Apple Glen Crossing v. Mesirow Realty Sale-Leaseback, Inc., 1:03-CV-235 (N.D. Ind. 9/18/2003)

Decision Date18 September 2003
Docket Number1:03-CV-235.
PartiesAPPLE GLEN CROSSING, LLC, Plaintiff, v. MESIROW REALTY SALE-LEASEBACK, INC., Defendant.
CourtU.S. District Court — Northern District of Indiana
MEMORANDUM OF DECISION AND ORDER

ROGER B. COSBEY, Magistrate Judge.

I. INTRODUCTION

The Plaintiff, Apple Glen Crossing, LLC ("Apple Glen") is suing the Defendant, Mesirow Realty Sale-Leaseback, Inc. ("Mesirow") for fraud, constructive fraud, and breach of agreement to negotiate in good faith, stemming from a letter of intent entered into between Bobeck Real Estate Company, Inc. ("Bobeck") and Mesirow. Apple Glen is seeking compensatory and punitive damages.

This matter is before the Court pursuant to the fully briefed motion to dismiss filed by Mesirow. The record consists of the complaint, the motion to dismiss, Apple Glen's response, and Mesirow's reply. The Court has jurisdiction based on diversity. 28 U.S.C. §1332(a). For the reasons hereinafter set forth, the motion to dismiss will be granted in part and denied in part.1

II. FACTUAL BACKGROUND

Apple Glen sold its interest in a commercial real estate development in Fort Wayne Indiana. (Compl. at ¶5). In order to reduce the tax liability it incurred from that sale, Apple Glen sought to "do a 1031 exchange."2 Id. at ¶6. Apple Glen had until January 24, 2003, to submit its §1031 exchange list. Id. at ¶7. Among the properties listed by Apple Glen was a freezer distribution facility for Marsh Supermarkets ("Marsh") located in Indianapolis, Indiana ("the Property"). Id. at ¶9.

The Property was the subject of a letter of intent entered into by Mesirow and Bobeck in January 2003. Id. at ¶11. That letter evidences "the intent of Bobeck Real Estate Company, Inc., or any one of its affiliates"3 to acquire the Property. Id. at Ex. B, p.1.4 The letter states that the sales terms would be "subject to a detailed Purchase & Sale Agreement setting forth the terms and conditions of the purchase and sale of the property. . . ." Id. The letter then summarized some of the proposed terms, such as: the purchase price; the intent to lease the Property to Marsh; Bobeck's right to inspect the proposed lease agreement with Marsh and to review the final sales contract; and the proposed deadline for closing on the purchase. Id. at pp. 1-2. An attachment to the letter stated that the letter of intent "shall remain in effect until 5:00 p.m. on January 23, 2003." Id. at pp. 4. Finally, the attachment expressly declared that:

This Letter of Intent is not intended to create a binding obligation on either party but, rather, a recitation of general terms of interest. Seller [Mesirow] agrees, however, that it shall not market the property for sale to any other party, nor solicit or entertain any other offers for its sale, prior to February 10, 2003. Should a final, mutually binding Agreement of Purchase and Sale for this transaction not be fully executed by 5:00 p.m. Central time, February 7, 2003, this Letter of Intent shall be null and void.

Id. According to the complaint, Mesirow told Bobeck that it had the authority to sell the Property. (Compl. at ¶10). Apple Glen alleges that, after the expiration of the forty-five (45) days for submission of its §1031 exchange list, it discovered that Mesirow did not have the authority to sell the property. Id. at ¶13. Thus, Apple Glen was "unable to proceed in full with its §1031 exchange and will suffer tax liability on approximately $6,000,000 in capital gain from its sale" of the original property. Id. at ¶14.

III. STANDARD OF REVIEW

A complaint should not be dismissed for failure to state a claim unless it appears that the plaintiff can prove no set of facts which would support his claim for relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957); Kelley v. Crosfield Catalysts, 135 F.3d 1202, 1205 (7th Cir. 1998) (citation omitted). In determining the propriety of dismissal under Fed. R. Civ. P. 12(b)(6), the court must "accept as true all well-pled factual allegations in the complaint and draw all reasonable inferences therefrom in favor of the plaintiff." Perkins v. Silverstein, 939 F.2d 463, 466 (7th Cir. 1991). See also Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 1686, 40 L.Ed.2d 90 (1974), overruled on other grounds, Davis v. Scherer, 468 U.S. 183, 104 S.Ct. 3012, 82 L.Ed.2d 139 (1984). The purpose of the motion to dismiss is to test the legal sufficiency of the complaint and not to decide the merits. Triad Assoc., Inc. v. Chicago Housing Auth., 892 F.2d 583, 586 (7th Cir. 1989), cert. denied, 489 U.S. 845, 111 S.Ct. 129, 112 L.Ed.2d 97 (1990). "If it appears beyond doubt that [the plaintiff] can prove any set of facts consistent with the allegations in the complaint which would entitle [the plaintiff] to relief, dismissal is inappropriate." Perkins, 939 F.2d at 463. Further, the court must "construe pleadings liberally, and mere vagueness or lack of detail does not constitute sufficient ground for a motion to dismiss." Strauss v. City of Chicago, 760 F.2d 765, 767 (7th Cir. 1985). Finally, "[t]he motion to dismiss for failure to state a claim is viewed with disfavor and is rarely granted." 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure: Civil 2d § 1357, p. 321 (1990).

IV. DISCUSSION5
A. Pleading Fraud With Particularity

Mesirow contends that the fraud and constructive fraud claims must be dismissed due to Apple Glen's failure to meet the heightened pleading standard for fraud contained in Fed. R. Civ. P. 9(b). That rule provides that "[i]n all averments of fraud . . . the circumstances constituting fraud or mistake shall be stated with particularity." The circumstances of fraud have been held to "`include the identity of the person who made the misrepresentations, the time, place and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff.'" F. McConnell & Sons, Inc. v. Target Data Systems, Inc., 84 F.Supp.2d 980, 983 (N.D. Ind. 2000) (quoting General Electric Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1078 (7th Cir. 1997)). In other words, the pleadings must set forth "`the who, what, where, and how: the first paragraph of any newspaper story.'" Id. (quoting DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990).

Mesirow contends that the complaint fails to sufficiently state the "who" element as it does not identify a specific person at Mesirow who made the alleged misrepresentations. However, as Mesirow is the only defendant, the complaint need not state which Mesirow employee made the misrepresentations. See AAR International v. Vacances Heliades S.A., 202 F.Supp.2d 788, 799 (N.D. Ill. 2002) (holding that "when the only defendant is a corporation or institution, `the institutional identity of the caller, viz that she [or he] was from [the corporate defendant], is what matters'" and a failure to name a specific employee was not fatal to the claim) (quoting Blaz v. Michael Reese Hosp.Foundation, 191 F.R.D. 570, 574 (N.D. Ill. 1999)).

Mesirow next argues that the complaint does not contain a specific allegation as to whom the alleged misrepresentations were made. Clearly, however, the complaint may be fairly read to state that the misrepresentations were made to an employee of Bobeck or Apple Glen. Discovery will doubtlessly ferret out the identity of the Bobeck or Apple Glen employee(s) to whom the misrepresentations were made, just as it will ferret out the Mesirow employee(s) who made the statements. In short, it is permissible at this stage of the proceedings for Apple Glen to simply state that someone from Mesirow made the alleged misrepresentations contained in the complaint to someone at Apple Glen as that gives Mesirow sufficient notice of the claims against it. See e.g., Creative Foods of Indiana v. My Favorite Muffin, Too, Inc., 2002 WL 244584 at *2, 4 (S.D. Ind. 2002) (holding that a complaint similar to the one at hand was sufficient for Rule 9(b) purposes).

Next, Mesirow argues that the complaint fails to state precisely when the misrepresentations were made. However, it may be reasonably inferred from a fair reading of the complaint that the misrepresentations must have been made between November 2002 (when the complaint alleges that Mesirow misrepresented that it had entered into a letter of intent for the acquisition of the Property) and January 24, 2003 (the last date which Apple Glen could have submitted its §1031 exchange list). Although more specific dates likely would be helpful to Mesirow, this approximately three (3) month time span is sufficiently detailed to withstand Rule 9(b) scrutiny. See Id. at *4 (holding that allegations of fraud committed during negotiations in 1997 were sufficient for Rule 9(b) purposes).

Finally, Mesirow argues that the complaint fails to state how the misrepresentations were communicated. This argument is without merit as the alleged misrepresentations contained in the letter of intent itself were, obviously, communicated in writing. It may be reasonably inferred that the other alleged misrepresentations, construing the complaint in a light most favorable to Apple Glen, were communicated orally. Id.

Having held that the complaint is sufficient to meet Rule 9(b)'s heightened pleading requirements, the Court now turns to Mesirow's Rule 12(b)(6) arguments.6

B. Fraud

Apple Glen contends that fraud occurred when it relied to its detriment upon Mesirow's knowing misrepresentation that it had the ability to control and sell the Property. (Compl. ¶15-21). Under Indiana law, the elements of fraud are:

(1) a material misrepresentation of past or existing fact which (2) was untrue, (3) was made with knowledge or in reckless ignorance of its falsity, (4) was made with the intent to deceive, (5) was rightfully relied upon by the complaining party and (6) which proximately caused the injury or damage complained of.

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