Smith v. Sack , 2016 Ohio 763 ( 2016 )

[Cite as Smith v. Sack, 2016-Ohio-763.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
LAKE COUNTY, OHIO
ROBERT K. SMITH, : OPINION
Plaintiff-Appellee, :
CASE NO. 2015-L-081
- vs - :
JARED SACK, d.b.a. J.S. HARDSCAPES, :
Defendant-Appellant. :
Civil Appeal from the Lake County Court of Common Pleas, Case No. 14 CV 001139.
Judgment: Affirmed.
George L. Badovick, 13033 Ravenna Road, Chardon, OH 44024 (For Plaintiff-
Appellee).
Katherine S. Riedel, Law Offices of Katherine S. Riedel Co., L.P.A., Jefferson
Commercial Park, 1484 State Route 46 North, No. 5, Jefferson, OH 44047 (For
Defendant-Appellant).
CYNTHIA WESTCOTT RICE, J.
{¶1} Appellant, Jared Sack, dba J.S. Hardscapes, appeals the judgment of the
Lake County Court of Common Pleas awarding appellee, Robert K. Smith, a refund
under the Ohio Home Solicitation Sales Act (“HSSA”) of the money he paid to appellant
in connection with a home improvement project. At issue is whether the trial court erred
in finding that Mr. Smith was entitled to a refund under the HSSA. For the reasons that
follow, the judgment is affirmed.
{¶2} The statement of facts that follows is based on the evidence submitted on
summary judgment and presented at the damages hearing following the trial court’s
entry of summary judgment on the issue of liability in favor of Mr. Smith. Between
October 20, 2010 and August 16, 2013, the parties entered into a series of four
contracts for appellant to construct and install a stone patio behind Mr. Smith’s
residence, stone retaining walls surrounding the patio, and a detached stone wall along
the southern boundary of Mr. Smith’s property. The four contracts were part of one
integrated project, which was completed in four stages.
{¶3} The four contracts were evidenced by four invoices, one for each of the
four stages of the project. Upon completion of each stage, appellant submitted an
invoice to Mr. Smith. Appellant submitted to Mr. Smith the first three invoices on
October 20, 2010; April 25, 2011; and May 26, 2011, and Mr. Smith promptly paid each
in full, totaling $50,794.
{¶4} The final stage of the project was completed in August 2013. On August
16, 2013, appellant submitted the fourth and final invoice to Mr. Smith for labor and
materials in the amount of $9,427. Mr. Smith paid $2,000 of this invoice on October 10,
2013, but refused to pay the balance due to problems with appellant’s work. The
retaining wall surrounding the patio was built in two sections, a lower retaining wall and
an upper retaining wall. The upper wall was recessed by about one foot and a rock
garden was installed in the recessed area between the two levels. After the patio was
completed, part of the upper retaining wall came apart and fell to the ground. The lower
and upper retaining walls and piers facing the backyard pulled away from the patio;
were leaning outward; and pulled the patio floor out with them. Further, the lower wall
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facing the backyard, which was about 20 feet long, was bowed in the middle along the
entire length of the wall. Due to the foregoing defects, Mr. Smith testified that the patio
was “not useable.” Appellant’s efforts to repair the defects were unsuccessful.
{¶5} On June 4, 2014, Mr. Smith filed this action against appellant, alleging
breach of contract, a violation of the Ohio Consumer Sales Practices Act (“CSPA”), and
a violation of the Ohio Home Solicitation Sales Act (“HSSA”). Mr. Smith alleged that the
transaction was a “home solicitation sale” as defined in the HSSA and that appellant
failed to provide a notice of cancellation as required by the act.
{¶6} Appellant filed an answer and counterclaim for the remaining balance
allegedly owed on the fourth contract in the amount of $7,427.
{¶7} Eight months after Mr. Smith filed the complaint, on February 10, 2015,
appellant provided Mr. Smith with four notices of cancellation, one for each contract. As
required by the HSSA, each notice provided that if Mr. Smith cancelled the contract
within the allotted time (three days), all the money he paid would be refunded to him.
Mr. Smith signed all four cancellation notices and timely mailed them to appellant on
February 12, 2015. However, appellant did not refund any of the money Mr. Smith paid
under the contracts.
{¶8} Mr. Smith filed a motion for summary judgment on his complaint and on
appellant’s counterclaim. Mr. Smith argued that since he cancelled the contracts, there
was no balance owed to appellant on the fourth contract, thus negating his
counterclaim. Further, Mr. Smith argued that after the contracts were cancelled,
appellant was required by the HSSA to return the purchase price within ten days of the
cancellations. Mr. Smith argued that since appellant failed to return the purchase price
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or to restore the property to its original condition, he was entitled to the damages
provided for in the CSPA and the HSSA.
{¶9} In appellant’s brief in opposition, he conceded that Mr. Smith timely
cancelled the contracts, but argued that the court should exercise its discretion in
making an equitable determination of damages.
{¶10} On June 11, 2015, the trial court granted Mr. Smith’s motion for summary
judgment on the issue of liability. The court noted the parties agree that the HSSA
applies to this case and that the contracts were properly and timely cancelled by Mr.
Smith. The court found that under the HSSA, appellant was not permitted to begin work
during the time Mr. Smith was permitted to cancel. The court noted that under the act,
the three-day cancellation period does not begin to run until notice of cancellation has
been provided by the seller. The court found that since appellant began and completed
the project before the cancellation period expired, he bore the risk that the contracts
could be cancelled. The court found that because Mr. Smith timely cancelled the
contracts, he was entitled to summary judgment on his HSSA claim.
{¶11} The court noted that the complaint also included a claim under the CSPA,
but found that Mr. Smith could not recover under both the CSPA and the HSSA
because they are mutually exclusive. The court found that since Mr. Smith cancelled
the contracts, he had elected to proceed under the HSSA to recover a refund of the
amount he paid and, thus, he was not entitled to any damages under the CSPA.
{¶12} The court also entered summary judgment in favor of Mr. Smith on
appellant’s counterclaim, finding that because Mr. Smith properly cancelled the
contracts, there was no balance owed to appellant.
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{¶13} Although the parties do not address the issue, we note the court did not
expressly dispose of Mr. Smiths’ breach-of-contract claim. However, because the court
found, based on the undisputed evidence, that Mr. Smith cancelled the contracts, the
court implicitly dismissed that claim because with no contracts, there could be no
breach. The court thus disposed of all claims and appellant’s counterclaim.
{¶14} In addition, the court scheduled a hearing to determine the appropriate
amount of damages to be awarded to Mr. Smith.
{¶15} The court held a damages hearing at which both parties presented
evidence and argument. Mr. Smith argued that because the trial court found he
properly cancelled all four contracts, pursuant to the HSSA, he was entitled to a refund
of all monies paid under the contracts, i.e., $52,794. In opposition, appellant argued
that only one area of the project had damage, i.e., the upper retaining wall. He thus
argued that awarding Mr. Smith a full refund would unjustly enrich him, and asked the
court to instead make an equitable determination of damages.
{¶16} On June 23, 2015, the trial court entered final judgment, awarding Mr.
Smith a full refund of his payment of the October 20, 2010 invoice ($12,650); the May
26, 2011 invoice ($710); and the $2,000 he paid on the August 16, 2013 invoice. The
court also awarded Mr. Smith a partial refund on the April 25, 2011 invoice ($22,692),
but excluded the cost of the detached wall along the southern boundary of the property
($14,742) from the refund because Mr. Smith admitted there was no problem with that
wall. The court thus awarded Mr. Smith a refund in the total amount of $38,052.
{¶17} Appellant appeals the trial court’s judgment, asserting the following for his
sole assignment of error:
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{¶18} “THE TRIAL COURT’S AWARD IN FAVOR OF APPELLEE WAS
AGAINST THE MANIFEST WEIGHT OF THE EVIDENCE AND CONTRARY TO LAW.”
{¶19} As a preliminary matter, we note that appellant does not challenge the trial
court’s June 11, 2015 summary judgment on the issue of liability against him and in
favor of Mr. Smith. Further, appellant concedes that the HSSA applies to this case and
that Mr. Smith timely cancelled the contracts. Rather, appellant argues that once the
trial court set this matter for a “damages” hearing, Mr. Smith was no longer entitled to a
refund and his only available remedy was damages. He further argues that because
Mr. Smith did not prove he sustained damages as a result of appellant’s work, the trial
court erred in awarding him any damages.
{¶20} In opposition, Mr. Smith argues that he was not required to prove
damages. Instead, he argues that, because he timely cancelled the parties’ contracts,
under the HSSA, he was entitled to a refund of all the money he paid to appellant under
the contracts, and the act did not require him to prove damages.
{¶21} The determination of the available remedies under Ohio’s consumer
protection statutes involves statutory construction, which is a question of law that we
review de novo. Beaumont v. Kvaerner N. Am. Constr., 11th Dist. Trumbull No. 2013-T-
0047, 2013-Ohio-5847, ¶8.
{¶22} “The HSSA seeks to decrease high-pressure sales tactics that are
sometimes employed during in-home solicitations by providing consumers with a
cooling-off period within which the transaction may be cancelled.” Garber v. STS
Concrete Co., L.L.C., 8th Dist. Cuyahoga No. 99139, 2013-Ohio-2700, ¶12. The HSSA
applies to “home solicitation sales,” which are defined as “a sale of consumer goods or
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services in which the seller * * * engages in a personal solicitation of the sale at a
residence of the buyer * * * and the buyer’s agreement * * * to purchase is there given to
the seller * * *.” R.C. 1345.21(A).
{¶23} This court has held that “home improvement contracts generally fall within
the purview of the HSSA.” Kamposek v. Johnson, 11th Dist. Lake No. 2003-L-124,
2005-Ohio-344, ¶17. Under the HSSA, each home solicitation sale must include a
written agreement in which the seller must give the buyer notice of the buyer’s right to
cancel the sale within three business days. Garber, supra, at ¶18, citing R.C. 1345.22
and R.C. 1345.23. If the agreement does not include notice of the buyer’s right to
cancel, the buyer’s right to cancel does not expire, and the three-day period for
cancellation does not begin to run until the seller gives the buyer notice of the right to
cancel. Kamposek, supra, at ¶24, citing R.C. 1345.23(C). Thus, under the HSSA, “the
buyer has the right to cancel the contract until three days after the seller provides notice
of the buyer’s right to cancel.” Kamposek, supra, at ¶27. If the buyer exercises his
right to cancel the sale, the seller must “refund all payments made under the contract of
sale.” R.C. 1345.23(D)(4)(a). The buyer’s remedy under the HSSA is limited to a
refund; unlike the CSPA, there is no provision for damages in the HSSA. R.C.
1345.23(D); R.C. 1345.09.
{¶24} Further, the seller under a home solicitation sales contract is not permitted
to begin performance of the contract until the three-day period for the buyer to cancel
has expired. R.C. 1345.22. “This provision has been interpreted to put the risk of loss
on the seller if performance is begun prior to expiration of the buyer’s right to cancel.”
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Kamposek, supra, at ¶25, citing Clemens v. Duwel, 100 Ohio App.3d 423, 432 (2d
Dist.1995).
{¶25} Under appellant’s assignment of error, he raises three issues. Because
the first and third issues are essentially the same, they are considered together.
Appellant argues that because the trial court set the matter for a “damages hearing,”
this meant that Mr. Smith was no longer entitled to any refund, but, rather, was entitled
only to damages upon proof of his damages. Appellant argues the trial court erred in
awarding Mr. Smith any damages because he was required, but failed, to present any
evidence of damages. However, the trial court did not award Mr. Smith any damages,
but, rather, awarded him a refund. In any event, appellant fails to cite any pertinent
case or statutory law supporting this argument. He also ignores the relevant sections of
the HSSA and the well-settled case law, which compel the opposite result.
{¶26} While a consumer can assert CSPA and HSSA violations in a complaint
as alternative theories, before trial “[a] consumer must elect which remedy to base
recovery on because the consumer cannot recover under both [the HSSA] and [the
CSPA].” Garber, supra, at ¶23; White v. Allstate Ins. Co., 8th Dist. Cuyahoga No.
92648, 2009-Ohio-5829, ¶14. This is because the remedies provided for in these two
statutes are mutually exclusive. Garber, supra. Where the buyer elects to cancel the
contract under the HSSA, he is entitled to the refund of payments made under the
contract. Id. at ¶25. This election of remedies precludes the buyer from arguing for
damages under the CSPA in addition to the contract price. Id.
{¶27} Because Mr. Smith canceled the contracts, he elected to proceed under
the HSSA. As such, his remedy was limited to a refund and he was not entitled to
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damages under the CSPA.1 Since Mr. Smith could not recover damages, he was not
required to prove them.
{¶28} Contrary to appellant’s argument, in referring to the upcoming hearing in
the court’s summary judgment as a “damages hearing,” the court did not state or even
suggest that damages were available to Mr. Smith. To the contrary, the term “damages
hearing” was simply used by the court to notify the parties that the court would
determine the amount of Mr. Smith’s award at the hearing. With respect to the specific
remedy the court would be considering, the trial court stated: “As Plaintiff has canceled
the contracts, Plaintiff has elected to proceed under the HSSA and is not entitled to any
damages under the CSPA.” (Emphasis added.) This entry made it clear that the court
would not be considering damages, but, rather, would be determining the amount of the
refund, the only available remedy under the HSSA. Moreover, in the final judgment, the
court determined the amount of Mr. Smith’s “refund,” and did not award him any
damages. Thus, contrary to appellant’s argument, the fact that the court referred to the
hearing as a damages hearing had no legal significance, and did not transform Mr.
Smith’s claim for a refund into one for damages.
{¶29} The Eighth District’s holding in White, supra, supports this court’s holding.
In White, the trial court entered summary judgment on the issue of liability in favor of the
plaintiff on his HSSA claim. The trial court later held a hearing on the issue of damages.
The plaintiff conceded he had elected to cancel the contract under the HSSA, but also
attempted to pursue damages under the CSPA. The trial court found the plaintiff was
1. Under the CSPA, the consumer may seek to recover three times the amount of his actual economic
damages. Actual economic damages is not limited to the price paid under the contract, but, rather,
includes damages for direct, incidental, or consequential pecuniary losses resulting from a violation of the
CSPA. R.C. 1345.09(G); Garber, supra, at ¶21.
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not entitled to damages. The plaintiff appealed. The Eighth District affirmed, holding:
“Having chosen to cancel the contract under the HSSA, [the plaintiff] could not pursue
damages under the CSPA.” White, supra, at ¶15. Thus, although the trial court in
White, supra, held a “damages hearing” after entering summary judgment, the Eighth
District held that because the plaintiff cancelled the contract, he was only entitled to a
refund, not damages. Id. at ¶17.
{¶30} We therefore hold the trial court did not err in awarding Mr. Smith a refund
under the HSSA without requiring him to prove damages.
{¶31} For appellant’s second and final issue, he argues the trial court erred in
awarding Mr. Smith damages for the patio steps. However, as noted above, the trial
court did not award any damages to Mr. Smith, but, rather, did not reduce Mr. Smith’s
refund by the cost of the patio steps.
{¶32} A brief discussion of the legal principles concerning a buyer’s right to a
refund under the HSSA is in order.
{¶33} Initially, we note the HSSA does not contain a “substantial performance”
exception to the buyer’s right to a full refund. Kamposek, supra, at ¶31. Further, the
HSSA does not require the refund owed to the buyer to be offset by the benefit
conferred on the buyer by the seller under an unjust-enrichment theory. Id.
{¶34} Further, if the items sold under the home solicitation sales contract were
goods, they would have to be returned to the seller. Id. at ¶32, citing R.C. 1345.27. In
contrast, because the contracts at issue here were home improvement contracts, and,
thus, service contracts, appellant bore the risk of starting the project before the
cancellation period expired, and Mr. Smith was not responsible for returning the
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materials used in the project, such as cement, or for paying appellant for their value.
Kamposek, supra, at ¶3, 32; Garber, supra, at ¶16; Clemens, supra, at 431.
{¶35} However, this court has stated that, “where a buyer enters into a contract
solely to take advantage of the seller’s possible failure to provide notice of the right to
cancel” and thus uses the HSSA as a “sword” rather than a “shield,” as the act was
intended, the trial court has the discretion to make an equitable determination of
damages. Kamposek, supra, at ¶33. “Thus, we will not disturb the trial court’s
determination absent an abuse of discretion.” White, supra, at ¶17. This court has
stated that the term “abuse of discretion” is one of art, connoting judgment exercised by
a court, which does not comport with reason or the record. Gaul v. Gaul, 11th Dist.
Ashtabula No. 2009-A-0011, 2010-Ohio-2156, ¶24.
{¶36} Appellant concedes that the trial court properly exercised its discretion by
subtracting from Mr. Smith’s refund the amount he paid for the wall along the southern
boundary of his property because, as Mr. Smith testified, he had no problem with that
wall. As a result, the court found that, with respect to the detached wall, because Mr.
Smith included $14,742, the cost of the wall, in his request for a refund, Mr. Smith used
the HSSA as a sword rather than as a shield, and the court reduced the amount of Mr.
Smith’s refund by $14,742.
{¶37} However, appellant argues that the trial court erred in not further reducing
Mr. Smith’s refund by the cost of the patio steps because Mr. Smith did not identify any
specific problem with the steps. We note that appellant does not say what that cost
was, and the cost is not clarified by a review of the invoices. In any event, in order for
the court to be authorized to exclude the cost of the steps from the refund, the court
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would have had to find that Mr. Smith used the HSSA as a sword rather than a shield
with respect to the cost of the steps. The court did not make such a finding for the
reasons that follow, which are obvious from the record.
{¶38} Appellant admits in his brief that the steps were part of the patio. Mr.
Smith testified that virtually every part of the patio failed, making the patio unusuble.
For example, a corner section of the upper wall came apart and fell over. The upper
and lower retaining walls and piers pulled away and are leaning outward with various
degrees of lean. The patio pavers were pulled away from the house by the retaining
walls, leaving large gaps between the pavers. Since the patio was useless and the
steps were part of the patio, the steps were also useless.
{¶39} We therefore hold the trial court did not abuse its discretion by not
reducing Mr. Smith’s refund by the amount he paid for the patio steps.
{¶40} For the reasons stated in this opinion, the assignment of error lacks merit
and is overruled. It is the order and judgment of this court that the judgment of the Lake
County Court of Common Pleas is affirmed.
TIMOTHY P. CANNON, J.,
COLLEEN MARY O’TOOLE, J.,
concur.
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