Court Opinion

ID: 9929026
Source: CourtListenerOpinion
Date Created: 2024-02-01 17:11:16.855507+00
Date Added: 2024-06-11T10:05:33.380484
License: Public Domain

[Cite as Ashmus v. Coughlin, 2024-Ohio-341.]

                             COURT OF APPEALS OF OHIO

                            EIGHTH APPELLATE DISTRICT
                               COUNTY OF CUYAHOGA

KEITH ASHMUS,                                   :

                Plaintiff-Appellee,             :
                                                             No. 112816
                v.                              :

THOMAS M. COUGHLIN, JR., ET AL., :

                Defendants-Appellants.          :

                              JOURNAL ENTRY AND OPINION

                JUDGMENT: AFFIRMED IN PART; REVERSED IN PART;
                          REMANDED
                RELEASED AND JOURNALIZED: February 1, 2024

            Civil Appeal from the Cuyahoga County Court of Common Pleas
                                Case No. CV-22-960806

                                          Appearances:

                Frantz Ward, LLP, and Mark L. Rodio, for appellee.

                Sammon Law, LLC, and Colin P. Sammon, for appellants.

MARY J. BOYLE, J.:

                  This case involves a dispute arising out of a residential real estate

transaction between defendants-appellants, Thomas J. Coughlin, Jr. (“Thomas”)

and Melissa A. Coughlin (collectively the “Coughlins”), and plaintiff-appellee, Keith

Ashmus (“Ashmus”). The Coughlins appeal the trial court’s decision granting
Ashmus’s motion for summary judgment and denying their motion for summary

judgment. The Coughlins raise the following two assignments of error for review:

      Assignment of Error I: The trial court erred by granting [Ashmus’s]
      motion for summary judgment on his claim for breach of contract.

      Assignment of Error II: The trial court erred by denying [the
      Coughlins’] motion for summary judgment on their claim for
      misrepresentation and failure to disclose.

              Based on the unique circumstances of this case, we find that genuine

issues of material fact exist. Therefore, we affirm the trial court’s judgment denying

the Coughlins’ motion for summary judgment, reverse the trial court’s decision

granting Ashmus’s motion for summary judgment, and remand the matter for

further proceedings.

I. Facts and Procedural History

              On August 27, 2021, the Coughlins purchased a home located at

24380 Lake Road in Bay Village, Ohio (“Property”) from Ashmus for $1,010,000

with a $2,500 credit from the Coughlins’ realtor (“Purchase Agreement”). The

Coughlins placed $200,000 in escrow as part of offer. The Purchase Agreement

provided for all funds and documents to be placed in escrow on October 31, 2021,

and for title transfer and possession on November 1, 2021.

              The Coughlins were not interested in the home that existed on the

Property. Rather, the Coughlins entered into the Purchase Agreement to perform

new construction. As a result, they did not conduct any inspections of the existing

Property but the Purchase Agreement was subject to a “14 [day] Due Diligence

Period to evaluate land and feasibility for new construction[.]” The Purchase
Agreement also provided that Ashmus shall convey marketable title to the Coughlins

“by general warranty deed * * * free and clear of all liens and encumbrances

whatsoever, except * * * such restrictions, conditions, easements (however created)

and encroachments as do not materially adversely affect the use or value of the

Property.” (Lines 73-76 of Purchase Agreement.)

              After executing the Purchase Agreement on August 27, 2021, the

Coughlins acknowledged receipt of the Residential Property Disclosure Form

(“Disclosure Form”) completed by Ashmus. Relevant to this case, Section N of the

Disclosure Form was blank and provides:

      N) OTHER KNOWN MATERIAL DEFECTS: The following are
      other known material defects in or on the property:

      For purposes of this section, material defects would include any non-
      observable physical condition existing on the property that could be
      dangerous to anyone occupying the property or any non-observable
      physical condition that could inhibit a person’s use of the property.

(Disclosure Form, p. 4.)

              On September 10, 2021, the 14-day due diligence period expired

without the Coughlins terminating the Purchase Agreement or advising Ashmus

that they had any issues with the land or feasibility for new construction. At some

point after September 10, 2021, the Coughlins became aware of a main sanitary

sewer line (“sewer line”) that stretched diagonally through the center of the land.

After investigating various options, the Coughlins determined that a new house

could not be constructed on a suitable area of the property, nor could the sewer line
be moved. The Coughlins did not close on the sale of the property and, on October

26, 2021, they presented Ashmus with a mutual release for the return of their

earnest money, which Ashmus rejected. On December 17, 2021, after negotiations

with different buyers, Ashmus accepted another offer to purchase the Property for

$925,000, less a $6,000 credit to the subsequent buyers for closing costs, for a net

sale price of $919,000. That sale closed in February 2022.

               In March 2022, Ashmus filed a complaint against the Coughlins and

the title company, Chicago Title Co. (“Chicago Title”), alleging breach of contract

and a declaratory-judgment action. Count One alleged that the Coughlins breached

the Purchase Agreement by refusing to purchase the property and demanding to

terminate the Purchase Agreement.          Ashmus alleged that as a result of the

Coughlins’ material breach of contract, he is entitled to damages in the amount of

$93,500.00 plus three percent statutory interest from October 22, 2021

($1,010,000 + $2,500 - $919,000=$93,500). In Count Two, Ashmus alleged that

he is entitled to a declaratory judgment that the Chicago Title shall deposit the

$100,000 in earnest money with the clerk of courts and, thereafter, be dismissed

from the action, and that such amount shall be held by the clerk of courts pending

final resolution of the case.1

               In response, the Coughlins filed an answer to Ashmus’s complaint

and a counterclaim, alleging “misrepresentation, non-disclosure and concealment”

      1 The parties stipulated to Chicago Title’s dismissal from the lawsuit in June 2022.

At appellate oral argument, the parties indicated that the remaining $100,000 in escrow
had been returned to the Coughlins.
of the Property’s conditions. The Coughlins alleged that Ashmus was “legally

obligated to disclose * * * any known material defects of the property,

encroachments and/or easements” on the Property in the Disclosure Form. The

Coughlins relied upon the truthfulness and accuracy of these representations when

they made the offer to purchase the Property. The Coughlins alleged that Ashmus

“intentionally and/or in conscious disregard of the truth” failed to disclose a

material issue surrounding the Property — that there was an underground sewer

line extending across a critical area of the property, which was not observable upon

inspection. The Coughlins alleged that Ashmus knew about the sewer line and knew

that the Coughlins intended to construct a new home on the Property, but failed to

disclose the existence of the sewer line.

               The Coughlins further alleged that they became aware of the sewer

line prior to close and their investigation revealed that it would not be feasible to

relocate the sewer line. As a result, the Coughlins advised Ashmus that they were

unable to close on Property because Ashmus’s failure to disclose the existence of the

sewer line inhibited their intended use and value of the property. The Coughlins

sought punitive damages for Ashmus’s alleged failure to execute the Disclosure

Form “in good faith and fair dealing.”

               The parties filed cross-motions for summary judgment. Ashmus filed

a motion for summary judgment, arguing that the Coughlins breached the Purchase

Agreement because the sewer line did not materially and adversely impact the use

or value of the Property and the sanitary sewer easement has been on public record
since 1964. Ashmus further argued that the Coughlins provided no law that a

recorded sanitary sewer easement constitutes a “defect” such that he was required

to disclose it on the Disclosure Form.

                The Coughlins filed their own motion for summary judgment, arguing

that they were entitled to summary judgment on Ashmus’s breach-of-contract claim

because Ashmus breached the Purchase Agreement when he “purposefully failed to

include the existence and location of the sanitary sewer line on the property he

marketed to the [Coughlins] as a new build” and then refused to complete the

mutual release when the Coughlins determined that the location of the sewer line

made it unfeasible for their new home construction.

                In May 2023, the trial court issued its decision granting Ashmus’s

motion for summary judgment and denying the Coughlins’ motion for summary

judgment. The court entered judgment against the Coughlins in the amount of

$93,500 plus interest and ordered that the Coughlins’ funds, which were in escrow,

be paid to Ashmus.2 The court stated:

        In August 2021, Ashmus and the Coughlins entered into a purchase
        agreement under which Coughlins were to purchase lakefront property
        in Bay Village, OH from Ashmus. After the expiration of a fourteen-
        day due diligence period on September 10, 2021, Coughlins did not
        terminated the purchase agreement. Per the purchase agreement, all
        funds and documents were to be placed in escrow on October 31, 2021,
        and for title transfer and possession on November 1, 2021. On October
        22, 2021, Coughlins claimed an existing sanitary sewer easement for
        the sewer servicing the property constituted a title defect that had a
        material and adverse impact on the use and value of the property.

        2 The Coughlins sought a stay of the judgment, which the trial court granted in June

2023.
      Coughlins signed a mutual release and authorization for return of
      earnest money to buyer and submitted [it] to Ashmus. Ashmus
      rejected this demand to cure the location of the sewer and did not sign
      the release.

      It is undisputed that the sanitary sewer easement is recorded in the
      public record, and has been since 1964.

(Judgment entry, May 8, 2023.) The court, relying on Cox v. Estate of Wallace, 12th

Dist. Butler No. CA87-06-078, 1987 Ohio App. LEXIS 10358, 6 (Dec. 31, 1987),

found that

      the existing sanitary sewer easement is a matter of public record of
      which Coughlins has constructive notice. Pursuant to the purchase
      agreement at lines 75-76 Coughlins were obligated to accept such
      “encroachments as do not materially adversely affect the use or value
      of the property.” The Coughlins have not presented evidence or
      appraisal that the sanitary sewer easement materially and adversely
      impacts the use or value of the property. Accordingly, this court does
      not find persuasive the Coughlins argument that the easement
      constitutes a “defect” such that Ashmus was required to disclose it on
      the residential public disclosure form.

(Judgment entry, May 8, 2023.)

              It is from this order that the Coughlins now appeal.

II. Law and Analysis

              Within their two assigned errors, the Coughlins argue that the court

erred by granting Ashmus’s motion for summary judgment on his claim for breach

of contract and by denying their motion for summary judgment on their claim for

misrepresentation and failure to disclose.

      A. Summary Judgment Standard of Review

              An appellate court reviews the grant or denial of summary judgment

de novo. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 671 N.E.2d 241 (1996).
In a de novo review, this court affords no deference to the trial court’s decision and

independently reviews the record to determine whether the denial of summary

judgment is appropriate. Hollins v. Shaffer, 182 Ohio App.3d 282, 2009-Ohio-2136,

912 N.E.2d 637, ¶ 12 (8th Dist.).

               Summary judgment is appropriate if (1) no genuine issue of any

material fact remains; (2) the moving party is entitled to judgment as a matter of

law; and (3) it appears from the evidence that reasonable minds can come to but one

conclusion, and construing the evidence most strongly in favor of the nonmoving

party, that conclusion is adverse to the party against whom the motion for summary

judgment is made. Id., citing State ex rel. Cassels v. Dayton City School Dist. Bd. of

Edn., 69 Ohio St.3d 217, 631 N.E.2d 150 (1994).

               The party moving for summary judgment bears the burden of

demonstrating that no material issues of fact exist for trial. Dresher v. Burt, 75 Ohio

St.3d 280, 292-293, 662 N.E.2d 264 (1996). If the moving party fails to meet this

burden, summary judgment is not appropriate; if the moving party meets this

burden, the nonmoving party must then point to evidence of specific facts in the

record demonstrating the existence of a genuine issue of material fact for trial. Id.

at 293.

               “Because summary judgment represents a shortcut through the

normal litigation process by avoiding a trial, the burden is strictly upon the moving

party to establish, through the evidentiary material permitted by the rule, that there

is no genuine issue of material fact and that [the moving party] is entitled to
judgment as a matter of law. Civ. R. 56(C).” Angus v. Blue Cross & Blue Shield, 8th

Dist. Cuyahoga No. 60412, 1992 Ohio App. LEXIS 3935, 8 (July 30, 1992).

      B. Cross-Motions for Summary Judgment

              In this case, cross-motions for summary judgment were filed. When

assessing cross-motions for summary judgment, “‘[e]ach motion must be

considered individually and separately, construing the evidence most strongly in

favor of the party against whom the motion under consideration was filed. * * * If

neither movant is so entitled, both motions must be denied.’” Wigton v. Univ. of

Cincinnati Physicians, Inc., 2021-Ohio-3576, 179 N.E.3d 241, ¶ 12 (1st Dist.),

quoting United States Fid. & Guar. Co. v. Rains, 1st Dist. Hamilton No. C-790073,

1980 Ohio App. LEXIS 10510, 1 (Apr. 16, 1980), citing Williams v. First United

Church of Christ, 37 Ohio St.2d 150, 309 N.E.2d 924 (1974).

              The crux of this appeal is whether the sewer line, which runs

diagonally across the Property, materially and adversely affected the Coughlins’ use

of the Property and whether Ashmus, who knew of the sewer line’s existence, had a

duty to disclose or provide this information in Section N of the Disclosure Form.

Because we find that genuine issues of material fact exist as to the material and

adverse affect and the nondisclosure, we find that both motions for summary

judgment must be denied.

         1. Ashmus’s Motion for Summary Judgment

              There is no dispute that Ashmus was aware of the sewer line and

easement. Ashmus maintains, however, that he did not have a duty to disclose the
sewer line easement because (1) the Coughlins had constructive notice of the

easement since it was recorded; (2) the sanitary sewer easement was not a latent,

material defect, nor did it materially and adversely impact the Coughlins’ use of the

Property; and (3) the Coughlins’ counterclaim is barred by the doctrine of caveat

emptor and the “as is” clause in the Purchase Agreement.

              We first address Ashmus’s caveat emptor argument. The Supreme

Court of Ohio has held that 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 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,

176, 519 N.E.2d 642 (1988), syllabus, following Traverse v. Long, 165 Ohio St. 249,

135 N.E.2d 256 (1956).       However, when there are latent defects not easily

discoverable, coupled with misrepresentations or concealment, the doctrine of

caveat emptor will not preclude recovery for fraud in a real estate transaction.

Finomore v. Epstein, 18 Ohio App.3d 88, 481 N.E.2d 1193 (8th Dist.1984),

paragraph three of the syllabus. The doctrine precludes buyers from recovering for

patent, as opposed to latent, not readily observable defects. Layman at 178.

              We note that the sewer line in question is well below the surface of the

Property and, therefore, not open to observation or even discoverable upon

reasonable inspection. The Coughlins could not have discovered the existence of the
sewer line by mere inspection of the property. Therefore, the doctrine of caveat

emptor does not preclude recovery in the matter before us.

              Related to caveat emptor is Ashmus’s argument that the “as is” clause

in the Purchase Agreement also precludes recovery by the Coughlins. The Purchase

Agreement states that the Property is being sold in its “‘as is’ present physical

condition[.]” (Purchase Agreement, line 149.) As previously noted, the sewer line

is well below the surface of the Property and not open to observation or even

discoverable upon reasonable inspection; therefore, Ashmus cannot rely on the

existence of the “as is” clause in the purchase agreement to avoid liability. Bedwell

v. Schmitt, 11th Dist. Portage No. 2001-P-0136, 2002-Ohio-6909, ¶ 21.

              Moreover, this court has held, however, that the “as is” clause does

not prevent liability when the seller makes a fraudulent representation or

concealment. Felker v. Schwenke, 129 Ohio App.3d 427, 430-431, 717 N.E.2d 1165

(8th Dist.1998), citing Mancini v. Gorick, 41 Ohio App.3d 373, 536 N.E.2d 8 (9th

Dist.1987) (certain fact situations may exist where a duty to disclose arises, despite

the “as is” clause); Kaye v. Buehrle, 8 Ohio App.3d 381, 457 N.E.2d 373 (9th

Dist.1983); Dennison v. Koba, 86 Ohio App.3d 605, 607, 621 N.E.2d 734 (9th

Dist.1993); Black v. Cosentino, 117 Ohio App.3d 40, 689 N.E.2d 1001 (9th

Dist.1996); see also Schmitt. Indeed, an “as is” clause does not protect a seller who

positively misrepresents or conceals the complained-of condition.          Eiland v.

Coldwell Banker Hunter Realty, 122 Ohio App.3d 446, 457, 702 N.E.2d 116 (8th

Dist.1997), citing Vecchio v. Kehn, 8th Dist. Cuyahoga No. 66067, 1994 Ohio App.
LEXIS 3622 (Aug. 18, 1994); Kossutich v. Krann, 8th Dist. Cuyahoga No. 57255,

1990 Ohio App. LEXIS 3449 (Aug. 16, 1990). Thus, while a seller may not have a

duty to disclose a defective condition, the seller may not take affirmative steps to

misrepresent or to conceal the condition. Hubbard Family Trust v. TNT Land

Holdings, LLC, 2014-Ohio-772, 9 N.E.3d 411, ¶ 20 (4th Dist.). In this case, Ashmus

was aware of the existence of the sewer line easement and did not disclose that fact.

The concealment of such a fact may render him liable, and thus we are unpersuaded

by his argument.

              We next address Ashmus’s contention that the recorded easement

bars any claims by the Coughlins under Cox, 12th Dist. Butler No. CA87-06-078,

1987 Ohio App. LEXIS 10358, because the Coughlins had constructive notice of the

easement. In Cox, the plaintiffs purchased 41 acres of land from the defendants,

who were the decedent’s estate and the estate’s administrator. The plaintiffs had no

direct contact with the defendants.      The plaintiffs conducted only a cursory

inspection before signing the sales contract and did not discover two pipeline

easements on the property until after the purchase was completed. Subsequently,

the plaintiffs filed a fraud action against defendants, alleging that they violated an

obligation to inform the plaintiffs of the easements’ existence.

              On appeal, the plaintiffs argued that the trial court erred in granting

defendants’ motion for summary judgment. Plaintiffs maintained that there was a

genuine issue of fact as to whether they had actual notice of the easements. The

Twelfth District Court of Appeals stated that “[a] duly recorded deed or instrument
operates as constructive notice to subsequent purchasers.” Id. at 6, citing Vanzant

v. Davies, 6 Ohio St. 52 (1856).         The Cox Court held that the plaintiffs had

constructive notice of the easements because the easements were properly recorded

and of public record as required by R.C. 5301.25(A).3 Id. at 5-6. As a result, the

plaintiffs had no right to rely on any alleged oral representations of the defendants

because the easements were of public record. Id. at 7.

                We find Cox distinguishable, however, because the Twelfth District’s

decision predates the 2013 Disclosure Form used in the instant case, which includes

Section N. This section requires the seller to disclose any other known material

defects in or on the property, which includes any non-observable physical condition

existing on the property that could inhibit a person’s use of the property. Because

of Section N and the fact that the easement was readily discernible we find Cox

unpersuasive.

                Next, Ashmus argues that the Coughlins failed to submit any evidence

creating a genuine issue of material fact that the recorded sewer line easement

materially and adversely impacted their use of the Property. We disagree.

                According to Thomas’s affidavit, the Coughlins

       relied upon the truthfulness and accuracy of the disclosure statement
       as well as the statements provided to us by [Ashmus’s] real estate agent
       in that there were no known conditions on the property which could
       inhabit a person’s use of the property; specifically, our ability to
       construct a suitable new residence. The specific placement of a newly

       3 ‘“Constructive notice’ is that which the law regards as sufficient to give notice and

is regarded as a substitute for actual notice or knowledge.” Cox at 6, citing In re Estate of
Fahle, 90 Ohio App. 195, 105 N.E.2d 429 (6th Dist.1950).
      constructed house was a material aspect of the purchase because it was
      a lake front property.

      After walking around and through the property and relying upon the
      accuracy and truthfulness of the disclosure statement, we ultimately
      agreed to purchase the property at issue for $1,010,000.00, to
      construct a new home on the property. At that time, we believed we
      could construct our dream house in a suitable area of the property to
      enjoy Lake Erie views, etc.

      ***

      The feasibility of the land for new construction of our desired home was
      material to the agreement and was the reason we agreed to pay
      $1,010,000.00 for this property.

      At no time prior to the purchase was the existence of the sanitary sewer
      line extending across a critical portion of the property disclosed to us.
      Further, we did not know about the existence of the sanitary sewer line
      at the time we entered into an agreement to purchase the property.

      Although the purchase agreement had a 14-day due diligence period,
      we did not discover the existence of the underground sanitary sewer
      because it was not disclosed to us in the disclosure statement, was not
      told to us by Mr. Ashmus and/or Mr. Ashmus’ agent and it was not
      something that was readily observable as it was several feet
      underground.

      ***

      Ashmus’ lack of cooperation as well as the significant cost associated
      with moving the sanitary sewer line as well as the requirement of re-
      writing an easement, receiving city approval, as well as having to dig up
      neighbors’ driveways, yards, and landscaping beds, it was determined
      that it would not be practical to construct our new home on this
      property. Clearly, the existence of the undisclosed sanitary sewer line
      in a critical portion of the property, had a material impact on our use
      and/or ability to construct a suitable new home on this property.

(Thomas affidavit, para. 11-12, 14-17, 23.)

               After the Coughlins became aware of the sewer line, they attempted

to determine whether it was still feasible to construct their new home on the
Property. According to Thomas, they investigated whether it was possible to move

the sewer line, which “would require re-writing the easement, city approval as well

as the cooperation and consent by abutting property owners.” (Thomas affidavit,

para. 21.) The Coughlins ultimately determined that they could not use the Property

as they intended because the existence of the undisclosed sewer line in a critical

portion of the Property materially impacted their use and ability to construct a new

home on the Property.

              When viewing this evidence in a light most favorable to the

nonmoving party, we find that summary judgment was improper. Ashmus knew of

the existing physical condition of the sewer line and knew that the Coughlins

intended to demolish the existing structure and build a new home on the Property,

but did not disclose the sewer line to them. Thomas averred that the sewer line had

a material impact on their use and ability to construct a suitable new home on the

Property.

              Ashmus further argues that a recorded easement on real property is

not a latent, material defect that must be disclosed on the Disclosure Form, noting

that neither the Disclosure Form nor the Revised Code includes easements as

defects that must be disclosed. Ashmus, however, conflates “easement” with the

“physical condition” of a sanitary sewer line. An easement can exist in the absence

of a physical condition. Here, Section N of the Disclosure Form defines “defect”

broadly to include “any non-observable physical condition that could inhibit a
person’s use of the property.” (Disclosure Form, p. 4.) This suggests that the sewer

line is a “defect” that should have be disclosed on the Disclosure Form.

               Thus, based on the foregoing, a genuine issue of material fact remains

as to whether the existence of the sewer line materially and adversely affected the

Coughlins’ use of the property, which was to build a new structure. Because Ashmus

did not meet his burden, we find that the trial court erred in determining that no

genuine issues of material fact existed with regard to his breach-of-contract claim.

               Accordingly, the first assignment of error is sustained.

      2. Coughlins’ Motion for Summary Judgment

               As to the Coughlins’ motions for summary judgment, they as well did

not meet their burden on summary judgment. Genuine issues of material fact exist

as to the non-disclosure of the sewer line and the sewer line’s potential to inhibit the

Coughlins’ use of the property.

               The Coughlins contend that Ashmus had a duty to disclose the

existence of the sewer line and his failure to do so resulted in a material breach of

the contract and “inhibited” them from building their new home on the Property. In

support of their argument, the Coughlins rely on R.C. 5302.30, which governs the

Disclosure Form.     R.C. 5302.30 requires that a seller of residential property

complete and deliver to a prospective purchaser a Residential Property Disclosure

Form disclosing “material matters relating to the physical condition of the property”

and “any material defects in the property” that are “within the actual knowledge” of

the seller. R.C. 5302.30(C), (D). See also Wallington v. Hageman, 8th Dist.
Cuyahoga No. 94763, 2010-Ohio-6181, ¶ 17; Hendry v. Lupica, 8th Dist. Cuyahoga

No. 105839, 2018-Ohio-291, ¶ 7, quoting Wallington. The statute requires that the

disclosure be made in good faith, which “means honesty in fact in a transaction.”

R.C. 5302.30(A)(1).

               R.C. 5302.30(E)(1) provides that “[e]ach disclosure of an item of

information that is required to be made in the property disclosure form * * * and

each act that may be performed in making any disclosure of an item of information

shall be made or performed in good faith.” If a seller fails to disclose a material fact

on the disclosure form with the intention of misleading the buyer and the buyer

relies on the disclosure form, the seller may be liable for a resulting injury.

Wallington at ¶ 18, citing Pedone v. Demarchi, 8th Dist. Cuyahoga No. 88667,

2007-Ohio-6809, citing Juan v. Harmon, 1st Dist. Hamilton No. C-980587, 1999

Ohio App. LEXIS 833 (Mar. 5, 1999). And R.C. 5302.30(J) provides in pertinent

part that

      [t]he specification of items of information that must be disclosed in the
      property disclosure form as prescribed under division (D)(1) of this
      section does not limit or abridge * * * any obligation to disclose an item
      of information that is created by any other provision of the Revised
      Code or the common law of this state or that may exist in order to
      preclude fraud, either by misrepresentation, concealment, or
      nondisclosure in a transaction involving the transfer of residential real
      property. The disclosure requirements of this section do not bar * * *
      the application of any legal or equitable defense that a transferor of
      residential real property may assert in a civil action commenced against
      the transferor by a prospective or actual transferee of that property.

               Here, the Disclosure Form was made a part of the Purchase

Agreement and Ashmus was obligated under R.C. 5302.30 to answer the questions
in the Disclosure Form based on his actual knowledge and in good faith. There is no

reference to the word “easement” on the Disclosure Form itself. Section N is a

“catchall” provision, however, that requires the seller to disclose “other known

material defects in or on the property[.]” Section N defines material defects to

include “any non-observable physical condition that could inhibit a person’s use of

the property.” There is no dispute that Ashmus had actual knowledge of the sewer

line at the time he submitted the Disclosure Form to the Coughlins, but left Section

N of the Disclosure Form blank. Furthermore, there is no dispute that the sewer line

was non-observable. A genuine issue of material fact remains, however, as to

whether the sewer line could inhibit the Coughlins’ use of the property.

              The Coughlins agreed to purchase the Property for more than $1

million with the intention of tearing it down. When they realized that building new

construction on the property was not feasible, they attempted to find another way to

build on the property. Their efforts, however, were to no avail. According to

Thomas,

      the existence of the undisclosed main sanitary sewer line clearly
      impacted our use of the property which also affected the property value.
      Again, the existence of the sanitary sewer line in an important area of
      the property would have prevented us from constructing our residence
      in a suitable area because we would have had to move the property on
      this very deep lot closer to Lake Road which would have obstructed our
      view of the lake due to the presence of the location of abutting owners’
      residences.

(Thomas affidavit, para. 24.)
               By granting summary judgment in Ashmus’s favor, Ashmus was, in

essence, allowed to withhold his actual knowledge about the sewer line and

easement and then was awarded for the same when the 14-day due diligence period

expired and the Coughlins eventually discovered what Ashmus knew all along — that

there was an existing sewer line that ran across the Property. Hubbard, 2014-Ohio-

772, 9 N.E.3d 411, at ¶ 26. (“If a seller fails to disclose a material fact on a residential

property disclosure form with the intention of misleading the buyer, and the buyer

relies on the form, the seller is liable for any resulting injury”).

               These circumstances raise genuine issues of material fact as to

whether the sewer line was a non-observable physical condition that “could” inhibit

the Coughlins’ use of the Property and whether Ashmus completed the Disclosure

Form in “good faith.” As a result, we find that the Coughlins’ motion for summary

judgment was properly denied.

               Therefore, the second assignment of error is overruled.

III. Conclusion

               After assessing each motion for summary judgment individually, we

find that neither Ashmus nor the Coughlins are entitled to judgment as a matter of

law. Based on the foregoing facts and circumstances, genuine issues of material fact

exist necessitating resolution by trial — did the sewer line, which runs diagonally

across the Property, materially and adversely affect the Coughlins’ use of the

Property and did Ashmus, who knew of the sewer line’s existence, have a duty to
disclose this information in Section N of the Disclosure Form.4 Therefore, trial

court’s judgment denying the Coughlins’ motion for summary judgment is affirmed

and the trial court’s judgment granting Ashmus’s motion for summary judgment is

reversed.

               Accordingly, judgment is affirmed in part, reversed in part, and the

matter remanded for further proceedings.

      It is ordered that appellants recover from appellee costs herein taxed.

      The court finds there were reasonable grounds for this appeal.

      It is ordered that a special mandate be sent to said 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.

_______________________
MARY J. BOYLE, JUDGE

SEAN C. GALLAGHER, J., CONCURS;
MICHELLE J. SHEEHAN, P.J., CONCURS IN PART AND DISSENTS IN PART
(WITH SEPARATE OPINION)

MICHELLE J. SHEEHAN, P.J., CONCURRING IN PART AND DISSENTING IN
PART:

               Respectfully, I concur in part and dissent in part. I agree with the

majority that the trial court properly denied the Coughlin’s motion for summary

      4 Our holding is limited to the circumstances of this particular case.  Nothing
herein should be construed as suggesting there may be a duty to disclose sewer lines on
every Residential Property Disclosure Form.
judgment. I disagree, however, with the majority’s conclusion that the trial court

improperly granted summary judgment in favor of Ashmus regarding his duty to

disclose the existence of the sewer line in the Disclosure Form. Based on my review

of the record and applicable law, I find no issue of fact requiring a trial on this issue

and would affirm the trial court’s decision granting summary judgment in Ashmus’s

favor.

               As a matter of background, prior to the enactment of R.C. 5302.30,

Ohio common law governed residential disclosures and it characterized property

defects as either patent or latent; under the rule of caveat emptor, buyers were

responsible for discovering patent defects while sellers were obligated to disclose

latent defects unless the buyer contractually agreed to take the property “as is.”

Davis v. Kempfer, 3d Dist. Union No. 14-95-31, 1996 Ohio App. LEXIS 1725, 6 (Apr.

10, 1996). However, “[w]hile the ‘as is’ disclaimers relieved sellers from their duty

to disclose latent defects and defeated claims of nondisclosure, they could not defeat

claims of fraudulent concealment or misrepresentation.” Id., citing Brewer v.

Brothers, 82 Ohio App.3d 148, 611 N.E.2d 492 (12th Dist.1992).                 See also

Montgomery v. Vargo, 2016-Ohio-809, 60 N.E.3d 709, ¶ 7 (8th Dist.) (“In the

absence of evidence of fraudulent representation or fraudulent concealment, an ‘as

is’ clause in a real estate contract and the principle of caveat emptor preclude a buyer

from recovery for claims arising from latent defects.”).

               R.C. 5302.30, enacted in 1993, makes no distinction between patent

or latent defects. R.C. 5302.30(D) states:
      [T]he [disclosure] form prescribed by the director shall be designed to
      permit the transferor to disclose material matters relating to the
      physical condition of the property to be transferred, including, but
      not limited to, the source of water supply to the property; the nature
      of the sewer system serving the property; the condition of the
      structure of the property, including the roof, foundation, walls, and
      floors; the presence of hazardous materials or substances, including
      lead-based paint, asbestos, urea-formaldehyde foam insulation, and
      radon gas; and any material defects in the property that are within
      the actual knowledge of the transferor.

(Emphasis added.)

               Pursuant to the statute, a seller now must disclose any material defect

of which he or she has actual knowledge. Southworth v. Weigand, 8th Dist.

Cuyahoga No. 80561, 2002-Ohio-4584, ¶ 20.

               Sections A to M of the statutory Disclosure Form require the seller to

disclose matters relating to water supply, nature of sewer system, roof, water

intrusion, structural components (foundation, basement/crawl space, floors,

interior and exterior wall), wood destroying insects/termites, mechanical systems,

presence of hazardous materials, underground storage tanks/wells, flood

plain/Lake    Erie    coastal    erosion    area,   drainage/erosion,     zoning/code

violations/assessments/homeowners’                  association,             boundary

lines/encroachments/shared driveway/party walls.

               The form contains a “catchall” section in Section N. Section N

requires the seller to disclose “other known material defects,” and it states that, “for

the purpose of this section, material defects would include any non-observable

physical condition existing on the property that could be dangerous to anyone
occupying the property or any non-observable physical condition that could inhibit

a person’s use of the property.” (Emphasis added.)

               In light of the catchall section, even when a purchase agreement

contains an “as is” clause, “a seller may still be liable for nondisclosure of a material,

latent defect which is actually known to him.” Arbogast v. Werley, 6th Dist. Lucas

No. L-09-1131, 2010-Ohio-2249, ¶ 38. R.C. 5302.30, however, does not provide a

penalty for the failure to disclose a material defect, nor does it provide a remedy for

the buyer; rather, a buyer’s remedy for nondisclosure is limited to common claims

for fraud. Majoy v. Hord, 6th Dist. Erie No. E-03-037, 2004-Ohio-2049, ¶ 17.

               The Coughlins claim Ashmus committed fraudulent concealment

when he failed to disclose the existence of the sewer line in the Disclosure Form. A

review of the record and the applicable law indicates, however, that the subject sewer

line is not a “material defect” as that term is defined in the Disclosure Form.

               As defined in section N of the Disclosure Form, a “material defect” is

either a dangerous condition or any non-observable physical condition that “could

inhibit a person’s use of the property.” There is no allegation by the Coughlins that

the underground sewer line is a dangerous condition. Therefore, to be a “material

defect” requiring Ashmus’s disclosure of its existence in the Disclosure Form, the

sewer line must be a condition that could inhibit a person’s use of property.

               The employment of the indefinite article “a” rather than the definite

article “the” before “person” in the definition of “material defect” is significant. In

construing a statute, “definite article ‘the’ particularizes the subject which it
precedes and is word of limitation as opposed to indefinite or generalizing force ‘a’

or ‘an’.” Crosby-Edwards v. Ohio Bd. of Embalmers & Funeral Dirs., 175 Ohio

App.3d 213, 2008-Ohio-762, 886 N.E.2d 251, ¶ 29 (10th Dist.), quoting Black’s Law

Dictionary 1477 (6Ed. 1990).    See also Black v. Ryan, 11th Dist. Lake No. 2011-L-

030, 2012-Ohio-866, ¶ 37, citing State v. McDonald, 4th Dist. Ross No. 04CA2806,

2005-Ohio-3503, ¶ 13 (“a” is an indefinite article that is used before nouns that

denote a single, but unspecified, person or thing and “the” is a word used before

singular or plural nouns that denote particular persons or things).

              Here, the record reflects that Ashmus completed the Disclosure Form

on August 8, 2021, 19 days before Ashmus entered into the purchase agreement on

August 27, 2021, with the Coughlins. The majority finds that a genuine issue of

material fact remains regarding whether the sewer line could inhibit the Coughlins’

use of the property therefore requiring its disclosure. I disagree. The question for

Ashmus to answer when he filled out the Disclosure Form was not whether the sewer

line could inhibit a particular buyer’s intended use of the property but rather

whether the sewer line could inhibit a person’s use of the property generally, due to

the use of the indefinite article. While there may be an issue of fact as to whether

the Coughlins’ intended use of the subject property — to tear down the existing home

and rebuild — could be inhibited by the sewer line due to significant cost to move

the sewer line, the record is devoid of any evidence that the sewer line could inhibit

a person’s use of the property generally. Based on the specific language of Section

N and the record before us, I find there is no issue of fact regarding whether the
sewer line is a “material defect” — as defined in the Disclosure Form – thereby

requiring its disclosure. Ashmus was not required to disclose the existence of the

sewer line in the Disclosure Form.

              To be a “material defect” warranting disclosure, the physical

condition must also be “non-observable.” Although the above analysis renders it

unnecessary to determine whether the sewer line is “non-observable,” I would

further note that the sewer easement has been recorded since 1964 and, under the

purchase agreement, the parties negotiated a 14-day period to exercise due

diligence. “Constructive notice of a defective condition can be imputed to a

defendant when the plaintiff presents evidence establishing that the defect could or

should have been discovered.” Fraley v. Ohio Dept. of Rehab. & Correction, 2019-

Ohio-2804, 139 N.E.3d 1264, ¶ 30 (10th Dist.), quoting Kemer v. Ohio Dept. of

Transp., 10th Dist. Franklin No. 09AP-248, 2009-Ohio-5714, ¶ 24. A recorded

easement is readily discoverable by a review of the public record (and the subject

easement was in fact ultimately discovered by the Coughlins through a review of the

public record). Tiller v. Hinton, 19 Ohio St.3d 66, 68, 482 N.E.2d 946 (1985)

(pursuant to R.C. 5301.25(A), a buyer can be charged with constructive notice of an

easement when a deed was timely recorded).     While the sewer line is not physically

observable, the recording of the sewer easement serves as constructive notice to a

potential buyer. “‘[T]he duty to conduct a full inspection falls on the purchasers[,]

and the disclosure form does not function as a substitute for such careful

inspection.’” Nieberding v. Barrante, 8th Dist. Cuyahoga No. 110103, 2021-Ohio-
2593, ¶ 23, quoting Roberts v. McCoy, 2017-Ohio-1329, 88 N.E.3d 422, ¶ 17 (12th

Dist.).

              The Coughlins’ counterclaim for nondisclosure and concealment is

based on their allegation that Ashmus failed to disclose the existence of the sewer

line in the Disclosure Form. Because I find no issue of fact regarding whether the

sewer line is a “material defect” requiring its disclosure by Ashmus when he

completed the Disclosure Form, I would affirm the trial court’s judgment granting

Ashmus’s motion for summary judgment. Accordingly, I concur in part and dissent

in part.