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Psarras v. Rayburn

Court of Appeals of Ohio, Eleventh District, Geauga

June 3, 2019

JAMES P. PSARRAS, et al., Plaintiff-Appellant,
SARAH M. RAYBURN, TRUSTEE, Defendant-Appellee.

          Civil Appeal from the Geauga County Court of Common Pleas, Case No. 2013 M 000943.

          Jonathan P. Blakely, (For Plaintiff-Appellant).

          Elaine Tassi, (For Defendant-Appellee).


          MARY JANE TRAPP, J.

         {¶1} Appellant, James P. Psarras, M.D., appeals from the judgment of the Geauga County Court of Common Pleas, which found that he breached a combined lease and residential real estate purchase agreement with appellee, Sarah M. Rayburn, trustee, by not completing the purchase of the property at issue. During the summary judgment phase of this matter, the court found Ms. Rayburn violated the lease and Ohio's Landlord Tenant Law, Chapter 5321, by failing to make necessary repairs to prevent flooding in the residence. After the trial, however, the court found Dr. Psarras failed to offer sufficient evidence to support his damage claim. The court also awarded Dr. Psarras interest on the security deposit and Ms. Rayburn damages for the breached purchase agreement by subtracting the eventual sale price from the contracted purchase price.

         {¶2} Dr. Psarras now appeals, arguing flooding issues on the property negated his obligation to purchase the property. We disagree and affirm the trial court's judgment. Dr. Psarras signed a residential disclosure form, which disclosed the past flooding issue. He then waived his right to any inspection of the property even though he saw sump pumps in the basement of the residence before he signed the lease agreement with a purchase addendum and a separate residential real estate purchase agreement that contained an "as is" clause.

         Substantive and Procedural History

         {¶3} Ms. Rayburn, as trustee, and Dr. Psarras, together with his now deceased wife, Elaine Psarras, M.D. (collectively "Dr. Psarras"), entered into a lease agreement with a purchase addendum and a separate purchase agreement to purchase real property located at 3063 Forest Drive, Pepper Pike, Ohio. In order to allow Dr. Psarras sufficient time to sell their Shaker Heights home and have the funds needed to purchase the Pepper Pike home, the parties agreed Dr. Psarras, his wife, as well as their daughter and son-in-law would lease the property beginning December 16, 2009 to August 15, 2010. The purchase agreement provided that the sale of the property would close on August 15, 2010.

         {¶4} Prior to signing either agreement, Dr. Psarras received a residential disclosure form, which Ms. Rayburns' parents, the beneficiaries of the trust, completed and signed on July 8, 2008. Ms. Rayburns' parents disclosed a previous water intrusion, describing the water leakage as follows: "basement flooded after rain - repaired new pumps in place, outdoor and indoor piping replaced new grates placed in front yard." Dr. Psarras waived his right to an inspection of the water intrusion and signed the residential disclosure form on October 8, 2009.

         {¶5} Approximately a month later, on November 3, 2009, Dr. Psarras signed the lease/purchase and residential real estate purchase agreements. He testified he was being advised by counsel, but counsel did not negotiate the terms. Although the record is unclear, it appears Dr. Psarras did not have or does not recall having any of the documents at issue reviewed by his attorney before execution.

         {¶6} Both the lease/purchase and purchase agreements contained integration clauses. The lease agreement required rent of $20, 000 for the lease term, or $2, 500 per month, including the payment of the last monthly installment upon the execution of the lease agreement as a deposit. The pre-printed lease agreement form at paragraph 3, "Damage Deposit," called for "ZERO DOLLARS." The lease further provided via a handwritten interlineation that "[t]enant accepts premises 'as is.'" Pursuant to paragraph 20, "Default," if Dr. Psarras failed to pay rent for seven days, Ms. Rayburn was entitled to "declare the entire balance of rent due and payable" and to "exercise all rights/remedies available to the landlord at law or equity", or could "elect to terminate" the lease, "the purchase agreement and retain all amounts paid" (Emphasis added to show the handwritten addition by interlineation.)

         {¶7} In the lease addendum Dr. Psarras agreed to pay $510, 000 for the purchase of the home. In the separate purchase agreement, the purchase price of $510, 000 was restated, and that agreement also required earnest money of $51, 000 to be paid in two payments. The first payment, $25, 000, was due upon signing. The second payment, $26, 000, was due January 31, 2010, leaving a balance of $459, 000 to be paid on or before the closing date. Dr. Psarras timely paid both deposits.

         {¶8} The purchase agreement contained a waiver of inspection, in which Dr. Psarras waived his rights to general home, septic, water potability, well flow rate, radon, and mold inspections. The agreement also contained an "as is" clause, which stated as follows:

         {¶9} "BUYER has examined the property and agrees that the property is being purchased in its "AS IS" PRESENT PHYSICAL CONDITION including any defects disclosed by the SELLER on the State of Ohio residential Property Disclosure Form, identified by any inspections requested by either party or on any other forms or addenda made a part of this Agreement or identified by any other source. SELLER warrants to BUYER that SELLER has completed the State of Ohio residential Property Disclosure Form accurately and thoroughly and that no additional items of disclosure have occurred since the SELLER'S completion of that form. SELLER agrees to notify BUYER in writing of any additional disclosure items that arise between the date of acceptance and December 15, 2009. BUYER has not relied upon any representations, warranties or statements about the property (including but not limited to its condition or use) unless otherwise disclosed on this AGREEMENT or on the Residential Agreement Disclosure Form." Dr. Psarras initialed that he received a residential disclosure form and that he did not rely on any verbal representations made by brokers or their agents.

         {¶10} Under "additional terms" in the purchase agreement, it is handwritten that "[i]f tenant defaults under this agreement, the lease, or the lease addendum, all amounts paid by tenant to landlord shall become nonrefundable and shall be the sole property of seller."

         {¶11} The Psarras family started to remodel the interior of the home, which included new kitchen cabinets and installing carpet in the basement and furnishing a portion of it as a recreation room.

         {¶12} The basement flooded on Memorial Day of 2010 and on approximately July 4, 2010. Dr. Psarras testified that both floodings were significant, resulting in several inches of standing water.

         {¶13} Dr. Psarras was alerted to the flood on Memorial Day when the sump pump alarm went off. After the Memorial Day flood, the carpet was irreparable, and both the carpet and furniture were removed. They discontinued using the basement and called a clean-up crew and their real estate agent, Patty Munro.

         {¶14} Approximately one week after the first flooding, Dr. Psarras called Ms. Rayburn. He informed her of the flooding and that he had spoken with the city building inspector. Apparently, the flooding issue was an ongoing problem that had involved the building inspector and the mayor of Pepper Pike, because the adjacent neighbor had previously not allowed piping to go through his property to fix the problem. Ms. Rayburn offered to pay for the carpeting. While she sympathized with the problem, she did not offer to go to the city and/or neighbor meetings called to address the flooding problem that were to follow.

         {¶15} One month later, around July 4, 2010, Dr. Psarras learned from his daughter and son-in-law that the basement had flooded again with several inches of water.

         {¶16} On August 9, 2010, Dr. Psarras sent Ms. Rayburn a letter to notify her that they "will exercise the option in the agreement to delay closing. We plan to move the date to a finalized October 15, 2010." He went on to write that he appreciated "her responsibility" with the water problem; they love the house, look forward to "many years there," and this "problem has been frustrating."

         {¶17} Per the lease agreement, at the expiration of the term, a new holdover tenancy from month-to-month was created with an increase in monthly rent of $5, 000.

         {¶18} The following day Dr. Psarras received a letter from Ms. Rayburn's attorney, William P. Gibbons ("Mr. Gibbons") in which Mr. Gibbons informed Dr. Psarras there was no "option to continue rent," and that the residential property disclosure form Dr. Psarras signed plainly disclosed that the basement flooded and that a new pump was installed to correct the situation. The letter further informed Dr. Psarras that he had agreed to accept the property "as is present physical condition." Finally, Mr. Gibbons warned that if Dr. Psarras failed to close the transaction on August 15, 2010, he would be in breach of the agreement, Ms. Rayburn would seek specific performance as well as damages, and that he would "no longer be entitled to occupy the premises." The letter then listed several conditions under which Ms. Rayburn would consider extending the lease and closing date until October 15, 2010. This included paying $25, 000 by August 13, 2010, a nonrefundable amount, of which only half would be credited towards the purchase price.

         {¶19} Dr. Psarras emailed his counsel, John P. Blakely ("Mr. Blakely"), regarding the August 10, 2010 letter the following day. Dr. Psarras wanted to share the details of the flooding and expressed that neither he, his wife, or the realtor were previously aware of any flooding problem. He then listed step-by-step the details of the flooding problem and what he was doing to resolve it, including the issues with the ...

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