McCarthy, Lebit, Crystal & Haiman Co., L.P.A. v. First Union Mgt., Inc.

• Decision Date: 06 May 1993
• Docket Number: No. 61868,61868
• Citation: 87 Ohio App.3d 613,622 N.E.2d 1093
• Court: Ohio Court of Appeals
• Parties: McCARTHY, LEBIT, CRYSTAL & HAIMAN CO., L.P.A., Appellant, v. FIRST UNION MANAGEMENT, INC. et al., Appellees.

Page 613

87 Ohio App.3d 613

622 N.E.2d 1093

McCARTHY, LEBIT, CRYSTAL & HAIMAN CO., L.P.A., Appellant, v. FIRST UNION MANAGEMENT, INC. et al., Appellees.

No. 61868.

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

Decided May 6, 1993.

Marshall I. Nurenberg, Cleveland, for appellant.

James T. Crowley, Keith L. Carson and Kathleen B. D'Angelo, Cleveland, for appellees.

NUGENT, Judge.

This is an appeal from the Cuyahoga County Court of Common Pleas, which granted the motion for summary judgment filed jointly by defendants-appellees First Union Management, Inc. and First Union Real Estate Equity and Mortgage Investment (collectively, "First Union") against plaintiff-appellant McCarthy, Lebit, Crystal & Haiman Co., L.P.A. ("McCarthy, Lebit").

Pertinent to this appeal, McCarthy, Lebit's amended complaint asserts claims for relief of, among other things, ¹ breach of contract and promissory estoppel (first claim for relief), fraud (third claim for relief) and negligent misrepresentation (fourth claim for relief). McCarthy, Lebit's amended complaint generally alleges that First Union, the owner and manager of real property commonly known as 55 Public Square, Cleveland, Ohio (the Illuminating Building), breached an oral lease agreement entered into with McCarthy, Lebit for space in the above premises. In separate answers, both First Union entities denied that an oral lease agreement had been entered into and raised the defense that McCarthy, Lebit's claims were barred by the statute of frauds. Additionally, First Union Management asserted a counterclaim for unpaid operating expenses, which was subsequently dismissed.

On March 25, 1991, First Union moved for summary judgment on McCarthy, Lebit's remaining claims for breach of an oral lease agreement and promissory estoppel, fraud and negligent misrepresentation. McCarthy, Lebit duly opposed First Union's motion. Evidentiary materials submitted in support of and in opposition to First Union's motion indicate that McCarthy, Lebit occupied space in the Illuminating Building since 1961. In 1989, McCarthy, Lebit occupied a total of 9,565 square feet of space under two separate leases, both of which were scheduled to expire on November 1, 1989. Sometime in the spring of 1989, the parties entered into negotiations to renew McCarthy, Lebit's existing space as well as to occupy space being vacated by another tenant ("Sweeney space").

McCarthy, Lebit partners Larry Crystal and Irwin Haiman were appointed by the law firm to negotiate a new lease with First Union for the space then occupied, as well as the Sweeney space which the firm intended to occupy. In preparation for negotiations, Crystal reviewed the existing leases between McCarthy, Lebit and First Union, as well as a lease between another tenant, represented by Crystal, and First Union. Crystal was well aware that each lease contained a legend on its face and on the signature page stating that:

"This Lease is being forwarded for your approval and execution on the understanding that it shall not become effective until it is accepted by the Landlord and its counsel and executed by the Landlord."

Crystal, on deposition, stated that the legend meant "exactly what it says."

Subsequently, on April 13, 1988, Crystal and Haiman met with Arthur Roth, then an assistant vice president of leasing at First Union Management, at the offices of McCarthy, Lebit. At that time, Roth was responsible for obtaining new tenants and renewing existing tenants in the Illuminating Building. At that meeting, Crystal informed Roth that McCarthy, Lebit was interested only in a "good deal" because it had received solicitations from other nearby buildings seeking tenants. Roth testified that First Union wanted McCarthy, Lebit to remain in the building because it was a very prestigious law firm and had always paid its rent on time. Roth put forth two proposals: one was a five-year lease renewal at $13 per square foot with an option for another five years at market rates; and the other was a ten-year lease renewal with a base rental rate of $12.50 per square foot for the first five years and $13.50 per square foot for the second five years. Crystal and Haiman both asserted that the parties agreed to the second option and that McCarthy, Lebit would also obtain the adjacent Sweeney space at the same rate that Sweeney was paying until his lease expired. The Sweeney space would be added into the McCarthy, Lebit lease before the date upon which Sweeney was to vacate his space. Both parties agreed to leave open for further discussion the base year (1987 or 1988) and denominator (leased space or leasable space) to be utilized in connection with the escalation clause in any lease that might be entered into. Other provisions for the lease would reflect the standard lease employed in the past by First Union and other tenants in the building. At the conclusion of the meeting, Roth indicated to both Crystal and Haiman that he would need to discuss the deal with his superior at First Union, Dan Nixon. Likewise, Crystal and Haiman indicated that they had to discuss the proposal with their partners. The three men then shook hands to seal the deal.

Following the meeting, Crystal prepared a memorandum to his partners discussing the offer submitted by Roth and discussing the differences between the parties with respect to the base year and leased-vs.-leasable space. That same day, the partners of McCarthy, Lebit met to discuss the proposed lease agreement. They then prepared a wish list which they hoped to have added to the lease. The following day, Haiman and Roth met to discuss the wish list. Roth rejected McCarthy, Lebit's wish list. Subsequently, Haiman informed Roth that McCarthy, Lebit accepted the terms of the agreement reached at the April 13, 1988 meeting. Additionally, Irwin Haiman averred that he and Roth agreed that the base year would be 1988 and that the rent would be determined by calculating on the basis of leasable space as opposed to leased space.

Following this meeting, Roth discussed the entire agreement with his supervisor, Dan Nixon, who approved the deal. Roth then told McCarthy, Lebit that the parties had a deal and that he would begin the paperwork. However, the paperwork could not be completed at that time because First Union did not know the date upon which the Sweeney space would be available for McCarthy, Lebit's occupancy.

Over the next few months, Haiman repeatedly contacted Roth to determine when a written lease agreement would be prepared. Roth repeatedly indicated that a written lease agreement would be forthcoming and that the only reason for the delay was that First Union was behind in its paperwork. In reliance upon Roth's assurances, McCarthy, Lebit did not look for other space.

As early as July 1989, when George Sirow became Roth's supervisor, Roth knew that First Union did not intend to honor the agreement reached with McCarthy, Lebit and that First Union planned on presenting new terms to the lease agreement as well as represent to McCarthy, Lebit that Roth did not possess authority to bind First Union. However, it was not until August 1989 that Sirow, First Union's vice-president of operations, and Roth requested a meeting with Crystal and Haiman to discuss the lease agreement. At this meeting, Sirow, for the first time, asserted that Roth lacked authority to bind First Union and that the rental price would be increased by three dollars per square foot. McCarthy, Lebit refused to pay this price, did not sign a lease with First Union, and eventually moved their offices from the Illuminating Building.

Finally, Crystal's deposition testimony indicates that he and other attorneys at McCarthy, Lebit represented other tenants of the Illuminating Building in negotiations with First Union. On those occasions, the person with whom the McCarthy, Lebit attorneys dealt was Arthur Roth. Crystal stated that leases orally negotiated with Roth were honored by First Union. Over the years, Roth had developed an expertise in these negotiations and a reputation that his word could be relied upon.

Based on the foregoing, the trial court granted First Union's motion for summary judgment. McCarthy, Lebit timely appeals, raising the following assignments of error:

"I. The court erred in granting summary judgment to the defendants by finding that the theory of promissory estoppel was not applicable to the evidence.

"II. The court erred in granting defendants' motion for summary judgment by concluding that there was no evidence to support a jury finding that the defendants were liable for negligent misrepresentation.

"III. The court erred in granting defendants' motion for summary judgment by finding that a contract was not in existence.

"IV. The court erred in granting defendants' motion for summary judgment by finding that any oral agreement on the facts of this case was unenforceable under the statute of frauds (Ohio Revised Code Sections 1335.04, 1335.05)."

I

McCarthy, Lebit's first, third and fourth assignments of error are interrelated and will, therefore, be considered jointly. Collectively, McCarthy, Lebit argues the trial court erred in granting First Union's motion for summary judgment. In its first assignment of error, McCarthy, Lebit contends that a material issue of fact exists on its separate claim for relief based on promissory estoppel. In its third and fourth assignments of error, McCarthy, Lebit argues that a material issue of fact exists as to whether an oral lease agreement was established under the facts of the present case and that such agreement was not barred by the statute of frauds under the doctrine of promissory estoppel.

A court reviewing the granting of a summary judgment must follow the standard set forth in Civ.R. 56(C). Stegawski v. Cleveland Anesthesia Group, Inc. (1987), 37 Ohio App.3d 78, 523 N.E.2d 902. Civ.R. 56(C) provides that before summary judgment can be granted, it must...