United States District Court, W.D. New York
JAMES J. EAGAN and EILEEN R. EAGAN, Plaintiffs,
DR. LESLIE ANN GLASSBRENNER and GARY GLASSBRENNER, Defendants.
REPORT AND RECOMMENDATION AND DECISION AND ORDER
HUGH B. SCOTT, Magistrate Judge.
The Hon. William M. Skretny referred this case to this Court under 28 U.S.C. § 636(b). (Dkt. No. 33.) Pending before the Court are two motions, one from each side: 1) A dispositive motion (Dkt. No. 20) by plaintiffs James J. Eagan and Eileen R. Eagan ("the Eagans") for partial summary judgment (as to liability) on their claims for breach of contract, fraud, and attorney fees; and 2) a non-dispositive motion (Dkt. No. 26) by defendants Dr. Leslie Ann Glassbrenner and Gary Glassbrenner ("the Glassbrenners") for leave to amend their answer under Rule 15(a)(2) of the Federal Rules of Civil Procedure ("FRCP") and to amend the existing scheduling order accordingly. This document will serve as a Report and Recommendation to Judge Skretny for the dispositive motion and a Decision and Order for the non-dispositive motion.
With respect to the dispositive motion for summary judgment, the Eagans argue that the Glassbrenners lied when they denied that any leases, rents, royalties, wells, or storage facilities affected the property that they were selling. The Eagans believe that documentary evidence confirms the misrepresentations and warrants a finding of breach of contract and fraud as a matter of law. The Glassbrenners question whether the Eagans have submitted documentary evidence in admissible form from people with personal knowledge. On substance, the Glassbrenners argue that the real estate contract in question merged into the deed at closing, thereby extinguishing the contract. The Glassbrenners argue further that the Eagans have not pled fraud properly and that a search of the public record would have furnished them with all the information that they needed concerning any encumbrances on the property in question. Finally, the Glassbrenners contend that the Eagans did not conduct due diligence and that their claims for breach of contract and fraud are impermissibly redundant.
With respect to the non-dispositive motion to amend, the Glassbrenners argue that they have added a new law firm as local counsel since they filed their original answer. New counsel seek to add only a counterclaim for attorney fees under a particular section of the real estate contract in question. The Eagans have not filed any opposition to the motion.
The Court held oral argument for both motions on March 26, 2015. For the reasons below, the Court respectfully recommends denying the dispositive motion for summary judgment. The Court grants the non-dispositive motion to amend.
This case concerns allegations that the Glassbrenners misled the Eagans about leases and natural gas storage encumbering a property that the Eagans purchased from them. On June 6, 2013, the Glassbrenners entered a contract to sell the Eagans a parcel of real property (the "Property") at 8659 Finch Road in Colden, New York. (Dkt. No. 20-5.) Based on the description in the contract, the Property consists of about 64 acres of land with a one-family house and a 16-car garage. The parties agreed on a sale price of $900, 000. Under Section 3(D)(5) of the contract, the purchase included "[a]ll of Seller's rights to receive all future rents and royalties due under any lease, agreement or tenancy." (Id. at 3.)
A few provisions of the contract appear to be particularly relevant to the Eagans' claims. Section 6 consists of a list of disclosures that the Glassbrenners made to the Eagans. Under Section 6(H), titled "Gas and Oil Wells, " the Glassbrenners checked "no" to the statement, "The Property has an uncapped natural gas and/or oil well." (Id. at 4.) Under Section 9(B), the Eagans declined to conduct a property inspection. Section 12(A) contains the following warning: "CAUTION: This Property may have easements, rights-of-way and restrictions which may affect intended uses of or improvements to the Property." (Id. at 6.) The contract's Property Condition Disclosure Statement contained a question, Question 4, that asked whether anyone other than the Glassbrenners had "a lease, easement or any other right to use or occupy any part of your property other than those stated in documents available in the public record." (Dkt. No. 20-6 at 2 (emphasis added).) The Glassbrenners answered "no." In Question 14, the Glassbrenners answered "yes" to whether there had ever been fuel storage tanks above or below the ground on the property and whether those tanks were currently in use. (Id. at 3.) Section ATC7 of the contract's Additional Terms and Conditions gave the Eagans the right to a final inspection of the Property before closing and gave the Glassbrenners the responsibility for final utility readings and a transfer of utility services as of the closing date. (Dkt. No. 20-5 at 12.) Section ATC14(C) addressed attorney fees and stated that "[i]n connection with any litigation concerning this Contract, the prevailing Party shall be entitled to recover reasonable attorney's fees and costs. The provisions of this Paragraph ATC14(C) shall survive the Closing or cancellation of this Contract." (Id. at 14.)
Prior to closing, the Eagans arranged for a title search for the Property. Chicago Title Insurance Co. completed a title search report, or Commitment for Title Insurance, on July 16, 2013. (Dkt. No. 25-2.) The title search uncovered a total of 42 items affecting the Property that would count as exceptions to any title insurance coverage. The 42 items included the following:
Item No. Description Grantee Grant Date Liber/Page 14 Oil and Gas Iroquois Gas 11/16/1954 5662 / 18 Lease Corporation 17 Oil and Gas Iroquois Gas 11/18/1954 5659 / 109 Lease Corporation 25 Oil and Gas Iroquois Gas 2/26/1972 7918 / 183 Lease Corporation 29 Oil and Gas Charles E. 11/22/1949 5145 / 421 Lease Fralick 36 Oil and Gas Charles E. 11/22/1949 5145 / 521 Lease Fralich
(Id. at 9-11.)
Meanwhile, and also on July 16, 2013, the Glassbrenners furnished a document titled, "Oil and Gas Affidavit." (Dkt. No. 20-7 at 2.) The affidavit addressed four other oil and gas leases that had been signed over the years concerning the Property; these leases are not the ones in the table above, but they also appeared in the title search report. In Paragraph 4 of that affidavit, the Glassbrenners wrote, "That no rents or royalties have been received under the terms of said leases as said leases are expired by their own terms. To the best ...