Prime Retail Dev., Inc. v. MARBURY ENGINEERING CO.

• Decision Date: 19 November 2004
• Docket Number: No. A04A1275.,A04A1275.
• Citation: 270 Ga. App. 548,608 S.E.2d 534
• Parties: PRIME RETAIL DEVELOPMENT, INC. v. MARBURY ENGINEERING COMPANY.
• Court: Georgia Court of Appeals

608 S.E.2d 534

270 Ga. App. 548

PRIME RETAIL DEVELOPMENT, INC. v. MARBURY ENGINEERING COMPANY.

No. A04A1275.

Court of Appeals of Georgia.

November 19, 2004.

Mark Pickett, Donaldson, Bell & Pickett, P.C., Albany, for appellant.

W. Harris, Wasson, Sours & Harris, Atlanta, Donald Sweat, Gardner, Willis, Sweat & Goldsmith, Albany, for Appellee.

PHIPPS, Judge.

Prime Retail Development, Inc. (Prime Retail) sued Marbury Engineering Company, seeking damages for alleged breach of contract, professional negligence, and negligent misrepresentation. Judgment was entered upon the jury's verdict for Marbury. Prime Retail's subsequent motion for new trial was denied. On appeal, Prime Retail challenges the jury's verdict as contrary to the evidence and contends that the court incorrectly charged the jury. Because Prime Retail has demonstrated no reversible error, we affirm.

In May 1998, Prime Retail, a commercial real estate development company owned and operated by James Morton, contracted to purchase certain real estate owned by several members of the Chandler family (hereinafter, "the Chandlers"). Morton recognized that the site had previously been a service station and was concerned about environmental issues. He therefore placed in the sales contract Paragraph 11-C, which pertinently provided,

Buyer shall be entitled to perform, at Buyer's sole expense, any environmental tests or assessments that Buyer deems appropriate. In the event that such tests and assessments determine that remediation and/or risk assessment is necessary, Seller shall be solely responsible for all costs of any such remediation and/or risk assessment, and the Inspection Period shall be extended until such time as Buyer, Seller, and the governing authority shall agree upon an acceptable remediation or risk assessment plan. Seller shall be entitled to terminate this Agreement, on or before the date that is sixty (60) days after it has been determined that the cost of any remediation shall exceed $100,000.00.

The parties agreed that Prime Retail had until October 5, 1998, to complete its environmental inspection.

After entering into the sales contract, Prime Retail retained Marbury, a civil engineering and land surveying firm, to survey the boundary lines of the property and to complete a "Phase I Audit" on the property before the inspection period expired. Prime Retail's expert engineer explained at trial,

A Phase I audit is a non-intrusive audit where you just review records, inspect the site, interview people, but you don't take any samples. If, during the Phase I audit, you believe that there could be contamination at the site, if there is a reasonable expectation that there could be, then it is proper to recommend a Phase II audit. And a Phase II audit is an intrusive audit ... where you dig holes and take samples and collect groundwater and test the soil and test the groundwater to see if there is contamination.

During the inspection period, Marbury advised Morton that a building owned by the adjacent property owner encroached upon the subject property. As the end of the inspection period drew near, Morton testified, he repeatedly asked Marbury when he would receive the written report of the Phase I Audit; with each query, Marbury told him that the site contained no environmental problems and that it needed only to compile a report. With that verbal assurance, Morton recalled, he mailed a letter to the Chandlers on October 2 notifying them that the property was acceptable and that Prime Retail would proceed with the closing then scheduled in about 30 days, provided that the boundary issue was resolved.

On October 9, Marbury issued a 94-page Phase I Audit report. Morton read only the first nine pages, the executive summary, wherein Marbury opined that "this site does not contain materials that threaten the environmental integrity of the site or the community" and that "a Phase II audit is not required."

The boundary issue was not quickly resolved. Litigation ensued, and closing was extended several times. A tentative settlement was agreed upon in July 1999, but a different agreement that ultimately resolved the matter was not reached until October or November 2000 and not finalized until December 2000.

Meanwhile, in July 1999, Prime Retail assigned its rights under the sales contract with the Chandlers to another company owned by Morton, PRD Properties, LLC. (However, Prime Retail remained obligated for "development costs" of the property.) In September 1999, PRD entered into a contract to sell the subject property to Southeast Development, Inc. (SED) for the construction of a Walgreen's store. That sale, scheduled to be closed in December 1999, was contingent upon SED being satisfied with results from environmental inspections to be completed by September 30.

Because the Phase I Audit on that site was by then almost a year old, SED requested Marbury to conduct a new Phase I Audit, which Marbury completed on September 27, 1999. Contrary to its first report, among other things, Marbury's second report revealed that an abandoned underground oil storage tank remained in place. Most importantly, it recommended a Phase II Audit "to determine the possibility of oil spilled contamination."

At trial, Marbury conceded that in conducting the first Phase I Audit, it committed numerous "mistakes." For example, it had stated in the executive summary of its original report that "the site was a pecan grove until the existing buildings were built," without also stating that a gas station had been operated on the site. Elsewhere in the audit report, Marbury had expressly stated that the site had not been used as a "gasoline station." And in still another part of that report, Marbury indicated that the site had been used as a gasoline station. Marbury also conceded at trial that it had failed to discover and report the presence of an abandoned underground storage tank on the property. It admitted that it had failed to note a fourth vent pipe on the rear of an old gas station building, where only three underground tanks had been removed, and that had the fourth vent been noted, a Phase II Audit would have been recommended at that time. According to Prime Retail's expert engineer, Marbury failed to met the standard of care in conducting the first Phase I Audit.

Morton did not learn of Marbury's second report until September 29. By then, a Phase II Audit of the site was already underway by another engineering firm, Geosciences, Inc. Morton testified that, if the environmental problems had been reported to him during the inspection period of the sales contract between Prime Retail and the Chandlers, then Paragraph 11-C would have protected Prime Retail; but by September 29, 1999, that provision was no longer effective. Furthermore, Morton claimed, the Chandlers had a lease with the last operator of the gas station, Express Lane, that charged the company with "leaving the property clean and everything, and that survived the terms of the lease. So they were in a lot better shape to deal with Express Lane and had leverage over them. I didn't have any."

Satisfying SED's environmental concerns caused closing to be postponed several times. During the next six months, Geosciences, among other things, completed a Phase II Audit, removed the remaining underground storage tank, prepared a tank closure report, and completed a Corrective Action Plan Part A (CAP A). According to a Geosciences engineer, the Georgia Department of Natural Resources, Environmental Protection Division (EPD), required the last owner/operator of an underground storage tank system to file a CAP A showing information pertaining to certain contaminants at the site "for the State to make a determination of what needs to be done on a property that has had an impact from petroleum contamination."

Morton entered negotiations with Express Lane, seeking to recoup the $50,000 Prime Retail had spent dealing with the environmental issues and ultimately obtaining the tank closure report and CAP A in March 2000. Morton testified that Express Lane was required to file those reports to fulfill its obligation to the EPD, and thus he offered them to Express Lane and asked it to reimburse him what he had spent. Express Lane counter-offered to pay Prime Retail approximately $18,000. By October 2000, Morton explained, he was heavily invested in the property and thus "caved in," accepting Express Lane's counteroffer and providing it the reports. That same month, Express Lane filed a CAP A with the EPD. Prime Retail's attorney testified that, in addition,

Express Lane agreed to pick up the remediation from this point forward, to provide all of the testing and go forward and satisfy the State EPD on the environmental condition of the property, and to reimburse Prime Retail for some of the monies that they had expended to get it to examine the environmental condition of the property that they agreed to reimburse Mr. Morton for — not all of it, but some of it.

In December 2000, the closings occurred. PRD purchased the land from the Chandlers for $625,000 and simultaneously sold it to SED for $1,800,000. Morton testified that, with regard to the latter closing, PRD disbursed to Prime Retail approximately $250,000, which represented the amount Prime Retail then had invested in the property. Also that month, the Chandlers assigned to PRD all of their claims against Express Lane with respect to the environmental contamination of the property.

According to Morton, Express Lane was a participant of the Georgia Underground Storage Tank Fund and thus had $1,000,000 (less a $10,000 deductible) of coverage for corrective actions related to releases arising from operating an underground storage tank.¹ Evidence was adduced that Express Lane had requested $96,836 to resolve the environmental problems at the site and that it had been approved to receive $86,836. There was also evidence that,...