Apostolos Group, Inc. v. BASF Constr. Chems., L.L.C.

2011 Ohio 2238

• Court: Ohio Court of Appeals
• Decided: May 11, 2011
• Docket: 25415
• Status: Published

Opinion

[Cite as Apostolos Group, Inc. v. BASF Constr. Chems., L.L.C., 2011-Ohio-2238.]

STATE OF OHIO ) IN THE COURT OF APPEALS )ss: NINTH JUDICIAL DISTRICT COUNTY OF SUMMIT )

APOSTOLOS GROUP, INC. C.A. No. 25415 dba THOMARIOS

Appellant APPEAL FROM JUDGMENT v. ENTERED IN THE COURT OF COMMON PLEAS BASF CONSTRUCTION CHEMICALS, COUNTY OF SUMMIT, OHIO LLC CASE No. CV 2007-10-7262

Appellee

DECISION AND JOURNAL ENTRY

Dated: May 11, 2011

CARR, Judge.

{¶1} Appellant, The Apostolos Group, Inc., dba Thomarios (hereinafter referred to as

“Thomarios”) appeals the order from the Summit County Court of Common Pleas granting a

motion to dismiss count one of the complaint in favor of appellee, BASF Construction

Chemicals, LLC. (hereinafter referred to as “BASF”). This Court affirms.

I.

{¶2} This case was initiated by Thomarios on October 17, 2007, against multiple

defendants and eventually maintained solely against BASF. Thomarios subsequently filed

amended complaints on November 9, 2007, and June 26, 2008. Thomarios filed a third amended

complaint on April 8, 2009, against BASF, the sole remaining defendant. Count one of the third

amended complaint contained individual claims for breach of implied warranty, common law

negligence, strict liability, and punitive damages. Count two of the complaint contained a claim 2

for breach of express warranty under R.C. 1302.26. On April 20, 2009, BASF filed an answer to

the third complaint. On that same day, BASF filed a motion to dismiss count one of the third

amended complaint and the claim for punitive damages pursuant to Civ.R. 12(B)(6). On April

23, 2009, Thomarios filed its response to BASF’s motion to dismiss. Subsequently, on April 29,

2009, the trial court issued an order dismissing count one of the third amended complaint and the

associated punitive damages claim. Following the dismissal of count one of the third amended

complaint, the case proceeded under the claim for breach of express warranty under R.C.

1302.26. A bench trial was held before a magistrate in December of 2009. The magistrate’s

decision granting a verdict in favor of BASF was issued on February 12, 2010, and subsequently

adopted by the trial court on May 14, 2010. Thomarios filed a notice of appeal on May 24, 2010.

{¶3} The following substantive facts appeared in the third amended complaint and are

not in dispute on appeal. In October of 2005, Thomarios was contacted by the Akron

Metropolitan Housing Authority (“AMHA”) to apply deck coating on exterior balconies at the

Fowler Apartments in Akron, Ohio. The architect for the project, Rasmussen Design Group, Inc.

(hereinafter referred to as Rasmussen), specified the concrete deck coating for Thomarios to

apply to the exterior decking of the Fowler Apartments. Rasmussen indicated that the concrete

deck coating, known as Sonoguard, was manufactured by BASF. At some point after the

initiation of Thomarios’ deck coating process, Rasmussen advised Thomarios that the deck

coating remained “gummy” and “sticky” and was not hardening as it was supposed to according

to the manufacturer’s directions. These discussions occurred on or about October 18, 2005, and

were memorialized in a letter dated October 19, 2005, from Rasmussen to Thomarios. Because

the deck coating remained “gummy” and “sticky,” falling leaves stuck to the concrete decking

and such decking was rendered unfit for its intended purpose, and a good portion of the total job 3

had been insufficiently completed as of late October 2005. Rasmussen requested that Thomarios

contact the manufacturer’s representative for BASF and ask them how to proceed to cure the

defect so that the deck coating would harden and not remain “gummy” and “sticky.”

{¶4} Thomarios contacted the manufacturer’s representative as requested and BASF’s

representative instructed Thomarios to place a “top coat” of sealer on the defective areas that

would cure the defects. Despite following BASF’s instructions concerning how to repair the

deck coatings problems, the deck coating remained “gummy” and “sticky” and BASF’s

instructions for repair failed. Thomarios had to make its own determination about how to repair

the defects caused by the defective product which eventually caused Thomarios to strip the entire

defective coating off the concrete decking at their own cost. BASF then provided Thomarios

another batch of deck sealant to apply to the decking of the Fowler Apartments after Thomarios

stripped the prior defective layer. The second batch of deck coating performed to expectations as

well as the manufacturer’s representations, and this solution was solely attributable to

Thomarios.

{¶5} Thomarios complied with all requirements set forth in all warranties associated

with the product at issue and applied the product as directed by the manufacturer’s specifications

at all times. A reasonable examination of the goods by Thomarios prior to purchase would not

have disclosed any defects which would have been readily apparent to Thomarios. Thomarios

suffered economic damages in regard to the repair of the decking at the AMHA project at issue

to which the defective product was applied, needed to be removed, then once again applied, with

all labor and expenses at Thomarios’ cost, less the cost of the new deck coating product.

{¶6} Thomarios is a commercial consumer and the product at issue was purchased to

be applied to a commercial job and the parties to this case were not in privity with each other at 4

the time of the purchase, as the product was purchased at WL Tucker Supply Company in

Summit County, Ohio. Thomarios is a commercial consumer who is maintaining a claim for

breach of implied warranty/strict liability against a manufacturer, not in privity, for purely

economic loss. Upon information and belief, the Sonoguard product at issue has previously

failed in the same type of manner as it has failed in the instant case, and such failure can be

attributed to a defect in the product and not application by Thomarios.

{¶7} On appeal, Thomarios raises one assignment of error. While Thomarios

challenges the trial court’s dismissal of the claim for breach of implied warranty in tort and the

associated punitive damages claim, it does not challenge the trial court’s judgment on the breach

of express warranty issue on appeal.

II.

ASSIGNMENT OF ERROR

“THE TRIAL COURT ERRED AS A MATTER OF LAW AND/OR ABUSED ITS DISCRETION WHEN IT DISMISSED, PURSUANT TO CIV.R. 12(B)(6), COUNT I OF THE APPELLANT’S THIRD AMENDED COMPLAINT FOR BREACH OF IMPLIED WARRANTY IN TORT AND THE ASSOCIATED PUNITIVE DAMAGES CLAIM.”

{¶8} In its sole assignment of error, Thomarios argues that the trial court erred in

granting BASF’s motion to dismiss count one of the third amended complaint pursuant to Civ.R.

12(B)(6). This Court disagrees.

{¶9} An appellate court reviews a trial court order granting a motion to dismiss

pursuant to Civ.R. 12(B)(6) under a de novo standard of review. Perrysburg Twp. v. Rossford,

103 Ohio St.3d 79, 2004-Ohio-4362, at ¶5, citing Cincinnati v. Beretta U.S.A. Corp., 95 Ohio

St.3d 416, 2002-Ohio-2480, at ¶4-5. In reviewing whether a motion to dismiss should be

granted, an appellate court must accept as true all factual allegations in the complaint and all 5

reasonable inferences must be drawn in favor of the nonmoving party. Rossford at ¶5; Mitchell

v. Lawson Milk Co. (1988), 40 Ohio St.3d 190, 192. “To prevail on a Civ.R. 12(B)(6) motion to

dismiss, it must appear on the face of the complaint that the plaintiff cannot prove any set of

facts that would entitle him to recover.” Raub v. Garwood, 9th Dist. No 22210, 2005-Ohio-

1279, at ¶4, citing O’Brien v. Univ. Community Tenants Union (1975), 42 Ohio St.2d 242, 245.

{¶10} In granting BASF’s motion to dismiss, the trial court relied on this Court’s

precedent in Midwest Ford, Inc. v. C.T. Taylor Co., Inc. (1997), 118 Ohio App.3d 798, and

refused to apply the Tenth District’s decision in Ohio Dept. of Admin. Servs. v. Robert P.

Madison Internatl., Inc. (2000), 138 Ohio App.3d 388 to the facts of this case. In support of its

assignment of error, Thomarios argues this court must reconsider the scope of its precedent in

Midwest Ford. Thomarios argues that there should be no distinction between a commercial and

noncommercial consumer in cases where the consumer is not in privity with the manufacturer

and enjoys only limited bargaining power. Thomarios contends that a standard which does not

permit a commercial consumer who enjoys limited bargaining power and is not in privity with a

manufacturer to assert an implied warranty claim leads to an unjust result. Thomarios argues in

its merit brief that, “[t]he reality is, the best analysis is probably a hybrid analysis taking the best

of the decisions between Midwest Ford and Robert P. Madison.”

{¶11} In Midwest Ford, this Court expressly held that a “common-law action in tort for

purely economic loss from defective products, based upon implied warranty theory, is not

available to commercial buyers.” Midwest Ford, 118 Ohio App.3d at 801. This Court noted that

Ohio courts have recognized that the products liability doctrine serves to advance the following

policy concerns:

“First, human life and safety are promoted by subjecting to strict liability manufacturers of defective products that cause harm. Second, manufacturers are 6

in a better position than those injured to internalize and redistribute the cost of injuries. Third, strict liability relieves the ‘average consumer’ of the burden of proving negligence.” Midwest Ford, 118 Ohio App.3d at 805, citing Queen City Terminals, Inc. v. Gen. Am. Transp. Corp. (1995), 73 Ohio St.3d 609, 621.

We then noted that “[n]one of these policy reasons has any application to a claim by a

commercial buyer for purely economic losses.” Midwest Ford, 118 Ohio App.3d at 805.

{¶12} In resolving the issue of whether a commercial consumer can assert a claim based

on an implied warrant theory against a commercial manufacturer, this Court in Midwest Ford

conducted an in-depth discussion of pertinent case law. This Court distinguished the facts at

issue from the facts of Chemtrol Adhesives v. Am. Mfrs. Mut. Ins. Co. (1989), 42 Ohio St.3d 40,

49, where the Supreme Court of Ohio answered in the negative the question of “whether

economic loss may be recovered in strict liability where the parties are in privity of contract.”

(Emphasis in original). This Court also discussed the precedent established in Santor v. A. & M.

Karagheusian, Inc. (1964), 207 A.2d 305, and Seely v. White Motor Co. (1965), 403 P.2d 145,

cases the Chemtrol court noted are “universally recognized as the seminal decisions on the

question of whether economic loss is recoverable in a strict liability action.” Midwest Ford, 118

Ohio App.3d at 802, quoting Chemtrol, 42 Ohio St.3d at 46. This Court also considered the

Supreme Court of Ohio’s decisions in LaPuma v. Collinwood Concrete (1996), 75 Ohio St.3d

64, and Iacono v. Anderson Concrete Corp. (1975), 42 Ohio St.2d 88. In reaching our decision,

however, we adopted the reasoning set forth by the New Jersey Supreme Court in Spring Motors

Distributors, Inc. v. Ford Motor Co. (1985), 489 A.2d 660, where the court held that a

commercial truck buyer seeking economic damages for defective products could not recover in a

tort cause of action in strict liability to compensate for purely economic loss and was limited to

his remedies under the Uniform Commercial Code. The result in Spring Motors had the effect of 7

limiting Santor to the context of noncommercial buyers. Midwest Ford, 118 Ohio App.3d at

803.

{¶13} In adopting the reasoning of the New Jersey Supreme Court in Midwest Ford, this

Court set forth at length the analysis in Spring Ford. In determining whether a commercial

buyer can recover economic loss, the New Jersey Supreme Court emphasized the need to

consider the policies underlying the doctrine of strict liability as well as the U.C.C. Midwest

Ford, 118 Ohio App.3d at 803-804, quoting Spring Motors, 489 A.2d at 670.

“Those policy considerations include, among others, the relative bargaining power of the parties and the allocation of the loss to the better risk-bearer in a modern marketing system. As a general rule, the rights and duties of a buyer and seller are determined by the law of sales, which throughout this century has been expressed first in the Uniform Sales Act and more recently in the U.C.C. As indicated, however, strict liability evolved as a judicial response to the inadequacies in sales law with respect to consumers who sustained physical injuries from defective goods made or distributed by remote parties in the marketing chain.” Id.

The New Jersey Supreme Court further notes that the “considerations that give rise to strict

liability do not obtain between commercial parties with comparable bargaining power.” Id. The

New Jersey Supreme Court recognized that “perfect parity is not necessary to a determination

that parties have substantially equal bargaining positions.” Id at 671.

{¶14} The Third District subsequently reached the same conclusion this Court reached

in Midwest Ford and held that the “policies of product liability law as articulated by Ohio courts

would not be served by extending a strict-liability cause of action to commercial plaintiffs.”

Norcold, Inc. v. Gateway Supply Co., 154 Ohio App.3d 594, 2003-Ohio-4252, at ¶35.

Thomarios notes that in Robert P. Madison, the Tenth District held that “[a] consumer,

commercial or not, can maintain a claim for breach of implied warranty/strict liability against a

manufacturer, not in privity, for purely economic loss[.]” Robert P. Madison, 138 Ohio App.3d 8

at 397. The Tenth District stated that it could find “no basis for distinguishing between so-called

commercial and noncommercial buyers.” Id. at ¶396. The court further stated that no distinction

was necessary because “the doctrine of implied warranty is designed to protect ‘consumers’ who

are not in privity of contract.” Id. at ¶396.

{¶15} Under the facts of this case, this Court declines Thomarios’ invitation to depart

from our established precedent. There is no question that Thomarios was engaged in a

commercial endeavor when it agreed to apply deck coating on exterior balconies at the Fowler

Apartments. The Supreme Court of Ohio has held that there is no distinction between implied

warranty in tort and strict liability in tort. Chemtrol, 42 Ohio St.3d at 46. The aforementioned

policies set forth by Ohio courts underlying the products liability doctrine would not be advanced

by treating a commercial consumer such Thomarios as a noncommercial consumer. The

Supreme Court has noted that the “first and foremost objective of strict liability is to promote

public safety.” Queen City, 73 Ohio St.3d at 621. The foremost policy concern underlying the

strict liability doctrine is not an issue here. This case does not involve a situation where an

average customer was placed in physical danger due to the purchase of a defective product.

Rather, a commercial consumer purchased a product for use in a commercial context and

suffered purely economic losses. The second objective of products liability stems from a cost-

shifting rationale and recognizes that a manufacturer is in a better position to internalize the cost

of injuries than the general public. Id. In this case, the product was not purchased by a member

of the general public. On the contrary, the product was purchased by a commercial consumer

who was engaged in a profit-seeking endeavor. The third justification for strict liability is that

“proving negligence can be difficult and costly for the average consumer.” Id. Unlike the

average customer, Thomarios, as a commercial entity, is not in need of relief from the burdens of 9

proving negligence. It is axiomatic that a commercial entity is presumed to have a higher degree

of legal sophistication than the average customer who purchases a product for noncommercial

use.

{¶16} Thus, while the relative bargaining power of a commercial consumer will vary

from case to case, the commercial consumer functions in a different capacity than the average

customer. The fact that Thomarios did not have an opportunity to negotiate the warranty and

product formulation of the Sonoguard does not mean that it was similarly situated as a member

of the general public making a purchase for personal use. As a commercial consumer,

Thomarios was presumably aware of the inherent risks involved in entering into a commercial

endeavor. By making the decision to engage in the commercial endeavor of applying the deck

coating at the Fowler apartments, Thomarios entered into an arrangement where Rasmussen

could specify the type of deck coating used for the project. As the policies underlying the strict

liability doctrine would not be served by allowing Thomarios to assert an implied warranty

claim, the trial court did not err in following Midwest Ford and granting BASF’s motion to

dismiss pursuant to Civ.R. 12(B)(6).

{¶17} The assignment of error is overruled.

III.

{¶18} Thomarios’ sole assignment of error is overruled. The judgment of the Summit

County Court of Common Pleas is affirmed.

Judgment affirmed.

There were reasonable grounds for this appeal. 10

We order that a special mandate issue out of this Court, directing the Court of Common

Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy

of this journal entry shall constitute the mandate, pursuant to App.R. 27.

Immediately upon the filing hereof, this document shall constitute the journal entry of

judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the

period for review shall begin to run. App.R. 22(E). The Clerk of the Court of Appeals is

instructed to mail a notice of entry of this judgment to the parties and to make a notation of the

mailing in the docket, pursuant to App.R. 30.

Costs taxed to Appellant.

DONNA J. CARR FOR THE COURT

MOORE, J. CONCURS IN JUDGMENT ONLY, SAYING:

{¶19} It seems as if Thomarios is in a proverbial Catch 22 position. It appears as if he

was directed by Rasmussen to use the deck coating manufactured by BASF. There is nothing in

the record to suggest that he had any choice in determining the coating or the manufacturer. He

was not in direct privity with BASF, because the deck coating was sold through a supplier.

Thomarios appears to have done everything according to specifications, yet when the product

failed, he was prevented from pursuing a claim for breach of implied warranty. The result seems

inequitable, notwithstanding the established precedent of the Ohio Supreme Court. As a result, I

concur in judgment only. 11

BELFANCE, P. J. CONCURS IN JUDGMENT ONLY, SAYING:

{¶20} I reluctantly concur in the judgment based upon this Court’s precedent in Midwest

Ford, Inc. v. C.T. Taylor Co., Inc. (1997), 118 Ohio App.3d 798. Nonetheless, if I were writing

without regard to stare decisis, I would sustain Thomarios’ assignment of error. I see no logical

reason to treat Thomarios, who acted just like a consumer, differently than non-commercial

consumers. In this era of mega stores, businesses resemble consumers. Just as the average

consumer, businesses do not have privity of contract with the manufacturer of a product, but

purchase products through intermediaries. To say that Thomarios had some heightened

bargaining power due its commercial status when buying a brand name product which he was

specifically instructed to purchase from a large retail store seems disingenuous at best.

{¶21} Further, while the Supreme Court’s implied warranty cases involving parties not

in privity have involved a non-commercial party as the plaintiff, the Supreme Court of Ohio has

never emphasized this fact or limited its holdings only to non-commercial plaintiffs. See, e.g.

Chemtrol Adhesives, Inc. v. Am. Mfrs. Mut. Ins. Co. 1989, 42 Ohio St.3d 40, 49 (“Inglis and

Iacono stand for the proposition that in Ohio an action in tort for breach of express or implied

warranty, or an action in strict liability, may be maintained for purely economic loss. However,

notably absent from these cases is the element of privity of contract between the injured plaintiff

and the manufacturer-defendant.”); LaPuma v. Collinwood Concrete (1996), 75 Ohio St.3d 64,

67. Moreover, while the Supreme Court of Ohio has cited Spring Motors Distribs., Inc. v. Ford

Motor Co. (1985), 98 N.J. 555, with approval, it has never abandoned its holdings in Iacono v.

Anderson Concrete Corp. (1975), 42 Ohio St.2d 88 or LaPuma. See Chemtrol Adhesives, Inc.,

42 Ohio St.3d at 43. Furthermore, in Chemtrol, the Supreme Court also observed that the

doctrine of implied warranty is to protect consumers who are not in privity of contract and it did 12

not make any distinction between a commercial or noncommercial consumer. Chemtrol

Adhesives, Inc. 42 Ohio St.3d at 49. The holdings of Iacono, LaPuma and Chemtrol do not

prohibit a commercial consumer’s recovery in tort under an implied warranty theory where

privity is absent. Thus, I believe Midwest Ford, Inc., which did just that, Midwest Ford, Inc.,

118 Ohio App.3d at 801, was wrongly decided. Accordingly, absent our precedent in Midwest

Ford, Inc., I would conclude that Thomarios has the same right to recover under an implied

warranty claim as a non-commercial consumer.

APPEARANCES:

JAMES J. COLLUM , Attorney at Law, for Appellant.

JAMES T. DIXON, NORA LOFTUS, and FRANTZ WARD, Attorneys at Law, for Appellee.