McVay v. Store House Co., 1:16–cv–00644–SEB–MJD

• Court: United States District Courts. 7th Circuit. United States District Court (Southern District of Indiana)
• Citation: 289 F.Supp.3d 892
• Docket Number: No. 1:16–cv–00644–SEB–MJD,1:16–cv–00644–SEB–MJD
• Parties: Edward L. MCVAY, Mary W. McVay, One Stop Storage, Inc., Plaintiffs, v. The STORE HOUSE COMPANY, Store House of Indianapolis, LLC, TSHI Storage, LLC, Defendants.
• Decision Date: 21 December 2017

289 F.Supp.3d 892

Edward L. MCVAY, Mary W. McVay, One Stop Storage, Inc., Plaintiffs,
v.
The STORE HOUSE COMPANY, Store House of Indianapolis, LLC, TSHI Storage, LLC, Defendants.

No. 1:16–cv–00644–SEB–MJD

United States District Court, S.D. Indiana, Indianapolis Division.

Signed December 21, 2017

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Hamish S. Cohen, Sean P. Burke, Mattingly Burke Cohen & Biederman LLP, Indianapolis, IN, for Plaintiffs.

Emily J. Stine, Todd J. Ohlms, Verona M. Sandberg, Pro Hac Vice, Freeborn & Peters LLP, Chicago, IL, Robert R. Clark, Steven C. Shockley, Taft Stettinius & Hollister LLP, Indianapolis, IN, for Defendants.

MEMORANDUM ORDER ON MAGISTRATE JUDGE's REPORT & RECOMMENDATIONS (DKT. 124)

SARAH EVANS BARKER, JUDGE, United States District Court

Now before the Court are Defendants' Objections , Dkt. 126, to Magistrate Judge Mark J. Dinsmore's Report and Recommendations , Dkt. 124, on Plaintiffs' Motion for Partial Summary Judgment , Dkt. 91, and Defendants' Motion for Summary Judgment . Dkt. 94.

In this diversity case, plaintiffs Edward "Larry" McVay ("Larry"), his wife Mary McVay ("Mary"), and their company One Stop Storage, Inc. ("One Stop") (collectively, "the McVays"), sued defendants Donald Tolva ("Tolva"), who, having died during the pendency of this litigation, has been dismissed, Dkt. 83, and various entities controlled by Tolva ("the Tolva Entities"), to wit, The Store House Company ("Store House"), Store House of Indianapolis, LLC ("Store House Indianapolis"), and TSHI Storage, LLC ("TSHI Storage"), in tort and contract, in connection with the 2007 sale of certain real property in Indianapolis ("the Property") by the McVays to Store House on a traditional land-sale contract ("the Contract") with an untraditional compensation structure ("the Contingent Payment Clause").

We referred the parties' crossmotions for summary judgment to the magistrate judge, Dkt. 100, whose report has been issued and is objected to in part by the Tolva Entities. For the reasons below, we adopt the magistrate judge's unobjected-to recommendations but sustain the Tolva Entities' objections. Accordingly, Plaintiffs' Motion for Partial Summary Judgment is DENIED and Defendants' Motion for Summary Judgment is GRANTED in full.

Facts and Procedural History

The facts are fully set out in the magistrate judge's report. R. & R. 1–9. In brief, the McVays bought the Property in 2003 with the intention of developing and operating a consumer self-storage business there. In 2007, the McVays began negotiating with Tolva, an Illinois businessman who operated several such businesses across the country, to sell the Property to Store House, Tolva's umbrella company.

In their initial negotiations, the parties contemplated a purchase price in the neighborhood of $3 million. But, as agreed and executed by the McVays and Tolva, the Contract provided for a $1.95 million purchase price to be paid up front, with the Contingent Payment Clause providing for one or more future payments, contingent

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on the sale or refinance of the Property, which, in total, "c[ould] go to about $1 million, [$950,000, to be precise,] or much less[,]" without any "specified time period" for payment. Dkt. 95 Ex. K, at 2 (e-mail from Tolva to Mary). The Contract was executed on or about August 14, 2007.

As a condition of securing initial financing for the deal, Tolva created Store House Indianapolis, an LLC, the single purpose of which was to hold title to the Property. In 2014, Tolva refinanced the Property ("the 2014 Refinance"), then still in the hands of Store House Indianapolis. As a condition of securing the refinance, Tolva created a new entity, TSHI Storage, another LLC, the single purpose of which was to hold title to the Property. The Property was quitclaimed from Store House Indianapolis to TSHI Storage, and Store House Indianapolis dissolved.

Upon learning of the 2014 Refinance, the McVays believed that the refinance had triggered the Tolva Entities' obligation to make a Contingent Payment under the Contract, which the Tolva Entities had failed to do. The McVays filed this lawsuit on March 22, 2016. Dkt. 1.

After two motions to dismiss were disposed of by the Court, see McVay v. Store House Co. , No. 16-cv-644, 2017 WL 676395, at *1 (S.D. Ind. Feb. 21, 2017) (Dkt. 85), the McVays narrowed their claims to two: Count I, Breach of Contract, and merged Counts II and IV, Fraud in the Inducement. See id. at *3 n.3 (taking two separately pleaded fraud claims as one claim). On March 27, 2017, the McVays moved for partial summary judgment on the breach of contract claim. The same day, the Tolva Entities moved for summary judgment on both claims. We referred the motions to Magistrate Judge Dinsmore for a report and recommendation.

The magistrate judge's report (1) resolved certain evidentiary issues, R. & R. 9–11; (2) concluded that the Contingent Payment Clause was ambiguous, precluding judgment as a matter of law for either party, without, however, determining whether the parties' designated extrinsic evidence presented a genuine dispute of material fact, id. at 11–15; (3) concluded that a purported modification to the Contract ("the Amendment"), inter alia entitling the McVays to notice from the Tolva Entities of a sale or refinance of the Property ("the Notice Clause"), could not be enforced without proof of execution and that such proof was a matter for resolution by the trier of fact, id. at 15–17; and, finally, (4) concluded that the McVays' fraud claim failed for lack of actionable misrepresentation and was in any event barred by the applicable limitations period. Id. at 17–19. Accordingly, Magistrate Judge Dinsmore recommended that the parties' crossmotions be denied as to breach of the Contingent Payment and Notice Clauses, and that the Tolva Entities' motion be granted as to the fraud claim. Id. at 20.

The Tolva Entities object to the recommended denial of their motion relating to the breach of contract claim. The McVays respond that the breach of contract claim either must be submitted to the factfinder for resolution, or, in the alternative, that they are entitled to judgment as a matter of law on that claim. The McVays do not object to the recommended denial of the fraud claim. We thus confine our ruling here to the contract claim.

Standard of Review

As we noted in reviewing the magistrate judge's report and recommendation on the Tolva Entities' motions to dismiss,

Rule 72(b) of the Federal Rules of Civil Procedure requires a party who disagrees with a magistrate judge's report and recommendation on a dispositive motion to file "specific written objections to the proposed findings and recommendations."

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Fed. R. Civ. P. 72(b)(2) ; see also 28 U.S.C. § 636(b)(1) ; Johnson v. Zema Sys. Corp. , 170 F.3d 734, 739 (7th Cir. 1999). "The district court ‘makes the ultimate decision to adopt, reject, or modify’ the report and recommendation, and it need not accept any portion as binding; the court may, however, defer to and adopt those conclusions where a party did not timely object." Jamerson v. Colvin , 2013 WL 6119245, at *1 (S.D. Ind. Nov. 21, 2013). Upon a timely objection, the district court then determines, de novo , "any part of the magistrate judge's disposition that has been properly objected to." Fed. R. Civ. P. 72(b)(3) ; see also 28 U.S.C. § 636(b)(1) ; Remy Inc. v. Tecnomatic, S.P.A. , 2013 WL 1311095, at *1 (S.D. Ind. Mar. 26, 2013).

McVay v. Store House Co. , No. 1:16-cv-644, 2017 WL 676395, at *2 (S.D. Ind. Feb. 21, 2017). Accordingly, our de novo review of the magistrate judge's report is conducted under the same standard employed by the magistrate judge.

Summary judgment is appropriate where there are no genuine disputes of material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a) ; Celotex Corp. v. Catrett , 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A court must grant a motion for summary judgment if it appears that no reasonable trier of fact could find in favor of the nonmovant on the basis of the designated admissible evidence. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). We neither weigh the evidence nor evaluate the credibility of witnesses, id. at 255, 106 S.Ct. 2505, but view the facts and the reasonable inferences flowing from them in the light most favorable to the nonmovant. McConnell v. McKillip , 573 F.Supp.2d 1090, 1097 (S.D. Ind. 2008).

Analysis

I. Breach of Contract

"The essential elements of a breach of contract action are the existence of a contract, the defendant's breach thereof, and damages." McCalment v. Eli Lilly & Co. , 860 N.E.2d 884, 894 (Ind. Ct. App. 2007).¹ We hold, for the reasons explained below, that the McVays' claim for breach of the Contingent Payment Clause fails for lack of proof of the second element; their claim for breach of the Notice Clause fails for lack of proof of the third.

A. The Tolva Entities Did Not Breach the Contingent Payment Clause ...