Akron Pregnancy Servs. v. Mayer Invest. Co.

2014 Ohio 4779

• Court: Ohio Court of Appeals
• Decided: October 29, 2014
• Docket: 27141
• Status: Published

Opinion

[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. 2

{¶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, 3

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. 4

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). 5

{¶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.”). 6

{¶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 7

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 8

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 9

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

2 In 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. 10

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. 11

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. 12

APPEARANCES:

STEPHEN P. LEIBY, Attorney at Law, for Appellant.

HARRY A. TIPPING, CHRISTOPHER A. TIPPING, and KATHLEEN A. HAHNER, Attorneys at Law, for Appellees.