LHPT Columbus, L.L.C. v. Capitol City Cardiology, Inc.

[Cite as LHPT Columbus, L.L.C. v. Capitol City Cardiology, Inc., 2014-Ohio-5247.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
LHPT Columbus The, LLC, :
Plaintiff-Appellee, :
v. : No. 14AP-264
(C.P.C. No. 11CV-5913)
Capitol City Cardiology, Inc. et al., :
(REGULAR CALENDAR)
Defendants-Appellants, :
Cap Cit, Ltd. et al., :
Defendants-Appellees. :
D E C I S I O N
Rendered on November 25, 2014
Squire Patton Boggs (US) LLP, Aneca E. Lasley, Aaron T.
Brogdon and Larisa M. Vaysman, for plaintiff-appellee.
Luper Neidenthal & Logan, A Legal Professional Association,
Gregory H. Melick and Matthew T. Anderson, for appellants.
APPEAL from the Franklin County Court of Common Pleas
O'GRADY, J.
{¶ 1} Defendant-appellant, NSP Holdings, LLC ("NSP"),1 appeals from a
judgment of the Franklin County Court of Common Pleas in favor of plaintiff-appellee,
LHPT Columbus The, LLC ("LHPT"). For the reasons that follow, we reverse the trial
court's judgment and remand for further proceedings.
I. FACTUAL AND PROCEDURAL BACKGROUND
1We note that defendant-appellant Capitol City Cardiology, Inc. has not been an active participant in this
appeal.
No. 14AP-264 2
{¶ 2} On or about June 12, 2006, Eastside MOB LLC ("Eastside") and Capitol City
Cardiology, Inc. ("CCC") entered into a written lease agreement for office space in a
medical office building located at 4882 East Main Street, Whitehall, Ohio (the "building").
The shareholders of CCC were Doctors Charles Noble, Reuben Sheares, Rajendra Patel,
Michael Meleca, Shantanu Sinha, and Richard Bardales. The lease agreement was for a
period of 15 years through December 31, 2021. The total annual rent for the first year of
the lease agreement was $195,951.90, to be paid in monthly installments of $16,329.33.
Rent for the remaining years was to be determined by adding base rent (calculated
annually by multiplying the leased square footage by graduated rates in the lease
agreement) by CCC's pro rata share of expenses associated with operating the building.
None of CCC's shareholders signed a personal guarantee regarding CCC's obligations
under the lease agreement.
{¶ 3} CCC maintained several offices around the Columbus area, including the
office located in the building (the "leased space"). CCC sometimes referred to the
physicians groups that occupied its various offices as "pods" or "axes." The group that
practiced in the leased space was sometimes referred to as the "Columbus pod" or
"Columbus axis." This axis consisted of Drs. Noble, Sheares, and Patel.
{¶ 4} On June 23, 2008, LHPT purchased the building from Eastside, and
Eastside assigned its interest in the lease agreement to LHPT. LHPT and CCC executed a
tenant estoppel document in which CCC certified the lease agreement was in effect and
was a valid and binding obligation of CCC. CCC also certified LHPT had performed its
obligations under the lease agreement.
{¶ 5} By letter dated November 5, 2009, Tim Hill, practice administrator for CCC,
informed LHPT that CCC was "contemplating dissolution" and that "if it dissolves, [CCC]
will stop paying rent and [LHPT] can pursue [its] default remedies against [CCC]." (R.
259, ¶ 35.) Hill told LHPT it was "unlikely that [CCC] will have any assets from which you
can collect anything." (R. 259, ¶ 35.) If CCC dissolved, some of CCC's doctors "might be
interested in leasing the space" from LHPT. (R. 259, ¶ 36.) However, Hill advised LHPT
that these doctors did not have the ability to pay the rent CCC was currently paying under
the lease agreement.
No. 14AP-264 3
{¶ 6} On December 10, 2009, Drs. Noble, Sheares, and Patel formed NSP, an
Ohio limited liability company. On January 1, 2010, CCC ceased doing business and has
not occupied the leased space since. The last payment by CCC under the lease agreement,
in the amount of $11,937.58, was made on April 1, 2010.
{¶ 7} By letter dated January 27, 2010, LHPT was informed by Alterra Real Estate
Advisors that NSP was interested in entering into "lease-renegotiations for their current
office located at 4882 East Main St., 250 Columbus, Ohio." (R. 259, ¶ 46.) LHPT
requested a number of documents from CCC and NSP to help it evaluate NSP's request.
NSP supplied certain information and proposed a reduction in rent for the leased space.
LHPT reviewed the lease agreement, concluded it did not contain an early termination
clause, and decided not to let CCC "off the hook." (R. 259, ¶ 52.) Thus, LHPT chose not to
negotiate with NSP.
{¶ 8} On February 26, 2010, the owners of CCC, on behalf of themselves and CCC,
executed an agreement (the "Wind Up Agreement")2 by which they formally adopted and
agreed to the "Plan of Complete Liquidation and Winding Up of Capitol City Cardiology,
Inc. (the 'Plan of Liquidation')" and agreed to "take such action and execute such
documents and agreements as are reasonably necessary to carry out the terms of the 'Plan
of Liquidation.' " (R. 259, ¶ 55-56.) The Plan of Liquidation formally divided CCC into
the various "axes" referred to above and provided that "[t]he 'Columbus axis' consists of
Drs. Noble, Patel and Sheares who operate the Columbus, Granville and Westerville
offices." (R. 259, ¶ 59.) Section 2 of the Plan of Liquidation stated that "[a]ll references
herein to an 'axis' shall include an entity or other organization designated by the members
of such axis as an assignee or successor in interest of such members." (R. 259, ¶ 59.)
Section 2 also stated that "[a]ll expenses associated with the operation of each separate
axis (including, without limitation, lease obligations, operating expenses, physician and
staff salaries) will be allocated to the respective individual axis." (R. 259, ¶ 60.)
{¶ 9} Section 3(C) of the Plan of Liquidation provided that "[t]he real estate leases
for each of the offices shall be assigned to the axis which will operated [sic] such axis
2The shareholders of CCC also executed the Wind Up Agreement on behalf of a separate limited liability
company they owned, Cap Cit, Ltd. Cap Cit, Ltd., a holding company for certain assets, owned the medical
equipment and office furniture CCC used in the leased space.
No. 14AP-264 4
following the Effective Date by an Assignment of Lease ('Assignment of Lease')
substantially in the form attached hereto as Exhibit 3C, or such other form as is approved
by counsel for each axis, or the Shareholders of the respective axis will enter into a new
lease for such offices. * * * [CCC] shall make all required lease payments prior to the
Effective Date." (R. 259, ¶ 63.) Attached as exhibit No. 3C to the Plan of Liquidation was
a blank and unsigned assignment of real estate lease form. This blank form did not refer
to or reference any specific property or lease. The Plan of Liquidation stated that the
"Effective Date shall be such date as is agreed to by the shareholder physicians following
the satisfaction of all contingencies contained in the Plan, but in no event later than
March 1, 2010." (R. 259, ¶ 66.)
{¶ 10} In addition, section 14 of the Plan of Liquidation, entitled "Third Party
Beneficiaries," provided:
Nothing in this Plan, whether express or implied, is intended
to confer any rights or remedies under or by reason of this
Plan on any persons other than the Shareholders and the
Corporation and the respective successors and assigns of the
Shareholders, nor is anything in this Plan Agreement
intended to give any third persons any right of subrogation or
action over against any Shareholder or the Corporation.
(R. 259, ¶ 67.) The Wind Up Agreement contained a similar provision.
{¶ 11} Other CCC axes, aside from NSP, were able to negotiate new leases with the
landlords for their respective offices. Following CCC's final payment under the lease
agreement, Drs. Noble, Sheares, and Patel practiced in the building until approximately
March 2011. NSP made ten monthly payments to LHPT of $19,303.07 between May 1,
2010 and January 28, 2011.
{¶ 12} In May 2011, LHPT filed a complaint against CCC, its shareholders, NSP,
and others. After various proceedings, the only claims that remained for adjudication
were claims for breach of lease against CCC and NSP and claims for fraudulent
inducement and foreclosure of security interest against CCC only. The parties submitted a
joint stipulation of facts and submitted the matter for a bench trial based on stipulations,
legal briefs, and arguments.
No. 14AP-264 5
{¶ 13} Following the bench trial, the trial court issued a decision finding LHPT was
not a third-party beneficiary to the Wind Up Agreement and related documents.
However, in its findings of fact, the trial court also stated:
NSP is nevertheless legally liable under the Lease Agreement
as the assignee of CCC. NSP became an assignee by virtue of
the Wind Up Agreement under which the three individual
doctors (Noble, Sheares and Patel) dissolved former business
relationships and took-over long term occupancy of the Main
Street space from CCC. Their Plan of Complete Liquidation (at
¶ 3(C)) expressly contemplated an "assignment" of the
existing lease or some new and comparable arrangement with
the landlord. Drs. Noble, Sheares and Patel obtained releases
from other doctors who had been practicing together with
them in CCC, retained medical records for patients treated at
Main Street, and confirmed their actual right to occupancy of
the Main Street space for which they then paid rent for a
number of months. LHPT, of course, acquiesced in that
assignment by accepting NSP's occupancy plus rental
payments over ma[n]y months.
The court also takes note that a finding of joint legal liability
against both CCC and NSP based upon assignment of the
Lease Agreement is equitable because, despite the detailed
Wind Up Agreement and related documents, the doctors
splitting up CCC never made arrangements addressed to
existing landlords like LHPT. For instance, there is no
evidence that CCC rendered any accounting of their remaining
assets against liabilities to third-party creditors like LHPT.
For all one knows, the principals of old CCC retained
significant money following dissolution of the old business,
through collection of accounts receivable and other favorable
disposition of CCC assets. Instead, the Wind Up Agreement
was a pure walk-away. It protected individual doctors from
claims against each other, helped to fund their retirement
plans, and addressed other internal loose-ends like allocating
patients to each office location. But, as to third party creditors
like LHPT, the Wind Up neither accounted for residual assets
and liabilities nor made formal assignment of assets (or other
binding arrangements) to benefit known creditors. The law
cannot reward business people who simply walk-away from
long-term obligations under such circumstances.
(R. 301, at 4-5.)
No. 14AP-264 6
{¶ 14} The trial court concluded "the combination of the Plan of Liquidation,
repeated monthly payments of rent, continued occupancy of the Main Street premises for
use in conjunction with the same business activities in which CCC had engaged, and lack
of objection by either LHPT or NSP to this course of conduct created an enforceable
assignment of the Lease from CCC to NSP." (R. 301, at 6.) In addition, the trial court
found CCC's "failure to otherwise address its long-term liability" to LHPT supported the
conclusion that CCC contemplated an assignment. (R. 301, at 6.)3
{¶ 15} The trial court found the statute of frauds was satisfied because a
sufficiently full memorandum of the assignment from CCC to NSP existed. The trial court
found the rent checks from NSP were no different from a simple memorandum of lease.
The checks contained the identity of the landlord (LHPT) and tenant (NSP), monthly
rental amount, location of the premises being leased, and stated they were for "Rent."
Also, the trial court found Abraham v. Akron Sausage Co., 34 Ohio App. 285 (9th
Dist.1927) supported a finding that the statute of frauds was satisfied. Thus, the trial
court found CCC and NSP jointly and severally liable for all obligations under the lease
agreement and entered judgment against them for breach of the lease agreement in excess
of $1.5 million. The trial court also awarded LHPT some attorney fees and expenses. The
trial court dismissed the fraudulent inducement claim and entered judgment against CCC
on the foreclosure of security interest claim.
II. ASSIGNMENTS OF ERROR
{¶ 16} NSP appeals and presents three assignments of error for our review:
1. THE TRIAL COURT ERRED IN HOLDING THAT NSP
BECAME AN ASSIGNEE OF CCC'S LEASE BY VIRTUE OF
THE WIND UP AGREEMENT.
2. THE TRIAL COURT ERRED IN HOLDING THAT CCC
AND NSP ARE JOINTLY LEGALLY LIABLE FOR CCC'S
LEASE BY VIRTUE OF AN EQUITABLE ASSIGNMENT OF
THAT LEASE BECAUSE "THE LAW CANNOT REWARD
BUSINESS PEOPLE WHO SIMPLY WALK-AWAY FROM
LONG-TERM OBLIGATIONS UNDER SUCH CIRCUM-
STANCES."
3 The trial court also found LHPT waived a provision in the lease agreement requiring its prior written
consent before an assignment could become effective. (R. 412.) This finding is not in dispute on appeal.
No. 14AP-264 7
3. THE TRIAL COURT ERRED IN HOLDING THAT RENT
CHECKS ARE A MEMORANDUM OF LEASE THAT
SATISFIES THE STATUTE OF FRAUDS.
III. DISCUSSION
A. Background
{¶ 17} An assignment is a transaction in which a lessee/assignor "transfers its
entire interest in a premise for the unexpired term of the original lease to another party,
an assignee." Morse & Hamilton Ltd. Partnership v. Gourmet Bagel Co., 10th Dist. No.
99AP-1253 (Sept. 29, 2000), citing N.R.I. Co. v. N.R. Dayton Mall, Inc., 2d Dist. No.
12528 (Nov. 1, 1991). "The assignment divests the lessee of any interest in the property
and transfers it to the assignee." Id. However, the lessee remains in privity of contract
with the original lessor and is not relieved of its express obligation to pay rent. Id., citing
Smith v. Harrison, 42 Ohio St. 180 (1884); Harmony Lodge v. White, 30 Ohio St. 569(1876), paragraph one of the syllabus. "Instead, when a lease is assigned, the assignee
becomes the principal obligor for rent payments and the lessee becomes a surety toward
the lessor for the assignee's performance." Morse & Hamilton, citing Gholson v. Savin,
137 Ohio St. 551, 557 (1941).
{¶ 18} The dispute in this case, which centers on whether CCC assigned to NSP a
lease agreement with approximately 11 years remaining in its term, implicates the statute
of frauds. "In general, the term 'statute of frauds' refers to a provision that requires that
certain agreements be in writing." ELM Invests., Inc. v. BP Exploration & Oil, Inc., 10th
Dist. No. 11AP-1000, 2012-Ohio-2950, ¶ 11. In Ohio, the General Assembly codified the
statute of frauds in R.C. Chapter 1335. See Ed Schory & Sons, Inc., 75 Ohio St.3d 433,
438 (1996). R.C. 1335.04 provides:
No lease, estate, or interest, either of freehold or term of years,
or any uncertain interest of, in, or out of lands, tenements, or
hereditaments, shall be assigned or granted except by deed, or
note in writing, signed by the party assigning or granting it, or
his agent thereunto lawfully authorized, by writing, or by act
and operation of law.
{¶ 19} Additionally, R.C. 1335.05 states in part:
No. 14AP-264 8
No action shall be brought whereby to charge the defendant
* * * upon a contract or sale of lands, tenements, or
hereditaments, or interest in or concerning them, or upon an
agreement that is not to be performed within one year from
the making thereof; unless the agreement upon which such
action is brought, or some memorandum or note thereof, is in
writing and signed by the party to be charged therewith or
some other person thereunto by him or her lawfully
authorized.
"Where a plaintiff attempts to enforce an agreement against a defendant, the defendant
may raise the statute of frauds as an affirmative defense." ELM Invests., Inc. at ¶ 11. An
agreement that does not comply with the statute of frauds is unenforceable. Olympic
Holding Co., L.L.C. v. ACE Ltd., 122 Ohio St.3d 89, 2009-Ohio-2057, ¶ 32. "The purpose
of the statute of frauds is to prevent 'frauds and perjuries.' " Id. at ¶ 33, quoting Wilber v.
Paine, 1 Ohio 251, 255 (1824). "The statute does so by informing the public and judges of
what is needed to form a contract and by encouraging parties to follow these requirements
by nullifying those agreements that do not comply." Id.B. Assignment via the Wind Up Agreement
{¶ 20} Under its first assignment of error, NSP contends the trial court erred when
it found NSP became an assignee of the lease agreement by virtue of the Wind Up
Agreement, which adopted the Plan of Liquidation
{¶ 21} The issue of whether the Wind Up Agreement complies with the statute of
frauds presents a question of law we review de novo. Fontbank, Inc. v. CompuServe, Inc.,
138 Ohio App.3d 801, 812 (10th Dist.2000), citing Ruhe v. Hemmelgarn, 2d Dist. No. 96-
CA-1423 (Aug. 22, 1997); State v. Evans, 10th Dist. No. 13AP-939, 2014-Ohio-2081, ¶ 9
(stating "where questions of law are in dispute, an appellate court reviews the trial court's
determination de novo"). Also, "[t]he interpretation and construction of written contracts
is a question of law subject to de novo review on appeal." Hastings Mut. Ins. Co. v.
Village Communities Real Estate, Inc., 10th Dist. No. 14AP-35, 2014-Ohio-2916, ¶ 13,
citing State v. Fed. Ins. Co., 10th Dist. No. 04AP-1350, 2005-Ohio-6807, ¶ 22, citing Long
Beach Assn., Inc. v. Jones, 82 Ohio St.3d 574, 576 (1998).
{¶ 22} "In order to constitute a 'memorandum or note' for purposes of satisfying
the statute of frauds, [a] writing must 'contain words which can be reasonably construed
No. 14AP-264 9
as words of promise or agreement or as an indication of any contract or agreement.' "
Khanna v. Grandparents Living Theatre, Inc., 10th Dist. No. 96APE12-1744 (Sept. 25,
1997), quoting Sherman v. Johnson, 159 Ohio St. 209 (1953), paragraph two of the
syllabus; Kling v. Bordner, 65 Ohio St. 86 (1901). This court has previously stated that
" '[a]ny signed memorandum is sufficient to satisfy the Statute of Frauds so long as it
(1) identifies the subject matter of the agreement, (2) establishes that a contract has been
made, and (3) states the essential terms with reasonable certainty.' " Lamkin v. First
Community Bank, 10th Dist. No. 00AP-935 (Mar. 29, 2001), quoting Busler v. D & H
Mfg., Inc., 81 Ohio App.3d 385, 389 (10th Dist.1992), citing N. Coast Cookies, Inc. v.
Sweet Temptations, Inc., 16 Ohio App.3d 342, 349 (8th Dist.1984).
{¶ 23} NSP maintains that the Wind Up Agreement does not accomplish an
assignment of the lease agreement from CCC to NSP. NSP argues the Wind Up
Agreement contemplates either an assignment or a new lease with regard to properties
leased by CCC. According to NSP, it elected to negotiate a new lease with LHPT. LHPT
maintains that because of NSP's lack of success in negotiating a new lease, an assignment
of CCC's rights and responsibilities under the lease agreement occurred.
{¶ 24} We agree with NSP that the Wind Up Agreement did not accomplish an
assignment to NSP. Section 3(C) of the Plan of Liquidation, which was formally adopted
by CCC and its shareholders via the Wind Up Agreement, provided that "[t]he real estate
leases for each of the offices shall be assigned to the axis which will operated [sic] such
axis following the Effective Date by an Assignment of Lease * * * substantially in the
form attached hereto as Exhibit 3C, or such other form as is approved by counsel for
each axis, or the Shareholders of the respective axis will enter into a new lease for such
offices." (Emphasis added.) (R. 259, ¶ 63.) As NSP points out, Section 3(C) does not
simply assign CCC's leases to the different axes. Rather, Section 3(C) sets forth two
possible outcomes for the spaces CCC leased—the lease agreements for the spaces would
be assigned to the axes or the axes would negotiate new leases for the spaces.
{¶ 25} Section 3(C) does not indicate an assignment to an axis is automatic if the
axis fails to successfully negotiate a new lease. Instead, section 3(C) requires additional
action to accomplish an assignment, namely the execution of a document like the blank
Assignment of Lease form attached to the Plan of Liquidation. Thus, the Wind Up
No. 14AP-264 10
Agreement and accompanying Plan of Liquidation, taken alone, did not accomplish an
assignment of the lease agreement at issue in this case.
{¶ 26} We note the record does not contain an executed Assignment of Lease or
similar document with regard to the leased space. Also, a new lease was not negotiated
for the leased space. Thus, neither result contemplated by the Plan of Liquidation for the
leased space has occurred. However, "[u]nder Ohio law, only a party to a contract or an
intended third-party beneficiary may bring an action on the contract." Maghie & Savage,
Inc. v. P.J. Dick Inc., 10th Dist. No. 08AP-487, 2009-Ohio-2164, ¶ 40, citing Grant
Thornton v. Windsor House, Inc., 57 Ohio St.3d 158, 161 (1991). LHPT is not a party to
the Plan of Liquidation or Wind Up Agreement. For LHPT to be an intended beneficiary,
the contracting parties had to enter into the agreements with the intent to benefit LHPT.
See id. at ¶ 41, citing Doe v. Adkins, 110 Ohio App.3d 427, 436 (4th Dist.1996). Here, both
the Plan of Liquidation and Wind Up Agreement unambiguously disclaim any intent to
benefit third parties. Thus, LHPT is not an intended third-party beneficiary, so even if it
had sought an order to enforce section 3(C) of the Plan of Liquidation, its efforts could not
have succeeded.
{¶ 27} For the foregoing reasons, we sustain the first assignment of error.
C. Assignment via the Rent Checks
{¶ 28} Under its third assignment of error, NSP contends the trial court erred
when it found the rent checks from NSP to LHPT constituted a memorandum that
satisfied the statute of frauds. Generally citing N. Coast Cookies, the trial court found a
sufficiently full memorandum of assignment existed. The trial court found the rent
checks were no different, legally, from a simple memorandum of lease. The rent checks
contained key information, i.e., the identity of the landlord (LHPT), the identity of the
tenant (NSP), the monthly rental amount, the location of the premises being leased, and
indicated the checks were for "Rent." The trial court noted the law did not require a full-
writing of a lease as part of an assignment.
{¶ 29} This court has previously cited N. Coast Cookies for the proposition that "
'[a]ny signed memorandum is sufficient to satisfy the Statute of Frauds so long as it
(1) identifies the subject matter of the agreement, (2) establishes that a contract has been
made, and (3) states the essential terms with reasonable certainty.' " Lamkin, quoting
No. 14AP-264 11
Busler at 389, citing N. Coast Cookies at 349. In N. Coast Cookies, the Eighth District
also stated that "[i]n the assignment of a long-term lease, the Statute of Frauds (R.C.
1335.05) is satisfied by a signed writing which sufficiently identifies the parties, the lease
involved, and the consideration for the transfer." Id. at paragraph seven of the syllabus.
{¶ 30} To the extent the trial court's decision suggests the rent checks alone
memorialize the existence of an assignment in this case, we agree with NSP that the trial
court is incorrect. Under R.C. 1335.04, a lease must be assigned by "deed, or note in
writing, signed by the party assigning * * * it." Here, the rent checks are not signed by the
purported assignor, CCC. Although the rent checks were signed by the party to be
charged, i.e., NSP, as required by R.C. 1335.05, the checks do not establish a contract for
assignment was made between CCC and NSP. The rent checks make no mention of CCC,
the lease agreement, or an assignment. The rent checks do not indicate how NSP came
into possession of the leased space. As NSP points out, the rent checks also do not
indicate when NSP's interest in the leased space would terminate. At best, the rent checks
indicate NSP was in possession of the leased space and paying monthly rent to LHPT for
an indeterminate amount of time. The rent checks do not indicate that NSP accepted
from CCC a transfer of CCC's entire interest in the leased space for the unexpired term of
the original lease agreement. In other words, the checks do not establish with reasonable
certainty that a contract for an assignment was made.
{¶ 31} LHPT contends the rent checks, when read together with the lease
agreement, satisfy the statute of frauds. "The memorandum in writing satisfying the
requirement of the Statute of Frauds may consist of several related writings, even though
only one such writing is signed, if the signed writing refers to the unsigned writing or if it
appears by inspection and comparison of the writings that they logically relate to or form
part of the same transaction." Soteriades v. Wendy's of Ft. Wayne, Inc., 34 Ohio App.3d
222, 225 (10th Dist.1986), citing Thayer v. Luce, 22 Ohio St. 62 (1871), McGilvery v.
Shadel, 87 Ohio App. 345 (6th Dist.1949), and Restatement of the Law 2d, Contracts,
Section 208, at 543 (1979). It is not readily apparent that the trial court relied on this rule
in the present matter and concluded a sufficient memorandum of assignment existed
based on the rent checks coupled with the lease agreement. In any event, the lease
agreement cannot fill in the gaps in information missing from the rent checks without a
No. 14AP-264 12
writing indicating NSP agreed to comply with the lease agreement for the remainder of its
term. As we already explained, the Wind Up Agreement fails in this regard.
{¶ 32} For the foregoing reasons, we sustain the third assignment of error.
D. Part Performance
{¶ 33} Under its second assignment of error, NSP contends the trial court erred in
finding NSP and CCC jointly and severally liable to LHPT by virtue of an equitable
assignment of the lease agreement.
{¶ 34} NSP complains in part that the trial court's reliance on the Ninth District's
decision in Abraham, which implicates the doctrine of part performance, is misplaced.
" 'An agreement will be removed from operation of the Statute of Frauds only through the
doctrines of partial performance and promissory estoppel.' " DeAscentisi v. Margello,
10th Dist. No. 08AP-522, 2008-Ohio-6821, ¶ 26, quoting Gunsorek v. Heartland Bank,
124 Ohio App.3d 735, 740 (10th Dist.1997). Promissory estoppel is not at issue here.
{¶ 35} This court has previously found that a party seeking to invoke the doctrine
of part performance must establish that he has performed acts in exclusive reliance on an
oral contract, and that such acts have changed his position to his prejudice. DeAscentisi
at ¶ 26; Spectrum Benefit Options, Inc. v. Med. Mut. of Ohio, 174 Ohio App.3d 29, 2007-
Ohio-5562, ¶ 43 (4th Dist.); see generally Delfino v. Paul Davies Chevrolet, Inc., 2 Ohio
St.2d 282, 287 (1965) (stating in the context of R.C. 5301.01's statute of conveyances that
part performance sufficient to remove an agreement from the operation of the statute
"must consist of unequivocal acts by the party relying upon the agreement, which are
exclusively referable to the agreement and which have changed his position to his
detriment and make it impossible or impractical to place the parties in statu quo. * * * If
the performance can reasonably be accounted for in any other manner or if plaintiff has
not altered his position in reliance on the agreement, the case remains within the
operation of the statute"). "In cases involving the sale or lease of real property, courts
have required acts such as possession, payment of consideration, and improvements on
the land in order to find part performance." DeAscentisi at ¶ 26, citing Clements v.
Mayhew, 2d Dist. No. 2006 CA 126, 2007-Ohio-3700, ¶ 58.
{¶ 36} In Abraham, the plaintiff leased certain real estate to Akron Sausage
Company, a partnership, in September 1919 for a period of five years. In October 1919,
No. 14AP-264 13
Akron Sausage Company, a corporation promoted by the same persons who composed
the partnership, was incorporated. Id. at 287. According to the Ninth District, "[t]he
record * * * show[ed] that a short time after the incorporation of said company, the
partnership orally assigned its lease to said company, and the company went into the
possession of the * * * property and paid the rent stipulated in the lease until it abandoned
possession of the property in October, 1923." Id. Applying the doctrine of part
performance, the Ninth District found the contract at issue was removed from the statute
of frauds. Id. at 288-93.
{¶ 37} Here, the trial court found that Abraham supported a finding that an
enforceable assignment existed because Abraham "also involved related entities, a lease
assignment (albeit oral), and continued occupancy coupled with payment of rent, which
the Ninth District concluded were sufficient to take the agreement out of the Statute of
Frauds." (R. 301, at 7.) Aside from the fact that Abraham is persuasive, not binding
authority, we are not convinced Abraham and the present case are analogous. The
Abraham court found the record before it showed the partnership orally assigned its lease
to the corporation but did not elaborate on what evidence supported this conclusion.
Therefore, we are left to speculate as to how this evidence impacted the result in
Abraham. Moreover, in this case, the parties did not stipulate an oral assignment
occurred, and the trial court did not make such a finding. Contrary to the suggestion of
the trial court and LHPT, the record does not contain a written assignment that somehow
makes this case comparable to Abraham. If the record had contained a written
assignment, consideration of the doctrine of part performance would not be necessary.4
{¶ 38} LHPT contends no legitimate explanation for NSP's payment of rent and
possession of the leased space exists aside from an assignment of the lease agreement.
4 In its appellate brief, LHPT cites deposition testimony of Steve Toukan, CPA, who testified on behalf of
CCC, as evidence that CCC assigned its leases to the respective axes. Counsel for LHPT read to Toukan the
first sentence of section 3(C) of the Plan of Liquidation, i.e., the sentence indicating CCC's leases would be
assigned or new leases would be entered into for the leased spaces. Then counsel asked Toukan, "Did that, in
fact, happen?" (Steve Toukan Depo. 190.) Toukan responded, "Yes," over objection by counsel for NSP.
(Toukan Depo. 190) Counsel for LHPT then stated, "I understand you're not an attorney, but what do you
explain this to mean and what was the process?" (Toukan Depo. 190.) Over objection, Toukan stated, "That
the physical real estate that they were in, they assumed the leases." (Toukan Depo. 190.) Even if we overlook
the fact that the trial court never ruled on the objections and did not rely on Toukan's testimony in its
decision, the testimony is vague and does not demonstrate NSP accepted CCC's entire interest in the leased
space for the unexpired term of the original lease agreement.
No. 14AP-264 14
NSP implies that it had an informal arrangement with CCC under which NSP could
possess the leased space and pay rent for it. NSP maintains it never agreed to take on
CCC's obligations for the remainder of the lease term.
{¶ 39} The record does not reflect actions by any of the parties which are
exclusively referable to the existence of an assignment. NSP's possession of the leased
space and rent payments,5 similar to LHPT's acceptance of the rent checks and the
implicit consent of CCC and LHPT to the possession, are just as consistent with the
existence of an assignment as the informal arrangement suggested by NSP. Although the
trial court found it significant that CCC and NSP engaged in the same type of activities in
the leased space, that fact does not lend itself to the conclusion that NSP accepted CCC's
obligations for the approximately 11 years remaining on the lease agreement.
Additionally, the record does not reflect that LHPT or CCC, whom LHPT claims to be in
privity with, changed their positions in reliance on an assignment of the lease agreement
to their detriment. For instance, there is no evidence that LHPT made changes to the
leased space in anticipation of long-term occupation by NSP.6 Thus, the doctrine of part
performance is not applicable, and the trial court erred when it found NSP liable for
breach of the lease agreement between CCC and LHPT.
{¶ 40} Under its second assignment of error, NSP also takes issue with the trial
court's finding that it was equitable to impose joint liability on CCC and NSP in light of
what the trial court viewed as efforts of CCC's shareholders to protect themselves and
avoid obligations to creditors like LHPT. NSP's claim is moot. Regardless of how the trial
court viewed the shareholders' actions, it could not find NSP liable for breach of the lease
agreement because the alleged assignment of that agreement to NSP did not comply with
the statute of frauds, and no exception removed the alleged assignment from the
operation of the statute of frauds.
{¶ 41} Next, NSP complains about the trial court's statement that CCC's failure to
otherwise address its long-term liability to LHPT supported the conclusion that CCC
5 We note the parties' joint stipulation of facts provides a general formula for calculation of rent payments
under the lease agreement. There does not appear to be a dispute that NSP's monthly payments were the
equivalent of the amounts owed under the lease agreement, but that fact is not clear from the stipulation.
6 LHPT did present evidence, through an affidavit attached as an exhibit to the stipulated facts, that it
invested over $479,000 to improve the leased space for CCC.
No. 14AP-264 15
contemplated an assignment. However, we fail to see how this finding impacts our
conclusion that no writing satisfies the statute of frauds and the part performance
doctrine does not apply. Thus, NSP's contention is moot.
{¶ 42} For the foregoing reasons, we sustain the second assignment of error in part
and render it moot in part.
IV. CONCLUSION
{¶ 43} We sustain the first and third assignments of error. We sustain the second
assignment of error in part and render it moot in part. Accordingly, we reverse the
judgment of the Franklin County Court of Common Pleas and remand this matter for
further proceedings consistent with this decision.
Judgment reversed and cause remanded.
CONNOR and DORRIAN, JJ., concur.