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JDS So Cal, Ltd. v. Ohio Department of Natural Resources

Court of Appeals of Ohio, Tenth District

March 29, 2018

JDS So Cal, Ltd., Plaintiff-Appellee,
v.
Ohio Department of Natural Resources, Defendant-Appellant.

          APPEAL from the Franklin County Court of Common Pleas (C.P.C. No. 14CV-13181)

         On brief:

          Cooper & Elliott, LLC, Rex H. Elliott, Charles H. Cooper, Jr., and Sean R. Alto, for appellee.

          Michael DeWine, Attorney General, and Christopher P. Conomy, for appellant.

         Argued:

          Rex H. Elliott.

          Christopher P. Conomy.

          DECISION

          KLATT, J.

         {¶ 1} Defendant-appellant, the Ohio Department of Natural Resources ("ODNR"), appeals a judgment of the Franklin County Court of Common Pleas that granted plaintiff-appellee, JDS So Cal, Ltd. ("JDS"), summary judgment and denied ODNR summary judgment. For the following reasons, we reverse that judgment and remand for the trial court to enter summary judgment in ODNRs favor.

         {¶ 2} In 1996, Morno Holding Company ("Morno") deeded to ODNR a 17.85-acre parcel of undeveloped property abutting Sawmill Place Boulevard (hereinafter "the Sawmill property"). Morno added to the deed a restrictive covenant that provided that the conveyance was "granted and accepted on the condition that the real property be used and occupied solely for public purposes." (Pl.'s Ex. 2, June 1, 2016 Pl.'s Mot. for Summ. Jgmt.) Apparently, Morno included the public-use restriction in the deed to support a charitable tax deduction.

         {¶ 3} After receiving the property, ODNR named it the "Sawmill Wetland Education Area" and opened it to school groups so students could study the wetlands contained in the property. The Sawmill property, however, was little utilized for educational purposes. Moreover, security concerns forced ODNR to fence the property and only allow access to the general public by reservation.

         {¶ 4} Between 2006 and 2011, ODNR repeatedly offered the Sawmill property to the Columbus Recreation and Parks Department ("Parks Department"). While the Parks Department expressed some interest in acquiring the Sawmill property, the Parks Department ultimately declined to take the property. The Parks Department did not want the responsibility for paying the common-area-maintenance charges imposed on the property by a restrictive covenant in the original subdivision plat documents.

         {¶ 5} In 2012, ODNR entered into a contract with JDS to swap the Sawmill property for a 43.33-acre property located on the west bank of the Olentangy River (hereinafter "the Olentangy property"). While JDS did not own the Olentangy property, it had an option to purchase the property. ODNR wanted the Olentangy property due to its larger size, proximity to the Olentangy River and Highbanks Metro Park, and the variety and uniqueness of the wildlife inhabiting the property. JDS wanted the Sawmill property in order to develop it for commercial use.

         {¶ 6} The dispute in this case largely centers on Section 4(d)(1) of the land-swap contract. Pursuant to that provision, JDS agreed to obtain a release of the public-use restriction in the Sawmill property's deed prior to the property transfer. ODNR agreed to work cooperatively with JDS to obtain that release. If JDS did not obtain a release, it could either terminate the contract or waive the requirement that it obtain a release. If JDS chose to waive the release requirement, it was bound to indemnify ODNR for any breach of the public-use restriction.

         {¶ 7} In total, the contract included three contingencies to be satisfied prior to the property transfer. Specifically, the contract stated:

(d) Unless waived by [JDS], the following contingencies shall be satisfied by 5:00 p.m., Eastern Standard Time, on the date which is Three Hundred and Sixty (360) Days after the Effective Date (the "Deed Contingency Period").
(1) [JDS] obtaining the release of the current "public use" restriction encumbering the [Sawmill] Property. [JDS] and [ODNR] shall both work cooperatively to obtain the executed release of such encumbrance. Unless requested by [JDS], all communications with grantor of the deed in which the "public use" restriction originates shall be exclusively conducted by [JDS]. To the extent that this contingency is not timely satisfied, [JDS] may elect to terminate this Agreement pursuant to Section 6(a)(iii) in the exercise of its sole and absolute discretion or waive the contingency. Absent a timely written notice of termination, [JDS] shall be deemed to have waived this contingency. In the event that [JDS] elects to waive the contingency for the release of the current "public use" restriction or is deemed to have waived pursuant to the immediately prior sentence, [JDS] shall indemnify and hold harmless [ODNR] from any and all claims, losses, liabilities, causes of action, fines, penalties, or expenses, including, but not limited to, reasonable attorney's fee[s] and expenses, arising from or related to the continuation of the "public use" restriction after the conveyance of the [Sawmill] Property to [JDS], its successors and assigns. The foregoing indemnification and hold harmless agreement of [JDS] shall survive the expiration or termination of this Agreement.
(2) [JDS] (and/or its valid designee) has taken record title to the [Olentangy] Property, with any and all costs as to this pre-condition to be paid for by [JDS].
(3) Any title or survey objection of [ODNR] or [JDS] shall have been cured.

(Pl's. Ex. 1 at Section 4(d)(1) through (3), June 1, 2016 Pl.'s Mot. for Summ. Jgmt.)

         {¶ 8} In addition to setting forth contingencies, the contract scheduled a closing, at which ODNR would assume possession of the Olentangy property and JDS would assume possession of the Sawmill property. The closing had to occur "on a date determined by [JDS], not less than ten (10) days after written notice is given to [ODNR] but not later than thirty (30) days after the end of the Deed Contingency Period." (Pl.'s Ex. 1 at Section 3(a), June 1, 2016 Pl.'s Mot. for Summ. Jgmt.)

         {¶ 9} The deed contingency period began on April 12, 2012, the date on which the contract was fully executed. Consequently, JDS had until April 7, 2013 to satisfy the contingencies contained in Section 4(d). At the very latest, the closing had to occur on May 7, 2013, provided JDS gave ODNR notice by April 27, 2013.

         {¶ 10} By June 2012, news of the land-swap deal had reached the public, and environmental groups began expressing their opposition to the deal. Also in June 2012, JDS learned that its title insurer would issue a title commitment without a release of the public-use restriction from Morno, if ODNR "release[d] the restriction on their end at closing." (Pl.'s Ex. 10, Ruma Dep.) To address these developments, JDS drafted an amendment to the parties' contract.

         {¶ 11} In the draft amendment, JDS agreed to incorporate into the Sawmill property's deed a restrictive covenant requiring JDS to preserve 3.08 acres of the Sawmill property as a wetland. JDS added this change to appease the environmental groups who objected to any commercial development of the Sawmill property. The draft agreement also included a provision requiring ODNR to state in the Sawmill property's deed that it was "releas[ing] and discharg[ing] of record the Use Restriction and any and all rights it may have to enforce the Use Restriction for the [Sawmill] Property." (Def.'s Ex. 6A at Ex. C to the Purchase Agreement, Section 1, June 15, 2016 Def.'s Memo in Opp. to Pl.'s Mot. for Summ. Jgmt.) This alteration of the contract would allow JDS to acquire title insurance even if it could not obtain a release of the public-use restriction from Morno.

         {¶ 12} While ODNR considered whether it would agree to the amendment, JDS approached Morno and requested that it release the public-use restriction. Morno agreed to review the matter.

         {¶ 13} In August 2012, ODNR's director and the attorney general executed the amendment. The amendment then went to the governor's office, as it was not binding without the governor's signature.

         {¶ 14} From summer 2012 through winter 2012/2013, ODNR officials spoke about the land-swap deal with representatives of various environmental groups, including the Ohio Environmental Council, The Nature Conservancy, and the Friends of the Sawmill Wetlands. These groups opposed the land-swap deal and wanted to work with ODNR to arrive at an alternate disposition for the Sawmill property. In short, these groups wanted the Sawmill property preserved in its undeveloped state.

         {¶ 15} On December 12, 2012, Karl Gebhardt, then a deputy director of ODNR, spoke with Kate Hastings, a resident of the Sawmill area. Hastings told Gebhardt that she had attended a meeting held by the Friends of the Sawmill Wetlands the previous evening. During that meeting, a representative of the City of Columbus ("City") expressed interest in acquiring the Sawmill property. Hastings asked Gebhardt if ODNR would speak with the City about its interest. Gebhardt responded that, if the City "wanted to offer a proposal [to take possession of the Sawmill property, ] [ODNR] would talk with them[, ] but it need[ed] to be an official offer very soon which [ODNR] would evaluate." (Pl.'s Ex. 7, June 1, 2016 Pl.'s Mot. for Summ. Jgmt.) Later, when questioned as to why he expressed openness to an "official offer" from City, Gebhardt explained that he "didn't think there was any reason why the City couldn't have [made an offer]. If they wanted to, that was up to them. Whether we accepted it or what we did with it, I mean, that's a whole different situation. But if the City was really interested like we heard, then put something on the table." (Gebhardt Dep. at 99.)

         {¶ 16} Two days after Gebhardt's conversation with Hastings, Allen McKnight, the director of the City's Parks Department sought a meeting with Gebhardt. Gebhardt and Fred Shimp, an assistant director of ODNR, met with McKnight soon thereafter to determine if the City actually wanted the Sawmill property. Gebhardt figured, "If they were or were not [interested], we would be able to convey that * * * if we were * * * asked by the environmental [groups, ] [']Why aren't you working with the City[?'] We could convey to them we did, we were talking with the City, they're not interested." Id. at 104. According to Gebhardt, McKnight "said that there could be interest on the part of the City but there were some issues that obviously had to be addressed." Id. at 101. Gebhardt and Shimp told McKnight "where [ODNR] w[as] with [the deal with JDS], [and] [McKnight] understood it. He did not want to get really in the middle * * * of this deal that's already been going forward but he said if * * * something happened where it didn't go forward, they may have an interest. But it wasn't a real firm commitment on their part." Id.

         {¶ 17} Despite McKnight's equivocacy in the meeting, the City joined with The Nature Conservancy to make a formal offer regarding the Sawmill property. In a letter dated January 4, 2013, McKnight proposed that the Parks Department would assume permanent ownership of the Sawmill property and manage it for the public's benefit. The Nature Conservancy would provide recommendations for protecting the wetlands and donate up to ...


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