Share
Note: This is an unpublished decision, meaning that it will not be published in the permanent law reports. State court rules govern the reporting of opinions and impose restrictions and limitations on the use of unpublished opinions. Unpublished decisions usually may not be cited/used as precedent in other cases. In Ohio, the rule governing the use of unpublished decisions is Rule 2 of the Ohio Supreme Court Rules.
In Parahoo v. Mancini, the Ohio Court of Appeals made it clear that in Ohio, the property disclosure duties owed by a licensee to a buyer can be very different, depending upon whom licensee represents. In this case, the Mancinis (the “Sellers”) owned a single family home in a suburban Ohio area. It was situated on a 0.325 acre lot, with a 78 foot deep backyard which abutted an interstate highway at the rear. In February, 1995, the Sellers entered into an agreement to sell 62 feet of their backyard to the State of Ohio in connection with a highway widening project. The deed conveying this land to the state was dated April 27, 1995; it was recorded five weeks later, on June 7, 1995.
In early April (after they had entered into the agreement with the state, but prior to the actual conveyance), the Sellers listed their home for sale with a real estate broker (the “Listing Broker”). On April 30, 1995, the Parahoos (the “Buyers”) entered into a contract to purchase the property through a real estate broker who was representing them (the “Buyer Representative”). The contract stated that the Buyers had examined the property and were relying solely upon their own examination as far as “condition, character and size of land ...”
Neither the Buyers nor the Sellers were represented by legal counsel. At the closing, the Buyers were given a mortgage location survey (this type of survey is used by the lender and the title insurance company to confirm the location of the improvements); apparently the Buyers had not ordered their own survey. This survey did not show the new boundary lines of the property, rather, it depicted the boundaries prior to the conveyance to the state. Other closing documents the Buyers received, including the title insurance policy, the mortgage agreement and the deed, contained the accurate legal description, subsequent to the sale to the state.
According to the Buyers, their first knowledge of the Sellers’ conveyance of most of the backyard to the state was in August, 1995, when they were notified that excavation would begin for the highway project. In turn, they sued everyone involved in their home purchase, claiming, among other things, breach of contract, fraud, negligent misrepresentation, and breach of fiduciary duty. Ruling against the Buyers, the trial court granted all of the defendants’ motions for summary judgment.
On appeal, the Buyers argued that the Sellers breached the purchase contract by failing to convey the entire property to them. The Court of Appeals of Ohio disagreed. Under the doctrine of merger, the underlying contract is merged into the deed, and no cause of action on the prior contract exists. Therefore, the Buyers’ acceptance of the deed prevented a breach of contract action by them. Moreover, the court stated that the merger doctrine “specifically precludes claims by purchasers alleging that the amount or size of the property conveyed does not comport with the purchase agreement.” The court pointed to the fact that the deed to the Buyers contained the correct legal description, and also that the Buyers had stated in the purchase contract that they were relying solely on their own examination of the size of the property.
They also claimed that the Sellers committed fraud; that by not disclosing the sale to the state, they had made false representations. The Sellers had not made any affirmative statements regarding the size of the property. The court stated that the doctrine of caveat emptor applies to real estate transactions in Ohio, limiting a buyer’s ability to claim fraud or misrepresentation. “A seller or seller’s agent has an obligation to disclose only those defects known by the seller that could not be readily discovered by a reasonable inspection ... without the doctrine, nearly every sale would invite litigation instituted by a disappointed buyer.” It observed that courts regularly have dismissed fraud and misrepresentation claims in connection with land size or boundaries when the true size or boundaries readily are discoverable. Additionally, it stated that this is true “even though the seller or seller's agent misrepresents the actual size of the subject property.” Here, the court determined that the true lot size was readily discoverable by the Buyers since the deed from the Sellers to the state had been recorded approximately three weeks before the closing of the sale to the Buyers, and therefore, was a matter of public record.
By not disclosing the sale to the state on the property disclosure form, the Buyers argued that the Sellers violated the applicable Ohio statute. The court found that the disclosure form predated the conveyance to the state, that the Sellers did not have a duty to update the disclosure form, and that the Buyers had a duty to inspect the property themselves. The court upheld all of the lower court’s decisions with respect to the Sellers.
As far as the Listing Broker, the Buyers also claimed fraud and negligent misrepresentation. The court reiterated that under the doctrine of caveat emptor, reliance on misrepresentations (intentional or negligent) as to property size is unreasonable when accurate legal descriptions are available, and that this includes misrepresentations made by agents of the seller. Therefore, it also upheld the lower court decision in favor of the Listing Broker.
The Buyers also claimed that the Buyer Representative was aware of the sale to the state prior to the closing, and that her failure to disclose this information constituted a breach of her contractual and fiduciary duties to them. The Buyer Representative denied knowledge of the prior sale, and argued that even if she did have knowledge of it, the doctrine of caveat emptor protected her, preventing the Buyers’ claim.
On this claim against the Buyer Representative alone, the court agreed with the Buyers, finding that “Because of the affirmative obligations arising from the fiduciary relationship between a real estate agent and his clients, the defense of caveat emptor does not apply when a real estate agent fails to disclose to his clients facts known by him that are material to the transaction.” The court pointed to evidence indicating that the Buyer Representative may have been aware of the prior sale to the state. Therefore, since there was a genuine factual dispute on this point, it ruled that the lower court erred in granting the Buyer Representative’s motion for summary judgment, and remanded the case on this issue.
Parahoo v. Mancini, 698 N.E.2d 1005 (Ohio Ct. App. 1998).