Tokles & Son, Inc. v. Midwestern Indemn. Co.

Citation605 N.E.2d 936,65 Ohio St.3d 621
Decision Date31 December 1992
Docket NumberNo. 91-2384,91-2384
CourtUnited States State Supreme Court of Ohio

1. It is a general rule of evidence that before one may testify as to his opinion on the value of property, one must qualify as an expert. State Auto Mut. Ins. Co. v. Chrysler Corp. (1973), 36 Ohio St.2d 151, 65 O.O.2d 374, 304 N.E.2d 891.

2. As an exception to the general rule, an owner is permitted to testify concerning the value of his property without being qualified as an expert, because he is presumed to be familiar with it from having purchased or dealt with it. Bishop v. East Ohio Gas Co. (1944), 143 Ohio St. 541, 28 O.O. 470, 56 N.E.2d 164.

3. An officer or shareholder of a corporation is not presumed to be familiar with corporate property solely by virtue of occupying a corporate office or owning stock in the corporation.

4. An officer or shareholder of a closely held corporation who has acquired knowledge of the corporate property tantamount to that of an owner by virtue of having purchased, or dealt with, the property as if he were the individual owner may testify as to its value.

This action arises as a result of claims for breach of contract and insurer bad faith filed by appellee, Tokles & Son, Inc. ("Tokles & Son"), against appellant, Midwestern Indemnity Company ("Midwestern"). The focus of this action is the alleged theft of a tractor and trailer unit, which was insured by Midwestern in 1986.

In 1981, Timothy Tokles ("Tim") and Susan Tokles ("Susan") incorporated "E & T Investment, Inc." The corporate records indicate that Susan was the sole shareholder, the only director, and the president-treasurer. Tim was secretary of the corporation. The only asset of the corporation was the tractor-trailer unit, and the corporation was formed for the operation of this vehicle for long-haul trucking. After incorporation, E & T Investment purchased the tractor for $70,000 and the trailer for nearly $30,000, each financed through different financial institutions. There was never a corporate checking account or a corporate savings account established for the corporation. Moreover, income tax returns were never filed for the corporation and no records for expenses for the trucking unit were contained in the record.

In 1983, the corporation was disenfranchised by the state of Ohio. However, the title to the unit remained in the corporate name through the time of trial.

The truck was not used for the first month and a half after the unit was purchased. Thereafter, Mark Spahr ("Spahr"), Susan's brother, began driving the truck with the apparent understanding that all the proceeds from Spahr's long-hauling would be distributed to Tim and Susan. Spahr drove the unit for the first couple of years after E & T Investment purchased it. Spahr also had possession of the unit in the first few months of 1985, at which time he resided in Florida.

In May 1985, Tim and Susan instituted divorce proceedings. In May 1985, Tim flew to Florida and retrieved the unit from Spahr, planning to sell it. On February 18, 1986, Tim and Susan entered into a separation agreement, wherein Tim received the tractor and trailer unit 1 and Susan relinquished all of her shares in E & T Investment. On February 21, 1986, Tim called Midwestern's insurance agent at the Brooks Insurance Agency, Steve Lawson, and asked Lawson to add the unit to the Tokles & Son 2 business automobile insurance policy. Tim informed Lawson that the truck was in Toledo, would be stored in a fenced lot, and would not be used for long-haul trucking, because he hoped to sell the unit. The unit was added to the policy. On February 22, 1986, Tim filed a police report alleging that Spahr had stolen the vehicle and it was now in Florida. No claim was made to Midwestern at that time.

Tim did not see the tractor and trailer again until June 1985 for approximately one day, when it was found in the parking lot of Tokles & Son. On July 2, 1986, Tim filed another complaint with the Toledo Municipal Court, charging Spahr with "unauthorized use" of the unit. No theft loss claim was reported to Midwestern at that time. Tim stated to Dave Sokolowski, a Midwestern claims representative, that at that time the unit was not up for sale.

Tim was informed by the Brooks Insurance Agency that his insurance was to expire on the tractor-trailer unit on December 5, 1986, if he did not pay his premiums. On December 4, 1986, Tim reported to the Brooks Agency that the unit had been stolen in July. Immediately thereafter, an investigation of Tim's theft claim was undertaken by Sokolowski and A. Lynn Tule, a Midwestern director of property claims. After an extensive investigation, Tule denied Tokles & Son's theft loss claim on June 11, 1987. Tule reached this conclusion because the information received by Midwestern indicated that statements from Tim at the time he requested coverage of the unit were fraudulent, and had it been known that the unit would be used for long-haul trucking, Midwestern would not have issued the policy because it did not, at the time, write such policies. Also, Tule concluded that for various reasons no theft had occurred, in part because Spahr had an interest in the unit and Tim did not promptly notify Midwestern of the loss, as required by the policy.

After Midwestern rejected the claim, Tokles & Son initiated this action, alleging that Midwestern had breached its contract of insurance and had exercised bad faith in rejecting its claim. Midwestern denied the allegations and asserted a counterclaim against Tokles & Son, alleging fraud and "reverse bad faith."

Prior to trial, Midwestern moved for partial summary judgment against Tokles & Son on its bad faith claim against Midwestern. This motion was denied. After bifurcation of Tokles & Son's breach of contract claim and its bad faith claim, the cause was transferred to the docket of another trial judge.

The case proceeded to jury trial on Tokles & Son's breach of contract claim, wherein Midwestern moved for a directed verdict on two grounds: first, that no theft had occurred and, second, that Tokles & Son failed to prove damages. The trial court granted Midwestern's motion for directed verdict on the basis that Tokles & Son had failed to prove damages. After the trial, Midwestern filed another motion for summary judgment on Tokles & Son's bad faith claim, which the trial court granted. The trial court then, sua sponte, dismissed Midwestern's counterclaim with prejudice.

The Court of Appeals for Lucas County found that the trial court improperly granted Midwestern's motion for directed verdict at the close of Tokles & Son's case, because reasonable minds could come to a conclusion as to the value of the truck based solely on Tim's testimony. The appellate court also reversed the judgment for Midwestern on Tokles & Son's bad faith claim, and affirmed the dismissal of Midwestern's counterclaim. Finding its judgment to be in conflict with the judgment of the Court of Appeals for Summit County in Akron v. Hardgrove Ent., Inc. (1973), 47 Ohio App.2d 196, 1 O.O.3d 275, 353 N.E.2d 628, the court of appeals certified the record of the case to this court for review and final determination.

Rogers & Godbey Co., L.P.A., George C. Rogers and James D. Godbey, Toledo, for appellee. Schell & Schaefer, Stephen A. Schaefer and Thomas T. Schell, Toledo, for appellant.


I Corporate Officer's Testimony on Value of Corporate Property

Central to this case is the value of a tractor-trailer unit which is the subject of a theft loss claim and whether expert testimony is necessary to determine that value. It is a general rule of evidence that before one may testify as to his opinion on the value of property, one must qualify as an expert. State Auto Mut. Ins. Co. v. Chrysler Corp. (1973), 36 Ohio St.2d 151, 65 O.O.2d 374, 304 N.E.2d 891.

Some items are complex and their value is intermingled with fact and opinion. In addition, the item may not be available for appraisal. So, out of necessity, nonexperts are often permitted to enlighten the jury with their own opinions concerning the value of these items.

The question then arises as to where the line is to be drawn in permitting such testimony.

Evid.R. 701 provides:

"If the witness is not testifying as an expert, his testimony in the form of opinions or inferences is limited to those opinions or inferences which are (1) rationally based on the perception of the witness and (2) helpful to a clear understanding of his testimony or the determination of a fact in issue."

One exception to the rule requiring the testimony of an expert concerning the value of objects has developed in the case of owners of personal property because it is presumed that owners are generally quite familiar with their property and its value. In the past, owners have been permitted to testify on value by virtue of their ownership alone. Morris v. Huber (App.1933), 15 Ohio Law Abs. 71, 73. In Bishop v. East Ohio Gas Co. (1944), 143 Ohio St. 541, 546, 28 O.O. 470, 472, 56 N.E.2d 164, 166, this court stated:

" * * * When market value cannot be feasibly obtained, a more elastic standard is resorted to, sometimes called the standard of value to the owner. This doctrine is a recognition that property may have value to the owner in exceptional circumstances which is the basis of a better standard than what the article would bring in the open market.

"The Ohio rule is stated in 17 Ohio Jurisprudence, 473, Section 379:

" 'It is established in Ohio that the owner of personal property, because of such ownership, has a sufficient knowledge of its value to be qualified to give an opinion thereon which will be some evidence of the actual value, though not conclusive. * * *' "

Ownership may involve an intimate knowledge of the nature, quality, cost, and condition of the...

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