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Mar Jul, LLC v. Bernard W. Hurst

February 6, 2013

MAR JUL, LLC, PLAINTIFF-APPELLANT,
v.
BERNARD W. HURST, DEFENDANT-APPELLEE.



CIVIL CASE FROM COMMON PLEAS COURT

The opinion of the court was delivered by: Abele, J.

Cite as

Mar Jul, L.L.C. v. Hurst,

DECISION AND JUDGMENT ENTRY

{¶1} This is an appeal from a Washington County Common Pleas Court summary judgment in favor of Bernard W. Hurst, defendant below and appellee herein. Mar Jul LLC, plaintiff below and appellant herein, assigns the following error for review:

"THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT TO DEFENDANT-APPELLEE BECAUSE THERE WERE DISPUTED ISSUES OF MATERIAL FACT."

{¶2} In 2006, appellant, which is owned by Mark and Julie Haessly, paid $1,382,500 to purchase commercial real estate from appellee in an "as is" condition. As part of the transaction, appellee assigned the leases for the occupied commercial properties to appellant.

{¶3} After appellant took possession of the property, it began to discover problems with the real estate and the leases. For example, appellant observed that a building's foundation appeared sunken. Appellant also learned that the real estate lacked a water supply. With respect to the leases, appellant discovered that (1) some tenants paid less rent than it had been led to believe, and (2) not all tenants intended to renew their leases.

{¶4} On August 5, 2010, appellant filed a complaint that alleged fraud, and breach of contract and express and implied warranties. Regarding the fraud claims, appellant alleged that appellee (1) concealed a material fact by failing to disclose the faulty and defective foundation of one of the buildings; (2) falsely represented the amount of rental income generated; and (3) falsely represented the duration of the current leases. With respect to the breach of contract and express and implied warranties claim, appellant claimed that appellee (1) expressly and impliedly asserted that the property rental value was greater than its true value; and (2) misrepresented the condition of the property and the propriety of the property for its intended purpose. Appellant asserted that "[t]he failure of the property and rentals to conform to [appellee's] representation constitutes a breach of contract."

{¶5} On March 4, 2011, appellee requested summary judgment and alleged that appellant's fraud claim regarding the physical defects fails as a matter of law because (1) the property was sold "as is;" and (2) no genuine issues of material fact remain as to whether appellee fraudulently misrepresented or concealed the physical condition of the property. Appellee contended that no evidence exists that appellee made any statements regarding the lease renewals or amounts, and that even if he did, no evidence exists that the statements were false. Appellee further argued that appellant could not demonstrate that it justifiably relied upon any alleged false statement when it did not look at the leases before agreeing to purchase the real estate or before signing the closing documents. Appellee additionally argued that the statute of limitations bars appellant's fraud claims. He contended that because any alleged fraudulent statements must have occurred before appellant signed the June 15, 2006 purchase agreement, appellant's August 5, 2010 complaint falls outside the four-year statute of limitations that governs fraud claims.

{¶6} In its response, appellant argued that the statute of limitations did not bar its claim because it did not discover the fraud until after the sale, which appellant claimed occurred on August 8, 2006. Appellant also disputed appellee's claim that the "as is" clause barred its fraud claim because appellee engaged in active misrepresentation or concealment.

{¶7} To support their respective arguments, the parties referred to Mark Haessly's and appellee's depositions. Appellant further presented three affidavits, one from the Pastor of Blaze of Glory Worship Center (Charles Hall), one from the person who built the daycare building (David Burt), and one from Haessly (a principal in Mar Jul LLC).

{¶8} At his deposition, Haessly stated that "several months" after appellant purchased the real estate, he discovered problems with the daycare building foundation. Haessly explained that the back portion of the building "looks * * * like the ground work was not done right" and when the ground began to sink, so did the building. Haessly testified that he inspected the property before purchasing it, but that he did not get a "good look inside." Haessly explained that appellee had requested him "not to go back" to the daycare center, but admitted that appellee did nothing "to prohibit [him] from making a more intense inspection of the foundation." Haessly stated that he viewed the outside of the building, but further stated that appellee "basically more or less he would just drive us around" and Haessly did not look at anything up close. Haessly also stated that he did not hire an inspector and explained that he could have inspected the building more thoroughly if "appellee would have let" him.

{¶9} Appellee's counsel questioned Haessly about whether appellee prohibited Haessly from inspecting the building. Haessly responded: "I can't just say no, he wouldn't let us, but he said that he didn't want us talking to nobody, not to interfere when-hours-this place was open I don't know about 24 hours a day at the time, but it was close to it." When asked whether appellee prevented him from looking at the foundation of the building, Haessly stated that "you couldn't really tell * * * at that time" whether the foundation had sunk. When asked if appellee did "anything to prohibit [him] from making a more intense inspection of the foundation," Haessly stated: "I would have to say no, but I didn't know there was a problem."

{¶10} Appellee's counsel asked Haessly whether appellee "ever actively sa[id] anything to [Haessly] one way or the other about foundations or concrete before the purchase." Haessly responded, "He just said that the buildings was fairly new and they was all in good shape. [sic]" When asked whether "the condition of the foundation was able to be discovered if it had been inspected before [appellant] signed the purchase contract," Haessly responded, "I would have thought an inspector would have found it, yes."

{¶11} With respect to the leases, Haessly testified that appellee informed him that the church would be "good for another five years. That would be another lease of five years. The lease was for five years." Haessly admitted that he did not look at the written leases, but explained that he did not do so "because [appellee] didn't give them to us." Haessly also stated that he did not request to see the leases. Haessly stated that he knew the church's lease expired in November, but appellee informed him "not to worry about it," that "[t]hey're good for another five years." Haessly also testified that appellee told him not to talk to anyone at the church.

{¶12} Haessly stated that appellee informed him about the leases, (i.e., how much rent and "the automatic renewal") and that appellee provided him with a sheet of paper that listed the rental amounts. Haessly noted that the rents the tenants paid to Haessly after he took possession differed from both appellee's listed amounts and the contractual amounts. Haessly further explained that appellee also told him that the leases were "automatically renewed."

{¶13} Haessly also testified that appellee told him that Grandma's Catering was "good for another year." After appellant purchased the property, however, Grandma's Catering called Haessly and stated, "Did you know that I had already told [appellee] months ago that I was leaving?" Haessly stated that the owner of Grandma's Catering sent him "a copy of the certified letter" that the owner sent to appellee.*fn1 Haessly further stated that appellee lied about the rental income from the church. Appellee advised Haessly that it was $3150, but that it was actually $2850.

{¶14} In his deposition, appellee stated that the church was constructed in 2001 and the daycare facility in 2003. He testified that before June 2006, he was not aware of any problems with the daycare building foundation, but he knew that the building was built "out of square" or "crooked." Appellee explained that when the kitchen cabinets were installed, the contractor informed appellee that the cabinets would not level. Appellee spoke with David Burt, who constructed the buildings, but decided not to "do anything about it" because "[i]t didn't hurt the overall structure of the building." Appellee explained that he did not believe that either the daycare or church foundation was "in poor condition or in need of repair."

{¶15} Appellee stated that when appellant purchased the property, the well that supplied water to the daycare and church was not located on the property. He testified that he informed appellant that the well was not on the church/daycare property and that the buildings did not have any water supply.

{¶16} Regarding the leases, appellee testified that in 2005, Pastor Hall advised appellee that the church would renew its lease for another five years upon the expiration of its current five-year term. Appellee explained that in 2006, Hall, who also leased the daycare, defaulted on the daycare lease. Appellee testified that he informed appellant in March or April 2006 that the daycare lessee had defaulted. Appellee stated that when Hall defaulted, he did not know whether Hall would renew the church lease. Appellee also testified that Hall did not tell him that the church would not renew the lease. Appellee explained that if Hall averred that he told appellee before the August 2006 closing that the church did not intend to renew its lease, then Hall "would be misrepresenting the truth." He further stated that he "disclosed to [appellant] throughout the whole process of every change that took place in the mall or the church and day care."

{¶17} Appellee also explained that he informed appellant that the daycare paid $3,150 in rent and the church paid $2,500. Appellee testified that he had shown appellant the leases and had discussed the lease issues with appellant. He stated that he prepared an income potential statement for the rental properties and faxed it to appellant in April 2007.*fn2

{¶18} Appellee stated that the day after closing on the property, he informed appellant that Grandma's Catering would not be renewing its lease. Later, however, he stated that he informed appellant before the closing that Grandma's Catering had provided written notice that it would not renew its lease. Appellee admitted that he requested appellant "not to approach the tenants up until [appellant] decided whether [appellant] wanted to buy the property or not." He explained that appellant could speak with the tenants after it signed the purchase agreement.

{¶19} In his affidavit, the pastor stated that he informed appellee before June 2006 that the church would not renew its lease beyond October 2006.

{¶20} In his affidavit, Burt stated that after he constructed the building, appellee alleged that the building was not properly constructed and that issues existed with the fill work and the foundation. Burt averred, however, that a study had shown that appellee's excavation or backhoe work caused the foundation issue.

{¶21} Haessly's affidavit further stated that: (1) appellee did not disclose that the daycare building "was out of square"; (2) appellee did not advise appellant that the water supply to the church and daycare was not a municipal water supply or on the premises; (3) appellee specifically represented to appellant that the church and daycare buildings had city water; (4) appellee failed to advise appellant that the church would not be renewing its lease; (5) appellee did not inform appellant that the church or daycare had been in default of the lease; (6) appellee did not make the written leases available until after closing; (7) appellee did not inform appellant about any verbal rental agreement modifications; (8) appellee did not advise appellant until after the closing that Grandma's Catering would be moving; and (9) during the closing, appellee assured appellant that all of the leases were current and that he did not foresee problems renewing the leases.

{¶22} On December 13, 2011, the trial court entered summary judgment in appellee's favor. Regarding "the issue of the leases," the court noted that appellee argued that appellant did not request to see the leases and that it was free to contact the lessees. The court also determined that the alleged physical defects were capable of being "discovered upon inspection." The court further concluded appellant failed to plead with particularity his fraud claims relating to all physical conditions of the property, except the foundation issue. The court thus determined that appellant's failure to properly plead the alleged fraudulent statements with respect to the other physical defects was "fatal to them." The court consequently concluded that no genuine issues of material fact remained and that appellee is entitled to judgment as a matter of law.*fn3

{¶23} On December 23, 2011, the trial court entered a final judgment granting appellee summary judgment and dismissing the case. This appeal followed.

{¶24} In its sole assignment of error, appellant asserts that the trial court improperly entered summary judgment because genuine issues of material fact remain regarding its fraud claims.*fn4 Appellant argues that genuine issues of material fact remain as to whether appellee (1) fraudulently misrepresented or concealed the physical condition of the property, (2) fraudulently misrepresented that the real estate had city water and that the daycare building was "fairly new" and "in good ...


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