The Supreme Court of Ohio determined a trial court was correct to rule that a Bay Village property owner need not identify a sanitary-sewer running through his lakefront property as a “material defect” in a real estate transaction.

Just as the dissenting appellate judge wrote in consideration of the appeal of the original claim brought by the property owner, Keith Ashmus, against Westlake couple, Thomas and Melissa Coughlin, justices parsed the language of the statute that stipulates the residential property disclosure form in these transactions.

“A reasonable person might say that a sewer line had a defect if a pipe was cracked and sewage backed up,” Justice Pat DeWine wrote for the 7-0 court. “But few speakers would say that a sewer line was defective if it worked perfectly, but was in an inconvenient location.”

According to case summary, the Coughlins sought to build their Lake Erie dream home after viewing a promotional video featuring drone footage of Ashmus’ property.

The couple’s plan was to tear down the existing structure and build a new home, summary provided.

The Coughlins submitted a purchase offer that provided $200,000 in earnest money subject to a 14-day due-diligence period to allow for an evaluation of the land and feasibility for the project.

The couple agreed to purchase the property as is, waiving the right to all other inspections, and Ashmus accepted the offer.

Ashmus noted that the property was served by a public sewer and left blank a catch-all section of the disclosure form that requires the seller to list “any other known defects,” summary continued.

Weeks after the due-diligence period ended, but before the closing date, the Coughlins discovered a recorded sewer easement while reviewing Bay Village city records.

The sewer easement also was identified on the title commitment the couple later received, the summary detailed.

Having determined the sewer line would interfere with the plan to build a new home on the property, the couple explored the option of moving the sewer line, which they ultimately decided was impractical due to cost and easement issues.

The Coughlins did not close on the property, and Ashmus later sold the property to a different buyer.

He sued the Coughlins for breach of the purchase contract, seeking $93,500 in damages — the difference between the contract price and the price he received from a subsequent buyer.

Denying liability, the Coughlins argued that Ashmus’ failure to disclose the sewer line excused them from their duty to perform on the contract.

The couple also filed a counterclaim, asserting the sewer line constituted a physical defect that Ashmus was legally required to list on the disclosure form and that Ashmus fraudulently failed to disclose its existence, summary provided.

Both parties moved for summary judgment, which the trial court granted to Ashmus.

The court held that the sewer easement was recorded in a public record dating back to 1964, giving the Coughlins constructive notice.

Additionally, the trial court also found that the Coughlins failed to produce any evidence that the sewer line materially and adversely impacted the use or value of the property.

The couple appealed to the Eighth District Court of Appeals, which resulted in a split decision in their favor.

The 2-1 panel held that there existed a genuine issue of material fact relative to the existence of the sewer line and an adverse effect on the Coughlins’ planned use of the property, summary continued. The appellate panel also held it was unclear whether Ashmus completed the form in good faith.

“Notwithstanding the ordinary meaning of ‘defect,’ the court of appeals looked to the language in the disclosure form stating that a defect ‘includes any non-observable condition that could inhibit a person’s use of the property,’” DeWine continued. “In applying that clause, the court of appeals focused on the Coughlins’ planned use of the property. … The form’s provision uses the indefinite article ‘a’ — ‘a person’s use of the property.’ The use of the indefinite article ‘a’ suggests that a single, but unspecified, person is the standard. In this context, the disclosure form does not require that the seller anticipate how a particular buyer might use the property; instead, the form requires that the seller describe a condition that would interfere with an ordinary buyer’s use of the property.”

DeWine concluded that the sewer line did not constitute a “non-observable physical condition that could inhibit a person’s use of the property,” and therefore was not a material defect required by law to be listed on the form.

“Because Ashmus did not have a duty to disclose the sewer line, the Coughlins cannot prevail on their claim for fraudulent concealment,” the justice wrote. “Thus, the trial court correctly entered summary judgment in favor of Ashmus and against the Coughlins.

The high court decision reverses the Eighth District ruling, reinstating the trial court judgment.