David Duwel appeals from the judgment of the Montgomery County Common Pleas Court which ordered him to pay $168.24 to Mark Clemens.
The following is an overview of the facts. Additional facts will be included in our discussion of the assignments of error.
Clemens, who was doing business as Janus Builders, contracted with Duwel to refinish the upstairs bathroom in Duwel’s home. In early 1992, Duwel initiated the contact between the parties, and the negotiation of the contract occurred at Duwel’s house. The total contract price was $7,370, which included a budget of $1,200 for items which Duwel was supposed to purchase on his own. Among the items that Duwel purchased for Clemens to install were an antique claw foot tub and the tub and shower faucet.
The tub purchased by Duwel was designed for a dual-handled faucet, and Clemens was aware of that when the contract was signed. Before Duwel bought the tub and shower faucet, Clemens admonished him that the Ohio Plumbing Code required an anti-scald valve or an anti-scald faucet to regulate the temperature of the water for a shower. Duwel purchased a dual-handled tub and shower faucet designed for a claw foot, freestanding tub. Clemens saw the faucet when it arrived after performance of the contract had begun, and he did not indicate that there would be a problem with the faucet.
Before Clemens began performing the contract for the upstairs bathroom in July 1992, the parties also entered into a contract to renovate the downstairs bathroom. Disputes regarding the contract for the downstairs bathroom were also litigated in the trial court, but the court’s judgment on that contract was not appealed. The trial court ordered Duwel to pay $380.62 to Clemens for the performance of the contract on the downstairs bathroom, and this order will not be disturbed on appeal.
Clemens stopped work on the contract when Duwel would not approve the additions to the contract. Duwel had paid two $2,200 installments on the contract price, for a total of $4,400. In August 1992, after several attempted reconciliations, Clemens filed this action for breach of contract against Duwel for the balance due on the contract. Duwel answered and filed counterclaims alleging that Clemens violated the Consumer Sales Practices Act, R.C. 1345.01 et seq., and the Home Solicitation Sales Act, R.C. 1345.21 et seq., and that Clemens failed to substantially perform the contract. On June 29, 1993, Duwel mailed a “Notice of Cancellation” of the contract to Clemens.
The trial court found that Clemens had substantially performed the contract, and it concluded that Duwel owed Clemens $1,638.62 on the contract. The trial court also concluded that the Home Solicitation Sales Act did not apply to the contract, but it adopted the referee’s finding that Clemens had violated the Consumer Sales Practices Act. The court found that Duwel was entitled to $1,850 in actual damages for this violation. The court then offset the amount Clemens owed Duwel, $1,850, from the amounts Duwel owed Clemens, $380.62 for the downstairs bathroom and $1,637.62 for the upstairs bathroom, and the court ordered Duwel to pay Clemens the difference, $168.24, with interest.
Duwel filed a timely notice of appeal, asserting three assignments of error. Clemens filed a cross-appeal, asserting a single assignment of error.
Duwel’s First Assignment of Error
“The trial court erred when it found that the home solicitation contract for the upstairs bath came within the exception of Section 1345.21(A)(4), Ohio Revised Code.”
The referee found that the contract between Clemens and Duwel fell within an exception to the definition of “home solicitation sale,” R.C. 1345.21(A)(4), and refused to apply the Act. When ruling on Duwel’s objections to the referee’s report, the trial court, while acknowledging that Duwel made a persuasive argument, found the reasoning in the referee’s report to be sound and overruled the objection. Duwel contends that the trial court erred in determining that Clemens met his burden of proof to demonstrate that this contract fit within an exception to the Home Solicitation Sales Act.
A “home solicitation sale” is defined as “a sale of consumer goods or services in which the seller or a person acting for him engages in a personal solicitation of the sale at a residence of the buyer, including solicitations in response to or following an invitation by the buyer, and the buyer’s agreement or offer to purchase is there given to the seller or a person acting for him.” R.C. 1345.21(A). Given the facts of the transaction between Clemens and Duwel, this basic definition encompasses their contract; however, R.C. 1345.21(A) excludes certain types of transactions from the basic definition. The trial court found that this contract fit within the exclusion in R.C. 1345.21(A)(4) which states that a home solicitation sale does not include a transaction in which “[t]he buyer initiates the contract between the parties for the purpose of negotiating a purchase and the seller has a business establishment at a fixed location in this state where the goods or services involved in the transaction are regularly offered or exhibited for sale.”
Despite an apparent typographical error in the referee’s report to the contrary, the party seeking to assert the protection of an exemption from an otherwise mandatory statute bears the burden of proving the facts warranting the exception.
State ex rel. Schaefer v. Montgomery Cty. Bd. of Commrs.
(1967),
In order to fall within this exception, Clemens had to prove (1) that Duwel initiated the contact between the parties for the purpose of negotiating a purchase, (2) that Janus Builders had a business establishment at a fixed location in Ohio, and (3) that the goods or services involved in the transaction were regularly offered or exhibited for sale at the fixed location. See
R. Bauer & Sons Roofing v. Kinderman
(1992),
As to the second element of the exception, Clemens had to prove that he had a business establishment at a fixed location in Ohio. It is undisputed that Clemens had a room in his personal residence in Ohio which served as an office for Janus Builders. While that fact is sufficient to prove that Janus Builders had an office in a fixed location in Ohio, it does not, without more, establish that Clemens’s home office constituted a “business establishment.” The term “business establishment” is not defined in the statute, and virtually no case law has been developed defining the term as used in R.C. 1345.21(A)(4). The definition of “establishment,” in a business context, is “a place of business * * * with its furnishings and staff.” Webster’s New Collegiate Dictionary (1975) 391.
The Ohio Supreme Court gave a lengthy explanation of the meaning of the word “establishment” as used in a previous version of an unemployment statute, R.C. 4141.29(D), which, while not binding in the context before us, is instructive. In
Abnie v. Ford Motor Co.
(1963),
“[T]he word ‘establishment’ as normally used in business and in government, means a distinct physical place of business. * * *
“We think that ‘establishment’ is meant to embrace premises, not aptly described as a factory, where labor is performed — and without attempting to name them all — such as stores, banks, theatres and other places of amusement, laundries, garages, hotels, restaurants, office buildings, shipyards, newspaper and printing offices, insurance buildings, express and transportation buildings, repair
The testimony at the evidentiary hearing before the referee revealed that Clemens’s office was a room in the back of the second floor of his residence. Clemens had a drawing board, a desk, filing cabinets, and some home improvement supply catalogs in his office. It was necessary to walk through Clemens’s house to get to the office; there was no separate entry. From the street, it was impossible to discern that the Janus Builders office was inside the house. Clemens engaged in no advertising, not even a listing in the phone book, for his business. Although Clemens did testify that customers had come to his residence to enter into a contract, there was no indication that this was a regular practice. Further, Clemens did not present any evidence that customers generally knew about his home office or that he regularly invited customers to come to his office. Clemens stated that his business was “built on referrals and [he did not] operate a store front, general public, for sale items. * * * [He] was not zoned nor was [he] intending to have the total retail off-the-street trade.” Duwel testified that he did not know where Clemens’s business was located and that he was never’ invited to visit Clemens’s home office.
As Clemens acknowledged in his testimony and in stipulations, his residence was in a purely residential zoning district. The Dayton Zoning Code requires residents in a residential district to obtain a zoning or occupancy certificate to conduct a “home occupation” as permitted in the zoning code. Dayton Revised Code of General Ordinances 150.340 et seq. A “home occupation” is defined as “a business, profession, occupation, or trade conducted for gain or support entirely within a principal residential building, by the resident thereof.” Id. at 150.341. Clemens stipulated that he “operated his home improvement business out of his personal residence” and that he “had no Certificate of Occupancy to operate a business out of his home.”
In her report and recommendation, the referee explained her decision that Clemens had a business establishment at a fixed location in Ohio as follows:
“In this case there is no dispute that [Clemens’s] business was located in Ohio, at a fixed location in his home. The Referee is not persuaded that the zoning violation, by operating a business in a residential zone, is relevant to the factual determination of whether the business was operating in a fixed location at the time of the transaction. The statute does not require the location to be permanent, but merely fixed so that if the consumer had the opportunity to return to the seller’s location to execute the agreement, the consumer should not feel pressured to sign a contract at home, thus eliminating the need for the protection of the Act.”
We recognize that the definition of “business establishment,” as the term is used in R.C. 1345.21(A)(4), should remain flexible to permit the courts to give full effect to the legislative intent behind the Home Solicitation Sales Act. However, as a general rule in keeping with the policy behind the R.C. 1345.21(A)(4) exception, a “business establishment” should be a business location which is open to the general public. See,
Abnie, supra,
Where, as here, the record is devoid of any evidence that the consumer knew that he had the option of going to the seller’s business location to complete the transaction, the evidence cannot support a finding that the consumer actually had an opportunity to do so. If the home office in this case, which was not open to the general public nor in any manner advertised as a place of business, constituted a “business establishment,” any salesperson living in the state of Ohio would be protected by this exception whenever a consumer initiated the transaction as long as the salesperson kept catalogs of the goods or services that he offered in a room in his home which he called an office. Such a result would defeat the purpose of the Home Solicitation Sales Act. Therefore, we conclude that the evidence did not support a finding that Clemens had a business establishment at a fixed location in Ohio.
The evidence in the record regarding the catalogs, samples, and minimal “inventory” Clemens kept at his house was relevant to a determination of the third element of the R.C. 1345.21(A)(4) exception,
i.e.,
whether the goods and services involved in the transaction were regularly exhibited or offered for sale at the fixed location. See
Bauer, supra,
Because Clemens failed to prove that he had a business establishment at a fixed location in the state, he did not meet his burden to prove that the transaction between him and Duwel was exempt from the Home Solicitation Sales Act. Therefore, the Act applied to the transaction. The parties stipulated that Clemens had not provided Duwel with notice of his right to cancel the contract in accordance with R.C. 1345.23(B). Further, they stipulated that Duwel sent Clemens a written notice of cancellation on June 29,1993, about ten months after this action was filed.
The Home Solicitation Sales Act is clear that a consumer has the right to cancel a contract until midnight of the third business day after receiving notice of the right to cancel, and, if notice of the right is not given, the right does not expire. R.C. 1345.23. In order to ensure that, upon cancellation, both parties can be returned to their original positions as if the contract had not been made, the Act provides that “[w]here a home solicitation sale requires a seller to provide services, he shall not commence performance of such services during the time in which the buyer may cancel.” R.C. 1345.22. “This legislative pronouncement is clearly intended to put the risk on the home improvement contractor who begins performance before giving the consumer proper notice of the right to cancel.”
Bauer, supra,
When a buyer exercises his right to cancel, the seller must,
inter alia,
“refund all payments made under the contract or sale,” R.C. 1345.23(D)(4). In return, the seller is entitled to recover “any goods delivered by the seller pursuant to the sale. [These goods] shall not have been diminished in quantity nor subjected to unreasonable wear or use.” R.C. 1345.27. However, the goods that Clemens provided pursuant to his contract with Duwel,
e.g.,
drywall, plaster, and flooring, were inextricably combined with the services he provided under the contract. The holding in
Hines, supra,
“A home improvement contract such as the one at issue here is primarily a contract for services. Since [the contractor] failed to provide [the consumers] with adequate notice of cancellation, [the consumers’] right to cancel neverexpired and that option was still available to them. * * * In so deciding, the court finds that the [consumers’] reason for cancelling the contract is not material to the issue. Further, having violated the statutory prohibition of R.C. 1345.22 by commencing performance prior to delivery of a notice of cancellation, [the contractor] cannot now be heard to complain of an unjust consequence. To hold otherwise would permit the seller to avoid the purpose of the Act entirely.
U * * *
“The court, finding that [the consumers] have effectuated a cancellation of the contract with [the contractor], further finds that a return of the goods received by plaintiffs from [the contractor] is not required under the circumstances of this case. All parties agree that the windows cannot be removed without substantial damage to those windows. Further, return of the original windows to [the consumers] is an impossibility since they no longer exist. Therefore, [the consumers’] continued retention of the windows installed by [the contractor] is as close as we can come to returning the parties back to their original circumstances.'”
The facts before us are substantially similar to those before the court in Hines. Clemens demolished Duwel’s original bathroom and completed much of the work of refinishing the bathroom. An order allowing Clemens to take back his drywall, plaster, and flooring would not only be impractical, but it would also constitute waste. Thus, Clemens bore the risk of not recovering the goods he provided along with his services by beginning work under the contract while Duwel had the right to cancel. Allowing Duwel to keep the goods used to renovate his bathroom is the best means of returning him to his original position.
Further, to prevent Clemens from circumventing the requirements of the Home Solicitation Sales Act, Clemens cannot be allowed to keep the amounts paid to him by Duwel pursuant to the contract. Although it may appear just to allow Clemens to keep an amount equal to the value of the goods and services that he provided, to do so would permit him to avoid the mandate of the statute by completing performance during the cancellation period. See
Bauer, supra,
The first assignment of error is sustained.
Duwel’s Second Assignment of Error
“The trial court erred, when, after finding [Clemens] violated Ohio’s Consumer Sales Practices Act, it failed to treble [Duwel’s] damages.”
Duwel contends that the trial court erred when it failed to treble his actual damages in determining his remedy for Clemens’s violation of the Consumer Sales Practices Act. Our resolution of the first assignment of error is dispositive of this assignment of error.
The parties stipulated that Duwel sent a notice of cancellation to Clemens on June 29,1993. As we discussed in the first assignment of error, this notice was effective to cancel the contract. Regardless of the fact that Duwel sent that notice of cancellation in an attempt to exercise his rights under the Home Solicitation Sales Act, his action resulted in the rescission of the contract. Once the consumer has chosen to rescind, or cancel, the contract, he is not entitled to recover damages under the Consumer Sales Practices Act. The consumer cannot cancel the contract in one context and still claim a right to enforce it in another context. Therefore, in deciding to cancel the contract in accordance with his rights under the Home Solicitation Sales Act, Duwel also effectually elected rescission rather than actual or treble damages under the Consumer Sales Practices Act.
Thus, Duwel was not entitled to actual or treble damages. This assignment of error is overruled.
Duwel’s Third Assignment of Error
“The trial court erred when it found that [Clemens] substantially performed the written contract for the upstairs bath.”
In this assignment of error, Duwel contends that the trial court erred in ordering him to pay Clemens the amount due on the contract because Clemens
The third assignment of error is overruled.
Clemens’s Cross-Assignment of Error
“The court below erred when it held that [Duwel] was entitled to recover the cost of installing a shower in the upstairs bathroom.”
In his cross-assignment of error, Clemens contends that Duwel was not entitled to any actual damages for Clemens’s violation of the Consumer Sales Practices Act. For the reasons explained in the second assignment of error, we agree.
The portion of the trial court’s judgment finding that the Home Solicitation Sales Act did not apply to the contract between Duwel and Clemens is reversed. Duwel is awarded the amount that he paid on the contract, $4,400, less the amount he was ordered to pay Clemens for the downstairs bathroom, $380.62, for a total judgment in favor of Duwel in the amount of $4,019.38. The judgment of the trial court awarding Duwel damages for Clemens’s violation of the Consumer Sales Practices Act is reversed. In all other respects, the judgment is affirmed.
Judgment accordingly.