Davis v. Hawley Gen. Contracting, Inc. , 2015 Ohio 3798 ( 2015 )

[Cite as Davis v. Hawley Gen. Contracting, Inc., 2015-Ohio-3798.]
IN THE COURT OF APPEALS OF OHIO
SIXTH APPELLATE DISTRICT
HURON COUNTY
J. Thomas Davis & Judy Davis, Court of Appeals No. H-14-018
Trustees of the Davis Family
Holiday Lake Trust Trial Court No. CVH 2013 0947
Appellants
v.
Hawley General Contracting, Inc., et al. DECISION AND JUDGMENT
Appellees Decided: September 18, 2015
*****
Joel R. Campbell, for appellants.
Michael J. Warrell, for appellees.
*****
JENSEN, J.
{¶ 1} Following a bench trial, plaintiffs-appellants, J. Thomas Davis and Judy
Davis, individually and as Trustees of the Davis Family Holiday Lake Trust
(“appellants”), appeal the November 25, 2014 judgment of the Huron County Court of
Common Pleas, which awarded damages to appellants on their breach of contract claim
against defendant-appellee, Hawley General Contracting, Inc. (“HGC”), but awarded
nothing against defendant-appellee, Joel Hawley, personally, or on appellants’ remaining
claims. For the reasons that follow, we reverse the trial court’s judgment.
I. Background
{¶ 2} Tom and Judy Davis purchased an approximately 1000-square-foot lakefront
vacation home on Holiday Lake in Willard, Ohio in 2005. They transferred ownership of
the home to The Davis Family Holiday Lake Trust, of which they are trustees, intending
that the vacation home would pass from generation to generation. Their son, Michael,
and his wife, Debbie are successor trustees.
{¶ 3} The house was built on a crawl space. After purchasing the property,
appellants discovered that the crawl space was wet and the floor joists had dry-rotted.
They consulted with several contractors, including Hawley, who was a friend of
Michael’s. Hawley suggested not only repairing the problems with the crawl space, but
also creating a walk-out basement. Interested in creating additional space in the home,
appellants hired Hawley to perform the work. They signed a contract for construction
with HGC on March 11, 2010. Hawley signed his name to the contract above the words
“BUILDER, Hawley General Contracting.”
{¶ 4} The parties’ contract provided that HGC would excavate the foundation,
pour footing for a new foundation, lay eight-inch block walls, and create a walk-out
basement with two patio doors or windows. To do this required that the house be braced
2.
and supported above the foundation and then essentially placed on top of the basement
walls. HGC agreed to obtain all necessary permits, licenses, and inspections for the
work. Hawley obtained a building permit in March of 2010 from Holiday Lakes Property
Owners Association, Inc. (“POA”). That permit required compliance with the POA
ordinances, the Building Officials and Code Administrators (“BOCA”) code, and state
laws.
{¶ 5} The basement work was completed in late June of 2010. Appellants paid a
total of $60,000 for the work. Within a couple of weeks, a horizontal crack appeared in
the walls. Appellants notified Hawley. Hawley, who had subcontracted the work, had it
regrouted, but the crack reappeared within a couple of weeks. Again he had it regrouted
and again it failed. The parties disagreed about the extent to which the crack was
problematic and HGC never effectively repaired it.
{¶ 6} Appellants hired GPRS, Inc. to determine whether the walls had been
adequately reinforced.1 Nick Janney, a GPRS employee, x-rayed the walls using
technology that can identify where there are reinforcements in concrete and where there
are voids. He discovered that along the north and south walls of the basement, HGC
installed rebar no higher than the third concrete block from the top. There were also
various areas where grouting did not extend all the way up. In other words, the walls
were not vertically reinforced from bottom to top.
1
“GPRS” is short for Ground Penetrating Radar Systems.
3.
{¶ 7} On December 2, 2013, appellants filed a seven-count complaint against
Hawley and HGC alleging: (1) breach of written contract; (2) breach of warranty;
(3) violation of the consumer sales practices act (“CSPA”); (4) negligent or reckless
damage to real property; (5) breach of oral contract; (6) unjust enrichment; and
(7) violation of the home construction service suppliers act. The case was tried to the
bench on October 23 and 24, 2014. Appellants testified, as did their son, Michael;
Janney; Michael McCurdy, the building inspector for the city of Westerville; Barry
Neumann, a structural engineer with Richland Engineering; Ken Oswald, owner of
Carpentry By Kenny, Incorporated; Hawley; and Travis Mayer, an architect.
{¶ 8} Mr. Davis testified about his dealings with Hawley leading up to and after
hiring him for the basement project. He indicated that he believed that the work would
be performed in accordance with the applicable building codes. Davis described that the
horizontal crack appeared shortly after the basement was completed and that Hawley told
him that it was a stress crack from placing the house back down onto the walls. He had
the masons come back to regrout it. When the walls cracked again, Hawley told Davis
that the masons had not used non-shrinking grout and he had them come back again.
Two weeks later, it cracked again, and Davis said that it became obvious that the crack
was going to continue to reappear. He produced photos showing that the crack was large
enough for a quarter and a nickel to fit within the width of it. He said that water leaked
into the basement and he described that air flowed through the crack to the point that if he
held a piece of paper in front of the crack, the wind would blow the paper. Although
4.
Hawley initially indicated that he would take care of it, he never did. In the meantime,
Davis testified, the wall continued to move and the crack grew.
{¶ 9} McCurdy summarized the state’s residential building code requirements for
vertical reinforcement of basement walls. He testified that rebar must be installed from
the top of the footer to the top of the wall, the sill plates have to be anchored to the top of
the foundation walls, and the floor joists have to be anchored to the sill plates. McCurdy
observed that HGC had not installed any of these reinforcements.
{¶ 10} Neumann testified that he inspected the property and observed there was
water in the basement, leakage on the walls, the walls were bowed in, and the backfill
was “extremely settled.” He saw water flowing out of an outlet behind the wall.
Neumann concurred that the code required the vertical reinforcements described by
McCurdy and testified that his inspection of the property revealed that the walls hinged at
the point where the rebar stopped. He observed no anchors where the wall meets the sill
plate. He concluded that HGC’s work did not meet minimum code requirements, and
that the walls were not structurally sound. He explained that there was a long-term
progression towards failure and the question was when, not if, the walls would fail.
Neumann’s opinion was that the proper remedy was to rebuild the walls.
{¶ 11} Oswald described the necessary steps to reinforce the walls. He concurred
with Neumann that replacement of the walls would be the most effective solution, and he
estimated, conservatively, that the cost of doing so would be just over $30,000.
5.
{¶ 12} Architect Travis Mayer, who sometimes works on projects with Hawley,
testified in Hawley’s case-in-chief. Mayer viewed the basement and described that it was
dry. While he conceded that the code required rebar from the footers to the sill plates, he
explained that with an existing house on top of the foundation, rebar could not be
installed all the way to the sill plates without compromising the integrity of the concrete
blocks into which they are inserted. He said that to compensate for this, it is common to
“slop” the unreinforced blocks with grout. Mayer also believed that the wall was
purposely flared out and while not ideal, the crack in the wall was not problematic
because it followed the coursing as opposed to having occurred in the middle of a block.
Mayer agreed that the standard practice was to use anchor bolts to anchor the basement
walls to the sill plate. He did not look to see if this had been done. He also agreed that
there was substantial settling which meant that the backfill was insufficient. Mayer
concluded that while not built to code, the work was “clean” and of good quality.
{¶ 13} Ultimately, Hawley admitted that the code required rebar from the footers
to the sill plates and that this was not done. Like Mayer, he explained that it was not
feasible under the circumstances to install rebar in this manner. His view was that the
walls were not moving and that they were intentionally built to flare at the point of the
crack. He maintained that the crack was merely at a seam and was not a crack in the
blocks, thus there was no structural problem, he was not concerned, and there was no
need to fix it. Hawley, on cross-examination admitted, however, that what he described
as a “built-in flare” had actually tripled in size from one-half of an inch to an inch and
6.
three-eighths. But Hawley emphasized that the work had passed inspection. He also
boasted that he had done 40 basements using the same procedure and his customers were
happy.
{¶ 14} The trial court issued a written decision, journalized November 25, 2014,
finding for appellants on their breach of contract claim. The court determined that the
Holiday Lake trust and HGC were the real parties in interest to the contract. It was
persuaded by Neumann’s testimony that HGC’s work was not completed in a
workmanlike manner in accordance with the applicable building code in that HGC failed
to install rebar from the footer to the sill plate, failed to provide appropriate anchoring at
the sill plates, and performed “questionable backfilling” along the walls. It concluded
that the absence of rebar caused the horizontal cracking in the walls. The court awarded
$30,400 to compensate appellants for the replacement of the walls.
{¶ 15} The court rejected appellants’ claim that HGC acted recklessly, that it
misrepresented the quality of its work, or that it acted in an unfair or deceptive manner in
its dealings with appellants. The court determined that it was not reasonable for
appellants not to realize that the work was being undertaken by the construction company
and not by Hawley as an individual, and, therefore, declined to find Hawley personally
liable. It concluded that the evidence failed to establish a CSPA violation and that there
was no basis for punitive damages, treble damages, or attorneys fees. Appellants
appealed the trial court’s decision and assign the following errors for our review:
7.
FIRST ASSIGNMENT OF ERROR
IT IS AN ABUSE OF DISCRETION AND, THEREFORE, ERROR
FOR THE TRIAL COURT TO FAIL TO MAKE A FINDING THAT
DEFENDANTS-APPELLEES AND EACH OF THEM [sic] VIOLATED
THE CONSUMER SALES PRACTICES ACT FOR THEIR FAILURE TO
PERFORM THEIR CONSTRUCTION OBLIGATIONS IN A
WORKMANLIKE MANNER.
SECOND ASSIGNMENT OF ERROR
IT IS AN ABUSE OF DISCRETION AND, THEREFORE, ERROR
FOR THE TRIAL COURT TO FAIL TO MAKE A FINDING OF
PERSONAL LIABILITY FOR DEFENDANT-APPELLEE INDIVIDUAL
WHEN HE FAILED TO DISCLOSE THE AGENCY STATUS FOR A
LIMITED LIABILITY ENTITY.
THIRD ASSIGNMENT OF ERROR
IT IS AN ABUSE OF DISCRETION AND, THEREFORE, ERROR
FOR THE TRIAL COURT TO FAIL TO MAKE A FINDING THAT
DEFENDANTS-APPELLEES WERE RECKLESS AND EACH OF
THEM ARE OBLIGATED FOR THE PAYMENT OF THE ATTORNEY
FEES OF PLAINTIFFS.
8.
II. Standard of Review
{¶ 16} This is an appeal from the trial court’s judgment following a bench trial.
“In a bench trial, the trial court assumes the fact-finding function of the jury.” Cleveland
v. Welms, 169 Ohio App. 3d 600, 2006-Ohio-6441, 863 N.E.2d 1125, ¶ 16 (8th Dist.).
Although appellants couch their assignments of error in terms of an abuse of discretion,
we review the trial court’s findings under a manifest weight standard. Id. In doing so,
we “review the entire record, weigh the evidence and all reasonable inferences, consider
the credibility of witnesses and determine whether in resolving conflicts in evidence, the
trial court clearly lost its way and created such a manifest miscarriage of justice that the
judgment must be reversed and a new trial ordered.” (Internal citations omitted.) Id.
III. Analysis
A. First Assignment of Error
{¶ 17} In their first assignment of error, appellants claim that the trial court erred
in concluding that appellees did not violate the CSPA by breaching their obligation to
construct the basement in a workmanlike manner meeting building code requirements.
They claim that appellees acted deceptively in concealing their failure to install rebar
reinforcement and anchors. They contend that although the CSPA has a two-year statute
of limitations, appellees made repeated misrepresentations and assurances that they
would make necessary repairs, thereby engaging in unfair and deceptive acts or practices
after the original transaction. They urge that their CSPA action was filed within two
years of appellees’ last misrepresentations and was, therefore, timely filed.
9.
{¶ 18} Appellees respond simply that a number of Ohio cases have found that less-
than-satisfactory workmanship does not necessarily rise to the level of unconscionability
and they point out that there were differing opinions offered as to the quality of the work
performed. Appellees do not address appellants’ remaining arguments.
{¶ 19} The CSPA “prohibits unfair or deceptive acts and unconscionable acts or
practices by suppliers in consumer transactions.” Estate of Cattano v. High Touch
Homes, Inc., 6th Dist. Erie No. E-01-022, 2002-Ohio-2631, ¶ 42, citing Einhorn v. Ford
Motor Co., 48 Ohio St. 3d 27, 29, 548 N.E.2d 933 (1990); R.C. 1345.02(A). “In general,
the CSPA defines ‘unfair or deceptive consumer sales practices’ as those that mislead
consumers about the nature of the product they are receiving, while ‘unconscionable acts
or practices’ relate to a supplier manipulating a consumer’s understanding of the nature
of the transaction at issue.” Hanna v. Groom, 10th Dist. No. Franklin No. 07AP-502,
2008-Ohio-765, ¶ 33, quoting Johnson v. Microsoft Corp., 106 Ohio St. 3d 278, 2005-
Ohio-4985, 834 N.E.2d 791, ¶ 24. A failure to perform services in a workmanlike
manner by itself does not constitute a CSPA violation. Warren v. Denes Concrete, Inc.,
9th Dist. Lorain Nos. 08CA009414, 08CA009422, 2009-Ohio-2784, ¶ 25. To be
actionable under the CSPA, the performance also must amount to an unfair, deceptive, or
unconscionable act. Id. Similarly, not every breach of contract constitutes a CSPA
violation, however “when a supplier knowingly commits a breach, the breach is likely
also an unfair or deceptive act.” Cartwright v. Beverly Hills Floors, 7th Dist. Mahoning
No. 11 MA 109, 2013-Ohio-2266, ¶ 17.
10.
{¶ 20} Among the documents admitted as exhibits at trial were Hawley’s
application for a building permit where he agreed to perform work in compliance with the
POA’s ordinances, the BOCA code, and the laws of the state of Ohio, and excerpts from
the Ohio residential code setting forth the requirements for reinforcement of foundation
walls. Hawley, on cross-examination, was unable to articulate what the codes and
ordinances required with respect to vertical reinforcements, but McCurdy recited that
“[u]nder the strongest of soil conditions, you would have to have Grade 60 Number 5,
which is a five-eighths inch diameter rebar, spaced at 40 inches on center plus 12 inches
either side of any fenestration in that wall.” He also testified that “there’s a sill plate that
has to be anchored to the top of [the] foundation wall * * * every six feet on center with
half-inch diameter anchor bolts. It also has to be anchored at 12 inches from each corner
of each side of each corner and within 12 inches of each splice of each sill plate.” Each
sill plate requires a minimum of two anchor bolts. McCurdy described the implications
of the absence of vertical reinforcements:
First of all, the lack of vertical reinforcement will allow the wall to
hinge. And by that I mean as the vertical * * * rebar goes up the vertical
wall, where the rebar stops, the wall will start to pull away from itself one
way or the other. Normally in this situation, the bottom of the wall will
stay stationary. The top part of the wall that’s unreinforced will move away
from the bottom part of the wall, causing a stress crack in the wall itself.
11.
* * *. That in turn, as you go up the wall, that distance grows, okay. And,
in fact, will cause the structure to pull away from itself.
{¶ 21} Neumann testified that here, number six rebar—which is .44 square
inches—needed to be installed from the floor to the sill plate every 40 inches in order to
be code-compliant. Hawley installed number four rebar—.2 square inches—every 48
inches and it did not extend from floor to sill plate. McCurdy, Neumann, and Mayer all
agreed that this fell below the minimum standard required by the code. Mayer also
agreed that anchor bolts must be used to anchor the basement walls to the sill plates, yet
he did not look closely enough to see whether this had been done.
{¶ 22} The trial court found that the evidence failed to establish that appellees
misrepresented the quality of the work or acted in an unfair or deceptive manner in their
dealing with appellants. But Mr. Davis testified that he specifically asked Hawley how
far the rebar went, and Hawley responded that it went all the way to the top; Hawley
testified that he did not become aware that the rebar did not extend all the way up to the
sill plate like it was supposed to until he received a copy of appellants’ lawsuit. It was
not until appellants hired GPRS to x-ray the walls that they learned that rebar was not
installed from footer to sill plate and that there was an absence of grout in other places as
well. Moreover, after two failed attempts to repair the crack, Hawley repeatedly assured
appellants that he would make necessary repairs, but he never examined the root of the
problem and he never made the necessary repairs, thus forcing appellants to pursue
litigation.
12.
{¶ 23} In Estate of Cattano, 6th Dist. Erie No. E-01-022, 2002-Ohio-2631, ¶ 52,
we upheld a jury verdict finding a CSPA violation against the seller of a modular home
where the work did not meet the standards of the model shown to the buyer and the
repairs the seller intended to make were insufficient to remedy the problems. Similarly,
in Erie Shores Builders, Inc. v. Leimbach, 6th Dist. Huron No. H-99-034, 2001 WL
803952, *1, 3, we upheld the trial court’s decision finding a CSPA violation where a
contractor hired to construct a second-floor addition cut down a tree, damaged shrubs,
removed existing electrical service and improperly installed new service, improperly
reconstructed a chimney, and negligently installed a bathroom drain, resulting in water
damage.
{¶ 24} Upon our review of the record below, we find that the trial court erred
when it declined to conclude that appellees’ conduct in constructing the basement below
minimum code requirements, failing to determine and to disclose to appellants that rebar
was installed only to the point where the wall hinged, making inadequate attempts at
repairing the horizontal crack, and assuring appellants that they would remedy the
situation, but failing to do so, was sufficient to establish a CSPA violation. This is
particularly true given the latent nature of this structural defect which required x-ray
technology to discover.
{¶ 25} We find appellants’ first assignment of error well-taken.
13.
B. Second Assignment of Error
{¶ 26} In their second assignment of error, appellants claim that the trial court
erred in declining to find Hawley personally liable under the CSPA for failing to disclose
that he was acting as an agent of a limited liability company. They argue that Hawley’s
repeated signatures on documents never mentioned that he was signing on behalf of a
corporate entity and that appellants were unaware that Hawley was acting in his capacity
as an agent of a corporate entity.
{¶ 27} “A corporate officer may be held individually liable for acts that violate the
CSPA” where “the officer participated in the commission of an act or specifically
directed the particular act to be done.” Yates v. Mason Master, Inc., 11th Dist. Lake No.
2002-L-001, 2002-Ohio-6697, ¶ 24. In Gayer v. Ohio Bus. Trading Assn., 8th Dist.
Cuyahoga No. 54892, 1988 WL 87629, *2 (July 7, 1988), the Eighth District Court of
Appeals held that the corporation’s president, who made the representations upon which
the CSPA claim was premised, was personally liable to the plaintiffs. We reach the same
conclusion here. While appellants perhaps should have been aware that Hawley was
acting on behalf of HGC, the fact remains that Hawley engaged in the conduct giving rise
to appellants’ claims and is personally liable for the CSPA violation at issue. We,
therefore, find appellants’ second assignment of error well-taken.
14.
C. Third Assignment of Error
{¶ 28} In their third assignment of error, appellants contend that the trial court
erred in failing to find that HGC and Hawley were reckless and that each of them is
obligated to pay appellants’ attorney fees.
{¶ 29} R.C. 1345.09(F)(2) permits the court to award reasonable attorney fees to a
prevailing plaintiff where the supplier has knowingly committed an act or practice that
violates the CSPA. To find that the supplier acted “knowingly,” requires only that he or
she intentionally engaged in the conduct giving rise to the CSPA violation—the supplier
need not have known that the conduct violated the law in order for the court to grant
attorney fees. Borror v. MarineMax of Ohio, Inc., 6th Dist. Ottawa No. OT-06-010,
2007-Ohio-562, ¶ 50.
{¶ 30} Hawley testified that it was his practice to construct basement walls in this
manner despite the fact that the vertical reinforcement fell below the minimum standards
set forth for residential construction. He said that he had constructed 20-30 basements
using the same method. This testimony establishes that Hawley and HGC acted
knowingly for purposes of the CSPA. We, therefore, find appellants’ third assignment of
error well-taken.
15.
IV. Conclusion
{¶ 31} For the foregoing reasons, we reverse the November 25, 2014 judgment of
the Huron County Court of Common Pleas and remand the matter for further proceedings
consistent with this decision. The costs of this appeal are assessed to appellees under
App.R. 24.
Judgment reversed.
A certified copy of this entry shall constitute the mandate pursuant to App.R. 27.
See also 6th Dist.Loc.App.R. 4.
Mark L. Pietrykowski, J. _______________________________
JUDGE
Stephen A. Yarbrough, P.J.
_______________________________
James D. Jensen, J. JUDGE
CONCUR.
_______________________________
JUDGE
This decision is subject to further editing by the Supreme Court of
Ohio’s Reporter of Decisions. Parties interested in viewing the final reported
version are advised to visit the Ohio Supreme Court’s web site at:
http://www.sconet.state.oh.us/rod/newpdf/?source=6.
16.