Snell v. Salem Ave. Assoc.

• Citation: 675 N.E.2d 555,111 Ohio App.3d 23
• Decision Date: 10 May 1996
• Docket Number: Nos. 15169,15429 and 15462,s. 15169
• Parties: SNELL, Appellee and Cross-Appellant, v. SALEM AVENUE ASSOCIATES et al., Appellants and Cross-Appellees.
• Court: United States Court of Appeals (Ohio)

Page 23

111 Ohio App.3d 23

675 N.E.2d 555

SNELL, Appellee and Cross-Appellant, v. SALEM AVENUE ASSOCIATES et al., Appellants and Cross-Appellees.

Nos. 15169, 15429 and 15462.

Court of Appeals of Ohio,

Second District, Montgomery County.

Decided May 10, 1996.

Kurt Denkewalter, Thomas P. Whelley II and S. Renee Applegarth, Dayton, for appellee.

Thomas J. Replogle, Dayton, for appellants.

BROGAN, Presiding Judge.

This matter is before the court on the appeal of Dr. Laszlo Posevitz, Salem Avenue Associates, and Dr. Robert Black, appellants and cross-appellees, from the decision of the trial court granting summary judgment against them on Counts I-VI of the complaint. In addition, Leonard Snell, appellee and cross-appellant, appeals from the decision of the trial court granting summary judgment in favor of the appellants on Counts VII, VIII, and IX of the complaint. Also pending is Snell's motion to strike portions of appellants' briefs.

The present dispute had its genesis in the 1986 sale of the Salem Professional Building, which had previously been purchased by Black and Posevitz in 1980, through the Salem Avenue Associates partnership. The building itself is located on Salem Avenue, in Dayton, Ohio. After occupying the building for several years, Black and Posevitz discussed selling the building to two other doctors, Singer and Hanshaw, in September 1986. At the time, Singer was beginning practice, and Hanshaw had just come to the area from West Virginia, seeking to develop a practice. Singer and Hanshaw were offered several options, including rental, outright purchase, or a condominium-type arrangement, and chose to buy the building. A purchase agreement was then signed by Singer and Hanshaw, and a closing was set for December 12, 1986. By the terms of the purchase agreement, closing was required to take place no later than December 20, 1986.

Before the closing took place, a third party, Leonard Snell, became involved. Snell was a builder/developer, and was approached by Singer about investing in the building. After being told by Singer that part of the income stream would be lease commitments from the persons selling the building, Snell agreed to consider investing. Singer then sent Snell copies of the tenant leases and tenant roll. At the time of the proposed sale, the building had six of eight suites occupied and all of the tenants had leases, with the exception of a Dr. Siehl, who had been a tenant for many years. Posevitz and Black occupied suites 8 and 3, respectively.

After reviewing the information and viewing the building, Snell decided to invest. SHS Realty Group, with three general partners (Singer, Hanshaw, and Snell), was then formed to manage the building. Snell was aware that the property was located in a declining area of town, but was also aware that Posevitz and Black were prominent members of the medical community with the ability to attract other tenants. Hanshaw also had the same expectation. In fact, one of the aims of Posevitz and Black was to develop the building into a specialty or referral center.

At the closing, Snell presented lease agreements for Posevitz and Black to sign. While Snell claimed to have sent the agreements to Posevitz and Black approximately two weeks before the closing, their testimony was that they had never seen the leases before. For reasons which will become apparent, this dispute is not material. The testimony is undisputed, however, that Posevitz and Black refused to sign the lease agreements at the closing. Posevitz and Black then refused to go forward with the sale. Posevitz testified, "[W]e walked out on the transaction. We didn't want to sell the building."

The testimony is also undisputed that Snell refused to go through with the real estate transaction without signed lease agreements. In addition, Hanshaw did not want to get involved in the transaction if an agreement could not be reached on the paperwork. ¹ As a further matter, the bank that financed the purchase wanted leases in effect before the deal could be closed. After some discussion among Hanshaw, Singer, and Snell, the bank's attorney, Art Millonig, then prepared two one-page instruments that were handed to Posevitz and Black by Snell. These documents (referred to by the trial court as "letter agreements") were identical, except that one was signed by Black and the other was signed by Posevitz, and each designated the suite the particular doctor was currently occupying, i.e., either 3 or 8. ²

For example, the letter agreement signed by Posevitz was dated December 12, 1986, was addressed to Singer, Hanshaw, and Snell, and stated as follows:

"Gentlemen:

"As an inducement for you to complete the purchase of the property located as [sic ] 1217 Salem Avenue, the undersigned does hereby agree to lease Suite No. 3 according to the following provisions subject to approval as to the form of the lease by the undersigned's attorney; which approval shall not be unreasonably withheld:

"A. Seven (7) year lease term.

"B. Initial base rental equal to current lease rate plus 11% increase.

"C. After first year and thereafter, rental will increase by 5% per year over prior base rental."

The amounts of rent and the lease term in the letter agreements were the same as those in the lease agreements Snell had brought to the closing. However, the original lease agreements contained numerous other provisions placing additional obligations on the lessees, including payment of operational costs like increased property taxes, insurance, and utilities as an addition to the base rent, maintenance of equipment within the leased premises, and provision of insurance to cover property damage or personal injury.

After the letter agreements were signed by Black and Posevitz, the closing went forward, and they received $217,017 from the sale after payment of an existing mortgage. The profit was split equally between Black and Posevitz. Snell also signed a note, along with Hanshaw, Singer, and their wives, obligating himself to pay $440,000 to First National Bank for the building. After the sale, Hanshaw and Singer moved into the building, and Black and Posevitz paid rent in accordance with the letter agreements, but did not pay anything for property taxes on the building, utilities, or maintenance. This arrangement was apparently satisfactory to all parties, because Posevitz and Black stayed for several years, continuing to pay pursuant to the letter agreements. Moreover, Snell did not send new leases to Posevitz and Black until October or November 1989.

In 1989, Posevitz left the building because he needed additional space. Black stayed until February 1992, at which time he was the only tenant in the building. Due to cash flow problems, Black's payment history had been sporadic, but when he paid, he paid based on the terms in the letter agreement. Singer left the building two or three years after the sale, without having paid rent, and Hanshaw also left within the same approximate period of time, based on the fact that he felt he would have better financial opportunities for his practice in another area. Hanshaw continued to pay rent after he left, until 1990, when he stopped because Singer was not paying anything.

After Posevitz left, Snell was not able to rent out the space Posevitz had vacated. However, Snell was able to rent Black's space on October 1, 1992, and since that time has received $1,500 per month for Black's suite.

Following the above events, Snell initiated the present action against Posevitz and Black and Salem Avenue Associates, for the remaining payments due under the letter agreements. Counts I-VI of the complaint were based on the contract, and requested monetary relief, specific performance, and declaratory judgment. Counts VII-IX were based on fraud and misrepresentation, and requested rescission of the purchase agreement as well as punitive and compensatory damages. As was noted above, the trial court awarded summary judgment in favor of Snell on the contract claims and in favor of Posevitz, Black, and Salem Avenue Associates on the fraud claims. Both sides appealed.

The standards for assessing the propriety of summary judgment awards are well established. As was noted by this court previously in Doner v. Snapp (1994), 98 Ohio App.3d 597, 649 N.E.2d 42:

"The Ohio Supreme Court has interpreted [Civ.R. 56] to say:

" 'The appositeness of rendering a summary judgment hinges upon the tripartite demonstration: (1) that there is no genuine issue as to any material fact; (2) that the moving party is entitled to judgment as a matter of law; and (3) that reasonable minds can come to but one conclusion, and that conclusion is adverse to the party against whom the motion for summary judgment is made, who is entitled to have the evidence construed most strongly in his favor.' " Id. at 600, 649 N.E.2d at 43-44, quoting Harless v. Willis Day Warehousing Co. (1978), 54 Ohio St.2d 64, 66, 8 O.O.3d 73, 74, 375 N.E.2d 46, 47.

In Doner, this court also commented:

"In a summary judgment motion, the nonmoving party shoulders the burden to 'produce evidence on any issue for which that party bears the burden of production at trial.' Wing v. Anchor Media, Ltd. of Texas (1991), 59 Ohio St.3d 108, 570 N.E.2d 1095, paragraph three of the syllabus. '[S]ince the propriety of summary judgment is a question of law,' Children's Med. Ctr. v. Ward (1993), 87 Ohio App.3d 504, 508, 622 N.E.2d 692, 695, we apply the same standard as the trial court in our review of the court's disposition of the motion; in other words, our review is de novo. Id. However, we do not weigh the evidence; we 'accept the evidence properly before [us] and, with respect to the merit issues involved, construe the evidence most strongly in favor of the claims of the party against whom the motion is made.' Buckingham v. Middlestetter (Mar. 22, 1993), Montgomery App. No. 13575, unreported, 1993 WL 81827." Id. at 600, 649 N.E.2d at 44.

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