of summary judgment. The first six challenge summary judgment on the claim for breach of the alleged joint-venture agreement. The seventh assignment of error challenges summary judgment on the claims for breach of fiduciary duty, quantum meruit, unjust enrichment, conversion, and tortious interference.¹

{¶ 13} “Summary judgment will be granted only when there remains...