Montgomery v. Vargo , 2016 Ohio 809 ( 2016 )

[Cite as Montgomery v. Vargo, 2016-Ohio-809.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 102830
SIMON MONTGOMERY
PLAINTIFF-APPELLEE
vs.
DON VARGO
DEFENDANT-APPELLANT
JUDGMENT:
REVERSED
Civil Appeal from the
Berea Municipal Court
Case No. 04CV1002343
BEFORE: S. Gallagher, J., Celebrezze, P.J., and Kilbane, J.
RELEASED AND JOURNALIZED: March 3, 2016
ATTORNEY FOR APPELLANT
Mark M. George
5005 Rockside Road, Suite 600
Independence, Ohio 44131
FOR APPELLEE
Simon Montgomery, pro se
3637 South Green Road
Beachwood, Ohio 44122
SEAN C. GALLAGHER, J.:
{¶1} This cause came to be heard upon the accelerated calendar pursuant to App.R. 11.1
and Loc.R. 11.1. Don Vargo appeals Berea Municipal Court’s award of $1,500, imposed
against him for allegedly failing to disclose to Simon Montgomery the existence of a material
defect in a house before the sale of the property. For the following reasons, we reverse the
decision of the trial court and enter judgment in favor of Vargo.
{¶2} Montgomery purchased a house from Vargo in December 2011. In October 2013,
Montgomery noticed water leaking through the center of the ceiling in one room of the house.
The parties refer to this room as the “den.” The den was an addition completed before Vargo’s
ownership. A flat roof was installed on the addition, instead of sharing the roof line of the
existing structure. Montgomery hired a contractor to inspect the damage, which was determined
to be rotted wood. The contractor told Montgomery the roof needed to be replaced, ultimately
costing $2,939.55. Montgomery approached Vargo in an effort to force Vargo to cover the
costs.
{¶3} When Vargo purchased the property in a foreclosure sale, the den had a fireplace.
The chimney was attached as an appendage to the exterior wall of the room. When Vargo
owned the property, which was only for a few months, the chimney had a two- to three-inch
crack forming between the chimney and the building. Vargo removed the chimney and
fireplace, and re-sided that portion of the house. There was no evidence that the separation of
the chimney caused any damage to the building, that the separation was caused by a latent defect
in the structure of the building, or that the roof was repaired or in need of repair after the chimney
was removed.
{¶4} Vargo did not mention the renovation to the den in the residential property
disclosure form. Montgomery contends that Vargo fraudulently concealed the damage to the
chimney by negatively responding to the question “do you know of any movement, shifting,
deterioration, material cracks/settling (other than visible minor cracks or blemishes) or other
material problems with the foundation, basement/crawl space, floors or interior/exterior walls?”
This is the crux of the current dispute.
{¶5} In a trial before a magistrate in small claims court, Montgomery was awarded
$1,500 in damages.1 According to the magistrate’s decision, Vargo should have disclosed the
removal of the chimney and fireplace feature of the house pursuant to R.C. 5302.30, but the
property was nonetheless purchased in “as is” condition. In other words, judgment was entered
in favor of Montgomery solely because of the finding that Vargo failed to disclose a fact that the
court found he had a duty to disclose. Over Vargo’s objection, the trial court adopted the
magistrate’s decision in its entirety. Vargo timely appealed, in pertinent part claiming the trial
court erred because the removal of the fireplace and chimney was unrelated to the defect, the
rotted roof.
{¶6} The trial court’s decision to adopt a magistrate’s decision is reviewed under an
abuse of discretion review. Butcher v. Butcher, 8th Dist. Cuyahoga No. 95758,
2011-Ohio-2550, ¶ 7, citing O’Brien v. O’Brien, 167 Ohio App.3d 584, 2006-Ohio-1729, 856
N.E.2d 274 (8th Dist.). An abuse of discretion implies a decision that is unreasonable, arbitrary,
or unconscionable. Blakemore v. Blakemore, 5 Ohio St.3d 217, 219, 450 N.E.2d 1140 (1983).
In this case, liability was imposed because of the failure to disclose a fact under which the seller
1
The actual award calculation is not an issue raised on appeal.
owed a duty to disclose. The judgment must be reversed. Ohio law does not impose liability
based on the mere failure to disclose.
{¶7} In Ohio, an “as is” purchaser of residential property has a limited right to impose
liability upon a seller for latent defects discovered after the sale is completed. “In the absence of
evidence of fraudulent representation or fraudulent concealment, an ‘as is’ clause in a real estate
contract and the principle of caveat emptor preclude a buyer from recovery for claims arising
from latent defects.” Wolk v. Paino, 8th Dist. Cuyahoga No. 93095, 2010-Ohio-1755, ¶ 38,
citing Scafe v. Property Restorations, Ltd., 8th Dist. Cuyahoga No. 84447, 2004-Ohio-6296, ¶
14, and Yahner v. Kerlin, 8th Dist. Cuyahoga No. 82447, 2003-Ohio-3967, ¶ 20. In this case,
the court determined that the defect at issue, the rotted roof, was a latent defect unknown to either
party until October 2013, two years after Montgomery purchased the property. Further, the trial
court concluded Montgomery purchased it “as is,” and that conclusion was not appealed. In the
absence of fraud, therefore, Montgomery cannot recover any damages from Vargo.
{¶8} In order to substantiate a fraudulent concealment claim, a plaintiff must establish the
following:
(1) concealment of a fact when there is a duty to disclose[,] (2) that it is material
to the transaction at hand, (3) made falsely, with knowledge of its falsity or with
such utter disregard and recklessness as to whether it is true or false that
knowledge may be inferred, and (4) with intent to mislead another into relying
upon it, (5) justifiable reliance on the representation or concealment and (6)
resulting injury proximately caused by the reliance.
Volbers-Klarich v. Middletown Mgt., Inc., 125 Ohio St.3d 494, 2010-Ohio-2057, 929 N.E.2d
434, ¶ 27.
{¶9} In this case, as argued by Montgomery, the duty to disclose “the removal of the
chimney” stemmed from R.C. 5302.30. The duty to disclose, however, is but one element of a
fraudulent concealment claim. R.C. 5302.30 does not give rise to an independent cause of
action. The statute merely codifies a party’s duty to disclose certain facts for the purposes of
residential real estate transactions. Jordan v. Bordan, 8th Dist. Cuyahoga No. 90758,
2008-Ohio-5490, ¶ 15. The plaintiff must still present evidence substantiating all other elements
of the fraud claim. Even if Vargo breached a duty to disclose, there was no evidence presented
of any justifiable reliance on that concealment that proximately caused the injury for which
damages were sought. In other words, there was no evidence that the rotted roof was even
remotely related to the removal of the fireplace in the den or the chimney attached to the side of
the house.2
{¶10} Montgomery needed to prove all elements of a fraud claim and not that Vargo
simply failed to disclose a fact under which an arguable duty to do so existed. The failure to
disclose any fact in a residential property disclosure form does not open the seller to liability for
all latent defects later discovered. Riggins v. Bechtold, 1st Dist. Hamilton No. C-010541,
2002-Ohio-3291, ¶ 15. As with all tort claims in general, there has to be a connection between
the failure to disclose and the injury.
{¶11} In Bechtold, the plaintiff sought to impose liability against the sellers of a property
after experiencing water intrusion in various areas of the house. In an effort to demonstrate
fraud, the plaintiff claimed that the sellers failed to disclose the facts that the roof had been
2
There is no evidence in the record to support Montgomery’s theory that the chimney was a
structural component of the building or that the separation of the chimney from the exterior wall was
caused by movement, shifting, or any other material problem with the exterior wall.
replaced and the basement bathroom remodeled in the residential property disclosure form. Id.The First District held that such a disclosure was irrelevant to the actual injury underlying the
fraudulent concealment claim. Id. As the court concluded, even if a duty to disclose the new
roof and remodel existed, the plaintiff failed to demonstrate that the new roof or basement
renovation had contributed to the water damage problems caused by deteriorated areas around the
house. Id. The failure to connect the damage to the lack of disclosure was dispositive.
{¶12} The same result must follow in this case. Montgomery failed to introduce
evidence substantiating all elements of the fraud claim. Most importantly, he failed to produce
evidence that the removal of a defective, but isolated, component of the building contributed to
the deteriorated condition of the roof. Montgomery did not demonstrate that his reliance on the
lack of disclosure proximately caused his injury. Quite simply, Montgomery relied on the “post
hoc ergo propter hoc” fallacy, as proof of liability. The chronological order of events, however,
is not proof of causation. Proof that the roof failed two years after other work was performed in
or around the room is not legal proof causally connecting the two events. Montgomery bore the
burden of proving his claim. This burden was not met. For this reason, we must reverse the
judgment entered in favor of Montgomery. There was no evidence submitted to substantiate
each element of a fraudulent concealment claim, and thus the trial court erred as a matter of law
by adopting the magistrate’s decision.
{¶13} It should also be noted that R.C. 5302.30(F)(1) expressly limits liability to
nondisclosure of facts within the seller’s actual knowledge. A seller of residential property is
“not liable in damages that arise from any error in, inaccuracy of, or omission of any item of
information required to be disclosed in the property disclosure form if the error, inaccuracy, or
omission was not within the transferor’s actual knowledge.” (Emphasis added.) R.C.
5302.60(F)(1). There was no evidence that Vargo had actual knowledge of any problems
associated with the exterior roofing over the den; and therefore, even if he omitted any item of
information that he was required to disclose, he cannot be liable. There was no evidence that
Vargo had actual knowledge of the rotted condition of the roof — the latent defect.
{¶14} In an effort to demonstrate actual knowledge, Montgomery relied on a vague letter
— ultimately deemed incredible — from a neighbor who claimed to have seen an unknown
person replace a collapsed portion of the roof “over the family room” at an undetermined time in
the past. The only other evidence presented by Montgomery relating to Vargo’s knowledge of
the roof was that Vargo obtained a building permit listing the scope of work as “roofs-res.”
Montgomery then speculated that Vargo must have pulled the permit to fix the roof over the den.
There was no evidence substantiating Montgomery’s speculation. Further, we cannot infer
such knowledge based on the facts presented in the record.
{¶15} In order to demonstrate actual knowledge of the defect for which damages are
sought, a plaintiff needs to present more than evidence that some work was completed in or
around the area the defect was discovered. Tankersley v. Lohrey, 12th Dist. Butler No.
CA98-10-206, 1999 Ohio App. LEXIS 2116, *8 (May 10, 1999). In Lohrey, for example, the
seller was a carpenter by trade who renovated a house before selling the property to the buyers.
Id. at *2-3. The buyers argued, based on their own affidavits, that the seller had actual
knowledge of termite damage, discovered three years after the renovation and one year after the
purchase date, based on the fact the seller performed the renovation himself in the same area the
termite damage was discovered. Id. The Twelfth District held that actual knowledge must be
demonstrated and the buyers speculated as to the sellers’ knowledge because no evidence
established when the termite damage began. Id. at *8.
{¶16} In this case, Montgomery’s sole claim relies on his speculative belief that in
renovating the den, Vargo should have seen the problems with the roof. This impermissibly
presumes the roof was rotted or in need of repair at that time. There is simply no such evidence
in the record, much less evidence that Vargo was aware of the rotted roof or undertook
renovations that would have revealed the defect. Vargo did not live in the house, and only
owned it a short time while he renovated the home. The magistrate found that there was no
evidence of a visible leak at the time the house was purchased, a finding of fact not challenged.
Montgomery also had that roof inspected prior to purchasing the property, and the inspector
found the one- to two-year-old roof to be acceptable, with no patent evidence of water intrusion
or rot.
{¶17} We cannot infer actual knowledge of the rotted roof based on the evidence
presented. Wallington v. Hageman, 8th Dist. Cuyahoga No. 94763, 2010-Ohio-6181, ¶ 19, 21
(collecting cases in which a genuine issue of fact existed based on the evidence presented to
show actual knowledge of a latent defect). A seller only has a duty to disclose latent defects
within his actual knowledge. Pursuant to R.C. 5302.30(F)(1), without evidence of actual
knowledge of the latent defect, Vargo cannot be held liable for the replacement cost of the rotted
roof as a matter of law.3
{¶18} The judgment in favor of Montgomery is reversed, and judgment is entered in
favor of Vargo.
3
In a motion filed after oral argument, Montgomery sought a remand to the trial court to introduce
additional evidence in support of his claim. The trial court entered final judgment after trial in this
case. Montgomery did not file a motion for a new trial pursuant to Civ.R. 59 within the applicable
time period or a motion for relief from judgment following the standards espoused in Civ.R. 60. We
cannot remand the case to the trial court; there is no unresolved issue for the trial court’s
determination.
It is ordered that appellant recover from appellee costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to the municipal court to carry this judgment
into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the
Rules of Appellate Procedure.
SEAN C. GALLAGHER, JUDGE
FRANK D. CELEBREZZE, JR., P.J., CONCURS;
MARY EILEEN KILBANE, J., DISSENTS (WITH SEPARATE OPINION)
MARY EILEEN KILBANE, J., DISSENTING:
{¶19} I respectfully dissent. I would affirm the decision of the trial court that overruled
the objections to the magistrate’s decision and entered judgment in favor of Montgomery.
Having reviewed the record and the controlling case law, I believe that the magistrate reached a
correct and just decision in this matter when he concluded:
Testimony/evidence indicated that Defendant did remove the fireplace, but did not
disclose this on Section E of the State of Ohio Residential Property Disclosure
Form. * * * Testimony established that fireplace was removed because it was
pulling away from the house — this should have been disclosed. Plaintiff did
purchase the property in “AS IS’” condition, however, and Plaintiff’s Inspection
Report did not reveal/establish roof/ceiling leaks. Indeed no such leaks were
observed for almost 20 months after the sale.
{¶20} I would overrule the assignments of error and affirm.