Baltimore Sav. & Loan Co. v. Frye

• Decision Date: 15 February 1984
• Docket Number: No. 83-369,83-369
• Citation: 9 Ohio St.3d 164,459 N.E.2d 543
• Parties: , 9 O.B.R. 452 BALTIMORE SAVINGS & LOAN COMPANY et al., v. FRYE; Griffin, Appellant; Supt., Ohio Division of Real Estate, Appellee.
• Court: Ohio Supreme Court

Page 164

9 Ohio St.3d 164

459 N.E.2d 543, 9 O.B.R. 452

BALTIMORE SAVINGS & LOAN COMPANY et al., v. FRYE; Griffin, Appellant; Supt., Ohio Division of Real Estate, Appellee.

No. 83-369.

Supreme Court of Ohio.

Feb. 15, 1984.

Syllabus by the Court

R.C. 4735.12 provides for payment of "a final judgment" against any real estate broker from the Real Estate Recovery Special Account; this provision permits payment of punitive damages included in a final judgment.

On August 12, 1981, appellant, Alvester Marie Griffin ("Griffin"), filed an application with the Court of Common Pleas of Hamilton County, pursuant to R.C. 4735.12, for an order directing payment from the Real Estate Recovery Special Account ("Account") of an unsatisfied judgment she had obtained against Mike Frye, a licensed real estate broker and owner of Frye Realty Co. in Cincinnati. The facts giving rise to the judgment against Frye indicate that on August 3, 1976, Frye entered into a land installment contract with Griffin whereby Frye conveyed property, located at 15 Tower Avenue, Cincinnati, to Griffin and her husband. However, Frye failed to record the transaction as required by R.C. 5313.02(C). On November 19, 1980, Frye conveyed the same property to another party by a general warranty deed, which conveyance was recorded.

The evidence discloses that Griffin gave Frye $1600 as a downpayment and made monthly payments to him of $166.80 for a total of $10,568.32, as of February 1, 1983, under the terms of the land installment contract. However, he failed to apply Griffin's payments toward the mortgage on the premises held by Baltimore Savings & Loan Company. As a result of the default, the savings and loan initiated a foreclosure action against Frye and Griffin, in which Griffin filed a cross-claim against Frye based upon fraud. The trial court found in favor of Griffin on her cross-claim and awarded her a judgment of $22,872.84, which included the sum of $10,000 as punitive damages. Upon unsuccessfully attempting to collect the default judgment from Frye, Griffin filed an application as provided in R.C. 4735.12 for payment from the Account, including the punitive damages.

On November 2 and December 3, 1981, Stanley Goodin and Gale Hellkamp respectively filed similar applications for orders requesting payments from the Account for unsatisfied judgments rendered against Frye. Following a hearing in all three cases (although not formally consolidated), the court ordered the Superintendent of the Ohio Division of Real Estate, appellee, to pay all the claims in full.

Subsequently, the superintendent filed three notices of appeal and a motion to consolidate the cases, which was granted. The Court of Appeals for Hamilton County reversed as to Griffin, and held that punitive damages were not recoverable from the Account. Griffin appealed that decision. ¹

The cause is now before this court pursuant to the allowance of a motion to certify the record.

James G. Andrews, Jr., Cincinnati, for appellant.

Anthony J. Celebrezze, Jr., Atty. Gen. and Michael L. Squillace, Asst. Atty. Gen., for appellee.

FRANK D. CELEBREZZE, Chief Justice.

This appeal presents two questions for our determination. The first is whether R.C. 4735.12 permits payment of punitive damages included in a judgment against a real estate broker. If the answer is in the affirmative, the second question concerns the statutory dollar limit upon recovery.

I

The superintendent concedes that the amount of the judgment against Frye which represents $12,872.84 in compensatory damages, including $2,500 in attorney fees, is recoverable up to the statutory limit from the Account. The remainder of the judgment, representing $10,000 in punitive damages, is the subject of this appeal.

The superintendent maintains that R.C. 4735.12 does not allow recovery for punitive damages. We do not agree and conclude that the statute allows payment of punitive damages which are included in a final judgment.

R.C. 4735.12 provides in pertinent part:

"(B) When any person, except a bonding company when it is not a principal in a real estate transaction, obtains a final judgment in any court of competent jurisdiction against any broker or salesman licensed under this chapter, on the grounds of an act, omission, representation, transaction, or other conduct that is in violation of this chapter or the rules adopted under it, and which occurred after March 4, 1975, such person may upon exhaustion of all appeals, file a verified application in any court of common pleas for an order directing payment out of the real estate recovery special account of the amount of the judgment which remains unpaid." (Emphasis added.)

The superintendent does not dispute that Griffin satisfied these statutory requirements to receive payment from the Account. The question is whether she should be paid the full amount of the final judgment or should the judgment be reduced by the amount of punitive damages.

The statutory language clearly indicates that a person, who obtains a final judgment, may apply for an order directing payment of the amount of the judgment which remains unpaid. Both references in the statute are to a "judgment" without any qualification or limitation to preclude recovery of punitive damages. The only qualification is that it be a final judgment.

The General Assembly could have inserted language limiting recovery to a judgment for actual or direct losses or compensatory damages. For example, the language of a California statute, with respect to applications for payments from the state's Real Estate, Education, Research and Recovery Fund, provides for recovery of "actual and direct loss * * *." ² In construing the statute, the appellate court, in Circle Oaks Sales Co. v. Real Estate Commissioner (1971), 16 Cal.App.3d 682, 684, 94 Cal.Rptr. 232, stated that "the language of the statute expressly limits recovery from the Fund to 'actual and direct loss' and thus by implication precludes recovery of treble damages, which are punitive and exemplary in nature. * * * Had the Legislature intended exemplary or punitive damages to be included in an award against the Fund, it could simply have called for payment of the judgment rather than payment of 'actual and direct loss.' "

A comparable Texas statute also contains language which limits recovery. ³ It allows payments for "reimbursing aggrieved persons who suffer monetary damages * * *." In State v. Pace (Tex.App.1982), 640 S.W.2d 432, the appellate court concluded that the term "reimburse" means to refund, repay or restore, and does not contemplate treble damages.

In contrast to these statutes, R.C. 4735.12 does not contain limiting language. It clearly provides for payment of "a final judgment * * * against any [real estate] broker" from the Real Estate Recovery Special Account, and we hold that it permits payment of punitive damages included in a final judgment.

Because the statutory language is clear, it is unnecessary to resort to R.C. 1.49 to construe any ambiguity. However, the court of appeals incorrectly followed R.C. 1.49 in reaching its decision. It relied upon appellate court cases ⁴ construing former R.C. 4735.12 which required that real estate brokers post a bond and a surety make payments to cover unsatisfied judgments against the broker. The former statute did not allow imposition of punitive damages unless the surety was involved in the misconduct.

In 1975, the statute was amended and the bond requirement was replaced by a Real Estate Recovery Fund (now Real Estate Recovery Special Account), funded by license application fees paid by real estate brokers and salespersons. Upon payments from the Account, the license of the real estate person involved is automatically suspended until that person fully reimburses the Account. The new system eliminates the need for a surety, because bonds are not utilized. Thus, the common law relied upon by the court of appeals no longer applies to the new type of funding under the current statute.

Public policy reflected in the current statute supports the allowance of payment of punitive damages included in a judgment. The Account was established to aid victims of real estate persons' misconduct. Repayment of compensatory damages only may not serve this end, as it would merely require the real estate broker in this case to repay the money he wrongfully used, and presumably benefited from, for several years.

In Circle Oaks Sales Co., supra, 16 Cal.App.3d at 685, 94 Cal.Rptr. 232, the court reached a similar conclusion that the "assessment of treble damages against an errant real estate broker or salesman would unquestionably serve the purpose of promoting ethical practices." However, the court concluded that payment of treble damages would not punish the broker because he did not have to reimburse the fund. In contrast, R.C. 4735.12 requires brokers to reimburse the Fund for payments made on their behalf. Pursuant to the Ohio statutory scheme, therefore, punitive damages serve as a penalty for misconduct and act as a deterrent to others.

II

Having determined that punitive damages included in a final judgment are recoverable under R.C. 4735.12, we now consider the statutory limit upon recovery. The statutory limit is significant because the trial court awarded Griffin $22,872.84. The superintendent argues that the limit is $20,000 because the cause of action was filed before ...