Walker v. Dominion Homes, Inc.

Citations: 164 Ohio App. 3d 385; 2005 Ohio 6055; 842 N.E.2d 570Docket: No. 04AP-1388.

Court: Ohio Court of Appeals; November 14, 2005; Ohio; State Appellate Court

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Frank and Lisa Walker appeal a judgment from the Franklin County Court of Common Pleas that granted summary judgment to defendants Dominion Homes, Inc. and Dominion Home Financial Services, Inc. (DHFS). The court's ruling is affirmed in part, reversed in part, and remanded. In summer 2000, while searching for land, a builder, and financing for a new home, the Walkers were drawn to Dominion's advertisements for a "2-1 buydown" mortgage program, which offered reduced interest rates for the first three years. After expressing interest, they met with Dominion's salesperson, Denise Buede, who indicated they likely qualified for the program and would "look in on" the initial low interest rate.

On August 13, 2000, Lisa Walker completed a mortgage application, providing her income and authorizing DHFS to check their credit. The following day, loan counselor Deena Crawford reviewed their credit report, which revealed low scores due to high balances and delinquencies. Crawford classified the Walkers as "possibly approved" for a mortgage, suggesting they might qualify under FHA or non-conforming loans but not the 2-1 buydown program. This confidential information was not shared with the Walkers.

On August 20, 2000, the Walkers signed a home purchase agreement with Dominion, which included a provision for a loan-commitment fee. The agreement specified DHFS as the lender under the 2-1 buydown program, requiring Dominion's written consent to lock in an interest rate. On that same day, they signed a "Seller's Consent to Lock Rate" for the 90-day rate lock, and completed a loan-registration form for the 2-1 buydown program.

The Walkers believed they would qualify for the 2-1 buydown program based on discussions with Buede and relevant documentation. They asserted that had they known they likely wouldn't qualify, they would not have contracted with Dominion. Lisa Walker stated in her affidavit that the 2-1 buydown program significantly influenced their choice of Dominion over other builders. After signing the purchase agreement, they consulted Crawford about potential qualification issues, to which Crawford indicated that approval depended on income verification and addressing certain financial concerns. The Walkers complied by settling tax liens and explaining a delinquent payment. They were informed of their ineligibility for the program only ten days before closing. Upon learning this, they sought to be released from the agreement, but Dominion refused and threatened to retain their $2,700 deposit. Although DHFS proposed a higher-rate loan contingent on a 20% down payment, the Walkers declined and secured a different 30-year fixed mortgage at 8.375%. On September 10, 2002, they filed suit against Dominion and DHFS for CSPA violations, breach of contract, and promissory estoppel, claiming deception regarding financing and issues with the home's condition. The defendants sought partial summary judgment on financing-related claims, which the trial court granted on February 3, 2004, leaving only claims related to home defects and damages. The Walkers later dismissed these claims, making the February ruling final for appeal. They appealed, asserting errors in the trial court's conclusions regarding CSPA violations and the existence of an implied duty of good faith. The appellate court's review of summary judgment is de novo, applying the criteria set forth in Civ.R. 56(C) regarding genuine issues of material fact and entitlement to judgment as a matter of law.

The moving party in a summary judgment motion must initially inform the trial court of the motion's basis and identify record portions showing no genuine issue of material fact regarding the nonmoving party's claims. Simply alleging the nonmoving party lacks evidence is insufficient; the moving party must provide concrete evidence, such as affidavits, demonstrating the nonmoving party's lack of support for its claims. If the moving party fulfills this burden, the nonmoving party must then present specific facts showing a genuine issue for trial. Failure to do so may result in summary judgment against them.

In the case at hand, the Walkers contend that the trial court wrongly granted summary judgment to defendants regarding their claim of a violation of the Consumer Sales Practices Act (CSPA). They assert having sufficient evidence to question whether the defendants engaged in unfair, deceptive, or unconscionable actions in selling their home. The CSPA prohibits unfair or deceptive acts in consumer transactions and aims to protect consumers from unscrupulous suppliers, requiring liberal interpretation to favor consumers.

The Walkers argue that the defendants acted deceptively under R.C. 1345.02(B)(1) and (5) by misrepresenting benefits in the transaction and failing to supply the home per prior representations. However, the court found no merit in these claims, noting that the defendants did not guarantee the Walkers would qualify for the 2-1 buydown program and that relevant documents indicated no such approval had been secured. Thus, the defendants' actions did not meet the deceptive criteria outlined in the cited provisions.

The Walkers contend that the defendants engaged in deceptive practices under Ohio Adm. Code 109:4-3-10(A) by making representations that misled consumers. However, the defendants only made one claim regarding the availability of the 2-1 buydown program, which was true at the time and remained accurate throughout the Walkers' interactions with them. Consequently, this did not meet the definition of deception as outlined in the code.

Additionally, the Walkers assert that the defendants' actions violated Ohio Adm. Code 109:4-3-03(B)(1) by making a misleading offer of goods or services. The court disagrees, noting that the advertisement merely informed potential applicants of loan terms and did not constitute a formal offer to the Walkers, who were not qualified for the program.

Lastly, the Walkers argue that the defendants' conduct was unfair or deceptive under R.C. 1345.02. The definition of deceptive includes inducing false beliefs in consumers, while unfair is characterized by injustice or inequitable dealings. A court must evaluate the consumer's perspective rather than the supplier's intent. The court finds no evidence of deception or unfair practices by the defendants in this context.

A reasonable person could conclude that the defendants misled the Walkers regarding their eligibility for the 2-1 buydown program. Initially, Dominion's representation that the Walkers "probably" would qualify was arguably truthful. However, shortly after, a confidential opinion letter drafted by Crawford indicated that the Walkers could not qualify for any conventional loan, including the 2-1 buydown program, due to low credit scores. Crawford's explanation reinforced this interpretation, stating that the Walkers were not eligible under DHFS's conventional loan programs, although they might qualify for FHA or non-conforming loans.

On August 20, 2000, after DHFS had already determined the Walkers could not qualify, Buede misled them by providing forms related to the 2-1 buydown program. Crawford further misled the Walkers by suggesting that only minor issues were preventing their approval for the program. The defendants argue that no definitive denial had been issued by DHFS until late October 2000 and that the confidential letter only reflected a preliminary review, leaving room for possible qualification.

The determination of whether the defendants engaged in unfair or deceptive practices hinges on the interpretation of the confidential opinion letter. If it indicated the Walkers were ineligible, then the defendants' actions could be deemed unfair or deceptive. Conversely, if it suggested the Walkers were unlikely to qualify but could still apply, the defendants' conduct may not be misleading.

In addition to claiming unfair or deceptive actions, the Walkers allege that the defendants acted unconscionably, as defined by R.C. 1345.03(A). Courts must consider the supplier's awareness of the consumer's inability to benefit from the transaction when assessing unconscionability. Thus, a genuine issue of material fact exists regarding the nature of the defendants' actions under R.C. 1345.02 and R.C. 1345.03.

A reasonable person could conclude that the defendants were aware, at the time of the home-purchase agreement execution, that the Walkers would not qualify for the 2-1 buydown program, which was a critical factor in their decision to contract with Dominion. The failure to disclose this information could be seen as a violation of the Ohio Consumer Sales Practices Act (CSPA), specifically R.C. 1345.03, leading to genuine issues of material fact that prevent summary judgment for the defendants. The argument that the defendants had no duty to disclose financing information is rejected, as the relevant duty pertains to avoiding unfair, deceptive, or unconscionable acts. The Walkers' claims include reliance on the defendants’ representation regarding their financing eligibility.

Regarding the breach-of-contract claim, the Walkers allege an implied duty of good faith was breached when the defendants failed to inform them about their ineligibility for financing prior to the agreement. However, since such a duty arises from an existing contract, it cannot be breached before the contract is formed. Consequently, the trial court's summary judgment in favor of the defendants on the breach-of-contract claim is upheld.

The court sustains the Walkers' first assignment of error concerning the CSPA claim, reversing the trial court's judgment on that issue and remanding for further proceedings. The court affirms the judgment on the breach-of-contract claim, while the Walkers do not contest the decision on the promissory-estoppel claim.