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HomeMy WebLinkAboutHB Auto I , LLC - 2011-10-17an FROM DATE: CITY OF HUNTINGTON BEACH Interdepartmental Communication JOAN FLYNN, City Clerk JENNIFER McGRATH, City Attorney, y� November 9, 2011 SUBJECT: HB Auto I, LLC v. Redevelopment Agency of the City of Huntington Beach, Orange County Superior Court Case No. 30-2011-00485047 At the December 15, 2008 City Council meeting, the Agency approved on the Agenda an agreement to purchase the HB Auto property. Subsequently, HB Auto sued the City regarding this Purchase Agreement. The lawsuit was settled by way of a Settlement Agreement. The City Council approved the Settlement Agreement at the October 17, 2011 closed session. The City Manager and HB Auto have signed the Agreement. Attached is the signed, original Agreement for your files. JENNIFER McGRATH City Attorney Attachments c: Kellee Fritzal, Deputy Director of Economic Development Luis Gomez, Economic Development Project Manager 72647.doc SETTLEMENT AGREEMENT REGARDING HB AUTO I. LLC v. REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH HB AUTO I, LLC, a California limited liability company ("HB Auto") and the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a municipal corporation, hereinafter referred to as "Agency," hereby enter into this Agreement. In consideration of the promises made herein, the Parties agree as follows: RECITALS 1. HB Auto was owner of the property located at 7872 Edinger Avenue, Huntington Beach, California 92647 (the "Property"). For all times relevant to this Agreement, a car repair and tire shop was and is operating on the Property known as Big O Tires. 2. Prior to purchasing the Property, the Agency obtained a "Phase I Environmental Site Assessment Report, Project No. 6824, dated April 21, 2008, prepared by Phase One, Inc.," and a "Limited Phase II Environmental Site Assessment dated May 12, 2008, prepared by Phase One, Inc.," which documented contamination resulting from petroleum hydrocarbons in the form of hydraulic fluid located on the Property (collectively referred to as the "Assessments"). 3. On December 15, 2008, the Agency approved an Agreement entitled "Agreement And Escrow Instructions For Purchase And Sale Of Real Property" to purchase the Property from HB Auto (the "Purchase Agreement"). 4. Section 12.3 of the Purchase Agreement provides that $200,000 of the purchase price was to be held back in a separate escrow account "to cover costs incurred after the Close of Escrow to remediate Known Environmental Matters," which are defined as the contamination described in the Assessments. 5. Section 12.3 of the Purchase Agreement provides that the Agency "shall use commercially reasonable efforts" to remediate the contamination identified in the Assessments. Section 12.3 further provides that when remediating the contamination described in the Assessments, the Agency "shall use commercially reasonable efforts not to interfere with the operations of the business of the tenant of the Property." 6. Section 12.3 further provides that upon completion of the remediation and issuance of a closure letter issued by the lead governing agency, the unused balance of the Holdback Amount is to be disbursed to HB Auto. 7. Section 12.4 provides that an additional $50,000 was to be held back in the escrow to remediate "any Unknown Environmental Matters," which are defined to mean any environmental matter not identified in the Assessments. This holdback money must be spent by the Seventh Anniversary of the Close of Escrow, which date is January 27, 2016, with the unexpended remainder to be released to HB Auto. Page 1 of 5 71981.DOC 8. Escrow closed on the Agency's purchase of the Property on January 28, 2009. 9. On June 8, 2010, the Agency circulated a Request for Proposal for Soil Remediation at the Property, which stated that the "Agency's goal is to remediate the site without significantly impacting the operations of the businesses." However, all proposals received required demolition of the service bays of Big O Tires in order to excavate the contaminated soil. 10. After the close of escrow, the Parties authorized the release of Thirteen Thousand Fifty Two Dollars ($13,052.00) to pay for additional soils investigations. 11. As of March 31, 2011, Stewart Title Company, the escrow agent under the Purchase Agreement (the "Escrow"), is holding Two Hundred Thirty -Nine Thousand, Eight Hundred Sixty Dollars and 86/100 Dollars ($239,860.86) in both holdback accounts, which amount includes accrued interest. 12. The Parties dispute whether the Agency has used commercially reasonable efforts to remediate the Property. 13. On June 17, 2011, HB Auto filed a complaint in the Orange County Superior Court, Case Number 30-2011-00485047, entitled HB Auto I, LLC v. Redevelopment Agency of the City of Huntington Beach, et al. (the "Action"). AGREEMENT The Parties to this Agreement, for and in consideration of the mutual covenants, promises, and conditions set forth herein and subject to the terms and provisions hereof, agree to the following terms: 1. Pursuant to the stay issued by the California Supreme Court on August 11, 2011 in California Redevelopment Association v. Matosantos, Case No. S 194861, 2011 Daily Journal D.A.R. 12,412, and pursuant to Health and Safety Code § 34163(c), the Agency may not amend or modify existing agreements, obligations, or commitments with any entity. Although the Parties contend that this Agreement does not amend or modify the Purchase Agreement, but merely resolves a dispute as to the terms of the Agreement, the Parties agree that this Agreement is conditional upon Court approval. The Parties shall immediately ask the Court to approve this Agreement to allow this Agreement to be effectuated. The Court shall retain jurisdiction until all funds are disbursed from the Escrow. Should the Court not approve this Agreement, then this Agreement is terminated and shall be considered null and void under all circumstances. 2. In consideration of the terms and conditions of this Agreement, the Parties have agreed that Escrow shall disburse to HB Auto, One Hundred Twenty -Five Thousand Dollars ($125,000.00), and shall disburse the entire remaining funds in Escrow of approximately One Hundred Fourteen Thousand Eight Hundred Sixty Dollars and 86/100 Dollars ($114,860.86) to the Agency. Page 2 of 5 7198 1.DOC 3. The Parties agree that upon execution of this Agreement, all outstanding obligations each Party owes to the other Party under the Purchase Agreement are satisfied and extinguished. 4. Upon disbursement of all funds from the Escrow, HB Auto shall dismiss the Action with prejudice. 5. Each of the Parties to this Agreement shall be responsible for the payment of his, her, or its own attorneys' fees, court costs, litigation expenses and other sums which have been expended, are currently due, or may become due in conjunction with the matters referenced herein. Each of the Parties to this Agreement agrees to waive any claims for malicious prosecution arising from the prosecution of the Action. 6. In consideration of the recitals, covenants and agreements set forth in this Agreement, and other good and valuable consideration, receipt and sufficiency of which is hereby acknowledged, each Party to this Agreement hereby irrevocably, unconditionally, and mutually releases and forever discharges each other and each of their respective trusts, trustees, successors, assigns, executors and administrators, agents, employees, representatives, attorneys, principals, affiliates, and all persons acting by, through, under or in concert with any of them, or any of them, of and from any and all claims, demands, actions, causes of action, suits, liens, debts, obligations, promises, agreements, costs, damages, liabilities, and judgments of any kind, nature, or amount whether in law or equity, whether known or unknown, anticipated or unanticipated, liquidated or unliquidated, including any and all claimed or unclaimed compensatory damages, consequential damages, interest, costs, expenses and fees (including reasonable or actual attorneys' fees) arising from or related to the events as described in the Action or regarding or relating to the Purchase Agreement. 7. All Parties acknowledge and warrant that their respective execution of this Agreement is free and voluntary. 8. It is understood and agreed that this Agreement and the consideration set forth herein affect the settlement of claims which are denied and contested, and nothing in this Agreement shall be construed as an admission by any Party of any liability of any kind to any Party to this Agreement or any other person, and such liability is expressly denied. 9. This Agreement constitutes and contains the entire Agreement and understanding concerning this subject matter between the Parties and supersedes and replaces all prior negotiations, proposed agreements or agreements, written or oral. Each of the Parties acknowledges that no other Party or any agent or attorney of any other Party made any promise, representation or warranty whatsoever, express or implied, or oral, not contained in this Agreement, concerning its subject matter to induce any Party to execute this Agreement, and each of the Parties acknowledges that it/he/she has not executed this Agreement in reliance on any promise, representation or warranty that is not contained in this Agreement. Page 3 of 5 7i98LDoc 10. Each of the Parties hereto specifically acknowledges that it is familiar with the provisions of California Civil Code section 1542, which provides: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. Each of the Parties, being aware of section 1542, hereby expressly waives any and all rights they may have thereunder, as well as under any other statutes, or rules of law or equity of similar effect. 11. The terms of this Agreement are contractual and not merely recital. 12. The Parties acknowledge that they have been represented by independent legal counsel of their own choice throughout all of the negotiations which preceded the execution of this Agreement. The Parties further acknowledge that they or their counsel have had adequate opportunity to make whatever investigation or inquiry they may deem necessary or desirable in connection with the subject matter of this Agreement prior to its execution and the delivery and acceptance of the specified consideration. 13. This Agreement shall in all respects be interpreted, enforced and governed by and under the laws of the State of California. 14. In the event that any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision of this Agreement. 15. Each Party agrees to execute any documents as may be reasonably necessary and to cooperate in any reasonable manner to effectuate the terms of this Agreement. 16. The undersigned have carefully read, discussed with their attorneys, and understood the contents and effect of this Agreement and have signed it as their own free act. 17. All parties shall be deemed to have cooperated in the drafting and preparation of this Agreement. Hence, any construction to be made of this Agreement shall not be construed against any Party. Page 4 of 5 71981.DOC 18. This Agreement may be executed in counterparts and each executed counterpart shall be effective as the original. REAL) THE ABOVE CAREFULLY BEFORE SIGNING November Dated-/WWvf 1 , 2011 By: Dated: October 12011 By: APPROVED AS TO FORM: FRE IL, ON, Executive Director RedjKelopent Agency of the City of Huntington Beach (Print Name) Authorized Agent for HB AUTO I, LLC CITY OF HUNTINGTON BEACH Dated: October 2 6 , 2011 Illy ll JHI�J' NIFER McGRATH, City Attorney � �' � f �d Redevelopment Agency of the City of I Huntington Beach Dated: October , 2011 PALMIERI TYLER WIENER WILHELM & WALDRON, LLP Michael L. D'Angelo, Esq. Attorneys for HB Auto I, LLC Page 5 of 5 71981.DoC 18. This Agreement may be executed in counterparts and each executed counterpart shall be effective as the original. READ THE ABOVE CAREFULLY BEFORE SIGNING Dated: October , 2011 By: FRED WILSON, Executive Director Redevelopment Agency of the City of Huntington Beach Dated: October, 2011 B j�dk(Print Name) Authorized Agent for HB AUTO I, LLC APPROVED AS TO FORM: CITY OF HUNTINGTON BEACH Dated: October , 2011 By: JENNIFER McGRATH, City Attorney Redevelopment Agency of the City of Huntington Beach Dated: October ")I , 2011 PALMIERI TYLER WIE R WILHELM & W RIT, LI-P/ LZ- Nfic`hael L. n-gblo, Esq. Attorneys for HB Auto I, LLC Page 5 of 5