Morgan v. Cohen
2019 Ohio 3662
Ohio Ct. App.2019Background
- In May–July 2015 Michael Morgan and Hannah Arnson purchased condominium unit #311 in the Random Road Lofts; sellers were Benjamin Cohen and Meg Gerstenblith. The purchase agreement included an "AS IS" clause and incorporated seller-completed disclosure forms (RPDF, condominium addendum, condominium information).
- During sellers’ ownership the condominium association investigated water-intrusion/construction defects affecting some units; the association executed a tolling agreement with the builder in April 2015. Sellers signed the tolling agreement as individual unit owners.
- Sellers’ disclosure forms stated no knowledge of material defects, proposed assessments, increased fees, or pending litigation. Buyers had contractual obligations and the opportunity to review association documents (including meeting minutes) but did not review minutes prior to closing.
- Buyers first learned of association-wide construction concerns and the prospect of special assessments at an association meeting after closing; the association later sued the builder and levied special assessments, and buyers paid roughly $60,000 in assessments.
- Buyers sued sellers for breach of contract, fraudulent misrepresentation, and fraudulent inducement; trial court granted summary judgment to sellers (and to the sellers’ agent on sellers’ indemnity/contribution claims). The court of appeals affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether sellers’ disclosure statements were fraudulent or false | Buyers: disclosures and sellers’ execution of tolling agreement show sellers knew of building-wide defects, contemplated litigation, and likely assessments; nondisclosure was fraudulent | Sellers: disclosures were accurate as to unit and no pending lawsuits; no duty to disclose conditions in other units or speculative future assessments; no false affirmative statements | Court: No genuine issue that disclosures were false when made; statements about other units/association did not make sellers liable absent proof of actual knowledge of falsehoods |
| Whether buyers justifiably relied on sellers’ representations | Buyers: relied on seller disclosures and thus were entitled to relief | Sellers: buyers had contractual and practical opportunity to inspect association records (including minutes), "as is" clause, and caveat emptor bars reliance; buyers failed to investigate | Court: Reliance not justifiable as a matter of law given buyers’ access/contractual duty to review meeting minutes and the "as is" clause (no unequal access or direct affirmative misrepresentations) |
| Effect of "as is" clause on fraud claim | Buyers: clause should not shield sellers from fraudulent concealment/active misrepresentation | Sellers: "as is" and caveat emptor relieve sellers of passive nondisclosure liability | Court: "As is" bars passive nondisclosure but not active misrepresentation; no evidence of active misrepresentation here, so clause supports summary judgment for sellers |
| Sellers’ cross-claim against their agent (Northeast) for indemnity/contribution | Sellers: agent assisted in preparing disclosures and should indemnify if sellers are liable | Northeast: no evidence agent knew of potential assessments or litigation; no basis for contribution/indemnity | Court: Affirmed summary judgment for Northeast because sellers did not show agent had requisite knowledge |
Key Cases Cited
- Grafton v. Ohio Edison Co., 77 Ohio St.3d 102 (Ohio 1996) (standard of appellate review for summary judgment; de novo review)
- Dresher v. Burt, 75 Ohio St.3d 280 (Ohio 1996) (burden-shifting framework for summary judgment)
- Layman v. Binns, 35 Ohio St.3d 176 (Ohio 1988) (caveat emptor; vendor duty to disclose latent material defects known to seller)
- Cohen v. Lamko, Inc., 10 Ohio St.3d 167 (Ohio 1984) (elements of actionable fraud)
- ABM Farms, Inc. v. Woods, 81 Ohio St.3d 498 (Ohio 1998) (party is charged with knowledge of documents they sign; cannot generally rely on unread documents)