Li-Conrad v. Curran , 2016 Ohio 1496 ( 2016 )

[Cite as Li-Conrad v. Curran, 2016-Ohio-1496.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
LAKE COUNTY, OHIO
JANE ELIZABETH LI-CONRAD, : OPINION
Plaintiff-Appellant, :
CASE NO. 2015-L-085
- vs - :
CHRISTOPHER P. CURRAN, et al., :
Defendant-Appellees. :
Civil Appeal from the Lake County Court of Common Pleas, Case No. 14 CV 001227.
Judgment: Affirmed.
Russell D. Kornblut, The Law Offices of Russell D. Kornblut, 30455 Solon Road, Solon,
OH 44129 (For Plaintiff-Appellant).
Joshua T. Morrow, and James V. Aveni, Ranallo & Aveni, LLC 6685 Beta Drive,
Cleveland, OH 44143 (For Defendant-Appellees, Christopher Curran and Judith L.
Curran).
Tracey S. McGurk, Mansour Gavin, LPA, North Point Tower, 1001 Lakeside Avenue,
Suite 1400, Cleveland, OH 44114 (For Defendant-Appellees, Scott Newman, Jude
Crockett, and Howard Hanna Real Estate Services Mentor Office).
THOMAS R. WRIGHT, J.
{¶1} Appellant, Jane Elizabeth Li-Conrad, appeals the trial court’s judgment in
favor of appellees on all pending claims in her civil complaint. Appellant argues that
summary judgment was improper because her evidentiary materials create a factual
dispute concerning whether the appellees engaged in fraud during the course of a real
estate transaction. For the following reasons, we affirm.
{¶2} This case involves the sale of a residential home. Appellees, Christopher
and Judith Curran, sold a residential house located on North Palmerston Drive in
Mentor, Ohio. The Currans bought the home in April 1998, and resided there
continuously until the sale. When the Currans took possession, the basement was
finished. Most of the walls were covered with drywall. The walls not covered, are in the
southwest corner of the basement in a small room housing a sump pump.
{¶3} In July 2006, the Currans’ basement flooded due to a torrential rain storm.
According to them, the basement had an inch of standing water. The Currans replaced
the carpet over the majority of the basement floor and removed some of the wall
paneling in an area underneath a stairway closet. Additionally, they replaced nearly 500
square feet of drywall.
{¶4} A few months before placing the home on the market in 2012, the Currans
hired a company to make repairs to the sump pump room. The work primarily consisted
of patching cracks in a foundation wall, applying an epoxy floor, and caulking certain
areas.
{¶5} The Currans listed the house with Howard Hanna Real Estate Services,
and were represented by two Howard Hanna agents, Judie A. Crockett and Scott
Newman. Newman is the Currans’ nephew.
{¶6} The Currans completed a Residential Property Disclosure Form. Under
the “water intrusion” section, the Currans noted the 2006 flood and some of the repairs
that were performed as a result of the standing water. Under the “structural
components” section, they stated that they were unaware of any material problems with
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the foundation, basement, or crawl spaces.
{¶7} On February 14, 2013, appellant executed a written offer to purchase the
home for $260,000. The first term of the written offer states that appellant agrees to
accept the home “AS IS” except for normal wear and tear.
{¶8} The offer also contains an “inspection” term, under which appellant was
given an opportunity to have the premises inspected by a professional. This term
further provides that if the inspection reveals any material condition that appellant finds
unsatisfactory, she has three days to give notice to the Currans. The term then states:
{¶9} “If SELLER agrees within ____ days after notification to correct said
condition(s), then this AGREEMENT shall remain in full force and effect. If SELLER
does not so elect, then BUYER, at BUYER’S option, may either waive such condition(s)
and accept the PROPERTY in “AS IS” condition or terminate this AGREEMENT * * *.”
{¶10} After the Currans accepted appellant’s offer, she hired James Nemastil to
inspect the home. In his ensuing written report, Nemastil noted two areas of concern in
the basement. The first was inside the sump pump room, near the southwest corner of
the home. Specifically, he stated that the foundation wall inside that room was bowing
inward; accordingly, he recommended that a foundation repair specialist be contacted.
The second area of concern was in the southeast corner of the basement, where there
were cracks in the mortar that should be repaired by a mason. The report further
indicated that the grade of the land near the southeast corner was poor, and that this
could lead to water seepage and possible foundation failures. Last, Nemastil generally
noted that foundation wall cracks could get larger over time and require major structural
repairs.
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{¶11} Upon receiving the inspection report, appellant hired William Bridge and
Kirtland Contracting to inspect the basement and make recommendations regarding
possible repairs. In relation to the sump pump room, Bridge concluded that immediate
repairs to the bowing foundation wall were required, and that it would cost
approximately $16,000 to complete the necessary work. As to the issue in the
southeast corner, he did not make any recommendation because, since the walls were
covered with drywall, he could not discern any major problem.
{¶12} In light of Bridge’s recommendation, appellant made a second offer to the
Currans. Specifically, she stated in an e-mail that she was willing to go forward with the
purchase if the Currans would pay for half of the repairs in the sump pump room. This
offer made no reference to the cracks in the southeast corner, noted in the Nemastil
report. The Currans accepted this offer, and the purchase agreement was amended to
state a $252,000 purchase price.
{¶13} In conjunction with the second offer, appellant instructed her real estate
agent to contact the Currans’ agents at Howard Hanna and inquire whether there were
any other problems with the foundation and basement which the Currans failed to
mention. After discussing with the Currans, Scott Newman informed appellant’s agent
that all necessary disclosure regarding the foundation and basement had been made.
{¶14} The sale closed on March 26, 2015. At some point in April 2015, Kirtland
Contracting repaired the bowing foundation wall. When the project was completed, a
City of Mentor inspector came to the home and assessed the work. Although the
inspector approved the repairs to the bowing wall in the sump pump room, his
inspection revealed other possible problems with the foundation wall near the front
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porch. As a result, the inspector recommended that a “destructive” investigation be
done to determine if there were any latent defects in the foundation or basement.
{¶15} At appellant’s request, the investigation was conducted by Bridge and
Kirkland Contracting, and consisted of removing dirt around the exterior walls and
drilling holes in the drywall inside the basement. This work revealed a thirty-foot
horizontal crack in the southeast foundation wall and significant dampness on the north
foundation wall. Kirtland Contracting estimated the cost for repairing these new
problems would be approximately $24,000.
{¶16} In June 2014, appellant brought the underlying case against the Currans,
Howard Hanna, Scott Newman, and Judie Crockett. Her complaint set forth six counts,
including claims for fraud, negligent misrepresentation, and violations of the Ohio
Consumer Sales Practices Act. Appellant sought compensatory and punitive damages
in an amount not less than $25,000.
{¶17} After engaging in considerable discovery, the three Howard Hanna
defendants moved for summary judgment on all claims. The Currans submitted a
separate motion for summary judgment. The Currans’ motion relied heavily on the
affidavit of James Nemastil, who conducted the original inspection for appellant. In
responding to both motions, appellant relied on William Bridge’s affidavit, who averred
that the amount of standing water in the Currans’ basement during the 2006 flood had
to be greater than one inch.
{¶18} In its final order, the trial court granted both summary judgment motions
and entered judgment against appellant on all claims in her complaint. In appealing this
decision, appellant asserts five assignments of error for review:
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{¶19} “[1.] The trial court committed prejudicial error in granting defendants-
appellees, Howard Hanna Real Estate Services, Judie Crockett, and Scott Newman et
al.’s motion for summary judgment based upon its opinion that negligent
misrepresentation claims, because not all professionals are in the business of supplying
information to others and it is not clear to the court that such a claim is applicable to a
realtor, finding that because defendant-appellee realtor was not the plaintiff’s realtor and
that defendant-appellee seller is not in the business of supplying information, plaintiff did
not seek guidance from them regarding her business transaction.
{¶20} “[2.] The trial court committed prejudicial erred in granting defendants-
appellees, Christopher P. Curran and Judith L. Curran et al.’s motion for summary
judgment based upon its opinion that for fraudulent nondisclosure claims, an ‘as is’
clause ‘relieves a seller of any duty to disclose and bars a claim for fraudulent
nondisclosure.’
{¶21} “[3.] The trial court committed prejudicial error in granting all defendants-
appellees, Christopher P. Curran, et al.’s motion for summary judgment based upon its
opinion that for fraudulent misrepresentation claims, the plaintiff cannot establish
justifiable reliance where the sale is contingent upon an inspection of the premises,
finding that because the sale was contingent upon an inspection, and because an
inspection was conducted, plaintiff cannot establish justifiable reliance.
{¶22} “[4.] The trial court committed prejudicial error in granting defendants-
appellees, Christopher P. Curran, et al.’s motion for summary judgment based upon its
opinion that for fraudulent concealments claims, because the inspection report
specifically advised and recommended that plaintiff contact a foundation repair
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specialist, finding that plaintiff was aware of potential problems so did not actually rely
on any alleged misrepresentations, failures to disclose, or concealment by the sellers.
{¶23} “[5.] The trial court committed prejudicial error in granting defendants-
appellees, Howard Hanna Real Estate Services, Judie Crockett, and Scott Newman et
al.’s motion for summary judgment based upon its opinion that plaintiff-appellant does
not address her claims for violations of the Ohio Consumer Sales Practices Act, finding
that because the OCSSPA does not apply to real estate transactions, realtor
defendants-appellees are entitled to judgment as a matter of law.”
{¶24} Appellant’s first assignment of error pertains to the merits of her negligent
misrepresentation claim. As noted, after appellant received the Nemastil report and
learned of the problem with the bowing wall in the sump pump room, she asked her real
estate agent to contact the Howard Hanna defendants and ascertain whether the
Currans had provided full disclosure concerning all problems with the basement. She
now contends that, given the subsequent discovery of the thirty-foot horizontal crack in
the southeast wall, it is clear that the Currans and the Howard Hanna appellees lied in
stating that they were unaware of any other problems. In light of this, appellant argues
that her evidentiary materials created a factual dispute concerning negligent
misrepresentation.
{¶25} Negligent misrepresentation is defined as: “‘One who, in the course of his
business, profession or employment, or in any other transaction in which he has a
pecuniary interest, supplies false information for the guidance of others in their business
transactions, is subject to liability for pecuniary loss caused to them by their justifiable
reliance upon the information, if he fails to exercise reasonable care or competence in
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obtaining or communicating the information.’” (Citations omitted.) (Emphasis six.)
Delman v. Cleveland Heights, 41 Ohio St. 3d 1, 4, 534 N.E.2d 835 (1989).
{¶26} Given the elements of negligent misrepresentation, this court has
concluded that such a claim is considered a business tort that is not meant to have
extensive application. The Middlefield Banking Co. v. Deeb, 11th Dist. Geauga No.
2011-G-3007, 2012-Ohio-3191, ¶31-33. We have also stated that, “under Ohio law, the
tort of negligent misrepresentation has no application to consumer transactions or
typical business transactions.” Id. at ¶35. Therefore, the tort does not apply to a loan
transaction between a bank and its customer because, in that type of situation, there is
no “fiduciary-like” relationship in which the bank would have a professional duty to give
dependable information. Id. at ¶36.
{¶27} A similar analysis applies to this case. That is, since the three Howard
Hanna appellees were not representing appellant, they do not owe a fiduciary-like duty
to her. There also is no fiduciary-like relationship between the Currans and appellant
because they are opposing parties in a real estate transaction. Although the Currans
were required to provide accurate information in completing the disclosure form as to
the condition of the home, this requirement did not arise from a fiduciary relationship.
Thus, in light of the undisputed facts as to the relationship between the parties,
appellant cannot maintain a negligent representation claim against any of the five
appellees because they were not hired by her to provide information. Accordingly the
first assignment is not well-taken.
{¶28} Although appellant’s complaint stated one general claim for fraud, that
claim was broken down into three separate causes of action for summary judgment
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purposes: fraudulent nondisclosure, fraudulent misrepresentation, and fraudulent
concealment. Appellant’s second assignment addresses the trial court’s decision on
her fraudulent nondisclosure claim. She contends that the trial court erred in holding
that the presence of the “as is” clause in the purchase agreement barred her from
maintaining this claim against the Currans.
{¶29} As a general proposition, the presence of an “as is” clause in a real
estate purchase agreement has no effect upon the viability of claims for fraudulent
misrepresentation or fraudulent concealment. Bencivenni v. Dietz, 11th Dist. Lake No.
2012-L-127, 2013-Ohio-4549, ¶44. However, such a clause bars a claim for fraudulent
nondisclosure because it relieves the seller of any duty to disclose. Id. Stated
otherwise, the clause only provides protection for acts of omission, as compared to a
positive act of fraud. Id.
{¶30} There is no dispute that the purchase agreement contains a clause that
she was accepting the home “as is.” Despite this, she asserts that she should be
allowed to predicate her fraudulent nondisclosure claim upon the Currans’ “affirmative
false representation” that, except for the bowing wall in the sump pump room, there
were no other defects in the foundation or basement. Yet, appellant’s argument is
clearly based upon the misconception that an “affirmative false representation” can form
the grounds of a fraudulent nondisclosure claim. As appellant has failed to establish
that the trial court erred in relying upon the Bencivenni precedent as the basis for its
ruling on the fraudulent nondisclosure claim, her second assignment is without merit.
{¶31} Under her next assignment, appellant submits that the trial court erred in
concluding that she could not prevail on her fraudulent misrepresentation due to the
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lack of “justifiable reliance.” Citing Kimball v. Duy, 11th Dist. Lake No. 2002-L-046,
2002-Ohio-7279, the trial court found that the provisions in the purchase agreement’s
“inspection” term precluded her from relying upon any statement made by the Currans
concerning the condition of the basement. Appellant argues that the trial court
misinterpreted Kimball, and that she could still prove justifiable reliance by showing that
she actually based her decision to proceed with the sale upon the Currans’ statements.
{¶32} As noted above, the “inspection” term of the purchase agreement states
that if the inspection revealed new problems with the home and the seller chose not to
remedy those problems, the buyer accepts the home “as is,” thereby waiving the right to
have the problem corrected. Despite the fact that the Nemastil report had a reference
to possible crack problems in the southeast foundation wall, appellant did not negotiate
a resolution of this issue with the Currans. As a result, she accepted the home “as is”
once the “bowing wall” issue was resolved.
{¶33} To prevail on her fraudulent misrepresentation claim, appellant must prove
that she justifiably relied upon the seller’s false statement. Bencivenni, at ¶43. But, “‘[a]
buyer cannot be said to have justifiably relied upon misrepresentations made by the
seller where the agreement is clearly contingent upon the inspection rather than any
alleged representations.’” Kimball. at ¶23, quoting Massa v. Genco, 11th Dist. Lake No.
89-L-14-162, 1991 Ohio App. LEXIS 867, *7 (Mar. 1, 1991). Noting the use of the
words “rather than” in the foregoing quote, appellant asserts that Bencivenni and Massa
must be interpreted to allow the buyer to rebut the effect of the “inspection” provision by
showing actual reliance on a misrepresentation. However, such an interpretation would
have the effect of rendering the “inspection” provision meaningless.
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{¶34} In this case, the Nemastil report gave appellant notice of potential crack
problems in the southeast foundation wall. Despite this, she did not take any steps to
investigate the issue or enter into further negotiations with the Currans. Thus, under the
express wording of the “inspection” term, she agreed to accept the residence in its
present condition. This precludes her from asserting that she justifiably relied upon any
false statements made by the Currans. Since appellant cannot establish all elements of
a fraudulent misrepresentation claim, the trial court properly granted summary
judgment, and the third assignment of error lacks merit.
{¶35} Under her fourth assignment, appellants asserts that summary judgment
was not warranted on her fraudulent concealment claim because her evidentiary items
create a factual dispute as to the concealment of the thirty-foot crack and the significant
dampness on the southeast foundation wall. Citing the affidavit of William Bridge, she
argues that his averments were sufficient to raise an inference that the Currans were
aware of these problems and tried to hide them from plain view.
{¶36} To prevail on a fraudulent concealment claim, the plaintiff must establish
“1) there was an actual concealment, 2) of a material fact, 3) with knowledge of the
concealment, 4) with the intent to mislead another into relying, 5) which causes
justifiable reliance by a party with a right to rely, and 6) the relying party suffers
damages as a result.” Buchanan v. Improved Properties, LLC, 3rd Dist. Allen No 1-13-
38, 2014-Ohio-263, ¶15. In stating in their summary judgment motion that there were
no set of facts appellant could establish under which she could satisfy the first and third
elements, the Currans attached a joint affidavit in which they averred that the basement
was “fully finished” for the entire period they owned the home. Based upon this, they
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maintained that they could not have been aware of the crack and the dampness
because it was hidden behind the existing drywall.
{¶37} In his opposing affidavit, William Bridge made several averments with the
intent of showing that the Currans had lied as to the amount of standing water that was
in their basement during the 2006 flood. For example, Bridge noted that the paneling in
one area of the basement had been cut out approximately eighteen inches above the
basement floor. He also noted that the invoices covering the repairs made following the
2006 flood showed that nearly 500 square feet of drywall was replaced.
{¶38} Taken as a whole, Bridge’s averments were sufficient to raise an inference
that the Currans may have been deceitful in describing the extent of the damage
caused by the flood. However, the averments were not sufficient to support a further
inference that, in light of the greater damage, they were aware of the specific problems
found on the southeast wall. As to the replacement of the drywall, Bridge made no
assertions as to where the old drywall was replaced. Furthermore, even if the drywall
on the southeast wall was removed in 2006, there is no evidence indicating that the
problems existed at that time and could have been observed.
{¶39} Bridge also averred that the Currans’ deceitful tendencies could be seen
in the 2012 cosmetic repairs they made to the bowing foundation wall in the sump pump
room. In support, he noted that an epoxy floor was applied, and the loose debris and
cracks on the wall had been merely caulked. However, the undisputed facts show that
the sump pump room was on the southwest wall, totally separate from the problems on
the southeast wall. Moreover, the repairs made to the bowing wall were visible to
inspection.
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{¶40} Even when considered in a manner that is most favorable to appellant, her
evidentiary materials were insufficient to raise an inference that the Currans were aware
of the exact problems found during the “destructive” investigation of the basement. As
appellant could not create a factual dispute as to the extent of the Currans knowledge,
she would not be able to satisfy all necessary elements for a fraudulent concealment
claim. Accordingly, because summary judgment was warranted under Civ.R. 56(C), her
fourth assignment is without merit.
{¶41} Appellant’s final assignment pertains to her claim for violations of the Ohio
Consumer Sales Practices Act. While acknowledging that that the OCSPA does not
apply to a pure real estate transaction, she maintains that she was entitled to go forward
under the OCSPA because the transaction for the Currans’ home also had a “goods or
services” aspect. In support of this point, she notes that Howard Hanna offered a 100
percent money back guarantee if a purchaser was not satisfied with the property.
{¶42} During his deposition, Scott Newman testified that appellant could not
qualify for the guarantee because Howard Hanna was not acting as her representative.
He further noted that the Currans did not qualify for the guarantee because the
company’s commission on the deal would not be high enough. Since appellant never
refuted Newman’s testimony concerning her lack of qualification, she was unable to
establish the factual predicate for her entire OCSPA claim; i.e., she did not show that
the purchase of the home was a hybrid transaction. Therefore, since the OCSPA
cannot be applied to a pure real estate transaction, Hurst v. Enterprise Title Agency,
Inc., 157 Ohio App. 3d 133, 2004-Ohio-2307, ¶34 (11th Dist.), summary judgment was
justified. Appellant’s fifth assignment is not well-taken.
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{¶43} The judgment of the Lake County Court of Common Pleas is affirmed.
CYNTHIA WESTCOTT RICE, P.J.,
DIANE V. GRENDELL, J.,
concur.
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