Shannon v. Fischer

2020 Ohio 5567

• Court: Ohio Court of Appeals
• Decided: December 7, 2020
• Docket: CA2020-05-022
• Status: Published

Opinion

[Cite as Shannon v. Fischer, 2020-Ohio-5567.]

IN THE COURT OF APPEALS

TWELFTH APPELLATE DISTRICT OF OHIO

CLERMONT COUNTY

CHRIS SHANNON, et al., :

Appellants, : CASE NO. CA2020-05-022

: OPINION - vs - 12//7/2020 :

ROBERT FISCHER, et al., :

Appellees. :

CIVIL APPEAL FROM CLERMONT COUNTY COURT OF COMMON PLEAS Case No. 2017CVH01625

Cooper & Elliott, LLC, Jeffrey T. Kenney, Melanie M. Lennon, 2175 Riverside Drive, Columbus, Ohio 43221, for appellants Chris and Erika Shannon

Shrive Law Firm, Brian C. Shrive, 7305 Tangleridge Drive, Cincinnati, Ohio 45243, for appellees Robert and Amy Fischer

Gallagher Sharp, LLP, Timothy T. Brick, Steven D. Strang, Drew D. Price, 1215 Superior Avenue, 7th Floor, Cleveland, Ohio 44114, for appellees Deborah Martin and Keller Williams Advisors Realty/Fri Mason LLC

RINGLAND, J.

{¶1} Appellants, Chris and Erika Shannon, appeal the grant of summary judgment

by the Clermont County Court of Common Pleas in favor of appellees, Robert and Amy

Fischer, Deborah Martin, and Keller Williams.

{¶2} The Fischers purchased property in 2012 after being advised of a previous Clermont CA2020-05-022

water intrusion in the basement when the sump pump failed, and water leaked onto the

carpet. The prior owners indicated that they installed an electrical back-up and claimed no

additional water issues. In December 2014, the Fischers experienced additional sump

pump issues, which caused flooding in the basement. As a result, they replaced the sump

pump and hired a water clean-up company to remediate the flood.

{¶3} In 2015, the Fischers decided to sell their home, and listed the property with

Robert's sister, Deborah Martin, who is a real estate agent employed by Keller Williams.

The Fischers completed a residential property disclosure form and stated that there were

no water intrusion issues other than the sump pump malfunction that occurred in 2014. The

Fischers stated that they had replaced the sump pump, hired a water clean-up company,

and had "no further issues." The Fischers also stated that the property had not been

inspected for mold by a qualified inspector. The Fischers did not list the previous water

intrusion that they were warned of when they purchased the home, as such did not occur

during their ownership.

{¶4} The Shannons attended two open houses and one private showing of the

property prior to purchasing it. During the open houses, Mildred Fischer was present on

behalf of Deborah. Mildred, who is Robert and Deborah's mother, is also employed by

Keller Williams. The Shannons asked Mildred questions about water stains in the

basement, as well as a drywall patch under a window well in the basement. Mildred told

the Shannons that the water stain was likely from the 2014 sump pump flood and that the

drywall patch was likely due to her grandchildren making a hole in the wall with a pool table

cue.

{¶5} Before ultimately purchasing the property, the Shannons had an inspection

performed, but a mold inspection was never completed. The Shannons and Fischers

entered into a purchase agreement, whereby the Shannons agreed to purchase the

-2- Clermont CA2020-05-022

property for $275,000.

{¶6} Less than two weeks after closing, there was a significant water intrusion in

the basement that originated from multiple window wells and a door. One such intrusion

occurred directly above the patched area where Mildred claimed a pool cue struck the wall.

Thereafter, water intrusions occurred three more times. Because of the intrusions, the

Shannons hired professional water and mold remediation services, and discovered

extensive water damage in the basement, as well as a black mold infestation. The costs

associated with addressing the discovered issues exceeded $43,000.

{¶7} The Shannons filed suit against the Fischers, Deborah Martin, and Keller

Williams. The Complaint alleged the following causes of action: 1) negligence and negligent

misrepresentation against the Fischers, Deborah, and Keller Williams, 2) fraud against the

Fischers, 3) breach of contract against the Fischers, 4) violations of R.C. 4735.67 against

Deborah and Keller Williams, 5) fraudulent misrepresentation against Deborah and Keller

Williams, and 6) punitive damages against the Fischers, Deborah, and Keller Williams.

{¶8} Discovery revealed that a neighbor witnessed Robert draining water from the

basement on at least four different occasions, each time occurring after a heavy rainfall. An

employee from the water remediation company employed by the Fischers averred that the

Fischers removed drywall and baseboards and that there was visible mold where the

drywall and baseboards were removed. The employee also averred that his company did

not perform any mold remediation on the house per the Fischers' denial of the

recommended service. An employee of the mold remediation company hired by the

Shannons averred that the mold infestation was indicative of repeated water intrusions over

several years.

{¶9} The Fischers, Deborah, and Keller Williams moved for summary judgment. In

separate decisions, the trial court granted summary judgment in favor of all defendants on

-3- Clermont CA2020-05-022

all claims. The Shannons now appeal the trial court's grant of summary judgment, raising

the following assignments of error.

{¶10} Assignment of Error No. 1:

{¶11} THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT AS TO

APPELLANT'S [SIC] CLAIMS OF FRAUD, BREACH OF CONTRACT, FRAUDULENT

MISREPRESENTATION, NEGLIGENT MISREPRESENTATION, AND NEGLIGENCE

AGAINST THE FISCHER DEFENDANTS.

{¶12} The Shannons argue in their first assignment of error that the trial court erred

in granting summary judgment in favor of the Fischers.

{¶13} An appellate court reviews a trial court's ruling on a motion for summary

judgment de novo. Grizinski v. Am. Express Fin. Advisors, Inc., 187 Ohio App.3d 393,

2010-Ohio-1945, ¶ 14 (12th Dist.). "De novo review means that this court uses the same

standard that the trial court should have used, and we examine the evidence to determine

whether as a matter of law no genuine issues exist for trial." Morris v. Dobbins Nursing

Home, 12th Dist. Clermont No. CA2010-12-102, 2011-Ohio-3014, ¶ 14.

{¶14} Summary judgment is proper if there are no genuine issues of material fact to

be litigated, the moving party is entitled to judgment as a matter of law, and reasonable

minds can come to only one conclusion, and that conclusion is adverse to the nonmoving

party. Civ.R. 56(C).

Fraudulent Nondisclosure

{¶15} A claim of fraudulent nondisclosure requires proof of the following elements:

(1) a representation or, where there is a duty to disclose, concealment of a fact, (2) which

is material to the transaction, (3) made falsely, with knowledge of its falsity, or with such

utter disregard and recklessness as to its truth or falsity that knowledge may be inferred,

(4) with the intent of misleading another to rely on it, (5) justifiable reliance upon the

-4- Clermont CA2020-05-022

representation or concealment, and (6) a resulting injury proximately caused by the

reliance. Russ v. TRW, Inc., 59 Ohio St.3d 42, 49 (1991).

{¶16} "An action for fraud may be grounded upon failure to fully disclose facts of a

material nature where there exists a duty to speak." Layman v. Binns, 35 Ohio St.3d 176,

178 (1988); Roberts v. McCoy, 12th Dist. Butler No. CA2016-04-071, 2017-Ohio-1329, ¶

16; Reese v. VanHeeswijk, 10th Dist. Franklin No. 93AP-389, 1993 Ohio App. LEXIS 4706,

*12 (Sep. 30, 1993). Buyers are protected by law against "being misled by others into

making unwise decisions which result in financial loss" when sellers fail to "fully disclose"

material facts. Miles v. McSwegin, 58 Ohio St.2d 97, 99-100 (1979).

{¶17} "A party is under a duty to speak, and therefore liable for non-disclosure if the

party fails to exercise reasonable care to disclose a material fact which may justifiably

induce another party to act or refrain from acting, and the non-disclosing party knows that

the failure to disclose such information to the other party will render a prior statement or

representation untrue or misleading." Armbruster v. Mason, 5th Dist. Ashland No. CA-766,

1982 Ohio App. LEXIS 14819, *11-12 (July 20, 1982).

{¶18} Pursuant to R.C. 5302.30(D), sellers of residential real estate must complete

a disclosure form to inform potential buyers of "material matters relating to the physical

condition of the property to be transferred * * * [and] the condition of the structure of the

property, including the roof, foundation, walls, and floors * * *." The statute further requires

that any disclosure be made in good faith or with "honesty in fact in a transaction." R.C.

5302.30(A)(1). R.C. 5302.30(D) requires sellers to disclose on the form only those defects

that are within their actual knowledge. Roberts, 2017-Ohio-1329 at ¶ 16.

{¶19} The trial court noted that some genuine issues of material fact were created

through the discovery evidence specific to aspects of this legal standard. Nonetheless, the

trial court determined that summary judgment was proper because the Shannons did not

-5- Clermont CA2020-05-022

justifiably rely on representations made by the Fischers.

Justifiable Reliance

{¶20} "Reliance is justifiable if the representation does not appear unreasonable on

its face and if there is no apparent reason to doubt the veracity of the representation under

the circumstances." AmeriFirst Sav. Bank v. Krug, 136 Ohio App.3d 468, 495 (2d

Dist.1999). Justifiable reliance, as contrasted with reasonable reliance, "'is a matter of the

qualities and characteristics of the particular plaintiff, and the circumstances of the particular

case, rather than of the application of a community standard of conduct to all cases.'" Id.

at 496, quoting Field v. Mans, 516 U.S. 59, 70-71, 116 S.Ct. 437 (1995).

{¶21} In determining whether there was justifiable reliance, "the court must inquire

into the relationship between the parties. * * * The court must consider the nature of the

transaction, the form and materiality of the representation, the relationship of the parties

and their respective means and knowledge, as well as other circumstances." Mishler v.

Hale, 2d Dist. Montgomery No. 25962, 2014-Ohio-5805, ¶ 33.

{¶22} Even the existence of an "as is" clause does not overcome the ability of buyers

to justifiably rely on representations made by the sellers regarding defects in the home.

Duman v. Campbell, 8th Dist. Cuyahoga No. 79858, 2002-Ohio-2253, ¶ 28-29 (summary

judgment was not appropriate where there existed a genuine issue of material fact regarding

whether the buyers were reasonably justified in relying on the sellers' disclosure that no

water problems existed in the basement).

An "as is" clause bars an action for "passive nondisclosure" but does not shield the seller from an "active" fraud or commission (as opposed to a fraud of omission), i.e., a misrepresentation or fraudulent concealment. Thus, an "as is" clause does not protect a seller who positively misrepresents or conceals the complained of condition. "An 'as is' clause cannot be relied on to bar a claim for fraudulent misrepresentation or fraudulent concealment." Thus, while a seller may not have a duty to disclose a defective condition, the seller may not take affirmative

-6- Clermont CA2020-05-022

steps to misrepresent or to conceal the condition.

(Internal citations omitted). Hubbard Family Trust v. TNT Land Holdings, LLC, 4th Dist.

Pike No. 12CA833, 2014-Ohio-772, ¶ 20.

{¶23} The requirement of justifiable reliance tests the credibility of the claim that

fraud induced a party to act and it is generally a question of fact. March v. Statman, 1st

Dist. Hamilton No. C-150337, 2016-Ohio-2846, ¶ 22. See also Teter v. Rossi, 11th Dist.

Trumbull No. 98-T-0044, 1999 Ohio App. LEXIS 2817, *8-9 (June 18, 1999) (reversing

summary judgment because an issue of fact remained regarding the appellant's reliance on

owner's comments on water damage and whether such reliance was justifiable); Gross v.

Garrison, 5th Dist. Delaware No. 81-CA-5, 1981 Ohio App. LEXIS 11560, *8 (Dec. 7, 1981)

(the question of whether or not a reasonable inspection of the house would have revealed

the problem "was a question for the jury"); Gorbett v. HGM Hilltop, 8th Dist. Cuyahoga No.

58240, 1991 Ohio App. LEXIS 2789, *6 (June 13, 1991) (reversing trial court's grant of

summary judgment because there existed an issue of fact regarding whether the sump

pump was concealed during a buyer's investigation of a property before buying it); and

Mohley v. Ottens, 3d Dist. Hancock No. 5-94-8, 1994 Ohio App. LEXIS 4377, *2-3 (Sep. 21,

1994) ("whether any representations were made by the [sellers] and, if so, whether such

representations were misrepresentations, and were material in nature, are all questions of

fact precluding the trial court from granting summary judgment").

"Full" Disclosure of Latent and Patent Defects

{¶24} In Ohio, the seller of real property must disclose substantial latent defects to

the purchaser. McClintock v. Fluellen, 8th Dist. Cuyahoga No. 82795, 2004-Ohio-58, ¶ 16.

As noted earlier, Ohio's real property disclosure statute, R.C. 5302.30, requires sellers of

real estate to disclose defects within their actual knowledge on a residential property

disclosure form. If the seller fails to disclose a material fact on the form with the intention

-7- Clermont CA2020-05-022

of misleading the buyer, and the buyer relies on the form, the seller is liable for any resulting

injury. Melenick v. McManamon, 8th Dist. Cuyahoga Nos. 92453 and 92675, 2010-Ohio-

1051, ¶ 24.

{¶25} Ohio courts have determined that a seller's failure to "fully disclose" latent and

patent defects creates a genuine issue of material fact rendering summary judgment

inappropriate. For example, the Second District reversed a trial court's grant of summary

judgment because genuine issues of material fact remained where the sellers did not

disclose that a well that provided water to the property was high in sulfur content resulting

in water with an unpleasant taste and smell. Hull v. Dietrich, 2d Dist. Miami No. 97-CA-32,

1997 Ohio App. LEXIS 5955 (Dec. 31, 1997).

{¶26} Despite the buyers procuring an inspection prior to their purchase, the Second

District focused upon the fact that the sellers indicated on the residential disclosure form

that the source of water was the well, but did not disclose the sulfur issue. In so deciding,

the court relied on law that "fraud may be grounded upon failure to fully disclose facts of a

material nature where there exists a duty to speak." Id. at *13.

{¶27} Similarly, the Eleventh District reversed the grant of summary judgment where

sellers made representations, which were later determined to be false, regarding the cause

of cracks in a house before selling it to the buyers. Flute et al., v. Logan et al., 11th Dist.

Lake No. 8-135, 1981 Ohio App. LEXIS 14164 (June 29, 1981). The buyers had a home

inspection performed before purchasing the home and inquired into the cause of the cracks.

Even so, the Eleventh District found that there was an issue of fact "as to whether appellees

knowingly withheld knowledge of the latent defects which were the real cause of the cracks."

(Emphasis added.) Id. at *6. In so doing, the court reasoned that failure to "fully disclose"

material facts supports a fraud action. Id. at *5.

{¶28} The Fifth District also found that genuine issues of material fact precluded

-8- Clermont CA2020-05-022

summary judgment even where home buyers failed to read a report regarding past termite

damage that was available to them. Hartfield v. Coldwell Banker-McMahon Real Estate

Co., 5th Dist. Licking No. CA-3221, 1987 Ohio App. LEXIS 5680 (Jan. 8, 1987). The court

found that further litigation was necessary in order to determine whether the buyers acted

reasonably by relying on the seller's statements that there were no bug problems in the

home when deciding not to read the report.

{¶29} When the buyers asked if there were any bug-related issues, the sellers did

not disclose that there had been a termite infestation, and only stated that there were no

bug problems. The Fifth District reasoned, "an action for fraud is maintainable as a result

of the failure of a party in a transaction such as this to fully disclose facts of a material

nature where there exists a duty to speak." Id. at *4. Thus, the court determined that

summary judgment was not proper where "reasonable jurors could find that the

representation to the appellants by the appellee induced the appellant not to read the report

at closing." Id. at *6.

Genuine Issues of Material Fact Remain

{¶30} After reviewing the record, we find that the trial court erred in granting

summary judgment in favor of the Fischers, as multiple issues of material fact remain that

require further litigation.

{¶31} In granting summary judgment in favor of the Fischers, the trial court relied

upon Roberts, 2017-Ohio-1329, in which this court affirmed the trial court's grant of

summary judgment in a water and mold damage case. In Roberts, we determined that

summary judgment was appropriate where the prior owner and a contractor hired to make

repairs on the home averred that they were unaware of any mold on the property at the time

of sale.

{¶32} However, and unlike Roberts, there is evidence in the case sub judice to

-9- Clermont CA2020-05-022

indicate that the Fischers had actual knowledge of an ongoing water intrusion issue and

had actual knowledge of the presence of mold behind the basement walls. The Fischers'

deposition testimony and information on the residential disclosure form were directly

contradicted by three different witness affidavits.

{¶33} First, a neighbor averred that Robert Fischer pumped water out of the

basement on at least 4 separate occasions after heavy rain fall. The neighbor, who lived

directly across from the property in question, averred that she observed Robert pumping

water out of the basement with a "large drainage hose" and that in her experience, Robert

was not cleaning his carpets at the time of the drainage. Conversely, Robert testified that

he was cleaning carpet in the basement, not pumping water out because of a flood.

{¶34} This conflicting testimony presents a genuine issue of material fact regarding

Robert's actual knowledge of flooding problems in the basement, and will require a finder

of fact to determine what Robert was doing on the four separate occasions in question and

whether he knew that the water intrusions existed separate from the sump pump issue.

{¶35} This issue of fact impacts the question of justifiable reliance. If Robert failed

to exercise reasonable care by not disclosing the other floods and their cause, such would

render the prior statements and representations on the disclosure statement untrue or

misleading. Whether the basement had water issues and from what cause, which was a

specific question on the residential form, is a material fact that could justifiably induce the

Shannons to act or refrain from acting.

{¶36} Evidence obtained during discovery also indicated that the Fischers had

actual knowledge of the mold in the basement, refused services to remediate it, and took

actions on their own to cover the molded area by installing new drywall. An employee from

the company the Fischers hired to remediate water damage during their ownership of the

property averred that there was visible mold in the areas specific to where the Fischers

- 10 - Clermont CA2020-05-022

removed drywall and baseboards.1 However, and despite knowing that the mold issue

existed, the Fischers did not agree to mold remediation services through the company. The

employee's affidavit was accompanied by the company's estimate, which supported the

employee's testimony that the Fischers did not have mold remediation performed despite

being advised of its presence.

{¶37} It was clear from the subsequent remediation of the water intrusions that the

window wells and door required repair and that the mold required remedy. Viewing the

evidence in a light most favorable to the Shannons, the Fischers were advised of the mold

issues, and knew that flooding was caused from sources other than a single failure of the

sump pump. However, the Fischers failed to disclose the existence of these issues, or their

decision not to remediate the issues, on the disclosure form.

{¶38} The Shannons also presented affidavit testimony from the owner of the

company they hired to remediate mold damage that the mold was due to repeated water

issues. The owner of the company averred that there was "extensive mold" present in the

basement and that based on his "education, training and experience in mold remediation,

the extent of mold" in the basement "was an indication of repeated water intrusion over

several years."

{¶39} While it is undisputed that the Shannons had a home inspection and did not

have a mold inspection performed, those facts do not vitiate the Fischers' statutory duty to

produce a truthful residential disclosure report. Nor does the fact that the Shannons agreed

in their purchase contract to rely upon their own inspections where there is evidence that

the Fischers knew about multiple water intrusions separate from the sump pump incident in

1. Robert testified that he did not see any mold when he removed the drywall and baseboards. Thus, there is a credibility determination that must be made regarding this evidence as well.

- 11 - Clermont CA2020-05-022

2014, and that mold was growing in the basement.2

{¶40} While the Shannons agreed in their purchase contract that they were going to

rely upon their own inspection of the property, they were not sufficiently alerted to a possible

defect with the window wells and door or to the possibility of growing mold so as to require

further inquiry that a reasonable inspection would provide.3 See Melenick, 2010-Ohio-1051

at ¶ 33 (a buyer is charged with knowledge of the conditions that a reasonable inspection

would have disclosed).

{¶41} As noted above, the trial court relied upon our prior decision in Roberts v.

McCoy in granting summary judgment. In Roberts, this court noted, "a buyer cannot be

said to have justifiably relied upon representations made by the seller where the purchase

agreement is clearly contingent upon the inspection rather than any alleged

representations." 2017-Ohio-1329 at ¶ 25. However, and as noted above, the facts herein

are distinguishable from Roberts so that the law relied upon by the trial court, while correctly

stated, is not dispositive of the issue currently on appeal.

{¶42} In Roberts, the seller had repairs made after a flood in the basement occurred

and during the repairs did not observe any mold on areas above a drop ceiling or behind

areas of drywall. Nor did the employee of the company who performed the repairs on the

owner's behalf observe any indication of mold. Before the buyer purchased the home, the

seller informed the buyer of the presence of flooding and moisture in the basement and

2. The contract provides, "SELLER(S) AND REALTORS SHALL NOT BE RESPONSIBLE FOR ANY UNKNOWN AND/OR DISCLOSED DEFECTS IN THE REAL ESTATE. BUYER ACKNOWLEDGES THAT BUYER HAS BEEN ADVISED BY REALTOR TO CONDUCT INSPECTIONS OF THE REAL ESTATE THAT ARE OF CONCERN TO BUYER AND HAS BEEN PROVIDED THE OPPORTUNITY TO MAKE THIS CONTRACT CONTINGENT UPON THE RESULTS OF SUCH INSPECTION(S)."

3. However, we would also note that the contract provides in the Real Estate Inspection Contingency section that while the buyers would not rely upon "any representation by the REALTORS involved," the buyer could rely upon the "Seller's certification herein," which stated that the sellers did not have knowledge of "adverse environmental conditions" on the property. [Bold sic.] An issue of fact remains here as well regarding whether mold would constitute an adverse environmental condition that the Fischers should have included in the seller certification section of the contract.

- 12 - Clermont CA2020-05-022

informed the buyer of her belief that such was remediated with the installation of the new

drop ceiling and new drywall.

{¶43} This court agreed with the trial court that "there is no indication from the

evidence that the disclosures made on the Disclosure Form were made falsely or with the

intent to mislead [the buyer]." We further considered that the information within the

disclosure form and the statements from the seller and the employee were consistent with

the summary judgment evidence and that no evidence indicated that the seller or the

employee had any actual knowledge that there was mold growing as a result of flooding

that occurred in the basement.

{¶44} Thus, we determined in Roberts that the buyer did not reasonably rely on any

representations by the seller because she had been apprised of the presence of moisture,

the flood history, and repairs made in the basement prior to closing but chose not to hire a

certified mold inspector until after completing the purchase of the property. The buyer made

this choice despite having ample opportunity for a mold inspection before closing pursuant

to the contingency agreement and despite being given an accurate flood history and notice

of repairs required and made.

{¶45} Unlike Roberts, however, the evidence here demonstrates that the Shannons

had not been apprised of an accurate flood history, what repairs were recommended but

not made, what repairs were actually made to the drywall and baseboards, or to the possible

presence of mold. Also unlike Roberts, the summary judgment evidence is not consistent

with the Fischers' statements on the disclosure form that the only water issue in the

basement was based on a single sump pump failure that was remedied by the water

remediation company with no further issues.

{¶46} The evidence actually indicates that the basement flooded on four prior

occasions enough so that it required pumping of water from the basement after rainfall.

- 13 - Clermont CA2020-05-022

Moreover, the Fischers, as well as the employee they hired to remediate the flood, observed

visible mold growing. The Fischers also made repairs to the basement that were not

disclosed, and also refused services that would have remediated mold in the basement.

This evidence raises an issue of fact in regard to whether the Fischers had actual

knowledge of the true flood history and presence of mold, as well as whether the statement

on the disclosure form was made with falsity or with the intent to mislead.

{¶47} We would also note that unlike the drop ceiling issue in Roberts in which a

single tile may be easily lifted for inspection, there was no way of knowing of the latent

defect in the window wells and the door that a reasonable inspection could have uncovered.

Nor could the inspection of areas covered by drywall be performed as reasonably as an

inspection made possible by simply lifting a ceiling tile to see what could be observed.

{¶48} Roberts continues to apply in situations where the disagreement between a

buyer and seller involves passive nondisclosures. However, Roberts does not control a

situation where sellers make positive misrepresentations or actively conceal latent defects.

See also Liotta v. Eckley, 8th Dist. Cuyahoga No. 75127, 2000 Ohio App. LEXIS 68, at *7

(Jan. 13, 2000) ("defendants are not protected from a positive misrepresentation or

concealment of such latent defects" despite contract clause making the sale contingent

upon an inspection).

{¶49} The facts and circumstances are such that Roberts does not control the case

sub judice because there are issues of fact regarding positive misrepresentations made in

an attempt to conceal latent defects that could not have been discovered through a

reasonable inspection.

{¶50} As noted above, Ohio law imposes a duty to make full disclosure of the

circumstances where such disclosure is "necessary to dispel misleading impressions

created by a partial revelation of the facts." Klasa v. Rogers, 8th Dist. Cuyahoga No. 83374,

- 14 - Clermont CA2020-05-022

2004-Ohio-4490, ¶ 25. The evidence submitted suggests that the Fischers created a false

impression regarding the real cause of the water intrusion by stating that a single sump

pump failure was the cause of the flooding in the basement without also advising of the

mold and additional repeated sources of flooding.

{¶51} Moreover, the sales contract's clause cannot be relied upon to displace

summary judgment evidence of the fraudulent misrepresentation or fraudulent concealment

that occurred. See Melenick, at ¶ 37 ('as is' clause in a sales contract "cannot be relied

upon to bar a claim for fraudulent misrepresentation or fraudulent concealment").

{¶52} In a similar case, the Fifth District Court of Appeals reversed the grant of

summary judgment in favor of a seller who entered into a purchase agreement with a buyer

whose sales contract noted the purchaser's agreement to not rely upon any representations

of the seller. Ferguson v. Cadle, 5th Dist. Richland No. 2008 CA 0077, 2009-Ohio-4285, ¶

4.

{¶53} In Ferguson at ¶ 4, the sales contract stated,

Purchaser acknowledges that, except as otherwise herein noted, the real estate property is being purchased in its present physical condition after examination and inspection by Purchaser. Purchaser further acknowledges that Purchaser(s) are relying solely upon such examination and inspection with reference to condition, value, character, and dimensions of property, improvements, component systems and fixtures. Purchaser acknowledges that neither Seller, nor Seller's Agent(s) have made any representation or warranties upon which Purchaser has been induced to rely; rather Seller and Seller's Agent(s) have encouraged Purchaser to conduct a thorough and independent inspection(s) of the premises.

{¶54} Despite the sales contract's clause, the Fifth District Court of Appeals

determined that summary judgment was inappropriate because the seller fraudulently

misrepresented the number of incidents of water intrusion in the basement on the disclosure

form.

- 15 - Clermont CA2020-05-022

{¶55} Like Ferguson, there is a genuine issue of material fact regarding the Fischers'

misrepresentations on the disclosure form despite an agreement in the sales contact that

the Shannons would rely upon their own inspection. Instead of disclosing all of the

information within their actual knowledge, there is proper summary judgment evidence that

the Fischers represented to the Shannons that the visible water damage was limited to a

faulty sump pump and that the repaired drywall was caused by a pool cue incident. Thus,

there is evidence that raises issues of fact as to whether the Fischers fully disclosed the

real cause of the mold and water damage despite having actual knowledge that the

intrusions were from a source other than the faulty sump pump.

{¶56} The evidence, when viewed in a light most favorable to the Shannons, also

indicates that the Fischers failed to fully disclose that the water intrusions were repeated

and had occurred over time thereby causing mold. The Shannons presented evidence that

at least four separate occasions of rainfall resulted in water being pumped out of the

basement. The evidence submitted by the Shannons also indicates that the Fischers knew

that mold was growing in the basement and refused service to remediate the mold in

existence during their ownership of the home.

{¶57} Thus, the evidence, both conflicting and undisputed, raises genuine issues of

material fact that require further litigation. This is especially true where the determination

of justifiable reliance is a question of fact that requires a review of the qualities and

characteristics of the particular plaintiff, the relationship between the parties, the nature of

the transaction, the form and materiality of the representation, the relationship of the parties

and their respective means and knowledge, as well as other circumstances.

- 16 - Clermont CA2020-05-022

{¶58} The Shannons' first assignment of error is sustained.4 The trial court's

decision granting summary judgment in favor of the Fischers is reversed, and the cause is

remanded for further proceedings.

{¶59} Assignment of Error No. 2:

{¶60} THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT IN

FAVOR OF THE KELLER DEFENDANTS ON THE APPELLANTS' CLAIMS FOR

VIOLATIONS OF R.C. 4735.67, FRAUDULENT MISREPRESENTATION, NEGLIGENCE,

AND NEGLIGENT MISREPRESENTATION.

{¶61} The Shannons argue in their second assignment of error that the trial court

erred in granting summary judgment in favor of Deborah Martin and Keller Williams.

{¶62} According to R.C. 4735.67,

A licensee shall disclose to any purchaser all material facts of which the licensee has actual knowledge pertaining to the physical condition of the property that the purchaser would not discover by a reasonably diligent inspection, including material defects in the property, environmental contamination, and information that any statute or rule requires be disclosed. For purposes of this division, actual knowledge of such material facts shall be inferred to the licensee if the licensee acts with reckless disregard for the truth.

A licensee is not required to discover latent defects in the property or to advise on matters outside of the scope of the knowledge required for real estate licensure, or to verify the accuracy or completeness of statements made by the seller, unless the licensee is aware of information that should reasonably cause the licensee to question the accuracy or completeness of such statements.

4. The trial court also granted summary judgment on the Shannons' contract claim, holding that merger by deed was applicable. However, the merger by deed doctrine does not apply generally when there is evidence of fraud or false representations. Mong v. Kovach Holdings, LLC, 11th Dist. Lake No. 2012-T-0063, 2013- Ohio-882, ¶ 22. The trial court also granted summary judgment against the Shannons on their negligence claim based on caveat emptor. "[T]he doctrine of caveat emptor precludes recovery in an action by the purchaser for a structural defect in real estate where (1) the condition complained of is open to observation or discoverable upon reasonable inspection, (2) the purchaser had the full and unimpeded opportunity to examine the premises, and (3) there is no evidence of fraud on the part of the vendor." Layman v. Binns, 35 Ohio St.3d 176, 178-79 (1988). Thus, given our determination that there are genuine issues of fact regarding the Shannons' fraudulent misrepresentation claim, we also find that the grant of summary judgment regarding the contract and negligence claims was also erroneous.

- 17 - Clermont CA2020-05-022

{¶63} R.C. 4735.68(a) further provides,

A licensee is not liable to any party for false information that the licensee’s client provided to the licensee and that the licensee in turn provided to another party in the real estate transaction, unless the licensee had actual knowledge that the information was false or acted with reckless disregard for the truth.

{¶64} The meaning of "reckless disregard for the truth" is not defined in the statute.

However, courts have relied upon the definition used within defamation statues, in that "a

person acts with reckless disregard for the truth when the person acts with a high degree

of awareness of the probable falsity of facts or with serious doubts as to the truth of the

statements." Tanzillo v. Edwards, 10th Dist. Franklin No. 06AP-383, 2007-Ohio-497, ¶ 16.

{¶65} After reviewing the record, we find that the trial court properly granted

summary judgment in favor of Deborah and Keller Williams. The evidence is undisputed

that Deborah and Keller Williams did not assist the Fischers in completing the residential

disclosure form, and took no part in the decision as to what water intrusion(s) and source(s)

would be listed, or not listed, on the form.

{¶66} Deborah testified that she was unaware of additional water or mold problems

at the property, and instead, was only informed of the 2014 sump pump flood after it

occurred. The evidence is undisputed that Deborah visited the property on a few occasions,

but there is no evidence that she was made aware of multiple instances of flooding

unrelated to the sump pump or that she knew mold was growing in the basement.

{¶67} Nor have the Shannons indicated specific evidence that Deborah should have

been aware of the flooding or mold. Deborah testified that she was informed of the sump

pump failure in 2014. However, she was not present in the Fischers' home at the time, and

she did not observe the damage caused by the 2014 sump pump incident. Thus, she was

not in a position to question whether the sole cause of the flooding was the sump pump as

- 18 - Clermont CA2020-05-022

reported. As such, there are no genuine issues of material fact that Deborah acted with a

high degree of awareness that the Fischers' statements were probably false or that she had

serious doubts about their statements.

{¶68} Unlike the Fischers, there is no evidence to suggest that Deborah and Keller

Williams pumped water out of the home, hired water damage remediation services,

removed drywall and baseboards and saw mold, or that they refused service to remediate

mold despite being told it was present in the basement.

{¶69} Even so, the Shannons assert that Deborah had a duty to disclose the sump

pump failure included on the residential disclosure form when the Fischers purchased the

property in 2012. However, the statute requires the agent to disclose material defects, and

the sump pump failure Deborah was made aware of in 2012 was not a material defect. See

Schroeder v. Henness, 2d Dist. Miami No. 2012 CA 18, 2013-Ohio-2767, ¶ 58 (single sump

pump failure resulting in a temporary water accumulation is not a material defect). 5

{¶70} After reviewing the record and considering each of the Shannons' arguments

on appeal, we find that the trial court properly granted summary judgment in favor of

Deborah and Keller Williams. The Shannons' second assignment of error is overruled.

{¶71} Judgement affirmed in part, reversed in part, and the cause is remanded for

further proceedings consistent with this opinion.

M. POWELL, P.J., and PIPER, J., concur.

5. For these same reasons, there are no issues of material fact regarding the Shannons' other causes of action including negligence and negligent misrepresentation. In a negligence action, the plaintiff must show (1) the defendant owed the plaintiff a duty of care, (2) the defendant breached the duty of care, and (3) as a direct and proximate result of defendant's breach, plaintiff was injured. Matthews v. Texas Roadhouse Mgt. Corp., 12th Dist. Butler No. CA2020-03-037, 2020-Ohio-5229, ¶ 7. However, "although real estate agents owe certain duties to the principals who hire them, no such duties exist between agents of the seller and potential or actual purchasers." James v. Partin, 12th Dist. Clermont No. CA2001-11-086, 2002-Ohio-2602, ¶ 20. Thus, the duty owed to the Shannons by Deborah and Keller Williams was statutory and fails for the reasons stated herein specific to the Shannons' statutory arguments.

- 19 -