Summitt Properties, Inc. v. New Technology Electrical Contractors, Inc.

2004 WL 1490327 (D.Ore, July 2, 2004)

Facts

Summit Properties, Inc. (P), filed a complaint alleging claims against New Technology Electrical Contractors, Inc. (D) and its parent company, Integrated Electrical Services (D1). D was incorporated in Oregon. D1 is a national corporation generally referred to as a “roll-up company,” which means that it seeks to increase its business by purchasing locally-owned companies and rolling them up into a larger parent company. Coleman and the other owners sold to D through an Agreement and Plan of Merger. There were merged in accordance with the laws of the state of Delaware. On October 16, 2001, New Technology Acquisition Corporation changed its name to New Technology Electrical Contractors, Inc., a Delaware corporation. After the sale to D1, Coleman remained the president of New Technology Acquisition Corporation, and later New Tech, by virtue of Section 2.3 and Schedule 2.3 of the Merger Agreement. Coleman, as president, was given certain duties and authority. After the sale to D1, D continued to do business as it had previously. At the time of the Merger Agreement, D was the lessee in two buildings owned by Milestone. D's business began to grow. D and D1 discussed whether to move D into an uncompleted facility on the Campus Way Property also owned by Milestone. While in Houston Coleman hand-delivered a copy of the Campus Way Property documents, including the lease, to Weik. Coleman's notes state that “Ben [Mueller] said go ahead on Building,” Coleman returned to Portland and signed the lease of the Campus Way Property on behalf of Milestone. The lease was for a seven-year period beginning on October 1, 2001, and could be “amended or modified” only in writing. After the lease was signed, Milestone began paying for the improvements required for D to occupy the premises. D performed the improvements itself and was paid 10% profit above its costs by Milestone. After the lease was signed and the improvements were underway, P learned that the Campus Way Property was for sale and being marketed by Grub & Ellis, a real estate broker, as subject to a seven-year lease with D. P was alerted that D1 is not a financial guarantor of the lease, but does represent a strong financial backer, committed to the success of D. In an e-mail dated July 19, 2001, to the real estate broker handling the transaction with P, Coleman wrote that “New Tech is a D.B.A. of IES and when I, as an officer of New Tech, am signing on behalf of IES [sic]. So IES is the guarantee [sic]. That's what I've just been told.” Milestone's attorney wrote to P as follows: Apparently, your client has misunderstood certain comments regarding which specific entity is obligated under the [Campus Way Property lease]. It stated that D is the only tenant and sole obligee of the tenant's duties as provided in this lease. P then asked Coleman for clarifications that D was a wholly owned subsidiary of D1. Coleman faxed P four replacement pages to the lease that made several changes, including identifying the tenant as a wholly owned subsidiary of D1. P informed Milestone that it had “become comfortable with the financial situation of the tenant” and would remove the contingencies it previously placed on the purchase if Milestone agreed to an attached Lease Addendum and certain construction warranties. The Lease Addendum requires the tenant to give 12 months' notice of an intent to renew following expiration of the seven-year lease term (rather than six months as set out in the lease); use of the Arbitration Service of Portland, rather than the American Arbitration Association, to arbitrate any dispute over the market rate for a renewal terms; the insertion of the word “casualty” in section 5(b) of the lease to clarify the type of insurance the tenant was required to maintain; and a change in the name of the tenant from “New Tech Electric, Inc.” to “New Technology Electrical Contractors, Inc., a Delaware Corporation.” P then made an offer to buy the Campus Way property, as did several other prospective purchasers. P closed on the purchase and took formal assignment of the lease four days before D was to begin occupying the premises. D1 publicized D's move in its newsletter. D's economic fortunes deteriorated after its move to the Campus Way Property, coinciding with the collapse of the Oregon high-tech market it served. D1 directed D to sublet some or all of the Campus Way building. Coleman signed a severance agreement with D1 on September 3, 2002. D1 eventually reviewed the lease for the Campus Way Property in 2003. D1 concluded that the lease was executed without the requisite corporate authority. Ds served P with a complaint in the Texas lawsuit alleging that the misconduct of Coleman and Crouser rendered the lease “void ab initio or voidable.” D delivered the keys to the Campus Way Property to P, together with prorated July rent (covering three days). P seeks a declaratory judgment that the lease and its subsequent revisions are valid and enforceable, while D proffers a variety of reasons why the lease is void ab initio or voidable.