Real Property – Breach of Contract – Tort/Negligence – Fraud – Unfair Trade Practices – Hazardous Materials – Monitoring Wells

Metropolitan Group, Inc. v. Meridian Industries (Lawyers Weekly No. 12-04-0463, 20 pp.) (Max O. Cogburn Jr., J.) 3:09-cv-00440; W.D.N.C.

Holding: The defendant-seller covenanted that it had no “actual knowledge” of the presence or disposal of asbestos, fuel oil, or other hazardous or toxic substances on the land it was selling. The parties’ purchase agreement defines “actual knowledge” as “the current, actual conscious knowledge of the officers and employees of Meridian Dyed Yarn Group” as of the date of closing. Except as to asbestos, the plaintiff-buyer has failed to come forward with evidence that any of the seller’s officers or employees knew, on the date of closing, that such substances were present on the land.

The buyer is entitled to summary judgment as to liability on its breach of contract claim with regard to the presence of asbestos. The seller is entitled to summary judgment on all of the buyer’s other claims and as to liability on the seller’s counterclaim for breach of contract. The issue of damages is reserved for trial.

The lack of evidence also dooms the buyer’s fraud claim. Moreover, the seller never hid the presence of asbestos in the 100-year-old textile mill; in fact, the seller provided the buyer with information about the removal of some asbestos and the likelihood that other asbestos was present. Furthermore, the buyer bases its fraud claim on its breach of contract claim, but there were no substantial aggravating factors since both parties were sophisticated, had counsel, were advised by environmental consultants, and had unfettered access to the subject property prior to the sale.

For the same reasons, the buyer’s unfair trade practices claim fails.

The parties’ purchase agreement required the buyer to grant the seller access to the property so the seller could monitor groundwater wells in compliance with a corrective action plan approved by the N.C. Department of Environment and Natural Resources. The seller alleges that the buyer breached that part of their contract.

The buyer repeatedly destroyed the groundwater monitoring wells, it has been fined and cited by the state for doing so, and it has refused to reimburse the seller for its costs in replacing the wells.

Callous destruction of groundwater testing wells that are part of a corrective action plan 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 the seller’s continuing duty to monitor the wells. By destroying the wells, the buyer has failed to reasonably cooperate with the seller to facilitate access to the property for purposes of complying with the seller’s obligations under the corrective action plan.

Motions granted in part and denied in part.