Metropolitan Group v. Meridian Industries, Inc.
Filing
46
ORDER granting in part and denying in part 39 Motion for Summary Judgment. This matter is set for trial during the June 2012 term. Signed by District Judge Max O. Cogburn, Jr on 4/23/2012. (tmg)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
3:09cv440
METROPOLITAN GROUP, INC.,
)
)
)
)
)
)
)
)
)
)
Plaintiff,
Vs.
MERIDIAN INDUSTRIES, INC.,
Defendants.
_______________________________
ORDER
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
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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.
Whisnant Dep. 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.
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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
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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, 40:1420.
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
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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 price for the Property, and even solicited bids from demolition
companies during the Option period. Gross Dep. 20:3-24, 23:14-19. He further admitted that his plan
all along was to demolish everything on the Property, including “below the pavement.” Gross Dep.
50:16-20. Gross never asked Sullivan to determine the extent of asbestos that remained on the
Property. Sullivan Dep. 90:21-24.
On August 26, 2005, Leonhardt sent an email to Sullivan responding to questions raised in
the July 14, 2005 Sullivan Letter and during an August 8, 2005 meeting. Sullivan Dep. 95:18-96:1,
Meridian 0000874-891, Ex. 23. By separate cover, Leonhardt mailed a site map of the Property to
Sullivan outlining the location of chemical storage areas, fuel tanks, and groundwater monitoring
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wells. WS0001147, Ex. 24, Leonhardt Dep. 57:1-58:20, 85:3-86:22.
5.
Purchase Agreement
After extending the Option several times, the parties entered into the Agreement for Purchase
and Sale of the Property (the “Purchase Agreement”) on July 19, 2006, for the amount of
$1,000,000.00. Metropolitan 00028-37, Ex. 25, Dunn Dep. 93:13-21. The Purchase Agreement
included the following provisions:
a.
Meridian represented that it had “no actual knowledge of the presence or disposal
within the buildings or on the Property of hazardous or toxic waste or substances,”
including, among other materials, “petroleum” and “asbestos.” Ex. 25, Purchase
Agreement § 7.
b.
“Actual knowledge” was negotiated, agreed to, and defined as the “the current,
actual conscious knowledge of the officers and employees of Meridian Dyed Yarn
Group.” Id. None of the Meridian employees or former employees who testified in
this action have stated that they had “actual knowledge” of the presence of chemicals
or other hazardous materials at the time of the sale. Whisnant Dep. 39:6-11, Setliff
Dep. 26:20-27:7, Queen Dep. 39:16-19, Jacobson Dep. 19:13-17.
c.
Metropolitan has the right to terminate the Purchase Agreement if the Property was
not in “substantially the same condition” as of the date of Metropolitan’s original
offer. Id. §6(e). Metropolitan did not avail itself of this right. Metropolitan
000024-25, Metropolitan 000044 Exs. 26-27.
d.
Metropolitan has the right to assign its obligations under the Purchase Agreement
to any party owned by, controlled by, or under common ownership with
Metropolitan without obtaining Meridian’s permission or to any other party with
Meridian’s written consent. Id. Para. 16. Metropolitan did not avail itself of this
right. Anderson Dep. 22:24-23:11, Gross Dep. 72:19-73:11.
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Gross testified that at no time during their inspections of the Property prior to Closing did he or
Sullivan observe totes, drums, or other containers containing dyeing chemicals. Gross Dep. 25:5-23.
He further admitted that while he identified an aboveground fuel tank on the Property, he never
determined whether the tank contained any fuel, even prior to hiring a contractor to demolish the
Property. Id. 27:10-20, 65:10-17. Gross also testified that “there was never a representation that all
of the asbestos was gone. I was aware of that.” Id. 38:15-17.
6.
Presale Discovery and Disclosure of Groundwater Contamination
On April 14, 2005, Meridian, through John Reuscher of Mid-Atlantic Associates
(“Mid-Atlantic”) and Leonhardt, notified NCDENR that it had identified certain hazardous
substance contamination in the groundwater on the Property, as reflected in an October 11, 2004
study, and had installed groundwater monitoring wells on the Property to address the issue. Metro
000030-94, Ex. 36.
On May 23, 2005, Sullivan emailed Gross about the October 11, 2004 Groundwater Report,
the presence of groundwater wells on the Property, and his meeting with Mid-Atlantic to discuss the
groundwater contamination issues. Gross responded that “based on what they are telling me, all that
has been done environmentally is 3 or 4 wells have been drilled.” Metro 000246, Ex. 37, Gross Dep.
38:19-39:19, 40:14-20.
On February 13, 2006, Meridian submitted to NCDENR a proposed Corrective Action Plan
(the “CAP”) outlining the process for monitoring the groundwater contamination on the Property
on a semi-annual basis, and noting the presence of six permanent wells on the Property.
Metropolitan 000134-155, Ex. 38. On May 5, 2006, NCDENR gave Final Approval for the CAP.
Metropolitan 000132-133, Ex. 39. In the Purchase Agreement, the parties acknowledged “Certain
Hazardous substance contamination identified in the groundwater at the Property,” and Meridian
retained responsibility for performance of the CAP. Metropolitan 00028-37, Ex. 25 at § 7. In turn,
Metropolitan was required “to reasonably cooperate with [Meridian] to facilitate” access to the
Property and the groundwater under the Property (which access existed through groundwater
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monitoring wells) in order for Meridian to perform its approved CAP. Id.
7.
Closing
On September 8, 2006, the parties closed on the real estate transaction (the “Closing”) and
Metropolitan took possession of the Property. Metropolitan 000024-25, Metropolitan 000044, Exs.
26-27.
8.
Demolition and Fuel Spill by Plaintiff’s Contractor, Danny Still
Soon after closing, in October 2006, Gross hired Danny Still of Still’s Services (collectively
“Still”) to demolish the Property. Metropolitan 000322-323, Ex. 28, Gross Dep. 57:23-25, 59:21-22.
The contract between Still and Gross, which included specific instructions for Still, did not mention
the existence of a fuel tank, fuel oil, or groundwater monitoring wells. Metropolitan 000322-323,
Ex. 28. Gross testified that he didn’t know for sure whether he had discussed the possibility that fuel
oil remained on site with Still prior to the demolition, but he did point out the fuel tank to him. Gross
believed that Still was aware of the fuel oil though because he had salvage rights and had
approached potential buyers. Gross Dep. 27:10-20, 65:24- 66:3; 100:9-15, 100:24-101:8; Petitioner’s
Prehearing Statement, Ex. 29. In February 2007, Metropolitan and Still received a Notice of
Violation from the North Carolina Department of Health and Human Services for failing to properly
inspect the Property for the presence of asbestos prior to beginning demolition activities. The Notice
stated that “regulated asbestos containing material had been disturbed at the facility and left lying
on the floor and surrounding area of one of the manufacturing buildings not yet demolished.”
Metropolitan 000373-374, Ex. 30.
On February 6, 2007, Still caused the collapse of a retaining wall near the fuel tank leading
to the discharge of fuel oil into the Catawba River. Petitioner’s Prehearing Statement, Metropolitan
000121-122, Government’s Response to Defendant’s Sentencing Memorandum at 2, Exs. 31-32,
Gross Dep. 66:15-17. The federal government determined that Still drove his demolition equipment
in a recklessly negligent manner too close to an adjacent retaining wall, causing the retaining wall
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to collapse which in turn severed the fuel line of the aboveground fuel tank. Still did not notify
the authorities of the spill, instead sending an employee to purchase cat litter to try to absorb the
fuel oil and to prevent it from flowing into the storm drain. A resident downstream from the spill
reported the spill to the authorities after the oil covered boats and the shoreline. Government’s
Response to Defendant’s Sentencing Memorandum at 2, September 8, 2010; Judgment, Exs. 3233. Gross testified that Still’s response to the spill was “particularly stupid,” Gross Dep. 100:4-8,
and admitted that Still could have saved a lot of money in clean up costs had he reacted quicker.
Gross Dep. 100:9-15. In 2009, Still pleaded guilty to one federal criminal charge in violation of the
Clean Water Act and was sentenced to eight months in a federal prison. Superseding Bill of
Information, September 8, 2010 Judgment, Exs. 34, 33.
9.
Discovery of Containers on the Property After the Spill
After the fuel spill, the North Carolina Department of Environment and Natural Resources
(“NCDENR”) identified totes, drums, and other containers of chemicals on the Property.
Metropolitan 000360-365, Ex. 35. Gross had never seen these containers during his multiple
inspections.
10.
Further Demolition by Plaintiff’s new Contractor, “Big Dog”
In June 2007, Metropolitan hired Big Dog Demolition, Inc. (“Big Dog”) to replace Still and
finish the demolition of the Property. Metro 000002-3, Ex. 40. Among the “scope of work” for Big
Dog was:
a.
“Demolish all structures, foundations, fencing walls, asphalt, paving, silos, and
slabs;”
b.
“All inert debris will be crushed and remain onsite;”
c.
“All disturbed areas will be smoothed and Hydro-seeded.”
Id. Metropolitan did not inform Big Dog that the Property contained groundwater monitoring wells
or otherwise instruct Big Dog to avoid the wells as part of its demolition. Metro 000002-3,
Metropolitan’s Amended Responses to Meridian’s First Set of Interrogatories, No. 13, Exs. 40-41,
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Anderson Dep. 16:16-20.
By late 2007, Big Dog had demolished the buildings on the Property but, because of a
dispute with Gross, failed to remove the debris, which remained “stacked up” on the Property in
piles “probably 20 feet tall.” Gross Dep. 109:4-10, Anderson Depo. 32:3-33:16, 37:10-38:5,
41:20-44:8, Leonhardt Dep. 16:17-25, Meridian00003866, Ex. 42. During this time period,
Metropolitan was cited with violating various environmental regulations. For example, in November
2007, Metropolitan received a $5,000 fine for failing to have an Approved Erosion Control Plan in
place prior to commencing demolition work. Metro 000184-185, Ex. 43. In May 2008, Metropolitan
received a Notice of Violation regarding the stormwater detention on the Property. Metro 000197,
Ex. 44. In October 2008, NCDENR contacted Metropolitan regarding crushed concrete and brick
being disposed of improperly into excavated holes on the Property. Metro 000199-201, Ex. 45.
11.
Access to and Destruction of Monitoring Wells
Between the Closing and May 2008, Meridian performed its ongoing duties under the CAP
by testing the groundwater wells on a semi-annual basis. Beginning in May 2008, however,
Meridian was unable to perform its semi-annual review because four of the groundwater monitoring
wells on the Property had been destroyed. Leonhardt Dep. 90:11-91:14, Meridian00003866,
Meridian00002852-2853, Exs. 42, 46. When Meridian advised Metropolitan of this issue,
Metropolitan refused to repair or replace the wells. Metropolitan Group, Inc.’s Response to Meridian
Industries, Inc.’s First Request for Admission, Response No. 15, Ex. 15. Instead, Metropolitan’s
attorney, Rick Kane, provided insurance information for Big Dog, and Meridian thereafter filed a
claim, to no avail. Meridian 00004350, Meridian 00004357, Exs. 47-48. Ultimately, Meridian paid
for and replaced four of the groundwater monitoring wells in February 2009, resulting in
out-of-pocket
expenses
of
$36,821.38
to
Meridian.
Leonhardt
Dep.
91:6-14,
Meridian00002852-2853, Ex. 46.
In or around August 2009, one of the monitoring wells was again covered with debris and
rubble. Meridian00003866, Leonhardt Defendant’s Dep. Ex. 1, Exs. 42, 49, Leonhardt Dep.
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90:11-91:14. Then, in or around July 2010, all of the groundwater monitoring wells, both the
original wells and those replaced in February 2009, were completely destroyed or rendered
inaccessible. Id. Meridian has shown without dispute that it has been unable to perform its
semi-annual testing of the groundwater on the Property under the CAP since this time. Id.
On December 22, 2010, NCDENR sent Metropolitan a Notice of Violation informing
Metropolitan that the destruction of the groundwater monitoring wells on the Property constituted
a failure to abandon a well and failure to submit records of well abandonment, both in violation of
North Carolina well construction standards. Metro 000165-166, Ex. 50.
II.
Applicable Standard
Rule 56(a), Federal Rules of Civil Procedure, provides:
A party may move for summary judgment, identifying each claim or defense — or
the part of each claim or defense — on which summary judgment is sought. The
court shall grant summary judgment if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of
law. The court should state on the record the reasons for granting or denying the
motion.
Fed.R.Civ.P. 56(a). The rule goes on to provide procedures for plaintiff to use in responding to a
Motion for Summary Judgment:
(c) Procedures.
(1) Supporting Factual Positions. A party asserting that a fact
cannot be or is genuinely disputed must support the assertion by:
(A) citing to particular parts of materials in the record, including
depositions, documents, electronically stored information, affidavits
or declarations, stipulations (including those made for purposes of the
motion only), admissions, interrogatory answers, or other materials;
or
(B) showing that the materials cited do not establish the absence or
presence of a genuine dispute, or that an adverse party cannot
produce admissible evidence to support the fact.
(2) Objection That a Fact Is Not Supported by Admissible
Evidence. A party may object that the material cited to support or
dispute a fact cannot be presented in a form that would be admissible
in evidence.
(3) Materials Not Cited. The court need consider only the cited
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materials, but it may consider other materials in the record.
(4) Affidavits or Declarations. An affidavit or declaration used to
support or oppose a motion must be made on personal knowledge, set
out facts that would be admissible in evidence, and show that the
affiant or declarant is competent to testify on the matters stated.
Fed.R.Civ.P. 56(c).
On a motion for summary judgment, the moving party has the burden of production to show
that there are no genuine issues for trial. Upon the moving party's meeting that burden, the nonmoving party has the burden of persuasion to establish that there is a genuine issue for trial.
When the moving party has carried its burden under Rule 56(c), its opponent must
do more than simply show that there is some metaphysical doubt as to the material
facts. In the language of the Rule, the nonmoving [sic] party must come forward
with "specific facts showing that there is a genuine issue for trial." Where the record
taken as a whole could not lead a rational trier of fact to find for the non-moving
party, there is no "genuine issue for trial."
Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (citations
omitted; emphasis in the original) (quoting Fed. R. Civ. P. 56). There must be more than just a
factual dispute; the fact in question must be material and readily identifiable by the substantive law.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986).
By reviewing substantive law, the court may determine what matters constitute material
facts. Anderson, supra. "Only disputes over facts that might affect the outcome of the suit under
governing law will properly preclude the entry of summary judgment." Id. at 248. A dispute about
a material fact is "genuine" only if the evidence is such that "a reasonable jury could return a verdict
for the nonmoving party." Id. The court must credit factual disputes in favor of the party resisting
summary judgment and draw inferences favorable to that party if the inferences are reasonable,
however improbable they may seem. Cole v. Cole, 633 F.2d 1083, 1092 (4th Cir. 1980). Affidavits
filed in support of a Motion for Summary Judgment are to be used to determine whether issues of
fact exist, not to decide the issues themselves. United States ex rel. Jones v. Rundle, 453 F.2d 147
(3d Cir. 1971). When resolution of issues of fact depends upon a determination of credibility,
summary judgment is improper. Davis v. Zahradnick, 600 F.2d 458 (4th Cir. 1979).
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In determining whether a genuine issue of material fact exists, the admissible evidence of
the non-moving party must be believed and all justifiable inferences must be drawn in his or her
favor. Anderson, supra, at 255. In the end, the question posed by a summary judgment motion is
whether the evidence "is so one-sided that one party must prevail as a matter of law." Id., at 252.
III.
Discussion
A.
Summary Judgment as to Metropolitan’s Breach of Contract Claim
Metropolitan contends that Meridian breached the Purchase Agreement by representing that
it had no “actual knowledge” of the presence or disposal of asbestos, fuel oil, or other hazardous
or toxic substances. First Amended Complaint (#18). As mentioned above, Section 7 of the
Purchase Agreement defines “actual knowledge” as “the current, actual conscious knowledge of the
officers and employees of Meridian Dyed Yarn Group.” Id. At the hearing, Meridian conceded
breach of the contract as to asbestos – thus, summary judgment will be denied as to Meridian and
granted in favor of Metropolitan as to breach of contract concerning asbestos, leaving damages for
trial.
To otherwise survive summary judgment on a breach of contract claim, plaintiff must show
that a genuine issue of material fact exists as some element of its claim requiring resolution by a
jury. In North Carolina, breach of contract requires showing:
(1)
a legal obligation of defendant to plaintiff;
(2)
a violation or breach of that right or duty; and
(3)
a consequential injury or damage to the defendant.
See generally Investment Properties v. Norburn, 281 N.C. 191 (1972). Under North Carolina law,
[w]hen the language of the contract is clear and unambiguous, construction of the
agreement is a matter of law for the court[,] and the court cannot look beyond the
terms of the contract to determine the intentions of the parties.
Piedmont Bank & Trust Co. v. Stevenson, 79 N.C.App. 236, 240 (internal citations omitted), aff’d
per curiam, 317 N.C. 330 (1986). Thus, ‘[i]t must be presumed the parties intended what the
language used clearly expresses, and the contract must be construed to mean what on its face it
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purports to mean.” Hartford Accident & Indemnity. Co. v. Hood, 226 N.C. 706, 710 (1946) (internal
citations omitted).
In this case, Metropolitan’s claim pivots on the defined language of the contract, wherein
the parties expressly chose to define “actual knowledge” as “current” with the date of the Purchase
Agreement, which was July 19, 2006. Thus, plaintiff’s obligation is to come forward with some
evidence to show that such provision was breached on that date. Review of the response reveals no
evidence that Meridian had “actual knowledge” of the presence of chemicals and other hazardous
materials (excepting asbestos) on the Property on such date. See #39-1, Ex. 25 § 7. Considering
the evidence in a light most favorable to the party resisting summary judgment, all that Metropolitan
has been able to show is Meridian employees knew chemicals were on the Property at some point
prior to sale when Meridian still operated its dye plant or that Meridian employees were informed
after the sale that chemicals were discovered as a result of an investigation by NCDENR and the
EPA. There simply is no evidence that any employee or officer of defendant knew of the presence
on those chemicals on the date of closing.
It appearing that defendant has shown that no genuine issue of material fact remains and that
it is entitled to summary judgment as a matter of law on plaintiff’s contract claim as to petroleum
and hazardous chemicals (other than asbestos), summary judgment will be granted in favor of
defendant and against plaintiff on those claims.
B.
Summary Judgment as to Metropolitan’s Claim of Fraud
Metropolitan’s fraud claim is also based on Section 7 of the Purchase Agreement and
Meridian’s representation that it lacked “actual knowledge” of the presence or disposal of asbestos,
fuel oil, or other hazardous or toxic substances. First Amended Complaint (#18). Metropolitan
contends that Meridian committed fraud either by misrepresenting that it lacked “actual knowledge”
or by omission through failure to inform Metropolitan of its “actual knowledge.” First Amended
Complaint (#18). While the asbestos claim has survived summary judgment, there is no evidence
that Meridian concealed any knowledge it had as to asbestos and even made substantial pre-sale
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disclosures as to the presence of asbestos – thus, the presence of asbestos cannot form the basis of
a fraud claim. As discussed above, Metropolitan’s failure to come forward with any evidence that
Meridian knew of the presence of the chemicals or other hazardous materials on the day of sale is
equally fatal to claims of fraud.
The essential elements of a claim of fraud by misrepresentation are: (1) a false representation
or concealment of a material fact, (2) that was reasonably calculated to deceive, (3) which was made
with the intent to deceive, (4) that did in fact deceive, and (5) resulted in damage. Jolly v. Acad.
Collection Serv., 400 F.Supp.2d 851 (M.D.N.C. 2005). To satisfy the specificity requirements of
Rule 9(b), it is plaintiff’s obligation to plead the time, place, and contents of the false
representations, as well as the identity of the person making the representation and what such person
obtained thereby. In order to plead fraud by omission, a plaintiff must allege the following:
(1) the relationship or situation giving rise to the duty to speak, (2) the event or
events triggering the duty to speak, and/or the general time period over which the
relationship arose and the fraudulent conduct occurred, (3) the general content of the
information that was withheld and the reason for its materiality, (4) the identity of
those under a duty who failed to make such disclosures, (5) what those defendant(s)
gained by withholding information, (6) why plaintiff's reliance on the omission was
both reasonable and detrimental, and (7) the damages proximately flowing from such
reliance.
Breeden v. Richmond Community College, 171 F.R.D. 189, 195 (M.D.N.C. 1997) (citations
omitted).
In this case, Metropolitan admits in its Response that its fraud claim flows directly from its
alleged breach of contract claim; however, “‘mere failure to carry out a promise in contract does not
support a tort action for fraud [or UDTP].’” Broussard v. Meineke Disc. Muffler Shops, Inc., 155
F.3d 331, 346–47 (4th Cir. 1998) (quoting Strum v. Exxon Co., U.S.A., 15 F.3d 327, 331 (4th Cir.
1994)). Indeed, there are no substantial aggravating factors shown as it is undisputed that both buyer
and seller were sophisticated parties to a commercial transaction, had counsel, were advised by
environmental consultants, and had unfettered access to the subject property prior to the sale. As a
matter of law, neither of plaintiff’s claims of fraud can survive summary judgment. Further,
plaintiff cannot come forward with facts upon which a jury could find in its favor on each element
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of fraud by misrepresentation or omission as there is no evidence that defendant had actual
knowledge beyond that which it disclosed on the date of closing.
Finding that no genuine issue of fact remains for trial, the defendant’s Motion for Summary
Judgment will be granted as to Metropolitan’s fraud claim and judgment will be entered in favor of
Meridian on such claim.
C.
Summary Judgment as to the Breach of Warranty Claim
The essential elements for a breach of an express warranty claim are: (1) the existence of an
express warranty, (2) breach of the express warranty, and (3) damages suffered by the plaintiff as
a result of the breach. Besse v. Gen. Motors Corp., 317 F. Supp. 2d 646, 654 n.7 (D.S.C. 2004).
Breach of express warranty claims apply only to the sale of goods and not land. Everts v. Parkinson,
555 S.E.2d 667, 677 (N.C. Ct. App. 2001). This claim fails as a matter of well-settled law.1
D.
Summary Judgment as to the Trespass Claim
Under North Carolina law, the essential elements of a claim for civil trespass are: (1) that
the plaintiff was in possession of real property at the time of trespass; (2) that defendant, without
authorization, unlawfully entered such real property; and (3) that plaintiff sustained damage as a
result of the unlawful entry. Broughton v. McClatchy Newspapers, Inc., 161 N.C.App. 20, 32
(2003). While Metropolitan alleges that Meridian somehow placed chemicals and materials
on the property after Metropolitan took possession, there is absolutely no evidence to support
such contention. Indeed, Metropolitan has otherwise alleged to the contrary, stating that
Meridian left such materials on the property prior to the sale. Finally, Metropolitan has
1
The court notes from the arguments at the hearing that, in addition to claiming a
breach of the warranty supplied by the UCC in the sale of goods, plaintiff may be asserting a
breach of the covenant of general warranty conveyed by deed. Under North Carolina law, a
covenant of general warranty is confined to all lawful claims and demands, and does not extend
to wrongful acts of strangers or tortious wrongdoers, and the warranty is not broken until there is
an eviction or ouster under a superior title. Shimer v. Traub, 244 N.C. 466, 467(1956). To be
actionable, plaintiff must be able to show ouster or eviction under a superior title, otherwise no
cause under the covenant of warranty exists. Id. Having not shown ouster, plaintiff has no
actionable claim under the common law covenant of warranty in this case.
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failed to respond to the Motion for Summary Judgment on the trespass clam.
Meridian having shown that there are no genuine issues of fact as to such claim in
dispute and that it is otherwise entitled to judgment in its favor as plaintiff cannot prove each
element of a claim for civil trespass, the court will grant summary judgment in favor of
defendant on such claim.
E.
Summary Judgment as to the UDPTA Claim
The elements of a claim for violation of the UDTPA are: “(1) an unfair or deceptive
act or practice, or an unfair method of competition; (2) in or affecting commerce; (3) which
proximately caused actual injury to the plaintiff or his business.” N.C. Gen. Stat. § 75-1.1,
see Phelps-Dickson Builders, LLC v. Amerimann Partners, 617 S.E.2d 664 (N.C. Ct. App.
2005). An act is “unfair” when it “offends established public policy as well as when the
practice is immoral, unethical, oppressive, unscrupulous, or substantially injurious to
consumers.” Marshall v. Miller, 276 S.E.2d 397, 403 (N.C. 1981).
A cause of action for unfair and deceptive trade practices under Section 75-1-1 can
be a distinct cause of action from breach of contract claim. Branch Banking and Trust Co.
v. Thompson, 107 N.C.App. 53, 62 (1992). To do so, however, plaintiff must show
“substantial aggravating circumstances attending the breach to recover under the Act, which
allows for treble damages.” Id. It is “unlikely that an independent tort could arise in the
course of contractual performance, since those sorts of claims are most appropriately
addressed by asking simply whether a party adequately fulfilled its contractual obligations.”
Broussard , 155 F.3d at 347 (citation omitted).
The UDTPA claim, like the fraud and contract claims that precede it, is predicated on
Section 7 of the Purchase Agreement and Meridian’s alleged misrepresentation that it lacked
“actual knowledge.” As discussed earlier, plaintiff has come forward with no evidence that
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Meridian had actual knowledge on the date of closing with respect to the presence of
chemicals and other hazardous materials on the property.
Further, Mer4idian clearly
disclosed under the terms of the agreement its knowledge of the presence of asbestos. Thus,
the UDTPA claim fails both as a matter of law and substantively as no supporting evidence
has been presented.
Meridian having shown that there are no genuine issues of fact as to such claim in
dispute and that it is otherwise entitled to judgment in its favor as plaintiff cannot prove each
element of a UDTPA claim, the court will grant summary judgment in favor of defendant on
such claim.
F.
Summary Judgment as to Defendant’s Breach of Contract Counterclaim
The language of the Purchase Agreement places certain contractual obligations on
Metropolitan with respect to monitoring the groundwater contamination wells as the
property:
Pursuant to correspondence dated May 5, 2006 from the North Carolina
Department of Environment and Natural Resources (“NCDENR”) to Valdese
Manufacturing Co., a Division of Seller, a copy of which is attached hereto as
Attachment A (the “NCDENR Letter”), NCDENR granted final approval of
a Corrective Action Plan submitted by Seller to NCDENR related to certain
Hazardous Substance contamination identified in the groundwater at the
Property, subject to ongoing groundwater monitoring obligations, as set forth
in the NCDENR Letter (the “Post-Closing Groundwater Monitoring”). Seller
hereby agrees to assume and retain responsibility for the Post-Closing
Groundwater Monitoring identified in the NCDENR Letter . . . . Seller will
coordinate with Buyer to facilitate access to the property at times and under
terms that will not unreasonably interfere with Buyer’s use of the Property,
and Buyer agrees to reasonably cooperate with Seller to facilitate the same.
#39-1, Ex. 25 § 7. In response to Meridian’s Motion for Summary Judgment, Metropolitan
does not contest that it has repeatedly destroyed the groundwater monitoring wells, that it has
been fined or cited by the State of North Carolina for doing so, or that it has refused to
reimburse Meridian its costs in replacing the wells. Instead, Metropolitan reasons that such
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contract language only obligated them to provide Meridian with reasonable access to the
property and nothing more. Response, at 4. It further argues that nothing has prevented
defendant from accessing the groundwater, despite its destruction of the test wells, inasmuch
as nothing such as a solid parking lot has prevented it from doing so.
While this court recognizes that what constitutes “reasonable access” is usually a jury
question, callous destruction of groundwater testing wells that are part of a CAP administered
and mandated by a state environmental authority is facially unreasonable. This is especially
so where, as here, the plain language of the Purchase Agreement makes the importance of
such wells abundantly clear as well as defendant’s continuing obligation to monitor the wells.
Indeed, the NCDENR letter directing monitoring was attached to the agreement. By
destroying the wells, Metropolitan has failed to reasonably cooperate with Meridian to
facilitate access to the property for purposes of complying with defendant’s obligations under
the NCDENR letter. Summary Judgment will be granted in favor of defendant on the
counterclaim. Monetary damages will be left for determination by the jury, and the court
will consider injunctive relief after the jury returns its verdict. Damages may be mitigated
or limited based on a showing by plaintiff that the location of the wells interfered with its
reasonable development of the property.2
ORDER
IT IS, THEREFORE, ORDERED that defendant’s Motion for Summary Judgment (#39)
is GRANTED in part and denied in part, and SUMMARY JUDGMENT is entered in favor of
defendant and against plaintiff, as follows:
1.
Summary Judgment is granted in favor of defendant and against plaintiff on all
claims asserted in the First Amended Complaint, with the exception of the Breach
2
The notes that the wells will have to be placed somewhere, and the court is
amazed that the parties have not agreed to with each other and NCDENR as to their placement.
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of Contract claim as to asbestos, such claims are dismissed with prejudice, and a
judgment shall be entered providing that plaintiff have and take nothing of this
defendant on such claims. Summary Judgment is entered in favor of plaintiff as to
the asbestos aspects of its Breach of Contract claim, and the issue of damages as to
such breach are set for trial;
2.
Summary Judgment is granted in favor of defendant and against plaintiff on
defendant’s Counterclaim for Breach of Contract. Damages shall be determined by
a jury at trial.
This matter is set for trial during the June 2012 term. Motions for continuance or peremptory
setting should be filed as soon as possible.
Signed: April 23, 2012
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