Kern v. Buehrer

[Cite as Kern v. Buehrer, 2012-Ohio-4057.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 97836
BETSY KERN
PLAINTIFF-APPELLANT
vs.
ANTHONY BUEHRER, ET AL.
DEFENDANTS-APPELLEES
JUDGMENT:
REVERSED AND REMANDED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-741851
BEFORE: Stewart, P.J., Keough, J., and Kilbane, J.
RELEASED AND JOURNALIZED: September 6, 2012
[Cite as Kern v. Buehrer, 2012-Ohio-4057.]
ATTORNEY FOR APPELLANT
Daniel S. White
34 Parmelee Drive
Hudson, OH 44236
ATTORNEY FOR APPELLEES
David Ledman
35000 Chardon Road, Suite 105
Willoughby Hills, OH 44094
[Cite as Kern v. Buehrer, 2012-Ohio-4057.]
MELODY J. STEWART, P.J.:
{¶1} Plaintiff-appellant Betsy Kern brought this fraud action against
defendants-appellees Anthony and Michelle Buehrer (“the Buehrers”)
primarily alleging that they induced her to purchase their house by failing to
disclose or affirmatively denying the existence of water leakage in the
finished basement of the house. The Buehrers denied knowledge of any
water leakage and sought summary judgment on grounds that Kern
purchased the house “as is,” despite obtaining a presale home inspection that
alerted her to certain defects that could lead to water damage. The court
found that the home inspection report placed Kern on notice of possible
defects with the house, so she had knowledge of any defective conditions prior
to completing the sale and could not establish a triable issue of fact on her
fraud claim.
{¶2} Cases involving house sales with subsequent discovery of water
leakage raise several issues. As a general principle, Ohio adheres to the
doctrine of caveat emptor, which precludes a purchaser from recovering for a
structural defect in real estate if: “(1) the condition complained of is open to
observation or discoverable upon reasonable inspection, (2) the purchaser had
the unimpeded opportunity to examine the premises, and (3) there is no fraud
on the part of the vendor.” Layman v. Binns, 35 Ohio St.3d 176, 519 N.E.2d
642 (1988), syllabus.
{¶3} Caveat emptor does not apply, however, when the decision to
purchase has been induced by fraudulent misrepresentations. To prove
fraud, a plaintiff must show:
(a) a representation or, where there is a duty to disclose,
concealment of a fact, (b) which is material to the transaction at
hand, (c) made falsely, with knowledge of its falsity, or with such
utter disregard and recklessness as to whether it is true or false
that knowledge may be inferred, (d) with the intent of misleading
another into relying upon it, (e) justifiable reliance upon the
representation or concealment, and (f) a resulting injury
proximately caused by the reliance. Burr v. Stark Cty. Bd. of
Commrs., 23 Ohio St.3d 69, 491 N.E.2d 1101 (1986), paragraph
two of the syllabus.
{¶4} Read together, these cases hold that there is no duty to warn of or
disclose “patent” defects; that is, defects that are readily observable.
However, when defects are “latent” or not readily observable or discoverable
through a purchaser’s reasonable inspection, the seller has a duty to disclose
the defect if material to the sale. Layman at 178. In other words, a seller
has no duty to disclose that which a buyer can see or discover through
reasonable inspection; however, if the seller is aware of defects that may be
hidden from a buyer’s reasonable inspection, there is a duty to disclose.
{¶5} Ohio also enforces “as is” clauses in home purchase agreements.
In contract law, an “as is” clause essentially disclaims any warranties made
by the seller. As applied to home purchases, the agreement to purchase “as
is” means that a buyer agrees to make her or his own appraisal of the bargain
and to accept the risk that she or he may be wrong. Tipton v. Nuzum, 84
Ohio App.3d 33, 39, 616 N.E.2d 265 (9th Dist.1992). An “as is” clause in a
home purchase agreement will not, however, prevent recovery on a seller’s
fraudulent misrepresentation or information concealment. Brewer v.
Brothers, 82 Ohio App.3d 148, 151, 611 N.E.2d 492 (12th Dist.1992).
{¶6} Civ.R. 56(C) permits the court to grant summary judgment
when, after viewing the facts most favorably to the nonmoving party,
reasonable minds could find that there are no genuine issues of material fact
and the movant is entitled to judgment as a matter of law.
{¶7} Kern alleged that she found water in the basement within two
days of moving into the house. She claimed that “with every rain or snow,
there was water pooling and flooding” in the basement, rendering the space
unusable. The foreman of a waterproofing contractor she hired to repair the
house offered an affidavit on her behalf in which he said he found:
a. Stains on the wall and floor from water running to drain;
b. Dry-rotted drywall that was still damp;
c. Cement steps in front right corner had gaps to allow water;
d. Moisture under the floor; and
e. Existing footer tile failure.
{¶8} Prior to selling the house to Kern, the Buehrers signed a
residential property disclosure form in which they denied having knowledge
of “water intrusion” in the house. In an affidavit submitted in support of the
motion for summary judgment, Anthony Buehrer stated that apart from
performing “some maintenance work” in the basement, including cleaning
and painting, and extending down spouts further from the house, “we
experienced no significant water leakage, water accumulation, excess
moisture or other water instrusions” in the basement.
{¶9} The Buehrers also offered evidence of a home inspection report
commissioned by Kern that found “[t]he downspouts are draining into the
yard which may indicate the drain tiles are broken.” Kern’s home inspector
also reported:
The basement is partially dry at the time of the inspection.
Because the basement is below grade, there exists a vulnerability
to moisture penetration after heavy rains. There were no major
visual defects observed in the basement. There was a high level
of moisture observed on the exterior walls.
{¶10} It is true that the home inspector’s report uncovered several
items that might have led the reasonably prudent home buyer to suspect that
the basement of the house suffered from, or was susceptible to, water leakage.
But the home inspector couched his findings in somewhat ambiguous
language: the characterization of the basement walls as “partially dry” and
the statement that the grading of the soil created “vulnerability” to leakage
were not definitive statements that the basement was subject to ongoing
water intrusion.
{¶11} Despite these warnings from her home inspector, Kern said that
she relied on the Buehrers’ representation in the real estate disclosure form
that they had no knowledge of water intrusion in the basement. She said
that just two days after moving into the house, she discovered water “pooling
and flooding in the basement[.]” She then spoke with Anthony Buehrer to
ask whether he had experienced any issues with water in the basement and
he told her “there had been a few instances of water near a drain” in an
unfinished portion of the basement. Kern’s recollection of Anthony’s
statement was corroborated by Anthony’s affidavit that said that “we
experienced no significant water leakage, water accumulation, excess
moisture or other water intrusion problems with the Property * * *.”
Anthony’s use of the word “significant” implies that there was some water
intrusion in the basement, the amount of which depended on what Anthony
subjectively considered to be “significant.”
[Cite as Kern v. Buehrer, 2012-Ohio-4057.]
{¶12} Anthony’s statement that the basement experienced water
intrusion directly conflicted with the Buehrers’ representation in the
disclosure form that they had no knowledge of any past or current water
leakage in the basement. We are aware that a purchaser, once alerted to a
possible defect, “may not simply sit back and then raise his lack of expertise
when a problem arises.” Duman v. Campbell, 8th Dist. No. 79858,
2002-Ohio-2253, ¶ 22. However, sellers may not misrepresent the condition
of a house and expect to be insulated from liability by pointing to the results
of a home inspection with ambiguous findings on water intrusion. Comment
(a) to 3 Restatement of the Law 2d, Torts, Section 547, states:
It is not enough to relieve the maker of a fraudulent
misrepresentation from liability that the person to whom it is
made makes an investigation of its truth. It is only when he relies
upon his investigation and does not rely upon the false statement
that he cannot recover. Whether he does rely upon the one or
the other or in substantial part upon both * * * is a question of
fact and is for the jury to determine, unless the evidence clearly
indicates only one conclusion.
Ordinarily one who makes an investigation will be taken to rely
upon it alone as to all facts disclosed to him and all facts that
must have been obvious to him in the course of it. Thus one who
has fully inspected a house before buying it ordinarily cannot
claim that he was deceived by a misrepresentation of the
condition of the ceilings that was apparent to any one taking the
trouble to look at them. On the other hand, if the condition is a
latent one, which the inspection or investigation could not
reasonably be expected to discover, the recipient may still be
relying upon the representation as well as the investigation * * *.
Particularly when the investigation produces results that tend to
confirm the representation but are still somewhat inconclusive, it
may be found that the recipient has relied upon both the
investigation and the representation and that the latter has played
a substantial part in inducing him to take action. (Emphasis
added.)
{¶13} There was no obvious evidence of water intrusion in the
basement. In fact, at the time of sale the Buehrers used the basement as a
living space complete with carpet and furniture. This use reasonably
suggested that the basement did not suffer from water intrusion despite
warnings from the home inspector. And the home inspector’s report made
findings that were couched in ambiguous or vague language such as walls
were “partially dry” and that the outside grading of the soil created
“vulnerability” to leakage.
{¶14} For purposes of summary judgment, there was sufficient
evidence from which reasonable minds could differ on whether the Buehrers
misrepresented or failed to disclose the extent of water intrusion in the
basement, and whether Kern justifiably relied on those statements. Despite
there being some warning signs of water intrusion, those warnings were
sufficiently ambiguous that, when viewed along with the Buehrers’ firm
representation that no water intrusion existed and evidence that the
basement had been used as a living space, reasonable minds could differ on
whether Kern reasonably relied on the representation in the disclosure form.
As the non-moving party for summary judgment, Kern was entitled to have
the evidence viewed most favorably to show that she relied in substantial part
on the Buehrers’ representation that the basement experienced no water
instrusions of any kind. It remains for the trier of fact to determine whether
this reliance was reasonable under the circumstances.
{¶15} We therefore find that the court erred by granting summary
judgment on the fraud counts. Our holding moots Kern’s second assignment
of error on her claim for rescission on a mutual mistake of fact.
{¶16} This cause is reversed and remanded for proceedings consistent with this
opinion.
[Cite as Kern v. Buehrer, 2012-Ohio-4057.]
It is ordered that appellant recover of appellees her costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to the Cuyahoga County Court of Common
Pleas to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the
Rules of Appellate Procedure.
MELODY J. STEWART, PRESIDING JUDGE
KATHLEEN ANN KEOUGH, J., and
MARY EILEEN KILBANE, J., CONCUR