[Cite as Schnippel Constr., Inc. v. Profitt,

.]

IN THE COURT OF APPEALS OF OHIO THIRD APPELLATE DISTRICT SHELBY COUNTY

SCHNIPPEL CONSTRUCTION, INC.,

PLAINTIFF-APPELLANT, CASE NO. 17-09-12

v.

JIM PROFITT, ET AL, OPINION

DEFENDANTS-APPELLEES.

Appeal from Shelby County Common Pleas Court Trial Court No. 07CV000437

Judgment Affirmed

Date of Decision: November 9, 2009

APPEARANCES:

Timothy G. Pepper for Appellant

Roger L. Sabo for Appellee Case No. 17-09-12

PRESTON, P.J.

I. Facts & Procedural History

{¶1} Plaintiff-appellant, Schnippel Construction, Inc. (“Schnippel”),

appeals the Shelby County Court of Common Pleas’ grant of summary judgment

in favor of defendant-appellees Jim Profitt (“Profitt”) and Service Contract

Administrators, Inc. (“SCA”). For the reasons that follow, we affirm.

{¶2} Schnippel is an Ohio corporation and non-union contractor for

private and public commercial construction projects in the State of Ohio.

(Complaint, Doc. No. 2, ¶¶1, 5). On or about October 4, 1996, Schnippel

executed and adopted a welfare benefit plan sold by SCA through its trustee or

fiduciary, Profitt, and administered by Prevailing Wage Contractors Association,

Inc. (“PWCA”). (Id. at ¶10). Schnippel executed and adopted this benefit plan

based upon Profitt’s representation that PWCA’s benefit plan complied with

federal and state prevailing wage laws. (Id. at ¶7). The PWCA benefit plan was

subsequently amended, and Schnippel adopted the amended plan in 2001. (May 5,

2009 JE, Doc. No. 127); (Profitt Aff. ¶8, Ex. B).

{¶3} In 2005, Schnippel entered into a contract with Montgomery County

for construction on a solid waste treatment plant. On June 20, 2006, the

International Association of Bridge, Structural, Ornamental, and Reinforcing Iron

Workers, Local Union 209 filed suit against Schnippel alleging violations of

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Ohio’s prevailing wage laws. (Doc. No. 2, ¶¶11-12); (Doc. No. 9, attached). In

August 2007, Schnippel entered into a settlement agreement with Local 290,

wherein it agreed to: pay $60,000.00 in damages, penalties, and attorney’s fees;

and abstain from bidding on projects within Local 290’s territorial jurisdiction for

a period of three (3) years. (Sharon Schnippel Depo., Ex. C).

{¶4} On December 19, 2007, Schnippel filed a complaint against SCA,

Profitt, and PWCA, alleging negligent misrepresentation and fraud against

defendants SCA and Profitt and breach of contract and tortious breach of duty

arising via contract against defendant PWCA. (Doc. No. 2).

{¶5} On February 9, 2009, SCA and Profitt filed motions for summary

judgment. (Doc. Nos. 85-86). On March 18, 2009, Schnippel voluntarily

dismissed defendant PWCA pursuant to Civ.R. 41(A). (Doc. No. 114). On March

26, 2009, Schnippel filed its memorandum in opposition to the motion for

summary judgment to which SCA replied on April 3, 2009. (Doc. Nos. 120, 126).

Schnippel also dismissed its fraud claim against defendants SCA and Profitt. (May

5, 2009 JE, Doc. No. 127).

{¶6} On May 5, 2009, the trial court granted SCA and Profitt summary

judgment on Schnippel’s remaining claim of negligent misrepresentation, finding

that it was barred by the applicable statute of limitations. (Id.).

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{¶7} On June 2, 2009, Schnippel filed a notice of appeal. (Doc. No. 135).

Schnippel now appeals raising two assignments of error for our review.

II. Standard of Review

{¶8} Before addressing the merits of Schnippel’s assignments of error, we

must set forth the applicable standard of review. An appellate court reviews a

grant or denial of summary judgment pursuant to Civ.R. 56(C) de novo. Wampler

v. Higgins (2001),

,

, citing Doe v. Shaffer

(2000),

,

, citing Grafton v. Ohio Edison

Co. (1996),

,

. To prevail under Civ.R.

56(C), a party must show: (1) there are no genuine issues of material fact; (2) it

appears from the evidence that reasonable minds can reach but one conclusion

when viewing evidence in the nonmoving party’s favor, and that conclusion is

adverse to the nonmoving party; and (3) the moving party is entitled to judgment

as a matter of law. Civ.R. 56(C); Shaffer,

; Grafton,

.

{¶9} Material facts have been identified as those facts “that might affect

the outcome of the suit under the governing law.” Turner v. Turner (1993),

,

, citing Anderson v. Liberty Lobby, Inc.

(1986),

, 248

,

. “Whether a genuine

issue exists is answered by the following inquiry: [d]oes the evidence present “a

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sufficient disagreement to require submission to a jury” or is it “so one-sided that

one party must prevail as a matter of law[?]”

citing Liberty Lobby, Inc.,

.

{¶10} Summary judgment should be granted with caution, resolving all

doubts in favor of the nonmoving party. Osborne v. Lyles (1992),

,

. “The purpose of summary judgment is not to try issues

of fact, but is rather to determine whether triable issues of fact exist.” Lakota Loc.

Schools Dist. Bd. of Edn. v. Brickner (1996),

,

.

III. Analysis

ASSIGNMENT OF ERROR NO. I

THE TRIAL COURT ERRED IN DETERMINING WHEN APPELLANT’S NEGLIGENT MISREPRESENTATION CLAIMS ACCRUED, BECAUSE THE TRIAL COURT FAILED TO FOLLOW THE OHIO SUPREME COURT’S PRECEDENT OF UTILIZING THE ACTUAL INJURY RULE FOR NEGLIGENCE CLAIMS.

ASSIGNMENT OF ERROR NO. II

THE TRIAL COURT ERRED IN DETERMINING WHEN APPELLANT’S NEGLIGENT MISREPRESENTATION CLAIMS ACCRUED, BECAUSE THE TRIAL COURT FAILED TO DISTINGUISH THE DISCOVERY RULE FROM THE ACTUAL INJURY RULE.

{¶11} In its first assignment of error, Schnippel argues that the tort of

negligent misrepresentation accrued in September 2007 when it settled the lawsuit

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with Local 209. Specifically, Schnippel argues that its negligence claim against

Profitt and SCA was not actionable until September 2007 because until then it had

suffered no injury or damages. As a corollary to this argument, Schnippel argues

in its second assignment of error that the trial court erred in determining when his

negligent misrepresentation claim accrued because the trial court failed to

distinguish the actual injury/delayed damages rule1 from the discovery rule.

{¶12} Profitt and SCA, on the other hand, argue that the alleged negligent

misrepresentations occurred in 1996 or 2001, at the latest, and, as such, are barred

by R.C. 2305.09(D)’s four-year statute of limitations. Appellees also point out

that the discovery rule does not apply to negligent misrepresentation claims, and

that the “actual injury rule” cited by appellant was for construction cases only.

Since the alleged negligent misrepresentations occurred in 1996 or 2001, the

complaint was filed in 2007, and the discovery rule is inapplicable, appellees

argue that the trial court correctly determined the complaint was time-barred.

{¶13} We will examine the trial court’s judgment entry, the relevant statute

of limitations, and case law cited by the trial court in support of its decision.

Ultimately, we conclude that the delayed damages rule is inapplicable herein since

1 The “delayed damages” rule is also referred to as the “actual injury” or “actual damage” rule. See, e.g., O’Stricker v. Jim Walter Corp. (1983),

,

(actual injury rule); Shaker Courts Condo. Unit Owners’ Ass’n, Inc. v. Indus. Energy Sys., Inc., (Feb. 24, 2000), 8th Dist. No. 75378, *2 (“actual injury or damage” rule).

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Schnippel was damaged when Profitt and SCA allegedly made the negligent

misrepresentation.

{¶14} The trial court sub judice found that the parties agreed that the

applicable statute of limitations for negligent misrepresentation is four years. (May

5, 2009 JE, Doc. No. 127). The sole issue presented to the trial court was “* * *

when did the cause of action accrue. Did the cause of action accrue in 1996 when

the alleged negligent misrepresentation took place or did it accrue in 2006 or 2007

when Schnippel was sued or settled that lawsuit?” (Id.). The trial court

acknowledged the Fifth District’s decision in J.P. Morgan Chase Bank v.

Lanning—which found that a mortgagor’s cause of action against a title company

for negligently altering his mortgage accrued when his property was wrongfully

foreclosed upon, not when the negligent alteration occurred—but found the Ohio

Supreme Court’s decision in Investors REIT One v. Jacobs and our decision in

Reidel v. Houser controlling. (Id., citing (1989),

,

; (1992),

,

). The trial court also found

persuasive that the Court of Appeals in other districts have rejected the delayed

damages rule as a way to circumvent the unavailability of the discovery rule in

negligence actions. (Id., citing Chandler v. Schriml (May 25, 2000), 10th Dist. No.

99AP-1006. See, also, Dancar Properties, Ltd. v. O’Leary-Kientz, 1st Dist. No. C-

030936,

; James v. Partin, 12th Dist. No. CA2001-11-086,

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, ¶25). Ultimately, the trial court concluded that Schnippel’s

negligent misrepresentation cause of action accrued in 1996 when the alleged

misrepresentations were made, or, at the latest, in 2001 or 2002 when amendments

to the benefit plan were made. (Id.). Since Schnippel’s claim accrued in 2002, at

the latest, and its complaint was filed in December 2007, the trial court concluded

that Schnippel’s claim was time-barred. (Id.). We agree.

{¶15} As the trial court found, the parties do not dispute that R.C.

2305.09(D)’s four-year statute of limitations governs negligent misrepresentation

claims. The parties also are not disputing whether the discovery rule is applicable

for negligent misrepresentation claims. (Appellant’s Brief at 14, “The discovery

rule is irrelevant to Schnippel’s negligent misrepresentation claim.”). Rather,

Schnippel claims that the trial court’s reliance upon Investors REIT One was in

error since that case, unlike his case, dealt with the discovery rule and not claim-

accrual.

{¶16} In Investors REIT One, the Ohio Supreme Court specifically

determined that: (1) claims of professional accountant negligence are governed by

R.C. 2305.09(D)’s four-year statute of limitations; and (2) that the discovery rule

was unavailable for claims of professional accountant negligence.

, at paragraphs 1 and 2a of the syllabus. The Ohio Supreme Court has since

reaffirmed Investors REIT One. Grant Thornton v. Windsor House, Inc. (1991), 57

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,

. Several Appellate Courts, relying upon

Investors REIT One, have rejected the discovery rule for other negligence actions

governed by R.C. 2305.09(D)’s four-year statute of limitations. For example, the

First District has held that “the Ohio Supreme Court’s rejection of the discovery

rule in cases against accountants [Investors REIT One] applies generally to claims

for professional negligence controlled by R.C. 2305.09.” Dancar Properties, Ltd.,

, citing Hater v. Gradison Div. of McDonald & Co.

Securities, Inc. (1995),

,

. The Fifth and

Seventh Districts have rejected the discovery rule for cases involving negligent

investment advice generally. Kegg v. Mansfield (Apr. 30, 2001), 5th Dist. No.

2000CA00311, at *4, citing Hater,

; Hirschl v. Evans,

(Mar. 27, 1996), 7th Dist. No. 94 C.A.43, at *3. The First and Tenth Districts

have specifically rejected the discovery rule for negligent misrepresentation

claims, like at issue herein. Chandler, 10th Dist. No. 99AP-1006, at *2. See, also,

Dancar Properties, Ltd. (1st Dist.),

. Therefore, the

trial court’s conclusion that the discovery rule was inapplicable to negligent

misrepresentation claims, relying upon Investors REIT One, was not in error.

{¶17} With respect to Schnippel’s argument that the delayed damages rule

is applicable and distinguishable from the discovery rule, this Court rejected that

argument, at least implicitly, in Riedel v. Houser,

. In

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that case, Riedel filed a claim alleging that Houser negligently prepared his sales,

use, and permissive tax returns for the years 1983 to 1986.

. The trial

court granted Houser summary judgment based upon R.C. 2305.09(D)’s four-year

statute of limitations.

On appeal, Riedel, like Schnippel herein, argued that the

trial court misinterpreted Investors REIT One and urged this Court to distinguish

the discovery rule in Investors REIT One from the delayed damages rule in order

to preserve his claim.

. We, however, declined Riedel’s offer,

followed Investors REIT One, and found that the discovery rule was unavailable

for claims of professional accountant negligence.

. This Court rejected

Riedel’s attempt to distinguish the delayed damages rule from the discovery rule,

stating “[w]e believe the distinction urged by appellant to be without difference

where the discovery rule is applicable for determination of the accrual of a cause

of action.”

. We further found that, in light of Investors REIT One,

“consideration of the discovery rule [was] irrelevant to application of R.C.

2305.09(D) in cases of accountant’s professional negligence.”

Therefore, we

also cannot conclude that the trial court’s reliance upon our decision in Houser to

reject Schnippel’s delayed damages argument was in error.

{¶18} Several appellate districts have agreed with our statement in Riedel

v. Houser—that the distinction between the delayed damages rule and the

discovery rule for accountant negligence claims was a distinction without a

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difference—and have rejected attempts to use the delayed damages rule as a way

to circumvent the unavailability of the discovery rule for similar claims. Hater,

(1st Dist. 1995),

; Rihm v. Wade (Dec. 10, 1999), 2nd

Dist. No. 17802, at *4; Hirschl, 7th Dist. No. 94 C.A.43, at *3; Bell v. Holden

Survey, Inc. (Sept. 29, 2000), 7th Dist. No. 729, at *5; Chandler, 10th Dist. No.

99AP-1006, at *2; Partin, 12th Dist. No. CA2001-11-086, at *2. Several other

appellate districts have rejected the delayed damages rule primarily relying upon

Investors REIT One. Fronczak v. Arthur Anderson, L.L.P. (10th Dist. 1997),

,

; Jim Brown Chevrolet, Inc. v. S.R.

Snodgrass, A.C. (11th Dist. 2001),

,

.

See, also, Accelerated Sys. Integration, Inc. v. Hausser & Taylor, L.L.P., 8th Dist.

No. 88207,

. Although many of these cases involved

professional accountant negligence claims, the Seventh and Twelfth Districts have

rejected the delayed damages rule for professional negligence claims against

surveyors as well. Bell v. Holden Survey, Inc. (Sept. 29, 2000), 7th Dist. No. 729,

at *5; Partin, 12th Dist. No. CA2001-11-086, at *2. The Tenth District rejected

the delayed damages rule for a negligent misrepresentation claim. Chandler, 10th

Dist. No. 99AP-1006, at *2.

{¶19} Despite the overwhelming authority rejecting the delayed damages

rule, the Fifth and Sixth Districts have extended it in a few cases. In Gray v.

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Estate of Barry, the Sixth District held that R.C. 2305.09(D)’s four-year statute of

limitations for accountant malpractice founded on negligent preparation or filing

of tax returns did not begin to run until after the client was notified by the I.R.S.

that a penalty had been assessed for such faulty preparation or failure to file.

(1995),

,

. In that case, accountant

John E. Barry, deceased, had provided accounting and tax preparation services to

Joseph W. Gray III, M.D., Inc.

. On July 14, 1993, Gary filed suit

against Barry’s estate alleging that Barry had negligently failed to file I.R.S. form

5500R along with the remainder of his 1987 tax return at the close of the 1987 tax

year.

As a result of Barry’s failure to file the appropriate forms, Gary alleged

that he incurred a $9,000.00 I.R.S. tax penalty.

In response, Barry’s estate filed

a motion to dismiss arguing that Gary’s action was time-barred under R.C.

2305.09(D)’s four-year statute of limitations.

Barry’s estate argued that any

wrongful act on Barry’s part had occurred, at the latest, in 1988, and since there

was no discovery rule for accountant malpractice, Gary should have filed his suit

no later than 1992.

The trial court agreed with Barry’s estate and granted the

motion to dismiss, citing Philpott v. Ernst & Whinney (Nov. 25, 1992), 8th Dist.

No. 61203.

{¶20} On appeal, Gary argued that the discovery rule should apply and,

alternatively, that the cause of action did not accrue until the I.R.S. assessed the

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penalty in 1993.

The Sixth District rejected Gary’s argument for a discovery

rule, citing Investors REIT One, but found his argument with respect to delayed

damages persuasive.

, citing Investors REIT One,

.

The Court in Gray distinguished the case at bar from Investors REIT One and a

line of appellate cases, on the basis that its case dealt with claim accrual, not

discovery of an existing claim. Id. at 768. The Court in Gray acknowledged

Philpott but, nonetheless, found Philpott’s dissent more persuasive. Id. at 767-78.

The Court reasoned as follows:

We agree with the dissent in Philpott and the court of appeals opinion in Sladky. Philpott, Sladky and the present case are not discovery cases. The issue in each is the time at which the cause of action accrued. In any negligence action, a claim for which relief may be granted cannot be maintained absent the presence of all essential elements. “To establish actionable negligence, one must show * * * the existence of a duty, a breach of that duty and injury resulting proximately therefrom.” Mussivand v. David (1989),

,

. Since there can be no negligence without injury, there can be no negligent conduct by which a cause accrues, pursuant to Holsman, until there is an injury to a legally protected interest. Kunz v. Buckeye Union Ins. Co., supra. In the case of a negligently prepared tax return or a tax form negligently omitted from a return, there is no injury until the I.R.S. determines to levy a penalty assessment. Until that time, no claim upon which relief can be granted exists. Similarly, it is not until such a claim may be maintained that the time for any statute of limitation begins to run.

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Id. at 768. Utilizing the date when Gary received notice from the I.R.S. that it was

imposing a penalty, the appellate court determined that Gary’s action was filed

within R.C. 2305.09(D)’s four-year time limitation. Id. at 769.

{¶21} The Fifth District subsequently adopted Gary v. Estate of Barry’s

delayed damages rule with respect to actions against accountants for negligent

preparation of tax returns. Fritz v. Brunner Cox, L.L.P. (2001),

,

. In doing so, however, the Fifth District acknowledged:

* * *that other courts, in interpreting and applying Investors REIT One, would find that appellants’ complaint against appellees for accountant negligence was time-barred, since it was not filed within four years after the alleged negligent act was committed, which, in this case, was the filing of appellants’ 1994 federal income tax return on September 14, 1995. However, that interpretation of Investors REIT One would lead to an illogical and inequitable result, namely, that appellants’ claims against appellees would be time-barred before appellants’ damages even manifested themselves.

. More recently, the Fifth District applied its reasoning in Fritz and held

that a mortgagor’s cause of action against a title company for negligently altering

his mortgage accrued when the bank filed a foreclosure complaint against the

wrong property in reliance upon the incorrect legal description of the property

provided by the title company, not when the title company negligently altered the

mortgage. J.P. Morgan Chase Bank v. Lanning, 5th Dist. No. 2007CA00223,

.

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{¶22} Schnippel asks this Court to adopt the reasoning of these cases

applying the delayed damages rule. While we acknowledge Gray, Fritz, and

Lanning, we are not persuaded by them for several reasons. To begin with, in

Houser we rejected the delayed damages rule adopted by the Courts in Gray and

Fritz.

. Additionally, the holding in Sladky v. Lomax (9th

Dist., 1988),

,

, upon which the dissent in

Philpott and the Courts in Gray and Fritz relied, has been questioned following

Investors REIT One. Lord v. Ernst & Whinny (June 3, 1992), 9th Dist. No. 15361,

at *2; Jodway Heating, L.L.C. v. Stevens, 9th Dist. No. 08 CA0089-M, 2009-Ohio-

5054, ¶10. Furthermore, a majority of Ohio’s appellate districts have rejected the

delayed damages rule in similar cases. For its part, Lanning,

, is

distinguishable since it did not involve negligent misrepresentation, and

furthermore, we reject it since it relies upon Gray and Fritz, which cases are

contrary to our decision in Houser.

{¶23} We also find the Tenth District’s decision in Chandler persuasive.

10th Dist. No. 99AP-1006. In that case, the property owners and the real estate

company represented to Chandler that the duplex he was purchasing was properly

used as a two-family unit for zoning purposes. Id. at *1. Based upon that

representation, Chandler closed on the duplex on April 26, 1994. Id. In April of

1998, Chandler decided to sell the duplex and discovered that it, in fact, was not

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zoned for two-family use but for single-family use, contrary to the owners’ and

real estate company’s representations. Id. On August 7, 1998, Chandler filed a

complaint alleging, in pertinent part, negligent misrepresentation against the real

estate company and the owners. Id. The trial court, however, granted summary

judgment against Chandler, finding that his negligent misrepresentation claim was

time-barred under R.C. 2305.09. Id.

{¶24} On appeal, Chandler argued that his claim was not time-barred since

it did not accrue until he suffered damages, which was when he discovered the

zoning defect. Id. at *2. Chandler, like Schnippel herein, attempted to distinguish

the discovery rule from the delayed damages rule to avoid the unavailability of the

latter. Id. The Tenth District, however, found Chandler’s argument irrelevant,

because Chandler did not suffer delayed damages as he opined. Id. at *3.

According to the Court, Chandler was injured at the time he purchased the duplex,

and his cause of action accrued at the time of the negligent misrepresentation. Id.

The Court reasoned as follows:

Chandler alleged in his complaint that he would not have purchased the duplex for the amount paid had he known that the duplex was zoned for single-family use. From the time he closed on the property, Chandler owned less than he believed. Thus, Chandler’s injury occurred at the closing on April 26, 1994. The fact that Chandler did not realize his injury until much later does not change the fact that the financial injury occurred at the closing.

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Id. at *4. The appellate court affirmed the trial court’s decision finding that

Chandler’s negligent misrepresentation claim was time-barred under R.C.

2305.09(D). Id.

{¶25} As the Court found in Chandler, we find that Schnippel’s argument

in support of delayed damages is irrelevant, because Schnippel did not suffer

delayed damages. Id. at *3. Schnippel, like Chandler, alleged that he purchased

the PWCA benefit plan based upon the negligent misrepresentations of Profitt and

SCA that the plan complied with federal and state prevailing wage laws.

(Complaint, Doc. No. 2, at ¶¶6-10). Accordingly, like the Court in Chandler

found, we find that Schnippel was damaged in 1996 when he purchased (or, at the

latest, in 2001 when he renewed) the PWCA benefit plan. 10th Dist. No. 99AP-

1006, at *4. Assuming its allegations are true, Schnippel, like Chandler,

purchased less than it received based upon Profitt and SCA’s misrepresentations.

Chandler, 10th Dist. No. 99AP-1006, at *4. That Schnippel did not discover that

he was damaged until 2006 when Local 290 filed suit does not change the fact that

he suffered damages at the time he purchased (or renewed) the PWCA benefit

plan. Id. Therefore, based upon Chandler, we reject Schnippel’s argument that he

suffered delayed damages.

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IV. Conclusion

{¶26} Since Schnippel’s negligent misrepresentation claim accrued, at the

latest, in 2001 or 2002 when it renewed the PWCA benefit plan, and its complaint

was filed in December 2007, Schnippel’s claim is time-barred under R.C.

2305.09(D)’s four-year statute of limitations.

{¶27} Schnippel’s first and second assignments of error are both overruled.

{¶28} Having found no error prejudicial to the appellant herein in the

particulars assigned and argued, we affirm the judgment of the trial court.

Judgment Affirmed

WILLAMOWSKI and SHAW, J.J., concur.

/jlr

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