Penn Grand Mgmt., LLC v. Homeriver Grp., LLC

Full title: PENN GRAND MANAGEMENT, LLC, an Oklahoma Limited Liability Company…

Court: Court of Civil Appeals of Oklahoma, Division No. 2.

Date published: Sep 25, 2020

Facts

Penn Grand purchased an apartment complex located in Oklahoma City (Penn Grand Apartments) on January 31, 2018. Prior to that purchase, Penn Grand had been in negotiations with HomeRiver regarding HomeRiver’s proposal to be hired as property manager for the apartments. At the time Penn Grand purchased the apartments, there were two eight-unit buildings, described as “burn-out” buildings, that had fire damage “down to the studs” and required reconstruction. In addition to the necessary reconstruction of those units, Penn Grand desired additional work at the apartments, such as removing a pool, constructing a dog park, building dumpster covers with fencing, reconstructing concrete ADA ramps and removal of areas of vinyl siding. By email dated January 31, 2018, HomeRiver’s CEO, Andrew Propst, advised Penn Grand that the property management service HomeRiver would provide “covers all the day-to-day managing of the properties including overseeing maintenance. It would not cover a large-scale overseeing of a big rehab that you are proposing.”

Penn Grand’s owner and manager, Jim Huntzicker, and HomeRiver’s CEO, Andrew Propst, signed a “Property Management Agreement” on February 2, 2018. The 7-page agreement detailed the services HomeRiver would provide with respect to the management and day-to-day operation of the apartments, for a two-year period, and to continue on a month-to-month basis until terminated.

After executing the Property Management Agreement, the parties negotiated terms for HomeRiver’s construction management services. By email dated February 22, 2018, HomeRiver submitted a “Management Fee Proposal” for providing “Construction Management services” for Penn Grand’s construction project. The Management Fee Proposal outlined HomeRiver’s fees for providing one full-time Project Manager and general liability insurance and included an additional “Cost plus 10%” fee. The Management Fee Proposal provided that “[a]ll costs are based on a 12-month construction duration.”

Beginning March 6, 2018, HomeRiver sent Penn Grand a series of proposals specifying projects to be completed and itemizing construction costs. HomeRiver designated KS Elite Services, owned and operated by Oklahoma resident Defendant Kerry Story (collectively referred to as Story), as the local contractor it would provide to complete the construction project outlined in the proposals. HomeRiver also provided an owner/contractor master agreement for Penn Grand and Story to execute, which specified, among other things, how Story would be compensated through periodic payment draws upon completion of certain phases of the construction. In additional emails during the month of April 2018, HomeRiver informed Penn Grand that Story had ordered materials, started demolition, and commenced the reconstruction work.

Penn Grand stopped construction when it became dissatisfied with both HomeRiver’s management of the construction project and the construction services Story performed. On or around June 1, 2018, Penn Grand informed HomeRiver and Story that the construction project was terminated. Penn Grand terminated the Property Management Agreement on or around June 12, 2018.

On September 7, 2018, Penn Grand commenced this action against HomeRiver and Story. Penn Grand asserted claims for breach of contract, breach of fiduciary duties, fraud and misrepresentation, conversion, breach of express and implied warranties, negligent construction and supervision of construction, and accounting.

HomeRiver filed a motion to dismiss pursuant to 12 O.S.2011 § 2012(B)(6), asserting that Penn Grand had failed to bring the action in the forum required by the terms of  the “Contract,” which it attached as “Exhibit A.”

Issue

Decision

In its petition, Penn Grand asserted claims against HomeRiver in Count Four (Conversion) and in parts of Count Eight that arise directly from the Property Management Agreement and fall within the scope of that agreement’s forum selection clause. We affirm that portion of the district court’s judgment dismissing those counts.

The district court erred in dismissing Counts One, Two, Three, Four (Breach of Express Warranty), Five and Six of Penn Grand’s petition. Those counts arise from the subsequent, separate and distinct agreement between the parties regarding a large-scale construction project and HomeRiver’s management of that project. The claims in those counts are beyond the scope of the forum selection clause of the Property Management Agreement, pursuant to which the parties contracted for HomeRiver to provide day-to-day management services for operation of the Penn Grand Apartments.

Accordingly, this Court affirms the district court’s judgment in part. We reverse the judgment in part and remand the matter to the district court for further proceedings consistent with this Opinion. ¶38 AFFIRMED IN PART, REVERSED IN PART, AND REMANDED FOR FURTHER PROCEEDINGS .

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