Akron Pregnancy Servs. v. Mayer Invest. Co. , 2014 Ohio 4779 ( 2014 )

[Cite as Akron Pregnancy Servs. v. Mayer Invest. Co., 2014-Ohio-4779.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT )
AKRON PREGNANCY SERVICES C.A. No. 27141
Appellant
v. APPEAL FROM JUDGMENT
ENTERED IN THE
MAYER INVESTMENT CO., et al. COURT OF COMMON PLEAS
COUNTY OF SUMMIT, OHIO
Appellees CASE No. CV 2012-01-0089
DECISION AND JOURNAL ENTRY
Dated: October 29, 2014
MOORE, Judge.
{¶1} Plaintiff-Appellant, Akron Pregnancy Services (“APS”), appeals from the
judgment of the Summit County Court of Common Pleas, granting summary judgment in favor
of Defendant-Appellees, Mayer Investment Company, Jeffrey Mayer, and Rory Mayer
(collectively, “Mayer Investment”). This Court reverses.
I.
{¶2} Prior to the events giving rise to this appeal, APS and Mayer Investment enjoyed
a long-standing business relationship. Mayer Investment owned property on East Market Street
in Akron, and APS leased space from Mayer Investment to operate its facility. On January 2,
2001, the parties entered into a lease agreement for a five-year term, commencing on January 1,
2001, and ending on December 31, 2005. The lease agreement also contained an option to
renew, whereby APS could extend its lease for an additional five years. There is no dispute that
APS exercised its option such that the parties had a binding lease until January 1, 2010.
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{¶3} In early January 2005, the parties signed a lease extension agreement. The lease
extension agreement purported to grant APS a new extension term, commencing on January 1,
2010, and ending on January 1, 2015. Further, the lease extension agreement authorized two
additional options to renew for five-year terms. The first option would allow APS to extend its
lease from January 1, 2015, to January 1, 2020. The second option would allow APS to extend
its lease from January 1, 2020, to January 1, 2025. Although both parties and four witnesses
signed the lease extension agreement, it was not notarized.
{¶4} In 2010, both parties underwent financial difficulties. APS asked Mayer
Investment to consider a lease modification. Specifically, it suggested decreasing the amount of
office space it leased in exchange for a $1,000 reduction in its monthly rent. Mayer Investment
countered that it would approve the modification so long as the rent reduction was only $500 per
month and APS agreed to terminate the lease “currently in existence” and instead abide by a
month to month tenancy. APS rejected Mayer Investment’s offer and expressed a desire to
maintain the current lease arrangement. Nevertheless, on November 22, 2011, Mayer Investment
notified APS that it would be terminating APS’ tenancy and closing its building due to financial
constraints. Mayer Investment asked APS to vacate the building on or before January 31, 2012.
{¶5} On January 6, 2012, APS filed suit against Mayer Investment for anticipatorily
breaching their lease agreement. Rather than pursue a claim for damages, APS sought specific
performance of the lease agreement. APS asked the court to issue both temporary and permanent
injunctions, ordering Mayer Investment to abide by the terms of the lease and to not interfere
with APS’ access to the building and tenancy. Shortly thereafter, Mayer Investment filed a
motion to dismiss for failure to state a claim upon which relief could be granted. It noted that the
lease extension agreement the parties had signed in January 2005, was not notarized and was,
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therefore, void by statute. Absent a term lease, Mayer Investment argued, APS had an implied
month-to-month tenancy that Mayer Investment could, and did, terminate with timely notice.
Mayer Investment also filed an answer and several counterclaims. On October 29, 2012, the trial
court granted Mayer Investment’s motion to dismiss.
{¶6} On February 12, 2013, APS filed a motion for reconsideration,1 arguing that the
court had improperly relied upon evidence outside of the complaint to dismiss the case. The trial
court granted the motion to reconsider, vacated its prior journal entry, and also agreed to allow
APS to file an amended complaint. In its amended complaint, APS reasserted its previous claim
for relief, but also pleaded promissory and equitable estoppel on the basis of certain
representations Mayer Investment had made about the parties’ lease arrangement. Mayer
Investment filed an answer as well as several counterclaims. In particular, Mayer Investment
sought a declaration that the lease extension agreement the parties signed was void, APS had an
implied month-to-month tenancy, and Mayer Investment had a right to evict APS as a result of
having properly terminated the implied tenancy.
{¶7} Subsequently, Mayer Investment sought summary judgment on APS’ complaint
as well as on its own counterclaim for declaratory judgment. APS responded in opposition and
also filed its own motion for summary judgment. Mayer Investment also responded in
opposition, and APS filed a reply. The trial court granted Mayer Investment’s motion for
summary judgment on APS’ complaint as well as on its counterclaim for declaratory relief. The
court declared that the parties’ lease extension agreement was void by statute, APS had a month-
1
The motion noted that the court’s October 29, 2012 entry was not a final judgment because it
did not dispose of Mayer Investment’s counterclaims.
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to-month tenancy by operation of law, and Mayer Investment had terminated the implied tenancy
with sufficient notice.
{¶8} APS now appeals from the trial court’s judgment and raises one assignment of
error for our review.
II.
ASSIGNMENT OF ERROR
THE TRIAL COURT ERRED AS A MATTER OF LAW IN GRANTING
[MAYER INVESTMENT] SUMMARY JUDGMENT[.]
{¶9} In its sole assignment of error, APS argues that the trial court erred by awarding
summary judgment to Mayer Investment. We agree.
{¶10} An appellate court reviews an award of summary judgment de novo. Grafton v.
Ohio Edison Co., 77 Ohio St.3d 102, 105 (1996). It applies the same standard as the trial court,
viewing the facts of the case in the light most favorable to the non-moving party and resolving
any doubt in favor of the non-moving party. Viock v. Stowe-Woodward Co., 13 Ohio App.3d 7,
12 (6th Dist.1983). Pursuant to Civ.R. 56(C), summary judgment is proper if:
(1) No genuine issue as to any material fact remains to be litigated; (2) the
moving party is entitled to judgment as a matter of law; and (3) it appears from
the evidence that reasonable minds can come to but one conclusion, and viewing
such evidence most strongly in the favor of the party against whom the motion for
summary judgment is made, that conclusion is adverse to that party.
Temple v. Wean United, Inc., 50 Ohio St.2d 317, 327 (1977). The moving party bears the initial
burden of informing the trial court of the basis for the motion and pointing to parts of the record
that show the absence of a genuine issue of material fact. Dresher v. Burt, 75 Ohio St.3d 280,
292-93 (1996). Once this burden is satisfied, the non-moving party bears the burden of offering
specific facts to show a genuine issue for trial. Id. at 293; Civ.R. 56(E).
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{¶11} APS argues that the trial court erred by granting Mayer Investment’s summary
judgment motion for two reasons. First, it argues that defectively executed leases are
enforceable as contracts in equity such that it was entitled to specific performance of the parties’
lease extension agreement. Second, it argues that Mayer Investment should have been ordered to
abide by the lease extension agreement by virtue of the doctrine of equitable estoppel.
Specific performance on a defective lease
{¶12} The statute of conveyances provides, in relevant part, that:
A * * * lease of any interest in real property * * * shall be signed by the * * *
lessor * * *. The signing shall be acknowledged by the * * * lessor * * * before a
judge or clerk of a court of record in this state, or a county auditor, county
engineer, notary public, or mayor, who shall certify the acknowledgement and
subscribe the official’s name to the certificate of the acknowledgement.
R.C. 5301.01(A). The statute “sets forth clearly the legal requisites necessary to create a valid
lease.” Delfino v. Paul Davies Chevrolet, Inc., 2 Ohio St.2d 282, 284 (1965). “[A] defectively
executed lease is invalid and does not operate to convey the estate or create the term of leasehold
sought to be created thereby.” Id. Absent partial performance, “no recovery can be had in an
action at law upon the defective [lease].” Wineburgh v. Toledo Corp., 125 Ohio St. 219, 221
(1932). See also Delfino at 287 (partial performance can “remove [an] agreement from the
operation of the statute of conveyances”). Yet, “[a] defectively executed [lease] * * *, when
made by the owner, may be enforced against him as a contract to make a lease * * * for the
reason that it is his contract.” Lithograph Bldg. Co. v. Watt, 96 Ohio St. 74, 84 (1917). Accord
Citizens Nat. Bank in Zanesville v. Denison, 165 Ohio St. 89, 95 (1956) (“A defectively executed
conveyance of an interest in land is valid as between the parties thereto, in the absence of
fraud.”).
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{¶13} There is no dispute that the lease extension agreement the parties signed was
subject to the statute of conveyances and, because it was not notarized, it failed to satisfy the
statute’s requirements. See R.C. 5301.01(A). In moving for summary judgment, Mayer
Investment argued that the defective agreement resulted in a periodic tenancy. Because APS
paid its rent on a monthly basis, Mayer Investment argued that the parties had a month-to-month
tenancy. See Delfino at paragraph one of the syllabus. It further argued that APS was not
entitled to relief because Mayer Investment gave adequate notice of its intention to terminate the
lease and APS failed to argue or demonstrate partial performance. See id. at paragraph four of
the syllabus.
{¶14} In its brief in opposition to summary judgment, APS argued that the parties’
agreement, while defective as a lease, was nonetheless enforceable as a contract between the
parties in equity. APS noted that it had brought suit against Mayer Investment for anticipatory
breach of contract and had requested specific performance rather than damages. It argued that, if
the lease extension agreement was not enforced, it would be left without an adequate remedy at
law. In support of its argument, it attached an affidavit from its Executive Director, Kaye
Gauder. Ms. Gauder averred that APS had leased the subject property for over 23 years, that
APS was unable to find office space at a comparable rent rate or in a location sufficient to suit its
needs, and that the subject property was “uniquely suited” and “unique[ly] visibil[e]” to its target
clients.
{¶15} The trial court accepted Mayer Investment’s legal arguments and relied primarily
upon Delfino to grant its motion for summary judgment. The court determined that the parties’
defective lease had resulted in a month-to-month tenancy that Mayer Investment had properly
terminated. It noted that, while a defective lease could be enforced in equity under the doctrine
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of partial performance, APS had not argued partial performance. Thus, it concluded that APS
was not entitled to relief.
{¶16} The law that applies in a defectively executed lease case depends upon the type of
relief being pursued. In Delfino, the Supreme Court considered the effect of a defectively
executed lease in an action at law to recover damages for breach of the lease. Delfino, 2 Ohio
St.2d at 283. The Court held that:
A defectively executed lease for a term of five years upon monthly rental creates a
tenancy in the lessee from month to month and, where the tenant occupying under
such lease vacates the premises at the end of a month after fully prepaying the
rentals then due, he is not liable to the lessor for the rental installments accruing
after such vacation, in an action at law based upon such defectively executed
lease.
(Emphasis added.) Id. at paragraph one of the syllabus, citing Wineburgh, 125 Ohio St. at
paragraph one of the syllabus. The Delfino Court noted that, as a matter of equity, the doctrine
of part performance could remove a defective lease from the operation of the statute of
conveyances in certain instances. Delfino at 286-287. It concluded that the plaintiff was not
entitled to relief because the acts the plaintiff had alleged were not sufficient evidence of partial
performance. Id. at 289. The Court’s opinion, however, was driven by the remedy the plaintiff
sought. That is, even though the Court applied the equitable doctrine of part performance, its
purpose for doing so was to determine whether the plaintiff was entitled to money damages.
Before affirming the decision to deny plaintiff relief, the Court specifically noted: “Since
plaintiff did not request specific performance it is not necessary to decide in the action whether
the defectively executed lease could be treated as a contract to make a lease which could be
specifically enforced.” Id.
{¶17} The plaintiff’s election of remedy also explains the Supreme Court’s decision in
Wineburgh. In Wineburgh, the Court rejected the proposition that a defectively executed lease
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could be regarded as a contract so as to allow a plaintiff to recover in an action at law.
Wineburgh at 222-223. The plaintiff in Wineburgh, however, only sought damages in an action
at law for breach of the lease. Id. at 221. Accord Baltimore & O.R. Co. v. West, 57 Ohio St. 161(1897); Richardson v. Bates, 8 Ohio St. 257 (1858). See also Cole v. EV Properties, L.P., 6th
Cir. No. 13-3677, 2014 WL 1560502, *3-4 (Apr. 18, 2004) (result in case brought upon
defective lease in Ohio dependent upon whether the aggrieved party has asked for a legal or an
equitable remedy). The Wineburgh Court specifically noted: “Whether reformation or other
equitable remedy is available * * * under this or similar circumstances, it is not necessary to
decide in this action, for that question is not here presented.” Wineburgh at 223.
{¶18} Had APS sought damages from Mayer Investment, Delfino would apply. That is,
APS would be unable to recover under the parties’ defectively executed lease extension
agreement unless it demonstrated partial performance. See Delfino, 2 Ohio St.2d at 286-287.
APS, however, never sought damages. It sought specific performance of the lease extension
agreement under the theory that it was a contract to make a lease. Compare Wineburgh at 289.
“A lease, defectively executed, will in equity be treated as a contract to make a lease * * *.”
Lithograph Bldg. Co., 96 Ohio St. at syllabus. Accord Citizens Nat. Bank in Zanesville, 165
Ohio St. at 95. In certain instances, “a trial court may exercise its equitable jurisdiction and
order specific performance” of a contract. Oglebay Norton Co. v. Armco, Inc., 52 Ohio St.3d
232, 237 (1990). See also Carruthers v. Johnston Petroleum Corp., 5th Dist. Tuscarawas No.
CA 1399, 1980 WL 354011, *5 (June 5, 1980) (specific performance ordered where “lease in
question, although legally void for failure to comply with Section 5301.01, [was] enforceable in
equity as a contract to make a lease”); Moss v. Olson, 148 Ohio St. 625 (1947) (specific
performance of contract to renew lease ordered where no adequate remedy at law existed). “The
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remedy of specific performance is not a matter of right, but of grace, resting in the sound
discretion of the court.” Gans Tire Co. v. Intl. Polymer Equip. Corp., 9th Dist. Summit No.
14652, 1990 WL 235955, *2 (Dec. 26, 1990).
{¶19} Mayer Investment moved for summary judgment strictly on the basis that it had
properly terminated the month-to-month tenancy that arose by operation of law when the parties
failed to properly execute their lease extension agreement. The trial court granted summary
judgment in favor of Mayer Investment on that basis. It did not consider the issue of specific
performance because it mistakenly believed that, to prevail, APS had to demonstrate partial
performance under Delfino. APS, however, could pursue the equitable remedy of specific
performance under the theory that the lease extension agreement was a contract that Mayer
Investment had breached. See Citizens Nat. Bank in Zanesville at 95; Lithograph Bldg. Co. at
84. Accordingly, the trial court erred by granting Mayer Investment’s motion for summary
judgment, as Mayer Investment was not entitled to judgment as a matter of law. As such, we
remand the matter for the trial court to apply the correct law in the first instance. See, e.g.,
Nevinski v. Dunkin’s Diamonds, 9th Dist. Summit No. 24405, 2010-Ohio-3004, ¶ 11. The court
must determine whether the parties had a valid contract2 and, if so, whether to grant APS specific
performance on the contract.
Equitable estoppel
{¶20} “Rather than provide an affirmative action for relief, * * * equitable estoppel
operates as a defense or shield to prevent the assertion of a right otherwise available.” Goodyear
Tire & Rubber Co. v. Aetna Cas. And Surety Co., 9th Dist. Summit No. 16993, 1995 WL
2In its answer and counterclaims, Mayer Investment also challenged the validity of the lease
extension agreement on the basis that Charles W. Mayer Jr., the man who signed the agreement
on its behalf, was suffering from Alzheimer’s and dementia at the time of its signing.
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422733, *9 (July 12, 1995). APS raised equitable estoppel as a defense when Mayer Investment
asserted that the parties’ lease extension agreement was invalid. The only reason Mayer
Investment advanced to support its position that the agreement was invalid, however, was that it
was defectively executed. See R.C. 5301.01(A). Mayer Investment took the position that
Delfino controlled and Ohio case law did not permit the lease extension agreement to be treated
as a contract. The trial court agreed and ultimately concluded that “APS lack[ed] evidence to
support its contention that equitable estoppel should remove the Lease Extension Agreement
from operation of the Statute of Conveyances.”
{¶21} As set forth above, Delfino is distinguishable from the case at hand. A defectively
executed lease is nonetheless enforceable in equity as a contract between the parties who
intended to be bound by it. See Lithograph Bldg. Co., 96 Ohio St. at syllabus. Accord Citizens
Nat. Bank in Zanesville, 165 Ohio St. at 95. When an aggrieved party seeks specific
performance, the statute of conveyances is not an impediment to their recovery. See, e.g.,
Carruthers, 1980 WL 354011, at *6. See also Seabrooke v. Garcia, 7 Ohio App.3d 167, 169
(9th Dist.1982) (“The purpose of the acknowledgment statute (R.C. 5301.01) is to provide
evidence of execution and authority for recordation. It is not to provide a way of escape for a
party who later wishes to renege on his agreement.”). Thus, Mayer Investment could not use the
statute to defend itself against APS’ complaint. Because an enforceable contract between the
parties may exist, APS’ equitable estoppel argument is premature. See Goodyear Tire & Rubber
Co., 1995 WL 422733, at *9 (equitable estoppel is a defense or shield, not a separate cause of
action). This Court, therefore, will not address APS’ equitable estoppel argument at this time.
See Kick v. Smithville W. Care Ctr., 9th Dist. Wayne No. 12CA0032, 2013-Ohio-2034, ¶ 7.
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III.
{¶22} APS’ sole assignment of error is sustained. The judgment of the Summit County
Court of Common Pleas is reversed, and the cause is remanded for further proceedings consistent
with the foregoing opinion.
Judgment reversed,
and cause remanded.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the
period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is
instructed to mail a notice of entry of this judgment to the parties and to make a notation of the
mailing in the docket, pursuant to App.R. 30.
Costs taxed to Appellees.
CARLA MOORE
FOR THE COURT
HENSAL, P. J.
CARR, J.
CONCUR.
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APPEARANCES:
STEPHEN P. LEIBY, Attorney at Law, for Appellant.
HARRY A. TIPPING, CHRISTOPHER A. TIPPING, and KATHLEEN A. HAHNER,
Attorneys at Law, for Appellees.