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Ne 2007-0885
Jn t^[^e ^u^rrme (nnur^ af (^1^tn
RISA DUNN-HALPERN,
Plaintiff-Appellant,Y.
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♦
iQ LAIr af s+l
Defendants-Appellees.
ON DISCRETIONARY APPEAL FROM THE
COURT OF APPEALS, EIGHTH APPELLATE DIST T
CUYAHOGA COUNTY, OHIOCASE Ns CA-06-088337
♦
F C^©JUN 13 2001
^IARCIA J. MENGEL,REME CUUF'tT OF UIiIU
MEMORANDUM OF APPELLEES STEVEN DERIN ANDDEBORAH DERIN IN OPPOSITION TO JURISDICTION
♦
HARVEY B. BRUNER (#0004829)
HARVEY B. BRUNER & ASSOC.1600 Illuminating Building55 Public Square .Cleveland, Ohio 44113Tel: (216) 566-9477Fax: (216) 696-7047E-mail: [email protected]
Counsel for Plaintiff-Appellant,Risa DunlV_F&Ipern r--
/7 ^'JUN 13 Zi?U7
TIMOTHY J. FITZGERALD (#0042734)[COUNSEL OF RECORD]
TODD M. HAEMMERLE (#0062328)
GALLAGHER SHARPBulkley Building, Sixth Floor1501 Euclid AvenueCleveland, OH 44115-2108Tel: (216) 241-5310Fax: (216) 241-1608E-mail: [email protected]
Counsel for Defendants Appellees,Steven Derin and Deborah Derin
A4APuPR
iLiui. ; ;UF
TABLE OF CONTENTSpage:
EXPLANATION OF WHY THE ISSUES RAISED IN THISAPPEAL ARE NOT OF PUBLIC OR GREAT GENERAL INTEREST ...... ... •1-
STATEMENT OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-
ARGUMENT OPPOSING APPELLANT'S PROPOSITIONS OF LAW . . . . . . . . . -S-
Counter-Prouositions of Law Nos. 1 and 3: Summary judgment is appropriateon a complaint for fraudulent concealment of a latent defect in the sale ofresidential real estate when there is no genuine issue of material fact fromwhich the jury could find that the seller had knowledge of the defective conditionin the property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . •8-
Counter-Proposition of Law No. 2: In Ohio real estate transactions, the caveaternptordoctrine precludes recovery by the buyer for defects in the property if thefollowing apply: (1) the condition complained of is open to observation ordiscoverable upon reasonable inspection; (2) the purchaser had the full andunimpeded opportunity to examine the premises; and (3) there is no evidence offraud on the part of the vendor. (Layman v. Binns [1988], 35 Ohio St. 3d 176,applied and followed) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . •11-
CONCLUSION .................. .................................. •12-
CERTIFICATE OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13-
I.
EXPLANATION OF WHY THE ISSUES RAISED IN THISAPPEAL ARE NOT OF PUBLIC OR GREAT GENERAL INTEREST
Section 2(B)(2)(e) of Article IV of the Ohio Constitution dictates that the Supreme
Court of Ohio's discretionary jurisdiction is reserved for "cases of public or great general
interest." Cases presenting questions and issues of public or great general interest are
to be distinguished from cases where the outcome is primarily of interest to the parties
in a particular piece of litigation. Williamson v. Ru.bich (1960), 171 Ohio St. 253, 254.
While undoubtedly important to the parties here, this appeal falls into the latter
category of cases referenced in Wilhamson. Because this case does not present issues of
public or great general interest, jurisdiction over this appeal should be declined.
This appeal arises out of a civil complaint filed by Plaintiff-Appellant, Risa
Dunn-Halpern ("Dunn-Halpern"), which involves claims stemming from the purchase of
residential real estate located in Pepper Pike, Ohio, a suburb of Cleveland. The property
was purchased by Dunn-Halpern and her husband, Scott Halpern, in July of 2002 from
the Defendants-Appellees, Steven and Deborah Derin (collectively "the Derins"). The
purchase price was $579,000. Subsequent to taking possession of the property,
Dunn-Halpern's complaint alleges that mold was discovered in a number of locations
throughout the house. As a result, Dunn-Halpern filed suit against, among others, the
Derins, alleging that they "intentionally, recklessly and/or negligently" failed to disclose
"latent defects" in the property prior to the sale of the home.
Because existing law in Ohio covering fraud in the sale of resideritial real estate will
not support the claim being made here, the Appellants have tried to creatively
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recharacterize their claims and arguments. Adoption of Appellant's propositions of law
would exempt these types of cases from the scrutiny given to all other civil causes of
action under Civ. R. 56. In essence, as long as a plaintiff could get beyond a Civ.R
12(B)(6) motion, summary judgment could never be granted in a fraud case involving the
sale of real estate because the knowledge elements would, as a matter of law, be a
question of fact for the jury to decide. This case is a perfect example of why such a
standard cannot be the law in Ohio. Here there is no evidence, and Appellant has so
conceded, to establish knowledge on the part of the sellers. Regardless of how Appellant
might try to portray and recast the claims being made in this appeal to avail herself of
a different legal theory, the evidence in the record does not satisfy the only recognized
claim in Ohio arising out of the alleged fraudulent concealment of latent defects in the
sale of residential real estate.
Quite simply, this discretionary appeal has been filed in order to advocate that the
Court of Appeals came to the wrong (or at least less desirable) holding. By seeking
review in this Court, Appellant hopes that a different outcome might be achieved and a
new theory for loss of evidence created. That self-interest notwithstanding, this Court's
discretionary jurisdiction does not encompass error correction. See, Ba ughman v. State
Farm MutualAutomobile Insurance Company(2000), 88 Ohio St. 3d 480, 492 (Cook, J.,
concur). There is nothing unique or distinctive about this case. Appellant has cited no
case in conflict with the Eighth District's decision here. There is no suggestion that this
Court needs to resolve an emerging divergence in legal holdings from different appellate
districts. Nothing of public or great general interest warrants the Court accepting
jurisdiction over this appeal. The Court should decline to exercise jurisdiction over this
-2-
appeal.
II.
STATEMENT OF FACTS
Dunn-Halpern and her husband, Scott Halpern, began their property search about
a year before they ultimately decided to buy the subject property on Bryce Road in
Pepper Pike, Ohio. Both were sophisticated buyers. Dunn-Halpern is a board certified
arliningict_ Scott Halnern is a salafi manager for a flooring outlet. Their search for a
home was intensive, and included dozens and dozens of homes before they ultimately
decided to purchase the one in Pepper Pike. They had a specific idea as to the type of
home they were seeking. Specifically, they were interested in the location, size of the
house, and situation of the home on the particular street. Conversely, they were not at
all interested in the cosmetics or decor of the home. In fact, Scott Halpern commented,
in terms of the cosmetics of the home, "the uglier the better" because the plan was to gut
and reinodel the home.
Dunn-Halpern and her husband first saw the Bryce Road home in May or June of
2002. Both had extensive and multiple opportunities to look at, inspect, and walk
through this house before the contract for sale was finalized, and before title transferred.
Scott Halpern's first visit to the house lasted approximately 15 minutes. He had the
opportunity to walk through the entire house. On his second visit to the home, he was
present for another 20-30 minutes. Again, he had the opportunity to walk through the
entire house. He noticed no problems with water or mold during either of his first two
visits. When Scott Halpern visited the home yet a third time, he again spent 20-30
minutes in the home, and once again had the opportunity to walk through the entire
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house. During his third visit, he noticed no problems with water or mold. These three
visits all occurred before execution of the contract for the sale of the home.
Likewise, Dunn-Halpern made multiple visits to the home before the contract for its
purchase was executed. During Dunn-Halpern's first visit, she also testified that she had
the opportunity to walk the entire house unimpeded. During her second visit, she again
had the opportunity to walk into every room of the house. These would have accounted
for Dunn-Halpern's two visits to the home before the contract for its purchase was
executed.
Ultimately, Dunn-Halpern and her husband executed a contract to purchase the
subject property.
In addition to multiple visits to the home prior to making their offer to purchase,
Dunn-Halpern and her husband retained the services of a professional home inspector
to inspect the home and property per the terms of the purchase contract. The inspector
had access to every part of the home. Nobody limited his opportunity to look at anything
in the home. Scott Halpern actually accompanied the inspector throughout the
inspection, which lasted approximately four hours, and he observed nothing regarding
water, mold, or otherwise. The inspector also did not comment about any problems with
water or mold in the home. The professional inspector issued a report which made no
mention of problems with water or mold.
After the contract for the sale of the home was executed, both Dunn-Halpern and her
husband had further opportunity to go through the home on additional occasions before
title was transferred to them. Again, no problems with water, moisture, or mold were
observed.
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The home was purchased with the intent of doing substantial and major remodeling.
Dunn-Halpern and her husband had no plans to move into the home until the
substantial renovation was completed. The intent was that the renovation would take
5-6 months. The parameters of this large-scale renovation, at a cost of $250,000,
included, but were not necessarily limited to the following:
1. Stripping wallpaper throughout the home.
2. Removal and replacement of flooring throughout the house.
3. Removal and replacement of door frames, baseboards, window frames anddoors.
4. Removal of multiple non-support walls.
5. Installation of a skylight in the second floor master bedroom.
6. Removal and replacement of plumbing fixtures, including bathtubs, toilets,and sinks throughout the house.
7. Complete and total renovation of the kitchen, including new cabinets,appliances, countertops, flooring, etc.
8. Removal and replacement of all lighting, fans, fixtures, etc.
9. Refacing of the fireplace
10. Removal and replacement of appliances in laundry room.
11. Installation of new bookcases in the living room.
12. Installation of a new staircase and banisters.
There was a 3-4 week window between the time Dunn-Halpern and her husband took
title to this home and the date the substantial renovation began. In that 3 or 4 week
window, Dunn-Halpern and her husband were in the house almost every day for the
purpose of looking at every room in the house, making renovation plans, etc. By this
-5-
point, the house was empty of furnishings and personal property, and they had extensive
opportunity to view every part of the home. As with past occasions, they made no
observation regarding problems with water or mold.
It wasn't until after the renovation was underway at the home that mold was
allegedly discovered in various locations in the home, which included the following areas:
1. In the attic area of the home during installation of the master bedroomskylight;
3. At an area in the addition basement along the baseboard.
4. In a closet on the first floor adjacent to a bathroom.
5. In the bar area of the first floor.
6. In the living room between the window and the baseboard.
In each instance, it has been conceded that there is no evidence or indication that the
Derins knew of a problem with water, moisture or mold, which they failed to disclose to
Dunn-Halpern and/or her husband before sale of this property. Dunn-Halpern herself
testified:
Q: Do you have any evidence, indication, or knowledge of any problems withwater, moisture or mold that the Derins had knowledge of before closing butfailed to disclose to you?
A: No.
Scott Halpern gave similar testimony.
It is logical that the Derins would have no such knowledge of these problems. In each
case, the problem was discovered only after substantial renovation work had been
undertaken and the mold was found in areas that were otherwise inaccessible, covered
-6-
by wallpaper, obstructed from view by permanent furnishings, woodwork, etc. Take, for
example, the mold allegedly discovered in the attic. The attic mold was discovered only
after the contractors had cut a hole in the roof for skylights. The attic was otherwise
accessed by a hole in one of the upstairs bedroom closets. It was not living space, and
the Derins had not used it for storage. Scott Halpern conceded that there was no reason
to go into the attic. There is no evidence or indication that either of the Derins ever went
up into the attic area, as there was no reason to go there.
The other areas where mold was allegedly discovered were similarly remote. For
example, Dunn-Halpern conceded that the mold in the living room between the window
and the baseboard was discovered only after wallpaper was removed during the
renovation process. The mold along the baseboard at only a couple of places in the
basement was found only after renovation had started, and only after furniture and
carpeting had been removed. In summary, this mold was discovered only after the house
had been cleared of all personal property and after wallpaper, carpeting, baseboards, etc.
had been removed. The mold was found in spots that were previously obstructed from
view or otherwise in areas not accessible during normal living conditions. The mold of
which Dunn-Halpern now complains was not discovered to any extent by either her or
her husband, Scott Halpern, during their multiple visits to the home both before
purchase and after purchase (but before renovation). Further, the mold was not
discovered by their professional home inspector, even though he had complete, unlimited,
and unimpeded access to all parts of the home.
Without evidence, or other indication that the Derins knew of a problem with
moisture or mold in this home, and failed to disclose it prior to the sale, the Derins were
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entitled to judgment in their favor as a matter of law. The Court of Appeals correctly
affirmed the trial court's summary judgment. There is nothing about this case that
would warrant further appellate review by this Court. There is no confusion in the
courts below on the applicable law. There are no conflicting appellate court opinions on
the law. There is no issue of public or great general interest that would justify this Court
exercising its discretionary jurisdiction over this case. The Court should decline to accept
this appeal.
ARGUMENT OPPOSING APPELLANT'S PROPOSITIONS OF LAW
Counter-Propositions of Law Nos. 1 and 3: Summary judgment is appropriateon a complaint for fraudulent concealment of a latent defect in the sale ofresidential real estate when there is no genuine issue of material fact fromwhich the jury could find that the seller had knowledge of the defectivecondition in the property.
In the trial court's entry granting summary judgment, the court stated that there was
no genuine issue of material fact to establish knowledge by the Derins of a defect in the
property (i.e., water/mold) which the Derins concealed with the intent to induce
Dunn-Halpern's reliance and purchase of the Bryce Road property. In affirming
summary judgment, the Court of Appeals agreed. Dunn-Halpern v. MAC Home
Inspectors, Inc., 8°h Dist. No. 88337, 2007-Ohio-1853, at ¶¶16-17.
Under Ohio law, a plaintiff in a fraud case is required to prove each of the
following elements:
(1) a representation or, where there is a duty to disclose, concealment of a fact;
(2) which is material to the transaction at hand;
•S-
(3) made falsely, with knowledge of its falsity, or with such utter disregard andrecklessness as to whether it is true or false that knowledge may beinferred;
(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.
Burr v. Board of County Commissioners (1986), 23 Ohio St.3d 69, paragraph two of the
syllabus. Failure to establish any of one of these elements precludes recovery. Mathias
v. America Online, Inc., 8°h Dist. No. 79427, 2002•Ohio-814, ¶38; Burrat paragraph two
of syllabus.
A plaintiff in a real estate transaction, like Dunn-Halpern, cannot establish fraud
when there is no evidence to establish that the seller had knowledge of a material fact
which is allegedly concealed from the purchaser. Li v. Stanek, 8`h Dist. No. 85553,
2005-Ohio-4168, ¶13: To survive summary judgment, Dunn-Halpern was required to
demonstrate that the Derins had actual knowledge of the mold problems in the house.
See, e.g., Liotta v. Eckley(Jan. 13, 2000), 8th Dist. No. 75127, 2000 Ohio App. LEXIS 68,
*7-9 (reversing judgment in favor of the buyer because there was no evidence in the
record to demonstrate that the sellers knew of water problems in the basement). She
failed to do so in the trial court. She failed to carry her burden to convince the Court of
Appeals that the trial court had erred in this regard. As the Court of Appeals correctly
noted, the evidence fails to create a genuine issue of material fact from which a jury
could reasonably conclude that the Derins had knowledge of the mold and moisture
problem. Dunn-Halpern, at ¶18.
Furthermore, as the trial court aptly noted, Dunn-Halpern did not justifiably rely on
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any alleged misrepresentations or concealment and, as a result, cannot establish fraud.
A buyer who seeks damages for fraudulent concealment or fraudulent misrepresentations
must establish justifiable reliance on the concealed defect or misrepresentation. Gaines
v. Preterm-Cleveland, Inc. (1987), 33 Ohio St.3d 54, 55. But, a buyer cannot be found to
have justifiably relied upon an alleged concealment or representation attributable to the
seller where the buyer exercises the right to have an inspection done of the property by
a professional inspector of the buyer's choosing. See, Liotta, supra, at *10; see also,
Kimball v. Duy, 11t'' Dist. No. 2002-L-046, 2002-Ohio-7279, ¶24.
In Liotta, like here, the purchase agreement gave the purchaser the right to have an
inspection done of the property before closing. The Liotta plaintiff exercised his option
to inspect the property and "hired a construction worker to perform the inspection on the
home." Id. at *10. As a result, this Court noted that the plaintiff could not have relied
on any misrepresentations or concealment as a matter of law. Id. This rationale comes
from the fact that a buyer should not be able to complain about a defect that an
inspection should have revealed. See e.g., Belluardo v. Blankenship (June 4, 1998), 8th
Dist. No. 72601, 1998 Ohio App. LEXIS 2409, *14. Here, like the purchaser in Liotta,
Dunn-Halpern and her husband exercised the right to have the property inspected as the
purchase agreement permitted them to do. The inspector along with Scott Halpern
inspected the home and property.
In the case at bar, there is simply no evidence to support a claim of fraud against the
Derins. Dunn-Halpern has conceded that there is no evidence or indication that the
Derins knew about the mold and water problems but failed to disclose them. Further,
the problems were discovered only after all furnishings had been removed, and
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substantial renovation of the home had begun. For example, the alleged attic mold was
discovered only after a hole was cut in the roof to install a new skylight. The mold in the
living room was discovered only after wallpaper and furnishings had been removed.
Other mold in small quantities was discovered only after wallpaper had been removed,
personal belongings of the sellers had been removed, etc. There is simply no evidence
that the Derins had knowledge of mold and intentionally concealed that knowledge from
Dunn-Halpern and her husband.
Counter-Proposition of Law No. 2: In Ohio real estate transactions, the caveatemptor doctrine precludes recovery by the buyer for defects in the property if thefollowing apply: (1) the condition complained of is open to observation ordiscoverable upon reasonable inspection; (2) the purchaser had the full andunimpeded opportunity to examine the premises; and (3) there is no evidence offraud on the part of the vendor. (Layman v. Binns [1988], 35 Ohio St. 3d 176,applied and followed).
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. In real estate
transactions, the caveat emptordoctrine precludes recovery by the buyer for defects in
the property if the following apply: (1) the condition complained of is open to observation
or discoverable upon reasonable inspection; (2) the purchaser had the full and unimpeded
opportunity to examine the premises; and (3) there is no evidence of fraud on the part of
the vendor. Layman at 178-179; McClintock v. Fluellen, 8th Dist. No. 82795, 2004-Oliio-
58, ¶ 17. In order to avoid operation of caveat emptor, the buyer has the burden of proof
under each of the three elements. See Layman at 179 (reversing a.bench trial damages
award because the plaintiffs failed to establish the third element).
Here, the record demonstrates that Dunn-Halpern failed to produce evidence to
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overcome application of caveat emptor. That is, Dunn-Halpern failed to establish that
the Derins engaged in fraud. The third prong of this test, i.e., the fraud element, has
been thoroughly briefed above. The Derins did not engage in fraud given that they did
not knowingly make any affirmative misrepresentation or actively conceal with the
intent of misleading Dunn-Halpern. As long as a seller does not engage in fraud, the
principle of caveat emptorbars any claims brought by a buyer. See, e.g., Moreland v.`
Ksiazek, 8h1i Dist. No. 83509, 2004-Ohio-2974. The doctrine of caveat emptorprecludes
the claims made here against the Derins and thus summary judgment was appropriately
entered in their favor.
This Court should decline to accept jurisdiction over this appeal as the Eighth
District's decision here is a correct statement and application of the law of fraud in the
sale of residential real estate.
N
CONCLUSION
WHEREFORE, Defendants-Appellees, Steven Derin and Deborah Derin respectfully
request that the Supreme Court of Ohio decline jurisdiction over this appeal because the
issues presented in this case are not of public and great general interest. The Eighth
Appellate District's decision in this case applies the law correctly such that the outcome
is entirely consistent with the settled law announced by this Court relating to the duty
to make disclosure of hidden defects in the sale of residential real estate.
Date: June 12, 2007
Respectfully submitted,
TIMO VIT ALD (#0042734)[COUNSEL OF RECORD]
TODD M. HAEMMERLE (#0062328)
GALLAGHER SHARPBulkley Building, Sixth Floor1501 Euclid Avenue
eve an ,Tel: (216) 241-5310Fax: (216) 241-1608E-mail: [email protected]
Counsel for Defendants-Appellees,Steven Derin and Deborah Derin
CERTIFICATE OF SERVICE
A copy of the foregoing Memorandum ofAppellees Steven Derin and Deborah Derinin Opposition to Jurisdiction has been served by regular U.S. Mail, this 12t'' day ofJune, 2007 to the following:
Harvey B. Bruner, Esq.HARVEY B. BRUNER & Assoc.1600 Illuminating Building55 Public SquareCleveland, Ohio 44113
Co unsel for Plain tiff Appellan t,Risa Dunn -Halpern
TiMOTHIkJMTZQfKD (#0042734)[COUNSEL OF RECORD]
TODD M. HAEMMERLE (#0062328)
