Cronkelton v. Guaranteed Constr. Servs.

[Cite as Cronkelton v. Guaranteed Constr. Servs., 2013-Ohio-328.]
IN THE COURT OF APPEALS OF OHIO
THIRD APPELLATE DISTRICT
LOGAN COUNTY
CLIFFORD A. CRONKELTON,
TRUSTEE OF THE CLIFFORD A.
CRONKELTON TRUST DATED
APRIL 8, 1994,
PLAINTIFF-APPELLEE, CASE NO. 8-12-01
v.
GUARANTEED CONSTRUCTION
SERVICES, LLC, DBA GUARANTEED
ASSET MANAGEMENT, ET AL., OPINION
DEFENDANTS-APPELLANTS.
Appeal from Logan County Common Pleas Court
Trial Court No. CV-10-12-0605
Judgment Affirmed
Date of Decision: February 4, 2013
APPEARANCES:
James S. Savage and Douglas J. Segerman for Appellants
Terrence G. Stolly and John D. Bodin for Appellee
Case No. 8-12-01
PRESTON, P.J.
{¶1} Defendants-appellants, Guaranteed Construction Services, LLC, d.b.a.
Guaranteed Asset Management, and Patrick Shivley, appeal the Logan County
Court of Common Pleas’ jury verdict finding that they committed fraud and
awarding compensatory damages, punitive damages, and attorney fees to plaintiff-
appellee, Clifford Cronkelton. Appellants contend the jury’s verdict was
erroneous because Cronkelton’s fraud claim was barred by the parol evidence rule,
that Cronkelton unjustifiably relied on Shivley’s statements, and that the award of
punitive damages and attorney fees was unwarranted. For the reasons that follow,
we affirm.
{¶2} The case before this Court stems from a real estate transaction for a
foreclosed car wash in Bellefontaine, Ohio. (Doc. No. 1). On December 3, 2010,
Cronkelton filed a complaint against appellants in the Logan County Court of
Common Pleas following his purchase of the car wash. (Id.). Cronkelton asserted
three causes of action: breach of contract, negligent misrepresentation, and fraud.
(Id.). Cronkelton claimed that he had reasonably relied on Shivley’s
misrepresentations that the car wash had been properly winterized and sought
compensatory damages, punitive damages, and attorney fees. (Id.). Appellants
filed their answer on January 5, 2011. (Doc. No. 12).
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{¶3} On March 21, 2011, appellants filed a motion for summary judgment.
(Doc. No. 21). On April 29, 2011, Cronkelton filed his response. (Doc. No. 31).
The trial court granted appellants summary judgment on the breach of contract and
negligent misrepresentation claims, but denied appellants’ motion for summary
judgment on the fraud claim. (Doc. No. 33).
{¶4} On October 25-27, 2011, the trial court held a jury trial on the fraud
claim. The jury returned a verdict for Cronkelton, awarding him compensatory
damages of $43,671, punitive damages of $66,000, and found that the trial court
should award Cronkelton attorney fees. (Doc. No. 73).
{¶5} On November 8, 2011, the parties filed a stipulation for attorney fees
for the amount of $30,000. (Doc. No. 83). On November 10, 2011, the trial court
filed its judgment entry recording the jury’s verdict for Cronkelton and awarding
Cronkelton $43,671 in compensatory damages, $66,000 in punitive damages, and
$30,000 for attorney fees. (Doc. No. 86).
{¶6} On November 23, 2011, appellants filed a motion for judgment
notwithstanding the verdict, and in the alternative, for a new trial or a remittitur of
the punitive damages. (Doc. No. 104). On December 14, 2011, Cronkelton filed
his motion in opposition. (Doc. No. 115). On January 20, 2012, the trial court
filed its judgment entry denying appellants’ motion. (Doc. No. 158).
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{¶7} On February 17, 2012, appellants filed a notice of appeal. (Doc. No.
171). Appellants now raise three assignments of error for our review.
Assignment of Error No. I
The fraud claim is barred under the parol evidence rule.
{¶8} In their first assignment of error, appellants argue the trial court erred
by admitting evidence regarding Shivley’s statements that the car wash would be
winterized. Appellants contend that the parol evidence rule barred this evidence
because it was contrary to the “as is” term of the purchase agreement.
{¶9} “The parol evidence rule states that ‘absent fraud, mistake or other
invalidating cause, the parties’ final written integration of their agreement may not
be varied, contradicted or supplemented by evidence of prior or contemporaneous
oral agreements, or prior written agreements.’” Galmish v. Cicchini, 90 Ohio
St.3d 22, 27 (2000), quoting 11 Williston on Contracts, Section 33:4, at 569-570
(4th Ed.1999). The parol evidence rule is a rule of substantive law that excludes
extrinsic evidence to prove the content of an agreement. Id. “‘The rule comes
into operation when there is a single and final memorial of the understanding of
the parties. When that takes place, prior and contemporaneous negotiations, oral
or written, are excluded; or, as it is sometimes said, the written memorial
supersedes these prior or contemporaneous negotiations.’” Id., quoting In re
Gaines’ Estate, 15 Cal.2d 255, 264-265 (1940). The parol evidence rule thus
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protects the integrity of final, written agreements. Paragon Networks Internatl. v.
Macola, Inc., 3d Dist. No. 9-99-2, *4 (Apr. 28, 1999).
{¶10} However, one exception to the parol evidence rule applies when a
party seeks to prove fraud in the execution or inducement of an agreement. Id. In
the case of fraudulent inducement, the party will often claim that facts outside of
the contract induced the party to enter into the agreement. Id. “‘Parties may not,
however, prove fraud by claiming that the inducement to enter into an agreement
was a promise that was within the scope of the integrated agreement but was
ultimately not included in it.’” Id., quoting Busler v. D & H Mfg., Inc., 81 Ohio
App.3d 385, 390 (10th Dist.1992). Thus, “the parol evidence rule does apply ‘to
such promissory fraud if the evidence in question is offered to show a promise
which contradicts an integrated written agreement. Unless the false promise is
either independent of or consistent with the written instrument, evidence thereof is
inadmissible.’” Galmish at 28, quoting Alling v. Universal Mfg. Corp., 5
Cal.App.4th 1412, 1436 (1992). “‘Thus, parol evidence can only be introduced to
challenge a written contract when the alleged oral misrepresentations are
consistent with the written contract.’” D & H Autobath, LLC v. PJCS Properties I,
Inc., 12th Dist. No. CA2012-05-018, 2012-Ohio-5845, ¶ 18, quoting Westwinds
Dev. Corp. v. Outcalt, 11th Dist. No. 2008-G-2863, 2009-Ohio-2948, ¶ 58
(emphasis in original). Furthermore, an integration clause does not prevent a trial
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court from admitting the evidence in the case of fraud because “the presence of an
integration provision does not vitiate the principle that parol evidence is
admissible to prove fraud.” Galmish at 28.
{¶11} The application of the parol evidence rule is an issue of substantive
law that is reviewed de novo on appeal. Rice v. Rice, 7th Dist. No. 2001-CO-28,
2002-Ohio-3459, ¶ 38. As a result, we review the application of the parol
evidence rule without deference to the trial court’s decision. Arnett v. Precision
Strip, Inc., 3d Dist. No. 2-11-25, 2012-Ohio-2693, ¶ 10.
{¶12} In the present case, the trial court admitted evidence regarding
Shivley’s representation that the property would be winterized. Cronkelton
testified that he first inspected the foreclosed car wash at the end of November
2009. (Oct. 25, 2011 Tr. at 33). At that time, Cronkelton tested the equipment
and knew that some of the pieces of equipment were fully functioning and some
were not. (Id. at 34-35). Cronkelton made an offer on the property on December
1, 2009. (Id. at 36). Shortly thereafter, Cronkelton called Shivley to discuss the
winterization of the property. (Id. at 37). Cronkelton testified:
so I called him, said, hey, it’s going to freeze here this week. I knew
like December 10th or after it was going to freeze because I watch
the weather pretty closely. It’s supposed to get down to like ten
degrees, have you got it winterized, you know. If it’s not winterized,
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I’m not interested in the property. If it freezes, I’m not interested in
the property at all. And he guaranteed me. He said, no, it will be
taken care of. We don’t have a problem. That’s my job as receiver.
I’ll take care of it.
(Id.). After the phone call, Shivley sent Cronkelton an email dated December 7,
2009 that stated:
As per our phone conversation Guaranteed Asset Management will
winterize the Car Wash with the anticipation of reopening the wash
in the near future. Within this Winterization we will put antifreeze
and secure floor heating as well as blow water out of all lines in self
serve bays as well as empty tanks, etc. We will leave the heat on at
a minimal level in the pump room. We will take all brushes, wands
and hoses off and leave in the storage facility. We will leave the
Vac units attached and cut off all electric to the Vacs. We will clean
up lot, including cutting bushes, trees, etc. where necessary and pick
up all trash and empty cans on lot. We will lastly place a Chain at
the entrance of the wash preventing cars, etc. into the parking lot.
Please let me know if there is anything else you would like us to do.
We will complete all of this on Wednesday, December 9, 2009.
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(Plaintiff’s Ex. 3). After Huntington Bank had not accepted Cronkelton’s offer for
several months, Cronkelton withdrew the offer. (Oct. 25, 2011 Tr. at 39-40).
Shivley then contacted Cronkelton and indicated that Huntington Bank was open
to another offer from him. (Id. at 40). Cronkelton testified, “I just asked him, I
said was it all in good shape? It’s still- you’ve got it winterized, everything is like
it was? Yeah, nothing’s changed. We had it all winterized. We took care of it-
just as his e-mail says.” (Id. at 40-41). Huntington Bank rejected Cronkelton’s
second offer, but finally accepted his third offer of $110,000. (Defendant’s Ex. 1).
Cronkelton testified that throughout the negotiations, he repeatedly asked Shivley
about the winterization of the property, stating “[i]t just said everything still the
same? We’re good to go? You know the property’s- you know, he said the
property’s good.” (Oct. 25, 2011 Tr. at 42). Cronkelton testified that Shivley
specifically told him the property had been winterized, “[t]hat’s part of it. You’ve
got it all winterized. We’ve got it take[n] care of, no problem.” (Id.).
{¶13} Cronkelton testified that they closed on the property in June and he
received the keys at that time. (Id. at 44). Cronkelton testified that he
immediately went to the property:
I opened the door, and the huge canisters that I was telling you about
were all busted. The tops had been exploded off the top of them. At
first when I opened the door I thought it had been vandalized. I
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thought, wow, what happened to this property, you know. And then
I close looked at it, seeing the tops exploded off and the side of one
of the conditioners was broke, and all the- all the mineral that they
use inside was all laying on the floor and it was tipped over and
turned around and looked at the- the R/O, which is the other water
conditioner, to keep it from spot free, it was all busted and the side
was exploded on it. And I have pictures. I took my camera and took
detail pictures. You could see pipes that were bursted, you know,
had big old, you know, copper exploded. It gets big old holes in it
and pops. So it was clear at that time that this whole thing had froze
up, and the extent of the damage could not even be, you know,
detailed at that point- until we would have turned the water on and
got everything up. Which was not going to happen because there
was so much explosion in there.
(Id. at 45). Cronkelton immediately contacted Shivley, and “[a]t that time he told
me that can’t be possible, or if it is I’m upset because I hired Strayer Company to
winterization [sic] this property. And you know what, they were supposed to do
their job and so forth.” (Id. at 48). Cronkelton then contacted Keith Strayer, the
owner of Strayer Company, who came to inspect the damage. (Id. at 49).
Cronkelton testified that this was the first time he received a memorandum that
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Strayer had sent informing Shivley that the company was unable to properly
winterize the building. (Id. at 49-50).
{¶14} Strayer testified that his company was unable to properly winterize
the building because it was not designed or plumbed to be winterized. Strayer
further testified that his company sent Guaranteed Asset Management a
memorandum to that effect on December 10, 2009. (Id. at 197-199); (Plaintiff’s
Ex. 5). The memorandum stated:
I believe we did everything we could to winterize the building but I
can not [sic] guarantee there will not be problems when the building
is put back into service. The simple fact of the matter is this
building was not designed or plumbed to be winterized. The only
way to ensure you won’t have any problems would be to disconnect
and remove all the equipment or install an electric heater to maintain
an above freezing temperature.
(Plaintiff’s Ex. 5).
{¶15} Shivley testified that he did not give Cronkelton the memorandum
from Strayer. (Id. at 145). According to Shivley, he made an inspection of the
property after November 28, 2009. (Id. at 147). At that time, Huntington Bank
decided not to pay for the improvements to the property and not to maintain the
property because it would not generate any income, “and they elected [to]
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basically keep it closed and move forward the way we did.” (Id.). On December
1, 2009, Shivley submitted an analysis and evaluation of the car wash to
Huntington Bank where he stated, “[i]n the current condition of [the] Car Wash
and Real Estate, if nothing would be done except turning of [sic] water and
utilities, the Car Wash and pipes would burst through the winter and the value of
the Car Wash/Real Estate would be for land value only less cost to dispose of Car
Wash.” (Id. at 158); (Plaintiff’s Ex. 6). Shivley admitted he sent the email to
Cronkelton representing that they would put antifreeze in the water lines, secure
the floor heating, blow the water out of all the lines, and keep the heat at a
minimal level, and that they would complete the work by December 9, 2009. (Id.
at 149-150). In a memorandum to Huntington Bank dated March 29, 2010,
Shivley wrote, “for the wash in question, on 11/28/09, we did go in and winterize
the wash. It was evident that it was too late and that much damage, freezing of
pipes, as well as Vandalism had occurred.” (Id. at 163-164); (Plaintiff’s Ex. 11).
Shivley repeatedly testified that he did not believe he had any obligation to inform
Cronkelton of the problems with the winterization, “[a]s a receiver, I’m not
obligated to inform any defects. That’s- that’s what it is, an as is purchase
contract,” and “He had- as is, again, it’s open for him to do his due diligence. It’s
not obligated for me to tell him the condition of the property.” (Oct. 25, 2011 Tr.
at 174, 185).
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{¶16} We agree with the trial court that the evidence regarding Shivley’s
representations was admissible in this case. Here, the representations were
consistent with the written agreement and thus not barred by the parol evidence
rule when admitted to prove fraudulent inducement. Galmish, 90 Ohio St.3d at
28. The evidence demonstrates that Cronkelton intended to purchase the car wash
in the condition he observed in November 2009. (Oct. 25, 2011 Tr. at 40-41).
Cronkelton was aware that he would have to repair some of the equipment, and
thus was purchasing the property “as is.” (Id. at 34-35). However, Cronkelton
also believed that Shivley, as the receiver, would prevent further damage to the
property by appropriately winterizing it. (Id. at 79-80). Shivley’s representations
to Cronkelton that he had winterized the property and that it was in the same
condition as when Cronkelton inspected it in November 2009 were consistent with
Cronkelton’s interpretation of the contract, as well as the plain language of the
purchase agreement, which simply stated that he was purchasing the property “as
is.” (Defendant’s Ex. 1). Thus, the evidence regarding Shivley’s representations
was not contrary to the language of the contract. Cronkelton knew that some of
the equipment was functioning and some was not, but believed that Shivley, as the
receiver, would properly winterize the property to prevent further damage based
on the representations he had made.
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{¶17} Furthermore, the present case is similar to the Supreme Court of
Ohio’s decision in Galmish. In that case, the Court stated, “‘[t]he rule excluding
parol evidence of collateral promises to vary a written contract does not apply
where such contract is induced by promises fraudulently made, with no * * *
intention of keeping them * * *.’” In Galmish, the plaintiff sold property to the
defendant, who represented that he would then sell the property to a developer and
pay the plaintiff one half of the proceeds, as long as he sold the property within
one year. Galmish at 23. The plaintiff alleged that the defendant intentionally
delayed completing the sale of the property to prevent paying her a share of the
proceeds, and that the defendant never intended to fulfill the promise that induced
her to enter into the contract. Id. The Supreme Court of Ohio held that evidence
of the defendant’s promise to the plaintiff was admissible to prove the plaintiff’s
claim of fraudulent inducement, stating:
[i]t was never intended that the parol evidence rule could be used as
a shield to prevent the proof of fraud, or that a person could arrange
to have an agreement which was obtained by him through fraud
exercised upon the other contracting party reduced to writing and
formally executed, and thereby depriving the courts of the power to
prevent him from reaping the benefits of his deception or chicanery.
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Id. at 28, quoting 37 American Jurisprudence 2d, Fraud and Deceit, Section 451, at
621-622 (1968). The Court thus determined that the evidence of the defendant’s
representations did not contradict the contract, were admissible to show the
circumstances surrounding the finalized written agreement, and were admissible to
demonstrate that the defendant never intended to fulfill the promise he made to
induce the plaintiff to enter into the contract. Galmish at 31.
{¶18} Similarly, in the present case, Shivley made representations to
Cronkelton that he never intended to keep. Those representations were made to
induce Cronkelton to purchase the property. Specifically, the evidence
demonstrates that Strayer sent Guaranteed Construction a memorandum notifying
the company that Strayer had been unable to fully winterize the property and that
Guaranteed Construction needed to keep the heat on at a minimal level to prevent
damage. (Oct. 25, 2011 Tr. at 197-199). Strayer sent this memorandum to
Shivley before Cronkelton made his second and third offers on the property, offers
made at Shivley’s request. (Id. at 40-42). Thus, Shivley had been notified that he
needed to heat the property to prevent damage at the time that he represented to
Cronkelton that the car wash had been fully winterized in accordance with the
email he sent Cronkelton in December 2009. (Id. at 197-199); (Plaintiff’s Ex. 3).
Furthermore, the evidence demonstrated that at the time Cronkelton made his
offers, Shivley knew Huntington Bank had elected to shut off the utilities because
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the property was not generating income. (Oct. 25, 2011 Tr. at 147). Shivley did
not intend to have Guaranteed Asset heat the property because of substantial
unpaid balances on prior heating bills that he viewed as Huntington Bank’s
responsibility. (Id.). In March 2010, before Cronkelton signed the purchase
agreement in June 2010, Shivley sent a report to Huntington Bank informing them
of damage to the property, comprising of damage that was the result of freezing.
(Id. at 163-164). However, Shivley consistently represented to Cronkelton that the
property had been appropriately winterized, including maintaining the heat at a
minimal level, although he had no intention of heating the property and knew the
car wash had been damaged from freezing. As in Galmish, this evidence was
admissible to show the circumstances surrounding the finalized written agreement,
to demonstrate that Shivley never intended to fulfill the promises he made to
Cronkelton, and to prove Shivley induced Cronkelton to enter into the contract.
{¶19} The dissent argues that admitting this evidence disregards the parol
evidence rule. We disagree. Rather, the evidence is admissible as an exception to
the parol evidence rule in the case of fraudulent inducement because the
representations are consistent with the contract’s language. Galmish, 90 Ohio
St.3d at 28. Given the circumstances of this case, the trial court did not err by
admitting Shivley’s representations to prove Cronkelton’s claim of fraudulent
inducement.
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{¶20} Appellants’ first assignment of error is, therefore, overruled.
Assignment of Error No. II
As a matter of law, appellee’s reliance on Mr. Shivley’s
statements about the condition of the car wash was not justified
{¶21} In their second assignment of error, appellants argue Cronkelton
unjustifiably relied on Shivley’s statements about the car wash’s condition because
Cronkelton had the opportunity to inspect the property prior to closing.
{¶22} The doctrine of caveat emptor places a duty on the buyer of real
estate to make an inquiry or investigation into a property’s potential defects.
Findlay Ford Lincoln-Mercury v. Huffman, 3d Dist. No. 5-02-67, 2004-Ohio-541,
¶ 14. A seller is not obligated to disclose everything he or she knows about the
property to the buyer. Id. However, caveat emptor “has never shielded deliberate
fraud by the seller.” Id. In order for the doctrine of caveat emptor to apply, “(1)
the defect must be open to observation or discoverable on reasonable inspection,
(2) the purchaser must have an unimpeded opportunity to examine the property,
and (3) the vendor may not engage in fraud.” Id. ¶ 15, citing Boehringer v. Miller,
3d Dist. No. 2-88-18 (Jan. 29, 1990).
{¶23} As an initial matter, we note that appellants argue whether
Cronkelton justifiably relied on Shivley’s representations is a question of law.
However, this Court has previously stated that “[w]hether or not reliance on a
material misrepresentation was justified under the facts of a case is a question for
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the trier of fact.” Simon Property Group v. Kill, 3d Dist. No. 1-09-30, 2010-Ohio-
1492, ¶ 26. Consequently, we must determine whether the jury’s decision is
supported by competent, credible evidence. Id. at ¶ 31.
{¶24} In the present case, it is undisputed that the damage caused by
freezing was open and obvious upon inspection, that Cronkelton did inspect the
property in November 2009, and that he could have inspected the property again
before signing the purchase agreement. Cronkelton testified regarding why he did
not inspect the property after November 2009:
Because I was guaranteed by- by- in writing and several
conversations that everything- the only thing I was worried about
was it not freezing. I wasn’t worried about the state of the
equipment, whether it was repairable because I had already looked at
that and made my assessment on that. I was just mainly concerned
about the freezing. Wrote me this e-mail, guaranteed me it was
taken care of in detail what he was going to do, so I had no reason.
And because I relied on him being professional, he’s got a real estate
license, he was appointed by the Court, I don’t know how much
more I could have done to know that I could trust him.
(Oct. 25, 2011 Tr. at 79-80). In response to an interrogatory, the jury found that
Cronkelton had reasonably relied on Shivley’s representations. (Doc. No. 73).
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{¶25} The jury’s finding was supported by competent, credible evidence.
This Court has previously stated that when determining whether reliance is
justifiable:
courts consider the various circumstances involved, such as the
nature of the transaction, the form and materiality of the transaction,
the form and materiality of the representation, the relationship of the
parties, the respective intelligence, experience, age, and mental and
physical condition of the parties, and their respective knowledge and
means of knowledge.
Findlay Ford, 2004-Ohio-541 at ¶ 22.
{¶26} Cronkelton relied on representations made by Shivley, who was a
receiver. (Oct. 25, 2011 Tr. at 79-80). Shivley was appointed as a receiver
pursuant to R.C. 2735.01 and had taken an oath to faithfully discharge his duties
and obey the trial court’s orders. R.C. 2735.03. As a receiver, Shivley had a
fiduciary duty to the assets under his control. Hummer v. Hummer, 3d Dist. No.
96132, 2011-Ohio-3767, ¶ 18. Under the circumstances of this case, Cronkelton
had a reasonable basis to believe that Shivley, who was acting as an arm of the
court, would take the promised steps to winterize the property.
{¶27} Appellants cite several cases where this Court has previously held
that the doctrine of caveat emptor barred a party from recovering damages for
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undisclosed defects. See Van Horn v. Peoples Banking Co., 64 Ohio App.3d 745(3d Dist.1990); Findlay Ford, 2004-Ohio-541. However, those cases are
distinguishable from the instant case. In each of those cases, the plaintiff failed to
take affirmative actions to discover the defect. Id.; Id. Furthermore, although the
plaintiffs in those cases alleged the defendants had made misrepresentations, the
misrepresentations did not rise to the level of fraud. Id.; Id. In the case currently
before this Court, Cronkelton did take affirmative steps to discover the defect by
inspecting the property in November 2009 and repeatedly confirming with Shivley
that Shivley had taken the steps necessary to winterize the property. (Oct. 25,
2011 Tr. at 33-36, 40-43). In addition, Shivley’s misrepresentations that he had
taken the appropriate steps to winterize the property rose to the level of fraud
because his statements were: (1) actual misrepresentations, (2) made while
knowing their falsity, (3) with the intent to mislead, (4) justifiably relied upon by
Cronkelton, and (5) caused damage to Cronkelton. Findlay Ford at ¶ 20.
Therefore, Cronkelton’s fraud claim is not barred by the doctrine of caveat emptor.
{¶28} Appellants’ second assignment of error is, therefore, overruled.
Assignment of Error No. III
The additional egregious conduct necessary to justify an award
of punitive damages and attorney’s fees is not present in this
case.
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{¶29} In their final assignment of error, appellants argue the trial court
erred by awarding Cronkelton punitive damages and attorney fees because
Cronkelton failed to demonstrate that the fraud was aggravated by malice or that
the wrongdoing was especially egregious.
{¶30} “Punitive damages are awarded to punish the guilty party and deter
tortious conduct by others.” Digital & Analog Design Corp. v. North Supply Co.,
63 Ohio St.3d 657, 664 (1992). However, punitive damages are not appropriate in
every case of fraud. S.H.Y., Inc. v. D. Garman, 3d Dist. No. 14-04-04, 2004-Ohio-
7040, ¶ 43. “In cases alleging fraud, in order to be awarded punitive damages, the
plaintiff must establish not only the elements of the tort itself, but must also show
that either the fraud is aggravated by the existence of malice or ill will or must
demonstrate that the wrongdoing is particularly gross or egregious.” Id. As a
general rule, it is reasonable to award attorney fees in an action where punitive
damages have been awarded, although this issue is in the sound discretion of the
trial court. Digital & Analog at 664, citing Columbus Finance, Inc. v. Howard, 42
Ohio St.2d 178, 183 (1975). “The trial judge is in the best position to determine
whether an award is so excessive as to be deemed a product of passion or
prejudice, and the trial court’s determination on that issue will not be disturbed
absent an abuse of discretion.” Burns v. Prudential Securities, 3d Dist. No. 9-03-
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49, 2006-Ohio-3550, ¶ 78, citing Fromson & Davis Co. v. Reider, 127 Ohio St.
564, 569 (1934).
{¶31} We cannot find that the jury abused its discretion by awarding
punitive damages in this case. The evidence presented at trial demonstrates that
not only was Shivley dishonest with Cronkelton, but that he was dishonest with
the court. Shivley’s actions were particularly egregious in light of his role as a
receiver, who was appointed by the court and had a duty to faithfully fulfill his
responsibilities. Shivley received the memorandum indicating Strayer had been
unable to fully winterize the property on December 10, 2009, and forwarded the
memorandum to Huntington Bank by email. (Oct. 25, 2011 Tr. at 152-154).
However, in his deposition in this case, Shivley claimed he had not previously
seen the memorandum. (Id. at 152). In his November 28, 2009 report, Shivley
stated that the property’s utilities were still turned on. (Id. at 172). However, in
an affidavit filed with the trial court, Shivley averred that “at the time Guaranteed
took control of the subject premises, the water and electricity had been shut off
and, therefore, Guaranteed never tested or inspected the equipment at the
property.” (Doc. No. 22); (Plaintiff’s Ex. 21). Shivley also averred that neither he
nor any of his employees had any actual knowledge as to the condition of the
equipment on the premises, although in a March 29, 2010 letter, he stated “we did
go in and winterize the wash. It was evident that it was too late and that much
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damage, freezing of pipes as well and vandalism had occurred.” (Oct. 25, 2011
Tr. at 163-164). Shivley also filed a report with the court stating, “we did
winterize the facility with a professional plumber and did general maintenance to
the facility back in November.” (Id. at 182). This evidence shows that Shivley
continually represented to the trial court that he was fulfilling his responsibility as
a receiver and was unaware of the damage to the premises, although the Strayer
memorandum and report to Huntington Bank demonstrate that Shivley knew the
car wash had not been properly winterized and was damaged from freezing. In
light of the foregoing, we cannot find that the jury abused its discretion by
determining Shivley’s conduct was particularly egregious. Since the punitive
damages were appropriate in this case, the trial court also did not err by awarding
attorney fees.
{¶32} Appellants’ third assignment of error is, therefore, overruled.
{¶33} Having found no error prejudicial to the appellant herein in the
particulars assigned and argued, we affirm the judgment of the trial court.
Judgment Affirmed
WILLAMOWSKI, J., concurs.
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ROGERS J., Dissenting.
{¶34} I must respectfully dissent from the majority’s opinion. I would first
find that the parol evidence rule would exclude the admission of Shivley’s pre-
contract representations, and further, that even if permitted, Cronkelton could not
claim justifiable reliance on such representations.
{¶35} I first disagree with the majority’s disregard of the parol evidence
rule. The application of the parol evidence rule was aptly set forth in Busler v. D
& H Mfg., Inc., 81 Ohio App.3d 385 (10th Dist. 1992). The court of appeals
explained:
This misnamed and often misunderstood rule is not really a rule of
evidence but instead is a rule of substantive law designed to protect
the integrity of final, written agreements. Charles A. Burton, Inc. v.
Durkee (1952), 158 Ohio St. 313, paragraph one of the syllabus. If
contracting parties integrate their negotiations and promises into an
unambiguous, final, written agreement, then evidence of prior or
contemporaneous negotiations, understandings, promises,
representations, or the like pertaining to the terms of the final
agreement are generally excluded from consideration by the court.
Id. at paragraph two of the syllabus; Yoder v. Columbus & S. Elec.
Co. (1974), 39 Ohio App.2d 113. This rule is not confined to
excluding merely parol communications; it excludes contrary written
communications as well.
Notwithstanding, many Ohio cases have held that a party may offer
evidence of prior or contemporaneous representations to prove fraud
in the execution or inducement of an agreement. See, e.g.,
Stegawski v. Cleveland Anesthesia Group, Inc. (1987), 37 Ohio
App.3d 78, 84. Indeed, without such evidence it would be difficult
if not impossible to prove fraud. However, it is important to realize
that the law has not allowed parties to prove fraud by claiming that
the inducement to enter into an agreement was a promise within the
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scope of the integrated agreement but which was not ultimately
included in it. Id. at 84; AmeriTrust Co. v. Murray (1984), 20 Ohio
App.3d 333, 335. Hence, if there is a binding and integrated
agreement, then evidence of prior or contemporaneous
representations is not admissible to contradict the unambiguous,
express terms of the writing. Restatement, supra, at 136, Section
215. (Emphasis added.) Busler at 390-391. Accord Paragon
Networks Intl. v. Macola, Inc., 3d Dist. No. 9-99-2 (April 28, 1999).
{¶36} Here the purchase agreement, prepared by Cronkelton, stated that the
property was being purchased “in its ‘as is’ condition without any representations
and warranties from Seller regarding the condition of the Real Property.”
(Defendant’s Exhibit 1, p. 1). Any representations by Shivley as to the
winterization of the property were within the scope of the integrated agreement but
not ultimately included in it. Therefore, the parol evidence rule requires that
evidence of prior representations to the contrary be excluded.
{¶37} In addition, I would also find that, as a matter of law, Cronkelton
could not claim justifiable reliance upon any of Shivley’s representations
concerning winterization of the property. The majority places much weight on the
fact that Cronkelton inspected the property in late November 2009 when he made
his first offer on the property. This then becomes the basis which they argue
justified his later reliance on Shivley’s representations. However, Cronkelton
revoked that offer. A second verbal offer was made and refused. Finally, in
March 2010, a third offer was made and accepted, resulting in the purchase
agreement at issue in this matter.
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{¶38} What the majority fails to discuss is that the final written purchase
agreement was drafted by Cronkelton. In the agreement, Cronkelton, as discussed
above, acknowledged that he was purchasing the property “in its ‘as is’ condition
without any representations and warranties from Seller regarding the condition of
the Real Property.” (Defendant’s Exhibit 1, p. 1). In addition, Cronkelton gave
himself an unlimited right to inspect the property, a right he failed to exercise
immediately before entering the purchase agreement.
{¶39} Apparently the majority is convinced that Cronkelton’s inspection of
the property in November 2009, coupled with Shively’s representations
concerning the property’s winterization, relieved Cronkelton of any obligation of
due diligence or actual inspection. I strongly disagree.
{¶40} First, Cronkelton’s inspection in November 2009 was in conjunction
with an offer that he withdrew. It is therefore irrelevant to the purchase agreement
at issue in this matter.
{¶41} Second, the November inspection was too remote in time to be relied
upon and occurred prior to the time period and weather conditions that were the
subject of Cronkelton’s concerns. It is therefore immaterial to the purchase
agreement at issue in this matter.
{¶42} Third, Cronkelton failed to take advantage of his right to inspect the
property which he had included in the purchase agreement that he drafted.
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Cronkelton claims that his only concern when making a new offer on the property
was whether the property had survived the winter months in substantially the same
condition as it was in when he inspected it in November 2009. If that was the
case, then a cursory inspection by Cronkelton would have removed any question
of the property’s condition. In fact, his testimony suggests that after the closing all
he had to do was open the door to enter the property and the damage was obvious.
{¶43} At most, Shivley’s representations may have induced a new offer
from Cronkelton. I fail to see any justification for allowing Cronkelton to claim
he was induced to purchase the subject property by Shivley’s representations when
he had the right, the opportunity, and the duty to inspect the property within a
reasonable time before entering into the purchase agreement.
{¶44} Again, the purchase agreement, prepared by Cronkelton,
unequivocally stated that the property was being purchased in “as is” condition.
Any representations by Shivley as to the winterization of the property were within
the scope of the integrated agreement but not ultimately included in it. The
representations were not even as to the condition of the property, but rather as to
the winterization of the property. Even if winterization had been accomplished,
common sense tells one that events may have occurred to cause damage not
present when an inspection took place four months earlier. Under these
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circumstances Cronkelton should be estopped from asserting that his reliance on
Shivley’s representations was reasonable.
{¶45} Finally, the majority argues that an exception to the parole evidence
rule applies in this case because the representations were consistent with the
contract’s language. I fail to see any consistency between representations of
winterization and acceptance of the property in its “as is” condition.
{¶46} For all the reasons stated above, I dissent from the majority’s opinion
and would reverse the judgment of the trial court.
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