Centennial Ins. v. Vic Tanny International of Toledo, Inc.

346 N.E.2d 330, 46 Ohio App. 2d 137, 75 Ohio Op. 2d 115, 19 U.C.C. Rep. Serv. (West) 1089, 1975 Ohio App. LEXIS 5838
CourtOhio Court of Appeals
DecidedJanuary 20, 1975
Docket7718
StatusPublished
Cited by54 cases

This text of 346 N.E.2d 330 (Centennial Ins. v. Vic Tanny International of Toledo, Inc.) is published on Counsel Stack Legal Research, covering Ohio Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Centennial Ins. v. Vic Tanny International of Toledo, Inc., 346 N.E.2d 330, 46 Ohio App. 2d 137, 75 Ohio Op. 2d 115, 19 U.C.C. Rep. Serv. (West) 1089, 1975 Ohio App. LEXIS 5838 (Ohio Ct. App. 1975).

Opinion

Beowit, J.

This appeal is by Yic' Tanny Intel-national of Toledo, Inc., the defendant' and third-party plaintiff, from a summary judgment rendered by the Court of Common Pleas of Lucas County in favor of the third party defendants, Cricket Health Clubs of America, Inc., and James W. Balough, the appellees. For brevity, Vic Tanny International of Toledo, Inc., will be referred to as Vic Tan-ny, and Cricket Health Clubs of America, Inc., will be called Cricket.

' ' Plaintiffs are ten insurance companies claiming sub-rogation rights of insured tenants and two tenants in the Cricket West Shopping Center, Toledo, Ohio, who sued Vic Tanny for damages arising out of a fire loss which occurred December 6,1970, when a fire damaged the westerly two-fifths of Cricket West Shopping Center. Vic Tanny operated a. health club studio, on these premises, where the fire allegedfy originated. The claims of these twelve plaintiffs are not involved in this appeal.

The twelve plaintiffs contended that a defective condition, design, operation or installation of a heater in a sauna bathroom in the Vic Tanny studio caused the fire and consequent fire losses. The record for summary judgment reveals the following facts. On October 7, 1970, two months before the fire, Vic Tanny, formerly known as Holiday Health Spa of Toledo, Inc., purchased the business and all the assets of Cricket. Cricket executed a bill of sale con *139 veying-to Vic Tanny “the said personal property described in attachment A” and this included “one sauna heater and room.?’ . ;

Vic Tanny’s Third-Party Complaint against - Cricket and Balough ••alleges that both defendants expressly - and impliedly warranted that the sauna room and heater conveyed by the' bill of sale were safe and fit for-.the use. for which they were intended. They also represented that the premises had,been inspected and were free from fire hazard; that if the third party plaintiff Vie Tanny proved that the cause of the fire was the defective design or installation of .the heater and/or the sauna room this was a breach of the express and implied warranties; and that if the sauna or the heater was defective, such defects were latent and undiscoverable' by Vic Tanny and were known or should have been known, by Cricket and Balough. Vic Tanny predicated liability for any damages upon the alleged breach .of express and implied warranties by the two defendants. :

Balough was a majority stock holder and president of Cricket, participated in the management and operation of the health .club for Cricket, individually purchased the health club -business and equipment in controversy on May 13, 1969, and negotiated and consummated the sale of the premises and equipment to Vic Tanny. Vic Tanny contended and produced evidentiary matter in support thereof that, prior to the sale on October 6, 1970, to Vic Tanny, Balough negotiated the sale of the assets and the equipment with Vic ;Tanny without prior authorization of Cricket’s board, of-directors or shareholders.

Balough’s. motion for summary judgment relies -solely on his sixth defense in the answer — namely, that Balough was not responsible for the corporate obligations of defendant Cricket. Balough argues that he consummated, the sale of the sauna heater and other equipment as president of Cricket for and on behalf of the corporation, and was not acting individually or personally.

Cricket’s motion for a summary judgment relies on the fourth defense of its Answer, that it sold its facilities, which included the sauna heater and room on an “as is” *140 basis with no warranties except as to liens.

Before considering the validity of the summary judgment in favor of Cricket and Balough, we should keep in mind that we are determining whether the record for review contains a “genuine issue of material fact, ” within the meaning of Civ. R. 56. If there is such a genuine issue of material fact, Cricket and Balough are not entitled to summary judgment. We are not confronted with the record of a trial on the merits and an appellate inquiry into whether the evidence supports a final judgment for the third party defendants on the issues raised by the Yic "Tanny Third-Party Complaint and the responsive answers of the third-party defendants.

Balough’s reliance on his sixth defense as a basis for a summary judgment in his favor is predicated upon his argument that Vic Tanny’s transaction resulting in the purchase of the sauna heater and other assets was only with Cricket as a corporation and not with Balough individually. However, there is a genuine issue of material fact whether or not Vic Tanny made the purchase from Cricket or from Balough individually. The present record reveals that Balough individually bought the sauna heater and assets on May 13, 1969, before Cricket was incorporated on May 23.1969, and there was no evidence that Balough ever, as an individual, conveyed the sauna heater and assets to the Cricket Corporation. Negotiations for the sale to Vic Tanny were made by Balough without prior authorization of the Cricket hoard of directors. Balough’s answers to interrogatories further support the contention that there is an issue whether Balough in the sale and dealings with Vic Tanny was acting for himself personally and individually or on behalf of the Cricket Corporation, as an agent or officer. R. C. 1701.76; Auglaize Box Board Co. v. Hinton, 100 Ohio St. 505; Knight v. Burns, 22 Ohio App. 482; 13 Ohio Jurisprudence 2d 294, Corporations, Section 825; 1 Fletcher, Cyclopedia Corporation 171, Section 41.1; 1 O’Neal, Close Corporations, Section 1.10; cf. State, ex rel. Watson, v. Standard Oil Co., 49 Ohio St. 137; cf. 58 A. L. R. 2d. 784.

• It follows that if the sale of the sauna heater and other *141 assets was made by Balough individually, and not on behalf of the .corporation, he is answerable individually for any breach- of warranty extended by him to -Vic Tanny, or for any fraud.committed by him. Trust Co. v. Floyd, 47 Ohio St. 525; 12 Ohio Jurisprudence 2d 658, Corporations, Section 532. There is a genuine issue of material fact concerning such individual activity and responsibility of Ba-lough to Vic Tanny for breach of warranty or for fraud.

However, if Balough was not acting solely in his in7 dividual capacity but was acting -solely as an -officer and agent of Cricket Corporation, then the question arises: what is Balough’s liability personally for breach of warranty or for fraud, committed by the corporation upon Vic Tam ny? The answer is that Balough is personally liable to. Vic Tanny-if fraud is proven. Directors and corporate officers generally may be personally liable for fr,aud even though the corporation may be liable also. Bartholomew v. Bentley, 15 Ohio 659; Merchant’s National Bank v. Thoms, 11 Ohio Dec. Rep. 632; State v. Stemen, 90 Ohio App. 309; 12 Ohio Jurisprudence 2d 669, .Corporations, Sections 545, 546. To fasten- personal liability upon a corporate officer for fraud, it must be shown that he knew-the statement was false,, that, he intended it- to-be acted upon by the parties seeking redress, and that it was acted upon tp- .the .

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346 N.E.2d 330, 46 Ohio App. 2d 137, 75 Ohio Op. 2d 115, 19 U.C.C. Rep. Serv. (West) 1089, 1975 Ohio App. LEXIS 5838, Counsel Stack Legal Research, https://law.counselstack.com/opinion/centennial-ins-v-vic-tanny-international-of-toledo-inc-ohioctapp-1975.