94 F.3d 1014 (6th Cir. 1996), 95-3450, Anchor v. O'Toole
|Citation:||94 F.3d 1014|
|Party Name:||Gerald L. ANCHOR and Hazel B. Anchor, Plaintiffs-Appellants, v. Dennis M. O'TOOLE and Melinda L. O'Toole, Defendants-Appellees.|
|Case Date:||September 09, 1996|
|Court:||United States Courts of Appeals, Court of Appeals for the Sixth Circuit|
Argued May 20, 1996.
Rehearing Denied Oct. 9, 1996.
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Robert R. Linton, Jr., Cleveland, OH (argued and briefed), for Plaintiffs-Appellants.
Martin J. Murphy (argued and briefed), Davis & Young, Cleveland, OH, Daniel D. Mason, Warhola, O'Toole, Loughman, Alderman & Stumphauzer, Lorain, OH, for Defendants-Appellees.
Before: RYAN and NORRIS, Circuit Judges; JOINER, District Judge. [*]
RYAN, Circuit Judge.
In this breach of contract claim involving the sale of real estate, plaintiffs appeal a favorable jury verdict awarding them only nominal damages. They claim the district court erred in denying their motion for a new trial based on the ground that damages were against the manifest weight of the evidence, and in granting judgment as a matter of law in favor of defendants on plaintiffs' breach of fiduciary duty claim. For the reasons that follow, we affirm on all grounds.
This breach of contract claim arose as a result of the sale of a home, referred to by the parties as an estate, located in Vermilion, Ohio. The estate is comprised of a large, custom-built tudor home, a guest house, a caretaker's house, and a barn, situated on 104 acres of river front property along the Vermilion River. Plaintiffs, Gerald and Hazel Anchor, put the estate up for sale in the summer of 1990. Gerald Anchor is a lawyer.
In June 1990, defendant Dennis O'Toole, who is also a lawyer, sent a letter of introduction to the Anchors expressing an interest in purchasing the estate. In this letter, O'Toole explained that he did not have the cash to purchase the property outright, but offered the Anchors, in partial payment of the purchase price, a one-third interest in O'Toole's company, International Marina Group (IMG). IMG was created for the exclusive purpose of entering into a joint venture in the development of a new marina located on Lake Erie. The letter provided the Anchors with extensive details about the nature of the joint venture, the potential for future profits, and Dennis and Melinda O'Tooles' interest in the venture. With the letter, O'Toole included several financial statements for the marina, which revealed that the enterprise had always operated at a loss.
Marina International was a joint venture entered into in December 1987 by IMG as 40% owner, and Spitzer Great Lakes Ltd. as 60% owner. O'Toole was the only shareholder and director of IMG. He was responsible for the day-to-day operations of the marina, for which services IMG received a management fee. The marina has over 600 imported floating docks; it is a deep water port located strategically half-way between Cleveland and the islands located in Lake Erie's western basin. In his letter to the Anchors, O'Toole represented that his interest in the marina was worth between $900,000 and $1.4 million, although he also warned plaintiffs that he had never had his interest appraised. The letter also speculated that the value of O'Toole's interest might rise dramatically if casino gambling were approved in Ohio.
The letter described the creation of the joint venture as follows:
Development of the marina began with a plan of mine in 1978 and continued until everyone and their brother figured out what and why I was doing and tried to get into the act. In any event, the Port Authority awarded me the bid in October of 1987; my main competitor was Spitzer. We joined forces later that year and began development in the Spring of 1988. The award of the bid resulted in a 32 year lease [sic] of the east port area....
... Phase one and two were financed, in part, by the issuance of Ohio Port Development Bonds.... Balance of funds came from the individual companies and or the joint venture itself.
Anchor admitted at trial that he made no effort to inquire about, or investigate, the nature of IMG's interest, or to have the value of the business appraised.
A few days after receiving O'Toole's letter, Anchor met with O'Toole to tour the marina and to discuss further the possibility of selling the estate to the O'Tooles. The parties then entered into negotiations for the purchase of the estate. The final agreement states that the O'Tooles paid the Anchors $677,642 excluding the interest in IMG, for the estate. Surprisingly, however, nowhere does the purchase-sale agreement set forth the full purchase price for the estate. The agreement provided as follows:
Purchaser agrees to purchase said property as described above for the following consideration:
(a) the sum of $50,000.00 cash, payable upon closing;
(b) the sum of $50,000.00 cash upon the sale of Purchaser's residence and the close of escrow and disbursement of the sale proceeds to Purchaser; or by December 1, 1990, whichever first occurs;
(c) a promissory note in the amount of $410,000.00 secured by a mortgage deed on the Dean Road property [ (the estate) ], payable interest only at the rate of 9.5% per year in equal monthly installments, such monthly payments beginning on the first day of the month following close of escrow and the transfer of title from Seller to Purchaser, principal due and payable on June 30, 1995;
(d) the sum of $82,757.00 secured by a mortgage deed on the Dean Road property, payable in a lump sum including accrued interest at the rate of 9.5% per annum upon close of escrow of the sale of Purchaser's property located at 125 Alabama Avenue, but no later than 24 months after close of escrow of the Dean Road purchase, whichever first occurs. In no event shall the lump sum due on this mortgage be less than $100,000.00;
(e) the sum of $75,285.00 secured by a mortgage deed on the Dean Road property, payable in a lump sum including accrued interest at the rate of 9.5% interest per annum, all due and payable three years after close of escrow and transfer of title to Purchaser. In no event shall the lump sum be less than $100,000.00;
(f) [a] non-assessable one-third interest of International Marina Group, Inc. in Marina International, Lorain, Ohio. The parties further stipulate and agree that a mortgage deed on the Dean Road property shall be recorded in this escrow in the amount of $70,849.00 to accrue interest at the rate of 9.5% per annum. At the time, but in no event later than six years after the close of escrow, Seller has received profit disbursements for its one-third interest in IMG from the operation of Marina International of the sum of $125,000.00, this mortgage obligation shall be satisfied. In the event IMG's profit distributions to Seller do not satisfy this requirement within six years after close of escrow, Purchaser shall immediately pay the difference between $125,000.00 and what has already been received by Seller theretofore in the form of profit disbursements for its one-third interest in IMG, Inc., and the aforesaid mortgage shall be then deemed satisfied and discharged of record.
(Emphasis added.) The parties agreed that the "non-assessable" interest meant that the Anchors would incur none of the marina's liability nor any of its debts.
The parties signed the agreement on July 26, 1990, and the O'Tooles moved into the Anchors' estate on September 2, 1990; they still live there.
Shortly after the agreement was signed, the joint venture began experiencing shortfalls in business and consequently in revenues. Suddenly, IMG was unable to make its monthly debt service payments: 40% of $65,000 per month. Alan Spitzer, the 60%...
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