Opinion
Decided June 15, 1931.
Landlord and tenant — Oral three-year lease — Tenant in possession estopped from setting up statute of frauds — Landlord incurred expense adapting premises to tenant's use.
Where a landlord has incurred large expenditures in adapting his property to the particular needs of his tenant, and the tenant has entered into possession under an oral agreement to continue the tenancy for three years, the tenant is estopped from setting up the statute of frauds as a defense in an action at law for damages for his breach of the contract.
ERROR: Court of Appeals for Cuyahoga county.
Messrs. Lieghley, Halle, Haber Berick, for plaintiffs in error.
Mr. Max P. Goodman and Mr. Charles Auerbach, for defendant in error.
The Center Woodland Realty Company, the plaintiff, by an amended statement of claim in the municipal court, alleged that the Artcraft Specialty Company, the Sheffield Bronze Powder Company, and the Star Printing Company had on March 16, 1929, leased from plaintiff certain floor space for manufacturing purposes for a term of three years; that after occupying the property for some four months the tenants violated their contract by vacating and ceasing to pay rent. The plaintiff sought damages resulting from the breach complained of. The defendants filed an answer denying the plaintiff's averments. They further pleaded the statute of frauds (Section 8621, General Code). By a third defense they pleaded that plaintiff had acquiesced in the surrender of the leased property and the answer also embodied a fourth defense upon which no testimony was adduced. Trial was had without a jury and a judgment rendered for plaintiff. This proceeding is to reverse that judgment.
It is complained in the first place that the defendants were not prepared for trial at the time trial was had, that the court erred in not granting a continuance, and that by the refusal to grant a continuance the defendants were deprived of an opportunity to make their defense. The record shows no abuse of discretion in this behalf on the part of the trial judge.
The defense that the parties by agreement acquiesced in the cancellation of the lease is not sustained by the evidence.
The only debatable question involved is whether or not the parties entered into an oral lease for the premises in question, and if so whether the attendant circumstances were such as to avoid the application of the statute of frauds. The testimony shows that officers representing the defendant companies in March, 1929, by parol evidence, undertook to lease the property for a period of three years, agreeing to pay therefor a graduated rent of $3,000 for the first year, $3,300 for the second year, and $3,600 for the third year of the term; that the rent was to be paid by monthly installments in advance; that the landlord should put the property in repair and should make substantial alterations to adapt the property for the particular use for which it was wanted by defendants.
The landlord thereupon proceeded to make substantial and extensive alterations in the property, whereupon the defendants took possession and carried out the terms agreed upon for a period of four months. The landlord desired to have the terms of the lease reduced to writing and desired to have certain covenants embodied in that writing for his own protection. He was, of course, protected by the implied terms of the oral lease from the defendants' waste, or the use of the property for unlawful purposes, and such other covenants as are implied by law, but desiring to have further protection and to have a written instrument evidencing the lease he prepared and submitted to the tenants in April two different forms of lease. These leases were not, however, signed by defendants and it is not clear that the terms of the landlord were in all respects acceded to by the defendants.
It is now claimed that the possession taken by defendants was not referable to the oral agreement, but was in contemplation of the written lease thereafter to be agreed upon and signed, and it is further claimed that as some of the tenants had theretofore occupied a part of the property there was not such a change of possession of the property under the oral lease as to warrant a finding that such possession was a part performance. We do not find that the record sustains either view contended for by defendants. All of the necessary terms to constitute a valid lease were agreed upon at the conference in March and it was pursuant thereto that a change of possession of the property was effected.
From the earliest years it has been held in Ohio that such part performance as delivery of possession takes the case out of the statute of frauds. Moore v. Beasley, 3 Ohio, 294; Grant v. Ramsey, 7 Ohio St. 157. This rule has been criticized, 1 Tiffany on Landlord and Tenant, 257, Thompson on Real Property, Section 1181, but the doctrine has never been abandoned in this state though distinctions have been made in cases having peculiar facts behind them.
The case at bar, however, is much stronger than a case of part performance predicated upon the tenant's possession. Here there was not only part performance by the lessee, but full performance by the lessor. The lessor not only yielded possession, but spent a large sum of money in making over the property to serve the peculiar needs of the lessee.
"Where the lessor incurred large expenditures in altering the premises for the lessee's use as required by the oral agreement, and the lessee entered into possession and continues his occupation for several years, it has been held that this is such performance on the lessor's part as to entitle him to a decree requiring the lessee to execute the lease." 25 Ruling Case Law, 568.
The Supreme Court of Wisconsin in Seaman v. Aschermann, 51 Wis. 678, 8 N.W. 818, 820, 37 Am. Rep., 849, was dealing with just such a case. The court in speaking of the application of equitable principles to such a situation said: "The facts stated in this complaint make one of the strongest and clearest cases for its application to be found in the books. The plaintiff was put to great expense to change and remodel the block of stores to make them suitable for the business of the defendants, and at their special instance and request, and in consequence and fulfillment of the agreement, and made out and executed and tendered the lease to the defendants for them to execute on their part; and the defendants went into full possession and enjoyment of the premises under said agreement, and for two years paid the plaintiff the rents stipulated in the agreement and the lease to be executed, and merely delayed, by sheer neglect and without refusal, to execute the lease on their part. A stronger case for the exercise of this equity jurisdiction could hardly be made."
The circumstances of this case, therefore, are such as to take the case out of the statute of frauds upon the doctrine of equitable estoppel, or upon application of the principles of specific performance, without resorting to the liberal rule obtaining in Ohio by virtue of Moore v. Beasley, supra, and Grant v. Ramsey, supra.
In some jurisdictions it is held that the avoidance of the statute of frauds by part performance requires the application of equitable principles, and that these equitable principles can only be availed of in a court of equity. It is sometimes held that such a proceeding is akin to equitable estoppel or specific performance, and that one cannot avoid the statute of frauds in a direct proceeding in an action at law, and that was the attitude of the court in the Seaman case supra. In this respect Ohio again seems to have adopted the most liberal view. Thompson on Real Property, vol. 2, Section 1181, holds that generally part performance of a lease only avails against the statute of frauds in equity. The author adds, however, that there are cases where part performance avoids the statute at law, as well as in equity, and cites the Ohio authorities already referred to as sustaining that doctrine. They do sustain the doctrine, so that in this state that full relief against the statute is afforded at law which in other jurisdictions can only be had in equity.
It is accordingly determined that the plaintiff made a case and that the judgment of the municipal court is right.
Judgment affirmed.
MIDDLETON and FARR, JJ., concur.
MAUCK and MIDDLETON, JJ., of the Fourth Appellate District, and FARR, J., of the Seventh Appellate District, sitting by designation in the Eighth Appellate District.