Woodside Mgmt. Co. v. Bruex

• Decision Date: 12 August 2020
• Docket Number: No. 29179,29179
• Citation: 157 N.E.3d 295,2020 Ohio 4039
• Parties: WOODSIDE MANAGEMENT COMPANY, d/b/a/ Ohio Woodside Management Company, et al., Appellees/CrossAppellants v. Andrew BRUEX, et al., Appellants, Cross-Appellees
• Court: Ohio Court of Appeals

157 N.E.3d 295

2020 Ohio 4039

WOODSIDE MANAGEMENT COMPANY, d/b/a/ Ohio Woodside Management Company, et al., Appellees/CrossAppellants

v.Andrew BRUEX, et al., Appellants, Cross-Appellees

No. 29179

Court of Appeals of Ohio, Ninth District, Summit County.

Dated: August 12, 2020

CLAIR E. DICKINSON, KERRI KELLER, and JOSEPH T. DATTILO, Attorneys at Law, for Appellants/Cross-Appellees.

PHILIP F. DOWNEY and ANDREW P. GURAN, Attorneys at Law, for Appellees/Cross-Appellants.

DECISION AND JOURNAL ENTRY

CALLAHAN, Presiding Judge.

{¶1} Appellants/Cross-Appellees, Andrew Bruex, Bruex Properties, L.L.C., and Andrew J. Bruex, Trustee of the Andrew J. Bruex Revocable Trust (collectively "the Bruex Parties") and Appellees/Cross-Appellants, Woodside Management Company, dba Ohio Woodside Management Company and Woodside Logic Corporation (collectively "the Woodside Parties"), appeal from the judgment of the Summit County Court of Common Pleas. For the reasons set forth below, this Court affirms in part, reverses in part, and remands the matter for further proceedings consistent with this decision.

I.

{¶2} Mr. Bruex was the founder and, eventually, the sole shareholder of Industrial Logic Controls, Inc., a Michigan distributor of automation systems and components that operated out of a building located at 7136 East Kilgore Road in Kalamazoo, Michigan ("the Kilgore Road property"). The property consisted of 11 acres and was managed by Bruex Properties, L.L.C. ("Bruex Properties") on behalf of the owner, Andrew J. Bruex, Trustee of the Andrew J. Bruex Revocable Trust ("the Bruex Trust").

{¶3} On October 25, 2011, Mr. Bruex entered into a Stock Purchase Agreement with B.W. Rogers Company for the sale of the shares of Industrial Logic Controls, Inc. As consideration for the acquisition of Industrial Logic Controls, Inc., B.W. Rogers Company paid Mr. Bruex a down-payment and executed two Promissory Notes payable to Mr. Bruex for the balance of the purchase price. The Stock Purchase Agreement contained a provision providing B.W. Rogers Company the right to withhold and offset against the amount due under the Promissory Notes for any damages to which B.W. Rogers Company may be entitled under the Stock Purchase Agreement.

{¶4} Under the terms of the Stock Purchase Agreement, Mr. Bruex delivered the Amended and Restated Lease ("Lease") which was entered into between Industrial Logic Controls, Inc. (now owned by B.W. Rogers Company) and Bruex Properties. This Lease provided for Industrial Logic Controls, Inc., after its acquisition by B.W. Rogers Company, to continue operating at the Kilgore Road property. The Lease was a triple net lease for a period of seven years and comprised 1.5 acres, in addition to the parking lot and the building.

{¶5} Before proceeding with the Stock Purchase Agreement, Mr. Bruex and B.W. Rogers Company shared the cost of a Phase I environmental site assessment performed by Villa Environmental Consultants, Inc. ("Villa") on the Kilgore Road property. The Villa Phase I assessment "revealed no evidence of recognized environmental conditions in connection to" the Kilgore Road property. B.W. Rogers Company elected not to conduct a Phase II assessment which would have tested the water and soil for the presence of hazardous substances. Under the Stock Purchase Agreement, Mr. Bruex warranted that as of October 31, 2011 there were no hazardous substances on or in the environment of any property owned, operated, or managed by Industrial Logic Controls, Inc.

{¶6} During 2013, B.W. Rogers Company engaged in negotiations with Kaman Fluid Power, LLC ("Kaman") regarding the sale of substantially all of B.W. Rogers Company's assets and Industrial Logic Controls, Inc.'s assets. In April 2014, B.W. Rogers Company sold those assets to Kaman, but retained its stock and interest in Industrial Logic Controls, Inc.

{¶7} Prior to executing the asset purchase agreement in February 2014, Kaman had Environmental Resources Management ("ERM") conduct a Phase I assessment and a Phase II assessment on the Kilgore Road property. The Phase II assessment found a variety of hazardous substances in the soil and water. B.W. Rogers Company notified Mr. Bruex in February 2014 of these findings and had its own supplemental Phase II assessment performed by Fishbeck, Thompson, Carr & Huber ("FTC&H"). Mr. Bruex also obtained a new assessment from Villa and began to remediate the contaminants in the water.

{¶8} Based upon the results of the Phase II assessment, Kaman added a closing condition to the asset purchase agreement with B.W. Rogers Company: Industrial Logic Controls, Inc. was required to vacate the Kilgore Road property and enter a new lease at a location, approved by Kaman, in Kalamazoo, Michigan before the closing of the deal in April 2014. Similarly, Mr. Rogers (the president of B.W. Rogers Company) was concerned about the safety of his Industrial Logic Controls, Inc. employees at the Kilgore Road property and instructed his financial officer to find a new lease location.

{¶9} In March 2014, Industrial Logic Controls, Inc. vacated and surrendered the Kilgore Road property on the basis of the discovered hazardous substances in the water and land at the property and Mr. Bruex's failure to remediate. Based upon the foregoing, B.W. Rogers Company gave Mr. Bruex notice of his breach of the Stock Purchase Agreement and its total damages incurred by his breach. B.W. Rogers Company then exercised its right to offset the amount due under the Promissory Notes and paid off the Promissory Notes.

{¶10} After the closing of the asset sale, B.W. Rogers Company changed its name to Woodside Management Company, dba Ohio Woodside Management Company ("Woodside Management"). Similarly, Industrial Logic Controls, Inc. changed its name to Woodside Logic Corp. ("Woodside Logic").

{¶11} In the amended complaint, Woodside Management (fka B.W. Rogers Company) and Woodside Logic (fka Industrial Logic Controls, Inc.) sued Mr. Bruex, Bruex Properties, and the Bruex Trust. The Woodside Parties sought three declaratory judgments: 1) the Bruex Parties breached the Stock Purchase Agreement and the warranties therein; 2) the Bruex Parties breached their covenants, warranties, and duties to the Woodside Parties and the Woodside Parties were constructively evicted; and 3) the Lease is invalid and unenforceable. Additionally, the Woodside Parties alleged two claims seeking damages, one for the breach of the Stock Purchase Agreement and the other for breach of the Lease. The Bruex Parties answered the amended complaint and filed a counterclaim against the Woodside Parties alleging breach of the Lease and breach of the Promissory Notes.

{¶12} The parties filed cross motions for summary judgment which were denied. On the parties' motions for reconsideration, the trial court again denied summary judgment, but determined that Michigan law governed the Lease and Ohio law governed the Stock Purchase Agreement. Based upon that ruling, the Woodside Parties moved for leave to name additional experts regarding the mitigation of damages under the Lease. That motion was denied.

{¶13} The trial judge ruled that the Lease was valid¹ and enforceable under Michigan law and the remaining matters were tried to a jury. The jury returned verdicts in favor of Bruex Properties against Woodside Logic on the breach of the Lease and the quiet enjoyment and constructive eviction claims and awarded Bruex Properties $186,745. As to the breach of the Stock Purchase Agreement and the Promissory Notes, the jury found in favor of Woodside Management and against Mr. Bruex.

{¶14} After the verdicts were read, but before the jury was released, the Bruex Parties objected, arguing that there was an inconsistency between the interrogatory answer finding Woodside Management was allowed to set off $48,940 from the Promissory Notes for Mr. Bruex's breach of the Stock Purchase Agreement and the verdict finding Woodside Management did not breach the Promissory Note and awarding no damages to Mr. Bruex. The trial court agreed that there was an inconsistency and returned the jury for further deliberations. When asked for clarification, the jury responded that Mr. Bruex was "entitled to any money not set off from the Promissory Notes[.]" The trial court interpreted the jury's clarification interrogatory answer to mean that Mr. Bruex should be awarded $74,000 on the breach of the Promissory Notes claim and entered judgment accordingly. After additional briefing and hearings, the trial court awarded attorney fees and prejudgment interest to the respective parties.

{¶15} The Bruex Parties filed a timely appeal, raising five assignments of error for our review. The Woodside Parties filed a timely cross-appeal, raising nine assignments of error. The assignments of error contained in the Bruex Parties' appeal and the Woodside Parties' cross-appeal are rearranged and organized as to the respective agreements for purposes of discussion.

II.

THE LEASE AGREEMENT

THE WOODSIDE PARTIES' ASSIGNMENT OF ERROR NO. 1

THE TRIAL COURT ERRED IN RULING THAT THE LEASE IS GOVERNED BY MICHIGAN LAW AND NOT OHIO LAW.

{¶16} The Woodside Parties contend that the trial court erred in determining that the Lease is governed by Michigan law and not Ohio law. We agree.

{¶17} Summary judgment is proper under Civ.R. 56(C) when: (1) no genuine issue as to any material fact exists; (2) the party moving for summary judgment is entitled to judgment as a matter of law; and (3) viewing the evidence most strongly in favor of the nonmoving party, reasonable minds can only reach one conclusion, and that conclusion is adverse to the nonmoving party. Civ.R. 56(C) ; Temple v. Wean United, Inc. , 50 Ohio St.2d 317, 327, 364 N.E.2d 267 (1977). An appellate court reviews a decision granting or denying summary judgment de novo. State ex rel. Sunset Estate Properties, L.L.C. v. Lodi , 142 Ohio St.3d 351, 2015-Ohio-790, 30 N.E.3d 934, ¶ 6.

{¶18} Additionally, appellate courts apply a de novo...