Shelly Co. v. Karas Properties, Inc.

2012 Ohio 5416
CourtOhio Court of Appeals
DecidedNovember 21, 2012
Docket98039
StatusPublished
Cited by3 cases

This text of 2012 Ohio 5416 (Shelly Co. v. Karas Properties, Inc.) is published on Counsel Stack Legal Research, covering Ohio Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Shelly Co. v. Karas Properties, Inc., 2012 Ohio 5416 (Ohio Ct. App. 2012).

Opinion

[Cite as Shelly Co. v. Karas Properties, Inc., 2012-Ohio-5416.]

Court of Appeals of Ohio EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA

JOURNAL ENTRY AND OPINION No. 98039

SHELLY CO. PLAINTIFF-APPELLEE/ CROSS-APPELLANT

vs.

KARAS PROPERTIES, INC. DEFENDANT-APPELLANT/ CROSS-APPELLEE

JUDGMENT: AFFIRMED

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-739744

BEFORE: Cooney, J., Stewart, P.J., and Keough, J.

RELEASED AND JOURNALIZED: November 21, 2012 ATTORNEYS FOR APPELLANT/CROSS-APPELLEE

Steven J. Miller David A. Kunselman Miller Goler Faeges LLP 1301 East Ninth Street Suite 2700 Cleveland, OH 44114-1835

Andrew T. Czarzasty Joseph B. Jerome Joseph B. Jerome & Associates 55 Public Square Suite 1950 Cleveland, OH 44113

ATTORNEYS FOR APPELLEE/CROSS-APPELLANT

Andrew J. Natale Mark L. Rodio Frantz Ward LLP 2500 Key Center 127 Public Square Cleveland, OH 44114 COLLEEN CONWAY COONEY, J.:

{¶1} Defendant-appellant, Karas Properties, Inc. (“Karas”), appeals the partial

grant of summary judgment in favor of plaintiff-appellee, the Shelly Co. (“Shelly”), and

the damages awarded to Shelly following a bench trial. Shelly cross-appeals the denial

of its claim for attorney fees. We find no merit to the appeal and cross-appeal and

affirm.

{¶2} This action involves claims and counterclaims between Shelly, the tenant,

and Karas, the landlord, under a commercial lease. The parties dispute who is

responsible for the cost of rectifying an environmental violation on the property.

{¶3} The leased property consists of 7.1 acres located at 4900 West 150th Street

in Cleveland (“the property”). A stream runs across the middle of the property through

two 98” by 62” underground culverts. Karas’ predecessor-in-interest, Karas Brothers

Co., Inc., installed the culverts without a building permit in 1993. At that time, Karas

leased the property to another Karas entity — Karas Trucking Co., Inc. The installation

of the culverts allowed Karas Trucking to have access to, and use of, more of the land.

{¶4} Shelly’s predecessor-in-interest, Cuyahoga Road Products, Inc. (“CRP”),

leased the property from Karas Brothers Co., Inc. Although the lease was not signed

until March 21, 1995, CRP took possession of the property on March 1, 1994. Paragraph

Z of the lease contains the following provision:

Z. ENVIRONMENTAL ACKNOWLEDGMENT

Lessor acknowledges that it is, and will remain solely responsible for any past or future environmental violations arising or resulting solely and exclusively from Lessor’s prior use or occupancy of the leased premises. Lessor shall hold Lessee harmless from any and all fines, costs of cleanup or any costs incidental to or a consequence of any environmental violations arising out of Lessor’s or any or all of its predecessor’s prior use or ownership of the premises, without limitation.

{¶5} A rain event flooded the area in 2007. As a result, the city of Cleveland

(“the City”) became aware not only of the existence of the culverts, but also that the

culverts were inadequate to handle the flow of water from a large storm. In December

2008, the City cited both Karas and Shelly for violating Cleveland Codified Ordinances

3167.05, which prohibits encroachment in a floodway unless “technical evaluation

demonstrates that the encroachment shall not result in any increase in flood levels during

the occurrence of a base flood discharge.” Section 3167.05(b)(7)(A). Violations are

punished based on each day they persist, and Shelly was threatened with fines up to

$365,000 per year as a party to a lease that did not expire until 2014.

{¶6} Shelly retained Krock Esser Engineering, Inc. (“Krock Esser”) and other

experts to prepare plans to eliminate the impediment in the floodway. The experts

proposed installing a bypass box culvert above the ordinary high water mark because this

design would avoid the need for additional environmental permits required by the EPA,

Army Corps of Engineers, and other agencies for any construction below the high water

mark.

{¶7} On October 21, 2010, the City issued 254 criminal violations against Karas

and Shelly in addition to violations against individual officers of each entity. The City

alleged that the two underground culverts installed in the Big Creek Tributary, which divides the frontage of the property on West 150th Street from acreage in the rear of the

property, violated the City’s ordinances because they were installed without the required

permits and they impeded the floodway. During settlement negotiations, Shelly

presented Krock Esser’s plan for the bypass box culvert to the City, and the plan became

part of separate but similar proposed settlements. Both Shelly and Karas agreed to pay

the City $10,650 in fines and promised to remedy the problem in exchange for dismissals

of the criminal complaints.

{¶8} In response to the criminal charges, on October 22, 2010, Shelly filed this

action seeking indemnity from Karas under the indemnity provision contained in

paragraph Z of the lease agreement. Shelly also asserted claims for breach of lease,

unjust enrichment, and declaratory judgment. Karas denied it was obligated to indemnify

Shelly and filed counterclaims asserting that Shelly was responsible for rectifying the

environmental violation caused by the culverts.

{¶9} The trial court granted summary judgment in favor of Shelly and against

Karas on liability. It held that the “lease requires Karas to indemnify Shelly for all fines,

costs of cleanup, and any other costs incidental to, or a consequence of, the illegal

culverts on the leased premises.” It further found that Shelly’s claim for common law

indemnity was moot, because Shelly was entitled to contractual indemnity, and that

Shelly’s claims for breach of lease, unjust enrichment, and negligence would remain

pending because their resolution depended on the evidence presented at trial. {¶10} At trial, Steve Karas admitted that his brother constructed the culverts in

1993. Steve Karas also admitted that there was no notice of a violation concerning the

culverts until December 2008. Although Shelly informed Karas of the proposed bypass

box culvert plan prepared by Krock Esser, Karas never sought to have Krock Esser or

another engineer estimate the practicability and cost of other solutions. Steve Karas

nevertheless asserted without the support of any expert testimony that the environmental

violations could be rectified at a lower cost by either removing the culverts and returning

the streambed to its natural state, or by creating a swale in the area of the current culvert.

{¶11} Jason Popiel, an engineer with Krock Esser, testified that installation of the

bypass box culvert would be the most cost-effective means of solving the problem. He

also stated that removing the culverts would cost more than installing the bypass box

culvert. Similarly, Eric Flickinger, a wetlands consultant with Flickinger Wetland

Services Group, testified that a bypass box culvert was the most expeditious means of

fixing the problem because alternative solutions, including removing the culverts, would

require numerous permits from multiple agencies, which would increase both time and

expense. (Tr. 80-82.)

{¶12} Following a bench trial, the court awarded Shelly $647,679.17 in

compensatory damages for breach of contract, plus interest and costs. The court also

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