COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 72128 THOMAS WARD, ET AL. Plaintiffs-appellees JOURNAL ENTRY vs. AND PAUL KAMINSKY, ET AL. OPINION Defendants-appellants DATE OF ANNOUNCEMENT OF DECISION: FEBRUARY 12, 1998 CHARACTER OF PROCEEDINGS: Civil appeal from Common Pleas Court Case No. CV-306550 JUDGMENT: Affirmed. DATE OF JOURNALIZATION: APPEARANCES: For plaintiffs-appellees: For defendant-appellants: KEVIN R. BLUM, ESQ. VINCENT F. GONZALEZ, ESQ. Three Commerce Park Square 2159 West Boulevard 23200 Chagrin Boulevard Cleveland, Ohio 44102 Suite 720 Cleveland, Ohio 44122 -2- KARPINSKI, J.: Defendants Paul Kaminsky and George Santiago appeal from the judgment of the trial court finding them liable in the amount of $4,776.00 in actual damages and $5,000.00 in punitive damages based on their intentional misrepresentations to plaintiffs, Thomas and Barbara Ward. Defendants sold a home to plaintiffs. After experiencing a leaky basement soon after the sale, plaintiffs sued defendants alleging that defendants intentionally misrepresented that a complete waterproofing system had been installed in the basement when only a partial system had been installed. On appeal, defendants argue that (1) the evidence did not support a finding of fraud, (2) the court erred by not granting defendant's motion for a directed verdict on the issues of liability and damages, and (3) the jury instructions regarding damages were in error. For the reasons that follow, we find these arguments lack merit and affirm the judgment of the trial court. The relevant facts follow. Testifying first for the plaintiffs, Thomas Ward took the stand. While looking for a home to purchase, he noticed an advertisement for the sale by owner of the house located at 21703 Halworth, Beachwood, Ohio. Ward called the number in the ad and talked to Jorge Santiago. The next week, he and his wife looked at the house. Santiago met them at the house, showed them the property, and gave them a residential disclosure form. Santiago stated that both he and Paul Kaminsky owned the house but only Kaminsky's name appeared on the title. Once in the basement, Ward noticed stains at the bottom of the woodwork. He asked Santiago -3- whether there was a problem with water in the basement. Ward testified that Santiago responded by saying that there was a problem in the past with water in the basement but that the basement had been B-dried. (Tr.14.) Santiago, while standing in the recreation room, then explained to Ward that a B-Dry system consisted of having a trench dug around the perimeter of the basement and pipes installed which would carry the water into a sump pump. (Tr. 15.) Santiago then stated that the system had a lifetime warranty that could be passed on to a subsequent buyer. After this tour, Ward had no doubt that the entire basement was B- dried. Ward stated that Santiago never told him that only part of the basement was B-dried. On the contrary, Ward testified that when he specifically asked Is the whole basement B-dried? Santiago replied, Yes. (Tr. 19.) Ward then looked at the property a second time and stated that he relied on Santiago's statements that the basement was waterproofed. After signing a purchase agreement, Ward gave defendants a check for $1,000 as a deposit. The check was made out to Santiago and Kaminsky. Ward further testified that the purchase agreement was subject to a home inspection and, for that purpose, hired John Townley from the yellow pages. Townley inspected the property with Santiago and Ward present. Upon entering the basement, Ward told Townley that he was concerned about the stained wood. He asked Townley if a B- Dry system was reliable. Ward heard Townley ask Santiago about the B-Dry system and heard Santiago respond that a complete B-Dry system was installed, which carried a lifetime warranty. Townley -4- told Ward that a B-Dry system was reliable. The report issued by Townley and given to Ward noted water damage and a Complete B- Dry. After the sale was completed, plaintiffs moved into the house on November 3rd or 4th. In December, Ward noticed that the woodwork was wet, damp to the touch. Then, in January, plaintiffs experienced water in the basement and damp walls. Ward then called B-Dry who sent a representative to the house. The B-Dry representative told Ward that the B-Dry system was installed only in the utility room portion of the basement. B-Dry gave Ward an estimate for completing the remaining portions of the basement. Barbara Ward took the stand and testified that when her husband asked Santiago about the water stains in the basement, Santiago replied that there had been a problem in the past but it was taken care of by the B-Dry system, which had a lifetime warranty. She concluded her testimony by stating that she would not have purchased the home if she had known it did not have a complete B-Dry system. The plaintiffs called as a witness their home inspector, John Townley, who owns his own pre-purchase home inspection company, North Coast Home Pro. His report noted the following: Stains in wall panels appears [sic] to be from basement flooding. Furthermore, under the section labeled existing water control measures were the notations, perimeter drain and Complete B- Dry. Explaining these terms, Townley stated: Complete B-Dry means that it's completely [sic], the perimeter drain system is -5- completed throughout all walls and around all systems. (Tr. 176.) He further stated that he would have written these notes in his report only if he had been told, by the owner, that the B-Dry system was complete. During redirect, Townley reiterated that he felt that the water problem was taken care of because of the B-Dry warranty. Plaintiffs then called Paul Kaminsky, the owner listed on the deed, and questioned him under cross-examination. Kaminsky stated that Santiago is his business partner and that he had authority to show the property in question. Kaminsky did not know much about the existence of the B-Dry system. After the trial court denied defendants' motion for a directed verdict, Santiago testified about his business and personal relationship with Kaminsky. Although they are friends and also own some properties together, Santiago stated that he did not own half of the house in question. (Tr. 248.) Santiago helped Kaminsky prepare the property disclosure statement. He stated that he told Ward that a B-Dry system had been installed in the house (Tr. 252), but that he never stated that it was a complete B-Dry sytem. (Tr. 255, 262, 263.) Finally, regarding the property disclosure form, Santiago stated that he did not write anything on the report that would indicate a complete B-Dry system in the disclosure form. The disclosure form was a standard form signed by Paul Kaminsky. Under the section labeled the Basement/Crawl Space, the following question appeared, Do you know of any current water leakage, water accumulation, excess dampness or other defects with -6- the basement/crawl space? The YES box was checked. Describing this response, defendants explained on the form, minor leakage -- Previously corrected 9-90, Lifetime warranty, To be recorrected 8- 95. (Plaintiff's Ex. 1.)1 Returning a verdict in favor of plaintiffs, the jury found that Santiago made a false representation of fact, which was material to the transaction and which the plaintiff relied upon. The jury awarded actual damages of $4,776.00 and punitive damages of $5,000.00. In a timely appeal defendants raise four assignments of error, the first of which states as follows: I. THE PLAINTIFFS/APPELLEES DID NOT ESTABLISH FRAUD NOR THE INTENTIONAL MISREPRESENTATION NOR MISSTATEMENT OF MATERIAL FACT AND THE VERDICT AND JUDGMENT OF THE JURY SHOULD BE REVERSED. In this assignment, defendants argue that the jury verdict should be reversed because plaintiffs did not establish fraud or intentional misrepresentation. Defendants contend, moreover, that under the doctrine of caveat emptor as enunciated in Layman v. Binns (1988), 35 Ohio St.3d 176, plaintiffs cannot recover for a structural defect that was open to observation and discoverable upon a reasonable inspection. This assignment lacks merit. Defendants first argue that the judgment should be reversed because plaintiffs failed to establish fraud. A claim of fraud contains the following elements: (a) a representation or, where 1 At trial, Santiago explained the phrase to be corrected referred to a repair he anticipated at the time he started to fill out the disclosure form. When the southwest crock and downspout was replaced on August 16, 1996, he subsequently noted the repair on the same form. -7- there is duty to disclose, concealment of a fact, (b) which is material to the transaction at hand, (c) 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, (d) with the intent of misleading another into relying upon it, (e) justifiable reliance upon the representation or concealment, and (f) a resulting injury proximately caused by the reliance. Gaines v. Preterm-Cleveland Inc. (1987), 33 Ohio St.3d 54, 55. Regarding our standard of review, an appellate court will not overturn the judgment of a lower court where that court's judgment is supported by competent, credible evidence going to all the essential elements of the case. Seasons Coal Co. v. Cleveland (1984), 10 Ohio St.3d 77. In the case at bar, it was undisputed that the B-Dry system covered only part of the basement. The disclosure form itself was misleading in that it stated, minor leakage - Previously corrected 9-90, Lifetime warranty, to be corrected 8-95. Three witnesses confirmed that Santiago said the basement had a complete B-Dry system with a lifetime warranty. In particular, the jury heard Townley testify that he would have written the words Complete B- Dry only if he had been told this fact by Santiago. Thus the jury heard competent credible evidence that: (1) Santiago misrepresented the extent of the basement waterproofing system, (2) the extent of the waterproofing was material to the sale of the home, (3) Santiago's statements were false because the entire basement was not waterproofed, (4) Santiago intended plaintiffs to rely upon -8- these representations because they were a direct response to the buyer's express concerns, (5) in deciding to buy the property, plaintiffs relied on these representations, and (6) relying on these representations proximately caused their injury. Accordingly, plaintiffs presented some competent and credible evidence of fraud. Because the jury found that defendants committed fraud, defendant's argument regarding caveat emptor fails. The syllabus to Layman v. Binns, supra, states as follows: The 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 unimpeded opportunity to examine the premises, and (3) there is no fraud on the part of the vendor. (Traverse v. Long [1956], 165 Ohio St. 249, 59 O.O. 325, 135 N.E. 2d 256, approved and followed.) (Emphasis added.) Because the plaintiff presented and the jury believed evidence of fraud on the part of the sellers, a claim of caveat emptor will not preclude plaintiffs' recovery. Defendants' first assignment of error is, therefore, overruled. Their second assignment states as follows: II. THE COURT ERRED IN REFUSING TO ORDER A DIRECTED VERDICT AT THE CLOSE OF THE PLAINTIFF/APPELLEES' EVIDENCE WHEN PLAINTIFFS/APPELLEES' [SIC] TESTIFIED THAT 1) THEY PURCHASED THE PROPERTY IN AS IS CONDITION, 2) THEY WERE AWARE OF OLD WATER DAMAGE IN THE BASEMENT, 3) THEY HAD A PRIVATE INSPECTION OF THE PROPERTY; AND 4) THE WATERPROOFING SYSTEM WAS VISIBLE TO THE PLAINTIFFS/ APPELLEES DURING THEIR INSPECTION. In this assignment, defendants argue the trial court erred by not granting their motion for a directed verdict at the close of plaintiffs' evidence. -9- The standard for granting a motion for a directed verdict is set forth in Civ.R. 50(A)(4), which provides as follows: When a motion for a directed verdict has been properly made, and the trial court, after construing the evidence most strongly in favor of the party against whom the motion is directed, finds that upon any determinative issue reasonable minds could come to but one conclusion upon the evidence submitted and that conclusion is adverse to such party, the court shall sustain the motion and direct a verdict for the moving party as to that issue. In Howell v. Dayton Power & Light Co. (1995), 102 Ohio App.3d 6, 13, the court went on to state, A motion for directed verdict tests the legal sufficiency of the evidence, and therefore presents a question of law, even though in deciding such a motion it is necessary to review and consider the evidence. Accordingly, we make an independent review. When considering a motion for a directed verdict, a court must construe the evidence most strongly in favor of the party against whom the motion is directed. Where there is substantial competent evidence favoring the nonmoving party so that reasonable minds might reach different conclusions, the motion must be denied. (Citations omitted.) Construing the evidence in the case at bar most strongly in favor of plaintiffs, we conclude the trial court did not err in denying defendants' motion for a directed verdict. As we stated in the first assignment of error, supra, plaintiffs presented evidence that after inquiring about the water damage in the basement, defendants represented that the problem was fixed because the entire basement was waterproofed. In fact, only a part of the basement was waterproofed, and the other parts flooded soon after the sale. Plaintiffs stated they would not have purchased the house if they had known of the incomplete waterproofing. -10- Defendants' four arguments included in this assignment do not warrant the granting of a directed verdict. First they argue that they are entitled to a directed verdict because the property was sold in an as is condition. Like the doctrine of caveat emptor, an as is clause will not prevent recovery if the seller engages in fraud. Although the `as is' clause bars the Kayes' [plaintiff's] claim for nondisclosure, such is not the case when the fraud claimed is `positive' fraud, i.e., fraud of commission rather that omission. Kaye v. Buehrle (1983), 8 Ohio App.3d 381, 383; Tipton v. Nuzum (1992), 84 Ohio App.3d 33, 39. As we stated earlier, plaintiffs presented evidence of fraud and misrepresentation. Second, defendants argue that plaintiffs were aware of old water damage in the basement. This argument ignores that, in observing the prior damage, plaintiffs and their inspector expressly asked whether the problem had been fixed. Both Ward and Townley testified that it was because of the information provided to them about the B-Dry system they were satisfied the problem was fixed. Because plaintiffs relied on defendant's responses to their inquiries regarding the prior damage, defendants were not entitled, therefore, to a directed verdict. In the third and fourth arguments under this assignment, defendants argue that they were entitled to a directed verdict, because plaintiffs had a home inspection performed and because the waterproofing that was in place was visible. Once again, defendants miss the point that the existence of a home inspection -11- will not relieve them of liability if fraud exists. To hold otherwise would encourage misrepresentation to inspectors. After hearing the evidence, the fact finder determined defendants misrepresented the waterproofing system. Accordingly, defendants' second assignment of error is overruled. Defendants' third and fourth assignments challenge the damages awarded by the trial court. III. THE COURT ERRED IN DENYING DEFENDANTS/APPELLANTS A DIRECTED VERDICT AT THE CLOSE OF THE EVIDENCE ON THE ISSUE OF DAMAGES WHEN PLAINTIFFS/APPELLEES FAILED TO PROVE A LOSS OR DAMAGE BY CREDIBLE EVIDENCE. IV. THE COURT ERRED BY ALLOWING THE JURY TO CONSIDER GENERAL DAMAGES. In these two assignments, defendants argue that the court employed the wrong standard for assessing damages. They argue that the measure of damage is the difference between the value of the property as it was represented to be and the actual value at the time of the purchase. Referred to as the benefit of the bargain rule, this statement of Ohio law is generally correct. Defendants state that no evidence was presented under this rule. These two assignments lack merit. Under the benefit of the bargain rule, the cost of repair or replacement is also a fair representation of damages and an adequate measure of damages. Noble v. Mandalin (1995), 104 Ohio App.3d 11; Brewer v. Brothers (1992), 82 Ohio App.3d 148. Because plaintiffs presented sufficient evidence of the costs of repair and replacement, the jury instructions and award of damages were, therefore, not in error. -12- Judgment affirmed. -13- It is ordered that appellees recover of appellants their costs herein taxed. The court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this court directing the Common Pleas Court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. DYKE, P.J., and LEO M. SPELLACY, J., CONCUR. DIANE KARPINSKI JUDGE N.B. This entry is an announcement of the court's decision. See App.R. 22(B), 22(D) and 26(A); Loc.App.R. 27. This decision will be journalized and will become the judgment and order of the court pursuant to App.R. 22(E) unless a motion for reconsideration with supporting brief, per App.R. 26(A), is filed within ten (10) days of the announcement of the court's decision. The time period for review by the Supreme Court of Ohio shall begin to run upon the journalization of this court's announcement of decision by the .