Euclid Business Park, LLC v. Peters

• Decision Date: 30 December 2013
• Docket Number: CV 06 589304
• Parties: EUCLID BUSINESS PARK, LLC, Plaintiff, v. JERRY PETERS, et al., Defendants. EUCLID REALTY, LLC, et al., Intervenor plaintiff, v. SESTECH ENVIRONMENTAL, et al., Intervenor defendants
• Court: Ohio Court of Common Pleas

EUCLID BUSINESS PARK, LLC, Plaintiff, v. JERRY PETERS, et al., Defendants.

EUCLID REALTY, LLC, et al., Intervenor plaintiff, v. SESTECH ENVIRONMENTAL, et al., Intervenor defendants

No. CV 06 589304

Court of Common Pleas of Ohio, Cuyahoga

December 30, 2013

JOURNAL ENTRY DENYING EUCLID REALTY AND THE CO-MAKERS' MOTIONS FOR SUMMARY JUDGMENT AND GRANTING AND DENYING IN PART EUCLID BUSINESS PARK AND STUART LICHTER'S MOTIONS FOR SUMMARY JUDGMENT

JOHN P. O'DONNELL, JUDGE

STATEMENT OF THE CASE

This lawsuit was initiated by Euclid Business Park, LLC, ^[1] the seller of a piece of real estate, against Jerry Peters, John Peters, Armond Waxman and Melvin Waxman, the four individual co-makers of a promissory note that help financed the sale. The co-makers, along with the buyer -- Euclid Realty, LLC^[2] (an intervention plaintiff) -- have asserted their own causes of action against Euclid Business Park and Stuart Lichter, the president of Euclid Business Park's managing member Industrial Realty Group, Inc.^[3]

Although the case has sprawled, the remaining issues can be concisely summarized: Euclid Business Park seeks a judgment for the money still owed on the promissory note, while Euclid Realty and the co-makers (who are all members of Euclid Realty) claim nothing is owed on the note because Euclid Business Park not only breached the parties' contract but, with Lichter, illegally procured the sale through fraudulent inducement to contract, fraud, negligent misrepresentation, and civil conspiracy.

The causes of action

The operative pleadings are Euclid Business Park's complaint, filed here on April 14, 2006, and the omnibus amended claims and counterclaims of Euclid Realty and the four defendants^[4] against Euclid Business Park and Lichter, filed September 24, 2008.

Euclid Business Park's complaint contains a single cause of action: breach by the Peterses and Waxmans^[5] of a May 31, 2003, amended and restated promissory note.

The claims of Euclid Realty and its members against Euclid Business Park and Lichter are more numerous. They include causes of action for: breach of contract against Euclid Business Park only; ^[6] negligent misrepresentation against Euclid Business Park and Lichter; ^[7] fraudulent inducement to contract against Euclid Business Park and Lichter; ^[8] fraud against Euclid Business Park and Lichter; ^[9] and civil conspiracy against Euclid Business Park and Lichter.^[10]

The pending motions

Euclid Business Park has moved for summary judgment on its complaint.^[11] Euclid Business Park and Lichter have jointly moved for summary judgment in their favor on all of the remaining claims against them.^[12]

For their part, Euclid Realty and its members have moved for summary judgment on their causes of action for breach of contract, fraud and fraudulent inducement.^[13]

The motions for summary judgment are fully briefed and this entry follows.^[14]

STATEMENT OF FACTS

The purchase agreement

Euclid Business Park and Euclid Realty entered into a purchase agreement on April 19, 2001. The contract called for Euclid Business Park to sell to Euclid Realty for $10, 167, 000 the real property located at 20001 Euclid Avenue in Euclid. Most of the purchase price was financed through a bank loan, but $1, 479, 454.45 of it came from a seller-financed promissory note personally signed by the four members of Euclid Realty.

Germane to the pending motions, the purchase agreement imposes three obligations on Euclid Business Park. First, a part of the property was under lease to an operator of self-storage units and the parties agreed that Euclid Business Park would keep that part of the land and continue to receive the tenant's rent. But because the self-storage part of the property could not be separately split or subdivided into a new, separate parcel of land before the sale, the parties agreed to cooperate after the sale to do whatever was necessary to obtain a lot split. Second, although Euclid Business Park would still get the rent it would be obligated to remit to Euclid Realty " that portion of the rent that represents reimbursement for real estate taxes, insurance and common area maintenance charges." ^[15] Third, Euclid Business Park had to obtain a covenant not to sue from the Ohio Environmental Protection Agency within one year of the sale closing date. These three obligations are specifically set forth in the contract as follows:

PURCHASE AGREEMENT

THIS PURCHASE AGREEMENT (the " Agreement") is entered into as of April 19, 2001, by and between EUCLID BUSINESS PARK, LLC, a Delaware limited liability company (the " Seller"), and EUCLID REALTY LLC, an Ohio limited liability company (the " Buyer").

2. Purchase Price. . . . Buyer shall pay or cause to be paid to Seller . . . the sum of . . . $10, 167, 000 . . .

6. Title. . . . (f) It is the intention of Buyer and Seller that Seller retain all the benefits of, and shall continue to be bound by all the obligations contained in, the following agreements relating to space leased to Self-Storage America (Euclid), LLC (" Self-Storage"): (a) the Lease Agreement, dated August 20, 1999, by and between Seller, as landlord, and Self-Storage, as tenant, . . . and (b) the Purchase Option Agreement, by and between Seller and Self Storage, dated October 5, 2000 (the " Purchase Option"). The parties acknowledge that the Purchase Option was exercised by letter dated April 26, 2001^[16] and delivered to Seller, but that the premises subject to the Purchase Option (the " Self-Storage Premises") is part of a larger parcel comprising the Property and is not a separate tax parcel. The Self-Storage Premises is being conveyed to Buyer at Closing as part of this Agreement because there is insufficient time to obtain a legal subdivision or lot split of the Self-Storage Premises from the larger tax parcel of which it is a part. Accordingly, Buyer and Seller agree as follows: (i) they shall cooperate with each other and with Self-Storage to obtain a legal subdivision or lot split of the Self-Storage Premises from the Property (the " Subdivision") as soon as reasonably practicable after the Closing (the cost of which shall be paid by Self-Storage as set forth in the Purchase Option), (ii) upon obtaining the Subdivision, Buyer will convey to Seller (or its designee) the Self-Storage Premises . .., (iii) at Closing, Seller shall not assign to Buyer the Self-Storage Lease or Purchase Option, (iv) until such time as the Self-Storage Premises is conveyed by Buyer to Seller (or its nominee), Seller shall collect and retain all rent under the Self-Storage Lease, but shall remit to Buyer that portion of the rent that represents reimbursement for real estate taxes, insurance and common area maintenance charges . . .

20. Environmental Remediation. As soon as reasonably practicable after the Closing, Seller covenants and agrees to enter the voluntary action program and to undertake, perform and complete with reasonable diligence, at its sole cost and expense, the remediation of all environmental conditions at the Property disclosed in the Environmental Report, to the extent required in order to obtain a Covenant Not to Sue with respect to the Property . . . within one (1) year of the Closing, subject to delays caused by the State of Ohio or other conditions outside the reasonable control of Seller. . .

The lot split and self-storage proportionate payments

Although Self-Storage America (Euclid), LLC had a lease and an option to buy the self-storage part of the property before the parties here entered into the purchase agreement, Self-Storage America never took possession of the property under the lease and never purchased the property under the option. While the reasons why the deal between Euclid Business Park and Self-Storage America fell through are disputed, the result is that no rent was ever paid or collected and the proportionate payments for tax, insurance and common area maintenance were not made. Moreover, the lot split was never done and the self-storage portion of the property is still part of the entire parcel.

Covenants not to sue ^[17]

Sestech Environmental is an environmental firm specializing in environmental compliance and assessment. By the time the purchase agreement was made, Euclid Realty and its members had been provided an April 2001 report prepared for Euclid Realty's lender by Sestech that detailed the environmental conditions on the premises. The gist of the report is that Sestech found one 2500-square-foot area of soil contamination by volatile organic compounds, primarily xylene, and identified small quantities of asbestos. Sestech recommended that an asbestos survey be performed before any demolition or construction and, as to the contaminated soil, that a covenant not to sue be obtained from the Ohio Environmental Protection Agency.

Euclid Business Park had used Sestech as an environmental consultant on other properties before this one. To comply with Paragraph 20 of the purchase agreement, Euclid Business Park then hired Sestech to obtain the covenant not to sue^[18] from the Ohio EPA.

In order to receive a CNS, an individual or entity must follow the mandates of Ohio's voluntary action program as set forth in Chapter 3746 of the Ohio Revised Code. VAP was created to give individuals a way to investigate possible environmental contamination, clean it up if necessary, and receive a promise from the State of Ohio - in the form of a CNS - that no more cleanup is necessary. Once all EPA rules and regulations have been satisfied, and any necessary environmental cleanup conducted, a certified professional prepares a no further action letter, which outlines all investigatory and remedial work performed related to the property. After a review of the no further action letter, the Ohio EPA will issue a CNS if it finds that the work performed is satisfactory and that the property is in compliance with all Ohio EPA rules and regulations. Ohio Revised Code section...