[Cite as Canfield Motor Sports, Inc. v. Motorist Mut. Ins. Co., 2017-Ohio-735.]



                            STATE OF OHIO, MAHONING COUNTY
                                   IN THE COURT OF APPEALS
                                        SEVENTH DISTRICT

CANFIELD MOTOR SPORTS, INC.                              )
                                                         )
        PLAINTIFF-APPELLEE                               )
                                                         )                CASE NO. 16 MA 0001
VS.                                                      )
                                                         )                        OPINION
MOTORIST MUTUAL INSURANCE                                )
COMPANY                                                  )
                                                         )
        DEFENDANT-APPELLANT                              )

CHARACTER OF PROCEEDINGS:                                Civil Appeal from the Court of Common
                                                         Pleas of Mahoning County, Ohio
                                                         Case No. 13 CV 2161

JUDGMENT:                                                Affirmed.

APPEARANCES:
For Plaintiff-Appellee                                   Attorney Stuart Strasfeld
                                                         100 East Federal Street, Suite 600
                                                         Youngstown, Ohio 44503-1893

For Defendant-Appellant                                  Attorney Merle Evens, III
                                                         Millenium Centre, Suite 300
                                                         200 Market Avenue, North
                                                         P.O. Box 24213
                                                         Canton, Ohio 44701-4213

JUDGES:

Hon. Mary DeGenaro
Hon. Cheryl L. Waite
Hon. Carol Ann Robb


                                                         Dated: February 28, 2017
[Cite as Canfield Motor Sports, Inc. v. Motorist Mut. Ins. Co., 2017-Ohio-735.]
DeGENARO, J.

        {¶1}     Defendant-Appellant, Motorist Mutual Insurance Company appeals the
trial court judgment awarding $27,500.00 to Plaintiff-Appellee, Canfield Motor Sports,
Inc. pursuant to the terms of a commercial general liability insurance policy issued by
Motorist. For the following reasons, the judgment entry of the trial court is affirmed.
        {¶2}     CMS was formerly in the business of selling both new and used
motorcycles, and insured under a commercial policy issued by Motorist. The "Select
Dealers Plus Program", Endorsement CA 7089 (01/09) of the policy includes a
section entitled "False Pretense Coverage" which provides as follows:

        B.       Physical Damage Coverage is changed as follows:
        1.       The following is added:
        We will pay for "loss" to a covered "auto" under:
        False Pretense Coverage caused by:
        a.       Someone causing you to voluntarily part with the covered "auto"
                 by trick, scheme or under false pretenses.

        {¶3}     John Allen, the former general manager of CMS, testified that he was
first contacted by a sales associate of Elite Auction Sales, Inc., John Watson, in early
August of 2009.           Watson solicited Allen to contract with Elite to sell CMS's
motorcycles through a public auction at its facility in Murfreesboro, Tennessee.
Watson explained that goods sold at public auctions typically garnered a much higher
price than goods sold at private auctions. During that first telephone conversation,
Allen told Watson that CMS was not interested in Elite's services. Watson contacted
Allen by telephone roughly ten times during the month of August. By the end of the
month, and after several discussions with Allen, Thomas Wronkovich, one of CMS's
owners, instructed Allen to contract with Elite to auction ten used "sport bikes" from
CMS's inventory. The sport bikes sold mainly in the springtime, and Wronkovich
reasoned that it would be preferable to sell the bikes than carry them over in CMS's
inventory to the following spring.
        {¶4}     Prior to contracting Elite's services, Wronkovich advised Allen to
                                                                              -2-


perform a due diligence investigation of Elite's business practices. Allen contacted
another dealer that had employed Elite in the past.       He spoke with the general
manager who did not raise any concerns regarding Elite.
      {¶5}     According to the Exclusive Auction Listing Contract, executed on
September 2, 2009, CMS's motorcycles were to be sold at an absolute auction with a
tentative sale date of September 5, 2009. Wronkovich and Allen agreed to sell the
motorcycles through Elite without a reserve price because Watson told them that the
auction would be widely publicized. Elite charged a commission of $300.00 per bike,
which included transportation from Ohio to Tennessee.             Elite collected the
motorcycles on the day the contract was signed, and provided a tentative auction
date of Saturday, September 5, 2009. Allen testified that the motorcycles were taken
in a red pickup truck with an open trailer on the back. Allen believed that the titles
had been sent to Elite, but conceded that he never looked up the vehicle
identification numbers in order to determine whether title had transferred to Elite or
the buyers at auction.
      {¶6}     On the Monday following the auction, Allen attempted to contact Elite at
the telephone number provided on the contract. The recipient of the call answered,
"Trotter Auction Sales." Allen asked for Watson, but he was told that Watson was
unavailable.   Allen was informed that Trotter Auction Sales had purchased Elite,
however Allen conceded at the bench trial that he was not aware of the details of the
sale. Allen had previously contacted Watson on Watson's mobile phone, but ten
phone messages on Watson's mobile voice mail over the course of the next week
went unanswered. Likewise, Allen made ten unsuccessful attempts to collect the
purchase money for the motorcycles from Trotter Auction Sales.
      {¶7}     Despite Allen's inability to contact Watson, CMS received a facsimile
transmission on September 10, 2009 of a consignor statement, which contained the
details of each of the ten motorcycle sales. The statement indicated that an auction
was held on September 5, 2009, and provided a description of the motorcycles which
were sold at auction, the unit price, the total price received, the commission, and the
                                                                              -3-


amount due to CMS, $35,400.00. However, CMS never received the amount owed
under the contract from Elite.
        {¶8}   Elite filed for bankruptcy on or about September 25, 2009. Both Allen
and Wronkovich conceded that they did not know the circumstances surrounding
Elite's bankruptcy petition or when Elite ceased doing business.         According to
Wronkovich's testimony, Elite filed a Chapter 11 petition for reorganization under the
Bankruptcy Code.      CMS filed a claim for $35,400.00 in the bankruptcy proceeding,
and was identified in the petition as one of the largest unsecured creditors. CMS
received $7,838.39 from the bankruptcy court. As a consequence, CMS submitted a
claim under the commercial policy on the basis that it voluntarily parted with the ten
motorcycles by trick, scheme or under false pretenses.
        {¶9}   CMS filed a complaint for declaratory judgment against Motorist
seeking a determination of coverage under a false pretenses endorsement, which
Motorist answered. The case proceeded to a bench trial before the magistrate, who
issued a decision granting CMS a judgment of $27,500.00. Motorist filed objections
which CMS opposed. The trial court overruled the objections, concluding that CMS
had voluntarily parted with ten motorcycles as a result of an intentional deceptive act
on the part of Elite, and that the terms of the policy required reimbursement for its
loss:

        Intent to deceive can be deduced from the circumstances of the
        transaction as a whole, as the misleading party is unlikely to admit to
        deceptive conduct. In re Case No. 01-50091, 2002 Bankr. LEXIS 1540.
        The timeline of events surrounding the transaction clearly establishes
        that Elite [ ], intended to deceive, and did deceive [CMS]. Such
        deceptive conduct falls under the Policy's False Pretense Coverage
        Clause.

        {¶10} Motorist asserts in its sole assignment of error:
                                                                               -4-


      THE TRIAL COURT'S JUDGMENT FILED ON DECEMBER 8, 2015, IS
      AGAINST THE MANIFEST WEIGHT OF THE EVIDENCE.

      {¶11} Motorist contends that CMS failed to meet its burden of proof with
respect to the policy language that requires evidence that CMS was induced to part
with the motorcycles by trick, scheme, or false pretenses.       Motorist argues that
neither Allen nor Wronkovich knew the details surrounding the sale of CMS's
motorcycles or the events prompting Elite's Chapter 11 bankruptcy. Likewise,
Motorist asserts that CMS failed to offer testimony from any representative from Elite
to establish that Elite had with false pretense induced CMS to surrender the
motorcycles. Motorist concludes that the trial court drew unwarranted inferences
from the dearth of evidence adduced at trial regarding Elite's motives.
      {¶12} CMS counters that the trial court did not rely solely upon the filing of the
bankruptcy petition to conclude that Elite engaged in a trick, scheme, or false
pretenses.   CMS argues instead that trick, scheme, or false pretenses can be
inferred from the fact that Elite ceased doing business immediately after the auction.
      {¶13} As to the standard of review of a declaratory judgement, an appellate
court's "inquiry * * * involves whether the trial court's judgment was against the
manifest weight of the evidence." Allason v. Gailey, 189 Ohio App.3d 491, 2010-
Ohio-4952, 939 N.E.2d 206, ¶ 26 (7th Dist.), citing Blair v. McDonagh, 177 Ohio
App.3d 262, 2008-Ohio-3698, 894 N.E.2d 377, ¶ 56. "Judgments supported by some
competent, credible evidence going to all the essential elements of the case will not
be reversed by a reviewing court as being against the manifest weight of the
evidence." Allason at ¶2, citing C.E. Morris Co. v. Foley Constr. Co., 54 Ohio St.2d
279, 280, 8 O.O.3d 261, 376 N.E.2d 578 (1978).
      {¶14} Insurance policies are construed by the same rules used to construe
contracts. World Harvest Church v. Grange Mut. Cas. Co., Slip Opinion 2016-Ohio-
2913, ¶ 28. In Westfield Ins. Co. v. Galatis, 100 Ohio St.3d 216, 2003-Ohio-5849,
797 N.E.2d 1256, the Ohio Supreme Court recognized that the court's task when
interpreting an insurance policy is to "examine the insurance contract as a whole and
                                                                                 -5-


presume that the intent of the parties is reflected in the language used in the policy."
Id. at ¶ 11, citing Kelly v. Med. Life Ins. Co., 31 Ohio St.3d 130, 509 N.E.2d 411
(1987), paragraph one of the syllabus. Moreover, courts must "look to the plain and
ordinary meaning of the language used in the policy unless another meaning is
clearly apparent from the contents of the policy." Id., citing Alexander v. Buckeye
Pipe Line Co., 53 Ohio St.2d 241, 374 N.E.2d 146 (1978), paragraph two of the
syllabus. The party seeking to recover under an insurance policy bears the burden of
proof to demonstrate that the policy provides coverage for the particular loss.
Chicago Title Ins. Co. v. Huntington Natl. Bank, 87 Ohio St.3d 270, 273, 719 N.E.2d
955 (1999).
       {¶15} A brief review of the history of false pretense provisions in insurance
policies is instructive. Most false pretenses provisions are typically exclusionary in
nature.   Thus, when interpreting the false pretense language as is present in
Motorist's policy here, courts have done so in order to determine if the allegedly
fraudulent actions serve to exclude coverage under the policy. See, e.g., Magolan v.
Shellhouse, 5th Dist. No. 2011-CA-105, 2012-Ohio-2144, where the vehicle owner
brought an action against the automobile insurer, claiming the body shop's conduct in
selling vehicle without owner's permission constituted theft.         Notably, Magolan
appears to be a case of first impression in Ohio; case law outside Ohio is based on
more commonly-accepted examples of trick, scheme and false pretense, for
instance, embezzlement by an employee. See, e.g., Joe Cotton Ford Inc. v. Illinois
Emcasco Ins .Co. 389 Ill. App.3d 718, 906 N.E.2d 1279 (2009), a retail customer
providing a worthless check; LaPerla, Ltd. V. Peerless Ins. Co., 51 Conn.Supp. 241,
980 A.2d 971 (2009) and; Lyday v. Ohio Farmers Insurance Co., 2d Dist. No.
5752,1978 WL 216210; McConnell v. Fireman's Fund Ins. Co., 178 F.2d 76, 77 (5th
Cir.1949), cert. denied, 339 U.S. 952, 70 S.Ct. 840, 94 L.Ed. 1365 (1950), or a
prospective car purchaser providing false identification in order to test drive a car.
       {¶16} In Magolan, the Fifth District underscored that the insured must
demonstrate that the scheme or trick existed at the time when the goods are
                                                                               -6-


transferred. Magolan at ¶16-17. Magolan contracted with Shellhouse to restore a
vintage automobile. After several delays, Magolan began contacting Shellhouse
every couple of months for a report on Shellhouse's progress. Several years passed.
Roughly five years after the contract was executed, because Magolan had stopped
calling Shellhouse and did not pay him additional money required under the contract,
Shellhouse sold the automobile. Magolan's insurance policy excluded coverage for
loss as a result of "anyone causing you to voluntarily part with [a covered auto] as a
result of any scheme or trick." Id. at ¶12.
       {¶17} The trial court entered summary judgment in favor of the insurer in the
declaratory judgment action file by Magolan, but the Fifth District concluded that
genuine issues of material fact existed as to whether Magolan voluntarily parted with
the vehicle as a result of a trick or scheme. Although Magolan conceded that
Shellhouse lied to try to placate Magolan over the course of many years when he
was either unable or unwilling to restore the automobile, the Fifth District recognized
that Magolan's admissions did not demonstrate that the trick or scheme existed on
the date the contract was executed. The Fifth District also relied upon the many years
that passed after the automobile was transferred to Shellhouse before he sold the
automobile. Id. at ¶ 16.
       {¶18} The crux of Motorist's argument is that there is no competent, credible
evidence in the record from which to infer that Elite engaged in any false pretense on
September 2nd, the date CMS signed the contract with Elite and took possession of
the 10 motor bikes. To the contrary, the chain of events occurred over approximately
a 45-day period, starting with Elite's relentless sales pitch during the month of August
through the September 5th auction, the multiple unreturned phone calls, culminating
in Elite's Bankruptcy petition filed on September 25th.
       {¶19} There was competent, credible evidence in the record from which the
trial court could infer fraudulent purpose by Elite. The events that occurred were
sufficiently close in proximity to support the trial court's inference that Elite's
fraudulent intent existed on September 2nd, the day the contract was executed and
                                                                           -7-


the motorcycles were retrieved by Elite.
       {¶20} Accordingly, Motorist's sole assignment of error is meritless, and the
judgment entry of the trial court is affirmed.



Waite, J., concurs.

Robb, P. J., concurs.
