Metro. Grp., Inc. v. Meridian Indus., Inc.

869 F.Supp.2d 692

METROPOLITAN GROUP, INC., Plaintiff,

v.MERIDIAN INDUSTRIES, INC., Defendants.

No. 3:09cv440.

United States District Court,

W.D. North Carolina,

Charlotte Division.

April 24, 2012.

Kenneth R. Raynor, Templeton & Raynor, P.A., Charlotte, NC, for Plaintiff.

Kenneth D. Bell, Donald P. Renaldo, II, Elizabeth Marion Zwickert Timmermans, McGuireWoods LLP, Matthew John Hoefling, Helms Mulliss & Wicker, PLLC, Charlotte, NC, for Defendants.

ORDER

MAX O. COGBURN, JR., District Judge.

THIS MATTER is before the court on defendant's Motion for Summary Judgment (# 39). Having considered defendant's motion, plaintiff's Response, and defendant's Reply, and conducted a hearing on April 18, 2012, the court enters the following findings, conclusions, and Order.

FINDINGS AND CONCLUSIONS

I. Factual Background

A. Nature of the Action

On July 19, 2006, two corporate entities entered into an agreement for the sale and transfer of commercial real property in Belmont, North Carolina, on which a textile mill had been located for a century. There is no dispute that each party was “sophisticated,” that they were at all times represented by counsel, and that the parties employed experts to assist them in reviewing the environmental aspects of the transaction.

The seller, Meridian, had previously operated a textile dyeing plant on the property, although it had ceased operations nearly three years prior to the sale. The buyer, Metropolitan Group, Inc. (“Metropolitan”), bought the property intending to demolish the buildings and construct residential units on the site. After nearly two years of due diligence, Metropolitan closed on the property on September 8, 2006.

Less than a year after closing, Metropolitan's demolition contractor ruptured a fuel line on the site. The rupture resulted in an oil spill into the Catawba River, for which the contractor was criminally charged and convicted. As a result of the ensuing criminal investigation, chemicals and other hazardous materials were discovered on the property. Among these were chemicals stored behind a wall in the plant, the existence of which neither plaintiff, defendant, nor their environmental experts were aware of prior to demolition, according to the evidence before the court.

In this action, Metropolitan alleges fraud, unfair and deceptive practices, trespass, breach of contract, and breach of warranty. The lynchpin to such claims is Metropolitan's claim that Meridian had “actual knowledge” of chemicals, asbestos, and fuel oil on the property at the time it sold the property, but made representations to the contrary to Metropolitan. Meridian has also asserted a counterclaim contending that Metropolitan failed to facilitate its continued access to the property under the contract so that Meridian could monitor groundwater wells on the site. Meridian contends that in demolishing and clearing the property after the sale, Metropolitan destroyed Meridian's groundwater monitoring wells. Meridian has moved for summary judgment on all of Metropolitan's claims and on its own counterclaim. At the hearing, Meridian conceded for the first time that it was in breach of the contract as it conveyed the property knowing that asbestos was present.

B. Undisputed Facts

1. Prior Use and Sale of the Plant Property

Until June 2003, Meridian operated a textile dyeing plant on the Property (the “Belmont Dyers Plant”). Whisnant Dep. 13:22–25, Setliff Dep. 11:11–12, 23:13–15. 1. After ceasing operations, Meridian transported chemicals that were useful to its plant in Valdese, North Carolina. WhisnantDep. 14:1–9, 16:1–6, 16:14–21, Setliff Dep. 23:21–25:4, Queen Dep. 8:16–24. While plaintiff argued at the hearing that employees of defendant knew on the date of closing that chemicals remained at the plaint, every Meridian employee who testified in this action believed that the chemicals not taken to Valdese would be discarded and removed from the Property. Whisnant Dep. 16:16–21, 17:11–13, 39:6–18, Setliff Dep. 26:20–27:7, Queen Dep. 17:24–18:9, 39:16–9, Jacobson Dep. 19:5–17.

2. Inspection and Remediation

In May 2004, Meridian entered into an agreement with Robert Dunn (“Dunn”), a real estate broker associated with The Stump Corporation, for Dunn to list and either sell or lease the Property on behalf of Meridian. Dunn Dep. Ex. 3, Ex. 10. As part of its efforts to sell the Property, Meridian, through its environmental consultant, Derr Leonhardt (“Leonhardt”) of Leonhardt Environmental, P.C., hired a licensed asbestos removal company to remediate the asbestos on the Property. Metro 000008–29, Ex. 11. 1 Deposition transcripts attached as Exs. 1–9.

On October 15, 2004, Leonhardt inspected the asbestos removal work and confirmed that there remained “no visible, friable asbestos at the facility.” Leonhardt cautioned, however, that the facility is not “asbestos free.” Id. at Metro 000008.

3. Offer and Option to Purchase

On April 12, 2005, Metropolitan, through its President James Gross (“Gross”), offered to purchase the Property for the amount of $1,000,000.00 and requested an inspection period of 120 days “to determine the feasibility of the Property for Purchaser's intended use, to obtain financing for the Property, and to conduct its own tests, inspections and studies of the Property as it deems necessary.” Dunn Dep. Ex. 8, Ex. 12. Gross testified that he wanted to purchase the Property so that he could demolish it and construct residential buildings on the site. Gross Dep. 11:18–20, 12:3–8, 50:13–20.

On April 28, 2005, the parties entered into the Option to Purchase Agreement (the “Option”) whereby Meridian agreed to sell and Metropolitan agreed to purchase the Property for the sum of $1,000,000 after an inspection period of 120 days. Metropolitan 000019–21, Ex. 13. In the Option, Meridian disclosed

that it ha[d] previously had certain asbestos removed from the Property, although it believes asbestos-containing materials may still be present in the building located on the Property, including specifically within the roof of the building located on the Property. In light of the age of the buildings located on the Property, [Meridian] acknowledges it is probable asbestos still is present on the Property.

Id. at ¶ 6. The Option further provided that Metropolitan had “the right to enter upon the Property for the purpose of inspecting, surveying, appraising, and/or otherwise examining the Property.” Id. at ¶ 7. Metropolitan retained an environmental consulting engineer, William Sullivan of Geoscience (“Sullivan”), to perform a review of environmental studies and reports pertaining to the Property. Metropolitan did not authorize Sullivan, or anyone else, to perform an independent environmental assessment of the Property. Sullivan Dep. 39:23–40:16, Gross Dep. 27:21–28:6. Meridian offered its environmental consultant, Leonhardt, as a contact and resource for Sullivan. Metro 000238–239, Ex. 14, Sullivan Dep. 62:16–25, 63:1–7, 95:14–17.

4. Presale Access, Opportunity to Inspect, and Exchange of Information

Meridian gave Gross and Sullivan access to the Property from the time it first expressed an interest in the Property through Closing. Gross Dep. 26:8–17, 44:12–45:1, 48:15–49:19, 52:4–7, Sullivan Dep. 28:13–25, 70:15–21. Gross and Sullivan entered the Property on multiple occasions prior to sale and Closing. Metropolitan's Response to Meridian's First Request for Admissions, No. 3, Ex. 15, Sullivan Dep. 18:9–16, 70:15–21, Gross Depo. 24:13–25, 25:24–26:17, 31:9–11.

On June 2, 2005, Leonhardt provided Sullivan a summary of the operations conducted at the Belmont Dyers Plant. Meridian00000737–739, Ex. 16. Sullivan forwarded this information to Gross. Metro 000234, Ex. 17. Throughout 2005, Meridian provided additional environmental reports and data to Metropolitan, including information about Meridian's prior use of chemicals and other hazardous materials, as well as the presence of fuel oil and asbestos on the Property. Metro 000228–29, Meridian 00000748, Metro 000225–27, Exs. 18–20, Gross Dep. 38:19–39:19, 40:14–20.

On July 14, 2005, Sullivan sent a letter to Gross summarizing his review of ten environmental reports and permits provided to him by Meridian regarding the environmental condition of the Property. Metropolitan 000277–290, Ex. 21. Sullivan's summary included the following:

a. An analysis of a Spill Prevention Control and Countermeasure Plan prepared by Leonhardt for Meridian in 2003, which showed storage and use of fuel oil. Id. at Metropolitan 000283–286.

b. An analysis of a Stormwater Pollution Prevention Plan prepared by Leonhardt in 2003, which showed the presence of boiler chemicals, lubricants, dye chemicals, fuel oil # 2, and other materials. Id. at Metropolitan 000286–287.

c. An analysis of a Tier 2 Emergency and Hazardous Chemical report from 2004 showing the existence of a “10,000 gallon # 2 fuel oil tank located outside the boiler room.” Id. at Metropolitan 000287.

d. An analysis of an Asbestos Closure Report prepared by Carolina Abatement Technologies in 2004 showing that residual asbestos “remains in selected elements of roofing material and in selected wall panels.” Id. at Metropolitan 000287–288.

Included with these reports was Leonhardt's October 15, 2004 letter noting that “it is possible that small amounts of asbestos containing material may remain hidden” on the Property. Metropolitan 000277–290, Metro 000008–29, Exs. 21, 11. On February 14, 2007, Gross' attorney, Sal Balsamo, admitted that Gross had

received the Leonhardt report in advance of closing and was on notice that there was the possibility that there was asbestos located within the confines of the mill ... As indicated in the report, [Gross] was able to determine that there was, in fact, asbestos located in parts of the mill that were hidden or locatable only upon demolition.

Meridian00003721, Ex. 22. Gross testified that he factored the cost of demolishing the buildings and removing asbestos into the purchase...