Northwest Plaza, LLC v. Northeast Enterprises, Inc.

699 S.E.2d 410, 305 Ga. App. 182
Court of Appeals of Georgia·Decided July 13, 2010·No. A10A0528, A10A0529·Published·Cited by 23 cases

Opinion

Adams, Judge.

Northwest Plaza, LLC (MI), f/k/a Northwest Plaza, Inc., and RAW Associates, LLC (MI), f/k/a RAW Associates, Lf¡ brought suit against Northeast Enterprises, Inc., Rick Tu, a/k/a Chang H. Tu, and Jim Tu, a/k/a Chin-Yuan Tu, asserting claims for fraud, breach of contract, conspiracy, conversion and punitive damages arising out of the purchase and sale of a shopping center. In Case No. A10A0528, Northwest and RAW appeal the trial court’s grant of partial summary judgment to Northeast and the Tus on certain of their claims for breach of contract and fraud. In Case No. A10A0529, Northeast and the Tus cross-appeal the trial court’s denial of their motion for summary judgment as to other claims for fraud, conspiracy and punitive damages.

On appeal from a grant or denial of summary judgment, this Court applies a de novo review “to determine whether the evidence, viewed in the light most favorable to the nonmoving party, demonstrates a genuine issue of material fact. Summary judgment is proper only when no issue of material fact exists and the moving party is entitled to judgment as a matter of law.” Field v. Lowery, 300 Ga. App. 812, 813 (686 SE2d 422) (2009).

So viewed, the evidence shows that Richmar Properties, Inc., a Michigan corporation, is in the business of managing shopping centers. In late 2005, Richmar was in the market for new commercial property when it received a marketing package/offering memorandum for Covington Square Shopping Center in DeKalb County, Georgia, which was owned by Northeast. Several months later, Richmar received an updated offering memorandum, which included a “Tenant Summary” page showing each tenant and its annual payments for rent, tax and common area maintenance (“CAM”) charges under the existing leases. These materials reflected that in April 2005, Northeast had begun renting a substantial space in Covington Square to Lee May Enterprises LLC, d/b/a Cinefe 8, for the operation of a movie theater. Cinefe had a five-year lease and was *183 one of Covington Square’s two larger, anchor tenants. The marketing materials reflect that Cinefe paid $16,479.99 in rent per month, or $197,759.88 per year, including CAM charges and taxes.

Mark Walton, Richmar’s president, and Robert Elmore, its chief financial officer, subsequently entered into negotiations with Rick and Jim Tu, two of Northeast’s principals, for the purchase of Covington Square. In February 2006, Walton, Elmore, and Richmar employee Tammy Todd traveled to Georgia for two to three days to conduct due diligence on Covington Square by reviewing Northeast’s books and records relating to the property. Although Richmar focused its examination on the period from January through December 2005, Northeast was only able to provide the tenant billing information for November 2005.

Following this visit, on February 28, 2006, Walton wrote Jim Tu to express concern about Cinefe, noting that the theater had only been in business for ten months, had bounced several checks, and was currently in a payment plan with Northeast to make up past due rents. Despite this and other stated concerns about the property, Walton’s correspondence also enclosed a letter of intent on behalf of Richmar to purchase Covington Square, reflecting a price adjusted to account for these issues.

On March 2, 2006, Jim Tu wrote in reply, praising Cinefe’s owner and stating that Cinefe had changed the type of movies it was showing, resulting in “much-improved sales.” Jim Tu stated that he had “absolute confidence that all rents will be collected.” Walton stated that these reassurances made him feel better about the property, although he acknowledged that he understood that Cinefe was still behind on its rent as of March 2. But during subsequent negotiations with the Tus, both Walton and Elmore came to understand that Cinefe “had made payments and was virtually caught up to within a few thousand dollars” in its past due rent payments. Rick Tu confirmed that as of late February, Cinefe was less than $2,500 behind in its rent.

On April 4, 2006, Walton, as president of Richmar, and Jim Tu, as president of Northeast, signed a “Shopping Center Purchase and Sale Agreement” for Covington Square, with a stated purchase price of $13,730,000. This Agreement was prepared by Richmar’s attorneys. Because Jim Tu was in Georgia and Walton was in Michigan, the Agreement was executed in duplicate, with each side exchanging copies with the other. Among the warranties Northeast provided as Seller under the Agreement was the following:

6.3 The rental report (“Rent Roll”) attached hereto as Exhibit C is a true and correct list of all of the Leases presently in force and affecting the Property and accurately *184 sets forth the information contained therein in all material respects; there are no leases or occupancy agreements entered into by Seller currently in effect which affect the Property other than those listed on Exhibit C (together with any additional leases approved by Purchaser); no amendment, modification, or supplement of any kind of the Leases exists other than as specified thereon; all rental and other payments due under the Leases as of the date hereof have been paid in full other than as specified thereon; and Seller has paid in full all expenses connected with the execution and delivery of the Leases other than as specified in the Rent Roll.

This section contemplated that a “Rent Roll” would be attached as Exhibit C to the Agreement, and on April 4, 2006, Jim Tu faxed him a rent roll for Covington Square dated April 1, 2006, but this document was never physically attached as an exhibit to the Agreement. 1 Elmore stated, however, that he understood the April 1 document to be the current “Rent Roll” for the property as of the date of the Sales Agreement.

In addition to the warranty under Section 6.3, Northeast also warranted as follows:

6.7 From the date of this Agreement to the Closing Date, Seller shall conduct its business involving the Property in the ordinary course, and during said period will: . . .
(b) Refrain from entering into any contracts or other commitments regarding the Property, other than in the ordinary and usual course of business, without the prior written consent of Purchaser, which consent shall not be unreasonably withheld, conditioned or delayed; . . .
(e) Deliver notice to Purchaser of: (i) any actions, suits, claims and other proceedings which are likely to have a material adverse [e]ffect on the value of the Property and that have been received by Seller; . . .
(g) Without the prior consent of Purchaser, which consent shall not be unreasonably withheld, conditioned or delayed, Seller shall not cancel, materially amend, materially modify or accept surrender or termination of, or accept any advance rental under, any Lease unless pursuant to the terms thereof, enter into any new lease or (unless Seller is reasonably required to do so by the terms of a Lease) consent to any assignment or subletting of any Lease[.]

*185 (Emphasis supplied.) The Agreement specified that Northeast’s representations and warranties would survive the closing.

Northwest Plaza, LLC v. Northeast Enterprises, Inc., 699 S.E.2d 410, 305 Ga. App. 182 (Ga. Ct. App. 2010).

699 S.E.2d 410 (Northwest Plaza, LLC v. Northeast Enterprises, Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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