COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA No. 72601 ELIZABETH BELLUARDO : : JOURNAL ENTRY Plaintiff-appellant : : AND vs. : : OPINION ANTHONY BLANKENSHIP, ET AL. : : Defendant-appellees : : : DATE OF ANNOUNCEMENT : JUNE 4, 1998 OF DECISION : : CHARACTER OF PROCEEDINGS : Civil appeal from : Court of Common Pleas : Case No. CV-305883 : JUDGMENT : AFFIRMED DATE OF JOURNALIZATION : APPEARANCES: For plaintiff-appellant: NEAL M. COX, ESQ. 1441 West 25th Street Cleveland, OH 44113 For defendant-appellees: JOHN A. ALBERS, ESQ. JOHN M. BAKER, ESQ. Weston, Hurd, Fallon, Paisley & Howley 2500 Terminal Tower Cleveland, OH 44113-2241 JOHN T. PATTON, J.: Plaintiff-buyer Elizabeth Belluardo bought a suburban home in 1993, only to find weeks later that water and raw sewage were leaking into the basement. As pertinent to the issues raised in -2- this appeal, she brought suit against the seller's real estate company, Coldwell Banker Hunter Realty, and Alice Kao, a real estate agent working for Coldwell Banker1. Plaintiff claimed the agent fraudulently concealed her knowledge of the defects in the basement with the intent to force plaintiff to rely on the representations made in a residential property disclosure form signed by the seller. Plaintiff's claim against Coldwell Banker asked the court to impose liability for the agent's negligent hiring, and further sought compensation on a theory of respondeat superior.Defendants filed a motion for summary judgment claiming plaintiff could not establish her fraudulent disclosure claim against the agent since plaintiff took the property as is and conducted her own home inspection. Likewise, Coldwell Banker argued it had no liability for the agent's actions since she was an independent contractor and, in any event, plaintiff failed to establish the elements of a negligent hiring claim. The court granted the motion without opinion and certified no just reason for delay pursuant to Civ.R. 54(B). When reviewing a summary judgment, we construe the underlying facts in a light most favorable to plaintiff. See Civ.R. 56(C). Plaintiff learned about the house from a friend who worked for another real estate company. The house had not been listed at the time. Plaintiff and her husband (since divorced) drove to the 1 Plaintiff also named as defendants the seller, and her own real estate agent and her real estate agent's company. The seller settled, and plaintiff dismissed without prejudice her claims against her agent and her agent's real estate company. -3- house and found it empty (the seller no longer lived there). They entered an open door and looked around for a few minutes. Plaintiff's husband went into the basement and later said, I looked at the furnace, hot water tank, the walls, the plumbing and, you know, just took a view of the entire basement. They found the house to their liking. Husband arranged to meet seller and look at the house again. At that meeting, he asked seller about the soundness of the house. Seller told husband the roof leaked, and they quickly agreed to credit the purchase price to allow for roof repairs. Husband said seller told me that the basement was in good condition and that there were no water problems. During that meeting, he learned how to operate the mechanical systems in the house, including the sump pump. Husband said seller told him he installed the sump pump to alleviate any problems with water. Plaintiff made an offer on the house after this meeting. Plaintiff next visited the house during an open house. While there, she met the agent and spoke to her for a few minutes. She thought she might have gone into the basement, but could not say for sure. She did remember telling agent that she and her husband had made an offer on the house. Seller accepted plaintiff's offer that day. The purchase agreement made the sale contingent upon the buyer's home inspection. Plaintiff exercised this option and husband accompanied the inspector. The inspector issued a report that found the front and rear basement walls had sheared at the -4- bottom. Of the eleven courses of cinder block, the second course, closest to the floor, had pushed inward, separating at the mortar joint. The inspector said repairs to the mortar joint were obvious to him. He also thought the land around the house should be graded away from the house because the existing grade encouraged water to drain toward the house. In conjunction with the grading, the inspector found relatively fresh tar above the grade line. The inspector concluded that some excavation work had been done on the property, but the work had been done in an unusual fashion and didn't look right. Because he could not determine the extent of the work, the inspector asked husband about the work. Husband told the inspector that seller mentioned some work had been done on the house prior to seller's ownership. The inspector suggested to plaintiff's husband that he contact the city building department to find out if a work permit had been taken out and whether the finished product had been inspected by the city. Husband recalled asking seller whether he experienced any problems with water in the basement, although he could not remember if he asked before or after the inspection. Husband did remember speaking to his own real estate agent about the problem, but he did not speak to anyone else about the basement walls. Plaintiff and husband discussed the inspection report, and wondered whether the shearing would happen again, whether the shearing had been fixed, and whether the basement would leak or not. Plaintiff went ahead with purchase. One month later, plaintiff noticed cracks forming along the mortar lines of the -5- cinder block basement walls. After four months, plaintiff noticed the smell of raw sewage coming from the basement. Several weeks later, raw sewage began seeping through the wall. A plumbing contractor could not find the cause of the problem. Another contractor, in conjunction with plaintiff's suburban service department, discovered the sewer line had not been properly connected to the house. This caused sewage leaving the house to flow into the ground instead of the sewer line. Plaintiff spoke to the agent who allegedly said, Oh yes, the man next door told me about the basement, I'm so sorry. Plaintiff claimed she spoke to her next door neighbor (who ran his own excavation company) and learned the neighbor told agent the entire neighborhood had problems with water in the basements. In an affidavit, the neighbor recounted how he told agent he replaced and waterproofed the north basement wall of plaintiff's house for earlier owners of the house. In fact, the neighbor had been approached by seller to offer an estimate on exterior waterproofing for the basement. Although plaintiff filed four assignments of error, we find the third assignment is dispositive whether the court erred by granting summary judgment on the fraudulent misrepresentation claim. Plaintiff argues she submitted sufficient evidence to create a triable issue of fact concerning agent's (and by implica- tion, Coldwell Banker's) prior knowledge of water in the basement. We find plaintiff has not submitted facts sufficient to create a factual dispute on the doctrine of caveat emptor. -6- The doctrine of caveat emptor is designed to finalize real estate transactions by preventing disappointed real estate buyers from litigating every imperfection existing in residential property. Layman v. Binns (1988), 35 Ohio St.3d 176, 177. To that end, the doctrine applies to preclude 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. Id., syllabus; Czarnecki v. Basta (1996), 112 Ohio App.3d 418, 422-23. We find the court did not err by applying the doctrine of caveat emptor and that plaintiff cannot establish triable issues of material fact. First, the defect in question was open to discovery on reasonable inspection. Plaintiff had full opportunity to inspect not only the house, but the basement as well. The purchase agreement gave plaintiff the option to inspect the premises, and she exercised that option. The inspector character- ized the shearing occurring in the basement walls as obvious. Mortar repairs to the cinderblock walls were also obvious the repaired joints did not match the original joints. Second, plain- tiff had the unimpeded opportunity to inspect the premises. Her inspector conducted a thorough inspection in husband's company. There were no complaints that the inspection had been impeded in any way. -7- The third factor is whether Coldwell Banker or agent committed fraud. The doctrine of caveat emptor is not absolute the seller of real estate cannot invoke the doctrine's protection if the buyer can prove fraud. Laymanat 177; Buchanan v. Geneva Chervenic Real- ty (1996), 115 Ohio App.3d 250, 257. The elements of fraudulent concealment are (1) a material concealment, (2) knowingly con- cealed, (3) with the intent of misleading another into relying upon it, (4) reliance, with a right to do so, upon the concealment by the party claiming injury, and (5) injury resulting from the reliance. See Gaines v. Preterm-Cleveland, Inc. (1987), 33 Ohio St.3d 54, 55. Nondisclosure will become the equivalent of fraudulent concealment when the duty to speak arises in order to place the other party on equal footing. Arbor Village Condo. Assoc. v. Arbor Village Ltd., L.P. (1994), 95 Ohio App.3d 499, 510. We recently stated, [i]f a purchase agreement states that the buyer purchases real property in its `as is' physical condition, as it does here, the vendor has no duty to disclose latent defects. Eiland v. Coldwell Banker Hunter Realty (Aug. 14, 1997), Cuyahoga App. No. 71369, unreported at 9 (citations omitted); see, also, Arbor Village Condo. Assoc, supra; Jacobs v. Racevskis (1995), 105 Ohio App.3d 1, 4. The purchase agreement provided: 10. INSPECTION. BUYER shall have 5 work days after acceptance of this offer to have a qualified inspector(s) or contractors perform, at BUYER'S expense, the inspections indicated below. If BUYER is not satisfied with results of such inspection, then BUYER shall notify -8- SELLER in writing within three (3) days after such inspection is conducted. This contract may be renegotiated or voided only in the event that major problems or significant safety risks are discovered by inspection. *** If SELLER agrees to correct condition(s), then this Purchase Agreement shall remain in full force and effect. If SELLER does not so elect, then BUYER, at BUYER'S option, may either waive such condition(s) and accept the property in its `AS IS' condition or terminate this agreement in which case neither BUYER, SELLER, nor any BROKERS involved in this transaction shall have any further liability or obligation to each other ***. Plaintiff conducted an inspection of the property and learned that problems existed in the past and she should take steps to determine what repair work had been performed on the property. She chose not to undertake further investigation and accepted the property as is. Under the circumstances, this as is disclaimer removed the agent's duty to disclose information relating to the basement. Plaintiff argues that R.C. 5302.30, the statutory provision calling for execution of a residential property disclosure form, effectively negates prior law relating to as is residential home purchase agreements. We disagree. R.C. 5302.30(C) provides that any person who intends to transfer real property must complete and deliver to the transferor a property disclosure form. The form provides that the transferor must disclose material matters relating to the physical condition of the property to be trans- ferred and any material defect in the property that is within the actual knowledge of the transferor. See, generally, Schlecht v. Helton(Jan. 16, 1997), Cuyahoga App. No. 70582, unreported. This -9- section simply codifies the common law doctrine of caveat emptor by requiring homeowners to disclose all known latent defects. In Montgomery v. Proper (Feb. 14, 1997), Huron App. No. H-96-019, unreported, the court stated, *** while R.C. 5302.30 requires a seller to disclose specific comprehensive information as to the physical condition of the property being sold, it retains the doctrine of caveat emptor as to those latent conditions which are not specifically covered by the disclosure requirements. Id. at 4, citing Davis v. Kempfer (Apr. 10, 1996), Union App. No. 14-95-31, unreported. Even if the as is clause did not apply, we would find the court did not err by granting summary judgment because plaintiff cannot show agent made any representations nor that she justifiably relied on agent's representations. Neighbor's affidavit shows the neighbor spoke to agent the same day plaintiff signed the purchase agreement. Neighbor told agent the owners prior to seller waterproofed the basement thirteen years prior to the sale; neighbor performed work on the north basement wall ten years previ- ously; and two years previously seller asked neighbor to give him an estimate on waterproofing the basement. Agent admitted speaking to the neighbor, but claimed she did so a few weeks after plaintiff signed the purchase agreement. She further denied learning of any present or perceived problems with the house. After the seepage began, plaintiff called agent to discuss the problems. Agent allegedly told plaintiff, Oh, yes, the man next door told me about the basement, I'm so sorry. -10- Assuming for purposes of summary judgment the truth of plaintiff's facts and that agent knew these facts and made the statement attributed to her, we nonetheless find no evidence in the record to show agent fraudulently misrepresented or concealed problems with the basement at the time of sale. By her own admission, plaintiff spoke to agent only once, and for just a few minutes. Agent asked plaintiff if she had a realtor. Plaintiff replied affirmatively and I told her that we already looked at the house and that my husband put an offer on the home. Agent said, Oh, okay, and their conversation ended. Agent's affidavit confirmed this point she swore neither plaintiff nor her real estate agent asked her about the condition of the basement at any time before closing the house sale. Unquestionably, agent made no representations to plaintiff about the basement. Since agent did not make any representations, so liability can only be established if she concealed a pertinent fact and had reason to expect plaintiff to act or to refrain from action in reliance upon the concealment. Miles v. McSwegin (1979), 58 Ohio St.2d 97, 100. Nondisclosure will become the equivalent of fraudulent concealment when the duty to speak arises in order to place the other party on equal footing. Textron Financial Corp. v. Nationwide Mutual Ins. Co. (1996), 115 Ohio App.3d 137, 150; Mancini v. Gorick (1987), 41 Ohio App.3d 373, 374. Again, a party seeking damages for fraudulent concealment must show justifiable reliance on the concealed matter. Gaines v. Preterm-Cleveland, Inc. supra. No such reliance is shown here -11- because plaintiff independently exercised her option to inspect the roperty. That inspection showed significant repair work had been performed in the basement. The inspector questioned the quality of the work and suggested that husband seek a more qualified opinion on the scope and quality of that work. Plaintiff did not follow her own inspector's advice, even though she had been placed on notice of a possible defect necessitating further inquiry. Once given notice of a possible defect, reasonable prudence dictated that plaintiff make further inquiry or inspection. See p Nuzum (1992), 84 Ohio App.3d 33, 39; Buchanan v. Geneva Chervenic Realty, 115 Ohio App.3d at 258. Plaintiff did neither so she cannot complain that agent concealed a material fact that her own reasonable inspection already revealed. The third assignment of error is overruled.2 Judgment affirmed. 2 Our disposition of this issue moots consideration of plaintiff's remaining assignments of error relating to negligent hiring and respondeat superior. Likewise, our de novo review of the evidentiary materials has been viewed in a light most favorable to plaintiff, so we need not resolve plaintiff's contention that the court made credibility determinations. -12- It is ordered that appellees recover of appellant 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 direct ing the Court of Common Pleas 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. PATRICIA A. BLACKMON, A.J. TIMOTHY E. McMONAGLE,J. CONCUR. JUDGE JOHN T. PATTON 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 .