Court Opinion

ID: 3715357
Source: CourtListenerOpinion
Date Created: 2016-07-06 06:48:33.088098+00
Date Added: 2024-06-11T13:51:43.515702
License: Public Domain

{¶ 44} I must respectfully dissent. In her fifth assignment of error, Hurst contends that appellees breached their fiduciary duty to her. I agree.
 {¶ 45} A layperson sought professional assistance to complete a real estate transaction. The professional failed to perform a duty imposed by law, which could have protected the purchaser's interests. When the purchaser sought compensation through this lawsuit, her claims were summarily dismissed by the trial court.
 {¶ 46} Section 1464.07 of the Mentor-on-the-Lake city ordinances is titled "obligations of escrow agents" and states:
 {¶ 47} "No person, firm or corporation acting in the capacity of an escrow agent in any real estate transaction involving the bona fide sale or conveyance of any interest in a dwelling structure, commercial building structure or other building, or land upon which such buildings are located, in the City, shall file for record an instrument to transfer title thereto or disburse any funds from such sale, unless the provisions of this chapter have been satisfied, including, but not limited to, the specific provisions of Section 1464.05." (Emphasis added.)
 {¶ 48} Section 1464.05 provides:
 {¶ 49} "(a) No person, agent, firm or corporation shall, in a bona fide sale for a good and valid consideration, transfer or convey any interest in a dwelling structure, commercial building structure or other building, or land upon which such buildings are located, without first providing the purchaser or prospective purchaser with a current certificate of inspection or an exact copy thereof as provided in this chapter.
 {¶ 50} "(b) The seller shall deposit in escrow a statement signed by the purchaser acknowledging receipt of the certificate of inspection, and such signed statement shall list thereon the date the certificate was given to the purchaser.
 {¶ 51} "(c) If, under the terms of the contract of sale, the seller is obligated to correct all violations listed on the certificate of inspection, the seller shall deposit in escrow, before transfer of title to the purchaser, either a compliance document as described in Section 1464.03 and/or a written statement agreed upon by the seller and the purchaser filed with the escrow agent setting forth an agreed upon sum of money that is sufficient to cover the costs of correcting those specific violations listed on the certificate of inspection which remain uncorrected."
 {¶ 52} Obviously, appellees did not wish to comply with these ordinances. They included language in the escrow contract that stated that they did not have to follow the law. That action breached their fiduciary duty to Hurst.
 {¶ 53} "The depositary under an escrow agreement is an agent of both parties, as well as a paid trustee with respect to the purchase money funds placed in his *Page 147 
hands."4 Knazek recognized her role in this dual representation, stating in her deposition, "I know I work for both sides * * *." She explained that she represented all parties, including the buyer, the seller, and the realtor.
 {¶ 54} A fiduciary has a duty to act primarily for the benefit of another.5 Appellees were retained by Petty, who was retained by Hurst. In her deposition, Knazek acknowledged that she represented Hurst, among others, in the transaction. Thus, as an escrow agent, appellees owed a fiduciary duty to Hurst.
 {¶ 55} The majority holds that neither the land sale contract nor the escrow agreement required appellees to hold funds until a point-of-sale inspection was completed. I agree. However, Mentor-on-the-Lake municipal ordinance sections 1464.05 and 1464.07 clearly place this duty on appellees.
 {¶ 56} In addition, the majority holds that only the Lowes were responsible for ensuring that any required inspections were preformed. While the Lowes, as sellers, did have a duty to make sure a point-of-sale inspection was performed, appellees were responsible for ensuring that the Lowes satisfied this duty.
 {¶ 57} Appellees breached their fiduciary duty to Hurst by including a disclaimer in the escrow contract that was inherently against her interests. As a matter of law, attempting to excuse a duty through a disclaimer placed on the agent by law, which benefits the purchaser, is breaching the fiduciary duty that the escrow agent owes to the purchaser.
 {¶ 58} The trial court erred by entering summary judgment in favor of appellees on the issue of a breach of fiduciary duty.
 {¶ 59} In her first assignment of error, Hurst contends that the closing escrow agreement was unenforceable as a matter of law. Specifically, Hurst argues that the contract clause waiving liability on behalf of appellees regarding compliance with city ordinances is unconscionable. I agree.
 {¶ 60} There are two prongs that must be met for a successful claim of unconscionability.6 A substantive unconscionability analysis considers whether the actual terms of the contract are commercially reasonable.7 "Procedural *Page 148 
unconscionability involves those factors bearing on the relative bargaining position of the contracting parties, including their age, education, intelligence, business acumen and experience, relative bargaining power, who drafted the contract, whether the terms were explained to the weaker party, and whether alterations in the printed terms were possible."8
 {¶ 61} This contract clause was substantially unconscionable. It permitted appellees to circumvent their duties prescribed by the Mentor-on-the-Lake city ordinances. Moreover, the clause was unreasonably unfair to Hurst, as it permitted the transaction to proceed without requiring a city inspection to take place.
 {¶ 62} In addition, the contract clause was procedurally unconscionable. In her deposition, Hurst testified that she was a high school graduate. She indicated that she had no other real estate experience. These factors are indicative of Hurst's relative disadvantageous bargaining position. Meanwhile, appellees drafted the contract. Appellees were in the business of serving as escrow agents to complete real estate transactions of this nature. Finally, Knazek stated that she was aware of the city ordinance sections regarding point-of-sale inspections. Accordingly, appellees had a much stronger bargaining position.
 {¶ 63} The trial court found that Hurst consented to the terms of the contract because she read and signed the document without asking any questions to anyone at Enterprise. As previously noted, as the escrow agent, appellees were acting in a dual agency capacity. In the words of Knazek, they were representing Hurst, the Lowes, and Smythe Cramer. Why would Hurst have any reason to question whether appellees, supposedly acting in her best interest, intentionally included language in the contract to circumvent their duties pursuant the city ordinance to her detriment?
 {¶ 64} The majority ratifies the trial court's reasoning, noting that Hurst could have negotiated with appellees or even changed the language of the clause. Again, appellees represented Hurst in this transaction. If an individual sought the advice of an attorney to draft a complicated commercial transaction, would the individual be required to meticulously question every clause of the agreement and negotiate with his attorney to make sure the contract is not inherently unfair to him? Of course not. The individual sought legal assistance with the assumption that the professional would zealously represent his interests. The same is true in the case sub judice. *Page 149 
 {¶ 65} Appellees' inclusion of a disclaimer attempting to excuse a duty imposed upon them by the Mentor-on-the-Lake city ordinances renders this contract clause unconscionable. The trial court erred by entering summary judgment in favor of appellees on this issue.
 {¶ 66} I would reverse the trial court's judgment regarding Hurst's breach-of-fiduciary-duty and unconscionability claims.
4 Pippin v. Kern-Ward Bldg. Co. (1982), 8 Ohio App. 3d 196, 198, 8 OBR 266, 456 N.E.2d 1235, citing Squire v. Branciforti (1936),131 Ohio St. 344, 6 Ohio Op. 59, 2 N.E.2d 878.
5 See, e.g., Strock v. Pressnell (1988), 38 Ohio St. 3d 207, 216,527 N.E.2d 1235.
6 Cross v. Carnes (1998), 132 Ohio App. 3d 157, 170, 724 N.E.2d 828, quoting Collins v. Click Camera  Video, Inc. (1993),86 Ohio App. 3d 826, 834, 621 N.E.2d 1294.
7 Jeffrey Mining Prod., L.P. v. Left Fork Mining Co. (2001),143 Ohio App. 3d 708, 718, 758 N.E.2d 1173, citing Dorsey v.Contemporary Obstetrics  Gynecology, Inc. (1996), 113 Ohio App. 3d 75,80, 680 N.E.2d 240.
8 Cross v. Carnes, 132 Ohio App.3d at 170, 724 N.E.2d 828, citingCollins v. Click Camera  Video, Inc., 86 Ohio App.3d at 834,621 N.E.2d 1294. *Page 150