In Harshman II Development Co., LLC v Meijier Stores Limited Partnership, 2010 Ohio App. LEXIS 314 (2/5/10) the defendand purchased a 19.23 acre parcel in Dayton, Ohio in 1992 to build a wholesale store. Prior to acquiring the property, the defendant obtained a phase 1 and phase 2 along with letter from Woolpert Consultants The Woolpert Report identified five isolated wetland areas on the property totaling approximately 0.293 acres. The Woolpert Report concluded that because of the limited acreage of the wetlands, the wetlands could be filled pursuant to nationwide permit # 26 and without filing notification to the Army Corps of Engineers. For other reasons, the defendant abandoned its plans to build the store, and the property was never developed.
In 1994, the defendant retained a former commercial real estate realtor/broker to list the property for sale. As a promotional tool to aid in the sale of the property, the defendant drafted a Site Evaluation Information Sheet ("SEI") that identified the three environmental reports
In 2004, the Ohio Environmental Protection Agency ("OEPA") obtained permission from the defendant’s real estate manager to enter the property and determine if a specific type of salamander was present on the property. The agency subsequently issued a report identifying the property has having three Category 3 wetland areas. This category is reserved for the most important wetlands under the state wetlands program and may only be disturbed upon a showing of a”demonstrated public need”. The OEPA did not provide the report or its findings to the defendant, nor was the report made available to the public.
In 2005, the plaintiff entered into a real estate option contract to purchase the property for $1.470MM. The agreement provided the property was being sold "as is" but allowed plaintiff to conduct its own inspection of the property In connection with its due diligence, the plaintiff requested all environmental reports pertaining to the property. Defendant provided copies of the phase 1 and phase 2 reports but did not forward the Woolpert Report prior to the closing. The Phase I and II reports did not identify the existence of jurisdictional wetlands on the property. The cover letter forwarding the environmental reports specifically stated "please note that neither Meijer nor its consultant make any representations or warranties to you or your firm concerning the accuracy or completeness of the enclosed report, and you should independently verify the information to your own satisfaction.” The plaintiff retained ERAtech, Inc. to conduct a Phase I Environmental Report which disclosed the existence of low-lying wet areas on the property but did not evaluate if the wetlands were “jurisdictional wetlands”.
In 1994, the defendant retained a former commercial real estate realtor/broker to list the property for sale. As a promotional tool to aid in the sale of the property, the defendant drafted a Site Evaluation Information Sheet ("SEI") that identified the three environmental reports
In 2004, the Ohio Environmental Protection Agency ("OEPA") obtained permission from the defendant’s real estate manager to enter the property and determine if a specific type of salamander was present on the property. The agency subsequently issued a report identifying the property has having three Category 3 wetland areas. This category is reserved for the most important wetlands under the state wetlands program and may only be disturbed upon a showing of a”demonstrated public need”. The OEPA did not provide the report or its findings to the defendant, nor was the report made available to the public.
In 2005, the plaintiff entered into a real estate option contract to purchase the property for $1.470MM. The agreement provided the property was being sold "as is" but allowed plaintiff to conduct its own inspection of the property In connection with its due diligence, the plaintiff requested all environmental reports pertaining to the property. Defendant provided copies of the phase 1 and phase 2 reports but did not forward the Woolpert Report prior to the closing. The Phase I and II reports did not identify the existence of jurisdictional wetlands on the property. The cover letter forwarding the environmental reports specifically stated "please note that neither Meijer nor its consultant make any representations or warranties to you or your firm concerning the accuracy or completeness of the enclosed report, and you should independently verify the information to your own satisfaction.” The plaintiff retained ERAtech, Inc. to conduct a Phase I Environmental Report which disclosed the existence of low-lying wet areas on the property but did not evaluate if the wetlands were “jurisdictional wetlands”.
Shortly after purchasing the property in January 2006, the plaintiff began clearing the property to construct a mall and began to fill in the wet areas. OEPA subsequently issued an order halting the work and charged the plaintiff with illegally disturbing jurisdictional wetlands without a permit.
The plaintiff filed a lawsuit against the defendant for fraud and breach of contract, arguing that that the existence of the jurisdictional wetlands was a latent defect in the property which Meijer had failed to disclose by intentionally withholding production of the Woolpert Report. The trial court granted the defendant’s motion for summary judgment in its entirety.
The appellate court held that the plaintiff had failed to establish that seller fraudulently concealed the existence of the wetlands on the property by failing to provide the buyer with the report regarding the discovery of such. The court noted that the broker had sent a letter to the defendant raising the possibility of a “wet land issue", and while acknowledging that this raised some issues regarding whether the plaintiff was aware of the existence of wetlands on the property, the court said it could not ignore the fact that the plaintiff was had experienced, knowledgeable, and sophisticated commercial real estate lawyers and developers.
The court also found that the presence of jurisdictional wetlands on the property was an open and obvious condition that the buyer who had unimpeded access to the property could have discovered upon reasonable inspection. The court noted that the National Wetlands Inventory Map not only revealed the existence of jurisdictional wetlands on the property but was used by the consultant retained by the plaintiff after development was halted on the property by the EPA to confirm the presence of wetlands. Moreover, the court pointed out that the plaintiff even attempted to use the presence of the wet areas to negotiate a lower purchase price.
The court also found that the 1992 Woolpert Report would not have been relevant to the plaintiff because the state wetlands program had become much more restrictive in 2001 and the size of the wetlands had changed-growing to approximately .82 acres of the property. The court also found persuasive the testimony of two of the defendant’s employees that a wetlands assessment was a separate and distinct inquiry from the Phase I and II environmental reports, and they thought that the plaintiff was only seeking to obtain copies of those report.
The plaintiff had originally named ERATech as a defendant but agreed to dismiss the consultant from the case and try to resolve its claim through an arbitration proceeding. The state Supreme Court declined to hear an appeal of this case in June
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