Foust v. Valleybrook Realty Co.

• Decision Date: 26 June 1981
• Citation: 4 OBR 264,446 N.E.2d 1122,4 Ohio App.3d 164
• Parties: , 4 O.B.R. 264 FOUST et al., Appellees, v. VALLEYBROOK REALTY CO. et al., Appellants.
• Court: Ohio Court of Appeals

Page 164

4 Ohio App.3d 164

446 N.E.2d 1122, 4 O.B.R. 264

FOUST et al., Appellees, v. VALLEYBROOK REALTY CO. et al., Appellants.

Court of Appeals of Ohio, Sixth District, Wood County.

June 26, 1981.

Syllabus by the Court

1. Vendors and their agents have a duty to disclose any material facts which are not visible and nondisclosure is willful misrepresentation. Purchasers have a duty to inquire and to inspect the premises in a prudent manner. However, the purchasers also have a right to rely upon the representations of the vendors and their agents and need not inquire of others after receiving answers to their questions.

2. A person injured by fraud is entitled to such damages as will fairly compensate him for the wrong suffered, that is, the damages sustained by reason of the fraud or deceit, and which have naturally and proximately resulted therefrom.

3. The relation of principal and agent is always regarded by the court as a fiduciary one, implying trust and confidence. All acts and contracts of an agent done or made within the discharge of his duties, and within the scope of his authority, whether that authority is express, implied, or apparent, are obligatory upon the principal, and no ratification or assent on the latter's part is necessary to give them validity.

4. The rule requiring one injured by wrongful act or omission of another to minimize the damages resulting does not require a party to make extraordinary efforts, or to do what is unreasonable or impracticable. Ordinary and reasonable care, diligence and prudence are the measure of the duty.

5. A principal's liability for willful, wanton, and malicious acts of his agent does not extend to a liability in punitive damages unless the principal has authorized, ratified, acquiesced or participated in the agent's conduct.

Dale Crandall, Perrysburg, for appellees.

Robert Pollex, Perrysburg, and George Hewes, Toledo, for appellants.

McQUADE, Judge.

This is an appeal from the judgment of the Wood County Court of Common Pleas entered in favor of the plaintiffs-appellees and against defendants-appellants, jointly and severally, after a one-day trial to the court on August 29, 1980. The facts of this case revolve around the purchase of real estate by plaintiffs-appellees Foust from the defendants-appellants McGeorge. Appellant Valleybrook Realty Co. was the agent for both the sellers and the buyers. Realtor's agent, Karen Kashmer, represented the buyers. Realtor's agent, Larry Mandell, represented the sellers. The buyers purchased the property for $57,000.

During negotiations several representations were made to the appellees concerning the recent completion of a sewer project in the area in question. Appellees were informed through the appellant-realtor that the residence was being served by a septic tank, but that they could tap into the new sanitary system at their option. Appellant-realtor's agent estimated the cost of the tap-in at approximately $500. In fact, however, the tap-in to the new system was mandatory and the charge and related fees totaled $1,166. Appellees also incurred an assessment fee of $2,200 with interest thereon of approximately $1,322.

Appellants Margaret McGeorge and Albert A. Wolfe, hereinafter referred to as sellers, were aware of the forthcoming assessment and notified appellant-realtor of this fact through their agent, Larry Mandell. Mandell denied knowledge of a pending sewer assessment. However, he filled out a listing on the property indicating that sanitary sewers were available but optional. Mandell lived in the same area as the property in question and was aware of a tentative assessment on his property.

The trial court found that the appellant-realtor, through its agent Mandell, committed a fraud upon the appellees. Judgment was rendered against all appellants as the fraud was committed within the scope of the realtor's agency relationship with sellers. Punitive damages were also awarded. It is from this judgment that appellant-realtor and appellants-sellers now appeal. Appellants-sellers label their appeal a cross-appeal, but it is, in fact, an appeal from the trial court's judgment of November 10, 1980.

Appellant-realtor's first assignment of error is as follows:

"The trial court erred to the substantial prejudice of defendant-appellant, Valleybrook Realty Co. in that the finding and conclusion of the trial court that the actions of the defendant, Valleybrook Realty Co., constituted fraud while unsupported by the evidence, and accordingly the award of punitive damages was improper."

We find this assignment of error not well taken.

Appellant-realtor alleges that the trial court ignored the testimony of the appellees themselves as to their knowledge of the possibility of assessments and tax charges, and that they, therefore, failed to exercise reasonable prudence in investigation of facts. The testimony at trial indicated that agent Larry Mandell had been a realtor for four years; that he had personal knowledge that a sewer line had been laid along Mandell Road, where the property in question was located; that Mandell lived in the area where the sanitary sewer was being constructed and was personally notified of the forthcoming assessment. The trial court noted in its finding of facts and conclusions of law that the buyers were at the limit of their credit and would not have been financially able to purchase the property if they had been aware of the impending assessment. These facts were sufficient for the trial court to find that Mandell intentionally misrepresented the mandatory tap-in and sanitary sewer assessment to facilitate the sale of the property.

It is true that in Ohio the law requires a person to exercise proper vigilance in his dealings, so that where one is put on notice as to any doubt to the truth of the representation, the person is under a duty to reasonably investigate before reliance thereon. Feliciano v. Moore (1979), 64 Ohio App.2d 236, 412 N.E.2d 427 . However, vendors and their realty agents have a duty to disclose any material facts which are not visible and nondisclosure is willful misrepresentation. Gilbey v. Cooper (1973), 37 Ohio Misc. 119, 310 N.E.2d 268 . Appellees were entitled to rely upon the representations of the realtor because of the fiduciary nature of the relationship. A fiduciary is bound to make full disclosure of material facts known to him and not known to the other party, which affects the value of the property which is the subject of the transaction. Connelly v. Balkwill (N.D.Ohio 1959), 83 Ohio Law Abs. 513 .

It is also pertinent that the trial court made specific findings that although the purchasers had a duty to inquire and to inspect the premises in a prudent manner, they were living in a motel in an unfamiliar area, they were returning to Dayton on weekends and that they had a right to rely upon the representations of Valleybrook and were not under a duty to inquire of others after receiving answers to their questions. See, also, Crum v. McCoy (1974), 41 Ohio Misc. 34, 322 N.E.2d 161 ; Miles v. McSwegin (1979), 58 Ohio St.2d 97, 388 N.E.2d 1367 .

Appellant-realtor states as its second assignment of error:

"The trial court erred to the substantial prejudice of appellant, Valleybrook Realty Co., in failing to reduce plaintiff's damages for fraudulent misrepresentation by the benefit received from tapping in and using public sanitary sewer services."

Appellant-realtor argues that the judgment for damages should have been offset by the benefit received from the installation of the new sanitary sewer system. No authority is cited for this proposition. Benefits are not applicable here because the home in question already had a working sewer system. Appellees only tapped into the new sewer system because it was mandatory. There was also testimony at trial that the existing septic system, which was of considerable value, was totally destroyed. Additionally, the appellees were required to pay the sewer assessment, interest, the costs of tap in, plus extra payments to the division of water for the maintenance of the sanitary sewer system. Although the trial court did not clearly indicate precisely how the sum of damages was derived, based upon the above testimony it appears that the trial court considered reducing the damages due to the benefit received and dismissed it as improper.

A person injured by fraud is entitled to such damages as will fairly compensate him for the wrong suffered; that is, the damages sustained by reason of the fraud or deceit, and which have naturally and proximately resulted therefrom. 25 Ohio Jurisprudence 2d 32, Fraud and Deceit, Section 201. The fundamental rule is that the owner must be compensated for the loss sustained. Groves v. Gray (1942), 74 Ohio App. 384, 59 N.E.2d 166 ; 16 Ohio Jurisprudence 2d 91, Damages, Section 73.

Appellant-realtor also argues that the appellees received a reduction in purchase price in consideration of the sanitary sewer assessment and that the trial court should have reduced the plaintiffs' damages by the $2,000 reduction. Testimony at trial indicated that the listing price of the property was $59,000 and sold for $57,000. Agent Mandell testified that the reduced price was a compromise and that the average selling price in the...