Lithograph Building Co. v. Watt (96 Ohio St. 74, 1917)

Matthias, J.

The trial court decreed the reformation of the lease involved in this proceeding, which had been executed by The Guardian Savings & Trust Company as the agent of the plaintiff in error. The instrument as written leased to Watt, plaintiff below, defendant in error here, a portion of the building belonging to The Lithograph Building Company, plaintiff in error, for a term of five years, and contained the following clause: “That the lessee will surrender possession of the within demised premises and relieve the lessor of all liability under this lease upon receipt of written notice from the lessor, one year prior to the time when possession is desired.”

The trial court found that said instrument did not accomplish the purpose of the parties and decreed that the same should be corrected and reformed by inserting instead of the paragraph above written the following: “It is understood and made a part of this lease that the city of Cleveland, is the owner of the ground on which said Lithograph Building is situated, and that the lessor reserves the right to cancel the within lease and demand possession of the within demised premises, by giving to the Lessee one year’s notice in writing in the event that the City purchase the building and require possession of the same.”

It is contended by plaintiff in error that The Guardian Savings & Trust Company was without authority to bind it by the execution of the lease here in question and that therefore such reformation was erroneously decreed.

The only authority of The Guardian Savings & Trust Company to act as the agent of the plaintiff in error with reference to the control or management of its building or any part thereof was conferred upon it by a power of attorney, or trust agreement so-called, the essential portions of which are sét out in the statement preceding this opinion. Assuming to act under authority thereby conferred The Guardian Savings & Trust Company executed the lease in question. The power of attorney was not acknowledged, and neither it nor the lease in question was recorded. The decree of reformation was apparently based upon the assumption that the execution of such lease was validly authorized, or upon a finding that it had been ratified by the plaintiff in error; or upon the ground that the agent had full power to make such lease, though the authority therefor was defectively executed, and that the instrument while void as a lease was good in equity as a contract to make a lease.

The plaintiff below did not seek the enforcement of a contract to make a lease. On the contrary the petition assumes the validity of the lease and that it was executed in pursuance of proper authority legally conferred. The decree of the court does not contemplate the enforcement of specific performance of a contract to execute a lease, but seems to have proceeded upon the theory that the lease was based upon valid authority, and reformation was directed to meet the terms to which it was found the agent had assented.

The provisions of Section 8512, General Code, require that a power of attorney for the conveyance, mortgage, or lease of any estate or interest in real property, shall be signed, attested, acknowledged, and certified in the same manner as deeds, mortgages, and leases. And- Section 8536, General Code, requires that it be recorded.

Looking to Section 8510, General Code, to ascertain the requirements with reference to leases, we find that, a lease of any interest in real property must be signed and acknowledged by the lessor; but under the provisions of Section 8517, General Code, such requirements are confined to leases executed for a term of more than three years. Under the plain provisions of these statutes a lease for five years is required to be acknowledged and recorded, and a power of attorney to authorize the execution of such a lease is also required to be acknowledged and recorded. However, failure to observe the requirements of these statutes with reference to the recording of such instruments does not in any wise affect the validity thereof as between the parties thereto. (Wright et al. v. Franklin Bank et al., 59 Ohio St., 80.) But it is held in the case of Richardson v. Bates, 8 Ohio St., 257, that, in an action upon an indenture leasing land for 'five years, to recover of lessees upon their covenants to pay rent, the answer, setting up the fact that the indenture was not attested nor acknowledged by the lessor, and therefore did not convey the term, and that the lessees were not indebted for any rent under the indenture, stated facts sufficient to constitute an equitable, and therefore a perfect, defense. In that case the judge rendering the opinion says, at page 264: “We have seen, by>the provision of the statute, the form prescribed for the execution of a valid lease, of such a term as this assumes to pass, must have the same requisites as an instrument to convey the fee of the land. If then this instrument as set forth entitled the plaintiff to recover, one executed in a similar manner purporting to convey a fee simple in land, should entitle a plaintiff to recover in an action for the title and possession of the lands; but that would be utterly inconsistent, as well with the uniform adjudications in this state, as with the plain provision of the statute.” The rule here stated was later applied by this court in the case of Toussaint Shooting Club v. Schwartz et al., 84 Ohio St., 440.

This lease is of no more or greater validity than the instrument authorizing its execution; the same formalities are required in the execution of both. If a lease for five years is invalid if not acknowledged, so also is a lease for such term, though acknowledged, if executed by an agent whose authority is derived only from a power of attorney not acknowledged by the lessor. Bocock et al. v. Pavey et al., 8 Ohio St., 270.

It is contended, however, that the present case is ruled by the decision of Diehl v. Stine et al., 1 C. C., 515, 1 C. D., 287, later affirmed by this court without opinion. It is quite apparent from an examination of the record of that case that the controlling question there was whether a valid power of attorney had been executed authorizing the making of a deed conveying certain land. The case was heard by the circuit court upon appeal, which found that the power of attorney was executed in all respects as required by law, and that having been executed in conformity to law neither of the parties executing it nor their heirs could defeat the title of the grantee by proof that such power of attorney was not recorded. That decision does not. support the contention of the defendant in error in this case that acknowledgment of such power of attorney by the lessor is not essential to its validity. The court not only did not hold that in its form and manner of execution the power of attorney there in question was lacking in any formality required by statute, but on the contrary expressly found that it was properly and legally executed, and based its decision upon that finding.

It is further contended by the defendant in error that the terms of the power of attorney in question in this case were broad enough to confer authority upon The Guardian Savings & Trust Company as the agent of The Lithograph Building Company to execute this lease, and that the same having been executed in pursuance of the authority vested, and the defendant in error having taken possession thereunder, such instrument must be treated at least as a contract to execute a lease, and, hence, enforceable in equity. If we assume that the power actually conferred upon the agent was sufficient to authorize it to execute such lease, then notwithstanding its defective execution the lease negotiated in pursuance of authority actually conferred would be treated in equity as a contract to make a lease. That proposition is well supported both by principle and authority, and, indeed, has not been questioned in this case.

As we have seen, however, the proposition rests upon the assumption that the agent did actually possess authority to execute such lease, although the. instrument by which it was sought to confer the authority was defectively executed. The Guardian Savings & Trust Company was constituted the agent of The Lithograph Building Company with reference to certain property known as The Lithograph Building, and was given the “full management and control thereof, with power to collect the rents and income therefrom, to pay the taxes, insurance premiums and other fixed charges incident thereto and to make all necessary repairs and to do all other things which second party [The Guardian Savings & Trust Company] deems necessary or advisable in the proper management of said property.”

It is to be observed that no authority is specifically conferred to execute a lease. Certain powers are enumerated, and specified acts are authorized. It is from the language above quoted, if at all, that authority to execute the lease in question in this case must be derived. It is worthy of note that the contract of agency provided that such agency should continue a year, and thereafter could be terminated by either party upon sixty days’ written notice to the other; but if the building was sold within a year the contract of agency was to immediately terminate. The record discloses that'at the time such agreement was entered into and the relation of principal and agent created there was no occasion for the execution of any lease for any portion of the building for the year 1912, and that it was subsequent to the expiration of that year, and during the period when the authority of the agent must be regarded as only temporary, and when its term of management was uncertain, that it executed the lease to the defendant in error for a term of five years. It is significant, too, that nowhere in the enumeration of the powers delegated to the agent is any express power conferred to execute any lease whatever, and the very general terms employed are relied upon as conferring sufficient authority to warrant the agent to execute a lease upon the premises for a period of five years notwithstanding the omission to observe the formalities required by the statute to accomplish the legal vesting of- such authority. The .very omission to so execute such power of attorney as to legally authorize the making of a five-year lease seems sufficient evidence