Kowalski v. SmithKowalski v. Smith
Dated: August 9, 2010
WHITMORE, Judge.
{¶1} Defendant-Appellant, Lisa M. Smith, Inc., dba Smith Quality Homes (Smith, Inc.), appeals from the judgment of the Wayne County Court of Common Pleas, awarding compensatory damages, punitive damages, and attorney fees to Plaintiff-Appellees, Kenneth and Patricia Kowalski (collectively, the Kowalskis). This Court reverses.
I
{¶2} In December 2004, Kevin and Angela Geitgey (the Geitgeys) sold their property at 1705 Steiner Road to Smith, Inc. The Geitgeys were family relations of Lisa Smith and her father, Robert Cogar. According to Smith, her corporation purchased the deed to the property as a favor to the Geitgeys because they were having difficulty financing it. The Geitgeys wished to build a manufactured home on the property, but only got so far as having the basement excavated and the foundation poured when their financing fell through. Cogar, a
{¶3} Several months before March 2005, the Kowalskis expressed an interest in purchasing the Steiner Road property. Kenneth Kowalski repeatedly made trips to the property to observe Cogar‘s construction work and secured financing with the help of Benjamin Lackey, the owner of BTL & Associates, Inc. (BTL). The Kowalskis understood Lackey to be an employee of Smith, Inc., but Smith, Inc. later claimed that it only retained BTL as a subcontractor. The Kowalskis purchased the property from Smith, Inc. in March 2005. Shortly thereafter, they experienced numerous problems, including water damage. Smith, Inc. failed to respond to the problems, so Kenneth Kowalski contacted the Wayne County Building Department (Building Department). Kowalski learned that the Building Department had never issued an occupancy permit for the Steiner Road residence and a final inspection had never taken place.
{¶4} On August 30, 2007, the Kowalskis brought suit against Smith, Inc. and Lisa Smith, in her individual capacity, based on fraud and rescission. Smith, Inc. and Smith filed an answer. Smith, Inc. also later filed a counterclaim against the Kowalskis based on breach of contract and unjust enrichment. On August 28, 2007, the Kowalskis filed an amended complaint, which added: (1) Cogar and BTL as named defendants; and (2) a claim for negligence. All of the named defendants filed a joint answer.
{¶5} Subsequently, Deutsche Bank National Trust Company (Deutsche) sought to intervene in the action. The Kowalskis apparently had defaulted on their mortgage, had been named as defendants in another suit, and had asked for a stay pending the resolution of their case against Smith, Inc. The trial court agreed to consolidate Deutsche‘s case against the Kowalskis
{¶6} The trial court held a bench trial on May 22, 2009. Smith, Inc. and Smith moved for a directed verdict at the close of the Kowalskis’ case-in-chief. The court denied the directed verdict motion as to the Kowalskis’ fraud claim. Smith, Inc. and Smith never renewed their directed verdict motion. The trial court ultimately ruled in favor of the Kowalskis on their fraud claim against Smith, Inc. and awarded $18,223.50 in compensatory damages and $5,000 in punitive damages. The court dismissed all the remaining claims and counterclaims with prejudice. On August 27, 2009, the court held a hearing on the issue of attorney fees. The court awarded the Kowalskis $7,742 in attorney fees.
{¶7} Smith, Inc. now appeals from the trial court‘s judgment and raises three assignments of error for our review.
II
Assignment of Error Number One
THE TRIAL COURT ERRED AS A MATTER OF LAW IN REFUSING TO GRANT DEFENDANTS’ MOTION FOR DIRECTED VERDICT ON PLAINTIFFS’ FRAUD CLAIM.
{¶8} In its first assignment of error, Smith, Inc. argues that the trial court erred by refusing to grant its motion for directed verdict on the Kowalskis’ claim for fraud. Specifically, it argues that the Kowalskis failed to prove all the elements of their fraud claim by a preponderance of the evidence. We agree.
{¶9} Although Smith, Inc. moved for a directed verdict in the court below, this Court has held that [a] motion for directed verdict, made at the close of a plaintiff‘s case in a bench trial, will be deemed to be a motion for involuntary dismissal under
{¶10} [W]hen the trial court rules on a motion for involuntary dismissal under
{¶11} Initially, the trial court determined that Benjamin Lackey of BTL and Robert Cogar were agents for Smith, Inc., rather than independent contractors. The court held that, through its agents, Smith, Inc. made a number of representations to the Kowalskis and led them to falsely believe that their home had been constructed according to code; that it passed final inspection; that an occupancy permit had been issued; and that the basement was properly
The elements of fraud are: (1) a representation, or where there is a duty to disclose, concealment of a fact; (2) which is material to the transaction at hand; (3) made falsely, with knowledge of its falsity, or with such utter disregard and recklessness as to whether it is true or false that knowledge may be inferred; (4) with the intent of misleading another into relying upon it; (5) justifiable reliance upon the representation or concealment; and (6) a resulting injury proximately caused by the reliance. Glenmoore Builders, Inc. v. Smith Family Trust, 9th Dist. No. 24299, 2009-Ohio-3174, at ¶51, quoting Baughman v. State Farm Mutual Auto. Ins. Co., 9th Dist. No. 22204, 2005-Ohio-6980, at ¶12.
An action in fraud will only be found if all of the elements are present and the absence of one element is fatal to recovery. Goodman Beverage Co., Inc. v. Kerr Beverage Co., 9th Dist. No. 02CA008142, 2003-Ohio-2845, at ¶21, quoting Westfield Ins. Co. v. HULS Am., Inc. (1998), 128 Ohio App.3d 270, 296.
{¶12} Kenneth Kowalski testified that he and his wife purchased their home from Smith, Inc. on March 31, 2005. Kenneth became interested in purchasing the home in the fall of 2004, when the home‘s foundation was still under construction. Kenneth visited the property multiple times and watched Cogar conduct the construction work. He testified that he had several conversations with Cogar during his visits and after the house was in place, asked him about dampness that he noticed in the walls. Cogar explained that the dampness would dissipate if the Kowalskis used a dehumidifier. When asked if Cogar made statements about the dampness in the basement prior to the Kowalskis’ purchase of the home, Kenneth testified that he did not believe so. That is, he believed Cogar made these statements after the Kowalskis purchased the
{¶13} As to Lackey, Kenneth testified that he believed Lackey worked for Smith, Inc. because Lackey held himself out as an officer for the company and Lackey had an office at Smith, Inc. Kenneth testified he worked with Lackey and Smith to secure financing in order to purchase the house. He further testified that Smith scheduled several closings on the house, each of which she cancelled before the final closing took place in March. Kenneth testified that Smith told him the third closing was cancelled because there was no final inspection on [the home]. According to Kenneth, he was never informed that his home failed any inspections or that a final inspection never occurred. He only found out about the inspection problems after he and his wife purchased the home. Kenneth testified that he and his wife relied upon representations from a speaker that [e]verything‘s approved and that when we closed [on the property] we could move right in. Yet, the Kowalskis never established the identity of that speaker. Moreover, Kenneth admitted that neither Lackey, nor anyone at Smith, Inc., ever told him that a final inspection had been completed. He also never testified that anyone ever discussed the matter of an occupancy permit with him. He only testified that he assumed Smith, Inc. had obtained any necessary inspections when he attended the final closing because he thought the closing could not take place without the inspections.
{¶14} Even if Lackey and Cogar were agents for Smith, Inc., Kenneth Kowalski did not point to a single misrepresentation that anyone from Smith, Inc. made to him before the purchase of his home. None of the other witnesses who the Kowalskis presented pointed to any
{¶15} Although the Kowalskis’ brief contains an argument that might be construed as one alleging fraudulent concealment, the Kowalskis never attempted to proceed upon a theory of fraudulent concealment in their complaint or trial brief. See LaSalle Bank N.A. v. Kelly, 9th Dist. No. 09CA0067-M, 2010-Ohio-2668, at ¶30, quoting
{¶16} The Kowalskis did not present any evidence that Smith, Inc. made any of the affirmative misrepresentations that the Kowalskis alleged in the court below. Accordingly, the trial court erred by denying Smith, Inc.‘s motion, and the judgment against Smith, Inc. on the Kowalskis’ fraud claim must be reversed. Smith, Inc.‘s first assignment of error has merit.
Assignment of Error Number Two
THE TRIAL COURT ABUSED ITS DISCRETION IN AWARDING PLAINTIFFS’ ATTORNEYS’ FEES.
{¶17} In its second assignment of error, Smith, Inc. argues that the court erred in awarding the Kowalskis’ attorney fees. [I]f punitive damages are awarded, the aggrieved party may also recover reasonable attorney fees. LaFarciola v. Elbert, 9th Dist. No. 08CA009471, 2009-Ohio-4615, at ¶10. Based on this Court‘s resolution of Smith, Inc.‘s first assignment of
Assignment of Error Number Three
THE TRIAL COURT ABUSED ITS DISCRETION IN REFUSING TO GRANT DEFENDANTS’ MOTION TO EXCLUDE TESTIMONY AND IN ALLOWING THE PLAINTIFFS’ EXPERT TO TESTIFY AT TRIAL.
{¶18} In its third assignment of error, Smith, Inc. argues that the court erred by admitting the testimony of the Kowalskis’ expert. Specifically, it argues the court abused its discretion by not excluding the expert testimony on the basis of unfair surprise. Based on our resolution of Smith, Inc.‘s first assignment of error, its third assignment of error is moot.
III
{¶19} Smith, Inc.‘s first and second assignments of error are sustained. Its third assignment of error is moot. The judgment of the Wayne County Court of Common Pleas is reversed, and the cause is remanded for further proceedings consistent with the foregoing opinion.
Judgment reversed, and cause remanded.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common Pleas, County of Wayne, State of Ohio, to carry this judgment into execution. A certified copy of this journal entry shall constitute the mandate, pursuant to
Costs taxed to Appellees.
BETH WHITMORE
FOR THE COURT
DICKINSON, P. J.
CONCURS, SAYING:
{¶20} Unfortunately, because of the Ohio Supreme Court‘s opinion in State v. Wilson, 113 Ohio St. 3d 382, 2007-Ohio-2202, sufficiency and manifest weight have become terribly confused in the civil context. It is important to keep sufficiency and weight analysis separate for a number of reasons. One of those, as noted by the Ohio Supreme Court in Bryan-Wollman v. Domonko, 115 Ohio St. 3d 291, 2007-Ohio-4918, at ¶4, is that, in jury cases, a court of appeals can only reverse a judgment as being against the manifest weight if it does so unanimously. A second reason it is important to keep the analysis separate is that a first reversal based on weight of the evidence leads to a new trial, while a reversal based on failure to present sufficient evidence results in entry of judgment in favor of the party defending the claim. That is why, while a conclusion that a judgment is not sustained by the weight of the evidence is ground for new trial under
{¶21} As noted in the lead opinion, Mr. Kowlaski did not point to a single misrepresentation that anyone from Smith Inc. made to him before the purchase of his home and [n]one of the other witnesses who the Kowlaskis presented pointed to any misrepresentations either. The flaw in the trial court‘s judgment, therefore, is that it is not supported by sufficient evidence. Accordingly, when the lead opinion says that the cause is remanded for further proceedings consistent with the foregoing opinion, those further proceedings must consist of entry of judgment in defendants’ favor rather than a new trial.
CARR, J.
DISSENTS, SAYING:
{¶22} I respectfully dissent. I would affirm the judgment of the trial court as I believe the record indicates that multiple affirmative misrepresentations were made to the Kowalskis prior to the purchase of the home. I would also hold that Smith, Inc. fraudulently concealed material facts prior to the purchase of the home.
{¶23} As the lead opinion notes, Kenneth Kowalski initially testified he did not believe his conversations with Mr. Cogar regarding dampness in the basement took place prior to purchasing the home. However, Mr. Kowalski went on to clarify during direct examination that he expressed concerns with the dampness in the walls prior to purchasing the home. Mr. Kowalski signed the contract to purchase the home on March 29, 2005. The negotiations between the parties, however, began to take place in the fall of 2004. Mr. Kowalski testified that the house was set on the property in either late October [or] early November of 2004. Mr. Kowalski testified that, after the house was in place, he began asking a lot of questions. When asked which concerns he expressed once the house was in place, Mr. Kowalski testified he
{¶24} I would further hold that the failure by Smith, Inc. to disclose that a proper final inspection never took place amounted to fraudulent concealment of a material fact. While the complaint does not specifically characterize the failure to disclose that a final inspection never occurred as fraudulent concealment, the Kowalskis presented this theory in support of their fraud claim.
{¶25} In their closing argument, the Kowalskis asserted that Smith, Inc. breached a duty to disclose that the house never passed final inspection. In response, Smith, Inc. emphasized that the Kowalskis never inquired prior to closing whether a final inspection had occurred and that no affirmative misrepresentation had been made. Smith, Inc. did not, however, argue that the fraudulent concealment theory fell outside the scope of the complaint. In light of the fact that the third attempt at closing was cancelled for the specific reason that a final inspection had not taken place, I would hold that failing to disclose that the house had not passed the inspection constituted fraudulent concealment of a material fact.
APPEARANCES:
TIMOTHY B. PETTORINI, Attorney at Law, for Appellants.
JASON M. STORCK, Attorney at Law, for Appellees.