Allen, Jr. v. Cedar Real Estate Group

• Decision Date: 03 January 2001
• Docket Number: No. 99-4090,99-4090
• Citation: 236 F.3d 374
• Parties: (7th Cir. 2001) THOMAS K. ALLEN, JR., Plaintiff-Appellant, v. CEDAR REAL ESTATE GROUP, LLP, Defendant-Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 374

236 F.3d 374 (7th Cir. 2001)

THOMAS K. ALLEN, JR., Plaintiff-Appellant, v. CEDAR REAL ESTATE GROUP, LLP, Defendant-Appellee.

No. 99-4090

In the United States Court of Appeals For the Seventh Circuit

Argued September 6, 2000

Decided January 3, 2001

Appeal from the United States District Court for the Northern District of Indiana, Hammond Division. No. 98 C 633--James T. Moody, Judge. [Copyrighted Material Omitted]

[Copyrighted Material Omitted] Before Manion, Kanne, and Diane P. Wood, Circuit Judges.

Kanne, Circuit Judge.

Thomas Keith Allen, an Indiana citizen, made a written offer to Cedar Real Estate Group, LLP ("Cedar"), an Iowa Partnership, to purchase a 6.2 acre parcel of land for $360,000. Cedar made a counteroffer which minimally changed the terms of the original offer, and Allen accepted. After an environmental audit revealed unexpected soil and groundwater contamination, the parties negotiated unsuccessfully for approximately four months in an attempt to allocate the costs of environmental remediation. Eventually, due to the parties' inability to reach an agreement, Cedar terminated the agreement and informed Allen that it was placing the property back on the market. In response, Allen notified Cedar that the parties had a binding agreement and insisted on closing the transaction. When Cedar refused, Allen filed suit against Cedar in federal district court, properly alleging diversity jurisdiction and asking for damages and/or specific performance of the land sale contract. Because we find that no contract existed, we affirm the district court's grant of summary judgment for the defendant- appellee, Cedar Real Estate Group.

I. History

At the center of the dispute in this case is a 6.2 acre parcel of real estate located in Lake County, Indiana ("the property") owned by Cedar. In May of 1998, Cedar listed the property for sale with Richard E. Weiss, a real estate agent. A large trucking company, CRST International, used the property as a terminal prior to its placement on the market. At that time, CRST International used five underground storage tanks ranging in volume from 500 to 10,000 gallons to store fuel and heating oil on the property. In 1990, the four largest of these tanks were removed from the property. The smallest tank was left in place and filled with concrete. As required by Indiana state environmental regulations, CRST International filed a closure report with the Indiana Department of Environmental Management ("IDEM") detailing the removal and closure of the underground storage tanks.

On June 4, 1998, through his real estate agent, Howard Cyrus, Allen offered to purchase the property from Cedar for $360,000. Allen made his offer on a preprinted purchase agreement that contained standard boilerplate contract provisions concerning the method of payment, taxes and assessments, and the risk of loss. The purchase agreement also specified that the sale of the property was "as is" and that "time periods specified in this Agreement expire at midnight on the date stated unless the parties agree in writing to a different date and/or time."

In addition to the preprinted purchase agreement, a typewritten page entitled "FURTHER CONDITIONS" was attached to Allen's offer. In pertinent part, this additional page provided the following:

This offer to purchase is subject to purchaser[']s approval of the following:

1) After purchaser[']s review of the Environmental Disclosure Document for Transfer of Real Property (see attached), at purchaser[']s option, a current Phase 1 and Phase 11 Environmental Audit with soil borings will be ordered. Cost not to exceed $5,000 and to be split on 50/50 basis between purchaser and seller. Audits to be completed within thirty (30) day period after acceptance of this proposal by sellers, with a reasonable extension of time, if needed. Seller shall provide completed copy of Disclosure Document with accepted copy of purchase agreement[.] In addition, sellers agree to provide purchasers with all existing environmental data and underground tank closure documents from the State of Indiana relating to the subject property.

The bottom of the additional page also contained the following footnote referring to the above paragraph, "Regarding #1--Mr. Allen will not request environmental audit if he is satisfied with the contents of the disclosure document. Mr. Allen will make the decision after it is reviewed." Although the purchase agreement specifically gave Allen the right to investigate the property to determine the existence of environmental contamination, it did not specify how such a discovery would affect the agreement to sell the property. The purchase agreement named July 15, 1998 as the closing date but also allowed a reasonable extension of time "for correcting defects in the Property noted in any inspection report."

On June 9, 1998, Cedar made a written counteroffer to Allen. The counteroffer modified the first paragraph of the further conditions to provide that:

[w]ithin five (5) business days after this Counter Offer is accepted by Purchaser, Seller shall provide Purchaser with a completed copy of the Environmental Disclosure Document for Transfer of Real Property and provide purchaser with all existing documentation, environmental data and underground tank closure documents from the State of Indiana regarding the subject property which Seller has in its possession. Purchaser shall then have three business days to review the information received from Seller and to exercise its option as provided in paragraph (1).

On June 12, 1998, Cyrus delivered Allen's signed acceptance of the counteroffer to Weiss.

In accordance with the agreement, Cedar delivered the appropriate environmental disclosure documents to Allen. After reviewing these documents, Allen decided to exercise his option to order an environmental audit. He engaged the services of Enviro Solutions, Inc. ("ESI") to perform an environmental assessment of the property. ESI representatives visited the property on June 19 and July 14, 1998. ESI also reviewed documents, spoke with a representative of CRST International, and interviewed personnel from various state and local governmental agencies. On July 29, 1998, ESI issued its environmental assessment of the property. ESI concluded that:

[t]he property does exhibit adverse environmental issues in the form of apparent diesel fuel contamination in the general area of the former site of two 10,000 gallon diesel fuel tanks. Both soil and groundwater are impacted. The full extent of the contamination is not known. A realistic estimate of potential clean up costs can not be prepared based on available information. ESI recommends that additional investigatory actions take place in order to further delineate the extent of the contamination. At that point, it may be possible to estimate the potential clean up costs.

After receiving this memorandum from ESI, Allen submitted it to Cedar. On August 7, 1998, Cyrus sent a memorandum to Weiss stating that Allen was "prepared to close th[e] transaction within thirty (30) days after receipt of an acceptably clean environmental report for the entire property indicating it meets state standards." The memorandum said that Allen was willing to pay fifty percent of the costs of further environmental investigation up to $5,000 and fifty percent of the costs of remediation up to $10,000. The memorandum also stated that:

I cannot stress enough, that Mr. Allen wants this property and is willing to accommodate the owner in terms of the time necessary to solve these problems plus his contribution toward their solution.

At this time, we believe that all responsibility for future investigations, remediation, and preparation of a final environmental report is the owner's, or his agent (you).

Upon receipt of this memorandum, Weiss contacted John M. Smith, one of Cedar's partners, to determine Smith's position with respect to sharing remediation costs with Allen. Smith told Weiss that he had not changed his position and that sale of the property would be "as is."

In an attempt to save the deal, Weiss brought in Environmental Restoration Systems ("ERS"), an environmental contractor with whom he had worked in the past. On August 18, 1998, a meeting was held between Cyrus, Allen, Weiss, and a representative of ERS. The purpose of this meeting was to attempt to determine the potential costs of further site investigation and eventual remediation. A few days after the meeting, ERS tentatively estimated that further investigation and remediation would cost $30,335.

After receiving this information from ERS, Weiss faxed a letter to Cyrus reiterating that the sale of the property would be "'as is' with the buyer to address the environmental condition." In the letter, Weiss suggested that Allen should consider revising his offer. A week later, on September 4, Weiss softened his position. He wrote another letter to Cyrus, this time indicating that Cedar would agree to sell the property as specified in the purchase agreement "with the provision that the cost of the environmental clean-up be split equally." The letter stated that a mutually acceptable remediation agreement would be prepared and become part of the purchase agreement.

On September 15, Weiss informed Allen that Cedar was looking into dealing with other parties "due to the unresolved contractual issues associated with the Purchase Agreement of June 4, 1998." The next day, Cyrus faxed a note to Weiss proposing that Allen contribute fifty percent of the costs of remediation work up to a total of $25,000. In response, Weiss opined that "[t]his is the type of approach that the Smiths will understand" and inquired whether Allen would agree to increase the remediation cap to $35,000. Cyrus responded that Allen would be willing to offer to pay one half of any remediation work that needed to be done up to $35,000.

A few days after Allen had offered to pay half of the...