2018 Ohio 2632
Oh. Ct. App. 4th Dist. Pickawa...2018Background
- Lessee Bob Bay operated a grocery at leased premises owned by Circle Investment (lessor). Penn Traffic had previously assigned the lease to Bob Bay.
- Bob Bay gave his spouse Julia Bay a security agreement (Dec. 31, 2014) covering corporate assets; Julia filed a UCC financing statement in 2016.
- Bob Bay ceased operations Nov. 2016, rent arrearage followed, and Circle changed locks; a liquidation sale of tenant chattels was planned and net proceeds were escrowed.
- Circle filed a notice of distress lien on Dec. 1, 2016 claiming a landlord "distress" lien on lessee chattels and proceeds; parties litigated competing summary judgment motions.
- The trial court granted partial summary judgment to Circle, finding common-law landlord distress liens still recognized; the court denied appellants’ motions. Appellants appealed.
Issues
| Issue | Plaintiff's Argument (Appellants) | Defendant's Argument (Appellee) | Held |
|---|---|---|---|
| Whether common-law landlord distress liens remain recognized in Ohio | Common-law distress liens have been abolished; security interests in personal property are governed by R.C. Ch. 1309 (UCC) | Common-law distress remains a valid remedy and R.C. Ch. 1309 does not displace it for landlord liens | Court held common-law landlord distress liens no longer recognized in Ohio; reversed trial court’s grant to Circle |
| Whether a statutory, operation-of-law, or consensual landlord's lien existed in this lease | No statutory lien; no lien arose by operation of law; no consensual lien because lease contains no security-interest language and expressly preserves tenant ownership of chattels | Circle contended its right-of-re-entry and distress notice created a lien on chattels/proceeds | Court held no statutory lien, none by operation of law, and no consensual lien under the lease language |
| Whether Chapter 1309 (UCC Article 9) governed any consensual landlord interest in tenant personal property | Chapter 1309 governs consensual liens in personal property; if a lease created a consensual lien it must be perfected under Chapter 1309 | Circle argued Chapter 1309 does not apply to landlord distress liens | Court held Chapter 1309 governs consensual security interests in personal property; here no consensual security agreement existed so Circle had no perfected UCC interest |
| Priority between Julia Bay’s perfected security interest and Circle’s claimed lien | Julia had a filed financing statement and claimed a perfected security interest in inventory and proceeds; priority question unresolved because trial court never adjudicated perfection/priority | Circle asserted a prior distress lien (but court found no valid distress lien) | Appellants’ priority claims (assignments III & IV) were not ripe on appeal; remanded for trial-court determination whether Julia’s interest is valid, perfected, and next in priority |
Key Cases Cited
- Sutliff v. Atwood, 15 Ohio St. 186 (Ohio 1864) (discusses common-law distress as a remedy for rent and contains language the court found persuasive that distress has been abolished)
- Stephenson v. Haines, 16 Ohio St. 478 (Ohio 1866) (recognizes a lessor's lien where instrument reserves right of re-entry and repossession)
- Metcalfe v. Fosdick, 23 Ohio St. 114 (Ohio 1872) (upholds lessor's reserved lien on movable machinery in lease language)
- Craig Wrecking Co. v. S.G. Loewendick & Sons, Inc., 38 Ohio App.3d 79 (Ohio Ct. App.) (discusses commercial lessor self-help repossession and limits)
- Northfield Park Associates v. Northeast Ohio Harness, 36 Ohio App.3d 14 (Ohio Ct. App.) (distinguishes commercial and residential self-help; allows certain commercial lease self-help provisions)