Summary
In Marquard v. Meadows (Dec. 16, 1999), Cuyahoga App. No. 75243, 1999 WL 1204855, home purchasers brought an action against the vendor in small-claims court.
Summary of this case from Campbell v. Union Twp. Serv. DeptOpinion
No. 75243.
Date of Announcement of Decision: December 16, 1999.
CHARACTER OF PROCEEDING: Civil appeal from the Rocky River Municipal Court, Case No. 97-CVF-1837.
JUDGMENT: Affirmed.
APPEARANCES:
For Plaintiffs-Appellees: JOHN E. SHEPHERD, ESQ.
For Defendant-Appellant: GEORGE PENFIELD, ESQ., FRANCES F. ALLINGTON, ESQ.
Appellant-defendant, Mary Meadows, is appealing the Rocky River Municipal Court's verdict in favor of appellees-plaintiffs, Kenneth Marquard and Antoinette Marquard. For the following reasons, we affirm.
Appellees purchased a home from appellant, which was located at 19521 Story Road, Fairview Park, Ohio. The house was built into a hill. The lower level was at ground level on the west side, and underground on the east side. On the west side of the home, there were steps leading up to the second level. Appellant's son lived in the first level, which is referred to as the basement or the "garden apartment." About nine months after moving in, appellees discovered water leakage in the northwest corner of the basement.
The purchase agreement stated that the property was being purchased in its present physical condition. Appellant provided a Residential Property Disclosure Form, which stated that appellant had no knowledge of any water problems in the basement.
Appellee-Kenneth Marquard testified that, Mr. Deak, appellant's friend, showed them the home. Kenneth asked if there were any water problems in the basement and Mr. Deak said, "no." The judge struck Deak's answer as hearsay. Appellees also testified that they asked appellant about water problems in the basement, and she said there were none. Appellant did not recall whether appellees asked her if there were any problems with the basement.
The Marguards did not observe anything which would lead them to believe water problems existed. A sleeper couch was in the northwest corner. The basement walls appeared freshly painted.
Appellees hired a professional home inspector. The inspection report stated that the downspouts were subject to blockage. Periodic cleaning and repair of the downspouts would be necessary. The inspector noted that the grading was low and flat at the rear foundation. The report stated that improper grading accounts for most foundation water penetration. The inspector found no seepage in the basement, but noted that only 40% of the area was visible. Appellees signed an addendum to the purchase agreement, which stated that failure to notify the seller in writing of any defects found in the inspection constitutes a waiver.
When appellees took possession in August, 1996 they immediately removed the sleeper sofa left by appellant in the northwest corner of the garden apartment. After the sofa was moved, appellees did not see anything on the walls or floor indicating a problem. In June of 1997, appellees were moving their sofa away from the wall in their stocking feet, when they noticed the carpeting in the northwest corner was damp. When they pulled the carpeting back, the padding was moldy and the baseboards and drywall were rotted. A visquine sheet was underneath the carpet padding in the northwest corner, anchored down by the caulking on the walls. With the carpet peeled away, appellees could observe water coming in the basement through the west wall during heavy rains.
Appellant testified that she had new gutters and down spouts installed in 1989. Appellant replaced the carpeting in the garden apartment in July. 1990. Appellant said she was not aware that the visquine sheet was underneath the carpeting. Appellant testified that she never had any problems with water seepage. Appellant installed a new concrete lower step on the staircase that goes up the west side of the house.
Appellant's son, John Paximadis, testified that he lived in the garden apartment from 1990 to July of 1995. Water was on the carpet on two occasions. Once, the water heater broke and another time an air conditioner drain hose was knocked loose, both in the southeast corner of the basement. He never noticed any other dampness, mold or mildew. In the spring of 1995, he hit the railing imbedded in the front slate step while backing up his car. The right corner of the slate step broke off.
Appellees hired Mural and Sons to fix the problem. Robert Mural testified that the down spout located on the west wall had a piece of underground plastic pipe that was not properly connected to the sewer. The type of pipe was a type which has been in use only for the past ten to fifteen years. During heavy rains, the water would dump right along next to the foundation wall. There were cracks in the foundation slab and the bottom concrete step of the staircase. When the bottom step was removed, there was a hole in the foundation wall. The step was sloped toward the house, and water from the steps would flow into the house. When the new step was put in, the hole was patched improperly. Mural stated that rotting would just be beginning, and would not be significant after four to six months. Light mold would appear in four to six months. If the basement was wet and then dry for ten to twenty times a year, he would expect to see some rotting. He also noticed concrete had been placed between the house and the walk on the west side of the house in front of the steps.
Appellees filed a small claims complaint against appellant demanding judgment in the amount of $3,000. The case was transferred to the regular docket. At a pretrial conference, appellees were granted leave to file an amended complaint. An amended complaint was never filed. At trial, the judge stated that the original small claims complaint was before the court. In closing arguments, appellant stated that fraud was not pled with particularity.
The judge held in favor of appellees in the amount of $2,105.
I.
Appellant's first assignment of error states:
WHETHER UNDER THE OHIO RULES OF CIVIL PROCEDURE 9(B), PLAINTIFF IS ENTITLED TO A JUDGMENT FOR FRAUDULENT MISREPRESENTATION WHEN PLAINTIFF DID NOT PLEAD FRAUDULENT MISREPRESENTATION WITH PARTICULARITY AND FAILED TO AMEND THE PLEADINGS EVEN AFTER HAVING BEEN GRANTED LEAVE TO AMEND.
Fraud must be pled with particularity. Civ.R. 9(B). The allegations must be sufficient to inform the defendant of the act of which the plaintiff complains and enable the defendant to prepare a response. See Baker v. Conlan (1990), 62 Ohio App.3d 290. The complaint should allege the time, place and content of the fraudulent misrepresentation, the fact misrepresented and the consequences. Id.; Korodi v. Minot (1987), 40 Ohio App.3d 1, 3. Direct allegations on every material legal point need not be made if they are fairly inferred from the facts alleged. Baker, supra; see also Illinois Controls, Inc. v. Langharm (1994), 70 Ohio St.3d 512.
Appellees' complaint alleged that appellant signed a disclosure statement stating there was no problem with water leakage, but appellees discovered water leakage nine months later. The complaint alleged that appellant had knowledge of the problem when she sold the house to appellees. Appellees alleged sufficient facts to plead fraud with particularity. Although the complaint did not state the legal ground of fraudulent misrepresentation, this legal ground is fairly inferred from the facts alleged. The allegations were sufficient to put appellant on notice of the statements appellees complained of and enabled appellant to prepare an appropriate response.
Moreover, the parties tried the issue of fraudulent misrepresentation by implied consent. See Civ.R. 15(B). Both parties submitted trial briefs citing case law on fraudulent misrepresentation. Both sides presented evidence at trial to prove or disprove fraudulent misrepresentation. Appellant did not timely object to the claim of fraudulent misrepresentation. Appellant did not show how she was prejudiced by the lack of proper allegations in the complaint. Therefore, the trial court did not abuse its discretion in finding that the claim of fraudulent misrepresentation was tried by implied consent. See Civ.R. 15 (B); State ex rel. Evans v. Bainbridge Twp. Trustees (1983), 5 Ohio St.3d 41; Mason v. Swartz (1991), 76 Ohio App.3d 43.
Accordingly, this assignment of error is overruled.
II.
Appellant's second assignment of error states:
WHETHER THE TRIAL COURT COMMITS REVERSIBLE ERROR WHEN IT DENIES THE DEFENSE OF CAVEAT EMPTOR, DUE TO FRAUDULENT MISREPRESENTATION WHEN THE PLAINTIFF FAILS TO OFFER SUBSTANTIAL, CREDIBLE EVIDENCE ON EACH OF THE ELEMENTS NECESSARY TO PROVE FRAUDULENT MISREPRESENTATION.
Judgements will not be reversed as against the weight or sufficiency of evidence, if the judgment is supported by competent, credible evidence going to all the essential elements of the case. C.E. Morris Co. v. Foley Construction Co. (1978), 54 Ohio St.2d 279; Seasons Coal Co. v. Cleveland (1984), 10 Ohio St.3d 77, 79-80. Appellant asserts that the trial court could only find that appellant was not liable, based on the doctrine of caveat emptor.
The doctrine of caveat emptor precludes recovery in an action by the purchaser for a structural defect in real estate where (1) the condition complained of is open to observation or discoverable upon reasonable inspection, (2) the purchaser has the unimpeded opportunity to examine the premises, and (3) there is no fraud on the part of the vendor.
Layman v. Binns (1988), 35 Ohio St.3d 176, syllabus. Additionally, appellant argues the language of the purchase agreement was such that it absolved appellant from liability for fraudulent non-disclosure. See Arbor Village Condominium Assn. v. Arbor Village Ltd., L.P. (1994), 95 Ohio App.3d 499, 511.
The evidence indicates that appellees had an adequate opportunity to inspect the house.
There was competent, credible evidence that the defects were latent. Neither appellees nor their experts saw any indication of a water problem. Although appellees did not move the couch, appellees did not find any problem when they moved the couch later. The inspector's report did not put appellees on notice of the defects. There was no evidence the problem was caused by improper grading. The report stated that blockage or damage to a down spout may occur, but did not state that there was an improperly installed underground pipe and a hole in the foundation.
There was sufficient evidence to demonstrate the elements of fraudulent representation or concealment. These elements are:
(1) a representation or concealment of 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 whether it is true or false that knowledge may be inferred; (4) with the intent of misleading another into relying upon it; (5) justifiable reliance upon the representation or concealment; and (6) injury proximately caused by the reliance.
Black v. Cosentino (1996), 117 Ohio App.3d 40.
Appellant represented in the disclosure form and made a verbal statement that there were no water problems in the basement. Appellees testified that they repeatedly asked about the water problems, and it was material to the transaction. The trial court could find appellees justifiably relied on these statements.
There was sufficient evidence to conclude that appellant had knowledge of the water problem. There was a visquine sheet underneath the carpeting, and concrete patching the outside wall. The testimony of Robert Mural indicated that it would take a while, maybe a year, for heavy mold to accumulate and the baseboards to rot. Appellant and her son testified that they had no knowledge of the problem. The credibility of these witnesses was for the trial judge, who had the opportunity to observe these witnesses in person. On the trial of a case, either civil or criminal, the weight to be given the evidence and the credibility of the witnesses are primarily for the trier of fact. See City of Cleveland v. Shaffer (1996), 112 Ohio App.3d 631.
There was sufficient evidence to support the trial court's verdict in favor of appellees.
Accordingly, this assignment of error is overruled.
III.
Appellant's third assignment of error states:
WHETHER THE TRIAL COURT COMMITS REVERSIBLE ERROR WHEN, IN VIOLATION OF EVID. R. 801, IT RELIES ON EXCLUDED HEARSAY EVIDENCE IN AN ACTION FOR A STRUCTURAL DEFECT IN REAL ESTATE, AND RULES THAT ALL NECESSARY ELEMENTS OF FRAUDULENT MISREPRESENTATION WERE PROVEN.
The statements made by Mr. Deak were excluded as hearsay. When the trial judge stated her findings of fact and conclusions of law on the record, she stated that Deak made a representation to the plaintiffs, with utter disregard and recklessness as to whether it was true or false. A trial court's judgment must be affirmed if there are any valid grounds to support it. Joyce v. General Motors Corp. (1990), 49 Ohio St.3d 93, 96. In this case, the evidence was clear that appellant represented on the disclosure form that there were no seepage problems in the basement. Even if the trial court improperly considered the hearsay statements of Mr. Deak, the error was harmless. See Civ.R. 61. Additionally, the rules of evidence are inapplicable in small claims court, and hearsay statements may be admissible. See Turner v. Sinha (1989), 65 Ohio App.3d 30.
Accordingly, this assignment of error is overruled.
The decision of the trial court is affirmed.
It is ordered that appellees recover of appellant their costs herein taxed.
The Court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this Court directing the Rocky River Municipal Court 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.
KARPINSKI, J., CONCURS IN JUDGMENT ONLY (SEE ATTACHED CONCURRING OPINION), CORRIGAN, J., DISSENTS (SEE ATTACHED DISSENTING OPINION).
ANN DYKE, PRESIDNG JUDGE
CONCURRING OPINION
I concur in judgment only.
If I were the fact finder, I doubt that I would have been by persuaded the evidence presented here. However, I cannot say that no reasonable person could find in favor of the plaintiffs and that is the standard by which we must review the trial court's verdict here.
DISSENTING OPINION
I must respectfully disagree with the majority as I would vacate the trial court's entry of judgment in favor of plaintiffs-appellees and enter judgment in favor of defendant-appellant as there was insufficient evidence, as a matter of law, properly before the trial court to support a finding that the appellant engaged in fraudulent concealment of a known defect prior to the transfer of the residence at issue from the appellant to the appellees.
As the majority opinion recognizes, in order to overcome the common law doctrine of caveat emptor, a buyer must show that a seller or agent committed fraud. Layman v. Binris (1988), 35 Ohio St.3d 176, 177; Belluardo v. Blankenship (June 4, 1998), Cuyahoga County App. No. 72601, unreported. The elements of fraudulent concealment are: (1) a material concealment, (2) knowingly concealed, (3) with the intent of misleading another into relying upon it, (4) reliance, with a right to do so, upon the concealment by the party claiming injury, and (5) injury resulting from the reliance. Belluardo v. Blankenship, supra; Gaines v. Preterm-Cleveland, Inc. (1987), 33 Ohio St.3d 54, 55.
In the instant case there was never any evidence introduced at trial showing a material and knowing concealment by the appellant. The appellees moved the couch which was covering the area where the water damage occurred soon after moving into the residence. Nevertheless, the appellees did not notice the dampness for nearly another full year. How then can it be presumed that the appellant must have had knowledge, prior to the sale, of a condition that the appellees did not notice for an entire year, despite the fact that the area was in plain view to the appellees, but had been covered by a large sectional couch during the time that the appellant occupied the house. Additionally, one of the appellees, Antoinette Marquard, testified that she only noticed the dampness because she was walking in the affected area of the basement in her bare feet. Thus, it can be inferred that even when the couch was removed, the water problem was not immediately visible to the naked eye.
In the case of Belmer v. Petrella (May 31, 1994), Richland App. No. 93-CA-96-2, unreported, the court stated:
Rather than accept personal responsibility for their decisions, many people are quick to look for someone else to blame when things go wrong. The doctrine of caveat emptor is intolerant of that tendency in disgruntled home buyers[.]
In Layman v. Binns, supra, the Ohio Supreme Court reaffirmed the role of the doctrine of caveat emptor in the regulation of the real estate marketplace:
The doctrine of caveat emptor is one of long standing. Since problems of varying degree are to be found in most dwellings and buildings, the doctrine performs a function in the real estate marketplace. Without the doctrine nearly every sale would invite litigation instituted by a disappointed buyer. Accordingly we are not disposed to abolish the doctrine of caveat emptor. A seller of realty is not obligated to reveal all he or she knows. A duty falls upon the purchaser to make inquiry and examination. Layman v. Binns (1988), 35 Ohio St.3d 176, 177.
Even if the appellees had established that there was a false and material representation made to them as to the condition of the basement by either the appellant or her agent, their claim would still fail because of their inability to demonstrate justifiable reliance on the representation or concealment. A party seeking damages for fraudulent concealment must show justifiable reliance on the concealed matter. Gaines v. Preterm-Cleveland, Inc., supra. No such reliance is shown here because the appellees independently exercised their option to inspect the property. Belluardo v. Blankenship, supra. "A buyer cannot be said to have justifiably relied upon representations made by the seller where the purchase agreement is clearly contingent upon the inspection rather than any alleged representations." Massa v. Genco (Mar. 1, 1991), Lake Cty. App. No. 89-L-14-162, unreported.
In this case the appellees chose to have an independent inspection of the property performed by an expert, rather than rely on the alleged representations of the appellant. There is no evidence that the inspection was in any way impeded by the appellant. The inspector recommended some minimal repairs to a detached down spout that, if performed, may have prevented the water damage to the subject property. The appellees' inspector also put them on notice that the sloping of the soil on the property and along the foundation of the house needed to be adjusted in order to "reduce the chance of water penetration and foundation structural concerns." The appellees nonetheless chose not to undertake the recommended repairs.
Appellee, Antoinette Marquard, testified at trial that "we were so concerned about this because it had been a problem in our previous home and that we would be extremely upset if this basement were to have water problems." It is interesting that given this "extreme concern" the appellees would 1) not bother to take basic precautionary measures recommended by their inspector, and 2) rely on the representation of a friend of the owner who did not live in the house and was not in a position to know the condition of the home.
By retaining the services of an expert inspector and by making the sale contingent on the inspection, rather than on the alleged representations of the appellant, the appellees affirmatively demonstrated that they were not relying on the representations of the appellant as to the condition of the premises. Therefore, there was no justifiable reliance on the part of the appellees.
In light of the foregoing, it is impossible, in my view, to conclude that there was sufficient evidence to establish the elements of fraudulent representation. Therefore, the appellees' recovery should have been barred by the doctrine of caveat emptor.
I also differ from the majority's analysis of the issue found in the first assignment of error of whether the appellees plead fraud in this case with sufficient particularity. The only "complaint" in the record in this case is a one-paragraph "statement of claim" filled out by the appellees when they originally filed the case pro se in the small claims division. This statement of claim does not include a claim for fraud. The appellees were granted leave by the court to amend their complaint, but failed to do so. It is not apparent from the record why the appellees failed to comply with the court's order granting them leave to amend. Yet, it is apparent that the appellant was prejudiced by the failure to properly plead fraud because it was impossible from the complaint for the appellant to know what alleged misrepresentation the appellees claimed they were induced to rely on. This necessarily resulted in the appellant being prevented from being able to adequately prepare a defense prior to trial.
Finally, I would also sustain the appellant's third assignment of error, dealing with the trial court's reliance on stricken testimony in its oral findings of facts. The testimony in question was proffered by Kenneth Marguard, and was to the effect that a "friend" of the appellant, who had been present at the time that the appellees initially toured the house, had represented to him that there were no water problems in the basement and that appellees had relied on this representation despite the fact that they later retained an expert for the purpose of, among other purposes, examining the basement for evidence of water damage. The trial court properly struck this testimony as impermissible hearsay, but then proceeded to base its decision on the stricken testimony.
Initially, there was absolutely no evidence in the record that "Mr. Deak" was authorized to make a representation as to the condition of the basement. Secondly, the majority misperceives the record when it states that "[e]ven if the trial court improperly considered the statements of Mr. Deak, the error was harmless." In its findings of fact the trial court stated the following:
But the fact remains that [the water problem] was there and the fact remains that there was response (sic) to Plaintiffs' questions with regard to it and I'm going to say to you that somebody was there made (sic) some specific representation with regard to questions. And I'm not questioning that you were a meticulous homeowner and that you upgraded your former home.
* * *
I do believe that this is a case of a latent defect; I do believe that when you have something underneath carpeting that that is a latent defect. And once the statement was made that there was no problem and that there was a representation there I believe made with utter disregard and recklessness as to whether it was true or false or not there is a problem.
* * *
And I do have to say, though, with Mr. Deak's being there and questions being, you know, responded to and representations made, that I do feel it incumbent upon the Court (sic) to give Plaintiff damages of $2,150.00. * * * And I believe that a person indicated that there was absolutely no problem in response to showing and then the problem developed. (Emphasis added.)
Thus, I believe that it is clear from the trial court's findings on the record that it relied almost exclusively on the testimony of Paul Deak in support of its finding that the appellant committed fraud by making an affirmative misrepresentation as to the condition of the home with the intention of misleading the appellees into relying upon it. Given that the testimony of Kenneth Marquard had been stricken from the record this was clearly impermissible.
The majority states that "the rules of evidence are inapplicable in small claims court, and hearsay statements may be admissible." The admissibility of Mr. Marquard's statements as to his encounter with Mr. Deak are not at issue here. The trial court sustained the objection to this testimony at trial. Therefore, these statements were not part of the evidence properly before the court. Furthermore, the trial court transferred this case from the small claims docket to the general docket on January 6, 1998, near the time that the appellees were given leave to amend their complaint to properly state a claim for fraud. The case was never transferred back to the small claims docket. The transcript of the trial in the instant matter is 435 pages long. Both the appellant and the appellees were represented by counsel at trial and, during the majority of proceedings prior to trial. The only reason that the case was originally assigned to the small claims docket is that the appellees initially filed the suit pro se. Once the appellant's counsel filed an answer (along with a motion to transfer the case to the general docket) and the appellees obtained legal counsel, there was absolutely no reason for the case to remain in the small claims division.
The majority cites Turner v. Sinha (1989), 65 Ohio App.3d 30 in support of its assertion that the Rules of Evidence were not applicable. The plaintiff-appellee in Turner was pro se and the disputed testimony concerned an alleged diagnosis of her dog at the local veterinary hospital. The court reasoned that:
The small claims division is a "layman's forum" and a judge or referee, while exercising some discretion "should not deny a layman justice through the formalistic application of the law of evidence." Staff Note to Evid.R. 101. * * *
This is the type of case for which the small claims courts were designed and we believe that formalistic application of the hearsay rules in this case would undermine the goal's of the layman's forum. Turner had no expertise and her only alternative would be to subpoena the veterinarians into court. To require her to do so would place an undue burden on her and other small claims litigants similarly situated. Turner v. Sinha, supra, at 33-34.
The facts of the instant case differ markedly from those in Turner. The litigants in this case were in no way "similarly situated" to those in Turner, but rather were each represented by experienced counsel throughout the trial. The "layman's forum" rationale for discarding the Rules of Evidence was not applicable, even if the case had not been transferred from the small claims docket. Therefore, I would sustain the appellant's third assignment of error.
It is a serious stigma to a person's reputation when a tribunal makes a determination that the person has engaged in fraudulent and dishonest behavior. Such determinations must not be reached lightly, but rather should be made with discretion and caution.
I believe that the majority's decision invites litigation by failing to apply the long standing doctrine of caveat emptor to a situation where it should have clearly been a defense. Additionally, the record is deplete of any evidence that the appellant made a material misrepresentation with knowledge of its falsity or that the appellees were justified in their purported reliance thereon. Accordingly, I would reverse the judgment of the trial court and enter judgment for the appellant.