Gentile v. Ristas

Citations: 160 Ohio App. 3d 765; 2005 Ohio 2197; 828 N.E.2d 1021Docket: Nos. 04AP-547, 04AP-647, 04AP-704.

Court: Ohio Court of Appeals; May 5, 2005; Ohio; State Appellate Court

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David and Beth Gentile appeal from the Franklin County Court of Common Pleas' summary judgment in favor of three defendants related to their December 2001 purchase of a residential property located at 8643 Gavington Court, Dublin, Ohio. The defendants include Mark Bradley Ristas (the seller), Feazel Roofing (the roofing contractor), and Criterium, Withem/Liszkay Engineers (the structural-engineering firm). Ristas owned the property until late 2001 and completed a roof replacement in August 2001. He engaged real estate agents Charles Totonis and Premier Residential Group to sell the home and completed the required property disclosure form. The Gentiles, represented by Totonis, entered a purchase agreement for $395,000 after viewing the home and reviewing the disclosure form. Following a home inspection by ProCheck Engineering revealing several issues, the Gentiles expressed a desire to rescind the agreement, but after discussions with Ristas, who agreed to address the problems, they proceeded with the purchase. A pest inspection by Quality Pest Control led to additional treatments arranged by Ristas. The sale closed on December 10, 2001, but the Gentiles later faced multiple issues with the home. After unsuccessful attempts to remedy these problems, they filed suit on January 28, 2003, against multiple parties, including Ristas and his agents. The trial court denied summary judgment for some defendants but granted it for Ristas, Criterium, and Feazel. The Gentiles appealed these judgments, which were later consolidated for the appeal process.

The Gentiles appeal the trial court's summary judgment in favor of Mr. Ristas, asserting two errors: (1) the court improperly applied the doctrine of caveat emptor despite existing material fact disputes, and (2) Ristas is not entitled to judgment as a matter of law. They also challenge the summary judgment for Criterium, claiming (1) the court erred as there are disputes regarding breach of contract, negligence, and misrepresentation. Additionally, the Gentiles contest the judgment in favor of Feazel Roofing, arguing (1) they were third-party beneficiaries or in direct privity with the relationship between Ristas and Feazel, and (2) Feazel was negligent and misrepresented facts. The Gentiles contend that the trial court incorrectly granted summary judgment to all defendants. An appellate court independently reviews summary judgments, adhering to the same standard as the trial court, which requires no genuine material fact issues, entitlement to judgment as a matter of law, and a conclusion adverse to the nonmoving party when evidence is viewed favorably for that party. Only specified evidence types are considered for summary judgment, and doubts must favor the nonmoving party.

The party requesting summary judgment must first demonstrate to the trial court the grounds for their motion and identify specific record portions that show a lack of genuine issues concerning material facts relevant to the nonmoving party's claims. A mere assertion that the nonmoving party has insufficient evidence is inadequate. Instead, the moving party must present evidence as outlined in Civ.R. 56(C) that clearly indicates the nonmoving party lacks supporting evidence for its claims. If the moving party does not meet this initial burden, the summary judgment motion will be denied. Upon meeting this burden, the nonmoving party must then provide specific facts indicating a genuine issue for trial, rather than relying solely on allegations in pleadings. 

The Gentiles have brought five claims against Mr. Ristas: 1) fraudulent misrepresentation, 2) fraudulent concealment, 3) fraudulent inducement, 4) breach of contract, and 5) unjust enrichment. The fraudulent claims assert that Mr. Ristas misrepresented and failed to disclose crucial facts about the property, which influenced the Gentiles' purchasing decision. The breach of contract claim contends that Mr. Ristas significantly violated the purchase agreement by not disclosing all necessary property information. The unjust enrichment claim argues that Mr. Ristas's misconduct led to a higher sale price for the property than it would have otherwise fetched. Mr. Ristas's summary judgment motion is supported by Mr. Gentile’s deposition and related exhibits, detailing that the Gentiles inspected the property multiple times and identified issues, such as damage to a cabinet and dampness in the basement. Mr. Totonis, associated with the property sale, assured them that these issues would be addressed in a home inspection.

Mr. Totonis provided the Gentiles with a residential property disclosure form completed by Mr. Ristas on July 30, 2001. In Section C, regarding the roof, Mr. Ristas did not answer whether there were current leaks or material problems, instead indicating that a new roof was to be installed in August 2001. He left blank a question about any leaks or problems in the last five years. In Section D, he answered "No" to current issues with the basement/crawl space, and in Section G, he failed to respond to queries about wood boring insects or termites. The Gentiles signed the disclosure form on November 3, 2001, and made an offer to purchase the home, which included a clause allowing them to inspect the property and request remedies for any unsatisfactory conditions.

The Gentiles hired ProCheck for a home inspection on November 10, 2001, which lasted four to five hours, during which they could ask questions. The inspector suggested that damage near the north fireplace could be due to water or insects and advised further investigation. He noted the need to regrade the area beneath the deck to prevent water issues in the basement and pointed out inadequate ventilation from ridge vents and missing "crickets" around the chimneys, which could lead to leaks. He also identified potential water problems in the basement and mentioned that the electrical box was overloaded. In his report, he rated the grading at the house as "Poor," indicating that water pooling under the deck likely caused pressure on the basement wall, and recommended proper sloping around the foundation. Both chimneys were rated "Fair," with rusted metal caps needing painting.

Repairs were made to address water damage in the east front bedroom ceiling and the east living room wall, though cracks remained visible post-repair. The family room cabinet suffered damage from water and possibly wood-eating insects, with probable damage behind the cabinet. In the attic, the roof framing was rated "fair," with noted water damage at the east-end chimney and poor ventilation due to an improperly installed ridge vent. The basement was described as "damp" with visible water stains, attributed to insufficient grading under the deck. Following the inspection, the Gentiles expressed their desire to exit the contract due to extensive problems with the home. They met with Mr. Ristas to discuss their concerns, including potential water issues from the north chimney and the condition of the family room cabinet. Mr. Ristas admitted to a past roof leak and acknowledged that previous water pooling had caused cabinet damage, prompting a new roof installation. He agreed to have an engineer evaluate the family room wall's structural integrity while denying any issues with the north wall. The Gentiles raised concerns about moisture in the basement and grading issues, to which Mr. Ristas offered to regrade under the deck but attributed the basement's odor to the home being vacant. He dismissed worries about the south chimney and stated there were no leaks in the bedrooms. Regarding electrical issues, he committed to hiring professionals to address the inspection report's findings.

Mr. Ristas engaged three contractors—New Wave, Buckeye, and Criterium—to address electrical issues, regrade an area under the deck, and assess the structural integrity of the north wall and chimney, respectively. The Gentiles hired Quality Pest for a termite inspection, which occurred on November 13, 2001. Although no visible termites were found, the inspection noted termite galleries and stated that further investigation was needed to determine if treatment was necessary. Consequently, Mr. Ristas arranged for termite treatment on November 27, 2001. 

The Gentiles, trusting Mr. Ristas's assurances about the contractors' work and without further verification or documentation, executed a satisfaction document on December 6, 2001, releasing Mr. Ristas from future repair obligations. Prior to closing on December 10, 2001, Mr. Totonis informed the Gentiles about the inspection results, downplaying the termite findings, and Mr. Gentile signed the inspection report at closing without reading it. 

Within five months post-closing, the Gentiles encountered severe issues, including chimney separation, structural failures, water leaks, mold, an inadequate electrical system, and ongoing termite damage. They learned that Mr. Ristas had previously repaired roof leaks near the chimneys. In support of his summary judgment motion, Mr. Ristas submitted an affidavit stating he lived in the home from May 1990 to February 2000, had no prior knowledge of termite infestations or basement leaks, and believed the 2001 roof repairs resolved the dampness issue. He denied concealing defects or misleading the Gentiles about the home's condition.

Mr. Ristas contended that the Gentiles' claims were precluded by a release of claims from December 6, 2001, and/or the doctrine of caveat emptor. He also maintained that there were no genuine material facts in dispute regarding the Gentiles' claims, asserting he was entitled to judgment as a matter of law. In response, the Gentiles provided affidavits and depositions from various individuals, including home inspectors and contractors, which supplemented the information from Mr. Ristas's motion. 

Mr. Ristas detailed a history of water-related issues in the house, including a roof leak caused by a rainstorm prior to 1997, which was repaired and painted over. He later noticed water damage near the north fireplace and consulted Feazel, who recommended a roof replacement that occurred in August 2001, resolving any further roof leak issues. Between November 1998 and February 2000, he observed a dry stain on the ceiling above a bedroom wall, which he repaired without disclosing on the property disclosure form, deeming it insignificant. He claimed that his omission regarding roof leaks and termites on the form were oversights, asserting he had disclosed an upcoming roof replacement.

Mr. Ristas stated that he instructed contractors to address issues noted in a ProCheck report and indicated that the Gentiles did not raise any complaints, request further inspections, or seek to cancel the purchase contract prior to closing. Furthermore, mold analysis conducted by expert Shannon Landrum revealed mold growth associated with water intrusion during repairs for termite damage, specifically on the basement's west wall and in the living room, indicating extensive contamination.

Mr. Roof's affidavit detailed his inspection on May 20, 2002, revealing severe termite damage to the family room's cabinet, floor joists, and subfloor, along with a leaking and cracked chimney that required demolition and rebuilding. He noted significant termite damage and moisture-related mold in the basement recreation room, suggesting a longstanding moisture issue. Mr. Keeney conducted inspections on July 16 and 22, 2002, finding active termite infestations in the family room and basement, and damage to the cabinet and walls, concluding that the infestation began at least six years prior and should have been obvious to previous homeowners. Mr. Shepherd inspected the property later in July 2002, reporting that damaged structural components near the fireplace were inadequate for code-required loads and that the chimney was unstable. Ms. Lach presented a property disclosure from June 2000 in which Mr. Ristas acknowledged prior chimney flashing leaks and repairs. Mr. Lynn discovered concealed water damage during painting in summer 2003, indicating ongoing issues. The Gentiles opposed Mr. Ristas's summary judgment motion, claiming he misrepresented and concealed information about leaks and infestations, arguing their claims were valid despite a December 6, 2001 release due to mutual mistake, fraud, lack of consideration, and illegality. The trial court found material facts in dispute regarding the release's validity, denying summary judgment for Mr. Ristas on that defense, but ruled there was no evidence of fraud, thus granting summary judgment in his favor, dismissing the Gentiles' claims under the doctrine of caveat emptor.

The Gentiles alleged multiple claims against Mr. Ristas, including fraudulent misrepresentation, fraudulent concealment, fraudulent inducement, breach of contract, and unjust enrichment. The trial court grouped the fraud claims together without addressing the breach-of-contract or unjust-enrichment claims specifically. The Gentiles did not contest this omission, leading the court to refrain from considering those claims under App.R. 12(A)(2). 

In Ohio, the doctrine of caveat emptor applies to real estate transactions, limiting claims of fraud or misrepresentation. Sellers are only required to disclose defects known to them that are not readily discoverable by a buyer. The Ohio Supreme Court established that while sellers are not obligated to reveal all known facts, buyers have a duty to conduct their own inquiries. Under this doctrine, recovery for structural defects is precluded if the defects are observable, the buyer has had the opportunity to inspect, and there is no fraud by the seller.

The elements of fraud include a false representation or concealment of a material fact, made knowingly with the intent to mislead, resulting in justifiable reliance and injury. Fraud can also occur through nondisclosure when there is a duty to disclose. The Gentiles contended that Mr. Ristas misled them by inaccurately completing the property disclosure form and failing to disclose significant defects, such as prior roof and chimney leaks, termite damage, and basement mold.

According to R.C. 5302.30, sellers must complete a property disclosure form detailing material matters regarding the property's condition and any known defects. Disclosures must be made in good faith, defined as honesty in fact. While a failure to disclose does not automatically equate to fraud, intentional nondisclosure of material facts that misleads a buyer can result in seller liability for damages.

Mr. Ristas is accused by the Gentiles of misleading them regarding roof and chimney leaks by not disclosing current leaks on the disclosure form. However, he did indicate a new roof installation planned for August 2001, which serves as a reasonable notice about potential issues. Evidence does not support claims that he failed to disclose current leaks, as Ristas stated no leaks occurred after the roof replacement. The Gentiles also allege he did not disclose past leaks, including a 1997 repair in the foyer, a repair made between 1998 and 2000 near the north chimney, and a previously reported chimney flashing leak from June 2000. While he was obligated to disclose these past issues, the court found no evidence indicating Ristas intended to mislead the Gentiles or that they justifiably relied on any nondisclosure. Ristas asserted he never intended to mislead and believed minor repairs sufficed. He was assured by roofing companies that a new roof would resolve prior water issues. Additionally, Ristas verbally acknowledged past leaks to the Gentiles after the home inspection, explaining the reasons for the roof replacement and citing a chimney leak that damaged cabinetry. The inspection report further informed the Gentiles of previous roof and chimney problems, noting repairs for water damage and visible cracks, as well as potential water damage linked to the chimney.

The inspector noted that the absence of crickets on the chimney could lead to water leaks, potentially causing structural damage to the wall behind the cabinet. The Gentiles alleged that Mr. Ristas misled them regarding termite presence by not answering the disclosure form accurately and by suggesting the property had no termites, while allegedly painting the inside of the cabinet to hide termite damage. However, the court found no evidence indicating Mr. Ristas intended to mislead the Gentiles. He testified that he had no knowledge of termite issues and never observed signs of termites during his residence. The Gentiles cited Mr. Keeney's affidavit to claim fraud, arguing that he indicated the infestation should have been evident to the previous owner. The court clarified that such opinions do not establish fraud, as they do not prove actual knowledge of defects but rather suggest negligence. Additionally, even if there were grounds for inferring misrepresentation by Mr. Ristas, the Gentiles could not justifiably rely on such claims due to prior warnings from the home inspector about potential termite damage and the findings in the pest inspection report, which indicated visible signs of infestation and recommended further investigation.

Mr. Totonis informed the Gentiles before closing that a termite inspection revealed past issues, and Mr. Ristas was acquiring a termite-abatement system as recommended. The Gentiles did not request the termite report prior to closing and received it at that time. Mr. Gentile signed the report without reading it, while Mrs. Gentile read and signed it without questioning its contents. The Gentiles claim Mr. Ristas misrepresented the condition of the basement, stating there had never been water issues, despite the need for a roof replacement partly due to basement dampness. Mr. Ristas showed Mrs. Gentile a damp area in the basement, attributing it to a roof leak. The law states that nondisclosure of defects does not constitute fraud if the defects are discoverable through reasonable inspection. Evidence indicates the basement's water issues were apparent during the Gentiles' visits, including a damp smell and wet carpet, and were noted in the home inspection report. Therefore, the Gentiles could not justifiably rely on Mr. Ristas's alleged misrepresentations. The doctrine of caveat emptor bars their claims, as all defects were observable or reported by inspectors. The Gentiles failed to show that Mr. Ristas intentionally concealed property conditions to defraud them, leading to the overruling of their first assignment of error and rendering the second moot.

Additionally, the Gentiles raised three claims against Criterium: breach of contract, negligence, and misrepresentation. They claimed to be third-party beneficiaries of a contract between Mr. Ristas, RE/MAX, and Criterium for inspecting water damage and structural integrity. They alleged Criterium breached the contract by failing to conduct a thorough inspection and disclose damage from moisture, termites, and wood failure. The negligence claim asserted that Criterium had a duty to perform the inspection properly and breached that duty by inadequately reporting the damage.

The misrepresentation claim against Criterium alleges that it knowingly made false representations and failed to disclose significant facts regarding the property's condition. Criterium filed a motion for summary judgment, supported by affidavits and exhibits, including an inspection report by Nick Sung, an independent contractor hired to assess the property. The inspection, conducted on November 19, 2001, was described as a "limited structural inspection," focusing on visible structural components, and no destructive testing was performed. Both Mr. Totonis and Mrs. Gentile were present during the inspection.

Sung reported water damage near the north chimney, attributing it to water leakage, but noted that the structural integrity of the home was generally sound, with minimal necessary repairs limited to a small section of rotted plywood subflooring. He identified minor damage around the south chimney but deemed it repair-free. Criterium's defense included arguments of lack of privity of contract, a release of claims from December 6, 2001, and the doctrine of caveat emptor, asserting that no factual basis supported the Gentiles' claims.

In opposition, the Gentiles contended they were third-party beneficiaries of the contract between Criterium and Mr. Ristas and argued that their claims were not precluded by the release or caveat emptor. They claimed Criterium was negligent in its inspection, as subsequent deterioration of the north wall required extensive repairs.

The trial court found that there were genuine issues of material fact regarding whether the Gentiles were third-party beneficiaries of the contract between Criterium and Mr. Ristas. It ruled that the December 6, 2001 release of claims did not cover the Gentiles' claims against Criterium, and the doctrine of caveat emptor did not apply. However, the court determined that the Gentiles did not provide specific facts to show a genuine issue regarding Criterium's negligence in conducting its inspection and preparing its report.

The Gentiles attempted to introduce a new argument about the scope of the inspection requested by Mr. Ristas, claiming it was either a "limited structural inspection" or a more extensive one. This argument was not raised in their response to Criterium's motion for summary judgment, leading to its waiver on appeal, as established by precedents.

The Gentiles' claims of breach of contract and negligence were based on allegations of improper inspection by Criterium. To prove negligence, the Gentiles needed to demonstrate a duty, a breach of that duty, and resulting injury. The court noted that even if Criterium owed a duty to the Gentiles, they failed to show specific facts indicating a breach.

Criterium successfully demonstrated the absence of genuine issues of material fact by providing evidence, including an affidavit from Mr. Sung, which stated that the inspection was performed reasonably as a "limited structural inspection." Mr. Sung's findings indicated that the property appeared structurally sound. Consequently, the burden shifted to the Gentiles to present specific facts to dispute this, but they only provided conclusory allegations without evidence contradicting Mr. Sung's testimony regarding the property's condition.

The Gentiles failed to provide evidence contradicting Mr. Sung's testimony regarding his reasonable conduct during a limited structural inspection of the residence, resulting in their inability to establish a genuine issue of material fact for their breach-of-contract and negligence claims, which thus fail as a matter of law. The Gentiles' complaint, while suggesting a "misrepresentation" claim, aligns more with negligent misrepresentation rather than fraudulent misrepresentation. Negligent misrepresentation involves supplying false information in business transactions while failing to exercise reasonable care, leading to pecuniary loss from justifiable reliance on that information. The claim requires an affirmative false statement, not omissions regarding material facts. Although the Gentiles alleged that Criterium failed to disclose material facts, such omissions cannot support a negligent misrepresentation claim. They also claimed affirmative misrepresentations about the residence's condition; however, to withstand summary judgment, they must present evidence showing Mr. Sung’s lack of reasonable care or competence in his inspection and communication, typically requiring expert testimony unless the inadequacy is evident to laypersons.

In Dickerson Internationale, Inc. v. Klockner, the court addressed the Gentiles’ failure to present evidence or expert testimony to counter Mr. Sung's assertion of having exercised reasonable care in his limited structural inspection and reporting, leading to the rejection of their negligent misrepresentation claim. The Gentiles had three claims against Feazel: breach of contract, negligence, and misrepresentation. They alleged that, as third-party beneficiaries of a contract between Feazel and others, Feazel did not perform its inspection duties adequately, failing to identify necessary repairs for the chimney. 

The negligence claim asserted that Feazel breached its duty by providing incomplete and erroneous recommendations. The misrepresentation claim contended that Feazel knowingly provided misleading information and omitted critical facts about the property's condition. Feazel's motion for summary judgment referenced deposition materials that highlighted issues discovered in a ProCheck inspection regarding ventilation and water drainage around the roof and chimneys. 

Following inquiries from Mrs. Gentile, Feazel assured her of the adequacy of the ridge vent and the sufficiency of flashing, leading her to forgo further inspections. Subsequent inspections in 2002 addressed problems with heat and condensation, resulting in the installation of an attic fan; however, excessive heat remained unresolved. After a chimney separation incident, other contractors suggested crickets were necessary, but Feazel maintained that their inclusion was merely an engineering recommendation.

Feazel contended in its summary judgment motion that the Gentiles' claims were invalid due to a lack of privity of contract, a release of claims dated December 6, 2001, and the doctrine of caveat emptor, asserting that no factual support existed for the Gentiles' claims. In response, the Gentiles argued they were third-party beneficiaries of the contract between Feazel and Mr. Ristas, asserting that their claims were not barred by either the release of claims or caveat emptor. However, the trial court determined that the Gentiles did not legally establish their status as third-party beneficiaries.

Under Ohio law, only parties to a contract or intended third-party beneficiaries can file a breach-of-contract claim. The Gentiles, by claiming third-party beneficiary status, implicitly acknowledged they were not actual parties to the contract. Evidence showed that the Gentiles were uninvolved in the negotiation, execution, or payment of the roof-replacement contract between Feazel and Mr. Ristas. 

The critical issue was whether the Gentiles were intended third-party beneficiaries. Third parties lack enforceable rights unless the contracting parties intended to create such rights. The "intent to benefit" test requires evidence that the promisee aimed to benefit the third party directly, rather than merely providing incidental benefits. Additionally, there must be evidence that the promisee assumed a duty to the third party. The evidence indicated that Feazel and Mr. Ristas did not contemplate the Gentiles as beneficiaries when they entered into the contract, as they had not met the Gentiles at that time. The Gentiles argued for their status based on the vacant house and the "for sale" sign, suggesting that both parties understood the roof was to benefit a potential purchaser. However, the court found no reasonable inference supporting this claim.

Feazel's entry into a contract with Mr. Ristas for roof replacement does not establish the Gentiles as third-party beneficiaries. Despite potential awareness of the roof's replacement in anticipation of a home sale, the Gentiles are deemed incidental beneficiaries, not intended beneficiaries, as evidenced by the relevant case law, specifically *Brewer v. HR Concrete, Inc.*, which emphasizes the necessity of intent. The trial court noted that the facts here support the conclusion that the Gentiles lack evidence of any intent from Feazel to benefit them. Additionally, the Gentiles failed to provide any evidence of an oral contract for inspection of the roof and chimney conditions following a ProCheck inspection. Testimonies indicated that Mr. Gentile had no prior communication with Feazel, and Mrs. Gentile could not substantiate her conversation regarding the inspection. Consequently, the Gentiles lacked sufficient evidence to infer either a direct contractual relationship with Feazel or an intent to benefit from the contract with Mr. Ristas, resulting in the court granting summary judgment in favor of Feazel on the breach-of-contract claim. Furthermore, Feazel asserts entitlement to judgment on the Gentiles' negligence and misrepresentation claims, which are interpreted as negligent misrepresentation rather than fraudulent misrepresentation.

A plaintiff must be a party or in privity with a contract to establish a tort claim based on a duty arising from that contract. In the case of Gentiles' claims against Feazel, they allege negligence and negligent misrepresentation related to an inspection agreement that lacks evidentiary support. The only existing agreement is between Feazel and Mr. Ristas concerning roof replacement, and the Gentiles have not demonstrated they are third-party beneficiaries of this contract. Consequently, they cannot pursue tort claims based on duties stemming from Feazel's contractual obligations to Mr. Ristas. The court has overruled the Gentiles' assignments of error and affirmed the judgments from the Franklin County Court of Common Pleas.