Summary
In Corvington v. Heppert, 156 Ohio St. 411, 103 N.E.2d 558, it is held that in a lease of real property for a definite length of time with an option of "renewal" by the lessee for a further term on the same basis, which lease contains no definition and explanation of the word "renewal," such word is generally to be treated as the equivalent of "extension" and operates, upon exercise of the option, to continue the original lease for the period provided therein, so that a new lease for the additional term is not necessary.
Summary of this case from Walter C. Pressing Co. v. HoganOpinion
No. 32601
Decided January 16, 1952.
Real property — Lease for definite time with renewal option — Exercise of option continues original lease — New lease for additional term not necessary — Lease effective as original present demise for full term, when — Property registered under Torrens Act — Lease for term exceeding three years — Ineffective against purchaser of property, when — No cause of action for breach of warranty.
1. In a lease of real property for a definite length of time with an option of "renewal" by the lessee for a further term on the same basis, which lease contains no definition or explanation of the word, "renewal," such word is generally to be treated as the equivalent of "extension" and operates, upon exercise of the option, to continue the original lease for the further period provided therein, so that a new lease for the additional term is not necessary.
2. A lease of real property for a specified number of years coupled with an option to extend or renew the same for an additional period gives the lease effect as an original present demise for the full term for which it might be made inclusive, contingent on the election to extend or renew.
3. A lease of a part of real property for a term exceeding three years, which property has been registered under the Torrens Act (Section 8572-1 et seq., General Code), is ineffective against a purchaser of such property who takes a certificate of title thereto for value and in good faith and where such lease is not noted on the certificate, and the purchaser may not successfully maintain an action for breach of warranty against the seller on account of such lease, which was not mentioned in the deed of conveyance.
APPEAL from the Court of Appeals for Summit county.
The present action originated in the Court of Common Pleas of Summit County. It was brought by O.H. Corvington against Nellie C.V. Heppert to recover damages for alleged breach of warranty in a deed conveying real property.
Upon findings of fact and law the trial court determined that no damages were recoverable by plaintiff under the form of action adopted and entered judgment against him. Such judgment was affirmed in an appeal on questions of law by the Court of Appeals and the cause finds lodgement in this court on its merits by reason of the allowance of a motion to require the Court of Appeals to certify its record.
Additional facts are stated in the opinion.
Mr. O.H. Corvington, in propria persona. Mr. C.T. Moore and Mr. Scott Belden, for appellee.
The record discloses that by warranty deed dated June 7, 1946, Nellie C.V. Heppert, unmarried, the appellee in this court, conveyed to O.H. Corvington, the appellant herein, a parcel of real estate in the city of Akron upon which was situated a brick building. Such building contained two storerooms on the first floor and four residence apartments on the second. The title to such real estate had previously been registered under the provisions of Section 8572-1 et seq., General Code, commonly known as the Torrens Act, and there was issued to Corvington a certificate of title for the premises described.
It further appears that such premises had been held by one Ivy C. Williard, as the registered owner thereof, from April 1939 to May 1946, when they were conveyed to Mrs. Heppert.
By an indenture of lease dated February 1, 1945, H.E. Williard, husband of Ivy C. Williard, who was in possession of an unrecorded power of attorney from his wife, purported to lease one of the storerooms in the building to Clyde Howard for a period of two years from February 1, 1945, to January 31, 1947, with an option of renewal by the lessee for three additional years on the same terms. Howard was then in occupancy of the storeroom.
Such lease was signed by H.E. Williard as the designated first party or lessor and by Howard as the second party or lessee, and their signatures were duly witnessed and acknowledged. The name of Ivy C. Williard, the registered owner of the premises, did not appear anywhere in the instrument. However, on the trial she testified as follows:
"Q. At no time did you make any objection to his [Mr. Williard] leasing the property to Mr. Howard? A. No.
"Q. In other words you left the management entirely in his hands, is that right? A. That's right.
"Q. What is the fact as to whether you recognized this lease to Mr. Howard as being binding on you at all times, that is, did you always admit that this was a binding lease? A. Yes."
No mention of the Howard lease was made in the warranty deed from Mrs. Heppert to Corvington and the premises were represented therein to be free from encumbrances, except taxes, assessments and reassessments due and payable after June 1946.
There was no attempt to record the indenture of lease until August 17, 1946, when Howard, the lessee, delivered it to the recorder of Summit county for such purpose. The recorder then recorded the instrument as an ordinary lease and did not note it in the entry book devoted to registered lands.
In the hearing of the case in the Court of Common Pleas, Corvington testified that when he executed the agreement to purchase the property on May 23, 1946, he knew one of the storerooms in the building was occupied by Howard, but he disclaimed notice or knowledge of the existence of any lease. Some three months after Corvington became the owner of the premises, Howard advised him in writing that he was exercising the option to renew the lease for the additional three years provided therein.
The decisive question in this case is whether the purported lease to Howard constituted an encumbrance on the premises as to Corvington, thereby permitting him to maintain successfully an action for damages against Mrs. Heppert for a breach of warranty in her deed of conveyance.
Corvington contends that the indenture of lease in issue was a demise of but two years from February 1, 1945, notwithstanding that by its terms it might be renewed for an additional three years, and that it was effective as to him and operated as a subsisting encumbrance on the property to his detriment. On the other hand, Mrs. Heppert contends that the lease was wholly ineffective as to Corvington and that her failure to mention it in her deed to him constituted no breach of warranty on her part.
Some courts make a clear cut distinction between the words, "extension" and "renewal," employed in leases, holding that a covenant for extension operates of its own force to create an additional term under the original lease, but that a provision for renewal does not, it creating only an obligation to execute a new lease for the additional term. Other courts, representing the modern trend and with less strictness and technicality, we believe, make no distinction between the words, "extension" and "renewal," where their meaning is not defined or explained, and treat them as synonymous, so that no matter which expression is used, the implication is nothing more than for an extension of the term without the necessity of a new lease. W.G. Maltby, Inc., v. Associated Realty Co., 114 Conn. 283, 158 A. 548; Marckres Bros. v. Perry Gas Works, 189 Iowa 1204, 1208, 179 N.W. 538, 540; Economy Stores, Inc., v. Moran, 178 Miss. 62, 172 So. 865; American Press Co. v. City of St. Louis, 314 Mo., 288, 284 S.W. 482; Jador Service Co. v. Werbel, 140 N.J. Eq. 188, 191, 53 A.2d 182, 184, 172 A.L.R., 1199; Orr et al., Exrs., v. Doubleday Page Co., 223 N.Y. 334, 119 N.E. 552, 1 A.L.R., 338; Womble v. Walker, 181 Tenn. 246, 181 S.W.2d 5; 2 Underhill on Landlord and Tenant, 1362, Section 803; 51 Corpus Juris Secundum, 593, Landlord and Tenant, Section 54 (b). See, also, the annotation in 172 A.L.R., 1205.
The investigation we have made indicates that the weight of authority is to the effect that a lease of real property for a specified number of years, coupled with an option to extend or renew the same for an additional period, ordinarily gives the lease effect as an original present demise for the full term for which it might be made inclusive, contingent on the election to extend or renew. So, where, in the particular jurisdiction, a statute exists requiring a lease for more than a specified number of years to be recorded to affect others than the parties thereto, a lease which with its extension or renewal period rums beyond such specified time comes within the statute and must be recorded. Hopkins v. McCarthy, 121 Me. 27, 115 A. 513; Leominster Gas Light Co. v. Hillery, 197 Mass. 267, 83 N.E. 870; South Street Inn, Inc., v. Muehsam, 323 Mass. 310, 81 N.E.2d 821; Flynn v. Bachner, 168 Mich. 424, 134 N.W. 451, Ann. Cas. 1913C, 641; Meadow Heights Country Club v. Hinckley, 229 Mich. 291, 201 N.W. 190; Kahn v. American Stores Co., 94 N.J. Law, 367, 110 A. 562 (affirmed, 96 N.J. Law, 292, 114 A. 926); Murray v. Odman, 1 Wn.2d 481, 96 P.2d 489; 2 Tiffany, Landlord and Tenant, 1518, Section 219; 3 Thompson on Real Property (Perm. Ed.), 325, Section 1242.
Appellant places strong reliance on the case of Swetland Sons Co. v. Bronx Realty Co., 17 C.C. (N.S.), 249, 32 C.D., 128, decided by the Circuit Court for Cuyahoga County in 1910 and affirmed without opinion in 86 Ohio St. 313, 99 N.E. 1134, four judges concurring, in which the Circuit Court held that as between the parties a lease for three years with an option to the tenant to renew or extend the same for another like period was to be regarded as a lease for the initial period of three years only and came within the provisions of Section 4412, Revised Statutes (now Section 8517, General Code), whereby attestation, acknowledgment or recording of the instrument was unnecessary. However, in that case the court expressly stated that it was not "deciding what the rights of innocent purchasers or other third parties might be, nor what force the option might have if it were sought to be exercised." It will be noted that no authorities are cited supporting the views of the court in the Swetland Sons Co. case; that it has been cited and relied on in but one case decided by the Court of Common Pleas of Montgomery County; and that Courts of Appeals of Ohio have not considered it as of controlling significance. See Glicklich v. Garfield (Court of Appeals for Hamilton county), 31 Ohio Law Abs., 129, 131, and Gelman v. Holland Furnace Co. (Court of Appeals for Lorain county), 92 N.E.2d 704. The Swetland Sons Co. case therefore can hardly be said to represent the established rule in Ohio applicable to causes with facts like those in the present controversy.
In our opinion, Howard's lease for two years with the option to renew for three additional years is to be regarded and treated for the purposes of the instant case as a lease for five years.
Section 8572-25, General Code, a part of the Torrens Act, provides in part:
"Every applicant who without fraud on his part receives a certificate of title in pursuance of a decree of registration, and every subsequent purchaser of registered land who takes a certificate of title for value and in good faith, shall hold the same free from all estates and encumbrances except those noted on the certificate and any of the following estates and encumbrances which may be existing:
"* * *
"Fourth: Any lease for a term not exceeding three years, when there is actual possession under the lease."
Again, Section 8572-73, General Code, recites:
"A deed, mortgage, lease or other instrument purporting to convey, transfer, mortgage, lease, charge or otherwise deal with registered land, or any estate or interest therein, or charge upon the same, other than a will or a lease for a term not exceeding three years where the land is in the actual possession of the lessee or his assigns, shall take effect only by way of contract between the parties thereto and as authority to the recorder to register the transfer, mortgage, lease, charge or other dealing upon compliance with the terms of this act."
Compare Sections 8510, 8517 and 8543, General Code.
It will thus be seen that the five-year lease to Howard was unenforceable against Corvington, a "purchaser of registered land who * * * [took] a certificate of title for value and in good faith." The real estate was therefore not encumbered by the lease so far as Corvington was concerned and consequently he lacked the ground upon which to predicate an action for breach of warranty on account of the lease against Mrs. Heppert.
Both courts below held that the Howard lease was also inoperative as to Corvington, an innocent purchaser for value without knowledge of or connection with such lease, for the reasons (1) that it was executed by H.E. Williard, husband of Ivy C. Williard, the registered owner of the property, under a power of attorney which was never "recorded in the office of the recorder of the county in which such property is situated" as required by Section 8536, General Code, and (2) that in such indenture of lease no reference was made to Mrs. Williard, the owner of the property, as demanded by Section 8513, General Code.
No error being discoverable in the judgment of the Court of Appeals, the same is affirmed.
Judgment affirmed.
WEYGANDT, C.J., MIDDLETON, MATTHIAS and HART, JJ., concur.
STEWARD and TAFT, JJ., dissent.
As the majority opinion apparently recognizes, the principal question, to be considered in determining whether to reverse the judgment of the Court of Appeals in the instant case is whether a lease for two years with an option in the lessee to renew the lease on certain specified terms for a period of three additional years is, within the meaning of Sections 8572-25 and 8572-73, General Code, quoted in the majority opinion, "a lease for a term not exceeding three years." It is conceded that, to use the words of Section 8572-25, there was "actual possession under the lease," and that, to use the words of Section 8572-73, "the land" was "in the actual possession of the lessee."
The precise provisions of the lease with respect to renewal read as follows:
"Said lessor hereby grants unto said lessee the option to renew this lease for a further term of three years, commencing on the expiration of the term aforesaid, and ending on the 31st day of January A.D. nineteen hundred and fifty, for a yearly rent of twelve hundred dollars ($1,200) payable in monthly installments of one hundred dollars ($100) each on the first day of each and every month, in advance, subject to all the other terms and conditions of this lease; provided however, that notice of the exercise of such option shall be given by said lessee to said lessor at least 30 days before the expiration of the term of this lease." (Emphasis added.)
If this court has not previously decided the question, as to whether or not a lease for less than three years with an option to renew or extend the lease for an additional number of years is only a lease for a "term not exceeding three years," the weight of authority in other jurisdictions on that question should be persuasive in determining the decision of this court on that question. If this court has previously decided that question, then such weight of authority should be persuasive in determining that question only if the reasons given in support of the decisions and statements of textwriters, constituting such weight of authority, indicate the unsoundness of any decision previously reached by this court on that question. The majority opinion does not refer to any such reasons.
In his brief and in argument, appellant relied upon the decision of this court in Swetland Sons Co. v. Bronx Realty Co., 86 Ohio St. 313, 99 N.E. 1134, which affirmed without opinion the judgment of the Circuit Court for Cuyahoga county in the case of the same title reported in 17 C.C. (N.S.), 249, 32 C.D., 128.
The questions presented to this court for decision in the Swetland case are clearly disclosed by the report of the case in the Circuit Court where it is said in the court's opinion:
"The parties stand in the relation opposite to that in which they stood below. There the action was for rent accrued under a writing of March, 1906, purporting to be a lease for three years commencing April 1, 1906, with an option to the tenant to renew or extend the same for another like period. The first cause of action is for rent for a period of actual occupancy by the lessee, and as to this there is no dispute. The second cause of action is for later rent after the premises were vacated without cause. The judgment recovered for this rent is claimed to be erroneous because the lease being for a term exceeding three years, and hence not within the terms of Section 3112, Revised Statutes, was not executed as required by Section 4106, Revised Statutes. That the term exceeds three years is argued first, from the fact, that the three-year period contemplated commences in the future, and secondly, that it is subject at the tenant's option to a renewal or extension for another three year period.
As indicated by a reading of the balance of the opinion, 3112 should have read 4112. The latter section of the Revised Statutes is now Section 8517, General Code, reading in part: "Nothing in this chapter contained shall affect the validity of any lease * * * for any term not exceeding three years; or require such lease to be attested, acknowledged, or recorded."
This section is now Section 8510, General Code. This section was in the same chapter of the Revised Statutes as Section 4112. Section 8510, General Code, is in the same chapter of the General Code as Section 8517. Section 8510 provides in part: "A * * * lease of any estate or interest in real property must be signed by the * * * lessor and such signing be acknowledged by the * * * lessor in the presence of two witnesses who shall attest the signing and subscribe their names to the attestation. Such signing also must be acknowledged by the * * * lessor * * *."
"We find ourselves unable to agree with either of these contentions. * * *
"* * *
"On the other point, an examination of Toupin v. Peabody, 162 Mass. 473, and of the other authorities cited, fails to disclose any clear authority, nor do we perceive any reason, for holding that the demise of the term is invalidated by annexing thereto a conditional agreement to lease the property for an additional period." (Emphasis added.)
The Circuit Court stated, in discussing the contention that the lease was "for a term exceeding three years" because the three-year term commenced in the future, that it was not "deciding what the rights of innocent purchasers or other third parties might be, nor what force the option might have if it were sought to be exercised" since those questions were not involved. It may be suggested that, because of this, the Swetland case merely decided that, as between the parties to the lease, the lease there involved was not one "for a term exceeding three years." However, this court has consistently held that any defectively executed lease "for a term exceeding three years" is not enforcible for the term specified even as between the parties. Richardson v. Bates, 8 Ohio St. 257; Wineburgh v. Toledo Corp., 125 Ohio St. 219, 181 N.E. 20, 82 A.L.R., 1315. See, also, Baltimore Ohio Rd. Co. v. West, 57 Ohio St. 161, 49 N.E. 344.
The Swetland case therefore definitely decided that a lease for three years with an option to renew or extend for an additional three years is only a lease for a "term not exceeding three years." In affirming that judgment, this court necessarily and just as definitely so decided. There was no other ground upon which the judgment of the Circuit Court could have been affirmed.
Other decisions of this court, which tend to support a conclusion on the question involved in the instant case contrary to that reached by the majority, are Mack v. Eckerlin, 75 Ohio St. 627, 80 N.E. 1129, affirming without opinion, Mack v. Eckerlin, 17 C.D., 133; and Mills v. Connor et al., Trustees, 104 Ohio St. 409, 135 N.E. 616.
Obviously, the appellant in the instant case cannot contend that he is bound by the lease beyond its original two-year term without contending that the lease is one for five instead of for two years. The only existing tenancy under that lease, as indicated by the Swetland decision, was for two years, although the lessee may have had a right, enforcible against the original lessor, to a renewal of that lease for three more years. However, the two-year term of the lease ran from February 1, 1945 to January 31, 1947. Since it was a lease for less than three years and the lessee was in possession, appellant took title, by reason of the express language of Sections 8572-25 and 8572-73, General Code, quoted in the majority opinion, subject to such a lease, even though appellant was a "purchaser * * * for value and in good faith" and without notice of the lease. As a result, appellant was prevented from securing from the premises leased the reasonable rent which could have been secured therefrom and which substantially exceeded the rental provided for in the lease. Admittedly, he took steps to accomplish this in July 1946. He is certainly entitled to recover for any damages he thereby suffered by reason of his inability, as a result of the two-year lease extending to January 31, 1947, to realize from the premises covered by that lease the reasonable rental value thereof from July 1946 to the end of January 1947. Appellee expressly warranted against any such incumbrance.
It may be suggested that this court should not regard one of its decisions, rendered without opinion, as a precedent. To refuse to do so, however, would appear to be contrary to what was done in L. M. Properties Co., Inc., a Taxpayer, v. Burke, Mayor, 152 Ohio St. 28, 36, 37, 86 N.E.2d 768.
STEWART, J., concurs in the forgoing dissenting opinion.