LRC Realty, Inc. v. B.E.B. Properties , 118 N.E.3d 260 ( 2018 )

[Cite as LRC Realty, Inc. v. B.E.B. Properties, 2018-Ohio-2887.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
GEAUGA COUNTY, OHIO
LRC REALTY, INC., : OPINION
Plaintiff-Appellee, :
CASE NO. 2016-G-0076
- vs - :
B.E.B. PROPERTIES, :
Defendant, :
NEW PAR, d.b.a. :
VERIZON WIRELESS, et al.,
:
Defendants-Appellees,
:
- vs -
:
BRUCE BIRD, et al.,
:
Plaintiffs-Appellants.
Civil Appeal from the Geauga County Court of Common Pleas.
Case No. 2014 M 000690.
Judgment: Affirmed in part; reversed in part; remanded.
James F. Koehler and Timothy J. Fitzgerald, Koehler Fitzgerald LLC, 1301 East Ninth
Street, Suite 3330, Cleveland, OH 44114 (For Plaintiff-Appellee).
James P. Schuck, Bricker & Eckler, LLP, 100 South Third Street, Columbus, OH 43215-
4291; and Christopher M. Ernst, Bricker & Eckler, LLP, 1001 Lakeside Avenue, East,
Suite 1350, Cleveland, OH 44114-1718 (For Defendant-Appellee New Par, d.b.a.
Verizon Wireless).
Robert T. Dove and Robert A. Franco, 1007 Lexington Avenue, Mansfield, OH 44907
(For Defendant-Appellee 112 Parker Court LLC).
James B. Rosenthal and Ellen M. Kramer, Cohen Rosenthal & Kramer LLP, 3208 Clinton
Avenue, Cleveland, OH 44113 (For Plaintiffs-Appellants).
TIMOTHY P. CANNON, J.
{¶1} Appellants, Bruce and Sheila Bird (“the Birds”), appeal the decision of the
Geauga County Court of Common Pleas, granting summary judgment in favor of
appellees, 112 Parker Court LLC (“Parker Court”) and LRC Realty, Inc. (“LRC Realty”).
The trial court’s judgment is affirmed in part and reversed in part, and the matter is
remanded.
{¶2} On August 27, 2014, LRC Realty filed a complaint (case No. 14M000690)
against B.E.B. Properties, Parker Court, and New Par d.b.a. Verizon Wireless (“New Par”)
“in order to settle and declare the legal rights of the parties hereto to the past and future
rental payments owed and to be paid pursuant to the terms of a certain Option to Lease
and Lease Agreement dated March 14, 1994 and recorded on April 21, 1994 * * * involving
a portion of the real property located at 112 Parker Court, Chardon, OH 44024[.]” LRC
Realty sought a declaratory judgment that it “is and will be entitled to be paid the annual
installments of rental [sic] owed pursuant to the Lease Agreement for the time period
following LRC Realty’s acquisition of legal title to the Parker Court Property on January
18, 2013.” LRC Realty also sought a money only judgment against B.E.B. Properties and
New Par “to recover the annual rental payment to which Plaintiff was entitled in the
amount of $23,688.00 which was due and payable on April 1, 2013 pursuant to the Lease
Agreement[.]”
{¶3} On September 5, 2014, the Birds filed a complaint (case No. 14M000717)
against New Par and LRC Realty. The Birds brought a claim for breach of contract
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against New Par, alleging the anticipatory breach of a lease agreement whereby New Par
was required to make annual payments of rent for the use of a portion of the property
located at 112 Parker Court to build and maintain a cellphone tower. The Birds brought
a claim for tortious interference with contract against LRC Realty, alleging LRC Realty
had “interfered with the contract between the Birds and New Par by instructing New Par
to make the April 2014 lease payment, and future payments, to LRC.” The Birds sought
a declaratory judgment that, “as assignees of the original lessor, B.E.B. Properties,” they
“are entitled to receive the lease payments throughout the duration of the lease[.]”
{¶4} New Par filed an answer, counterclaim, and cross-claim in both cases. In
case No. 14M000690, New Par cross-claimed against the Birds for indemnification in the
event New Par was found liable for rental payments made to the Birds. In case No.
14M000717, New Par cross-claimed against LRC Realty for indemnification in the event
New Par was found liable for rental payments made to LRC Realty. In both cases, New
Par made a counterclaim and cross-claim for interpleader, “so that the Court can fairly
adjudicate the rights and obligations of the Birds and LRC and determine who among
them is entitled to future rental payments from New Par.”
{¶5} The Birds filed answers to New Par’s cross-claim and to LRC Realty’s
complaint. The Birds also raised a combined counterclaim against LRC Realty and cross-
claim against Parker Court for reformation of deed, seeking to reform a warranty deed for
the transfer of the subject property “to clarify that grantor [Parker Court] did not grant, and
grantee [LRC Realty] did not receive, the right to receive the rental payments from the
New Par Lease, which rights rest with Bruce and Sheila Bird, as assignees of B.E.B.
Properties * * * until the termination of the lease.”
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{¶6} Parker Court filed an answer to LRC Realty’s complaint and an answer to
the Birds’ cross-claim. Parker Court also raised cross-claims against New Par and the
Birds. The first claim was for a declaratory judgment that “112 Parker Court LLC [was]
entitled to receive the annual rental payments owed pursuant to the Lease Agreement for
the time period covering each full year 112 Parker Court LLC held title to the Parker Court
Property, January 2004 until January 2013.” The other claim was for a money only
judgment in an amount of “no less than $170,682, which was due and payable over the
period of January 2004 until January 2013, pursuant to the Lease Agreement[.]”
{¶7} The Birds and New Par each filed an answer to Parker Court’s cross-claims.
{¶8} LRC Realty filed an answer to the Birds’ complaint, an answer to New Par’s
cross-claim, and a reply to New Par’s and the Birds’ counterclaims.
{¶9} On December 23, 2014, both cases were consolidated under case No.
14M000690.
{¶10} On March 6, 2015, the trial court granted New Par’s unopposed motion to
deposit funds in interpleader, representing the 2015 lease payment of $23,688.00.1
{¶11} New Par, Parker Court, and LRC Realty, each filed a motion for summary
judgment, and the Birds filed a motion for partial summary judgment. All motions were
duly opposed. The parties also filed a “Stipulation” with the trial court, by which they
stipulated to the authenticity and admissibility of thirteen documents attached thereto,
listed below in chronological order:
1. Warranty Deed from Geauga Properties, Ltd. to B.E.B. Properties
(recorded July 23, 1980)
2. Option to Lease & Lease Agreement between B.E.B. Properties
and Northern Ohio Cellular Telephone Company [“Northern”]
(recorded April 21, 1994)
1. New Par has also interpleaded the 2016, 2017, and 2018 lease payments.
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3. Letter from Northern to B.E.B. Properties accepting the option to
lease (dated February 28, 1995)
4. Non-exclusive Easement Agreement between B.E.B. Properties
and Northern (recorded March 3, 1995)
5. Memorandum of Lease between B.E.B. Properties and Northern
(recorded March 3, 1995)
6. Warranty Deed from B.E.B. Properties to Keith R. Baker and
Joseph E. Cyvas (recorded April 4, 1995)
7. Assignment from David J. Eardley and Robert Bosler to the Birds
of their interest in the lease agreement between B.E.B. Properties
and Northern (signed June 22, 1995)
8. Memorandum of Assignment from David J. Eardley and Robert
Bosler of their “right, title and interest” in B.E.B. Properties to the
Birds (recorded July 12, 1995)
9. Assignment of Lease and Easement Documents from Northern to
New Par (recorded January 19, 1999)
10. Warranty Deed from Baker and Cyvas to Magnum Machine Co.
(recorded June 7, 1999)
11. Warranty Deed from Magnum Machine Co. to Parker Court
(recorded October 31, 2003)
12. Offer to Purchase and Acceptance Agreement between Parker
Court and LRC Realty (signed December 14, 2012)
13. Warranty Deed from Parker Court to LRC Realty (recorded
January 24, 2013)
{¶12} On May 10, 2016, the trial court rendered its decision in summary judgment,
making the following findings, which represent undisputed facts:
Under a recorded 35 year lease, New Par rents space at 112 Parker
Court, Chardon, Ohio (the ‘property’). The lease requires a single
yearly rental payment, made to the property owner on or before the
first of April. New Par has never missed a payment and has paid
each installment as instructed or ordered. The Birds, LRC, and
Parker Court LLC all claim entitlement to rent paid and payable by
New Par.
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On March 3, 1995, a lease and easement between defendant then
property owner B.E.B. Properties (‘BEB’) and New Par’s
predecessor, Northern Ohio Cellular Telephone Company
(‘Northern’) were recorded.
On March 22, 1995, BEB deeded the property to non-parties Keith
Baker and Joseph Cyvas (‘Baker and Cyvas’) ‘free from all
encumbrances whatsoever excepting restrictions of record…zoning
ordinances…and taxes.’ The Northern easement and lease were
described in the deed; the right to receive rent was not.
On April 1, 1995, the lease between BEB and Northern commenced.
In June, 1995, two of BEB’s three partners assigned all of their
partnership interests to the remaining partner and his wife, the Birds.
Beginning in 1995 or 1996, Northern paid rent to the Birds. Baker
and Cyvas did not complain.
Effective January 1, 1997, Northern assigned its rights to its affiliate,
defendant partnership New Par.
On June 2, 1999, Baker and Cyvas deeded the property to their
company, non-party Magnum Machine Co. (‘Magnum’).
On October 31, 1999, Magnum deeded the property to Parker Court
LLC.
On January 24, 2013, Parker Court LLC deeded the property to LRC.
On March 15, 2013, New Par paid $23,688.00 in rent for the period
from April 1, 2013 through March 31, 2014 to the Birds.
On March 28, 2014, New Par [paid] $23,688.00 in rent for the period
from April 1, 201[4] through March 31, 201[5] to LRC.
{¶13} The trial court denied the Birds’ motion for partial summary judgment and
granted New Par’s motion for summary judgment. The court granted in part and denied
in part the motions for summary judgment filed by Parker Court and LRC Realty: with
respect to New Par, the motions were denied; with respect to the Birds, the motions were
granted.
{¶14} The trial court denied the Birds’ requested reformation of the deed between
Parker Court and LRC Realty on the grounds that they “were never a granting or
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contracting party.” The court stated it was B.E.B. Properties that “owned the property,
was the granting party under the deed, and the contracting party under the lease” and
that when B.E.B. Properties sold the property to Baker and Cyvas, it did not reserve the
right to receive rent under the lease.
{¶15} The trial court ordered the Birds to pay Parker Court the rent they received
from New Par ($120,102.00) for the rental periods beginning on April 1, 2007, and ending
on March 31, 2013. The court stated the lease required payment to the “landlord,” which
was described as the owner of the property; the Birds “never owned the property and
never improved the property after it was sold to Baker and Cyvas”; and the “recorded
deeds and lease unambiguously conveyed the right to receive rent to the property owner.”
The court did not require the Birds to pay Parker Court for the rent received for the rental
periods beginning on April 1, 1995, and ending on March 31, 2007, based on the eight-
year statute of limitations for actions brought upon written contracts.
{¶16} For similar reasons, the trial court ordered the Birds to pay LRC Realty the
rent they received from New Par ($23,688.00) for the rental period beginning April 1,
2013, and ending on March 31, 2014. LRC Realty was also awarded the money
interpleaded by New Par with the clerk of courts for the rental periods beginning on April
1, 2015, and April 1, 2016.
{¶17} Finally, the trial court determined that New Par had paid rent as instructed
by the property owner (as had Northern, its predecessor) and, for the future, would pay
rent “according to instructions received from the property owner.”
{¶18} The Birds filed a notice of appeal from this decision and raise the following
four assignments of error, which are consolidated for the purpose of analysis:
[1.] The trial court committed prejudicial error in granting summary
judgment and awarding damages in favor of Appellees 112 Parker
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Court and LRC Realty, and denying Appellants Bruce and Sheila
Bird’s motion for summary judgment, holding that Bruce and Sheila
Bird, individually and as successors and assigns of B.E.B.
Properties, never had any right to receive rent from the cellphone
tower lease and must pay all rent received within 8 years of filing the
Complaints to past and current owners of the property.
[2.] The trial court committed prejudicial error in granting judgment
and awarding damages to Appellees 112 Parker Court and LRC
Realty, when the Appellees’ direct claims against Appellants Bruce
and Sheila Bird for money were equitable in nature, and when
derivative liability was not briefed on summary judgment.
[3.] The trial court committed prejudicial error in granting judgment to
Appellee 112 Parker Court, and requiring Appellants Bruce and
Sheila Bird to pay to Appellee all rent they received from 2007
through 2012, when undisputed evidence established that 112
Parker Court had actual knowledge of the reservation of rent to a
prior owner.
[4.] The trial court committed prejudicial error in granting judgment to
Appellee 112 Parker Court, and requiring Appellants Bruce and
Sheila Bird to pay to Appellee all rent they received from 2007
through 2012, based on R.C. 2305.06, the statute of limitations for
written contracts, when the undisputed evidence established no
contract between the Birds and 112 Parker Court, written or
otherwise.
{¶19} Pursuant to Civ.R. 56(C), summary judgment is proper when (1) the
evidence shows “that there is no genuine issue as to any material fact” 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 that conclusion
is adverse to the party against whom the motion for summary judgment is made, that
party being entitled to have the evidence * * * construed most strongly in the party’s favor.”
{¶20} A trial court’s decision to grant summary judgment is reviewed by an
appellate court under a de novo standard of review. Grafton v. Ohio Edison Co., 77 Ohio
St.3d 102, 105 (1996). “Under this standard, the reviewing court conducts an
independent review of the evidence before the trial court and renders a decision de novo,
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i.e., as a matter of law and without deference to the conclusions of the lower court.”
Jackson v. Moissis, 11th Dist. Geauga No. 2012-G-3070, 2012-Ohio-5599, ¶20 (citation
omitted).
Reformation of the Deed
{¶21} The Birds argue the trial court erred in denying their claim for reformation.
LRC Realty and Parker Court contend the Birds do not have standing to seek reformation
of any of the transferring instruments because they never owned the property and
because they were not a party to the deed at issue and, therefore, do not have privity of
contract.
{¶22} “‘It is well-established that “reformation of an instrument is an equitable
remedy whereby a court modifies the instrument which, due to mutual mistake on the part
of the original parties to the instrument, does not evince the actual intention of those
parties.”’” Mong v. Kovach Holdings, LLC, 11th Dist. Trumbull No. 2012-T-0063, 2013-
Ohio-882, ¶20, quoting Zwaryz v. Wiley, 11th Dist. Ashtabula No. 98-A-0073, 1999 WL
689940, *2 (Aug. 20, 1999), quoting Mason v. Swartz, 76 Ohio App. 3d 43, 50 (6th
Dist.1991); see also Greenfield v. Aetna Cas. & Sur. Co., 75 Ohio App. 122, 127-128
(12th Dist.1944), citing 35 Ohio Jurisprudence, Section 2, at 145 (“‘reformation’ is defined
as the remedy afforded by courts possessing equitable jurisdiction to the parties and the
privies of parties, to written instruments which import a legal obligation to reform or rectify
such instruments whenever they fail, through fraud or mutual mistake, to express the real
agreement or intention of the parties”).
{¶23} “Equity will permit the reformation of a written instrument not only as
between the original parties but also as to parties in privity with them.” Mason, supra, at
49 (citations omitted). “Generally, one is in privity with another if he succeeds to an estate
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or an interest formerly held by the other * * *, because privity is a succession of interest
or relationship to the same thing.” Columbus v. Union Cemetery Assn., 45 Ohio St. 2d 47,
51 (1976) (citations omitted); see also Black’s Law Dictionary (10th Ed.2014) (privity of
estate: “[a] mutual or successive relationship to the same right in property, as between
grantor and grantee or landlord and tenant”).
{¶24} “[O]ne who is in privity with another because of the transfer of property
‘stands in the same shoes’ as to the rights of the prior owner in the same property, thereby
giving the subsequent owner the same rights and obligation as the original owner had in
regard to the property[,]” including “the right to reformation of a deed if the necessary
elements are present, that is, fraud, error, omission or mutual mistake.” Berardi v. Ohio
Turnpike Comm., 1 Ohio App. 2d 365, 370-371 (8th Dist.1965).
{¶25} The initial relevant transfer of the subject property occurred on March 22,
1995, when B.E.B. Properties sold the property to Baker and Cyvas. That deed, which
was recorded on April 4, 1995, transferred the real estate in fee simple. Baker and Cyvas
subsequently sold the property to Magnum, which sold it to Parker Court, which sold it to
LRC Realty.
{¶26} The Birds seek to reform the warranty deed transferring the property from
Parker Court to LRC Realty.2 The Birds lack privity with respect to that transaction, as
they do not stand in a mutual or successive relationship to the same rights of property as
2. See Answer, Counterclaim, and Cross-Claim of Bruce and Sheila Bird as Assignees of Defendant B.E.B.
Properties, at ¶18 (“[t]he deed attached hereto as Exhibit 1 [Warranty Deed between Parker Court and LRC
Realty] should be reformed to reflect the true intention of the parties and the true state of affairs that existed
among the parties at the time of transfer to LRC Realty, Inc.”); Motion for Partial Summary Judgment of
Bruce and Sheila Bird, Individually and as Successors to B.E.B. Properties, at p. 16 (“the Court should still
enter judgment in favor of Bruce and Sheila Bird by reforming the current deed to reflect the clear and
unmistakable intent and understanding of 112 Parker Court LLC and LRC Realty, Inc. that their transaction
did not include any right to receive the cellphone tower lease payments, which were assigned to Bruce and
Sheila Bird”).
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either Parker Court or LRC Realty. The Birds claim they are predecessors in interest to
Parker Court and LRC Realty, but that claim is untenable.
{¶27} Because the Birds were not in privity with either Parker Court or LRC Realty,
the remedy of reformation was not available to them with respect to the deed transferring
the property between these parties. The trial court properly granted summary judgment
against the Birds on their claim for reformation.
Right to Receive Rent
{¶28} The trial court granted New Par’s motion for summary judgment and denied
Parker Court’s and LRC Realty’s motions for summary judgment with respect to their
claims against New Par. The trial court held that “Northern/New Par fulfilled its duty to
pay rent as instructed” and was “not required to pay past rental installments to property
owners who failed to provide payment instructions.” The judgment in favor of New Par
has not been challenged on appeal.
{¶29} The trial court further rendered summary judgment against the Birds and in
favor of Parker Court and LRC Realty. The trial court ordered the Birds to pay
$120,102.00 to Parker Court for rent received from New Par during the years 2007
through 2013 and to pay $23,688.00 to LRC Realty for rent received from New Par in the
year 2014. The trial court further held that the Birds were not entitled to future rent
payments from New Par. The trial court stated:
‘The right to receive rent…arises by privity of estate rather than by
contract. A contract fixes the amount of land, the terms of payment
and the manner of the use of the estate, but the right to recover the
rent depends upon the ownership of the reversion.’ See Loveless v.
Erie R. Co., 2 Ohio App. 404, 407 [11th Dist.1914].
Northern leased the property from its owner, BEB. The lease
describes ‘landlord’ as the property owner and requires rent to be
paid to the landlord.
11
After BEB sold the property, Baker and Cyvas, (and then their
company Magnum), owned the property, were the landlords, and
were entitled to the rent. Baker and Cyvas agreed with BEB and the
Birds not to collect the rent. Baker and Cyvas allowed Northern/New
Par to pay rent as instructed by BEB and the Birds. These
agreements, however, do not override the right of the succeeding
property owners to rely on recorded documents and to receive rent
according to the recorded lease and deeds.
{¶30} For the following reasons, we disagree with the trial court’s holding and its
decision to grant summary judgment in favor of Parker Court and LRC Realty on the right
to receive the past rent payments.
{¶31} The trial court indicates “the lease describes ‘landlord’ as the property
owner and requires rent to be paid to the landlord.” The lease does describe the Landlord
as the property owner (therefore, the Landlord had authority to enter into the lease), but
it also provides that B.E.B. Properties is “hereinafter referred to as ‘Landlord[.]’” Thus,
while the “landlord” was also the “property owner” at the time the lease was executed,
that designation does not define the “property owner” as a party to the lease. The lease
is a contract between B.E.B. Properties and Northern—not between Northern and
whomever the property owner happens to be at a given time. Therefore, the trial court is
incorrect in concluding that Baker and Cyvas (and then Magnum Machine Co.) became
the “landlords” by virtue of becoming the “property owners.”
{¶32} The trial court also relies on a case that is entirely distinguishable from the
case sub judice, to wit: Loveless v. Erie Ry., 35 Ohio C.C. 87 (11th Dist.1914). Loveless
involved a dispute between the executor of an estate and the devisee of real estate
regarding who was entitled to the rent generated from the property. The issue in Loveless
was “whether rent paid as consideration for a grant or lease of real estate made in the life
time of the testator, but which accrues after the death of the testator, goes to the devisee
of the leased premises, or is an asset of the testator’s estate.” Id. at 89. The Loveless
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Court cited the following case law, which the trial court adopted: “The right to receive rent
by one from another arises by privity of estate rather than by contract. A contract fixes
the amount of land, and the terms of payment, and the manner of the use of the estate,
but the right to recover the rent depends upon the ownership of the reversion.” Id. at 89-
90, citing West Shore Mills Co. v. Edwards, 24 Ore. 475, 33 P. 987 (1893). Contrary to
Loveless and West Shore Mills, the dispute at issue here does not involve ownership of
a reversion, nor is there a dispute about the accrual of rent after the death of a testator.
This case law is not applicable here.
{¶33} In their partial motion for summary judgment, the Birds argue that, “[a]t a
minimum, the recorded documents indicate that after Baker and Cyvas acquired the
property, B.E.B. Properties still retained some interest in the lease, which it assigned to
[the Birds], that it involved ‘rental payments,’ and that the reference to rental payments
‘refers to Lease Agreement recorded on April 21, 1994 at Volume 979, Page 1 of the
Geauga County Records.’” On this basis, we agree the trial court erred in granting
summary judgment in favor of Parker Court and LRC Realty.
{¶34} A recorded leasehold is an encumbrance of land governed by the recording
statutes. See R.C. 317.08(A)(25) (stating the county recorder shall record in the official
records all of the following instruments that are presented for recording, upon payment of
the fees prescribed by law: leases, memoranda of leases, and supplements,
modifications, and amendments thereto); see also Tenbusch v. L.K.N. Realty Co., 107
Ohio App. 133, 137 (8th Dist.1958) (holding that unexpired leases constitute
encumbrances of record). The benefit of a leasehold may be reserved by the grantor
when conveying title to a grantee. “It is undisputed that, generally, in the case of a
reservation, the whole title to the property conveyed passes to the grantee, but the grantor
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reserves to himself some benefit of the real estate.” Campbell v. Johnson, 87 Ohio
App.3d 543, 547 (2d Dist.1993).
{¶35} R.C. 5301.25(A) provides:
All deeds * * * and instruments of writing properly executed for the
conveyance or encumbrance of lands, tenements, or hereditaments,
other than as provided in division (C) of this section and section
5301.23 of the Revised Code, shall be recorded in the office of the
county recorder of the county in which the premises are situated.
Until so recorded or filed for record, they are fraudulent insofar as
they relate to a subsequent bona fide purchaser having, at the time
of purchase, no knowledge of the existence of that former deed, land
contract, or instrument.
{¶36} “Pursuant to this statutory provision, a bona fide purchaser for value is
bound by an encumbrance upon land only if he has constructive or actual knowledge of
the encumbrance.” Tiller v. Hinton, 19 Ohio St. 3d 66, 68 (1985). “[T]he proper recording
of those instruments referenced in R.C. 5301.25(A) serves as ‘constructive’ notice of that
interest or encumbrance to all who claim through or under the grantor by whom such deed
was executed.” Thames v. Asia’s Janitorial Serv., Inc., 81 Ohio App. 3d 579, 587 (1992).
“Statements and references contained in instruments in his chain of title bind the owner
and he is charged with knowledge he would have obtained from reasonable inquiry.”
Ferguson v. Zimmerman, 2d Dist. Montgomery No. 9426, 1986 WL 878, *5 (Jan. 16,
1986), citing Arnoff v. Williams, 94 Ohio St. 145 (1916). “These rules rest on the obvious
reason, that a searcher can be fairly supposed to be made acquainted with the contents
of such deeds only as, in the process of tracing, link by link, his chain of title on the record,
necessarily pass under his inspection.” Blake v. Graham, 6 Ohio St. 580, 584 (1856).
{¶37} There is no dispute between the parties that the warranty deeds at issue,
as well as the lease, memorandum of lease and easement agreement, were all recorded.
It is also without dispute that these instruments are within LRC Realty’s chain of title on
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the record as they can all be traced, link by link, from B.E.B. Properties to Baker and
Cyvas to Magnum to Parker Court and, finally, to LRC Realty.
{¶38} The option to lease and lease agreement between B.E.B. Properties and
Northern was recorded on April 1, 1994. The easement agreement and the memorandum
of lease agreement between B.E.B. Properties and Northern were recorded on March 3,
1995.
{¶39} The warranty deed from B.E.B. Properties to Baker and Cyvas was
subsequently recorded on April 4, 1995, and provides:
Said premises being subject to the same restriction as recorded in
Volume 537, Page 523, Geauga County Records of Deeds which are
hereby incorporated and made a part of this deed as if fully written
herein.
Further subject to an Option to Lease and Lease Agreement dated
March 14, 1994 and recorded April 21, 1994 at Volume 979, Page 1,
of the Geauga County Records;
Further subject to a Non-Exclusive Easement filed March 3, 1995
referred to in Volume 1009, Page 56 of Geauga County Records;
Further subject to a Memorandum of Lease filed March 3, 1995,
referred to in Volume 1009, Page 50 of Geauga County Records.
And B.E.B. Properties, an Ohio Partnership, the said Grantor, does
for its self and its successors and assigns, covenant with the said
Grantees, Keith R. Baker and Joseph K. Cyvas, their heirs and
assigns, * * * that it will warrant and defend said premises, with the
appurtenances thereunto belonging, to the said Grantees, their heirs
and assigns, against all lawful claims and demands whatsoever,
such premises further to be subject to the specific encumbrances on
the premises as set forth above.
{¶40} The warranty deed from Baker and Cyvas to Magnum was later recorded
on June 7, 1999, and sets forth the same “subject to” language. It warrants and defends
said premises “against all lawful claims and demands whatsoever except as hereinbefore
provided.”
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{¶41} The fact that the language in the deed does not expressly state B.E.B.
Properties “reserved the right to receive rent” is not dispositive. “The first rule of deed
construction in Ohio is that when the parties’ intentions are clear from the four corners of
the deed, we will give effect to that intention.” Koprivec v. Rails-to-Trails of Wayne Cty.,
Slip Opinion No. 2018-Ohio-465, ¶29, citing Hinman v. Barnes, 146 Ohio St. 497, 508
(1946). The “subject to” language contained within the deed, which is repeated in the
deed from Baker and Cyvas to Magnum, clearly indicates that the parties’ intention was
to reserve the right to receive rent for the benefit of B.E.B. Properties.
{¶42} Pursuant to the language in these deeds, both Parker Court and LRC Realty
are charged with constructive knowledge of the easement and leasehold encumbrance
that was reserved by B.E.B. Properties and properly recorded within their chain of title.
An examination of the recorded lease agreement and memorandum of lease would have
revealed that B.E.B. Properties was entitled to the rent payments from Northern/New Par.
Therefore, Parker Court and LRC Realty took title subject to the specific reservations and
were bound by the easement and leasehold encumbrance. Further, no party who
subsequently received the property within this chain of title could transfer the right to
receive rent, the same being reserved to B.E.B. Properties for the length of the lease with
Northern/New Par. The trial court erred in concluding Parker Court and LRC Realty are
entitled to claim the past rent profits from that encumbrance.
{¶43} The issue that remains is whether the trial court erred in denying summary
judgment in favor of the Birds on their claim of the right to receive past and future rent
profits. Included within the “Stipulation” exhibits filed by the parties is a copy of the
Assignment from Eardley and Bosler, two of the original partners in B.E.B. Properties, to
the third partner and his wife, the Birds. The Assignment was signed by all partners on
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June 22, 1995, in the presence of two witnesses and notarized. The document provides
the following, in relevant part:
WHEREAS, said Partnership has entered into a certain Option and
Lease Agreement with Tenant for approximately 2.983 acres of land
located on B.E.B. Properties’ premises for the construction of a
transmission and receiving tower and related facilities; and
WHEREAS, said Option to Lease and Lease Agreement between
B.E.B. Properties and Tenant dated March 14, 1994 was recorded
on April 21, 1994 at Volume 979, Page 1 of the Geauga County
Records along with a Memorandum of Lease filed March 3, 1995 at
Volume 1009, Page 50 of Geauga County Records; and
WHEREAS, B.E.B. Properties has granted unto Tenant a Non-
Exclusive Easement for ingress and egress to the Tower site, as
referred to above, filed March 3, 1995 at Volume 1009, Page 56 of
Geauga County Records; and
WHEREAS, Assignees are desirous of acquiring Assignor’s rights,
title and interest in and to said partnership interests as referred to
above; and
WHEREAS, Assignors are desirous of assigning their rights, title and
interest in and to said general partnership to Assignees.
WHEREFORE, in consideration of Assignees paying to Assignors
the sum of [$33,333.33] each, said Assignors hereby assign, jointly
and to the survivor of the Assignees, all of their rights, title and
interest in and to said partnership interests,
IT IS FURTHER understood and agreed that this assignment shall
be reflected in a Memorandum of Assignment to be filed of record on
the completion of this transaction.
FURTHER, this instrument along with the Memorandum of
Assignment shall constitute notice to the Tenant that any and all
rentals and/or payments, obligations, notices, communications
and/or rights or claims which may accrue between Tenant and the
Assignees shall henceforth be submitted to the Assignees effective
this 6th day of May, 1995. It is further understood that this instrument
shall be evidence of the transfer of any and all claims or rights
Assignors may have in and to said partnership interest.
{¶44} The Memorandum of Assignment was signed, witnessed, and notarized in
conjunction therewith and was duly recorded on July 12, 1995. It provides, in relevant
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part, that the purpose of recording the Memorandum “is to give notice to the existence of
said assignment and the rights granted therein by the Assignors to the Assignees.”
This instrument shall be further evidence of the transfer of any and
all claims or rights Assignors may have in B.E.B. Properties, an Ohio
General Partnership, and that all rental payments, notices and/or any
type of communication pertaining to said partnership shall henceforth
be forwarded to Assignees at the address set forth herein.”
Handwritten below this provision is an instruction to “Refer to Lease Agreement recorded
on April 21, 1994 at Volume 979, Page 1 of the Geauga County Records.”
{¶45} LRC Realty challenged the effectiveness of this assignment in its motion for
summary judgment. Because, however, LRC Realty is not entitled to the rent payments,
it does not have standing to challenge the assignment between B.E.B. Properties and the
Birds. B.E.B. Properties did not raise a challenge to the assignment in the trial court, and
the document was included in the Stipulated exhibits submitted to the court. Therefore,
the trial court erred in concluding the Birds are not entitled to the past and future rent
payments.
{¶46} We further note that the record includes a copy of the Offer to Purchase and
Acceptance Agreement that established the terms of LRC Realty’s acquisition of the
property, which indicates it agreed to take title with such exceptions to title as are
approved in writing by LRC Realty. The agreement also provided for remedies if a defect
in title was found in the Title Commitment or Survey, to wit: LRC Realty could either accept
the title subject to the defect or terminate the agreement. While the answer to this entire
conflict is likely contained in those documents, they are not a part of this record and are
not necessary for resolution of this appeal.
{¶47} The Birds’ assignments of error have merit to the extent indicated.
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{¶48} The judgment of the Geauga County Court of Common Pleas is affirmed
with respect to the Birds’ claim for reformation and with respect to all claims against New
Par. The judgment is reversed with respect to the damages claim against the Birds in
favor of Parker Court and LRC Realty; the trial court erred in granting summary judgment
against the Birds.
{¶49} This matter is remanded for the trial court to enter judgment in favor of the
Birds, as assignees of the interest in B.E.B. Properties, consistent with this opinion.
THOMAS R. WRIGHT, P.J., concurs,
DIANE V. GRENDELL, J., dissents with a Dissenting Opinion.
____________________
DIANE V. GRENDELL, J., dissents with a Dissenting Opinion.
{¶50} To a very limited degree, I concur in the judgment of the majority. I concur
that remedy of reformation is not available to the Birds. I would also reverse and remand
the grant of summary judgment, but for reasons and purposes wholly different from those
of the majority.
{¶51} The issue that is before this court is whether the Birds/B.E.B. Properties
retained the right to receive rent under the lease with New Par following the sale of the
property to Baker and Cyvas. Every participant in this litigation, from the Birds to 112
Parker Court to LRC Realty to the trial court and their respective attorneys, has
understood that resolution of this issue turns on the following propositions of law: A
“covenant to pay rent * * * runs with the land and vests in the assignee of the reversion
the right to receive the rents accruing during his ownership of the fee.” Smith v. Harrison,
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42 Ohio St. 180, 185 (1884); Commercial Bank & Sav. Co. v. Woodville Sav. Bank Co.,
126 Ohio St. 587, 186 N.E. 444 (1933), paragraph one of the syllabus (“[t]he right to rents
and profits of real estate follows the legal title”). The right to receive rent, however, may
be preserved in the grantor by a “reservation of rent” in the transferring instrument. Liberal
S. & L. Co. v Frankel Realty Co., 137 Ohio St. 489, 501, 30 N.E.2d 1012 (1940).3
{¶52} No party to this litigation has maintained that the deed transferring the
property to Baker and Cyvas contained a reservation of the right to receive rent.
{¶53} Incredibly, i.e., without citation to authority or precedent, the majority
concludes: “The fact that the language in the deed does not expressly state B.E.B.
Properties ‘reserved the right to receive rent’ is not dispositive.” Supra at ¶ 41. Instead
of an actual reservation of the right to receive rent, the majority holds that “[t]he ‘subject
to’ language contained within the deed [transferring the property to Baker and Cyvas] * *
* clearly indicates that the parties’ intention was to reserve the right to receive rent for the
benefit of B.E.B. Properties.” Supra at ¶ 41.
{¶54} The “subject to” language in question provides that: “B.E.B. Properties * * *
does * * * covenant with the said Grantees [Baker and Cyvas] * * * that it will warrant and
defend said premises * * * against all lawful claims and demands whatsoever, such
premises further to be subject to the specific encumbrances on the premises set forth
above [an Option to lease and Lease Agreement dated March 14, 1994 and recorded
April 21, 1994 at Volume 979, Page 1, of the Geauga County Records].”
3. See the trial court’s May 10, 2016 Decision (“[a]fter BEB sold the property, Baker and Cyvas, (and then
their company Magnum), owned the property * * * and were entitled to the rent”); the Byrds’ Assignments
of Error and Brief, at 12 (“The Law is Not in Dispute / The law holds that rent runs with the land unless it
is expressly reserved in a deed.”); and LRC Realty’s Answer Brief, at 17 (“In Ohio, the long-standing general
rule is that a covenant to pay rent runs with the land.”).
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{¶55} That this boilerplate language should amount to an express reservation of
the right to receive rent was certainly not clear to the lower court judge or the litigants in
the present case, is not clear to this judge, and, as far as this judge has been able to
determine, has not been clear to any court that has considered the significance of
language in a warranty deed that the premises are “subject to * * * specific
encumbrances.” Rather, the plain and ordinary meaning of this language is that B.E.B.
Properties’ covenant with Baker and Cyvas to warrant the premises against third-party
claims acknowledges the existence of certain pre-existing encumbrances.4 In no way
may this language be reasonably construed to mean that B.E.B. Properties was limiting
Baker and Cyvas’ rights in the subject premises by excepting the right to receive under
the lease with New Par. Thames v. Asia’s Janitorial Serv., Inc., 81 Ohio App. 3d 579, 590,
611 N.E.2d 948 (6th Dist.1992) (“the statement in the deed following the description of
the land, that the ‘above premises are conveyed subject to’ the mortgage, qualifies the
estate granted, and that it is to that estate, so qualified, that the warranties apply”) (citation
omitted); Davidson Land Co., LLC v. Davidson, 2011 WY 29, 247 P.3d 67, 74, ¶ 25
(Wy.2011) (“[t]he ‘subject to’ language simply put the grantee on notice that the warranty
was limited by any recorded encumbrances”); Birdwood Subdivision Homeowners’ Assn.,
Inc. v. Bulotti Constr., Inc., 175 P.3d 179, 183 (Id.2007) (“[t]he warranty deed * * * stated
that the grant was subject to ‘Taxes, easements, restrictions, reservations, assessments
and encumbrances as shown of record, if any,’” which “language simply creates
exceptions to the covenants in the warranty deed”).
4. This conclusion is even more evident when the “subject to” language relied upon by the majority is
considered in connection with the immediately preceding language defining the nature of the estate
transferred: “B.E.B. Properties * * * does * * * covenant with the said Grantees [Baker and Cyvas] * * * that
* * * Grantor is well seized of the above described premises, and it has a good and indefeasible estate in
fee simple, * * * and that the same are free from all encumbrances whatsoever, excepting restrictions of
record * * *, and that it will warrant and defend said premises * * * [quotation continues as above].”
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{¶56} Yet the majority construes this language, which merely qualifies B.E.B.
Properties’ warranty that it was conveying a good and indefeasible estate in fee simple,
to hold that “no party who subsequently received the property within this chain of title
could transfer the right to receive rent, the same being reserved to B.E.B. Properties for
the length of the lease with Northern/New Par.” Supra at ¶ 42. This conclusion cannot,
as demonstrated above, rely on the plain and ordinary meaning of the phrase “subject to”
but, rather, appears to rest on such language “indicat[ing] that the parties’ intention was
to reserve the right to receive rent for the benefit of B.E.B. Properties.” Supra at ¶ 41.
The majority thus equates “constructive knowledge of the easement and leasehold
encumbrance” with the expressed intent to reserve the right to receive rent.5 Constructive
or actual knowledge of the lease’s existence, however, does not imply an intent to retain
rights thereunder. “[A] court must analyze the language used in the deed, ‘the question
being not what the parties meant to say, but the meaning of what they did say, as courts
can not [sic] put words into an instrument which the parties themselves failed to do.’”
(Citation omitted.) Am. Energy Corp. v. Datkuliak, 174 Ohio App. 3d 398, 2007-Ohio-
7199, 882 N.E.2d 463, ¶ 50 (7th Dist.); McCoy v. AFTI Props., Inc., 10th Dist. Franklin
No. 07AP-713, 2008-Ohio-2304, ¶ 8.6 In the present case, even the majority
acknowledges that the deed does not contain an express reservation of rights. Recourse
5. Although invariably referred to as a “reservation” of the right to receive rent, “exception” would be the
proper term: “A reservation by definition is a ‘creation of a new right or interest (such as an easement) by
and for the grantor, in real property being granted to another.’ * * * An exception is the ‘retention of an
existing right or interest, by and for the grantor, in real property being granted to another.’” Am. Energy
Corp. v. Datkuliak, 174 Ohio App. 3d 398, 2007-Ohio-7199, 882 N.E.2d 463, ¶ 74 (7th Dist.), quoting Black’s
Law Dictionary 1333 and 604 (8th Ed.2004) respectively. In practice, “the two terms are often employed
‘indiscriminately.’” (Citation omitted.) Id. at ¶ 75.
6. Compare Palmer v. Campbell, 333 P.2d 957, 959 (Okl.1958) (“there must be, somewhere in the deed,
appropriate language expressly reserving some interest in and to the grantor, or the grantor’s entire interest
passes by a warranty deed to real estate”); Lipschultz v. Robertson, 95 N.E.2d 357, 359 (Ill.1950) (“[w]hen
the appellees conveyed the property to the city of Chicago by their warranty deed * * *, reserving nothing
to themselves, they conveyed the lease and the right to receive unaccrued rentals”).
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to what the majority believes the language of the deed indicates is insufficient to create a
reservation of rights where none exists in the deed.
{¶57} Although the majority states its conclusion that B.E.B. Properties reserved
the right to receive rent as a matter of law, one suspects the majority actually considers
the deed to be ambiguous on this point, as evidenced by speculation elsewhere in the
opinion that “the answer to this entire conflict is likely contained in [parol] documents
[which] are not a part of this record.” Supra at ¶ 46. Two points should be made. First,
any perceived ambiguity in the language of the deed should be construed in favor of
Baker and Cyvas as grantees. Mong v. Kovach Holding, L.L.C., 11th Dist. Trumbull No.
2012-T-0063, 2013-Ohio-882, ¶ 27 (the rule that “an exception or reservation in a
conveyance is construed in favor of the grantee rather than of the grantor * * * is so
elementary that citation is unnecessary”) (citation omitted). Second, if the “subject to”
language in the present warranty deed is deemed ambiguous or otherwise subject to
novel interpretation, inasmuch as the parties and their attorneys failed to grasp its
significance, then the construction of virtually every warranty deed or property transfer in
the State of Ohio is vulnerable to judicial reinterpretation.
{¶58} There are legitimate equitable issues regarding 112 Parker Court’s and LRC
Realty’s entitlement to recover damages for the rental payments received by the Birds
from New Par which ought to have precluded the granting of summary judgment in the
present case. However, to reverse and remand the trial court’s grant of summary
judgment on the grounds that B.E.B. Properties’ warranty of title being subject to specific
encumbrances is the functional equivalent of an express reservation of the right to receive
rents is not a result in which I can join.
{¶59} For the foregoing reasons, I respectfully dissent.
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