Psarras v. Rayburn
2019 Ohio 2168
Ohio Ct. App.2019Background
- Dr. James Psarras (with his then-wife) entered a lease with purchase addendum and a separate purchase agreement to buy a Pepper Pike house for $510,000; $51,000 earnest money was paid. The agreements included integration and an "as is" clause and the buyer waived various inspections.
- Seller (Sarah Rayburn, trustee) provided a State of Ohio Residential Property Disclosure form disclosing a prior basement flood and repairs (new pumps, piping, grates); Psarras signed the disclosure and waived inspection.
- The basement flooded on Memorial Day 2010 and again around July 4, 2010, damaging basement carpeting and furnishings; seller offered to pay for carpet replacement and to credit costs against the purchase price.
- Psarras missed the closing date (August 15, 2010), the landlord declared default, changed locks, and an eviction/holdover dispute followed; parties later settled eviction with Psarras vacating by October 23, 2010.
- Seller later sold the property for $365,000. Psarras sued alleging unconscionable retention of the $51,000 earnest/security deposit and sought other damages; seller counterclaimed for breach of the purchase agreement, fraud, and rent.
- At summary judgment/trial the court (1) found seller violated R.C. 5321 by not repairing (and awarded statutory interest on the deposit), (2) found insufficient evidence of tenant damages from the repair failure, (3) found Psarras breached the purchase agreement and awarded seller damages equal to the contract price less sale price, and (4) rejected fraud and unconscionability claims.
Issues
| Issue | Psarras' Argument | Rayburn's Argument | Held |
|---|---|---|---|
| Whether landlord’s failure to repair (and award of interest) prevents seller from retaining earnest money or enforcing purchase agreement | Rayburn’s failure to repair and court’s award of interest on deposit show she breached, so she cannot retain the $51,000 or enforce the purchase | The interest award under R.C. 5321.16 is separate; lease/purchase obligations and remedies are governed by the agreements and statutory framework | Court: Interest award under landlord-tenant statute does not excuse buyer’s obligation; seller’s actions re: deposit were not unconscionable and deposit retention was permissible given breach of purchase agreement |
| Whether flooding/unrepaired condition excused Psarras’ obligation to close (termination under R.C. 5321.07) | Flooding made premises uninhabitable and constituted material failure to repair, excusing Psarras from closing | Flooding was disclosed, buyer waived inspections and purchased "as is"; floods did not render entire premises unfit or satisfy statutory termination standards | Court: Psarras failed to satisfy statutory requirements to terminate under R.C. 5321.07; flooding did not excuse performance |
| Whether seller committed fraudulent misrepresentation or concealment about flooding | Psarras contends he was unaware flooding problem’s extent and relied on seller’s representations | Seller points to the written disclosure and open signs (sump pumps); no evidence of active concealment or fraudulent statements | Court: No actionable fraud—disclosure received, defects were open/knowable, buyer waived inspections; fraud elements not met |
| Whether mutual mistake or rescission is available given disclosure | Psarras seeks rescission for mutual mistake about unresolved flooding | Seller argues disclosure was given before contracting; when disclosure is provided, rescission is unavailable | Court: Rescission is not available where buyer received the statutory disclosure before execution; mutual mistake claim fails |
Key Cases Cited
- Nationwide Mut. Fire Ins. Co. v. Guman Bros. Farm, 73 Ohio St.3d 107 (Ohio 1995) (standard for reviewing application of law to contract breach)
- Goddard v. Stabile, 185 Ohio App.3d 485 (Ohio Ct. App. 2009) (discussing disclosure form effect and rescission limits)
- Cardi v. Gump, 121 Ohio App.3d 16 (Ohio Ct. App. 1997) (fraudulent misrepresentation elements)
- Wilson v. Safarek, 131 Ohio App.3d 622 (Ohio Ct. App. 1999) (receipt of disclosure form before transferring title bars rescission)