Opinion
Decided October 20, 1932.
Landlord and tenant — Option to extend term — Lessor may waive notice or extend time therefor — Acknowledging receipt of notice immaterial — Lessee's letter exercising option, sufficient — Term extended by exercising option, and new lease not required — Lease not defectively executed, by omission of property description, creating terminable tenancy — Reformation lies, to supply omitted description, notwithstanding statute of frauds — Sections 8510 and 12210, General Code — Assignee bound by lessee's exercise of option to extend unrecorded lease, when.
1. Option in favor of lessee for additional term giving stipulated notice is contractual privilege, which lessee may exercise within given time.
2. Provision requiring lessee to exercise option for additional term within given time is for sole benefit of lessor, which he may waive.
3. Where lessee exercises option for additional terms within time stipulated by giving notice, lessor's acknowledgment of notice is immaterial.
4. Where lessee does not exercise option for additional term within time stipulated, lessor may repudiate late action, or consent thereto.
5. Letter from lessee to lessor notifying latter that former exercises option to extend lease for additional term, held sufficient as exercise of option.
6. Exercise of option to extend lease for additional term held to extend term of original lease, rather than to require new lease.
7. Omission of description of premises from lease held not to constitute lease "defectively executed lease" so as to create tenancy from month to month (Section 8510, General Code).
8. Reformation of written lease so as to supply omitted description of leased property may be had notwithstanding statute of frauds (Section 12210, General Code).
9. Evidence held to establish that assignee of unrecorded lease had knowledge that lessee exercised option to extend lease, and therefore election was binding on assignee.
ERROR: Court of Appeals for Stark county.
Mr. William B. Quinn, for plaintiff in error.
Mr. Elson Wefler and Messrs. Amerman Mills, for defendant in error.
This case had its beginning in the municipal court of the city of Massillon. The parties therein stood in an order the reverse of that held here. The judgment of that court was rendered in favor of the defendant therein, the Baxter Laundries, Inc. From this judgment the plaintiff, H.E. Lucas, prosecuted error to the court of common pleas, and obtained therein a reversal of the judgment entered against him. Of this judgment the Baxter Company now complains in this court.
The purpose of the suit was twofold. It asked that a certain written lease be reformed, in that description of the leased premises be carried into the lease, it not having been embodied therein at the time of its execution, but was thereafter to be inserted. The second purpose was to recover a monthly installment of rent claimed to be due in advance after the plaintiff in error, the assignee of the lessee, had vacated the premises. The pertinent facts are as now related.
On May 31, 1917, the American Laundry Cleaning Co. was incorporated by Lucas and others. Thereafter, on March 18, 1920, one Grafton Johnson, as the owner of a chain of laundries known as the Fame Laundry Company, acquired all the capital stock of the American Company.
On September 18, 1925, Lucas executed a lease of the occupied premises to the American Company for a five year term, commencing October 1, 1925, and ending September 30, 1930. This lease was in all respects duly signed, witnessed, and acknowledged. At this point it is well to remark that in this court for the first time it is questioned whether or not the lease bore the year date of execution. Both of the original copies of the lease were introduced in evidence. The company's copy does not bear such date. All of the lessor's exhibits are now lost. However, the copy of the lease attached to the petition bears such date. This the answer does not question. Counsel agree at trial that the public record of the lessor's lost original shows the year date. We therefore conclude that the lessor's original copy of lease introduced in evidence and now lost bears the year date, and it will be so considered without further comment.
This lease contained the following covenant: "It is further agreed that the lessee shall have the right upon giving two years prior notice in writing of his intention so to do, to renew said lease upon the terms and conditions hereinabove set forth for the period of ten years."
On October 1, 1928, Grafton Johnson, by Arthur Admire, wrote Lucas upon the stationery of the Fame Laundry Company, saying: "This is to notify you that we will extend our lease on the Massillon plant for the additional ten years. Please acknowledge receipt." We note from this letterhead that Johnson bears the title of chairman and Admire bears that of secretary and treasurer, and that a picture of the Massillon premises appears thereon. Lucas testifies that he promptly acknowledged receipt thereof. The Baxter Company denies this.
On October 27, 1928, Admire wrote Lucas advising him of the description omitted from the lease, and asking that the same be promptly furnished the company. This description Lucas claims to have furnished, and this the company denies.
On April 22, 1929, the Baxter Company acquired ownership of the Johnson or Fame Laundries, including the Massillon property, and assumed its liabilities, and, thereafter, on July 12, 1930, Admire, on behalf of the Baxter Company, asks Lucas in a letter to consent to an assignment of the lease from the American Company to the Baxter Company. Lucas refused to execute the assignment presented, because it contained a release of Johnson, but did consent to the assignment and thereafter accepted rent installment checks of the Baxter Company.
At the date of the expiration of the term, a controversy arose as to the tenure resulting by continued occupancy. The Baxter Company, however, held over for another year, paying the rentals named in the lease, and vacated the premises on October 1, 1931. It is the rental for October that is sued for. One further fact is made much of by the plaintiff in error, it being that the lessor did not cause the lease to be recorded until September 29, 1930.
The complaining party now assigns four reasons to substantiate its claim that the common pleas court erred in its reversal: First, in that the lease lacked a description of the premises, and that the law of Ohio does not authorize or justify the insertion of a description in a lease after its expiration, in order to make binding upon a new party in interest another ten year term; second, that the Baxter Company was not bound by Johnson's notice of his exercising the lessee's option for two reasons, the lease and the extension were not of record, and no notice had ever been given it of the exercising of the option; third, that it was necessary that a new instrument of lease be offered by the plaintiff to it; and, fourth, that the option was not exercised prior to the time limit for exercising it, and, the plaintiff lessor not being bound thereby, the lessee and it could not be bound.
Considering first the last reason assigned, we quickly determine that there is no merit therein. An option in a lessee to enjoy an additional term upon his notice so to do is a contractual privilege, which he may exercise within a given time, or remain silent. The specification that the lessee must exercise the option within that given time is for the sole benefit of the lessor. He may waive the time restriction and consent to a delayed election by his lessee. If the exercise of the option is made in due season, the lessor's acknowledgment of notice has no binding effect. If made after season, the lessor may repudiate the late action, or he may consent thereto in writing, by word of mouth, or by his future conduct. It is contended that notice in this case was not made in time. We believe and find it to have been given in season. The lease reads, "Giving two years prior notice in writing." It does not say that it shall be given to hand, nor is it recited that it shall not be given by mail. Deposit in the mails we hold to have been sufficient, and, if this be not sound as a legal conclusion we believe from the evidence that the lessor consented by his conduct thereto. Certainly the Fame Laundry Company, through Admire, its agent, so understood, as is evidenced by its letter to Lucas of October 27, 1928.
The third reason advanced may also be disposed of with equal dispatch. The language of the option clause and the wording of the letter of October 1, 1928, plainly indicate that the intention of the parties was to extend the term, rather than to execute a new lease. In Gross v. Clauss, 6 Ohio App. 140, 29 O.C.A., 168, it was held: "A lease for a term with a privilege or option in the tenant of a renewal or extension for a further term, upon the same terms and conditions, is a present demise as to the renewal to begin at a future time, and under such covenant no new lease need be required * * *."
See, also, 35 Corpus Juris, 1022.
The first and second conclusions we would for convenience consider at the same time. Our attention is early directed to the recent case of Wineburgh v. Toledo Corp., 125 Ohio St. 219, 181 N.E. 20, as authority to the effect that a defectively executed lease creates but a tenancy from month to month. Truly, that is sound law, but the question comes, Is this a defectively executed lease in the sense as understood by Section 8510, General Code? In the present case it is not a question of signing, witnessing, or acknowledging the instrument, but the fault lies in an omission of the description of the premises.
But it is further said that to supply the omission would be to offend against the statute of frauds. This we must answer by direction to the authorities listed in 16 Ohio Jurisprudence, page 173. There the Ohio rule is thus stated: "The attitude of equity with respect to mistakes in written instruments is in opposition to the parol-evidence rule as administered in common-law courts."
It rather looks to the nature of the obligations intended to be secured by the instrument, and the relation of the parties thereto, in determining what relief, if any, should be awarded. The rule is clearly announced in Neininger v. State, 50 Ohio St. 394, at page 401, 34 N.E. 633, 40 Am. St. Rep., 674: "It has long been the settled law of this state, that contracts concerning lands, and even deeds and mortgages by which they have been conveyed, may be reformed, on the ground of mistake, and upon parol proof, by correcting misdescriptions, including lands omitted by mistake, enlarging or restricting the character of the estate, inserting or qualifying covenants and conditions, and in other respects."
Legislative recognition of equity's searching for substance and not form, and its desire to do that which ought to be done, finds expression in Section 12210, General Code, which reads: "When, in an instrument in writing, or in a proceeding, there is an omission, defect, or error, by reason of the inadvertence of an officer, or of a party, person, or body corporate, whereby it is not in strict conformity with the laws of this state, the courts of this state may give full effect to such instrument or proceeding, according to the true, manifest intention of the parties thereto."
Now, it seems all-important to us in this case to ascertain by clear and convincing proof, if possible, whether or not the Baxter Company had notice and knowledge of the lessee's exercising of its right of election to an extension of the term. If it had no such notice or knowledge, it would, of course, be an innocent party, and could not be bound thereby; but proof seems clear and convincing to the contrary. Admire, as secretary of the Fame Company, which controlled the lessee, exercises the option for it. He thereafter, in his letter of October 27, 1928, calls attention to the omission, and seeks to have the premises' description supplied and inserted. Next, we find the plaintiff in error acquiring the Massillon property, and thereafter we again find Admire on behalf of the Baxter Company writing Lucas on July 12, 1930, asking for a consent of Lucas to the assignment of the lease to the plaintiff in error, just two and a half months before the expiration of the first term of lease. Since April 22, 1929, it had been in the premises, paying the rentals provided by the lease. Surely it was not concerned about these two and a half months. It was the long term it had in mind.
We hold the view that it did have notice and knowledge of the lease and its terms and its assignor's exercising of the option. It is not, therefore, an innocent party, like one having no knowledge of an unrecorded document, and should not now be heard to assert that the lease is defective, after having recognized it as a valid instrument.
We conclude that the common pleas court was right in its conclusion. The judgment of that court is therefore affirmed, and the cause is remanded to the trial court for further proceedings.
Judgment affirmed.
LEMERT and MONTGOMERY, JJ., concur.