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Herhold v. The Smith Land Co.

Court of Appeals of Ohio, Ninth District, Summit

June 19, 2019

SHAWN A. HERHOLD, et al. Appellees
THE SMITH LAND COMPANY, et al. Appellants


          WARNER MENDENHALL, Attorney at Law, for Appellants.

          THOMAS A. SKIDMORE, Attorney at Law, for Appellees.


          DONNA J. CARR JUDGE.

         {¶1} Defendants-Appellants Smith Land Company, LLC ("Smith Land") and Robert G. Smith appeal from the judgments of the Summit County Court of Common Pleas. This Court affirms.


         {¶2} This appeal stems from the sale of a vacant lot on Brunsdorf Road ("the Property") in Fairlawn. In July 2002, then husband and wife, Plaintiffs-Appellees Shawn Herhold and Malavanh Herhold, nka Rassavong (collectively "the Herholds") purchased the Property from Smith Land and its president and sole shareholder, Robert Smith (collectively, "the Defendants"). The deed for the Property was recorded in September 2002. According to the Herholds, the Defendants represented to them that they would be able to build a home on the Property. Later, however, when the Herholds attempted to sell the Property, they discovered that the City of Fairlawn would not issue a building permit for the Property absent permission from the Ohio Environmental Protection Agency ("Ohio EPA"). In order to satisfy Ohio EPA, the Herholds removed numerous truckloads of fill dirt from the north boundary of the Property in order to restore the wetlands that were previously there. Such action created a ditch and decreased the buildable surface area of the Property. After the alterations to the Property, the Herholds were unable to sell it.

         {¶3} The Herholds brought suit against the Defendants, and others who are not relevant to this appeal, for breach of contract, breach of the warranty of title, fraud, misrepresentation, and fraudulent concealment/inducement. The Herholds sought compensatory damages, punitive damages, interest, and attorney fees.

         {¶4} Ultimately, the matter proceeded to a jury trial. The jury found in favor of the Herholds and awarded them $55, 000 on their breach of contract claim, $65, 000 on their fraud claims, and $35, 000 in punitive damages. Additionally, the jury determined that the Herholds should be awarded their attorney fees. The Herholds were awarded $39, 744 in attorney fees, $32, 407.82 in prejudgment interest on their contract claim, and $36, 854.91 in prejudgment interest on their fraud claims.

         {¶5} The Defendants filed a motion for judgment notwithstanding the verdict, or in the alternate, a motion for new trial. In the end, a new trial was ordered on all of the Herholds' claims.[1]

         {¶6} The Defendants then moved to reopen discovery, however, the request was denied. The matter proceeded to a second jury trial. The jury again found in favor of the Herholds. The Herholds were awarded $36, 700 on the breach of contract claim, $26, 485.07 in prejudgment interest on the breach of contract claim, $5, 300 on the fraud claim, $3, 341.66 in prejudgment interest on the fraud claim, $165, 000 in punitive damages, and $48, 062.55 in attorney fees. Subsequently, the Defendants filed a motion for judgment notwithstanding the verdict, or, in the alternate, a motion for a new trial. The trial court denied the motions.

         {¶7} The Defendants have appealed, raising seven assignments of error, which will be addressed out of sequence to facilitate our analysis.




         {¶8} The Defendants assert in their fourth assignment of error that the trial court erred in denying their motion for directed verdict and for judgment notwithstanding the verdict on the Herholds' breach of contract claim.

The test to be applied by a trial court in ruling on a motion for judgment notwithstanding the verdict is the same test to be applied on a motion for a directed verdict. The evidence adduced at trial and the facts established by admissions in the pleadings and in the record must be construed most strongly in favor of the party against whom the motion is made, and, where there is substantial evidence to support his side of the case, upon which reasonable minds may reach different conclusions, the motion must be denied. Neither the weight of the evidence nor the credibility of the witnesses is for the court's determination in ruling upon either of the above motions.

         (Internal quotations and citations omitted.) Jackovic v. Webb, 9th Dist. Summit No. 26555, 2013-Ohio-2520, ¶ 15. Both rulings are reviewed by this Court de novo. Id.

         {¶9} "Generally, a breach of contract occurs when a party demonstrates the existence of a binding contract or agreement; the non-breaching party performed its contractual obligations; the other party failed to fulfill its contractual obligations without legal excuse; and the non-breaching party suffered damages as a result of the breach." (Internal quotations and citations omitted.) Envision Waste Servs, LLC v. Cty. of Medina, 9th Dist. Medina Nos. 15CA0104-M, 15CA0106-M 2017-Ohio-351, ¶ 14.


         {¶10} The Herholds presented evidence supporting the following narrative. The Defendants did not present any witnesses on their behalf.

         {¶11} Woodbury Estates, where the Property is located, was platted in November 1999. Smith Land was the proponent of the plat map and the owner of the land. The allotment originally contained 10 lots. They were numbered 1 through 9 and an additional lot was labeled as block A. Ultimately, block A would be later split into lots, one of which is the Property.

         {¶12} Earlier in 1999, Smith Land, through a consultant, submitted a report delineating the wetlands in the land for verification by the United States Army Corps of Engineers. The report identified 5.54 acres of jurisdictional wetlands. Lee Robinette with the United States Army Corps of Engineers went out to the area to field verify the presence and location of wetlands. She then sent a verification letter to Smith Land's consultant.

         {¶13} The plat was reviewed by the zoning and engineering departments of the City of Fairlawn. Before the plat was approved, the city engineer requested that certain restrictions be placed on the map. One of those restrictions stated that, "[t]he lands delineated on this plat as wetlands are jurisdictional waters of the United States under the Federal Clean Water Act, and in order to fill any of the delineated wetlands, not shown on this plat as to be filled, a permit must be obtained from the U.S. Army Corps of Engineers." Once effective, those restrictions "run[] with the land" and "future development has to adhere to those restrictions." If at some point, someone desired to change or remove a restriction, that person would have to contact the planning commission and fill out an application to have the plat updated. No one has ever asked that any of the restrictions be removed. Christopher Randles with the Building and Zoning Commission for the City of Fairlawn was of the opinion that, until the restrictions are removed, they must be followed.

         {¶14} Notably, block A, where the Property would ultimately be, was composed of wetlands that were not designated as "to be filled[.]" Thus, Mr. Randles opined that if someone was going to put fill in block A, that person would need a permit. Lot 5, however, did contain the designation that a portion was "to be filled[.]" At one of the planning commission meetings in November 1999, Karen-Edwards Smith, Mr. Smith's wife, the vice-president of Smith Land, and also an attorney, appeared on behalf of Smith Land. Ms. Edwards-Smith told the commission that the lots will only appeal to certain individuals. Those people "would be ones that are interested in having a wetlands surrounding because the contracts that are signed as to purchasing these, as well as the plats, reflect that they do not have the right to go in and fill the wetlands without Army Corps of Engineers' permits." Ms. Smith told the commission that, "if the city does grant the lot splits as indicated that no way are we making any representations of building ability of the land itself."

         {¶15} In February 2000, Ms. Robinette's office received a report of a potential unauthorized wetland fill project on Smith Land's property. Employees of the United States Army Corps of Engineers visited the site and discovered that .5 acre of wetland had been filled. Under what was known as a Nationwide Permit or NWP number 26, any impact to wetlands over one-third of an acre and up to three acres required prior notification and mitigation planning. Mitigation planning involves the purchase and, thus preservation, of other wetlands so that there is not a net loss of wetlands. Smith Land did not notify the United States Army Corps of Engineers about the fill and did not mitigate for the impacted wetlands. Accordingly, United States Army Corps of Engineers determined the project was not in compliance with NWP number 26.

         {¶16} Subsequently, Smith Land applied to the United States Army Corps of Engineers to fill .945 acre of jurisdictional wetland and to mitigate the impact by purchasing 2 acres of wetlands elsewhere. In submitting the application, Smith Land included a map of the proposed fill that included the restriction about wetlands that was on the previous plat map. The proposed fill area included a portion of what would become the Property.

         {¶17} In April 2000, Smith Land received a letter from the United States Army Corps of Engineers authorizing the work under NWP number 26. The permit was valid until February 11, 2002, unless activity commenced or was contracted to commence prior to that date, in which case Smith Land would have an additional 12 months to complete activity under the permit. The letter concluded by noting that "[a]ny impacts to the remaining 4.609 acres of jurisdictional wetlands on the subject property would require authorization from this office. Please be aware that the nationwide permit authorization does not obviate the requirement to obtain state or local assent required by law for the activity." The City of Fairlawn was never notified of a violation of the permit. Further, Ms. Robinette was unaware of her office issuing any violation of the permit but she also noted that she was unaware of the United States Army Corps of Engineers being asked to evaluate the land as to whether there was a violation.

         {¶18} Around that time, Smith Land also requested that the city planning commission split block A into three lots. The letter from the United States Army Corps of Engineers was referenced during the planning commission meeting and it and the attachments were considered by the commission. Block A was ultimately split into three lots, one of which became the Property.

         {¶19} The plat map that designates the splitting of block A includes what is labeled a "Note" that specifies that "[t]he lands delineated on this plat as wetlands are jurisdictional waters of the United States under the Federal Clean Water Act and in order to fill any of the delineated wetlands, not shown on this plat as to be filled, a permit must be obtained from the U.S. Army Corps of Engineers." In May 2000, a deed was issued from Smith Land to Smith Land to address the splitting of the lots of block A. That deed did not contain the notation concerning the wetlands that was on the plat map.

         {¶20} In 2002, the Herholds were looking for a vacant lot upon which to build a home. Mr. Herhold first came across the Property and noticed that it was level and freshly graded with woods in the backyard. He observed that it appeared to have fresh dirt as "it was graded, so you could tell that it had just been recently worked up because it was like nice, flat, level." After showing the Property to Ms. Rassavong, Mr. Herhold met Mr. Smith at the Property.

         {¶21} Mr. Smith told Mr. Herhold that Mr. Smith had purchased the land in the area and divided it up into lots. Mr. Smith informed Mr. Herhold that Mr. Smith was building a house on a lot further down, lot 5, and the lot was very similar to the Property. Mr. Herhold said that Mr. Smith used lot 5 as an example of what Mr. Herhold would be able to do. Mr. Smith "was being very encouraging, * * * he was showing [Mr. Herhold] the house he [was] doing just down the road, saying that it is a buildable lot." Mr. Smith did advise Mr. Herhold that he would need a little bit of extra stone for the foundation and that would cost about $5, 000 extra as compared to an average house. Additionally, Mr. Smith told Mr. Herhold that there was some fill dirt on the Property that he had brought in and that "he was allowed to bring fill dirt in there." Mr. Smith indicated that there were wetlands at the back of the Property and showed Mr. Herhold how far back the Property went into the wetlands. However, Mr. Smith did not tell them that the Property had been filled over wetlands.

         {¶22} Thereafter, Mr. Herhold brought family members and his wife out to the Property several times. He estimated that he had been out to the Property at least 10 times at the point he made an offer. In making the offer, Mr. Herhold informed Mr. Smith that he "wanted to make sure that everything was okay with the piece of property, like [Mr. Smith] had said, that it was a buildable lot. * * * [Mr. Herhold] wanted something in [the agreement] to state that it was a buildable lot, and [Mr. Smith] said that was not a problem." Ms. Rassavong added that, due to the visible wetlands in the back, they wanted some assurance that the Property was buildable.

         {¶23} The top of the "Real Estate Purchase Agreement" included a handwritten notation that the "Seller to provide documentation that lot is buildable with fill dirt." There is also an asterisk near the notation which states "See Addendum A[.]" The handwritten notation appears to be initialed by Mr. Smith and the Herholds. The Herholds understood that this notation meant that, with the fill dirt already on the Property, the lot was a buildable lot.

         {¶24} The Real Estate Purchase Agreement also included an "'AS IS' Clause[, ]" which was part of the form agreement. It stated:

Buyer agrees and acknowledges that the property is being conveyed "AS IS" and that neither Seller, Broker, nor Agent have made any representations or warranties, either expressed or implied, regarding the property including, but not limited to, soil conditions, environmental conditions, flooding or flood zone, availability of septic or sewer, availability or condition of well or city water, availability of public utilities, feasibility for construction, zoning, easements, surveying or boundaries, and deed restrictions. Buyer has the sole responsibility to inspect the property before signing this Agreement. Broker or Agent assume no liability for the condition of the property at any time before or after delivery of the deed.
This Agreement is contingent upon an inspection of the property for its suitability for Buyer's intended purpose, including septic/sewer permits and preliminary title search, within sixty (60) days form the date of acceptance of this Agreement. Inspections to be performed by Buyer at Buyer's expense. If Buyer is not satisfied with the condition of the property then Buyer shall notify Seller within the inspection period and Seller may either correct the unsatisfactory condition or void this Agreement in which case all monies held in trust shall be returned to Buyer without further liability between Seller, Buyer, or Broker. If Buyer does not inspect, then the inspection is waived and Buyer takes the property in its present "AS IS" condition. After inspection and correction, if any, and delivery of deed Buyer accepts the property "AS IS". Buyer shall be responsible for the repair and restoration of any damage to the property which may be caused by the inspections.

         {¶25} The Real Estate Purchase Agreement was signed by the Herholds and Mr. Smith, whose signature was followed by "Pres[, ]" under which appeared "Smith Land Co. Inc." Mr. Herhold acknowledged that he did not have any inspections done nor did he contact the City of Fairlawn or Ohio EPA.

         {¶26} The "Addendum to Sales Contract" provides that "[t]he subject site will be required to be engineered by a company such as Messmore Engineering or Summit Testing. As with sub lot 5 * * * Messmore required a base of 1's and 2's (stone) in the construction area under the footer and basement floor. The fill used on sub lot 5 is approximately the same level of fill used on the subject lot." The addendum was signed by the Herholds and Mr. Smith on July 11, 2002.

         {¶27} Mr. Smith also completed a disclosure form. That document lists "Smith Land" as the seller but it is signed by Mr. Smith and the Herholds. With respect to the question, "Are you aware of any violation of either Federal or State Environmental Protection Agency rules or regulations?[, ]" the "NO" box is checked. The disclosure form also reflects, inter alia, that the seller did not know of any flooding, drainage, or grading problems on the Property, did know that the Property was designated as a wetland by a federal or state governmental agency, did not know of any violations of local, state or federal laws, building codes and/or zoning ordinances affecting the Property, and did not know of any excessive settling, slippage, sliding erosion, or other soil stability problems on the Property. The end of the form states "[t]he above information is true and correct to the best of my knowledge and, except as set forth herein, no material problems exist with respect to the property as of the date below. I further agree to notify Purchase[r] of any additional items which may become known to me prior to the recording of the deed." Mr. Herhold testified that he relied on the disclosure form when he made an offer on the Property.

         {¶28} The Herholds purchased the Property for $55, 000. Mr. Herhold averred that when he did so he believed that he purchased a buildable lot. Based on the representations made to him, Mr. Herhold believed that all he had to do to build on the lot was to add some extra stone for the foundation as specified in the Addendum. The deed was filed September 4, 2002.

         {¶29} Shortly after purchasing the Property, in November 2002, Mr. Herhold, who was in the United States Navy Reserve, was deployed to Japan for nearly a year. When Mr. Herhold returned almost a year later, the couple ...

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