Auer v. Paliath (Slip Opinion)

2014 Ohio 3632, 17 N.E.3d 561, 140 Ohio St. 3d 276
CourtOhio Supreme Court
DecidedAugust 28, 2014
Docket2013-0459
StatusPublished
Cited by25 cases

This text of 2014 Ohio 3632 (Auer v. Paliath (Slip Opinion)) is published on Counsel Stack Legal Research, covering Ohio Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Auer v. Paliath (Slip Opinion), 2014 Ohio 3632, 17 N.E.3d 561, 140 Ohio St. 3d 276 (Ohio 2014).

Opinions

French, J.

{¶ 1} This case concerns the vicarious liability of appellant, real-estate broker Keller Williams Home Town Realty (“Home Town”), for the tortious conduct of its former real-estate agent, Jamie Paliath. We affirm a long line of precedent in holding that in order to impose vicarious liability, a jury first has to make a factual determination that the agent was acting within the scope of her agency when she committed the torts at issue. Because the court of appeals in this case erroneously concluded that scope of agency was a matter of law and therefore outside the province of the jury, we must reverse.

Background

{¶ 2} In 2006, Paliath began working for Home Town as a licensed real-estate salesperson. Paliath’s contract with Home Town specified that she would “assist [277]*277clients * * * with the purchase and sale of real estate.” Paliath was free to “choose * * * her own target clients, marketing techniques and sales methods.” The contract also specified that Paliath had to pay Home Town 30 percent of the commissions she earned on real-estate transactions.

{¶ 3} Appellee, Torri Auer, a California resident, became acquainted with Paliath in September 2007 through the Internet website Bid4Assets.com. Auer was interested in purchasing investment properties in Dayton, Ohio, and Paliath had listed several such properties online. Auer contacted Paliath and arranged to come to Dayton to look at some of the properties. During the visit, Paliath informed Auer that she also owned a property-rehabilitation business and a property-management business. Paliath suggested that the two women start rehabbing properties together; if Auer could provide the funds, Paliath would renovate, manage, and sell the properties.

{¶ 4} Between October and December 2007, Paliath assisted Auer in purchasing five separate properties. Home Town received a commission on each of these sales.

{¶ 5} Auer hired Paliath’s personal companies to rehab and manage rents on the properties. Auer soon discovered, however, that although she had paid Paliath considerable sums to renovate the buildings, Paliath had actually done very little work. When Auer visited Dayton in 2008 to inspect her properties, she found them to be uninhabitable and still in need of considerable repair. The business relationship soon began to sour.

{¶ 6} All told, Auer invested over $430,000 in the properties. As of 2012, the properties had no value and were scheduled for destruction.

{¶ 7} Auer filed suit against Paliath and Home Town, seeking to recover the amounts she had invested. Auer alleged, among other things, that Paliath had fraudulently induced her to purchase the properties by misrepresenting their worth and their capacity to generate rental income.

{¶ 8} Auer’s claims against Home Town initially sounded in direct liability; the complaint alleged that Home Town had failed to supervise Paliath properly. But at trial, Auer abandoned any direct-liability claim and pursued her case against Home Town solely on the basis of respondeat superior liability. At the close of trial, the jury was instructed to consider only whether Home Town was vicariously liable for Paliath’s fraud, rather than whether Home Town was liable for any of its own independent actions.

{¶ 9} The jury returned verdicts against Paliath and Home Town. It found that Paliath had fraudulently induced Auer to purchase three of the five parcels of property in Dayton and that Home Town was vicariously liable for Paliath’s [278]*278fraud. The jury awarded Auer $135,200 in damages for this fraudulent inducement.

{¶ 10} Home Town appealed, arguing in part that the trial court failed to properly instruct the jury on scope of agency as it related to Home Town’s vicarious liability. Auer v. Paliath, 2013-Ohio-391, 986 N.E.2d 1052, ¶ 20, 38 (2d Dist.). The court of appeals determined that any such error was harmless, because scope of agency was a matter of law that the jury did not need to address. Id. at ¶ 46-52.

{¶ 11} We accepted review over Home Town’s'discretionary appeal. 135 Ohio St.3d 1458, 2013-Ohio-2285, 988 N.E.2d 578. For the reasons that follow, we reverse.

Analysis

A. The Jury Instructions

{¶ 12} “A trial court must give jury instructions that correctly and completely state the law.” Groob v. KeyBank, 108 Ohio St.3d 348, 2006-Ohio-1189, 843 N.E.2d 1170, ¶ 32. “An inadequate jury instruction that misleads the jury constitutes reversible error.” Id.

{¶ 13} In this case, the jury had to determine whether Home Town was vicariously liable for Paliath’s fraud, based on a theory of respondeat superior. The respondeat superior doctrine makes an employer or principal vicariously liable for the torts of its employees or agents. Clark v. Southview Hosp. & Family Health Ctr., 68 Ohio St.3d 435, 438, 628 N.E.2d 46 (1994). But “in order for an employer to be liable under the doctrine of respondeat superior, the tort of the employee must be committed within the scope of employment.” Byrd v. Faber, 57 Ohio St.3d 56, 58, 565 N.E.2d 584 (1991).

{¶ 14} The trial court did not instruct the jury in accordance with this precedent. Instead, the trial court instructed the jury as follows:

A real estate broker is vicariously liable for intentional torts committed by a salesman acting within the scope of their authority. A salesman is required to work under the supervision of a licensed broker and [in] all of her activities relating to real estate transactions.
Vicarious liability means that the broker, in this case, Defendant Keller Williams Hometown Realty of Vandalia, is bound by action taken on its behalf by a realtor, in this case Defendant Paliath, while acting within the scope of her authority. A real estate agent is not within the scope of her agency when she clearly and completely departs from the services or jobs that she was hired to do.
[279]*279When an agent acts solely for her own benefit or solely for the benefit of a person other than her broker, she does not act within the scope of her agency and the broker is not liable for the agent’s act.
If you find that Defendant Jamie Paliath committed fraud with respect to the sale of [properties] to Plaintiff Torri Auer, then Defendant Keller Williams Hometown Realty of Vandalia is vicariously liable and you must find in favor of Plaintiff Torri Auer and against Defendant Keller Williams Hometown Realty of Vandalia * * *.

{¶ 15} Although the trial court began by appropriately describing scope of agency, it then issued an instruction that made scope of agency irrelevant. The court told the jury, “If you find that Defendant Jamie Paliath committed fraud * * *, then Defendant Keller Williams Hometown Realty of Vandalia is vicariously liable * * That instruction is incomplete. It does not inform the jury that in order to impose vicarious liability on Home Town, the jury first had to find that Paliath was acting within the scope of her agency when she committed the fraud. Groob, 108 Ohio St.3d 348, 2006-Ohio-1189, 843 N.E.2d 1170, at ¶42, citing

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Cite This Page — Counsel Stack

Bluebook (online)
2014 Ohio 3632, 17 N.E.3d 561, 140 Ohio St. 3d 276, Counsel Stack Legal Research, https://law.counselstack.com/opinion/auer-v-paliath-slip-opinion-ohio-2014.