Shannack v. Yark Automotive Group, Inc. , 2021 Ohio 2372 ( 2021 )

[Cite as Shannack v. Yark Automotive Group, Inc., 2021-Ohio-2372.]
IN THE COURT OF APPEALS OF OHIO
SIXTH APPELLATE DISTRICT
LUCAS COUNTY
Iyad Shannak Court of Appeals No. L-21-1027
Appellant Trial Court No. CI0202003331
v.
Yark Automotive Group, Inc. DECISION AND JUDGMENT
Appellee Decided: July 9, 2021
*****
Joseph B. Clarke and Brianna L. Stephan, for appellant.
G. Opie Rollinson, Michael A. Gonzalez, and Anthony L.
Hunter, for appellee.
*****
MAYLE, J.
{¶ 1} In this accelerated appeal, plaintiff-appellant, Iyad Shannak, appeals the
February 1, 2021 judgment of the Lucas County Court of Common Pleas, granting
judgment in favor of defendant-appellee, Yark Automotive Group, Inc. For the following
reasons, we affirm the trial court judgment.
I. Background
{¶ 2} On December 2, 2017, after working with sales representatives for two-and-
a-half months, Iyad Shannak purchased a 2018 Dodge Ram 1500 from Yark Automotive
Group for use in his business, Summit Auto Hauling, LLC. According to Shannak’s
complaint, it was understood that he was purchasing the vehicle for business use and
sales representatives helped him select the vehicle best suited to those needs. Shannak
financed the vehicle, and Yark facilitated the purchase of additional insurance and
warranty products.
{¶ 3} Among that additional insurance, Yark prompted Shannak to purchase
Guaranteed Auto Protection (“GAP”) and represented to him that this protection would
insure the remaining balance of his vehicle loan and also pay off any comprehensive
deductible in the event of the total loss of the vehicle. Relying on Yark’s representations
that the GAP would provide coverage in the event of a total loss, Shannak opted into the
GAP and executed a deficiency waiver addendum (collectively, “the GAP agreement”).
The GAP coverage was provided and administered by Safe-Guard Product International.
{¶ 4} On July 7, 2020, an employee of Summit Auto was driving the 2018 Dodge
Ram 1500 and was involved in an accident. The vehicle was totaled. Shannak filed a
claim with his insurance company and received an insurance settlement of $14,497.89.
This left an outstanding balance on the vehicle loan of $31,221.31. Shannak filed a claim
under the GAP agreement for payment of the outstanding balance, but he was denied
coverage under a “commercial use” exclusion contained in the agreement.
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{¶ 5} Shannak filed a complaint on October 16, 2020, alleging fraud, fraud in the
inducement, misrepresentation, and negligent misrepresentation (Count I), breach of
express warranty (Count II), breach of implied warranty for a particular purpose (Count
III), and violation of Ohio’s Consumer Sales Protection Act (Count IV). Yark
Automotive Group filed an answer and a motion for judgment on the pleadings under
Civ.R. 12(C).
{¶ 6} In its motion for judgment on the pleadings, Yark argued that Shannak’s first
claim fails because the parol evidence rule bars the admission of extrinsic evidence that
varies or contradicts the terms of a written agreement, so Shannak’s reliance on the
alleged statements by Yark sales representatives was not justifiable and was
unreasonable. It argued that Shannak’s second and third claims fail because warranties
for the GAP agreement are not available under Ohio law and were disclaimed by Yark.
And it argued that Shannak’s fourth claim fails because he did not timely bring a claim
under the CSPA and no such claim is available.
{¶ 7} Shannak responded that an exception to the parol evidence rule exists where
fraud is alleged and where, as here, he does not seek to vary the terms of the agreement.
He insisted that justifiable reliance is a question of fact, requiring inquiry into the
relationship of the parties. He argued that R.C. Chapter 1302 applies to mixed contracts
for goods and services and here, the foremost transaction was the purchase of the truck.
He maintained that the disclaimer statement in the retail purchase agreement may not be
considered in deciding Yark’s motion because it was attached to Yark’s motion—not to
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the pleadings. And he argued that his claims under the CSPA were properly alleged in
the alternative, and questions of fact remain as to whether the transaction here was one
primarily for personal, family, or household purposes.
{¶ 8} The trial court granted Yark’s motion. It held that the GAP agreement
specifically disclaimed coverage for commercial use, and one who is competent to
contract who signs a written agreement without reading it is bound to its terms and
cannot avoid its consequences by asserting detrimental reliance based on others’
representations. The court concluded that because the GAP agreement does not
constitute “goods,” Shannak’s warranty claims fail, and the CSPA is inapplicable because
the truck, and the attendant GAP agreement, was not purchased for “primarily personal,
family, or household purposes” under R.C. 1345.01.
{¶ 9} Shannak appealed. He assigns the following error for our review:
The trial court erred in granting Appellee’s Motion for Judgment on
the Pleadings pursuant to Ohio Civ. R. 12(C) as Appellant’s Complaint
stated viable and specific claims for fraudulent inducement and negligent
misrepresentation.
II. Law and Analysis
{¶ 10} Shannak argues that the trial court erred in granting Yark’s motion for
judgment on the pleadings with respect to his principal claims of fraudulent inducement
and negligent misrepresentation. He maintains that a question of fact exists whether he
justifiably relied on the false and misleading claims that Yark representatives made
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regarding coverage under the GAP policy sold to him. He emphasizes that the allegedly
fraudulent—or alternatively, negligent—misrepresentations were made before he signed
the GAP policy, therefore, they concern the execution of the agreement, not its terms.
Shannak does not challenge the dismissal of his remaining claims.
{¶ 11} Yark responds that the GAP agreement contains an acknowledgement that
he read and agreed to its terms and contains a clear and ambiguous exclusion for vehicles
used for commercial purposes. It maintains that given the clear terms of the GAP
agreement, Shannak is unable to establish that he reasonably and justifiably relied on any
alleged representations by Yark’s representatives. It insists that the failure to read the
terms of the GAP agreement before executing it is fatal to his fraud claim. Yark also
argues that to the extent the factual allegations in the complaint are inconsistent with the
terms of the written instrument at issue, the court need not accept his allegations as true
and must instead accept the facts set forth in the agreement as true.
{¶ 12} Under Civ.R. 12(C), “[a]fter the pleadings are closed but within such time
as not to delay the trial, any party may move for judgment on the pleadings.” In
considering a Civ.R. 12(C) motion, the trial court may review only “the complaint and
the answer as well as any material incorporated by reference or attached as exhibits to
those pleadings.” Walker v. City of Toledo, 2017-Ohio-416, 84 N.E.3d 216, ¶ 19 (6th
Dist.). Employing the same standard as a Civ.R. 12(B)(6) motion for failure to state a
claim upon which relief may be granted, the trial court must construe as true the material
allegations in the complaint and draw all reasonable inferences in favor of the nonmoving
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party. Id. at ¶ 18, citing McMullian v. Borean, 167 Ohio App.3d 777, 2006-Ohio-3867,
857 N.E.2d 180, ¶ 7 (6th Dist.); Ohio Manufacturers’ Assn. v. Ohioans for Drug Price
Relief Act, 147 Ohio St.3d 42, 2016-Ohio-3038, 59 N.E.3d 1274, ¶ 10, citing Rayess v.
Educational Comm. for Foreign Med. Graduates, 134 Ohio St.3d 509, 2012-Ohio-5676,
983 N.E.2d 1267, ¶ 18. If it appears from the pleadings and the materials incorporated by
reference or attached as exhibits that the nonmoving party can prove no set of facts
entitling it to relief, the trial court may dismiss the plaintiff’s claims under Civ.R.
12(C). Ohio Manufacturers’ Assn. at ¶ 10. We review the trial court’s judgment de
novo. Reister v. Gardner, Slip Opinion No. 2020-Ohio-5484, ¶ 17.
{¶ 13} The parol evidence rule provides that “absent fraud, mistake or other
invalidating cause, the parties’ final written integration of their agreement may not be
varied, contradicted or supplemented by evidence of prior or contemporaneous oral
agreements, or prior written agreements.” Galmish v. Cicchini, 90 Ohio St.3d 22, 27, 734
N.E.2d 782 (2000), quoting 11 Williston on Contracts, Section 33:4, at 569-570 (4th
Ed.1999). It is not a rule of evidence or contract interpretation but, rather, it is “a rule of
substantive law which, when applicable, defines the limits of a contract.” Id.,quoting Charles A. Burton, Inc. v. Durkee, 158 Ohio St. 313, 109 N.E.2d 265 (1952),
paragraph one of the syllabus. The parol evidence rule protects the integrity,
predictability, and enforceability of written contracts by prohibiting evidence of any
purported agreements that are extrinsic to the contract. Id. “Extrinsic evidence is
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excluded because it cannot serve to prove what the agreement was, this being determined
as a matter of law to be the writing itself.” Id.{¶ 14} “Nevertheless, the parol evidence rule does not prohibit a party from
introducing parol or extrinsic evidence for the purpose of proving fraudulent
inducement.” Id. at 28, quoting Drew v. Christopher Constr. Co., Inc., 140 Ohio St. 1, 41
N.E.2d 1018 (1942), paragraph two of the syllabus. Indeed, “it was never intended that
the parol evidence rule could be used as a shield to prevent the proof of fraud, or that a
person could arrange to have an agreement which was obtained by him through fraud
exercised upon the other contracting party reduced to writing and formally executed, and
thereby deprive the courts of the power to prevent him from reaping the benefits of his
deception or chicanery.” Id., quoting 37 American Jurisprudence 2d, Fraud and Deceit,
Section 45, at 621-622 (1968) (footnotes omitted).
{¶ 15} The parol evidence rule, however, “may not be avoided ‘by a fraudulent
inducement claim which alleges that the inducement to sign the writing was a promise,
the terms of which are directly contradicted by the signed writing.’” Id. at 29,
quoting Marion Prod. Credit Assn. v. Cochran, 40 Ohio St.3d 265, 533 N.E.2d 325(1988), paragraph three of the syllabus. Thus, when a party alleges that it has been
fraudulently induced to enter a written contract through the other party’s
misrepresentations of fact, the relevant question is whether the alleged representations
directly contradict the signed agreement.
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{¶ 16} Here, the deficiency waiver addendum—attached to Shannak’s
complaint—defines “commercial use/vehicle” as “utilization of the Vehicle for any
commercial purpose. A vehicle registered as commercial, to a business or covered by a
commercial primary insurance policy shall be deemed commercial.” The Exclusions
section provides that “[t]his Addendum does not apply to loss of or damage to the
Covered Vehicle * * * [t]hat is part of a fleet that is intended for use as a public or livery
conveyance or any Commercial Vehicle or vehicle being used for Commercial Use.”
{¶ 17} Moreover, the addendum to the GAP agreement contains the following
provisions verifying that Shannak read the front and back of the addendum:
I (CUSTOMER), whose signature appears below, acknowledge that
the information contained above is, to the best of my knowledge, true. I
have read the front and back of this Deficiency Waiver Addendum in its
entirety; I understand that I am entering into a contractual agreement with
the Dealer/Assignee; I agree to all of its provisions, terms and conditions;
and I am requesting coverage. * * * (Emphasis added.)
{¶ 18} Shannak’s complaint clearly alleges that the Dodge Ram 1500 was
intended to be used—and was, in fact, used—for commercial purposes. It further alleges
that the vehicle was titled to Shannak and registered with the state of Ohio under Summit
Auto, the name of Shannak’s business. While Shannak’s complaint also alleges that
Yark representatives knew of his intended use of the vehicle and nevertheless told him
that the GAP agreement provided coverage in the event of a total loss, the inescapable
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conclusion we must reach is that those representations directly contradict the plain
language of the GAP agreement.
{¶ 19} Shannak emphasizes that the question of justifiable reliance is one of fact
and requires inquiry into the relationship between the parties, and we acknowledge that
this is generally true. See Mishler v. Hale, 2014-Ohio-5805, 26 N.E.3d 1260, ¶ 33 (2d
Dist.) (“The question of justifiable reliance is one of fact, and the court must inquire into
the relationship between the parties.”).1 But it is also well-established that “[a] person of
ordinary mind cannot be heard to say that he was misled into signing a paper which was
different from what he intended, when he could have known the truth by merely looking
when he signed.” (Internal citations and quotations omitted.) Id. at ¶ 36. To that end, a
plaintiff cannot claim to have justifiably relied on representations that contradict the
terms of the written agreement. Marable v. Michael J. Auto Sales, 1st Dist. Hamilton No.
C-120373, 2013-Ohio-1750, ¶ 11. A genuine issue of material fact does not exist in such
a scenario. Bender v. Logan, 2016-Ohio-5317, 76 N.E.3d 336, ¶ 53 (4th Dist.).
1
Shannak argues that Yark owed a heightened duty to him because it sold him insurance.
Under R.C. 1317.05(B), however, “a debt cancellation or debt suspension product”—
which is defined to include a “guaranteed asset protection waiver, guaranteed auto
protection waiver, or other similarly named agreement”—“shall not be considered
insurance.” The cases Shannak cites—Parker v. Protective Life Ins. Co., 11th Dist.
Trumbull Nos. 2004-T-0127, 0128, 2006-Ohio-4041, and Crow v. Fred Martin Motor
Co., 9th Dist. Summit No. 21128, 2003-Ohio-1293—involved the sale of credit disability
insurance policies.
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{¶ 20} In Bender, the parties entered into several agreements in connection with
their establishment of a cosmetology school. The plaintiff admittedly failed to read two
of those agreements. The plaintiff alleged that the defendant misrepresented the contents
of the agreements and concealed the text of the agreements. The Fourth District
concluded that the plaintiff could not prevail on her fraudulent inducement claims
because the documents clearly set forth the terms of the agreement. It observed that if
she had read the documents, she would have known their true content. Id. at ¶ 57-58.
{¶ 21} Another of the agreements the plaintiff signed in Bender was an
employment agreement that provided that plaintiff would be paid $30,000 per year. She
alleged that the parties had agreed that she would be paid $60,000 per year. She noticed
the discrepancy and pointed it out to the defendant, and he assured the plaintiff he would
correct the salary term. Plaintiff executed the agreement anyway. The defendant did not
correct the discrepancy and denied that the parties had agreed to a salary of $60,000. The
court agreed with the plaintiff that issues of fact existed whether the defendant falsely
made a material representation concerning his intention to correct the discrepancy in the
salary term with the intent to mislead the plaintiff into relying upon it. Id. at ¶ 60. And
the court acknowledged that the parol evidence rule does not prohibit a party from
introducing extrinsic evidence to prove fraudulent inducement. It concluded, however,
that parol evidence could not be introduced under the circumstances because the evidence
would contradict the express terms of the signed writing. Id. at 61. It held that the
plaintiff was unable to establish her fraudulent inducement claim. See also Chase Home
10.
Fin., L.L.C. v. Literski, 1st Dist. Hamilton No. C-130404, 2014-Ohio-615, ¶ 19 (“The law
is clear that the parol evidence rule cannot be circumvented by allegations of fraud, when
the alleged fraudulent promises are directly contradicted by the signed writing.”).
{¶ 22} To prevail on a claim of fraudulent inducement, a plaintiff must present
clear and convincing proof of “(1) a representation (or concealment of a fact when there
is a duty to disclose), (2) that is material to the transaction at hand, (3) 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, and (4) with intent to mislead another into
relying upon it, (5) justifiable reliance, and (6) resulting injury proximately caused by the
reliance.” (Internal citations and quotations omitted.) BAS Broadcasting, Inc. v. Fifth
Third Bank, 2018-Ohio-1324, 110 N.E.3d 171, ¶ 16 (6th Dist.).
{¶ 23} To prevail on a claim for negligent misrepresentation, the plaintiff must
show that (1) the defendant, in the course of his or her employment, or in a transaction in
which he or she has a pecuniary interest; (2) supplied false information to others in their
business transactions; (3) the plaintiff justifiably relied on the information; and (4) the
defendant failed to exercise reasonable care or competence in obtaining or
communicating the information. (Internal citations omitted.) Cuspide Properties, Ltd. v.
Earl Mechanical Servs., 2015-Ohio-5019, 53 N.E.3d 818, ¶ 58 (6th Dist.). A claim for
negligent misrepresentation requires proof of an affirmative false statement. Id.{¶ 24} Here, construing as true the material allegations in Shannak’s complaint
and drawing all reasonable inferences in his favor, we must conclude from the pleadings
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and the materials incorporated by reference or attached as exhibits to Shannak’s
complaint that he can prove no set of facts entitling him to relief. That is, Shannak
alleges that he purchased a vehicle for “intended commercial use” from Yark, and Yark
representatives told him that the GAP agreement “would, in the event of a total loss,
insure not only the remaining balance of the vehicle loan but also pay off any
comprehensive deductible.” But, the clear and unambiguous terms of the GAP
agreement—which is attached to the complaint—provide that it does not apply to
vehicles that are used “for any commercial purpose.” Thus, the GAP agreement directly
contradicts the alleged representations of Yark representatives. Although Shannak
alleges in conclusory fashion that he justifiably relied upon those representations, a
plaintiff cannot claim to have justifiably relied on representations that contradict the
terms of the written agreement. Accordingly, the complaint itself demonstrates that
Shannak can prove no set of facts entitling him to relief. The trial court properly
dismissed Shannak’s claims under Civ.R. 12(C).
{¶ 25} We find Shannak’s assignment of error not well-taken.
III. Conclusion
{¶ 26} Even accepting as true that Yark representatives misrepresented to Shannak
that the GAP agreement would provide coverage in the event of the total loss of his
truck—which they knew Shannak would be using for commercial purposes—this
representation directly contradicted the express terms of the GAP agreement, which
contained a commercial vehicle exclusion. Shannak, therefore, cannot establish
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justifiable reliance, therefore, his claims for fraudulent inducement and negligent
misrepresentation necessarily fail. Dismissal under Civ.R. 12(C) was properly granted to
Yark. We find Shannak’s sole assignment of error not well-taken.
{¶ 27} We affirm the February 1, 2021 judgment of the Lucas County Court of
Common Pleas. Shannak is ordered to pay the costs of this appeal under App.R. 24.
Judgment affirmed.
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
Christine E. Mayle, J.
____________________________
Gene A. Zmuda, P.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.supremecourt.ohio.gov/ROD/docs/.
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