IN THE SUPREME COURT OF OHIO. ) Court of Appeals,lvelfth Appellate ) District vs. ) ) ) Court of Appeals

Transcription

1 IN THE SUPREME COURT OF OHIO 6rm2348 MARY R. CLIFF ) Case No.: and ) PAULA M. CLIFF, ) ) On Appeal from the Clermont County Appellants, ) Court of Appeals,lvelfth Appellate ) District vs. ) ) ) Court of Appeals MICHAEL L. LOUDENSLAGER, et ) Case No. CA ) al. ) ) Appellees. ) MEMORANDUM IN SUPPORT OF JURISDICTION OF APPELLANTS MARY R. CLIFF AND PAULA M. CLIFF Rose Ann Fleming ( ) (COUNSEL OF RECORD) Rose Ann Fleming Professional Corporation 3855 Ledgewood Drive, Suite 13 Cincinnati, OH Phone: Fax: Fleming@xavier.edu COUNSEL FOR APPELLANTS MARY R. CLIFF and PAULA M. CLIFF Richard G. McCue, Esq. ( ) RICHARD G. MCCUE CO. LPA Eastgate Professional Centre Suite 6, 948 Old St. Rt. 74 Cincinnati, Ohio Phone: Fax: COUNSEL FOR APPELLEES MICHAEL LOUDENSLAGER AND SUSAN A. LOUDENSLAGER

2 Keith W. Collett, Esq. ( ) Cincinnati Insurance Company 6200 S. Gilmore Road Fairfield, Ohio Phone: Fax: 513: COUNSEL FOR APPELLEES JAMES H. HOOD and REMAX ELITE AND REMAX UNLIMITED

3 TABLE OF CONTENTS Page EXPLANATION OF WHY THIS CASE IS A CASE OF PUBLIC OR GREAT GENERAL INTEREST AND INVOLVES A SUBSTANTIAL CONSTITUTIONAL QUESTION STATEMENT OF CASE AND FACTS ARGUMENT IN SUPPORT OF PROPOSITIONS OF LAW Proposition of Law No. 1: The law of agency alone, without evidence of the principal's knowledge and acquiescence, cannot save the seller from liability under the requirements of O.R.C and the Residential Property Disclosure Form Proposition of Law No. 2: The seller has a duty to disclosure information that the buyer of residential real estate has a right to which arises from a special relationship of trust and confidence engendered by the formation of contract to purchase under O.R.C and the Residential Property Disclosure Form CONCLUSION PROOF OF SERVICE APPENDIX Appx. Page Opinion of the Clermont County Court of Appeals, November 6, Judgment Entry of the Clermont County Court of Appeals (November 6, 2006)... 10

4 EXPLANATION OF WHY THIS CASE IS A CASE OF PUBLIC OR GREAT GENERAL INTEREST AND INVOLVES A SUBSTANTIAL CONSTITUTIONAL OUESTION This case presents two critical issues that affect the transfer of real estate, specifically the buying and the selling of homes. 1) When can a buyer rely on the Residential Property Disclosure Form to disclose the true condition of real estate pursuant to O.R.C ? 2) Whether the Seller, and/or Seller's Agent, have a duty to reveal a latent defect to the Buyer in real estate which comes to their knowledge before the closing of the sale of a residence? In this case the Twelfth District Court of Appeals held that the Residential Property Disclosure Form is not a substitute for a careful inspection by potential purchasers. Under the statute, the duty to conduct a full inspection falls on the purchasers, citing Clark v. Allen 154 Ohio App. 3d 200, 2003-Ohio-4617, 19 (Opinion, 24). The Court also held that the common law of agency operates to impute the knowledge of the agent to the principal as to the true condition of the residence in the sale of the house, citing Fay v. Swicker, (1950), 154 Ohio St. 3431, paragraph one of the syllabus. (Opinion, 19). By its ruling in this case, the Twelfth District Court of Appeals undermined the legislative intent of O.R.C. Section This decision re-establishes the doctrine of caveat emptor as the leading doctrine to determine the obligation of the parties to the real estate contract. In issuing affirmation of summary judgment for the appellees, this Opinion ignores the fact that the buyers allege that the sellers misrepresented the true condition of the subject real estate on the Residential Property Disclosure Form, and that they relied on the misrepresentation of the sellers. The Ohio Legislature enacted O.R.C , effective July, 1993, to require the seller to disclose to the buyer, except under certain conditions excluded in the statute, 1

5 specific defects actually known, whether these defects be patent or latent, in the sale of a residential property on the theory that the seller knows the value of the property better than did the buyer by reason of having occupied it. The purpose was to create fairness in the bargaining power of the parties to the contract. Both the buyer and the seller were to be advantaged by this legislation Through this legislation the buyer was put on notice of any defects in the property of which the seller has knowledge. As a result of this notice, the buyer has the option to conduct a full investigation of the condition to determine the true value of the real estate. Therefore, the buyer could make a realistic offer for the purchase of the property, based on the effect of the defects in the property, and/or the cost of repair of such defects. From the side of the seller, the legislation had the intent of finalizing the sale of the property at the closing. If the seller provides the buyer with the Residential Property Disclosure Form prior to the time buyer enters a purchase contract, for the property, the seller has the power, under the statute, to preclude any rescission rights of the buyer. Any subsequent offer that the buyer makes on the property, the seller can conclude is final, unless seller's fraud can be shown by the buyer. In the case sub judice, the Twelfth District Court of Appeals, in a de novo review of the record, affirmed summary judgment for Defendant Appellees, without any reference to the fact that the Buyers had evidence, to be produced at trial, that at the time the sellers filled out the Residential Property Disclosure Form they had actual knowledge of an inspection of their property which they had requested within the last five years be made by Terminex which reveal the presence of wood-boring insects. Further, the sellers had engaged Terminex to treat that condition. The Seller's Residential Property Disclosure Form did not reveal any investigation by Terminex within the previous five years that revealed the presence of wood boring insects and the treatment applied. Based on this omission in the Residential Property Disclosure Form the 2

6 Buyers made an offer to purchase which was accepted, held a whole house inspection without engaging a termite expert, and closed on the property relying wholly on the results of their inspection and the statements of the Sellers on the Residential Property Disclosure Form. By affirming the lower court's grant of summary judgments to appellees, the Twelfth Appellate District's decision impairs the Appellants rights under their contract to purchase real estate and to rely on the truth of the Residential Property Disclosure Form. Unless this decision is reversed, the common law doctrine of caveat emptor triumphs over the O.R.C The magnitude of this decision is demonstrated by looking at the number of home sales demonstrated in the last five years, all of which had, or should have had, a residential property disclosure form submitted by sellers to buyers which became part of the purchase contract and on which the buyers relied in making an offer based on their perceived value of the property based on the disclosure statement. The judgment of the Court of Appeals has great general significance because it affects the lives of approximately 300,000 of Ohio's citizens every year. The Ohio Association of Realtors. 200 E. Town Street, Columbus, Ohio 43215, publishes statistics every year showing the total number of houses sold including new and old construction which have been sold and the average price of such housing. Assuming an average family of three involved in each house purchase, at least three hundred thousand Ohio citizens have been, and are effected by the purchase of homes each year as represented by the sales figures. The average price offers derives from the accepted offers to purchase which are based ultimately on the confidence that buyers have in the Residential Property Disclosure Statements. The following is a chart that indicates the volume of sales over the last six years. Months Year Sales Avera eg Price January to December ,963 $137, 256 3

7 January to December , , 967 January to December , ,271 January to December , ,802 January to December , ,779 January to December , ,677 A decision, such as the one in the case sub judice chills the confidence that buyers can have in the integrity of the transaction based on required legal forms underlying the Residential Property Disclosure Form, when, as in this case, an undisclosed latent defect, in the actual knowledge of the seller, is held to be the responsibility of the buyer. Further, this case involves a substantial constitutional question. The Ohio Constitution's Bill of Rights, Article I, Section 1 upholds the sanctity of the contracts involved in acquiring property as an inalienable right, as does the Constitution of the United States, Article I, section I, and the Fourteenth Amendment....[T]he right to contract is guaranteed by Section 1, Article I, and Section 28, Article LI of the Ohio Constitution, as well as Sectiott 10, Article I, and the Fourteenth Amendment to the United States Constitution. 10 Ohio Jurisprudence, 2d 573, Constitutional Law, Section 503. Article I, Section 1, of the Ohio Constitution, states in pertinent part: All men are, by nature, free and independent, and have certain inalienable rights, among which are... acquiring, possessing, and protecting property... Article II, Section 28, of the Ohio Constitution, provides, in pertinent part: The General Assemble shall have no power to pass...laws impairing the obligation of contracts, but may, by general laws, authorize courts to carry into effect, upon such terms that are just and equitable, the manifest intention of parties.... Article I, Section 10, of the United States Constitution, holds: No State shall... pass any...law impairing the Obligation of Contracts Section 1 of the Fourteenth Amendment to the United States Constitution directs: 4

8 ...[N]or shall any State deprive any person of life, liberty or property, with out due process of the law; nor deny any person within its jurisdiction the equal protection of the laws. In the case sub jucide, the rights of the Appellants under the purchase contract for real property have been impaired by the decision of the Twelfth District Court of Appeals granting summary judgment to the Appellees based on their disclosures on the Residential Property Disclosure Form, and based on their agent's negotiations under contract regarding the discovery of termites prior to closing.. On the face of the purchase contract, the parties agreed that the "Seller will provide to Purchaser a completed Property Disclosure Form as required by state law on or before the tinie of Contract acceptance. The representations set forth in the Property Disclosure Form are deemed a material part of this Contract". (Emphasis added). Based on contract law alone, where the Appellants have shown evidence that the Sellers had actual knowledge of wood boring insects in their home within the five year period, they had the right, under their contract, to have the Twelfth Appellate District direct the Court in Clermont County, to hold a trial on this matter. The affirination of the lower court's summary judgment by the Twelfth Appellate District, directly impairs Appellants' ability to enforce the Appellees' obligation under the contract aud deprives them of their rights to due under the Ohio Constitution and the Constitution of the United States. Further, the holding of the Twelfth Appellate District, that the knowledge of the agent is imputed to the principal, cannot be applied to this case of real estate contract formation. The law of agency requires that the statements of the buyers' agent without evidence of the buyers' knowledge and acquiescence in them. (Farmers' Co-operative Shipping As.s'n v. Adams, 84 Neb. 752). The Ohio Supreme Court has held in General Carthage Co. v. Cox, 74, Ohio St. 284, 5

9 (1906), that if the inferences against the existence of the autbority [of an agent] are just as reasonable as those in favor of it, there can be no reliance within this rule. Further, the Residential Property Disclosure Form on the face states: "The information contained in this disclosure form does not limit the obligation of the owner to disclose an item of information required by any other statute or law to be disclosed in the transfer of residential real estate." (Emphasis added), STATEMENT OF THE CASE AND FACTS This action arises from the purchase of a termite infested house by Plaintiffs-Appellees, Mary and Paula Cliff ("the Cliffs"), from Defendants-Appellees, Michael and Susan Loudenslager ("the Loudenslagers"). The Loudenslagers were represented in the transaction by Defendant-Appellee, James Hood ("Jim Hood" or "Defendant Hood"), a real estate agent with Defendant-Appellee, ReMax Unlimited ("ReMax"). By decision filed December 9, 2005, the trial court granted the Defendants-Appellees' Motion for summary judgment dismissing all claims asserted against them in the Second Amended Complaint. The Cliffs timely filed their appeal from the trial court's order granting summary judgment. On August 30, 2001, the Cliffs purchased a house in Cincinnati from the Loudenslagers who had listed the property with ReMax through Defendant Hood. The Cliffs were represented by Defendant Shirley Trester, a real estate agent with Coldwell Banker-West Shell. During their first meeting with Ms. Trester, the Cliffs told her their criteria: a ranch style home with a dry basement and no termites. (Mary Cliff Affidavit, T.d. 145, par. 1) Following the closing, the Cliffs had a conversation with the Loudenslagers at the property in which they learned, for the first time, that the house was infested with termites. (Id, par. 5). When they listed the property with ReMax, the Loudenslagers filled out a Residential Property Disclosure Form ("the 6

10 Disclosure Form" or "the Form") in which they stated that they did not know of the presence of termites and that "preventive maintenance and inspections" had been performed. (Decision, T.d. 152, p 2) In an Affidavit submitted in support of the Loudenslogers' summary judgment motions, Mrs. Loudenslager stated that when they signed the Form on July 11, 2001, she and her husband knew of no termites in the house and that there was no visible evidence of a termite problem. (S. Loudenslager Aff.,,T.d. 104, pp. 2-5) Mrs. Loudenslager further stated that she had periodically inspected the property for termites and that she had retained Terminix to perform a preventative maintenance program. (Id., 4). The evidcence from Terminex showed that Terminex had also investigated for wood-boring insects and found them (Perrine, Aff.). Susan Loudenslager said that either her own inspections, the preventative maintenance program, nor the Loudenslagers' residence in the house since for twelve years -- i.e. since July had disclosed any termites. (Id.; Residential Property Disclosure Form, p.1, Exh. 1 to Motion For Summary Judgment of Defendants Hood and ReMax.). The Cliffs and the Loudenslagers signed a purchase contract on July 28, (Mary Cliff Aff., T.d.145, par. 2) On August 5, 2001, the Cliffs inspected the house with their father; a friend of their father named Ron Rowe who was in the business of rehabbing properties; a plumber, name unknown; and their agent, Ms. Trester. (Id., par. 3). The inspection included an examination for termites, but no evidence of termites was found. (Id.) Shortly thereafter, Defendant Trester, acting on her own and without the Cliffs' authorization, ordered and paid for a termite inspection by a licensed termite inspector, Defendant Neal Termite and Pest Control ("Neal Termite"). (Id. par. 7; Paula Cliff, Aff, T.d. 147, p. 10). According to the Cliffs, Ms. 7

11 Trester never requested them to consent to this termite inspection, they never authorized it, and Ms. Trester order and paid for the inspection herself with her own funds.(id). attested: With respect to why the Cliffs did not order a professional inspection, Mary Cliff My sister and I saw no need for a termite inspection because the whole house inspection performed on August 5t" disclosed no evidence of termites, our lender did not require one, and in their Residential Property Disclosure Form the Loudenslagers had answered "No" to this question: `Do you know of the presence of any wood boring insects/termites in or on the property or [off any existing damage to the property caused by wood/boring insects/termites'?(mary Cliff Aff., T.d. 145, par 8). On August 13, 2001, Neal Termite inspected the home and found live termites in the band board under the front entry. (Decision, T.d. 152, p. 2; Report of Neal Termite dated August 13, 2001) According to Mrs. Loudenslager, the termites were "completely hidden from observation" and were only discovered when Neal Termite tore away the band board and fiberglass insulation. (S. Loudenslager Aff. T.D.104, pp. 2, 4.) Neal Termite informed Ms. Trester of the termites, and she passed this information on to Jim Hood. (Decision, T.d. 152, p. 2) Mr. Hood, in turn, informed his clients, the Loudenslagers, who hired Neal Termite to treat the house for termites before the Plaintiffs' purchase. (Id.) The Cliffs did not meet with the Loudenslagers between their inspection on August 5, 2001 and the closing on August 30, (Decision, T.d., 152, p. 3) The Cliffs had no conversation with the Loudenslagers other than to say "hello" at the closing. ( Id.) But the Cliffs did have a conversation with Mr. Hood a few minutes before the closing in which Mr. Hood said to the Cliffs: "You're getting a wonderful house." (Mary Cliff Aff. T.d. 145, par 11 ; Paula Cliff Aff. T.d. 147, par. 6) The Cliffs replied that they thought it was a good house and that although it was not a ranch like they had wanted, it had a dry basement and it did not have termites. (Id.) Mr. Hood then repeated that the Cliffs were getting a wonderful house, adding that they were 8

12 also getting wonderful neighbors. (Id.) At no time did Mr. Hood say to the Cliffs, in words or in substance, that a termite inspection had been performed at the property, that the inspection had revealed the presence of termites and that a treatment had been ordered. (Id.) On August 29, 2003, the Plaintiffs filed suit against the Loudenslagers, James Hood and ReMax, and Shirley Trester.(Complaint with Jury Demand, T.d.1) In their Second Amended Complaint, the Cliffs alleged that the Defendants fraudulently mis-represented the condition of the house when they made positive statements of fact to the Plaintiffs that the house did not have a termite problem. (Second Amended Complaint, T.d. 116, First Cause Of Action, pars. 1-27). The Cliffs also alleged that the Defendants wrongfully concealed the termite infestation from them. (Id., Second Cause Of Action, pars. 1-37) The Loudenslagers filed their motion for summary judgment on June 27, 2005 and Defendant Hood and ReMax filed their motion on July 1, The trial court granted the Defendants' motions and dismissed both claims of the Second Amended Complaint. ARGUMENT IN SUPPORT OF PROPOSITIONS OF LAW Proposition of Law No. 1: The law of agency alone, without evidence of the principal's knowledge and acquiescence, cannot save the Seller from liability under the requirement of O.R.C and the Residential Property Disclosure Form. The State of Ohio, enacted legislation, effective, July 1, 1993, to require disclosures of certain known information in all residential sales of one to four family houses, except for new construction and certain other specific exceptions, (see O.R.C. Sect (B)(2)(a) to (n)). Pursuant to this statute, all sellers must complete and deliver to the buyer a property disclosure form prescribed by the Department of Commerce which shall cover material matters relating to the physical condition of the property, including water, sewer, roof, foundation, walls, floors, 9

13 also getting wonderful neighbors. (Id.) At no time did Mr. Hood say to the Cliffs, in words or in substance, that a termite inspection had been performed at the property, that the inspection had revealed the presence of termites and that a treatment had been ordered. (Id.) On August 29, 2003, the Plaintiffs filed suit against the Loudenslagers, James Hood and ReMax, and Shirley Trester.(Complaint with Jury Demand, T.d.1) In their Second Amended Complaint, the Cliffs alleged that the Defendants fraudulently mis-represented the condition of the house when they made positive statements of fact to the Plaintiffs that the house did not have a termite problem. (Second Amended Complaint, T.d. 116, First Cause Of Action, pars. 1-27). The Cliffs also alleged that the Defendants wrongfully concealed the termite infestation from them. (Id., Second Cause Of Action, pars. 1-37) The Loudenslagers filed their motion for summary judgment on June 27, 2005 and Defendant Hood and ReMax filed their motion on July 1, The trial court granted the Defendants' motions and dismissed both claims of the Second Amended Complaint. ARGUMENT IN SUPPORT OF PROPOSITIONS OF LAW Proposition of Law No. 1: The law of agency alone, without evidence of the principal's knowledge and acquiescence, cannot save the Seller from liability under the requirement of O.R.C and the Residential Property Disclosure Form. The State of Ohio, enacted legislation, effective, July 1, 1993, to require disclosures of certain known information in all residential sales of one to four family houses, except for new construction and certain other specific exceptions, (see O.R.C. Sect (B)(2)(a) to (n)). Pursuant to this statute, all sellers must complete and deliver to the buyer a property disclosure form prescribed by the Department of Commerce which shall cover material matters relating to the physical condition of the property, including water, sewer, roof, foundation, walls, floors, 9

14 There is evidence in the record that the Seller did not disclose that they had, within the five year period preceding their signing the Residential Property Disclosure Form, July 11, 2001, that they had engage Terminex to perform an inspection at their home to determine the existence of wood boring insects. Such inspection was held, wood boring insects were discovered, and were treated by Terminix. When the Cliffs asked what "preventative maintenance and inspections" the only explanation that the Cliffs received was that the back porch had been made with wood that was treated to prevent termites. The sellers answer was not a complete answer, given in good faith, as required by law. O.R.C (E)(2).. As such, it was misleading and caused the Cliffs to rely on the fact that the property was not termite infested, a key condition of their purchase. The Cliffs had told their agent that tbe conditions of purchase are: a ranch-style house; the house be termite-free and that it not have a leaky basement. Because of their reliance on the Residential Property Disclosure form, and the explanstion they received from the sellers regarding the words "preventative maintenance and inspections", the buyers did not engage a termite expert to perform an inspection. The Cliffs went through the closing on this property with no additional information regarding termites and/or wood boring insects. Without further review of the evidence in the record it is clear that the Appellants can show that the seller' omission of a complete information regarding inspection and treatment of the property by Terminex raises an genuine issue of material fact which cannot be the decided without a trial of this matter. The Twelfth Appellant District's Opinion seriously jeapordized the parties obligation on the purchase contract when it stated: It is well-settled common law in Ohio that the knowledge of an agent, received while she is acting within the scope of her authority and in reference to a matter over which her authority extends, is imputed to such agent's principal. (Opinion,, 19, 20, citing Fay v. Swicker (1950) 154 Ohio St. 341, paragraph one of the syllabus.). 11

15 The facts in the record show that the inspection contingency was just ten (10) days duration from July 28, 2001, or August 7, The Contract provided that buyers had to inform the sellers within this time whether they were satisfied with the property after the inspection. The Cliffs, including their agent, and their friend who knew rehabbed housing, his plumber, their father and their real estate agent, Shirley Trester, inspected the property on August 5th, the eighth day of the 10 day period. Mr. Rowe informed the Cliffs that day that he saw no evidence of termites. By the 7th of August, 2001, the Sellers knew that the Cliffs had not found a defect that would inhibit the concluding the contract. The Twelfth Appellant District's assertion of agency law to justify its decision that James Hood and the Loudenslagers did not rise to the level of fraud, cannot be used in a real estate transfer under these conditions. The law of agency on this matter is set forth by Floyd R. Mechem, Law of Agency, 725, (Chicago: Callahan and Co., 1914) as follows: It is indispensable to keep in mind here that, as against the principal, there can be reliance only upon what the principal himself has said or done, or at least said or done through some other and authorized agent. The acts of the agent in question can not be relied upon as alone enough to support an estoppel. If his acts are relied upon there must also be evidence of the principal's knowledge of and acquiescence in them. (referring to Farmers' Co-operative Shipping Ass's v. Adams, 84 Neb. 752). The Cliffs' Affidavits adamantly deny that they knew about their real estate's agent's termite inspection on August 13, 2001, or that they had any knowledge of the treatment of the discovered tennites on August 14, 2001, or at any other time before the closing. The Cliffs affidavits affirm that their conversation with Mr. Hood regarding their purchasing a "wonderful house" never led them to believe that any changes that taken place in the property since they inspected it. The Decision of the Twelfth District on Cliffs' Appeal indicates that neither it, nor the trial court, considered the report of the Expert, Neal, of Neal Tenninte, that the termite 12

16 problem was hidden behind a band board. As such it compromises the intent of O.R.C which aims at complete disclosure of material defects from seller to buyer. As such, this opinion impairs the obligation of the seller under the real estate contract signed herein by the parties in this case Proposition of Law No. 2: The seller has a duty to disclose information that the buyer of residential real estate has a right which arise from a special relationship of trust and confidence engendered by the formation of contract to purchase under O.R.C and the Residential Property Disclosure Form. Pursuant to O.R.C and Administrative Code 1301: , the Ohio Department of Commerce issued the Residential Property Disclosure Form. This form specifically states the purpose of the disclosure form as follows: Purpose of Disclosure Form: This is a statement of the condition of the property and of information concerning the property actually known by the owner as required by Ohio Revise Code Section (Emphasis added). Owner's Statement: The representations contained on this form are made by the owner and are not the representations of the owner's agent or subagent. This form and the representations contained in it are provided by the owner exclusively to potential purchasers in a transfer made by the owner, and are not made to purchasers in any subsequent transfers. The information contained in this disclosureform does not limit the obligation of the owner to disclose an item of information that is required by any other statute or law to be disclosed in the transfer of residential real estate. (Emphasis added) While the Opinion of Ohio Twelfth Appellate District correctly sets forth the elements of frauduent misrepresentation that Appellants must establish by citing Fifth Third Bank v. Cope, 162 Ohio App. 3d 838, 2005-Ohio-4646, citing Cardi v. Gump (1997) 121 Ohio App.3d 16, 22, the Opinion completely ignores the actual the representations of the owners regarding the condition of the property that were in their actual knowledge on July 11, 2001 when they signed the Residential Property Disclosure Form. 13

17 The elements that the Fifth Third Bank v. Cope (Id.), sets forth in 25 are these: { 25} In order to prevail on their fraudulent misrepresentation claim, appellants were obligated to establish all 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, (3) made falsely, with knowledge of its falsity, or with such other disregard and recklessness as to whether it is true or false that knowledge may be inferred, (4) with the intent of misleading another into relying on it, (5) justifiable reliance upon the representation or concealment, and (6) a resulting injury proximately caused by the reliance." Cardi v. Gump (1997), 121 Ohio App.3d 16, 22. Based on the above elements, the record shows the following: (1) The Loudenslagers made a representation when they checked "No" on the Residential Property Disclosure Form that they had no knowledge of the presence of wood boring insect/termites on the subject property. They neglected to describe Terminex' inspection and treatment for wood boring insects within the last five years. Since this form was issued pursuant to O.R.C. Section , the sellers had a duty to disclose what they knew. (2) The presence of a defect listed on the Residetial Property Disclosure Forms is considered by law material to the transaction. The Cliffs would not have purchased the property had the presence of wood boring insects within the last five years put them on notice of a potential latent defect not available to their observation. Loudenslagers failed to reveal a material fact. (3) Loudenslager's statement of "preventative maintenance and inspections" concealed the investigation by Terminix and its discovery of wood boring insects and the ensuing damage and was "made falsely, with knowledge of its falsity, or with such other disregard and recklessness as to whether it is true or false that knowledge may be inferred". The contract with Terminex to investigate for wood boring insects and Terminex' finding of wood boring insects within the last five years was concealed and the cancelled checks paid for Terminex for treatment for over a year were concealed with "utter disregard and recklessness as to whether their statements were true or false that knowledge may be inferred on the part of the Loudenslagers that they were concealing the true condition of the property from the Cliffs. (4) The Loudenslagers filled out the Residential Property Disclosure Form with the intent of including the Cliffs as potential buyers into purchasing the real estate. (5) Since the Residential Property Disclosure Form was mandated by O.R.C , and clearly states under the Owner's Statement on page 1: "This form and the representations contained in it are provided by the owner exclusively to the potential purchasers in a transfer made by the owner", the Cliffs, as the purchasers had a right to rely on it. (6) The Cliffs were immediately and directly injured by the deception of the Loudenslagers in the purchase of the subject real estate. 14

18 The Court, in State v. Warner (1990), 55 Ohio St.3d 31, 54, quoting Chiarella v. United States (1980), 445 U.S. 222, 100 S.Ct. 1108, provides the basis for a reversal of summary judgment based on the evidence in the case sub judice One who fails to disclose material information prior to the consummation of a transaction commits fraud only when he is under a duty to do so, with the duty to disclose arising only when one party has information that the other party is entitled to know because of `a fiduciary or other similar relation of trust and confidence' that exists between them. The Residential Property Disclosure Form requires seller to disclose a material defect of which he has knowledge to put the buyer on notice of the true value of the property or of the need for further investigation of the existence of defects. The Loudenslagers had a duty arising from the fiduciary or similar relation of trust and confidence that existed between them and the Cliffs to disclose to the Cliffs further information regarding the presence of termites on the property, in light of the fact that not to do so subjected them to the allegations of fraud. Since the Loudenslagers and their agent James Hood had knowledge of a material defect in the property which was latent, they had the duty to disclose that directly to the purchasers, and not rely of the buyers' agent CONCLUSION For the reasons discussed above, this case involves matters of public and great general interest and a substantial constitutional question. The appellants request that the court accept jurisdiction in this case so that the important issues presented will be reviewed on the merits. Respectfully submitted, By: l1t%a.^z- ^^^ Rose Ann Fleming, Counsel of COUNSEL FOR APPELLANTS, MARY R. CLIFF and PAULA M. CLIFF 15

19 CERTIFICATE OF SERVICE I certify that a copy of this Notice of Appeal was sent by ordinary U. S. mail to Counsel for Appellees Michael L Loudenslager and Susan A. Loudenslager, Richard G. Mc Cue, Esq., Eastgate Professional Centre, Suite 6, 948 Old State Route 74, Cincinnati, Ohio 45245; to Counsel for Appellees James H. Hood, Remax Elite Realtors and Remax Unlimited, Keith W. Collett, Esq., 6200 South Gilmore Road, Fairfield, Ohio 45014, on December 21, Informational copies this Notice of Appeal were sent to Counsel for Defendants Shirley Trester and Coldwell Banker/West Shell, Joseph J. Braun, Esq., Strauss & Troy, LPA, The Federal Reserve Building, 150 East Fourth Street, Cincinnati, OH 45202; Counsel for Defendant Neal Termite and Pest Control, Stephen J. Brewer. Esq. and George Zamary, Esq., 1420 PNC Center, 201 E. Fifth Street, Cincinnati, Ohio Rose Ann Fleming'( ) COUNSEL FOR APPELLANTS MARY R. CLIFF and PAULA M. CLIFF 16

20 MARY R. CLIFF, et al., IN THE COURT OF APPEALS TWELFTH APPELLATE DISTRICT H CLERMONTCOUNTY FILFD NOV ALS BARBARA A. WIEDENBEIN CLERK CLERMONT COUNTY, OH - vs - Plai ntiffs-appel la nts, CASE NO. CA OPINION 11 /6/2006 MICHAEL L. LOUDENSLAGER, et al., Defendants-Appellees. CIVIL APPEAL FROM CLERMONT COUNTY COURT OF COMMON PLEAS Case No. 03-CVC Rose Ann Fleming, 3855 Ledgewood Drive, Suite 13, Cincinnati, Ohio 45207, for plaintiffsappellants Richard G. McCue, Eastgate Professional Centre, 948 Old St. Rt. 74, Suite 6, Cincinnati, Ohio 45245, for defendants-appellees, Michael L. and Susan A. Loudenslager Keith W. Collett, 6200 South Gilmore Road, Fairfield, Ohio 45014, for defendants-appellees, James Hood, Remax Unlimited and Remax Elite Strauss & Troy, LPA, Joseph J. Braun, The Federal Reserve Bldg., 150 East Fourth Street, Cincinnati, Ohio 45202, for defendants, Shirley F. Trester and Coldwell Banker Timothy E. Rogus, 1420 PNC Center, 201 East Fifth Street, Cincinnati, Ohio 45202, for defendant, Neal Termite and Pest Control BRESSLER, J. {11} Plaintiffs-appellants, Mary and Paula Cliff, appeal the grant of summary judgment by the Clermont County Court of Common Pleas in favor of defendants-appellees,

21 Clermont CA James Hood, ReMax Unlimited, and Michael and Susan Loudenslager, concerning appellants' purchase of a house from the Loudenslagers. We affirm. {12} On August 30, 2001, appellants purchased a house from the Loudenslagers located at 4327 Cider Mill Drive, Cincinnati, Ohio. Appellants were represented in the real estate transaction by Shirley Trester, a real estate agent employed by Coldwell Banker. The Loudenslagers were represented in the sale of their house by appellees James Hood and ReMax Unlimited. {13} Appellants state that the parameters for their house search included a ranchstyle design, that the house have a dry basement, and that it did not have termite issues. Appellants were first shown the Cider Mill house on July 28, {1[4} That day, appellants were presented with the Residential Property Disclosure Form that the Loudenslagers completed earlier that month. Under the section "WOOD BORING INSECTS/TERMITES," the Loudenslagers indicated that they did not know of the presence of any wood boring insects/termites in or on the property or any existing damage to the property caused by wood boring insects/termites. They also indicated that within the past five years, they knew of "preventative maintenance and inspections" for wood boring insects/termites on the property. Susan Loudenslager testified that she hired Terminix to treat the house in order to prevent termite migration from a neighbor's tree and that she treated the foundation herself periodically with over-the-counter insecticide. It was undisputed that the Loudenslagers were unaware of any termite infestation issue on July 11, 2001 when they completed the form. { 5} Appellants signed a purchase contract forthe house on July 28, the same day it was first shown to them. On August 5, 2001, appellants inspected the house. They were accompanied by Ron Rowe, a family friend of appellants who had experience rehabbing -2-

22 Clermont CA properties; a plumber known by Ron Rowe; Trester; and appellants' father. The inspection included an examination for termites, and Ron Rowe advised appellants that because the foundation of the house was high, it helped prevent termite problems. {116} There is disputed evidence concerning whether Trester next sought approval to call a termite specialist to perform an inspection. Appellants claimed that Trester never requested consent and consent was never given. Appellants further testified that Trester ordered a termite inspection from Neal Termite and Pest Control ("Neal Termite") and paid for the inspection using her own funds. Trester, however, testified in her deposition that after inquiring into the qualifications of appellants' personal home inspectors, Trester suggested to appellants that a professional termite inspector inspect the house. According to Trester, appellant Mary Cliff told Trester to call and order the professional inspection. {17} It is undisputed evidence that Trester called James Neal of Neal Termite to perform the inspection. He inspected the house on August 13, 2001, and discovered live termites behind the band board under the front entry. Neal Termite informed Trester of the inspection results and Trester in turn contacted Hood. Hood contacted the Loudenslagers who stated that they would agree to pay for the house's termite treatment. Hood called Trester and informed her of the same. According to Trester's deposition, she advised appellants of the termites and told them that the Loudenslagers would pay for treatment. Appellants dispute this claim. { 8} On the morning of August 30, 2001, appellants met with the Loudenslagers and Hood at the house closing. Appellants claim that they had a conversation with Hood prior to the closing during which Hood told appellants that they were "getting a wonderful house." According to appellants' testimony, they explained that they thought it was a good house even though it was not a ranch-style house like they wanted, the house had a dry basement -3-

23 Clermont CA and no termites. Appellants testified that Hood repeated that they were "getting a wonderful house" and added they were also getting "wonderful neighbors" because he lived across the street. Hood denied that this conversation took place. {19} Appellants claim that they first learned of the termite problem later that afternoon, several hours after the closing. Appellant Mary Cliff testified that when she visited the house, she noticed a strong chemical odor. She claimed that the Loudenslagers informed appellants of the termite treatment at that time. In her deposition, Mary Cliff stated that she called an attorney that day. Despite appellants' claims that they would not have entered the contract had they known of the termite presence at closing, there is no indication in the record that appellants attempted to execute any right of rescission or avoidance of the contract upon the alleged discovery of the termites' existence that same day. In fact, appellants filed their original complaint on August 29, 2003, nearly two years after the closing. {710} On August 3, 2005, appellants filed a second amended complaint that included the Loudenslagers, Hood and Remax Unlimited, Trester and Coldwell Banker, and Neal Termite as defendants. Appellants' claims included fraudulent misrepresentation and fraudulent concealment among others. On December 9, 2006, the trial court issued its decision granting summary judgment in favor of the Loudenslagers, Hood and ReMax Unlimited. The court entered judgment with respect to these three defendants shortly thereafter. Appellants now appeal the trial court's decision raising two assignments of error: {111} Assignment of Error No. 1: { 12} "THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT IN FAVOR OF THE DEFENDANTS AS TO THE FIRST CLAIM OF THE SECOND AMENDED COMPLAINT." -4-

24 Clermont CA { 13} In the first assignment of error, appellants argue that the trial court erred when it granted summary judgment in favor of the defendants with respect to appellants' fraudulent misrepresentation claim. Appellants claim that Hood's statement at closing that appellants were "getting a wonderful house" was a positive representation that the house did not have termites upon which they relied and were injured because of such reliance. {114} An appellate court's standard of review for summary judgments is de novo; the appellate court reviews the trial court'sjudgment independently and without deference to the trial court's determination. Burgess v. Tackas (1998), 125 Ohio App.3d 294, 296. A motion for summary judgment should be granted only where it is shown that (1) no genuine issue as to any material fact exists; (2) the moving party is entitled to judgment as a matter of law; and (3) reasonable minds can come to but one conclusion, and that conclusion is adverse to the party against whom the motion for summary judgment is made, with the nonmoving party being entitled to have the evidence construed most strongly in his or her favor. Harless v. Willis Day Warehousing, Co. (1978), 54 Ohio St.2d 64, 66. The moving party has the burden of showing that no genuine issue exists as to any material fact. Id. {115} In order to prevail on a fraudulent misrepresentation claim, appellants are obligated to establish all 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, (3) made falsely, with knowledge of its falsity, orwith such other disregard and recklessness as to whether it is true or false that knowledge may be inferred, (4) with the intent of misleading another into relying on it, (5)justifiable reliance upon the representation orconcealment, and (6) a resulting injury proximately caused by the reliance." Fifth Third Bank v. Cope, 162 Ohio App.3d 838, 2005-Ohio-4646, 25, citing Cardi v. Gump (1997), 121 Ohio App.3d 16, 22. { 16} Appellants argue that the trial court erred when it discussed only the -5-

25 Clermont CA Loudenslagers' completed Residential Property Disclosure Form as the only positive representation by appellees concerning the presence of termites in the house. They claim that Hood's statements that they were "getting a wonderful house" constitutes a fraudulent misrepresentation. { 17} We find that Hood's statement does not rise to the level of fraud. Despite appellants' claim that the statement was made in the context of appellants' expressing satisfaction that the house had a dry basement and no termites, "You're getting a wonderful house" is not the positive misrepresentation that appellants claim it to be. Specifically, appellants maintain the statement is tantamountto Hood stating that appellants were "getting a house without termites." We disagree. {118} The statement was a subjective remark about the quality of the house. As such, it cannot be verified as truthfully or falsely made. There can be no evidence that how "wonderful" the house was constituted a material fact to the transaction. There is no evidence that the statement was made with the intent to mislead appellants into relying upon it. Likewise, there is no evidence that appellants justifiably relied on the "wonderful house" statement in determining whether to purchase the house. {119} Furthermore, appellee Hood's statement would have been made under the reasonable belief that appellants already knew of the termite problem. It is well-settled common law in Ohio that the knowledge of an agent, received while she is acting within the scope of her authority and in reference to a matter over which her authority extends, is imputed to such agent's principal. See Fay v. Swicker (1950), 154 Ohio St. 341, paragraph one of the syllabus. Trester, appellants' agent, first informed Hood of the termite problem. The Loudenslagers discovered the termite problem from Hood. Because appellees learned of the issue from appellants' agent herself, appellees could reasonably rely on the fact that -6-

26 Clermont CA the agent's principals were aware of the termite issue as well. { 20} Hood's interactions with Trester, however, were not limited to the discovery of termites in the house. These dealings also included the negotiation between the Loudenslagers and Cliffs, albeit through their respective agents, to have the house treated before closing. Hood's statement that appellants were getting a "wonderful house" was thus made not only upon his reasonable belief that appellants knew the house had termites but also that appellants knew the Loudenslagers offered to have the house treated, that the treatment provided no impediment to the house's sale, and that the house was being treated in compliance with appellants' desire as expressed by their agent. The statement does not rise to the level of fraud. We find appellants' argument with respect to the alleged fraudulent misrepresentation to be without merit. Accordingly, we overrule the first assignment of error. {121} Assignment of Error No. 2: {122} "THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT IN FAVOR OF THE DEFENDANTS AS TO THE SECOND CLAIM OF THE SECOND AMENDED COMPLAINT." {123} In the second assignment of error, appellants argue that the trial court erred when it granted summary judgment in favor of appellees with respect to appellants' fraudulent concealment claim. Appellants allege that Hood and the Loudenslagers withheld knowledge of the termite infestation after discovery on August 13. Appellants claim that appellees had a duty to disclose this new information to appellants and that appellants would not have purchased the house had they known of the termite problem. { 24} R.C requires sellers of residential real estate to complete a disclosure form that informs potential buyers of "material matters relating to the physical condition of the property to be transferred, **' the condition of the structure of the property, including the -7-

27 Clermont CA roof, foundations, walls, and floors[.]" R.C (D). However, sellers are required to disclose only those defects that are within their actual knowledge. Id. The disclosure form is not a substitute for a careful inspection by potential purchasers. Under the statute, the duty to conduct a full inspection falls on the purchasers, not the sellers. Clark v. Allen, 154 Ohio App.3d 200, 2003-Ohio-4617, 19. {125} As described previously, in order to prevail on a fraudulent concealment claim, appellants must establish the following elements: "(1) * * * where there is a duty to disclose, a concealment of fact, (2) which is material to the transaction at hand, (3) made falsely, with knowledge of its falsity, or with such other disregard and recklessness as to whether it is true or false that knowledge may be inferred, (4) with the intenyof misleading another into relying on it, (5) justifiable reliance upon the * * * concealment, and (6) a resulting injury proximately caused by the reliance." Fifth Third Bank v. Cope, 2005-Ohio-4646 at 25. {126} Appellants' argument that appellees failed to disclose the fact that the house had termites is without merit. With respect to the disclosure form, the record is undisputed that the Loudenslagers had no actual knowledge of the termites' presence when the form was completed. No one was aware of the termite problem until after the Neal Termite inspection. {127} We find there is nothing in the record that supports appellants' assertion that Hood and the Loudenslagers concealed the termite issue from appellants. Appellees, in fact, relied upon the revelation of the termite presence by appellants' agent whose knowledge is imputed to appellants themselves. Hood and the Loudenslagers had a right to rely upon the representations of Trester. They reasonably believed that appellants were informed of the Loudenslagers' offerto pay for the termite treatment. Appellees further relied upon the belief that the treatment posed no impediment to closing, and the house was subsequently treated. -8-