LRC Realty, Inc. v. B.E.B. Properties
118 N.E.3d 260
Ohio Ct. App.2018Background
- B.E.B. Properties executed a recorded Option to Lease & Lease Agreement (1994) with Northern (later assigned to New Par/Verizon) for a cell-tower site at 112 Parker Court. The lease required annual rent payable to the “Landlord.”
- B.E.B. deeded the property to Baker & Cyvas (recorded Apr. 1995); that deed referenced the recorded lease and related instruments as encumbrances. The property later passed to Magnum, then Parker Court LLC, then to LRC Realty (recorded Jan. 2013).
- In June/July 1995, two partners of B.E.B. assigned their partnership interests to Bruce and Sheila Bird; a recorded Memorandum of Assignment stated rentals/communications should be forwarded to the Birds and referenced the recorded lease.
- New Par continued paying rent as instructed by whoever the payee was; the Birds received many payments (1995–2013), Parker Court/LRC received some later payments, and New Par interpleaded later installments.
- Litigation: LRC sued to declare entitlement to rent; Birds sued claiming assignment/entitlement and sought deed reformation; New Par interpleaded funds. The trial court granted summary judgment for Parker Court/LRC against the Birds on past rents and denied the Birds’ reformation claim; this appeal follows.
Issues
| Issue | Plaintiff's Argument (Birds) | Defendant's Argument (Parker Court / LRC / New Par) | Held |
|---|---|---|---|
| Whether Birds may reform the deed from Parker Court to LRC to preserve rent rights | Birds: reformation should correct instrument to reflect that rent rights remained with B.E.B./Birds | Parker/LRC: Birds lack privity/standing to reform a deed between Parker Court and LRC | Court: Affirmed — Birds lack privity; reformation of that deed unavailable to Birds |
| Whether B.E.B./Birds retained right to receive rent after sale (i.e., reservation/exception) | Birds: recorded assignment + deed language put successors on notice; assignment transferred rent rights to Birds | Parker/LRC: rent follows ownership (reversion) absent express reservation; successors entitled to rent; New Par paid as instructed | Court: Reversed trial court re: damages — recorded lease/assignment and deed “subject to” language charged successors with notice; Birds entitled to rent as assignees of B.E.B. Properties |
| Whether New Par was liable for misdirected past payments (interpleader) | Birds: New Par should have paid Birds per assignment | New Par: paid as instructed by property owner; interpleaded disputed funds to avoid liability | Court: Affirmed summary judgment for New Par — New Par fulfilled duty by paying per owner instructions; interpleaded funds awarded to LRC for some years (unchallenged) |
| Application of statute of limitations to recovery of past rents | Birds: no written contract with later owners; statute of limitations may not bar recovery | Parker/LRC: asserted eight-year statute for written contracts to limit recoverable periods | Court: Trial court correctly limited recovery for some years based on limitations theory as to certain periods, but trial court erred in awarding the bulk of past rents to Parker/LRC over Birds; remanded to enter judgment for Birds as assignees for rent rights (subject to limitations analysis) |
Key Cases Cited
- Grafton v. Ohio Edison Co., 77 Ohio St.3d 102 (Ohio 1996) (standard of review for summary judgment)
- Tenbusch v. L.K.N. Realty Co., 107 Ohio App. 133 (Ohio App. 1958) (unexpired leases are recordable encumbrances)
- Tiller v. Hinton, 19 Ohio St.3d 66 (Ohio 1985) (bona fide purchasers bound by recorded encumbrances only if they had constructive or actual notice)
- Thames v. Asia's Janitorial Serv., Inc., 81 Ohio App.3d 579 (Ohio App. 1992) (proper recording gives constructive notice of interests)
- Hinman v. Barnes, 146 Ohio St. 497 (Ohio 1946) (deed construction: give effect to parties' clear intent within deed’s four corners)
- Smith v. Harrison, 42 Ohio St. 180 (Ohio 1884) (rent follows legal title absent reservation)
- Commercial Bank & Sav. Co. v. Woodville Sav. Bank Co., 126 Ohio St. 587 (Ohio 1927) (right to rents and profits follows legal title)
- Liberal Sav. & Loan Co. v. Frankel Realty Co., 137 Ohio St. 489 (Ohio 1940) (reservation of rent can preserve right in grantor)