Nee v. State Industries, Inc.

2013 Ohio 4794

• Court: Ohio Court of Appeals
• Decided: October 31, 2013
• Docket: 99505
• Status: Published

Opinion

[Cite as Nee v. State Industries, Inc., 2013-Ohio-4794.]

Court of Appeals of Ohio EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA

JOURNAL ENTRY AND OPINION No. 99505

MATTHEW M. NEE PLAINTIFF-APPELLANT

vs.

STATE INDUSTRIES, INC. DEFENDANT-APPELLEE

JUDGMENT: AFFIRMED IN PART; REVERSED IN PART; REMANDED

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-713298

BEFORE: Rocco, P.J., Kilbane, J., and McCormack, J.

RELEASED AND JOURNALIZED: October 31, 2013 ATTORNEYS FOR APPELLANT

Stuart E. Scott Nicholas A. Dicello William B. Eadie Spangenberg, Shibley & Liber L.L.P. 1001 Lakeside Avenue, East Suite 1700 Cleveland, Ohio 44114

ATTORNEYS FOR APPELLEE

Thomas J. Lee Amelia J. Workman Farago Julie A. Crocker David H. Wallace Taft Stettinius & Hollister L.L.P. 200 Public Square, Suite 3500 Cleveland, Ohio 44114 KENNETH A. ROCCO, P.J.:

{¶1} In this breach of warranty action, plaintiff-appellant Matthew Nee appeals

from the decision of the Cuyahoga County Court of Common Pleas (1) granting summary

judgment in favor of defendant-appellee State Industries, Inc. (“State Industries”) on his

claims for breach of express warranty under R.C. 1302.26, breach of contract, equitable

restitution, and violation of the Ohio Consumer Sales Practices Act (“CSPA”) and (2)

denying Nee’s motion for partial summary judgment on breach of contract and agency

issues, arising out of State Industries’ alleged failure to provide Nee with a free,

replacement water heater under the terms of its warranty after his water heater leaked.

Nee’s claims center around a $80.81 charge Nee was required to pay when he made a

warranty claim on the leaking water heater, in exchange for which Nee received a new

water heater, with a new safety feature, and a new warranty.

{¶2} Based on our review of the record, we find that genuine issues of material

fact exist as to the viability of Nee’s claims. Accordingly, we reverse the trial court’s

entry of summary judgment in favor of State Industries and affirm the trial court’s denial

of Nee’s motion for partial summary judgment.

Factual and Procedural Background

{¶3} In April 2003, Nee and his wife entered into a agreement with Carol

Dunipace to purchase her home in Lakewood, Ohio. Shortly thereafter, Dunipace

noticed that the home’s water heater was leaking and sought a replacement water heater

under a seller’s home warranty she had purchased from HMS when she listed the home for sale. On May 9, 2003, A-1 Affordable Plumbing installed a new 40-gallon gas water

heater manufactured by State Industries in the home (the “2003 water heater”), pursuant

to the HMS home warranty. The water heater came with a six-year limited express

warranty from State Industries (the “water heater warranty”) which provided, in relevant

part:

6 YEAR LIMITED WARRANTY ON TANK The “Company” warrants the tank in this water heater in case of a leak within six (6) years from the date of purchase or, in the absence of a Bill of Sale verifying said date, from the date indicated on the model rating plate affixed to this water heater; provided, however, that use of this water heater for commercial, institutional, industrial, or other non-residential purposes, shall limit the maximum duration of this tank warranty to one (1) year from date of purchase. Should a leak occur in the tank, the Company will furnish a new current model water tank of equal capacity and quality. No labor, installation, or freight (if any) charges are included in this warranty. You must pay these costs.

***

4. These warranties shall be void and shall have no effect: * * *

i. If the model rating plate has been defaced or discarded and you do not have a Bill of Sale to verify the purchase date. * * *

5. Replacements and/or repairs furnished under these warranties do not carry a new warranty, only the unexpired portion of the original warranty.

6. The terms of this warranty may not be varied by any person, whether or not purporting to represent or to act on behalf of the Company.

7. In order to obtain service under these warranties you must promptly notify the installing contractor or dealer, giving the nature of the problem and the model and serial number of the water heater. If for any reason the installer or dealer cannot be located or fails to provide satisfactory warranty service, you should write the Company with the above information. Based on the date indicated on the model rating plate, the water heater was manufactured

on February 7, 2003.

{¶4} The sale of the home closed, and Nee and his wife became owners of the

home (including the 2003 water heater) in early June 2003. Included in the

documentation Nee and his wife received with their purchase of the home was the water

heater warranty and a “job work order” from A-1 Affordable Plumbing, dated May 9,

2003 (the “job work order”). Under “description of work,” the job work order states,

“[i]nstalled 40 gallon gas water heater [t]all.” The work order further reflects the receipt

of a check payment in the amount of $100 and is signed by Dunipace in

“acknowledg[ment]” of “the satisfactory completion of the above described work.” 1

{¶5} In early March 2009, Nee noticed that the tank on the 2003 water heater was

leaking and contacted State Industries to determine what needed to be done to replace the

water heater under the warranty. State Industries’ call log reflects that when Nee called

State Industries on March 2, 2009, one of its residential call center representatives

informed Nee that, based on the serial number Nee provided, the warranty on the 2003

water heater had expired and suggested that Nee provide “proof of purchase” to extend

1 Nee refers to this $100 payment as an “installation charge.” However, there is nothing in the record that identifies this payment as an installation charge. The documents relating to the HMS home warranty under which the water heater was replaced indicate that Dunipace had a $100 deductible under the home warranty. Accordingly, the $100 payment may simply represent Dunipace’s payment of her deductible, i.e., Dunipace’s share of the cost of the water heater and its installation, under the home warranty. the warranty date. Nee testified that the State Industries representative told him to

contact Edelman Plumbing Supply (“Edelman”), State Industries’ closest authorized

distributor, to submit his warranty claim. Nee did not recall being told by State

Industries that his water heater was out of warranty unless he could provide “proof of

purchase.”

{¶6} Nee testified that when he went to Edelman he “presented whatever

paperwork they required,” including the “sticker off the water heater,” i.e., the model

rating plate, which contained the water heater’s serial number and date of manufacture. It

is not clear from the record what other “paperwork” Nee submitted to Edelman in support

of his warranty claim.

{¶7} Amy Hopkins, consumer relations manager for A.O. Smith Water Products,

which handles customer service and warranty issues for State Industries, testified that

State Industries and its distributors use a computerized warranty system, Warranty

Wizard, to submit and process water heater warranty claims. The distributor enters the

serial number from the water heater’s model data rating plate into the Warranty Wizard

program, and the program displays various information, including the model, date of

manufacture, and existing warranty based on the serial number. If the water heater’s

installation date is available, that information may be entered into the Warranty Wizard

program as well. Hopkins testified that although a water heater may be out of warranty

based on its manufacture date, it could still be within warranty if the customer has proof

of the date of installation. As Hopkins explained, “[i]f they do not have the date of installation, then we go by the date of manufacture” in verifying whether a water heater is

within warranty. If the warranty is verified by the distributor, the distributor provides a

replacement water heater to the customer and files a claim for a credit from State

Industries. If the warranty claim is approved by State Industries, the distributor receives

a credit for the replacement water heater provided to the customer.

{¶8} In this case, Edelman entered information it received from Nee into the

Warranty Wizard program and submitted a warranty claim.2 Hopkins testified that based

on the information Edelman submitted, the 2003 water heater was under warranty, and

that Edelman had submitted a valid warranty claim relating to the 2003 water heater.

{¶9} Nee testified that an Edelman representative told him that there would be an

$80.81 charge for the replacement water heater. Nee testified that he questioned the

charge for the replacement water heater and claims the Edelman representative told him

that it was a charge State Industries had decided to pass along to consumers because of a

“newly required safety device.” Nee claims that he “protested” the charge because the

warranty “didn’t say anything” about it, but was told that it was a “required charge” and

that unless he paid it, he would not receive a replacement water heater. Nee paid the

$80.81 charge ($75.00 plus applicable sales tax) and brought the replacement water heater

2 It is not entirely clear from the record what information Edelman submitted in connection with Nee’s warranty claim. Edelman is not a party to the case, and there is no testimony from any Edelman representative in the record. Although the parties agree that the 2003 water heater was installed on May 9, 2003, Edelman apparently incorrectly entered the installation date in the Warranty Wizard program as March 9, 2003. This appears to have been a typographical error. home. A friend who does plumbing work later removed the 2003 water heater and

installed the replacement water heater for Nee.

{¶10} Several weeks after he received the replacement water heater, Nee called

State Industries to complain about the $80.81 charge. Nee testified that the State

Industries representative with whom he spoke told him that the charge was for a “new

device that was required pursuant to federal regulation” and that State Industries “had

implemented a corporate policy to pass that charge along to the consumers.”

{¶11} Beginning in July 2003, in order to comply with new industry safety

standards, all of State Industries’ gas water heaters placed on the market were

manufactured with flammable vapor ignition resistance (“FVIR”) technology. This

technology was designed to contain within the water heater any flammable vapors

accidentally ignited when flammable liquids are misused in the vicinity of the water

heater, in order to prevent the water heater from being an ignition source for flammable

vapors outside the water heater.3

{¶12} Hopkins testified that in January 2005, State Industries began assessing a

$60 charge (the “FVIR upcharge”) to cover the cost of the FVIR technology whenever a

water heater manufactured before the new safety standards became effective (a

3 The FVIR design involved enclosing the water heater’s combustion chamber (the area at the bottom of the water heater underneath the water tank where the gas burner is located), leaving only one opening for air in the bottom of the combustion chamber and placing a flame arrestor over that opening so that any air (including any flammable vapors) entering the combustion chamber would have to pass through the flame arrestor. If any flammable vapors ignited, the flames would be kept inside the water heater and would not flash out to ignite any vapors outside the water heater. “non-FVIR water heater”) was replaced with a water heater that was manufactured with

the FVIR technology (an “FVIR water heater”) under its water heater warranty. The

FVIR upcharge was charged to the distributor in the form of a reduced credit, i.e., when

replacing a non-FVIR water heater with an FVIR water heater under the warranty, the

distributor received a credit from State Industries for the cost of the replacement water

heater less the FVIR upcharge. Although its distributors were not required to do so,

Hopkins testified that State Industries expected that a distributor would pass the upcharge

along to its customer and so on down the distribution chain, so that the cost of the

upcharge was ultimately borne by the consumer receiving the FVIR water heater as a

replacement under the warranty. In exchange for the FVIR upcharge, the consumer was

provided with a full six-year warranty on the replacement FVIR water heater, rather than

the balance of the warranty remaining on the original non-FVIR water heater. Hopkins

acknowledged that the FVIR upcharge was not a “labor, installation, or freight * * *

charge” and thus was not one of the “costs” specifically referenced in the warranty that a

consumer “must pay” in connection with a warranty replacement. Although in certain

instances, State Industries refunded an FVIR upcharge when a customer complained,

Hopkins testified that refunds were not provided “in every instance.”

{¶13} In this case, State Industries credited Edelman the purchase price of the

replacement FVIR water heater it provided to Nee, less the $60 FVIR upcharge. There is

no information in the record as to why Edelman charged Nee an additional $15 (plus tax),

i.e., $80.81 rather than $60, for the replacement FVIR water heater. Hopkins testified that State Industries did not provide “strict instructions” to its distributors regarding how

to collect the FVIR upcharge; it “left [that] up to the distributors.” She further testified

that although State Industries knew certain of its distributors were charging customers

more for warranty replacements than the $60 FVIR upcharge State Industries assessed

against the distributors, it did not normally investigate or intervene when a distributor did

so — that was a matter between the distributor and the customer.

{¶14} On December 17, 2009, Nee filed a complaint asserting individual and class

action claims 4 against State Industries for breach of express warranty under R.C.

1302.26, breach of contract, violation of the Ohio Consumer Sales Practices Act

4 Nee’s claims were brought on behalf of himself and a putative class consisting of

all Ohio residents who, within the last fifteen (15) years: (1) own or owned a residential gas water heater manufactured by State Industries that is or was covered by the Warranty or a similar Express Warranty promising that State Industries would furnish, free of charge, a replacement gas water heater in the event of a tank leak occurring within the Express Warranty period; (2) due to a tank leak failure, replaced the residential gas water heater that was covered by the State Industries’ Warranty or a similar Express Warranty; and (3) were required to pay a charge for the replacement of the hot water heater other than the cost of labor, installation, or freight associated with the delivery and/or installation of the replacement gas water heater,

and a putative sub-class of class members consisting of

all Ohio residents who currently own residential gas water heaters manufactured by State Industries that are covered by the Warranty or a similar Express Warranty promising that State Industries will furnish, free of charge, a replacement gas water heater in the event of a tank leak occurring within the Express Warranty period, but who have not yet replaced the gas water heaters under the terms of the Express Warranty. On May 27, 2011, the trial court granted State Industries’ motion to stay class discovery pending its ruling on summary judgment on Nee’s individual claims. (“CSPA”), and equitable restitution related to the FVIR upcharge. Nee alleged that he

“became the owner” of the 2003 water heater in May 2003 and that prior to the expiration

of the six-year warranty, the tank of the water heater began to leak, entitling him to a

“free” replacement water heater under the warranty. Nee alleged that State Industries’

actions in charging him a fee for the replacement water heater (that was not a cost of

labor, installation, or freight associated with the delivery or installation of the replacement

water heater) was improper and constituted a breach of contract, a breach of express

warranty under R.C. 1302.26, and a violation of CSPA. Nee further alleged that it would

be “unjust and unfair” for State Industries to retain payments made to obtain replacement

water heaters that were not required by the terms of the warranty, justifying restitution of

the improper charges.

{¶15} Nee’s original complaint did not include a copy of the warranty or other

documentation supporting his warranty claim. After State Industries filed a motion to

dismiss the complaint pursuant to Civ.R. 12(B)(6), or, in the alternative, for a more

definite statement pursuant to Civ.R. 10(D) and 12(E), Nee filed an amended complaint,

containing nearly identical allegations but attaching a copy of the warranty. On May 3,

2010, State Industries filed a second motion for a more definite statement pursuant to

Civ.R. 10(D) and 12(E) or to dismiss the amended complaint pursuant to Civ.R. 12(B)(6),

arguing that Nee had failed to plead sufficient facts in his complaint establishing that he

had standing to enforce the warranty or that any warranty was breached. {¶16} On March 9, 2011, the trial court granted State Industries’ motion in part

and ordered Nee to provide the date on the water heater’s model rating plate or a copy of

the bill of sale for the water heater reflecting its purchase date. In response, Nee filed a

“notice of submission of bill of sale,” attaching a statement that he had obtained in

discovery from A-1 Affordable Plumbing. The statement reflected a transaction on May

9, 2003 relating to “HMS 131496111 P 225 L 175 TAX 15 *40 GAL W/H INSTALL”

and two payments of $100 and $315 on May 9, 2003 and June 2, 2003, respectively.

State Industries filed an answer, denying the material allegations of the complaint and

asserting various affirmative defenses.

{¶17} On October 31, 2011, State Industries filed a motion for summary judgment

on Nee’s individual claims. In its motion, State Industries argued that, based on the

undisputed facts, it was entitled to summary judgment on a number of grounds, including:

(1) because the water heater failed more than six years after it was manufactured and Nee

failed to present a bill of sale verifying the purchase date, State Industries had no

obligation to honor the warranty; (2) even if State Industries was required to honor the

warranty, it satisfied the warranty by providing Nee a replacement water heater; (3) Nee

was not a “buyer” under the UCC, could not bring a claim for breach of express warranty

under R.C. 1302.26, and failed to establish that State Industries breached any promise

made to Dunipace related to the 2003 water heater; (4) because Nee did not himself

purchase the water heater from State Industries, he was not a “consumer” and did not

participate in any “consumer transaction” within the meaning of CSPA; and (5) Nee received a substantial benefit in exchange for the $80.81 charge he paid when he received

the replacement water heater.

{¶18} Nee opposed the motion and filed his own motion for partial summary

judgment on two issues: (1) whether State Industries breached its warranty by charging

Nee “a fee to replace his defective water heater” and (2) whether Edelman was State

Industries’ agent such that State Industries was “legally responsible” for Edelman’s

actions in purportedly charging customers excessive fees for warranty replacements.

{¶19} On January 3, 2013, the trial court granted State Industries’ motion for

summary judgment and denied Nee’s motion for partial summary judgment. The trial

court held that because Nee never produced a bill of sale for the water heater verifying its

purchase date, he “failed to comply with the warranty claim requirements,” and that,

therefore, the date on the water heater’s model rating plate controlled in determining the

warranty period. Because, based on the date on the water heater’s model rating plate, the

water heater’s six-year warranty had already expired when the water heater began leaking

in March 2009, the trial court held that State Industries “was not obligated to honor the

warranty.” The trial court also “decline[d] to find” that Nee was a “buyer” for purposes

of his express warranty claim under R.C. 1302.26 or that State Industries had engaged in

any unfair or deceptive acts or practices in connection with a consumer transaction under

CSPA. {¶20} Nee appeals the trial court’s entry of summary judgment in favor of State

Industries and the trial court’s denial of his motion for partial summary judgment, raising

the following six assignments of error:

FIRST ASSIGNMENT OF ERROR

The trial court erred in finding that the 2003 water heater was no longer covered under the warranty as the basis for granting State’s and denying Mr. Nee’s motions for summary judgment.

SECOND ASSIGNMENT OF ERROR

The trial court erred in finding that plaintiff was not a “buyer” under the UCC as a basis to grant summary judgment on plaintiff’s UCC warranty claim.

THIRD ASSIGNMENT OF ERROR

The trial court erred in holding that Mr. Nee did not have a valid CSPA claim despite Mr. Nee being the owner of the water heater when the claim arose under a freely transferrable warantee [sic].

FOURTH ASSIGNMENT OF ERROR

The trial court erred in dismissing Mr. Nee’s CSPA claim based on finding that State did not engage in unfair and deceptive acts or practices in connection with a consumer transaction.

FIFTH ASSIGNMENT OF ERROR

The trial court erred in denying plaintiff’s motion for partial summary judgment on contract breach.

SIXTH ASSIGNMENT OF ERROR

The trial court erred in denying plaintiff’s motion for partial summary judgment on Edelman’s agency. {¶21} For the reasons that follow, we reverse the trial court’s granting of State

Industries’ motion for summary judgment and affirm the trial court’s denial of Nee’s

motion for partial summary judgment.

Standard of Review

{¶22} An appeal of a trial court’s summary judgment ruling is subject to a de novo

standard of review. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 671 N.E.2d 241

(1996). We accord no deference to the trial court’s decision and independently review

the record to determine whether summary judgment is appropriate. Id.

{¶23} Under Civ.R. 56, summary judgment is appropriate when (1) no genuine

issue exists as to any material fact, (2) the party moving for summary judgment is entitled

to judgment as a matter of law, and (3) viewing the evidence most strongly in favor of the

nonmoving party, reasonable minds can reach only one conclusion, which is adverse to

the nonmoving party.

{¶24} The moving party carries an initial burden of setting forth specific facts that

demonstrate his or her entitlement to summary judgment. 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, summary

judgment is appropriate only if the nonmoving party fails to establish the existence of a

genuine issue of material fact. Id. at 293.

Coverage under the Water Heater Warranty {¶25} In his first assignment of error, Nee claims that the trial court erred in

determining, as a matter of law, that the 2003 water heater was not covered by the

warranty. Specifically, Nee contends that the trial court erred in determining that Nee

“never produced a bill of sale for the water heater” and in concluding that the warranty,

therefore, expired on February 7, 2009, six years from the manufacture date indicated on

the water heater’s model rating plate, rather than six years from the date of purchase. For

the reasons that follow, we believe that genuine issues of material fact exist regarding

whether the water heater was covered by the warranty at the time Nee submitted his

warranty claim and that the trial court, therefore, erred in entering summary judgment on

that basis.

{¶26} Under the express terms of the warranty, State Industries warranted the 2003

water heater for a period of “six (6) years from the date of purchase or, in the absence of a

Bill of Sale verifying said date, from the date indicated on the model rating plate.”

{¶27} To determine whether the water heater was covered by the warranty at the

time Nee submitted his warranty claim, we must interpret the language of the warranty.

When faced with an issue of contract interpretation, a court must give effect to the intent

of the parties as reflected in the language of the contract. Sunoco, Inc. (R&M) v. Toledo

Edison Co., 129 Ohio St.3d 397, 2011-Ohio-2720, 953 N.E.2d 285, ¶ 37; Shifrin v. Forest

City Ents., Inc., 64 Ohio St.3d 635, 637, 597 N.E.2d 499 (1992). “When the language of

a written contract is clear, a court may look no further than the writing itself to find the

intent of the parties.” Sunoco at ¶ 37. If, on the other hand, a contract term is ambiguous, a court may consider extrinsic evidence, including evidence of the parties’

dealings and course of conduct, to ascertain the parties’ intent. Westfield Ins. Co. v.

Galatis, 100 Ohio St.3d 216, 2003-Ohio-5849, 797 N.E.2d 1256, ¶ 12, citing Shifrin,

supra.

{¶28} The fact that a term is not defined within the contract does not, in and of

itself, make the term ambiguous. State ex rel. Petro v. R.J. Reynolds Tobacco Co., 104

Ohio St.3d 559, 2004-Ohio-7102, 820 N.E.2d 910, ¶ 23, citing Nationwide Mut. Fire Ins.

Co. v. Guman Bros. Farm, 73 Ohio St.3d 107, 108, 652 N.E.2d 684 (1995). Where

terms in a contract are not defined, they will be given their plain and ordinary meaning

“‘unless manifest absurdity results, or some other meaning is clearly evidenced from the

face or overall contents of the instrument.’” Petro at ¶ 23, quoting Alexander v. Buckeye

Pipe Line Co., 53 Ohio St.2d 241, 374 N.E.2d 146 (1978), paragraph two of the syllabus;

see also Skerlec v. Ganley Chevrolet, Inc., 8th Dist. Cuyahoga No. 98247,

2012-Ohio-5748, ¶ 15, citing Penn Traffic Co. v. AIU Ins. Co., 99 Ohio St.3d 227,

2003-Ohio-3373, 790 N.E.2d 1199, ¶ 9. A contract term is ambiguous if it cannot be

clearly determined from a reading of the entire agreement or if the term is susceptible of

more than one reasonable interpretation. Michael A. Gerard, Inc. v. Haffke, 8th Dist.

Cuyahoga No. 98488, 2013-Ohio-168, ¶ 11, citing Hillsboro v. Fraternal Order of Police,

Ohio Labor Council, Inc., 52 Ohio St.3d 174, 177, 556 N.E.2d 1186 (1990); DDR Rio

Hondo, L.L.C. v. Sunglass Hut Trading, L.L.C., 8th Dist. Cuyahoga No. 98986,

2013-Ohio-1800, ¶ 15, quoting Look v. H&M Custom Home Builders Co., Inc., 11th Dist. Geauga No. 2011-G-3036, 2012-Ohio-3017, ¶ 18. These principles of contract

interpretation apply with equal force when interpreting warranty provisions. See, e.g.,

Leonard v. Brock, 1st Dist. Hamilton No. C-060635, 2007-Ohio-4601, ¶ 8; Walter v.

Agoston, 12th Dist. Warren No. CA2003-03-039, 2004-Ohio-2488, ¶ 12.

{¶29} It is undisputed that the water heater failed in March 2009, more than six

years after the February 7, 2003 date indicated on the water heater’s model rating plate.

Accordingly, under the express terms of the warranty, Nee needed to produce “a Bill of

Sale” “verifying” a date of “purchase” within the six-year term, i.e., after March 2, 2003,

to be eligible for a replacement water heater based on the purchase date. Therefore, the

issue in determining whether the water heater was covered by the warranty is whether

Nee provided “a Bill of Sale” “verifying” the requisite “purchase” date within the

meaning of the warranty.

{¶30} Nee contends that he produced two “bills of sale” in support of his warranty

claim: (1) the A-1 Affordable Plumbing job work order and (2) the A-1 Affordable

Plumbing statement. It is undisputed, however, that Nee did not obtain a copy of the

statement until discovery in this action, long after he submitted his warranty claim.

Accordingly, we need only consider whether the job work order constituted the requisite

“Bill of Sale” under the warranty.

{¶31} As an initial matter, although the trial court determined, in ruling on the

parties’ motions for summary judgment, that Nee “produced the job work order,” we

believe that genuine issues of fact exist as to whether Nee submitted the job work order in support of his warranty claim. Nee maintains that when he went to Edelman to process

his warranty claim, he submitted “whatever [paperwork] was required, likely the Job

Order.” However, no evidence was submitted by the parties as to exactly what

paperwork was submitted and whether that paperwork included the job work order.

Based on our review of the record, the only documentation Nee possessed at that time

related to the 2003 water heater was the model rating plate, the warranty, and the job

work order. To process Nee’s warranty claim, Edelman was required to submit the water

heater’s installation date. Of the model rating plate, warranty, and job work order, only

the job work order contained that information. Accordingly, viewing the evidence in the

light most favorable to Nee, it could be reasonably inferred that Nee provided a copy of

the job work order to Edelman when he submitted his warranty claim. However, we do

not believe that factual issue was properly resolved, as a matter of law, by the trial court.

{¶32} As to whether the job work order constituted “a Bill of Sale” “verifying” the

“purchase” date within the meaning of the warranty, the trial court held that the warranty

language was unambiguous and that because the job work order, “reflecting the day the

tank was installed,” was “silent as to the day the tank was purchased,” it was not a “Bill

of Sale” that “would have verified the date the heater had been purchased.” The trial

court, therefore, held, that under the terms of the warranty, the warranty expired on

February 7, 2009, six years after the date on the model rating plate and that Nee’s claims

failed as a matter of law. We disagree. {¶33} The terms “Bill of Sale,” “purchase,” and “verifying” are not defined in the

warranty. Webster’s New World Dictionary defines a “bill of sale” as “a written

statement certifying that the ownership of something has been transferred by sale.”

Webster’s New World Dictionary 138 (3d College Ed.1988). Black’s Law Dictionary

defines a “bill of sale” as: “In contracts, a written agreement, formerly limited to one

under seal, by which one person assigns or transfers his right to or interest in goods and

personal chattels to another. Legal document which conveys title from seller to buyer.”

Black’s Law Dictionary 164 (6th Ed.1990). It defines “purchase,” in relevant part, as:

“Transmission of property from one person to another by voluntary act and agreement,

founded on a valuable consideration. To own by paying or by promising to pay an

agreed price which is enforceable at law.” (Citations omitted.) Id. at 1234. The term

“verify” means “to prove to be true by demonstration, evidence, or testimony; confirm or

substantiate.” Webster’s New World Dictionary at 1482.

{¶34} “Bill of Sale,” as used in the warranty, is a capitalized term. Capitalization,

when used in the middle of a sentence, is typically reserved for defined terms or proper

nouns or titles. The warranty, however, does not refer to “the” Bill of Sale, but rather,

“a” Bill of Sale, in each of the instances in which the term is used. Accordingly, it is

unclear from the face of the warranty whether a consumer, in order to obtain coverage

under the warranty based on the purchase date, must produce a document entitled “Bill of

Sale” that “verif[ies]” the “purchase” date or whether any document that arguably meets

the definition of, or functions as, a “bill of sale” (e.g., a receipt, invoice, statement, or even a work order evidencing the transfer of ownership of the water heater) that

“verif[ies]” the “purchase” date, would suffice.

{¶35} The trial court held that the job work order did not satisfy the warranty’s

requirements because it reflected only the date the water heater was installed and was

“silent as to the day the tank was purchased.” The warranty, however, does not require

that a claimant produce a bill of sale expressly stating the purchase date in order for the

warranty to extend six years from the purchase date. The warranty requires only “a Bill

of Sale verifying [the purchase] date.” (Emphasis added.)

{¶36} State Industries does not sell water heaters directly to consumers, and,

therefore, does not provide “bills of sale” for water heaters directly to consumers. Instead,

consumers purchase State Industries’ water heaters through one of two channels: (1) State

Industries’ authorized distributors, who usually sell to service providers (i.e., plumbers)

but occasionally make direct sales to consumers, and (2) service providers who purchase

water heaters from distributors and sell them to consumers, often installing the water

heater as part of the transaction.

{¶37} As it relates to household consumer goods, “bill of sale” is an obsolete term.

Documents entitled “Bills of Sale” are no longer commonly prepared when household

consumer goods are purchased. Indeed, we question (1) whether a document entitled

“Bill of Sale” would ever be provided by a seller to a purchaser of a household consumer

good today, given the extensive commercial distribution networks that are involved, and

(2) if so, who would provide such a “Bill of Sale” and to whom. Would State Industries provide a Bill of Sale to Edelman? Would Edelman then provide a Bill of Sale to the

service provider? Would the service provider then provide a Bill of Sale to the

consumer? There is no evidence in the record that State Industries provided documents

entitled “Bills of Sale” to its distributors when selling them water heaters. Nor is there

any evidence that anyone else in the distribution chain provided or received such a

document in connection with the sale or purchase of the 2003 water heater.5

{¶38} In this case, the record reflects that Dunipace dealt exclusively with a

service provider, i.e., A-1 Affordable Plumbing, with respect to the purchase and

installation of the 2003 water heater. Once installed, the water heater became part of the

home. Accordingly, transfer of ownership of the 2003 water heater to Dunipace, i.e., the

water heater was “purchased” by Dunipace, when the water heater was installed on May

9, 2003.6 The job work order evidenced that transaction.

5 State Industries contends that neither the job work order nor the statement constitutes “a Bill of Sale” within the meaning of the warranty. State Industries, however, does not identify any document that a consumer would have received, where, as here, the consumer dealt exclusively with a service provider who sold the water heater to the consumer and installed the water heater as part of the same transaction, that it contends would have constituted “a Bill of Sale verifying [the purchase date]” within the meaning of the warranty. It is not reasonable to interpret the language of a warranty to impose a requirement for warranty coverage that, under the circumstances in which it most frequently applies, could not possibly be met. See, e.g., Kebe v. Nutro Mach. Corp., 30 Ohio App.3d 175, 177, 507 N.E.2d 369 (8th Dist.1985) (When interpreting contract language, “the court should prefer a meaning which gives it vitality rather than a meaning which renders its performance illegal or impossible.”); Liqui Lawn Corp. v. Andersons, 8th Dist. Cuyahoga No. 50240, 1986 Ohio App. LEXIS 6376, *8 (Apr. 10, 1986) (“[C]ourts disfavor contract interpretations which render contracts illusory or unenforceable.”). 6 Nee argues, based on the A-1 Affordable Plumbing statement, that the purchase date for the water heater was actually June 2, 2003. Although the A-1 Affordable Plumbing statement reflects that an additional $315 payment was made in connection with the transaction on June 2, 2003, that {¶39} That documentation of the water heater’s installation date could be used to

“verify” its purchase date for purposes of a warranty claim, is further supported by

evidence of State Industries’ own practice of using the “installation date,” rather than the

“purchase date,” to determine the validity of warranty claims in its warranty claims

processing system. State Industries’ corporate representative, Amy Hopkins, testified

that a water heater that was out of warranty based on its manufacture date could still be

within warranty if the customer had proof of the date of installation. Only if a customer

did not have proof of the date of installation did State Industries use the date of

manufacture in verifying whether a water heater was within warranty.

{¶40} Viewing the evidence in the light most favorable to Nee, the job work order

arguably evidences the installation of the 2003 water heater in the home, the transfer of

ownership of the water heater to Dunipace, and the date on which the installation and

purchase of the water heater occurred — May 9, 2003. A genuine issue of material fact,

therefore, exists as to whether the job work order constituted “a Bill of Sale” “verifying”

a “purchase” date within the warranty period.

{¶41} Given that issues of fact exist as to whether Nee presented “a Bill of Sale,”

in support of his warranty claim, that “verif[ied]” a “purchase” date within the warranty

period,7 the trial court erred in determining as a matter of law that the water heater was

does not change the purchase date. Although the transaction may not have been fully paid for until June 2, 2003, that does not mean that the water heater was not “purchased” when it was installed. 7 Even if the job work order did not constitute “a Bill of Sale verifying [the purchase date]” within the meaning of the warranty, we believe there is an issue of fact as to whether State Industries not covered by the warranty and in entering summary judgment in favor of State

Industries on that basis. Nee’s first assignment of error is sustained.

Breach of Express Warranty under R.C. 1302.26

{¶42} In his second assignment of error, Nee contends that the trial court erred in

granting summary judgment in favor of State Industries on his breach of express warranty

claim under R.C. 1302.26 on the grounds that he was not a “buyer” of the water heater as

defined in R.C. 1302.01(A)(1). We agree.

{¶43} The trial court held that because Nee did not himself “buy or contract to

buy” the 2003 water heater, but “instead became the owner of the [water] heater after

waived the requirement that the purchase date be “verified” by “a Bill of Sale” in order for the warranty to run six years from the purchase date, rather than six years from the date indicated on the water heater’s model rating plate. “[W]aiver of a contract term can occur when a party conducts itself in a manner inconsistent with an intention to insist on that term.” Kappa HQ & CC, Inc. v. Norman, 8th Dist. Cuyahoga No. 97892, 2012-Ohio-4816, ¶ 18, citing Vivi Retail Inc. v. E&A N.E. Ltd. Partnership, 8th Dist. Cuyahoga No. 90527, 2008-Ohio-4705, ¶ 30; see also Convenient Food Mart, Inc. v. Atwell, 11th Dist. Lake No. 2003-L-174, 2005-Ohio-704, ¶ 23 (“by failing to insist on enforcement” of term requiring that lease dates be confirmed in writing, defendants could not thereafter claim that “failure to satisfy this condition precludes a determination of a beginning date of the lease, where the subsequent conduct of the parties has evinced a mutual understanding of that date”); Snowville Subdivision Joint Venture Phase I v. Home S&L of Youngstown, 8th Dist. Cuyahoga No. 96675, 2012-Ohio-1342, ¶ 22 (saving and loan’s acceptance of extension fee could constitute waiver of requirement that no default existed at the time option to extend maturity date of loan was exercised). Whether a party has waived a contract term is a question of fact. Monroe Excavating, Inc. v. DJD&C Dev. Inc., 7th Dist. Mahoning No. 10 MA12, 2011-Ohio-3169, ¶ 40. The record reflects that when Nee initially contacted State Industries to determine what he needed to do to submit a warranty claim, he was told by State Industries’ representative to send in “proof of purchase,” not “a Bill of Sale.” It is undisputed that based upon the information Nee submitted to Edelman, Nee received a replacement water heater, and Edelman received a credit for the replacement water heater it provided to Nee after submitting the warranty claim. State Industries’ corporate representative further acknowledged that a valid warranty claim was submitted with respect to 2003 water heater. purchasing a home from its prior owner,” he was not a “buyer” within the meaning of

R.C. 1302.01(A)(1) and, therefore, was not entitled to enforce any express warranty

associated with the 2003 water heater under R.C. 1302.26.

{¶44} Under R.C. 1302.26, an express warranty is created when an “affirmation of

fact or promise” is “made by the seller to the buyer.” However, the fact that Nee was not

the original “buyer” of the water heater to whom the “affirmation of fact or promise” was

made is not determinative of whether he is entitled to enforce the express warranty under

R.C. 1302.26.

{¶45} Under Ohio’s Uniform Commercial Code, in the absence of a contractual

limitation on the right to transfer, a buyer or seller may assign any rights under a contract

“except where the assignment would materially change the duty of the other party, or

increase materially the burden or risk imposed on the other party by the contract, or

impair materially the other party’s chance of obtaining return performance.” R.C.

1302.13(B)(1); see also 2A Lawrence’s Anderson on the Uniform Commercial Code,

Section 2-210:53, 119 (3d Ed.2008) (“a buyer may assign its rights under a warranty prior

to breach”).

{¶46} There is nothing in the water heater warranty that precludes its transfer or

assignment to subsequent owners. The warranty refers to “you” and “the consumer” in

defining the parties’ rights under the warranty; it is not limited to the “original purchaser.”

There is nothing in the record that suggests that assignment of the water heater warranty

to Nee would “materially change” any duty of State Industries, “increase materially” the burden or risk imposed on State Industries, or “impair materially” State Industries’

“chance of obtaining return performance.” In addition, Nee presented evidence that

State Industries anticipated its warranty would be transferred to, and enforced by,

subsequent owners. State Industries’ corporate representative, Amy Hopkins, testified

that State Industries does not require a consumer to be the original purchaser of a water

heater to submit a valid warranty claim and that State Industries has historically honored

water heater warranty claims submitted by subsequent owners.

{¶47} However, simply because a warranty may be transferred to a subsequent

owner does not necessarily mean that such a transfer has occurred. There must be some

transfer of the warranty or assignment of rights under the warranty to entitle the

subsequent owner to enforce the warranty. See, e.g., Gold’n Plump Poultry, Inc. v.

Simmons Eng. Co., 805 F.2d 1312, 1316 (8th Cir.1986) (Applying Minnesota’s version of

UCC 2-210, “a subsequent purchaser of a warranted article is not automatically entitled to

a cause of action against the original seller for breach of warranty. There must be a

contract of assignment of rights to entitle the subsequent purchaser to this cause of

action.”), citing 8 Williston, A Treatise on the Law of Contracts, Section 998 (3d Ed.1961

& Supp.1985); Collins Co. v. Carboline Co., 125 Ill.2d 498, 515, 532 N.E.2d 834 (1988)

(“[T]he assignee of a warrantee’s rights under an express warranty, if the assignment is

otherwise valid, succeeds to all those rights and thus stands in privity with the warrantor.

* * * [W]hen one considers that an express warranty is merely a form of contractual

undertaking, it becomes perfectly logical to permit rights under the warranty to be assigned in the same way as other contract rights if they do not fall within one of the

UCC’s exceptions to assign-ability.”); see also 3 Lawrence’s Anderson on the Uniform

Commercial Code, Section 2-314:379, 625-26 (3d Ed.2009) (“A person satisfies the

requirement of privity with the defendant when that person is the assignee of the rights of

a person who was in privity with the defendant.”).

{¶48} An assignment is “a transfer of one’s rights to something to another.”

Quantum Chem. Corp. v. Mobil Oil Corp., 1st Dist. Hamilton Nos. C-940357 and

C-940395, 1995 Ohio App. LEXIS 4557, *7-8 (Oct. 18, 1995), citing 6 Ohio

Jurisprudence 3d, Assignments, Section 1 (1978). A valid assignment may be made by

any words or actions that demonstrate an intent on the part of the assignor to assign the

rights in question, an intent on the part of the assignee to be assigned the rights in

question, and the exchange of valuable consideration. See, e.g., Langhals v. Holt

Roofing Co., 47 Ohio App.3d 114, 116, 547 N.E.2d 401 (6th Dist.1988), citing Morris v.

George Banning, Inc., 49 Ohio Law Abs. 530, 533, 77 N.E.2d 372 (2d Dist.1947).

{¶49} In opposing State Industries’ motion for summary judgment and in support

of his own motion for partial summary judgment, Nee presented evidence that when he

purchased the home (and the 2003 water heater), he received the warranty documentation

for the 2003 water heater. He also presented evidence that he had discussions with

Dunipace, prior to his purchase of the home (and water heater), regarding the failure of

the prior water heater and the replacement of that water heater with the 2003 water heater

pursuant to the home warranty Dunipace had obtained when she listed the home for sale. Based on this evidence, we find that a genuine issue of material fact exists as to whether

Dunipace assigned or transferred her rights in the warranty to Nee when he purchased the

home (and the 2003 water heater) from her. The trial court, therefore, erred in granting

summary judgment in favor of State Industries on Nee’s breach of warranty claim. Nee’s

second assignment of error is sustained.

CSPA Claim

{¶50} Nee’s third and fourth assignments of error involve his CSPA claim. In his

third assignment of error, Nee argues that because the water heater warranty was

transferable, the trial court erred in determining that he could not bring a CSPA claim

based on a breach of warranty. In his fourth assignment of error, Nee contends that the

trial court erred in determining as a matter of law that State Industries did not engage in

any unfair or deceptive acts or practices in connection with a consumer transaction with

respect to his warranty claim.

{¶51} CSPA prohibits a supplier from committing “an unfair or deceptive act or

practice in connection with a consumer transaction” whether it occurs before, during, or

after the transaction. R.C. 1345.02(A). A “supplier” is “a seller, lessor, assignor,

franchisor, or other person engaged in the business of effecting or soliciting consumer

transactions, whether or not the person deals directly with the consumer.” (Emphasis

added.) R.C. 1345.01(C). A “consumer” is “a person who engages in a consumer

transaction with a supplier.” R.C. 1345.01(D). A “consumer transaction” is “a sale, lease,

assignment, award by chance, or other transfer of an item of goods, a service, franchise, or an intangible, to an individual for purposes that are primarily personal, family, or

household, or solicitation to supply any of these things.” (Emphasis added.) R.C.

1345.01(A).

{¶52} Nee contends that because he entered into an agreement to purchase the

home from Dunipace in April 2003, before the prior water heater began leaking,

Dunipace was “acting for [Nee]” and “purchased the 2003 Water Heater on [Nee’s]

behalf” when she replaced the prior leaking water heater with the 2003 water heater, such

that Nee was the “true consumer” entitled to bring a CSPA claim for breach of the water

heater warranty. State Industries, on the other hand, argues that because Nee did not

himself purchase the 2003 water heater from State Industries, but rather, became the

owner of the 2003 water heater when he and his wife purchased the home from Dunipace,

Nee is not a “consumer” and did not engage in a “consumer transaction” with respect to

the 2003 water heater. As such, State Industries contends, Nee’s CSPA claim fails as a

matter of law.

{¶53} We agree that Nee was not a “consumer” involved in a “consumer

transaction” with State Industries with respect to the purchase of the 2003 water heater in

May 2003. There is no evidence Nee was at all involved in the original purchase or

installation of the 2003 water heater. There is likewise no evidence that Dunipace was

acting on behalf of Nee or representing Nee when the 2003 water heater was installed

pursuant to the home warranty Dunipace purchased when she listed her home for sale. {¶54} State Industries’ argument, however, addresses only one of the transactions

involved in this case. This case involves two transactions: (1) the initial purchase of the

2003 water heater and (2) the 2009 transaction in which Nee sought to enforce the terms

of the warranty and acquired a replacement water heater in exchange for a required

payment of $80.81. Although Nee was not a “consumer” involved in a “consumer

transaction” with respect to the original purchase of the 2003 water heater, this does not

preclude him from being a “consumer” involved in a “consumer transaction” with State

Industries with respect to his 2009 warranty claim and the “other transfer” of the FVIR

replacement water heater to him following the submission of his warranty claim. There

is no dispute that the “transfer” of the replacement FVIR water heater to Nee was for

“primarily personal, family, or household” purposes. We find that reasonable minds

could conclude that Nee was a “consumer,” that State Industries was a “supplier,” and

that they were involved in a “consumer transaction” within the meaning of CSPA with

respect to Nee’s 2009 warranty claim and his receipt of the FVIR replacement water

heater.

{¶55} Nee’s CSPA claim is premised on State Industries’ alleged failure to honor

the terms of the water heater warranty and its allegedly “unfair and deceptive practices”

in handling his warranty claim. A manufacturer’s failure to honor an express warranty

can constitute an unfair or deceptive act or practice under CSPA. See, e.g., Layne v.

McGowen, 2d Dist. Montgomery No. 14676, 1995 Ohio App. LEXIS 2120, *15 (May 24,

1995); Brown v. Lyons, 43 Ohio Misc. 14, 19-20, 332 N.E.2d 380 (C.P.1974) (“Failure by a supplier in connection with a consumer transaction to honor express warranties,

constitutes deceptive acts and practices in violation of the Ohio Consumer Sales Practices

Act.”); R.C. 1345.02(B)(10) (unfair or deceptive act or practice includes supplier’s

representation that “a consumer transaction involves or does not involve a warranty, a

disclaimer of warranties or other rights, remedies, or obligations if the representation is

false”). Likewise, a “knowing breach of contract” may constitute a violation of CSPA.

See, e.g., Lump v. Best Door & Window, Inc., 3d Dist. Logan Nos. 8-01-09 and 8-01-10,

2002 Ohio App. LEXIS 1381, *19 (Mar. 27, 2002) (“While * * * not every breach of

contract will constitute a CSPA violation,” under the circumstances, genuine issues of

material fact existed as to whether CSPA was violated with respect to breach of contract

claims.); Zimmerman v. U.S. Diamond & Gold Jewelers, Inc., 2d Dist. Montgomery No.

14680, 1995 Ohio App. LEXIS 901 (Mar. 8, 1995) (where it was undisputed that supplier

refused to deliver ring to plaintiff for the stated price, trial court did not err in finding that

supplier violated R.C. 1345.02(A)).

{¶56} State Industries argues that, even if the trial court erred in ruling that it owed

no obligation to Nee because the water heater warranty had expired by the time Nee had

asserted his warranty claim, the trial court’s entry of summary judgment in favor of State

Industries should still be affirmed because State Industries “fully performed its

obligations under the Warranty when [Nee] was provided the 2009 Water Heater

containing the FVIR safety design.” We disagree. {¶57} State Industries asserts that because of changes in national safety standards

that mandated the incorporation of FVIR technology in its water heater design, it no

longer made a “current model water heater” of “equal quality” as the 2003 water heater

that it could provide to Nee when he submitted his warranty claim in 2009. Because Nee

arguably received “more” than he was entitled to under the warranty, i.e., a new model

water heater with a new safety feature and a new warranty, State Industries argues that it

was entitled to charge him for it.

{¶58} That State Industries could no longer supply a replacement water heater that

it deemed to be of “equal quality” to the 2003 water heater, i.e., a non-FVIR water heater,

when Nee submitted his warranty claim in 2009 did not relieve State Industries of its

obligation under the warranty to provide a replacement water heater. It is expected, as

the years progress, that “current” models will be improved over prior models and will

have additional features, including, in some instances, new and improved safety features.

{¶59} We find that Nee has presented evidence raising a genuine issue of material

fact as to whether State Industries breached the warranty and violated CSPA by charging

him a fee for a replacement FVIR water heater that was not specified in the warranty.

Accordingly, the trial court erred in granting summary judgment in favor of State

Industries on Nee’s CSPA claim. Miner v. Jayco, Inc., 6th Dist. Fulton No. F-99-001,

1999 Ohio App. LEXIS 3944, *16-19 (Aug. 27, 1999). Nee’s third and fourth

assignments of error are sustained in part. Breach of Contract

{¶60} In his fifth assignment of error, Nee contends that the trial court erred in

denying his motion for partial summary judgment on his breach of contract claim.

{¶61} To establish a breach of contract, a plaintiff must demonstrate: (1) the

existence of a contract; (2) plaintiff’s performance; (3) defendant’s breach; and (4)

plaintiff’s damage or loss. On Line Logistics, Inc. v. Amerisource Corp., 8th Dist.

Cuyahoga No. 82056, 2003-Ohio-5381, ¶ 39, citing Doner v. Snapp, 98 Ohio App.3d 597,

600, 649 N.E.2d 42 (2d Dist.1994). Nee’s breach of contract claim involves virtually the

same facts, arguments, and issues as his breach of warranty claim. Accordingly, for the

reasons stated above, we find that there are disputed issues of material fact that preclude

summary judgment on Nee’s breach of contract claim. Nee’s fifth assignment of error is

overruled.

Agency

{¶62} In his final assignment of error, Nee contends that the trial court erred in

denying his motion for partial summary judgment on the issue of State Industries’

“agency relationship with Edelman.” Nee contends that based on principles of actual and

apparent authority, Edelman was acting as State Industries’ agent in collecting FVIR

upcharges from customers on warranty claims, including “inflated” FVIR upcharges in

excess of the FVIR upcharges charged by State Industries, such that State Industries

should be “legally responsible” for Edelman’s actions. {¶63} An agency relationship is a consensual relationship pursuant to which the

agent has the power to bind the principal, and the principal has the right to control the

agent. Ferrell v. Nationwide Mut. Ins. Co., 8th Dist. Cuyahoga No. 95649,

2011-Ohio-3385, ¶ 26, quoting Remy v. Graszl, 5th Dist. Richland No. 98 CA 64, 1998

Ohio App. LEXIS 6530, *5 (Dec. 23, 1998). Agency can be based on actual authority

or apparent authority. Express authority is authority that is “‘directly granted to or

conferred upon the agent or employee in express terms by the principal, and it extends

only to such powers as the principal gives the agent in direct terms.’” Master Consol.

Corp. v. BancOhio Natl. Bank, 61 Ohio St.3d 570, 574, 575 N.E.2d 817 (1991), quoting

Stevens v. Frost, 140 Me. 1, 7, 32 A.2d 164 (1943). “[I]mplied authority may also arise

from the express delegation of actual authority and * * * carries with it the power to do

all that which is reasonably necessary to carry into effect the power actually conferred.”

Damon’s Missouri, Inc. v. Davis, 63 Ohio St.3d 605, 608, 590 N.E.2d 254 (1992), citing

Spengler v. Sonnenberg, 88 Ohio St. 192, 200-201, 102 N.E. 737 (1913); see also Crnic

v. Am. Republic Ins. Co., 8th Dist. Cuyahoga No. 89021, 2007-Ohio-5439, ¶ 24.

Apparent authority arises when (1) “the principal held the agent out to the public as

possessing sufficient authority to act on his behalf,” (2) a “person dealing with the agent

knew these facts,” and (3) the person “acting in good faith had reason to believe that the

agent possessed the necessary authority.” Ohio State Bar Assn. v. Martin, 118 Ohio

St.3d 119, 2008-Ohio-1809, 886 N.E.2d 827, ¶ 41, citing Master Consol. Corp. at

syllabus. The “primary distinguishing characteristic of an agency relationship” is the principal’s right “to control the conduct of the agent when the agent is performing work

on behalf of the principal.” Clark v. Univ. Hosps. of Cleveland, 8th Dist. Cuyahoga No.

78854, 2001 Ohio App. LEXIS 3832 (Aug. 30, 2001), quoting Costell v. Toledo Hosp.,

98 Ohio App.3d 586, 649 N.E.2d 35 (6th Dist.1994). The party alleging the existence of

an agency relationship bears the burden of proving that such a relationship exists.

Ferrell at ¶ 26, citing Gardner Plumbing, Inc. v. Cottrill, 44 Ohio St.2d 111, 115, 338

N.E.2d 757 (1975), and Remy, supra.

{¶64} Nee presented evidence that Edelman was an authorized distributor of State

Industries’ water heaters. However, the existence of a manufacturer-distributor

relationship, in and of itself, does not necessarily make the distributor an agent of the

manufacturer. See, e.g., Premier Business Group, LLC v. Red Bull of N. Am., Inc.,

N.D.Ohio No. 08-CV-01453, 2009 U.S. Dist. LEXIS 91647, *16-19 (Sept. 30, 2009).

Nee also presented evidence that Edelman was expressly authorized by State Industries to

process warranty claims and to collect a $60 FVIR upcharge when a non-FVIR water

heater was replaced with a FVIR water heater under the warranty. State Industries,

however, presented evidence that Edelman lacked authority to approve warranty

claims on its behalf and disputed that Edelman was acting as State Industries’ agent in

collecting the FVIR upcharge, including any amounts in excess of the $60 FVIR charge

State Industries assessed against the distributor. Based on our review of the record, we

find that genuine issues of fact exist for the jury to resolve regarding State Industries’

right to control Edelman’s conduct and the scope of Edelman’s actual or apparent authority in processing warranty claims for State Industries. Accordingly, the trial court

did not err in denying Nee’s motion for partial summary judgment on the agency issue.

Nee’s sixth assignment of error is overruled.

{¶65} Judgment affirmed in part and reversed in part.

It is ordered that appellant and appellee share the 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.

__________________________________________ KENNETH A. ROCCO, PRESIDING JUDGE

MARY EILEEN KILBANE, J., and TIM McCORMACK, J., CONCUR