Apostolos Group, Inc. v. BASF Constr. Chems., L.L.C. , 2011 Ohio 2238 ( 2011 )

[Cite as Apostolos Group, Inc. v. BASF Constr. Chems., L.L.C., 2011-Ohio-2238.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT )
APOSTOLOS GROUP, INC. C.A. No. 25415
dba THOMARIOS
Appellant
APPEAL FROM JUDGMENT
v. ENTERED IN THE
COURT OF COMMON PLEAS
BASF CONSTRUCTION CHEMICALS, COUNTY OF SUMMIT, OHIO
LLC CASE No. CV 2007-10-7262
Appellee
DECISION AND JOURNAL ENTRY
Dated: May 11, 2011
CARR, Judge.
{¶1} Appellant, The Apostolos Group, Inc., dba Thomarios (hereinafter referred to as
“Thomarios”) appeals the order from the Summit County Court of Common Pleas granting a
motion to dismiss count one of the complaint in favor of appellee, BASF Construction
Chemicals, LLC. (hereinafter referred to as “BASF”). This Court affirms.
I.
{¶2} This case was initiated by Thomarios on October 17, 2007, against multiple
defendants and eventually maintained solely against BASF. Thomarios subsequently filed
amended complaints on November 9, 2007, and June 26, 2008. Thomarios filed a third amended
complaint on April 8, 2009, against BASF, the sole remaining defendant. Count one of the third
amended complaint contained individual claims for breach of implied warranty, common law
negligence, strict liability, and punitive damages. Count two of the complaint contained a claim
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for breach of express warranty under R.C. 1302.26. On April 20, 2009, BASF filed an answer to
the third complaint. On that same day, BASF filed a motion to dismiss count one of the third
amended complaint and the claim for punitive damages pursuant to Civ.R. 12(B)(6). On April
23, 2009, Thomarios filed its response to BASF’s motion to dismiss. Subsequently, on April 29,
2009, the trial court issued an order dismissing count one of the third amended complaint and the
associated punitive damages claim. Following the dismissal of count one of the third amended
complaint, the case proceeded under the claim for breach of express warranty under R.C.
1302.26. A bench trial was held before a magistrate in December of 2009. The magistrate’s
decision granting a verdict in favor of BASF was issued on February 12, 2010, and subsequently
adopted by the trial court on May 14, 2010. Thomarios filed a notice of appeal on May 24, 2010.
{¶3} The following substantive facts appeared in the third amended complaint and are
not in dispute on appeal. In October of 2005, Thomarios was contacted by the Akron
Metropolitan Housing Authority (“AMHA”) to apply deck coating on exterior balconies at the
Fowler Apartments in Akron, Ohio. The architect for the project, Rasmussen Design Group, Inc.
(hereinafter referred to as Rasmussen), specified the concrete deck coating for Thomarios to
apply to the exterior decking of the Fowler Apartments. Rasmussen indicated that the concrete
deck coating, known as Sonoguard, was manufactured by BASF. At some point after the
initiation of Thomarios’ deck coating process, Rasmussen advised Thomarios that the deck
coating remained “gummy” and “sticky” and was not hardening as it was supposed to according
to the manufacturer’s directions. These discussions occurred on or about October 18, 2005, and
were memorialized in a letter dated October 19, 2005, from Rasmussen to Thomarios. Because
the deck coating remained “gummy” and “sticky,” falling leaves stuck to the concrete decking
and such decking was rendered unfit for its intended purpose, and a good portion of the total job
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had been insufficiently completed as of late October 2005. Rasmussen requested that Thomarios
contact the manufacturer’s representative for BASF and ask them how to proceed to cure the
defect so that the deck coating would harden and not remain “gummy” and “sticky.”
{¶4} Thomarios contacted the manufacturer’s representative as requested and BASF’s
representative instructed Thomarios to place a “top coat” of sealer on the defective areas that
would cure the defects. Despite following BASF’s instructions concerning how to repair the
deck coatings problems, the deck coating remained “gummy” and “sticky” and BASF’s
instructions for repair failed. Thomarios had to make its own determination about how to repair
the defects caused by the defective product which eventually caused Thomarios to strip the entire
defective coating off the concrete decking at their own cost. BASF then provided Thomarios
another batch of deck sealant to apply to the decking of the Fowler Apartments after Thomarios
stripped the prior defective layer. The second batch of deck coating performed to expectations as
well as the manufacturer’s representations, and this solution was solely attributable to
Thomarios.
{¶5} Thomarios complied with all requirements set forth in all warranties associated
with the product at issue and applied the product as directed by the manufacturer’s specifications
at all times. A reasonable examination of the goods by Thomarios prior to purchase would not
have disclosed any defects which would have been readily apparent to Thomarios. Thomarios
suffered economic damages in regard to the repair of the decking at the AMHA project at issue
to which the defective product was applied, needed to be removed, then once again applied, with
all labor and expenses at Thomarios’ cost, less the cost of the new deck coating product.
{¶6} Thomarios is a commercial consumer and the product at issue was purchased to
be applied to a commercial job and the parties to this case were not in privity with each other at
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the time of the purchase, as the product was purchased at WL Tucker Supply Company in
Summit County, Ohio. Thomarios is a commercial consumer who is maintaining a claim for
breach of implied warranty/strict liability against a manufacturer, not in privity, for purely
economic loss. Upon information and belief, the Sonoguard product at issue has previously
failed in the same type of manner as it has failed in the instant case, and such failure can be
attributed to a defect in the product and not application by Thomarios.
{¶7} On appeal, Thomarios raises one assignment of error. While Thomarios
challenges the trial court’s dismissal of the claim for breach of implied warranty in tort and the
associated punitive damages claim, it does not challenge the trial court’s judgment on the breach
of express warranty issue on appeal.
II.
ASSIGNMENT OF ERROR
“THE TRIAL COURT ERRED AS A MATTER OF LAW AND/OR ABUSED
ITS DISCRETION WHEN IT DISMISSED, PURSUANT TO CIV.R. 12(B)(6),
COUNT I OF THE APPELLANT’S THIRD AMENDED COMPLAINT FOR
BREACH OF IMPLIED WARRANTY IN TORT AND THE ASSOCIATED
PUNITIVE DAMAGES CLAIM.”
{¶8} In its sole assignment of error, Thomarios argues that the trial court erred in
granting BASF’s motion to dismiss count one of the third amended complaint pursuant to Civ.R.
12(B)(6). This Court disagrees.
{¶9} An appellate court reviews a trial court order granting a motion to dismiss
pursuant to Civ.R. 12(B)(6) under a de novo standard of review. Perrysburg Twp. v. Rossford,
103 Ohio St.3d 79, 2004-Ohio-4362, at ¶5, citing Cincinnati v. Beretta U.S.A. Corp., 95 Ohio
St.3d 416, 2002-Ohio-2480, at ¶4-5. In reviewing whether a motion to dismiss should be
granted, an appellate court must accept as true all factual allegations in the complaint and all
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reasonable inferences must be drawn in favor of the nonmoving party. Rossford at ¶5; Mitchell
v. Lawson Milk Co. (1988), 40 Ohio St.3d 190, 192. “To prevail on a Civ.R. 12(B)(6) motion to
dismiss, it must appear on the face of the complaint that the plaintiff cannot prove any set of
facts that would entitle him to recover.” Raub v. Garwood, 9th Dist. No 22210, 2005-Ohio-
1279, at ¶4, citing O’Brien v. Univ. Community Tenants Union (1975), 42 Ohio St.2d 242, 245.
{¶10} In granting BASF’s motion to dismiss, the trial court relied on this Court’s
precedent in Midwest Ford, Inc. v. C.T. Taylor Co., Inc. (1997), 118 Ohio App.3d 798, and
refused to apply the Tenth District’s decision in Ohio Dept. of Admin. Servs. v. Robert P.
Madison Internatl., Inc. (2000), 138 Ohio App.3d 388 to the facts of this case. In support of its
assignment of error, Thomarios argues this court must reconsider the scope of its precedent in
Midwest Ford. Thomarios argues that there should be no distinction between a commercial and
noncommercial consumer in cases where the consumer is not in privity with the manufacturer
and enjoys only limited bargaining power. Thomarios contends that a standard which does not
permit a commercial consumer who enjoys limited bargaining power and is not in privity with a
manufacturer to assert an implied warranty claim leads to an unjust result. Thomarios argues in
its merit brief that, “[t]he reality is, the best analysis is probably a hybrid analysis taking the best
of the decisions between Midwest Ford and Robert P. Madison.”
{¶11} In Midwest Ford, this Court expressly held that a “common-law action in tort for
purely economic loss from defective products, based upon implied warranty theory, is not
available to commercial buyers.” Midwest Ford, 118 Ohio App.3d at 801. This Court noted that
Ohio courts have recognized that the products liability doctrine serves to advance the following
policy concerns:
“First, human life and safety are promoted by subjecting to strict liability
manufacturers of defective products that cause harm. Second, manufacturers are
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in a better position than those injured to internalize and redistribute the cost of
injuries. Third, strict liability relieves the ‘average consumer’ of the burden of
proving negligence.” Midwest Ford, 118 Ohio App.3d at 805, citing Queen City
Terminals, Inc. v. Gen. Am. Transp. Corp. (1995), 73 Ohio St.3d 609, 621.
We then noted that “[n]one of these policy reasons has any application to a claim by a
commercial buyer for purely economic losses.” Midwest Ford, 118 Ohio App.3d at 805.
{¶12} In resolving the issue of whether a commercial consumer can assert a claim based
on an implied warrant theory against a commercial manufacturer, this Court in Midwest Ford
conducted an in-depth discussion of pertinent case law. This Court distinguished the facts at
issue from the facts of Chemtrol Adhesives v. Am. Mfrs. Mut. Ins. Co. (1989), 42 Ohio St.3d 40,
49, where the Supreme Court of Ohio answered in the negative the question of “whether
economic loss may be recovered in strict liability where the parties are in privity of contract.”
(Emphasis in original). This Court also discussed the precedent established in Santor v. A. & M.
Karagheusian, Inc. (1964), 207 A.2d 305, and Seely v. White Motor Co. (1965), 403 P.2d 145,
cases the Chemtrol court noted are “universally recognized as the seminal decisions on the
question of whether economic loss is recoverable in a strict liability action.” Midwest Ford, 118
Ohio App.3d at 802, quoting Chemtrol, 42 Ohio St.3d at 46. This Court also considered the
Supreme Court of Ohio’s decisions in LaPuma v. Collinwood Concrete (1996), 75 Ohio St.3d
64, and Iacono v. Anderson Concrete Corp. (1975), 42 Ohio St.2d 88. In reaching our decision,
however, we adopted the reasoning set forth by the New Jersey Supreme Court in Spring Motors
Distributors, Inc. v. Ford Motor Co. (1985), 489 A.2d 660, where the court held that a
commercial truck buyer seeking economic damages for defective products could not recover in a
tort cause of action in strict liability to compensate for purely economic loss and was limited to
his remedies under the Uniform Commercial Code. The result in Spring Motors had the effect of
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limiting Santor to the context of noncommercial buyers. Midwest Ford, 118 Ohio App.3d at
803.
{¶13} In adopting the reasoning of the New Jersey Supreme Court in Midwest Ford, this
Court set forth at length the analysis in Spring Ford. In determining whether a commercial
buyer can recover economic loss, the New Jersey Supreme Court emphasized the need to
consider the policies underlying the doctrine of strict liability as well as the U.C.C. Midwest
Ford, 118 Ohio App.3d at 803-804, quoting Spring Motors, 489 A.2d at 670.
“Those policy considerations include, among others, the relative bargaining
power of the parties and the allocation of the loss to the better risk-bearer in a
modern marketing system. As a general rule, the rights and duties of a buyer and
seller are determined by the law of sales, which throughout this century has been
expressed first in the Uniform Sales Act and more recently in the U.C.C. As
indicated, however, strict liability evolved as a judicial response to the
inadequacies in sales law with respect to consumers who sustained physical
injuries from defective goods made or distributed by remote parties in the
marketing chain.” Id.
The New Jersey Supreme Court further notes that the “considerations that give rise to strict
liability do not obtain between commercial parties with comparable bargaining power.” Id. The
New Jersey Supreme Court recognized that “perfect parity is not necessary to a determination
that parties have substantially equal bargaining positions.” Id at 671.
{¶14} The Third District subsequently reached the same conclusion this Court reached
in Midwest Ford and held that the “policies of product liability law as articulated by Ohio courts
would not be served by extending a strict-liability cause of action to commercial plaintiffs.”
Norcold, Inc. v. Gateway Supply Co., 154 Ohio App.3d 594, 2003-Ohio-4252, at ¶35.
Thomarios notes that in Robert P. Madison, the Tenth District held that “[a] consumer,
commercial or not, can maintain a claim for breach of implied warranty/strict liability against a
manufacturer, not in privity, for purely economic loss[.]” Robert P. Madison, 138 Ohio App.3d
8at 397. The Tenth District stated that it could find “no basis for distinguishing between so-called
commercial and noncommercial buyers.” Id. at ¶396. The court further stated that no distinction
was necessary because “the doctrine of implied warranty is designed to protect ‘consumers’ who
are not in privity of contract.” Id. at ¶396.
{¶15} Under the facts of this case, this Court declines Thomarios’ invitation to depart
from our established precedent. There is no question that Thomarios was engaged in a
commercial endeavor when it agreed to apply deck coating on exterior balconies at the Fowler
Apartments. The Supreme Court of Ohio has held that there is no distinction between implied
warranty in tort and strict liability in tort. Chemtrol, 42 Ohio St.3d at 46. The aforementioned
policies set forth by Ohio courts underlying the products liability doctrine would not be advanced
by treating a commercial consumer such Thomarios as a noncommercial consumer. The
Supreme Court has noted that the “first and foremost objective of strict liability is to promote
public safety.” Queen City, 73 Ohio St.3d at 621. The foremost policy concern underlying the
strict liability doctrine is not an issue here. This case does not involve a situation where an
average customer was placed in physical danger due to the purchase of a defective product.
Rather, a commercial consumer purchased a product for use in a commercial context and
suffered purely economic losses. The second objective of products liability stems from a cost-
shifting rationale and recognizes that a manufacturer is in a better position to internalize the cost
of injuries than the general public. Id. In this case, the product was not purchased by a member
of the general public. On the contrary, the product was purchased by a commercial consumer
who was engaged in a profit-seeking endeavor. The third justification for strict liability is that
“proving negligence can be difficult and costly for the average consumer.” Id. Unlike the
average customer, Thomarios, as a commercial entity, is not in need of relief from the burdens of
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proving negligence. It is axiomatic that a commercial entity is presumed to have a higher degree
of legal sophistication than the average customer who purchases a product for noncommercial
use.
{¶16} Thus, while the relative bargaining power of a commercial consumer will vary
from case to case, the commercial consumer functions in a different capacity than the average
customer. The fact that Thomarios did not have an opportunity to negotiate the warranty and
product formulation of the Sonoguard does not mean that it was similarly situated as a member
of the general public making a purchase for personal use. As a commercial consumer,
Thomarios was presumably aware of the inherent risks involved in entering into a commercial
endeavor. By making the decision to engage in the commercial endeavor of applying the deck
coating at the Fowler apartments, Thomarios entered into an arrangement where Rasmussen
could specify the type of deck coating used for the project. As the policies underlying the strict
liability doctrine would not be served by allowing Thomarios to assert an implied warranty
claim, the trial court did not err in following Midwest Ford and granting BASF’s motion to
dismiss pursuant to Civ.R. 12(B)(6).
{¶17} The assignment of error is overruled.
III.
{¶18} Thomarios’ sole assignment of error is overruled. The judgment of the Summit
County Court of Common Pleas is affirmed.
Judgment affirmed.
There were reasonable grounds for this appeal.
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We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the
period for review shall begin to run. App.R. 22(E). The Clerk of the Court of Appeals is
instructed to mail a notice of entry of this judgment to the parties and to make a notation of the
mailing in the docket, pursuant to App.R. 30.
Costs taxed to Appellant.
DONNA J. CARR
FOR THE COURT
MOORE, J.
CONCURS IN JUDGMENT ONLY, SAYING:
{¶19} It seems as if Thomarios is in a proverbial Catch 22 position. It appears as if he
was directed by Rasmussen to use the deck coating manufactured by BASF. There is nothing in
the record to suggest that he had any choice in determining the coating or the manufacturer. He
was not in direct privity with BASF, because the deck coating was sold through a supplier.
Thomarios appears to have done everything according to specifications, yet when the product
failed, he was prevented from pursuing a claim for breach of implied warranty. The result seems
inequitable, notwithstanding the established precedent of the Ohio Supreme Court. As a result, I
concur in judgment only.
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BELFANCE, P. J.
CONCURS IN JUDGMENT ONLY, SAYING:
{¶20} I reluctantly concur in the judgment based upon this Court’s precedent in Midwest
Ford, Inc. v. C.T. Taylor Co., Inc. (1997), 118 Ohio App.3d 798. Nonetheless, if I were writing
without regard to stare decisis, I would sustain Thomarios’ assignment of error. I see no logical
reason to treat Thomarios, who acted just like a consumer, differently than non-commercial
consumers. In this era of mega stores, businesses resemble consumers. Just as the average
consumer, businesses do not have privity of contract with the manufacturer of a product, but
purchase products through intermediaries. To say that Thomarios had some heightened
bargaining power due its commercial status when buying a brand name product which he was
specifically instructed to purchase from a large retail store seems disingenuous at best.
{¶21} Further, while the Supreme Court’s implied warranty cases involving parties not
in privity have involved a non-commercial party as the plaintiff, the Supreme Court of Ohio has
never emphasized this fact or limited its holdings only to non-commercial plaintiffs. See, e.g.
Chemtrol Adhesives, Inc. v. Am. Mfrs. Mut. Ins. Co. 1989, 42 Ohio St.3d 40, 49 (“Inglis and
Iacono stand for the proposition that in Ohio an action in tort for breach of express or implied
warranty, or an action in strict liability, may be maintained for purely economic loss. However,
notably absent from these cases is the element of privity of contract between the injured plaintiff
and the manufacturer-defendant.”); LaPuma v. Collinwood Concrete (1996), 75 Ohio St.3d 64,
67. Moreover, while the Supreme Court of Ohio has cited Spring Motors Distribs., Inc. v. Ford
Motor Co. (1985), 98 N.J. 555, with approval, it has never abandoned its holdings in Iacono v.
Anderson Concrete Corp. (1975), 42 Ohio St.2d 88 or LaPuma. See Chemtrol Adhesives, Inc.,
42 Ohio St.3d at 43. Furthermore, in Chemtrol, the Supreme Court also observed that the
doctrine of implied warranty is to protect consumers who are not in privity of contract and it did
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not make any distinction between a commercial or noncommercial consumer. Chemtrol
Adhesives, Inc. 42 Ohio St.3d at 49. The holdings of Iacono, LaPuma and Chemtrol do not
prohibit a commercial consumer’s recovery in tort under an implied warranty theory where
privity is absent. Thus, I believe Midwest Ford, Inc., which did just that, Midwest Ford, Inc.,
118 Ohio App.3d at 801, was wrongly decided. Accordingly, absent our precedent in Midwest
Ford, Inc., I would conclude that Thomarios has the same right to recover under an implied
warranty claim as a non-commercial consumer.
APPEARANCES:
JAMES J. COLLUM , Attorney at Law, for Appellant.
JAMES T. DIXON, NORA LOFTUS, and FRANTZ WARD, Attorneys at Law, for Appellee.