FRIEDLAND ET AL.,
APPELLANTS,
vs.
LIPMAN ET AL.,
APPELLEES
No. 41256
COURT OF APPEALS OF OHIO, EIGHTH APPELLATE DISTRICT, CUYAHOGA
COUNTY
429 N.E.2d 456, 68 Ohio App. 2d 255, 22 Ohio Op. 3d 422
June 12, 1980, Decided
APPEAL: Court of Appeals for Cuyahoga
County.
HEADNOTE
Fraud -- Real property
-- Sale of an apartment
building -- Buyers allege fraud -- Summary judgment improper, when
-- Genuine issue exists as to at least one of the material factual
elements of common law fraud -- Releases -- Effect on subsequent
action for fraud.
SYLLABUS
1. A claim of common law fraud requires proof of the following
factual elements:
(a) a representation or, where there is a duty to disclose,
concealment of a fact,
(b) which is material to the transaction at hand,
(c) made falsely, with knowledge of its falsity, or with such
utter disregard and recklessness as to whether it is true or false
that knowledge may be inferred,
(d) with the intent of misleading another into relying upon
it,
(e) justifiable reliance upon the representation or concealment,
and
(f) a resulting injury proximately caused by the reliance.
2. A trial court may grant summary judgment to a defendant upon
a claim of common law fraud only where, after construing the
evidence before it most strongly in the plaintiff's favor, it
determines that reasonable minds could come to but one conclusion
that there exists no genuine issue as to at least one of the
material factual elements of a common law fraud and, as a result,
the defendant is entitled to judgment as a matter of law.
3. A trial court may not grant summary judgment to a defendant
upon his defense of release to a claim of common law fraud where a
genuine issue exists as to whether the parties to the release
intended to discharge the defendant from liability on claims of
common law fraud, whether discovered or undiscovered, existing at
the time the release was executed.
COUNSEL
Mr. James M. Mackey, for appellants.
Wyner & Wyner Co., L.P.A., and
Mr. Edward D. Wyner, for appellees.
JUDGES
SILBERT, J. PATTON, P. J., and PARRINO, J., concur. SILBERT, J.,
retired, of the Eighth Appellate District, was assigned to active
duty under authority of Section 6(C), Article IV,
Constitution.
AUTHOR: SILBERT
OPINION
{*256} Plaintiffs-appellants, J. Edward Friedland and
Carolyn B. Friedland, appeal from an order of the court below
granting defendants-appellees', William Lipman and Gertrude Lipman,
motion for partial summary judgment and, accordingly, entering
judgment for appellees on the first claim within appellants'
complaint.
The record below reveals the following facts as established by
admissions within the pleadings and by documentary evidence
attached to both appellees' motion for partial summary judgment and
appellants' brief in opposition.
Prior to July 19, 1976, appellees owned an undivided, one-half
interest in a 32-suite apartment building, located at 15700 Van
Aken Boulevard, Shaker Heights, Ohio.1 In July and August of the
preceding year, appellees had submitted two claims to their
insurer, National Fire Insurance Company, involving roof damage to
this apartment building. On these claims, appellees received $
15,000 from their insurer. In 1974 and in 1975, appellees received
estimates from at least two roofers recommending that the entire
roof of the building be replaced. One of the roofers indicated in
its estimate that the {*257} total cost of the project
would be between $ 5,000 and $ 6,000.
In October of 1975, appellees hired Friedman Roofing to
repair the existing roof. Friedman repaired and
recoated the roof itself and repaired leaks in valleys on the roof.
The record does not indicate how much Friedman was paid by
appellees for this work.
In April of 1976, Friedman was hired by appellees to do more
extensive repairs to the roof and building. Breaks in the roof were
repaired; a coating of asphalt was applied; gutters, downspouts,
roof valleys, and dormer decks were also repaired; slates were
replaced; brick joints were pointed and filled; windowsills,
spindles and railings were rebuilt; and the railings were siliconed
and Thorosealed. Friedman was paid $ 2,500 by appellees for this
work.
In February of 1976, prior to Friedman's second repair job,
appellees and South Shaker Apartments, Inc. (the owner of the other
undivided, one-half interest), entered into
negotiations with appellants for the sale of their
apartment building. Among other things, appellants sought from the
owners a two-year warranty on the building's roof. Appellees
resisted giving such a warranty. Appellees assured appellants, on
several occasions, that the roof was in excellent condition and
that much money had recently been spent on it.
In reliance upon these assurances, and after talking with Ted
Friedman, of Friedman Roofing, and Lenny Himmel, appellees' real
estate broker, and, as well, visually inspecting the roof,
appellants dropped their demand for a roof warranty and, on July
19, 1976, signed a contract for the purchase of the apartment
building. Some two weeks later, title was transferred to
appellants.
At about this same time, appellants discovered several problems
with their just-purchased building. They found a water-damaged
basement suite. They also found that appellees had removed certain
tools and phone equipment which had been purchased with the
building. Finally, they determined that appellees, who leased a
suite in the building, had an air-conditioning system which used a
substantial amount of water.
In an effort to resolve these problems, appellants met, on
August 1, 1976, with appellees' attorney. An understanding was
reached. On August 3, 1976, appellants sent a letter to appellees'
attorney confirming this understanding that, in exchange
{*258} for appellees giving appellants $ 1,150 and paying
the utility charges associated with the air-conditioning system,
appellants would repair the basement suite, relinquish their claim
to the tools and phone equipment, and allow appellees to continue
using the air-conditioning system within their suite. Thereafter,
on August 31, 1976, appellants signed an agreement to this effect,
but one which also contained, inter alia, the
following paragraphs:
"1. Purchasers now agree that they have inspected every single
aspect of the property at 15700 Van Aken Boulevard, shaker Heights,
Ohio from and including the roof of the property down through the
entire property into the basement of the property where they have
examined all heating systems, plumbing systems, electrical systems,
sewage systems, apartments that had been damaged by water, all
other apartments, and all of the grounds of said property and admit
that they are fully and completely aware of every condition of the
property and that they agree to accept said property in its present
condition as is and that no representation, warranties, or
agreements have been made in connection therewith except as is
stated herein either by the Sellers or anyone acting in Sellers'
behalf.
"* * *
"6. Upon faithful performance by the Sellers of the conditions
contained in this Agreement, the Purchasers do hereby release,
discharge, the said Sellers from any claims that said Purchasers
now have or may hereafter have against said Sellers resulting from
an Agreement dated July 19, 1976 for the purchase and sell [
sic ] of the property at 15700 Van Aken Boulevard,
Shaker Heights, Ohio."
Appellants were paid $ 1,000 by appellees pursuant to the terms
of this agreement. Appellees themselves neither signed this
agreement nor ever saw it. Instead, one Ralph Appelbaum, without
power of attorney, signed it on their behalf.
Three or four months after signing this release agreement,
appellants learned from some of their tenants that the building's
roof had been leaking water into apartment suites since 1975.
Appellants' claim to their insurer in April of 1977 for roof damage
was denied on the basis of a roofer's report advising the insurer
that the building's previous owner had {*259} been
informed in 1975 that the entire roof needed to be replaced.
In October of 1977, appellants filed their complaint below
against appellees for compensatory and punitive damages, alleging
fraud in the sale of the apartment building, arising out of
appellees' alleged misrepresentations concerning the condition of
the roof. In their answer, appellees, inter alia,
raised, in the form of an affirmative defense, the release
contained within paragraph No. 6 of the August 31, 1976 agreement
between the parties.
On July 24, 1979, the lower court granted appellees summary
judgment on the first claim within appellants' complaint.2 In
timely appealing from this judgment, appellants assign the
following single error:
"The trial court erred prejudicially to appellants in its
decision and order of July 24, 1979, in the following respects:
"Trial court erred as a matter of law in granting appellees'
motion for partial summary judgment."
In arguing this assignment of error, appellants raise two
issues:
"1. Whether exculpatory language andor a release executed prior
to the discovery of fraudulent acts of a vendor will relieve a
vendor from responsibility for damages sustained by vendee arising
out of the fraudulent conduct of the vendor?
"2. Whether a partial summary judgment can be granted when there
is a genuine issue of fact before the court?"
In order to sustain the judgment below, we must be able to
conclude, as a matter of law, from the evidence considered by the
lower court in granting appellees' motion, that either appellants
released their fraud claim against appellees by virtue of the
agreement signed on August 31, 1976, or appellants failed to either
create a genuine issue of material fact or establish the existence
of all of the necessary elements of an action in fraud. Upon
reviewing all of the evidence in a light most favorable to
appellants and considering the arguments of the parties, we
determine that the judgment of the court below is contrary to law
and must be reversed.
We turn first to the issue of release. If the lower court
{*260} granted appellees summary judgment upon this
dispositive affirmative defense, the court erred. Even assuming
that no genuine issue of material fact existed with respect to
whether the parties executed the agreement of August 31, 1976, a
copy of which was attached to appellees' motion for summary
judgment below, it is clear that a genuine issue existed as to
whether the parties intended to release the claim which appellants
brought in the lower court. While the release provisions of the
August 31, 1976 agreement before us employ broad language, we
cannot say, as a matter of law, that the agreement encompasses
appellants' fraud claim. Whether the parties to a release intended
to discharge, inter alia, liability arising from
claims in fraud, the existence of which one party typically will
have been ignorant, is a question of fact to be resolved at trial.
See Sloan v. . Standard Oil Co.
(1964), 177 Ohio St. 149, paragraph two of the syllabus. Therefore,
even assuming the existence of a validly executed release, a
genuine issue of material fact remained as to whether the parties
to the release intended to discharge appellees from liability on
the claim brought by appellants below.
We turn next and finally to the issue of whether the evidence
below, when viewed in a light most favorable to appellants,
established as a matter of law, that no genuine issue of material
fact existed as to one or more of the necessary elements of a fraud
action and whether the undisputed nonexistence of any such
elements, as a result, entitled appellees to summary judgment on
the first claim within appellants' complaint.
The elements of a common law action of fraud are stated in
Klott v. . Associates Real Estate
(1974), 41 Ohio App. 2d 118, 120-21, as follows:
"* * * actual or implied representations or concealment of a
matter of fact which relates to the present or past, and which is
material to the transaction; made falsely, with knowledge of its
falsity, or with such utter disregard and recklessness as to
whether it is true or false that knowledge may be inferred; with
the intent of misleading another into relying upon it; and reliance
upon it by the other person with a right to so rely; with resulting
injury as the consequence of such reliance."
Appellant J. Edward Friedland's affidavit contains statements
creating a genuine issue of material fact on the {*261}
elements of a representation of fact and its materiality to the
transaction. Friedland therein stated that, on at least three
occasions prior to executing the July 19, 1976 purchase contract,
appellee William Lipman represented to him that the building's roof
was in "excellent condition" and that much money had been spent on
it. Friedland further stated that the condition of the roof was a
material concern of his prior to agreeing to purchase the
building.
Exhibits Nos. 5 and 8, attached to appellants' brief in
opposition to the motion for summary judgment, were letters from
roofers advising that appellees had been put on notice during the
year prior to the sale of the building that the entire roof needed
replacement.3 This evidence created a genuine issue of material
fact as to whether appellees had knowledge of the alleged falsity
of their representations to appellants that the roof was in
"excellent condition". This evidence, together with evidence that
appellees, during the negotiations leading up to the sale of the
building, hired a roofer to make extensive repairs to the roof,
created a genuine issue of material fact as to whether appellees
further intended to allegedly mislead appellants.
J. Edward Friedland's affidavit next created a genuine issue of
material fact as to whether appellants justifiably relied on
appellees' alleged misrepresentations regarding the roof's
condition. Therein, Friedland stated that he spoke with both roofer
Friedman, who indicated that work had been done on the roof, and
appellees' broker, Lenny Himmel, who related to Friedland that
appellees had told him (Himmel) that the roof was in fine
condition.4 Appellant Friedland further stated that he visually
inspected the roof itself, but, because he was not a roofing expert
and the defect itself was hidden, his suspicions were not further
aroused. These statements created an issue of fact both as to
whether appellants relied on appellees' alleged misrepresentations
and whether such reliance was justifiable.
Finally, J. Edward Friedland's affidavit and Exhibit No.
{*262} 7, which was attached to the brief in opposition to
the motion for summary judgment and which was an estimate
appellants received from National Cornice Company,5 created a
genuine issue of material fact as to whether, and in what amount,
appellants were damaged by appellees' alleged
misrepresentations.
Having neither, as a matter of law, concluded that appellants
were barred from initiating their fraud claim against appellees by
a release nor that appellees were otherwise, at the summary
judgment juncture, entitled to judgment on appellants' claim, we
find appellants' sole assignment of error well taken. The judgment
of the court below is reversed and the cause remanded for further
proceedings.
Judgment reversed and cause remanded.
DISPOSITION
Judgment reversed and cause
remanded.
OPINION
FOOTNOTES
1 The remaining undivided, one-half interest was owned by South
Shaker Apartments, Inc., against whom appellants have a claim still
pending in the court below. See fn. 2, infra, with
respect to Civ. R. 54(B).
2 This order was determined by the lower court to be a final
judgment pursuant to Civ. R. 54(B).
3 The copies of these letters, attached to appellants' brief,
constituted hearsay evidence and, further, failed to comply with
Civ. R. 56(C) and (E). However, no objection to their admission was
made by appellees below and, in the absence thereof, we must
presume that the lower court considered this evidence in arriving
at its decision.
4 Unobjected to hearsay. See fn. 3, supra.
5 Unobjected to hearsay. See fn. 3, supra.