Seller Allows Broker To Draft Environmental Condition and Then Loses Breach of Contract Case

Hager’s of Cohasset, Inc. v. Nelson, 2011Minn. App. Unpub. LEXIS 156 (Minn.Ct. App. Feb. 15, 2011) is yet another lesson from a long line of cases that illustrate the risks of not using counsel for commercial property transactions especially those have problematic environmental issues.

In this case, the plaintiff operated a fuel-oil business. In October 2007, plaintiff decided to sell his property and divided it into two parcels. After selling Tract A, he entered into a purchase agreement with the defendant for Tract B. Another defendant, the broker, served as a dual agent.

The broker drafted a clause at the instruction of the defendant buyer that provided the sale was contingent on seller obtaining a letter from the Minnesota Pollution Control Agency (MPCA) stating that the land was free from any future clean up. In addition, the clause stated that “Seller was to have tanks removed and proper fill removed and new fill in place prior to closing per MPCA rules in place at present time, seller to provide buyer with a completion certificate by the MPCA. Buyer to have no financial obligation for the removal and compliance with MPCA rules and regulations”

After the contract was signed, the plaintiff removed the above-ground fuel tanks and fuel pumps removed from tract B but did not provide buyer with any documentation from MPCA that the tanks were removed in compliance with MPCA rules and regulations, nor a letter from the MPCA stating that the land was free from future cleanup. The only letter from the MPCA seller provided was dated six months before the parties had entered into the purchase agreement that addressed a petroleum release associated with two 10,000-gallon USTs that had been removed in 2007. The MPCA closure letter simply indicated the petroleum release had been adequately addressed and did not require any additional investigation or cleanup work at that time. However, the letter also said that “file closure does not mean that all of the petroleum contamination has been removed from this site” and “that the MPCA reserves the right to reopen this file.” In addition, the letter stated “This letter does not release any party from liability for the petroleum contamination . . . . If future development of this property or the surrounding area is planned, it should be assumed that petroleum contamination may be present.”

Buyer refused to close, saying that the 2007 MPCA letter was not satisfactory. Seller then filed a breach of contract action and sough an order compelling specific performance. Seller also sued the broker, asserting that the broker breached his fiduciary duty because he drafted the purchase agreement per Nelson’s instructions without seeking legal advice or additional expertise from the MCPA about the conditions.

The buyer and broker moved for summary judgment and dismissal of all of Hager’s claims. The district court granted summary judgment in favor of buyer and the broker, concluding that the 2007 MPCA letter did not satisfy the minimum requirements of the condition because it predated the purchase agreement, released no party from liability, and indicated that it should be assumed that petroleum contamination may be present.

The appeals court affirmed, holding that because seller did not provide buyer with any documentation from the MPCA related to the tank removal in May 2008, the conditions precedent were not satisfied.  On the claim against the broker, the court said seller had not shown that the broker had a duty to obtain legal advice or consult with MPCA prior to drafting the condition precedent.

Scroll to Top