DeFoe v. Schoen Builders, L.L.C. , 2019 Ohio 2255 ( 2019 )

[Cite as DeFoe v. Schoen Builders, L.L.C., 2019-Ohio-2255.]
IN THE COURT OF APPEALS OF OHIO
SIXTH APPELLATE DISTRICT
WOOD COUNTY
John DeFoe, et al. Court of Appeals No. WD-18-031
Appellants Trial Court No. 2015CV0475
v.
Schoen Builders, LLC, et al. DECISION AND JUDGMENT
Appellees Decided: June 7, 2019
*****
James P. Sammon, for appellants.
Shannon J. George and John J. McHugh, for appellees.
*****
SINGER, J.
{¶ 1} This case is before the court on the appeal of appellants, John DeFoe and
Jodie DeFoe, from the February 20, 2018 judgment of the Wood County Court of
Common Pleas granting summary judgment to appellees, Schoen Builders, LLC (“SB”)
and Aaron Schoen (“Schoen”), on most of appellants’ claims. For the reasons that
follow, we reverse, in part, and affirm, in part, the trial court’s judgment.
Appellants’ Assignment of Error
The Trial Court erred in denying Appellants/Plaintiffs’ Motion for
Reconsideration and affirming its decision granting summary judgment to
Defendants/Appellees because there was no genuine issue of material fact
as to Counts I-V and Counts VII-VIII.
Relevant Background Facts and Procedural History
{¶ 2} This case involves a dispute between appellants, who are husband and wife,
and appellees, Schoen and SB.
{¶ 3} On January 18, 2013, appellants entered into a Standard Building Contract
(“the contract”) with SB, for the construction of a custom home (“the home”) for
appellants by SB. The contract provided the home would be completed no later than
October 24, 2013, for an all-in price of $623,317. Appellants moved into the home in
April 2014, and paid over $1.3 million for the home.
{¶ 4} On September 1, 2015, appellants filed their complaint. On October 9,
2015, appellants filed a nine-count amended complaint against appellees.1 In the
amended complaint, appellants alleged: (Count 1) breach of contract against SB; (Count
2) the contract should be rescinded; (Count 3) negligence by SB; (Count 4) breach of
warranty by SB; (Count 5) breach of warranties/breach of duty to perform in a
workmanlike manner by SB; (Count 6) violations of the Consumer Sales Practices Act
1
Additional parties were named in the amended complaint and other claims were alleged,
but those parties and allegations are not before us.
2.
(“CSPA”) by Schoen; (Count 7) fraudulent misrepresentation by Schoen; (Count 8) fraud
against Schoen; and (Count 9) negligent infliction of emotional distress (“NIED”) by
appellees.
{¶ 5} Appellees filed an answer to the amended complaint as well as
counterclaims against appellants. Appellees also filed third-party complaints against
numerous parties.2
{¶ 6} On June 1, 2017, appellees moved for summary judgment on all counts of
the amended complaint. Appellants filed a response on June 27, 2017. On February 20,
2018, the trial court granted summary judgment to appellees on all of the counts except
Count 6, CSPA, and Count 9, NIED.
{¶ 7} On February 22, 2018, Schoen filed a motion to dismiss, with prejudice, the
CSPA count for lack of standing. Schoen claimed the contract involved a home
construction service contract, as defined under R.C. 4722.01, which was not a consumer
transaction as defined in R.C. 1345.01(A) of the CSPA.
{¶ 8} On March 6, 2018, appellants filed a reply to the motion to dismiss, which
included a motion to amend the complaint to allow appellants to bring actions under R.C.
4722.01 et seq., and a motion for reconsideration of the court’s ruling granting summary
judgment to appellees on Counts 1 through 5 of the amended complaint.
2
All of these claims were settled, dismissed or otherwise disposed of by appellees, and
are not relevant to this appeal.
3.
{¶ 9} On March 15, 2018, the trial court granted Schoen’s motion to dismiss the
CSPA count, but allowed appellants seven days to file a motion to amend to assert a
claim under R.C. Chapter 4722, and denied the motion for reconsideration.
{¶ 10} On March 16, 2018, appellants filed a “Notice of Voluntary Dismissal of
Remaining Claims in Amended Complaint,” dismissing, without prejudice, Count 9
(NIED) of the amended complaint, and moving the court for an order, pursuant to Civ.R.
54(B), to enter a final judgment on all issues.
{¶ 11} Also on March 16, 2018, appellees filed a notice of voluntary dismissal,
without prejudice, of their counterclaims against appellants.
{¶ 12} On April 4, 2018, the court entered a final judgment finding no just reason
for delay, as all claims and issues were dismissed or adjudicated. Appellants appealed
the February 20, 2018 judgment granting summary judgment to appellees on Counts 1
through 5, 7 and 8 of the amended complaint.3
Final Appealable Order
{¶ 13} Appellees contend appellants did not appeal from a final, appealable order,
despite the Civ.R. 54(B) language in the April 4, 2018 final judgment. In support,
appellees cite to Pattison v. W.W. Grainger, Inc., 120 Ohio St. 3d 142, 2008-Ohio-5276,
897 N.E.2d 126, ¶ 1, where the Supreme Court of Ohio held:
3
Appellants did not appeal the trial court’s March 15, 2018 judgment granting Schoen’s
motion to dismiss Count 6, the CSPA count.
4.
when a plaintiff has asserted multiple claims against one defendant, and
some of those claims have been ruled upon but not converted into a final
order through Civ.R. 54(B), the plaintiff may not create a final order by
voluntarily dismissing pursuant to Civ.R. 41(A) the remaining claims
against the same defendant.
{¶ 14} Courts of appeals have jurisdiction to “affirm, modify, or reverse
judgments or final orders of the courts of record inferior to the court of appeals within the
district.” Ohio Constitution, Article IV, Section 3(B)(2). Therefore, “an order must be
final before it can be reviewed by an appellate court. If an order is not final, then an
appellate court has no jurisdiction.” Gen. Acc. Ins. Co. v. Ins. Co. of N. Am., 44 Ohio
St.3d 17, 20, 540 N.E.2d 266 (1989).
{¶ 15} “An order of a court is a final, appealable order only if the requirements of
both Civ.R. 54(B), if applicable, and R.C. 2505.02 are met.” Chef Italiano Corp. v. Kent
State Univ., 44 Ohio St. 3d 86, 541 N.E.2d 64 (1989), syllabus. When determining
whether a judgment is final, the appellate court must engage in a two-step analysis. Gen.
Acc. Ins. Co. at 21. First, the court must determine if the order is final within the
requirements of R.C. 2505.02. Id. If the order complies with R.C. 2505.02 and is final,
the court must then decide if Civ.R. 54(B) language is necessary. Id.
{¶ 16} R.C. 2505.02(B)(1) provides in relevant part that an order is final if it
“affects a substantial right in an action that in effect determines the action and prevents a
judgment.” A substantial right is “a right that the United States Constitution, the Ohio
5.
Constitution, a statute, the common law, or a rule of procedure entitles a person to
enforce or protect.” R.C. 2505.02(A)(1). “A court order which deprives a person of a
remedy which he would otherwise possess deprives that person of a substantial right.”
Chef Italiano at 88. A party’s right to enforcement and performance of a contract
involves a substantial right. Niehaus v. Columbus Maennerchor, 10th Dist. Franklin No.
07AP-1024, 2008-Ohio-4067, ¶ 19.
{¶ 17} Civ.R. 54(B) states “[w]hen more than one claim for relief is presented in
an action * * * or when multiple parties are involved, the court may enter final judgment
as to one or more but fewer than all of the claims or parties only upon an express
determination that there is no just reason for delay.”
Analysis
{¶ 18} The trial court granted summary judgment to appellees on Counts 1
through 5, 7 and 8 of the amended complaint, then granted appellees’ motion to dismiss
Count 6. Thereafter, appellants filed a notice of voluntary dismissal of their remaining
claim, Count 9, and appellees voluntarily dismissed their counterclaims. The court then
issued a final judgment finding no just reason for delay. Appellants appealed.
{¶ 19} At the outset, we find appellants’ notice of voluntary dismissal of Count 9
of the amended complaint was improper in light of the ruling in Pattison, 120 Ohio St. 3d
142, 2008-Ohio-5276, 897 N.E.2d 126. Thus, Count 9 remains pending before the trial
court. See Ningard v. Shin Etsu Silicones, 9th Dist. Summit No. 24524, 2009-Ohio-3171,
¶ 6-7.
6.
{¶ 20} As to whether we have jurisdiction to hear this appeal, we find the trial
court’s February 20, 2018 judgment, granting summary judgment to appellees on Counts
1-5, 7 and 8 of the amended complaint, affected appellants’ substantial rights as the
judgment deprived them of remedies they would otherwise possess. We therefore find
this judgment complies with R.C. 2505.02, and is a final order.
{¶ 21} Next, we must determine if Civ.R. 54(B) applies, and if so, if its
requirements were met. In the trial court’s April 4, 2018 judgment, the court found “the
multiple claims and issues set forth by the parties have been dismissed and/or
adjudicated. The Court further finds that there is no just reason for delay.” We note
Civ.R. 54(B) language is not necessary in a judgment entry to make that order final and
appealable when no claims remain pending before the trial court. However, since we
determined appellants’ dismissal of Count 9 of the amended complaint was improper and
that claim remains pending before the trial court, we find Civ.R. 54(B) applies. We
further find the trial court’s determination that there was no just reason for delay was
correct, albeit for the wrong reason. See Reynolds v. Budzik, 134 Ohio App. 3d 844, 846,
732 N.E.2d 485 (6th Dist.1999), fn. 3, citing Agricultural Ins. Co. v. Constantine, 144
Ohio St. 275, 284, 58 N.E.2d 658 (1944) (a decision which achieves the correct result
must be followed, even if the wrong reasoning or basis is used to justify the decision).
We therefore find the trial court complied with Civ.R. 54(B).
{¶ 22} Accordingly, we conclude there is a final judgment and we have
jurisdiction to hear this appeal. See Foley v. Empire Die Casting Co., 9th Dist. Summit
7.
No. 24558, 2009-Ohio-5539, ¶ 4 (although a count of the complaint remained pending,
the trial court’s judgment included the requisite language pursuant to Civ.R. 54(B) to
confer jurisdiction on the appellate court jurisdiction to consider the merits of the appeal);
Rutledge v. Lilley, 9th Dist. Lorain No. 09CA009691, 2010-Ohio-2275, ¶ 3, fn. 1 (the
purported dismissal was ineffective, but because the trial court included Civ.R. 54(B)
language in its order, the pending claims do not deprive the appellate court of
jurisdiction).
Appellants’ Assignment of Error
{¶ 23} We will first address appellants’ assignment of error with respect to the
trial court’s decision to grant summary judgment to appellees on Counts 1 through 5, 7
and 8 of the amended complaint. Some counts will be analyzed together, and some
counts will be reviewed out of order.
Standard
{¶ 24} We review a summary judgment decision on a de novo basis. Grafton v.
Ohio Edison Co., 77 Ohio St. 3d 102, 105, 671 N.E.2d 241 (1996). Thus, we undertake
our own independent examination of the record and make our own decision as to whether
the moving party is entitled to summary judgment. Dupler v. Mansfield Journal, 64 Ohio
St.2d 116, 119-120, 413 N.E.2d 1187 (1980).
{¶ 25} Summary judgment is appropriate when (1) no genuine issue as to any
material fact exists, (2) the party moving for summary judgment is entitled to judgment
as a matter of law, and (3) viewing the evidence most strongly in favor of the nonmoving
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party, reasonable minds can reach only one conclusion, and that is adverse to the
nonmoving party. Civ.R. 56; Harless v. Willis Day Warehousing Co., 54 Ohio St. 2d 64,
66, 375 N.E.2d 46 (1978).
{¶ 26} “The moving party bears the initial responsibility of informing the trial
court of the basis for the motion, and identifying those portions of the record before the
trial court which demonstrate the absence of a genuine issue of fact on a material element
of the nonmoving party’s claim.” Dresher v. Burt, 75 Ohio St. 3d 280, 292, 662 N.E.2d
264, (1996). In addition, “summary judgment may be rendered where the pleadings and
the arguments of the party seeking summary judgment clearly establish that the
nonmoving party has no legally cognizable cause of action.” Id. at 297-298. “When a
motion for summary judgment is made and supported as provided in this rule, an adverse
party may not rest upon the mere allegations or denials of the party’s pleadings.” Civ.R.
56(E).
Count 1—Breach of Contract, Count 4—Breach of Warranty
{¶ 27} In Count 1 of the amended complaint, appellants alleged they had a binding
agreement with SB which required SB to “perform the work according to the
specifications identified” by appellants, and SB failed to meet its contractual obligations.
{¶ 28} In Count 4, appellants alleged they “notified Schoen of the multiple
problems with the Construction * * * and indicated that much of the repairs would fall
under the warranty issued to them by Schoen Builders.” Appellants alleged SB refused
9.
to repair the major items and such refusal is a breach of the warranty issued to appellants
by SB.
Law
{¶ 29} To constitute a valid contract, there must be a meeting of the minds of the
parties, there must be an offer by one party and an acceptance by the other party, and the
contract must be supported by consideration. Mike McGarry & Sons, Inc. v. Constr.
Resources One, LLC, 2018-Ohio-528, 107 N.E.3d 91, ¶ 90 (6th Dist.), citing Noroski v.
Fallet, 2 Ohio St. 3d 77, 442 N.E.2d 1302 (1982). Whether a contract exists is a question
of law. Motorists Mut. Ins. Co. v. Columbus Fin., Inc., 168 Ohio App. 3d 691, 2006-
Ohio-5090, 861 N.E.2d 605, ¶ 7 (10th Dist.).
{¶ 30} It is an elementary principle that any law relating to a contract which is in
existence at the time of the execution of the contract becomes a part of the contract.
Eastern Mach. Co. v. Peck, 161 Ohio St. 1, 6-7, 117 N.E.2d 593 (1954). It is also
“elementary that no valid contract may be made contrary to statute, and that valid,
applicable statutory provisions are parts of every contract.” Bell v. N. Ohio Tel. Co., 149
Ohio St. 157, 158, 78 N.E.2d 42 (1948).
{¶ 31} “In construing a written instrument, the primary and paramount objective is
to ascertain the intent of the parties so as to give effect to that intent.” Aultman Hosp.
Assn. v. Community Mut. Ins. Co., 46 Ohio St. 3d 51, 53, 544 N.E.2d 920 (1989). The
contract must be reviewed as a whole, and it is presumed that the intent of the parties is
reflected in the language of the contract. Id. Common words appearing in a contract will
10.
be given their ordinary meaning unless manifest absurdity would result, or unless some
other meaning is clearly evident from the face or contents of the contract. Alexander v.
Buckeye Pipeline Co., 53 Ohio St. 2d 241, 374 N.E.2d 146 (1978), paragraph two of the
syllabus. When terms of a contract are unambiguous, courts will not, in effect, create a
new contract by finding an intent not expressed in the clear language employed by the
parties. Shifrin v. Forest City Ent., Inc., 64 Ohio St. 3d 635, 597 N.E.2d 499 (1992),
syllabus. “If a contract is clear and unambiguous, then its interpretation is a matter of law
and there is no issue of fact to be determined.” Inland Refuse Transfer Co. v. Browning-
Ferris Industries of Ohio, Inc., 15 Ohio St. 3d 321, 322, 474 N.E.2d 271 (1984).
{¶ 32} The elements of a breach of contract action are “the existence of a contract,
performance by the plaintiff, breach by the defendant, and damage or loss to the
plaintiff.” (Citations omitted.) Firelands Regional Med. Ctr. v. Jeavons, 6th Dist. Erie
No. E-07-068, 2008-Ohio-5031, ¶ 19.
Arguments
{¶ 33} In their motion for summary judgment, appellees argued the contract
entered into between appellants and SB included paragraph 5, which is unambiguous, and
states:
5. Possession. Both Contractor and Owner agree that occupancy
shall be given Owner only upon, and not until payment of the total contract
price, plus all amounts due Contractor for all changes or additions, have
been paid to Contractor as provided for in paragraph 3.
11.
{¶ 34} Appellees asserted it was undisputed appellants took possession of the
home before making final payment to SB, which triggered paragraph 5 of the contract.
They maintained “[a] nearly identical contract term was previously addressed” in
Kott v. Gleneagles Professional Builders & Remodelers, Inc., 197 Ohio App. 3d 699,
2012-Ohio-287, 968 N.E.2d 593 (6th Dist.), where the court found “[p]ursuant to the
plain terms of the parties’ contracts, the act of occupancy prior to full payment constitutes
acceptance of the property and relieves [the Contractor] of further obligation.” Id. at
¶ 13. As a result, the contractor was entitled to judgment on the owner’s “breach of
contract claim as concerns any purported substandard material or workmanship.” Id.
Appellees submitted a similar result should be reached here, as appellants “are barred
from bringing a breach of contract claim against SB” and “any claims for breach of
warranty are likewise invalid,” so appellees were entitled to summary judgment on the
breach of contract and breach of warranty claims.
{¶ 35} In response, appellants countered the contract language is not clear and
unambiguous and the allegation that appellants “obtained ‘occupancy’ of the residence
subject to para. 5 of the contract belies the very facts of this case.” Appellants suggested
there exists a question of fact as to whether they “at this very moment – maintain legal
occupancy of the residence” because appellees failed to obtain anything other than a
temporary occupancy permit. Appellants contended any arguments by appellees as to
paragraph 5 “are null and void” as the contract terms “have yet to be fulfilled.”
Appellants further argued they “have provided evidence of a myriad of breaches” by
12.
appellees and “the evidence is clear that [appellees’] construction of the residence
contained numerous latent defects.”
{¶ 36} Appellants further asserted Kott is distinguishable and should not be
followed. Appellants argued that at the time they entered into the contract with SB, “the
interpretation set forth in Kott [was] no longer valid as the requirements of R.C. 4722.01,
et seq., * * * now dictate the parameters of a home construction service contract.”
Appellants contended appellees’ proposed action, under paragraph 5, is a violation of
R.C. 4722.03(A)(4). Appellants also claimed “[t]he parameters of R.C. 4722.08 allows
for this very cause of action to continue against [appellees] and summary judgment to be
denied * * * [as] R.C. 4722.08(F) specifically states that ‘Nothing in this section shall
preclude an owner from proceeding with a cause of action under any theory of law.’”
{¶ 37} In addition, appellants submitted the contract is unconscionable, and “[a]s
it relates to the ‘effect’ that this Court should give [appellants’] moving into the home
and then paying the final amount to [appellees],” it is procedurally unconscionable to
construe the contract terms to prohibit appellants from bringing a cause of action for
latent defects and other issues prior to making final payment. Appellants argued their
“situation represents a situation of procedural impossibility on behalf of [appellants]. In
April 2014, their home has taken almost six (6) months longer than contracted for and
they * * * literally have no place to go.” Appellants also maintained the contract terms
are not commercially reasonable.
13.
{¶ 38} In reply, appellees asserted the contract was clear and not unconscionable.
Appellees argued, with respect to R.C. 4722.03(A)(4), that appellants “failed to identify
any violations of R.C. Chapter 4722 in their Amended Complaint but still attempt to rely
on the language of the statute to avoid judgment. That notwithstanding, the performance
of the contract was not made contingent on [appellants] waiving their right to a warranty
for work performed.” Appellees further submitted “R.C. 4722.08 outlines remedies
available to owners for violations of the statute” and appellants’ “conclusion [concerning
R.C. 4722.08(F)] misinterprets that statute and does not impact the award of summary
judgment” because “the plain meaning * * * reveals * * * common law claims to proceed
in addition to any violations of the statute.”
Analysis
{¶ 39} We must first determine whether a valid, binding contract existed between
appellants and SB.
{¶ 40} The record shows appellants alleged, in their amended complaint, they had
a binding agreement with SB, and appellants attached a copy of the contract to the
amended complaint. Appellees, in their answer to the amended complaint, admitted
appellants “entered into a contract for construction of a new residence by [SB], but state
that the contract speaks for itself.” However, in their response to the motion for summary
judgment, appellants asserted, for the first time, that the contract was unconscionable.
Unconscionability of a contract is an affirmative defense. Busch, Inc. v. Bailey Dev.
Corp., 6th Dist. Lucas No. L-83-297, 1984 Ohio App. LEXIS 9011, at *11 (Feb. 3,
14.
1984). A party may not rebut a motion for summary judgment by raising a new
affirmative defense in its opposition to summary judgment. Stanwade Metal Prods. v.
Heintzelman, 158 Ohio App. 3d 228, 2004-Ohio-4196, 814 N.E.2d 572, ¶ 22 (11th Dist.).
See also Mills v. Whitehouse Trucking Co., 40 Ohio St. 2d 55, 320 N.E.2d 668 (1974),
syllabus. Affirmative defenses, other than those listed in Civ.R. 12(B), are waived if not
raised in the pleadings or in an amended pleading. Jim’s Steak House v. City of
Cleveland, 81 Ohio St. 3d 18, 20, 688 N.E.2d 506 (1998). Since appellants did not set
forth the affirmative defense of unconscionability in a pleading, the defense is waived
and will not be considered. We therefore find, based on the evidence in the record, a
valid, binding contract existed between appellants and SB.
{¶ 41} Next, we will address appellees’ argument that paragraph 5 of the contract
is unambiguous and appellants took possession of the home before making final payment.
Appellants countered that a question of fact exists as to whether they obtained occupancy
and “maintain legal occupancy of the residence.”
{¶ 42} Paragraph 5 provides in relevant part “[b]oth Contractor and Owner agree
that occupancy shall be given Owner only upon, and not until payment of the total
contract price.” And, “[t]aking possession of the above-described property by the Owner
prior to payment in full to the Contractor as aforesaid shall be complete acceptance by the
Owner without any further obligation * * * of the Contractor to give the warranty
provided for in paragraph 12.”
15.
{¶ 43} Upon review, the term “possession” is not defined in the contract, so we
look to the common meaning and usage. The dictionary definitions of “possession”
include “the act of having or taking into control” and “control or occupancy of property
without regard to ownership.” Merriam-Webster, https://www.merriam-webster.com/
dictionary/possession (accessed Apr. 1, 2019). We find “possession,” as used in the
context of paragraph 5, is unambiguous. The issue raised by appellants of whether they
obtained occupancy or maintain legal occupancy in the home does not render the term
“possession” ambiguous. Thus, when applying the common and ordinary definition of
“possession” to the record before us, we find appellants took possession of the home over
Easter weekend, in April 2014, when they moved their belongings and children into the
home to live. This finding comports with the allegation in appellants’ amended
complaint that “Schoen turned over possession of the home to [appellants] on April 18,
2014.” We further find appellants took possession of the home before they made their
final payment to SB on May 9, 2014.
{¶ 44} Last, we will consider appellees’ argument that appellants’ possession of
the home before final payment triggered paragraph 5 of the contract, which entitled
appellees to summary judgment on the breach of contract and warranty claims on the
authority of Kott, 197 Ohio App. 3d 699, 2012-Ohio-287, 968 N.E.2d 593. Appellants
countered Kott was no longer valid because R.C. 4722.01 et seq. applied. Appellants
claimed “[t]he very actions proposed by [appellees] in their Motion for Summary
Judgment – that their service contract (Para. 5) somehow limits or makes contingent
16.
[appellants’] ability to obtain services for warranty issues once they move into the home
would be an express violation of R.C. 4722.[03(A)(4)].”
{¶ 45} In Kott, the relevant clause of the contracts stated “[o]ccupancy of the
dwelling by the Owners prior to payment in full to the Contractor aforesaid shall
constitute complete acceptance by the Owners without any further obligation on the part
of the Contractor, except that the Owner and Contractor may agree to earlier occupancy.”
Id. at ¶ 12. The owner moved into the home in October 2007, but did not make the final
payment until February 2008. Id. at ¶ 13. The court held “[p]ursuant to the plain terms
of the parties’ contracts, the act of occupancy prior to full payment constitutes acceptance
of the property and relieves [the Contractor] of further obligation.” Id. The court found
the contractor was entitled to judgment on the owner’s “breach of contract claim as
concerns any purported substandard material or workmanship.” Id.
{¶ 46} R.C. 4722.03(A)(4) provides “[n]o home construction service supplier shall
do any of the following: * * * [m]ake the performance of any home construction service
contingent upon an owner’s waiver of any rights this chapter provides[.]”
{¶ 47} Upon review, Kott was decided in January 2012, R.C. Chapter 4722
became effective on August 31, 2012, and the contract was executed on January 18,
2013. We therefore find the applicable provisions of R.C. Chapter 4722 apply to the
parties’ contract. See Eastern Mach. Co., 161 Ohio St. at 6-7, 117 N.E.2d 593; Bell, 149
Ohio St. at 158, 78 N.E.2d 42. However, we find paragraph 5 of the contract does not
violate R.C. 4722.03(A)(4), as appellants have not identified any rights, under R.C.
17.
Chapter 4722, that they, as owners, must waive in order for SB, the supplier, to perform a
service. Likewise, we find the clause in Kott does not violate R.C. 4722.03(A)(4). Thus,
we find the holding in Kott remains valid.
{¶ 48} In Kott, the scope of the relevant clause is very broad (“occupancy * * *
prior to payment in full * * * shall constitute complete acceptance by the Owners without
any further obligation on the part of the Contractor”), whereas the scope of paragraph 5
of the contract is much more limited (“possession * * * prior to the payment in full * * *
shall be complete acceptance by the Owner without any further obligation on the part of
the Contractor to give the warranty provided for in paragraph 12.”). The warranty in
paragraph 12 states in relevant part: “[t]he Contractor shall repair or replace any
defective materials in accordance with the procedures outlined in the Toledo Home
Builders Standard Warranty.” Therefore, we find paragraph 5 of the contract precludes
any claim by appellants based on the warranty contained in paragraph 12 of the contract.
We note this interpretation of paragraph 5 is much narrower than that advanced by
appellees.
{¶ 49} With respect to appellants’ contention that R.C. 4722.08 allows their cause
of action to continue, R.C. 4722.08 states “[f]or a violation of Chapter 4722. of the
Revised Code, an owner has a cause of action and is entitled to relief as follows:
* * * (F) [n]othing in this section shall preclude an owner from ALSO proceeding with a
cause of action under any theory of law.” (Emphasis added.) We find the statute clearly
provides an owner with a cause of action for a violation of R.C. Chapter 4722, as well as
18.
a cause of action under any theory of law. We therefore find the language of the statute
does not support appellants’ interpretation. We further find appellants are not entitled to
the relief available under R.C. 4722.08, as they have not pled a cause of action for a
violation of R.C. Chapter 4722.
{¶ 50} Accordingly, we find appellees are entitled to summary judgment on
appellants’ breach of contract claim (Count 1) and breach of warranty claim (Count 4)
only to the extent those counts seek the remedies provided for in the warranty in
paragraph 12 of the contract, for appellees to repair or replace any defective materials.
Count 3—Negligence, Count 5—Breach of Warranties
{¶ 51} In Count 3, appellants alleged SB owed them a duty “to perform the
Construction with reasonable care and in accordance with generally acceptable
construction industry standards.” In Count 5, appellants alleged SB owed them a duty “to
construct their home in a workmanlike manner.”
{¶ 52} In their summary judgment motion, appellees argued paragraph 5 of the
contract also warrants summary judgment for them on Counts 3 and 5 as paragraph 5
states appellants “occupying the property prior to final payment constitutes ‘complete
acceptance’ and relieves [SB] of any further obligations to provide a warranty.”
Appellees asserted the plain language of paragraph 5 releases SB “from any further
obligations regarding its workmanship or the requirement to provide any warranty
repairs” to appellants. Appellees further argued “any claims for negligent workmanship
sound in negligence and must be treated as such. * * * Since [appellants] accepted the
19.
residence in its condition upon moving in as stated in the contract, any claims for
negligence are invalid against [appellees].” In support, appellees cited to Velotta v. Leo
Petronzio Landscaping, Inc., 69 Ohio St. 2d 376, 379, 433 N.E.2d 147 (1982).
{¶ 53} Appellants countered the professional engineering report of Larry Fast
includes “innumerable examples of the failure of [appellees] to perform to the standards
required – i.e., in a workmanlike manner * * * [and] reasonable minds could conclude the
implied duty was breached.” Appellants cite to numerous cases including Kishmarton v.
William Bailey Constr., Inc., 93 Ohio St. 3d 226, 754 N.E.2d 785 (2001) and Seff v.
Davis, 10th Dist. Franklin No. 03AP-159, 2003-Ohio-7029.
Law
{¶ 54} The Velotta case involved an action by an owner against a builder of an
already constructed residence for damages caused by the builder’s failure to construct the
residence in a workmanlike manner using ordinary care. Velotta at paragraph one of the
syllabus. By contrast, the court in Kishmarton held “[w]here the vendee [owner] and
builder-vendor enter into an agreement for the future construction of a residence, the
vendee’s claim for breach of an implied duty to construct the house in a workmanlike
manner arises ex contractu [out of the contract].” Id. at paragraph one of the syllabus.
“Workmanlike manner is a standard that requires a construction professional to act
reasonably and to exercise that degree of care which a member of the construction trade
in good standing in that community would exercise under the same or similar
circumstances.” Seff at ¶ 19.
20.
Analysis
{¶ 55} Upon review, appellees relied on the language of paragraph 5 of the
contract and the holding in Kott, in support of their motion for summary judgment on
appellants’ negligence and breach of warranties claims. We find this reliance inadequate
to sustain their burden of establishing that appellants have no legally cognizable claims
for negligence or breach of warranties to construct the home in a workmanlike manner.
Since appellees failed to prove they were entitled to judgment as a matter of law on these
counts, it was not necessary for appellants to offer evidence sufficient to present a
genuine issue of material fact, yet appellants did so.
{¶ 56} Accordingly, the trial court erred in granting summary judgment to
appellees on Counts 3 and 5 of the amended complaint.
Count 2—Rescission
{¶ 57} In Count 2, appellants alleged as a direct and proximate result of Schoen’s
poor workmanship and breach of contract, the home is not habitable and cannot be used
for its intended purpose. Appellants alleged they are entitled to rescind the contract with
Schoen.4
{¶ 58} In the motion for summary judgment, appellees argued appellants alleged
“they are entitled to rescission of the Contract with Schoen Builders.” Appellees
observed “[t]he sole basis identified by [appellants] for the right to rescind the contract
4
We note appellants entered into the contract with SB, not Schoen.
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* * * [are] allegations [that] constitute either a breach of contract claim or a negligence
claim for the failure to perform in a workmanlike manner. Neither of these claims are
valid.”
Law
{¶ 59} Rescission of a contract “‘amounts to the unmaking of a contract, an
undoing of it from the beginning, and not merely a termination * * *.’ Black[’]s Law
Dictionary (5 Ed. Rev. 1979), 1174.” Admiral Holdings, LLC v. Adamany, 8th Dist.
Cuyahoga No. 87870, 2006-Ohio-6945, ¶ 6. For a court to order the rescission of a
contract, the court must conclude a breach exists which is so substantial and fundamental
that it goes to the root of the contract. Id. “Generally, without fraud, duress, undue
influence, or mistake, one party to a contract cannot rescind or cancel it without the
consent of the other party.” Id.
Analysis
{¶ 60} Upon review, we find appellees’ argument, that they are entitled to
summary judgment because appellants’ claims for breach of contract and negligence for
the failure to perform in a workmanlike manner are not valid, is insufficient to sustain
their burden of establishing that appellants have no legally cognizable claim for
rescission. The argument presumes appellants’ breach of contract and negligence claims
are “not valid,” which is not accurate.
{¶ 61} As set forth above, we found the breach of contract claim (Count 1) was
“not valid” only to the extent that count seeks the remedies provided for in the warranty
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in paragraph 12 of the contract, for appellees to repair or replace any defective materials.
Thus, the breach of contract claim remains pending except as it pertains to or seeks the
remedies provided in paragraph 12. We also found appellants’ negligence claim (Count
3), was “valid” and remains pending because appellees failed to sustain their burden of
establishing that appellants have no legally cognizable claim for negligence.
{¶ 62} Since appellees did not meet their burden of demonstrating appellants have
no legally cognizable claim for rescission, we find the trial court erred in granting
summary judgment to appellees on Count 2 of the amended complaint.
Count 7—Fraudulent Misrepresentation, Count 8—Fraud
{¶ 63} In Count 7, appellants alleged Schoen made certain representations to them
which were material to the contract and the home’s construction, were knowingly false or
were reckless, were made with the intent to mislead, and were relied upon by appellants.
{¶ 64} In Count 8, appellants alleged Schoen “indicated to a third party contractor
that he should charge [appellants] higher amounts on the Project because they had plenty
of money and could pay it.” Appellants further alleged Schoen advised, promised and
deceived them that the material and workmanship of the home “was being done in
accordance within the standards of the building industry.” Appellants alleged Schoen’s
false statements and promises “were undertaken as a method to continue to fraudulently
receive payment under the building contract.”
23.
Law
{¶ 65} A claim of fraud requires proof of the following elements: (1) a
representation or, where there is a duty to disclose, concealment of a fact, (2) which is
material to the transaction, (3) made falsely, with knowledge of its falsity, or with such
utter disregard and recklessness as to its truth or falsity that knowledge may be inferred,
(4) with the intent of misleading another to rely on it, (5) justifiable reliance upon the
representation or concealment, and (6) a resulting injury proximately caused by the
reliance. Russ v. TRW, Inc., 59 Ohio St. 3d 42, 49, 570 N.E.2d 1076 (1991). Whether or
not fraud exists is generally a question of fact. Interstate Gas Supply, Inc. v. Calex Corp.,
10th Dist. No. 04AP-980, 2006-Ohio-638, ¶ 84.
Arguments and Analysis
{¶ 66} Schoen argued, in the motion for summary judgment, that appellants
cannot show they relied on any statements he made for purposes of entering into the
contract. Schoen contended appellants’ allegations of fraud are based on his
representations that: he would have a project manager and a selections coordinator to
assist appellants during construction; the home would be built according to appellants’
specifications; and, the construction would be of a higher quality than what was
delivered. Schoen observed other allegations of fraud alleged by appellants included
that: he suggested third-parties charge appellants more for their services; he continued to
make false statements during construction to obtain payments from appellants; and his
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marketing materials, which indicated he had been in business for 30 years and had
customer testimonials, were fraudulent.
{¶ 67} Schoen maintained appellants were unable to show his statements
regarding a project manager or selections coordinator were false, and since there was no
definition of the role of a project manager or selections coordinator on which appellants
could have relied, there could be no fraud. Schoen also asserted appellants were unable
to confirm any of the information in the marketing materials was false. In support,
Schoen cited to appellants’ deposition testimony.
{¶ 68} In response, appellants mentioned four examples of fraud in appellees’
marketing materials and cited to Schoen’s deposition testimony as well as their own
testimony in support. Appellants contended they acted as the project manager, they never
had a selections coordinator and Schoen told a painter to overcharge appellants. In
support, appellants cited to their own deposition testimony.
{¶ 69} A review of the record, including all of the deposition transcripts and
exhibits, shows questions of fact exist as to whether Schoen committed fraud or made
fraudulent misrepresentations as alleged by appellants in Counts 7 and 8 of the amended
complaint. We therefore find genuine issues of material fact remain.
{¶ 70} Accordingly, the trial court erred in granting summary judgment in favor of
appellees on Counts 7 and 8 of the amended complaint.
25.
Conclusion
{¶ 71} Appellants’ assignment of error, with respect to the trial court’s decision to
grant summary judgment to appellees, is well-taken as to Counts 2, 3, 5, 7 and 8, and
well-taken, in part, as to Counts 1 and 4 of the amended complaint. This determination
renders moot appellants’ assertion that the trial court erred in denying their motion for
reconsideration. See App.R. 12(A)(1)(c).
{¶ 72} The February 20, 2018 judgment of the Wood County Court of Common
Pleas is affirmed, in part, and reversed, in part, and the case is remanded for further
proceedings consistent with this decision. Appellants and appellees are ordered to split
the costs of this appeal pursuant to App.R. 24.
Judgment affirmed, in part,
and reversed, in part.
A certified copy of this entry shall constitute the mandate pursuant to App.R. 27.
See also 6th Dist.Loc.App.R. 4.
Arlene Singer, J. _______________________________
JUDGE
Thomas J. Osowik, J.
_______________________________
Gene A. Zmuda, J. JUDGE
CONCUR.
_______________________________
JUDGE
This decision is subject to further editing by the Supreme Court of
Ohio’s Reporter of Decisions. Parties interested in viewing the final reported
version are advised to visit the Ohio Supreme Court’s web site at:
http://www.supremecourt.ohio.gov/ROD/docs/.
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