City of Akron v. Hardgrove Enterprises, Inc.

• Decision Date: 07 November 1973
• Citation: 1 O.O.3d 275,353 N.E.2d 628,47 Ohio App.2d 196
• Parties: , 1 O.O.3d 275 CITY OF AKRON, Appellant, v. HARDGROVE ENTERPRISES, INC., et al., Appellees.
• Court: Ohio Court of Appeals

Page 196

47 Ohio App.2d 196

353 N.E.2d 628, 1 O.O.3d 275

CITY OF AKRON, Appellant, v. HARDGROVE ENTERPRISES, INC., et al., Appellees.

Court of Appeals of Ohio, Ninth District, Summit County.

Nov. 7, 1973.

Syllabus by the Court

1. In an appropriation action, it is error to admit a lease of the property into evidence and to permit the jury to consider its terms and conditions, as well as the value of the remaining leasehold interests, and include it in the compensation award.

2. In Ohio, a shareholder or officer of a corporation is not the owner and cannot ipso facto qualify as an expert on the value of the corporate property.

3. It is error to permit the reading of an appraisal text book without there being any foundation laid for such hearsay evidence.

4. The trial court should not permit testimony concerning the possible use of a building and its accompanying rental value when the building is not zoned for such use and there is no evidence that it is reasonable and probable that the zoning would change to permit such use within the foreseeable future.

5. While the trial court would have to permit an individual owner to represent himself, it need not permit a corporation to be represented by its non-lawyer officers.

William R. Baird, Director of Law, and Harry A. Tipping, Akron, for appellant.

Dan J. Cavanaugh, Akron, for appellee Hardgrove Enterprises, Inc.

MAHONEY, Judge.

The city of Akron commenced an action in the Court of Common Pleas of Summit County to appropriate, for urban renewal purposes, a building and lot known as 760-762-764 South Main Street, in the city of Akron. The real estate consists of three first floor separate storerooms, with full basements underneath, and with private apartments and professional offices over the storerooms.

The condemned property was owned by Hardgrove Enterprises, Inc., a small family corporation, whose officers and sole shareholders are Robert and William Hardgrove-father and son, respectively. The corporation leased the storerooms and basements to the Akron Novelty and Merchandise Company, a sole proprietorship of the father, and in which both father and son were employed.

The trial court permitted William Hardgrove to act as trial attorney for the property owner, although he was, admittedly, not licensed to practice law. A licensed attorney (Hardgrove's present counsel) sat at the trial table but did not participate in the trial.

The date of the 'take' was stipulated as March 9, 1973.

Upon trial, the jury awarded the property owner the sum of $65,000 as compensation.

The city of Akron has appealed that verdict, setting forth the following assignments of error:

'1. The trial court erred by admitting in evidence alleged comparable sale properties offered by the Hardgrove corporation for which no proper foundation had been laid.

'2. The trial court erred by admitting in evidence a photograph of the subject property depicting its condition a substantial period prior to the date of take.

'3. The trial court erred by admitting in evidence a lease between the property owner and the tenant business owned and operated by the officers of said corporation which contained self-serving rental value and an apparent uncompensated leasehold interest.

'4. The verdict rendered by the jury was contrary to the weight of the legally admissible evidence.'

We have examined the record and find the following errors:

1. The trial court admitted in evidence a photograph (circa 1955) of the front of the building. This photograph had no bearing or relevancy to the condition of the building at the date of 'take' or to any other issue in the case. Its admission per se was innocuous. (Bekos v. Masheter, 15 Ohio St.2d 15, 238 N.E.2d 548.)

2. The trial court admitted in evidence the lease from 'Hardgrove' to 'Akron Novelty' (Property Owner's Exhibit B). Ordinarily, rentals that are received are proper evidence to be used in determining the fair market value of income producing property, but those rents should be as the result of an 'arm's length transaction,' and not one negotiated by interrelated parties, as in this case. Even so, the oral testimony was probably rendered admissible by the statement, on cross-examination, of the city's expert, James Nobil, who said that $500 a month was a fair rental.

However, it was error to admit the lease itself, since it did permit the jury to consider its terms and conditions and, perhaps, even speculate on the value of the remaining leasehold interests and include it in their compensation award. Such an issue was not before the jury. (See, Pokorny v. Local 310, 35 Ohio App.2d 178, 300 N.E.2d 464; Cincinnati v. Spangenberg, 35 Ohio App.2d 168, 300 N.E.2d 457; Bd. of county Commrs. v. Thormyer, 169 Ohio St. 291, 159 N.E.2d 612; Queen City Readty Co. v. Linzell, 166 Ohio St. 249, 142 N.E.2d 219, and Sowers v. Schaeffer, 155 Ohio St. 454, 99 N.E.2d 313.)

3. The trial court permitted Robert Hardgrove to testify as an expert and give his opinion on the fair market value of the subject property. The court considered him an owner, while the witness believed that he was 'self-ordained,' and his attorney argued, in the brief, that his testimony was offered as a qualified expert.

The law in Ohio is that a shareholder or officer of a corporation is not the owner and cannot ipso facto qualify as an expert on the value of the corporate property. Such a person must show that he is qualified because of knowledge gained independently, just as it is gained by an ordinary expert. (See, annotations, 5 A.L.R. 1171; 45 A.L.R. 1494; and 159 A.L.R. 7. Also, Marlie Trading, Inc. v. Biggs Boiler Works Co., 112 Ohio App. 428, 176 N.E.2d 301.)

In the instant case, the testimony of Robert Hardgrove shows some knowledge of real estate, but only as to two residential rental apartments or properties, three recreational cottages, and, perhaps, one commercial building. We do not feel that this was sufficient, as a matter of law, to qualify him as an expert on the fair market value of commercial properties.

4. The trial court admitted testimony of Robert Hardgrove relating to 'comparable rents' in the area. Since this is a total 'take,' the value of the leasehold interest is not an issue, and evidence concerning comparable rents would not be admissible. Also, Robert Hardgrove could not qualify as an expert simply by checking many properties. His opinion that they were getting only 'half as much' rents as they would pay elsewhere was clearly prejudicial.

5. The trial court permitted the property owners, on direct examination, to offer evidence concerning 'comparable sales' without first having a proper foundation laid. Masheter v. Hoffman, 34 Ohio St.2d 213, 298 N.E.2d 142. The court, before permitting evidence of the sale price, should require the party offering such evidence to show that:

(a) The sale was between a willing seller and a willing buyer, neither of whom is required to buy or sell;

(b) It was an 'arm's length' transaction...