Smith v. Padgett

Decision Date16 September 1987
Docket NumberNo. 86-1537,86-1537
Citation32 Ohio St.3d 344,513 N.E.2d 737
PartiesSMITH et al., Appellants, v. PADGETT, Appellee.
CourtOhio Supreme Court

Syllabus by the Court

1. Where a landlord breaches a promise to make repairs to the leased premises and the tenant does not elect to make the repairs, the measure of damages is the difference between the rental value of the premises in their unrepaired condition and what the rental value would have been had the promised repairs been made. The stipulated rent amount is presumptive evidence of the rental value of the premises as repaired, but it is not conclusive.

2. A lessee of real property is competent to give opinion testimony as to the rental value of the leased premises.

3. Under R.C. 5321.16(B) and (C), a landlord who wrongfully withholds a portion of a tenant's security deposit is liable for damages equal to twice the amount wrongfully withheld and for reasonable attorney fees. Such liability is mandatory even if the landlord gave the tenant an itemized list of deductions from the deposit pursuant to R.C. 5321.16(B).

4. If the trial court finds that a landlord has wrongfully withheld a portion of the tenant's security deposit, it shall determine the amount of reasonable attorney fees to be awarded on the basis of the evidence presented. Although such determination shall not be reversed except upon abuse of discretion, the award must relate solely to the fees attributable to the tenant's security deposit claim under R.C. 5321.16.

In September 1982, plaintiffs-appellants, Ruth and Henry Smith, rented a house from defendant-appellee, Kenneth W. Padgett. The agreement called for $300 rent per month, plus a $300 security deposit. Appellants assert that appellee also promised to make repairs to the doors, walls, ceilings and bathroom of the house, and that these repairs were never made despite their repeated requests.

In September 1983, after giving notice of termination, appellants returned possession of the house to appellee. Within thirty days, appellee refunded $26 of appellants' security deposit (withholding the remaining $274) and furnished appellants with an itemized list which purported to justify the deductions. Appellants filed an action in small claims court, seeking the balance of their deposit. Soon thereafter, appellee revised the list of deductions to reflect a total amount of $245.50 withheld, and issued a check to appellants for the balance of $54.50.

Subsequently, appellants amended their complaint to allege two causes of action: one claiming breach of contract and the other claiming that appellee had wrongfully withheld $204 from their security deposit. On their contract claim, appellants sought a refund of the difference between the agreed rental amount of $300 per month and the reasonable rental value of the house in its unrepaired condition, which they alleged to be $225 per month. On their security deposit claim, appellants sought a return of the $204, plus damages in an equal amount and reasonable attorney fees pursuant to R.C. 5321.16(C).

At a hearing before a referee, appellants attempted to testify as to the reasonable rental value of the house in its unrepaired state, but the referee disallowed such testimony on the ground that appellants had not established their expertise in real estate matters.

In his report, the referee found that appellee had properly withheld $195 of the security deposit, and therefore should have returned $105 to appellants. Apparently not taking into account either the $26 or the $54.50 that had previously been refunded, the referee recommended judgment for appellants in the amount of $105. The referee denied appellants' claim for attorney fees, and made no award of double damages on the amount he found to be wrongfully withheld. The referee made no mention of appellants' contract claim.

Appellants filed objections to the referee's report with the municipal court, but the court overruled such objections and entered judgment for appellants for $105. The court of appeals affirmed, holding that (1) appellants, as non-experts, were properly prevented from testifying as to the reasonable rental value of the house, and (2) the double damages and attorney fees provisions of R.C 5321.16(C) were inapplicable because appellee furnished appellants with an itemized list of the deductions from their security deposit.

The cause is before this court upon the allowance of a motion to certify the record.

George Nicholas Kafantaris, Warren, for appellants.

Peter M. Iskin, Cleveland, and Legal Aid Soc. of Cleveland, urging reversal for amicus curiae, Cleveland Tenants Organization.

HERBERT R. BROWN, Justice.

The parties and the courts below have recognized that this case requires the resolution of two distinct issues: (1) whether a lessee is competent to testify as to his or her opinion of the rental value of the leased premises, absent a showing of specialized knowledge of rental values in general; and (2) whether a landlord who wrongfully withholds a portion of a tenant's security deposit is thereby rendered liable for double damages and reasonable attorney fees under R.C. 5321.16(C), where the landlord timely furnishes the tenant with an itemized list of deductions from the deposit pursuant to R.C. 5321.16(B). As the amicus curiae suggests, however, a proper resolution of the first issue requires a threshold determination of the measure of damages recoverable by a tenant when a landlord breaches a promise to make repairs to the leased premises. Clearly, the competence of a lessee to give an opinion as to the reasonable rental value of the leased premises is meaningless unless such opinion is relevant to the determination of damages.

I
A

Ohio courts have held that where a landlord breaches a promise to make repairs to the leased premises, a proper measure of the tenant's damages is "the difference between the rental value of the premises in the condition they were in without such repair and what the rental value would have been if the repairs had been made." Cochran v. Widra (App.1931), 35 Ohio Law Abs. 608, 611, 41 N.E.2d 875, 877. See, also, Holder v. Farmakis (App.1951), 66 Ohio Law Abs. 279, 282, 117 N.E.2d 491, 494.

The "diminution-in-value" rule, as pointed out by the Cochran court, is supported by the weight of authority from other jurisdictions. See 49 American Jurisprudence 2d (1970) 812, Landlord and Tenant, Section 844. Accord Annotation (1953), 28 A.L.R.2d 446, 481.

The amicus curiae would have us abandon the diminution-in-value rule in favor of a "reduction-in-use" measure of damages. Under such measure, damages would be based upon the percentage reduction of a tenant's use of the leased premises resulting from the landlord's breach. In Pugh v. Holmes (1979), 486 Pa. 272, 295-297, 405 A.2d 897, 909-910, the Pennsylvania Supreme Court adopted the reduction-in-use rule for cases involving a breach of an implied warranty of habitability.

We observe, without deciding, that where premises are in whole or in part rendered uninhabitable, a measure of damages based upon the tenant's reduced use of the premises has a certain attraction. In contrast, where, as here, the tenant has not alleged that the landlord's failure to make repairs rendered the premises uninhabitable, the reduction-in-use measure would result in an inaccurate calculation of the tenant's true loss. For example, a landlord's failure to make promised repairs might not result in any reduction in the tenant's use of the premises, even though it does result in a diminution in the value of the tenant's leasehold. We will not endorse such an ill-fitting measure of damages in this case.

Therefore, we hold that where a landlord breaches a promise to make repairs to the leased premises and the tenant does not elect to make the repairs, the measure of damages is the difference between the rental value of the premises in their unrepaired condition and what the rental value would have been had the promised repairs been made. 1 The stipulated rent amount is presumptive evidence of the rental value of the premises as repaired, but it is not conclusive.

B

We next turn to an analysis of whether a lessee is competent to give opinion testimony as to the rental value of the leased premises, absent a showing of expertise in real estate and rental values. 2

Ohio law has long recognized that an owner of either real or personal property is, by virtue of such ownership, competent to testify as to the market value of the property. In Morris v. Huber (App.1933), 15 Ohio Law Abs. 71, 73, a case involving real property, the court quoted with approval from 22 Corpus Juris (1920) 586-587, Evidence, Section 685, which reads:

" 'The owner of real estate is assumed to possess sufficient acquaintance with it to estimate the value of the property, and his estimate is therefore received although his knowledge on the subject is not such as would qualify him to testify if he were not the owner.' " (Emphasis added.) (Footnotes omitted.) See, also, Bedard v. Protetch (App.1955), 78 Ohio Law Abs. 508, 511, 5 O.O.2d 277, 279, 151 N.E.2d 773, 775-776, quoting with approval from 20 American Jurisprudence (1939) 751, Evidence, Section 892.

This court and various Ohio courts of appeals have applied this so-called "owner-opinion rule" in cases involving personal property. See, e.g., Bishop v. East Ohio Gas Co. (1944), 143 Ohio St. 541, 28 O.O. 470, 56 N.E.2d 164; iButram v. Blair (1958), 106 Ohio App. 57, 6 O.O.2d 312, 148 N.E.2d 502; Groves v. Gray (1942), 74 Ohio App. 384, 29 O.O. 580, 59 N.E.2d 166; Detroit & Ironton RR. Co. v. Vogeley (1925), 21 Ohio App. 88, 153 N.E. 86.

There is no logical basis for distinguishing between owners of freehold estates in land and owners of personal property, on the one hand, and owners of leasehold estates in land, on the other. Because the owner-opinion rule applies to owners of both real and personal property, it should apply as...

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