459 N.E.2d 1325 | Ohio Ct. App. | 1983
The single issue is whether or not a mortgagee is charged with constructive notice of certain rent reduction provisions of a pre-existing, unrecorded lease pursuant to which the lessee was in possession at the time the mortgage was recorded, when the lease contains a promise by the lessee not to disclose the terms and conditions of the lease. The trial court decided that the mortgagee was not chargeable with constructive notice and entered judgment in her favor, and we concur.
The owner of the three-story, multiple-occupancy building in question and defendant-appellant Management Communication Consultants, Inc. ("tenant") entered into a written lease of third floor space in the building for a term of five years beginning August 1, 1980, renewable for another five-year term. The lease provided that the tenant would make and pay for all improvements to its space, and that the total cost paid by the tenant would be credited as rent against the monthly installments.1 An addendum to the lease, however, contained the following clause:
"10. NONDISCLOSURE: For purpose *307 poses of confidentialty [sic], Tenant agrees not to disclose the terms and conditions of this lease. Tenant and Landlord agree to execute a supplemental memorandum copy to record in lieu of the actual lease."2
No memorandum of lease was recorded until after the owner executed a mortgage to plaintiff-appellee Margaret B. Lantis ("mortgagee"), securing an obligation for $160,000.3 Recorded on January 20, 1981, this mortgage was second to a prior mortgage, but we will refer to it as "the mortgage." A memorandum of lease was recorded September 16, 1981, without any information in it about the rental credits arising from costs of improvements. The mortgagee began foreclosure proceedings on September 24, 1981, and after a series of court proceedings,4 the court journalized an entry holding the lease junior to the mortgage and ordering a distribution of net proceeds of the foreclosure sale that included no amount for the tenant.5
The record discloses that while the mortgagee knew that the tenant was in possession of part or all of the third floor of the building, she did not personally know of the existence of the lease until after the foreclosure action was filed, a receiver had been appointed and the tenant refused to pay rent because it had not been fully credited with the costs of its improvements.
Under R.C.
Despite the fact that the mortgagee knew of the tenant's possession and was therefore charged with knowledge of the tenant's equities as a lessee in possession, one other circumstance of this case removes it from the principle of constructive notice chargeable against a mortgagee: the tenant's promise of non-disclosure. Insofar as that promise stood as a barrier to any inquiry the mortgagee might have made, it prevented her from finding out about the tenant's rights, and it was deceptive, if not actually fraudulent. We cannot perceive how justice would be served by imposing a duty on the mortgagee running in favor of the tenant to discover matters the tenant had promised not to disclose. "He who seeks equity must do equity," is a principle irrevocably established in Ohio jurisprudence.
The single assignment of error8 has no merit. We affirm.
Judgment affirmed.
DOAN and KLUSMEIER, JJ., concur.
"All deeds, land contracts referred to in division (B)(2) of section
"The trial court's granting of the plaintiff-appellee's motion for summary judgment was against the manifest weight of the evidence and contrary to the applicable law."
Since the judgment appealed from was a ruling on a motion for summary judgment, ipso facto it could not be "against the manifest weight of the evidence." We conclude it was not "contrary to the applicable law," a phrase that includes the decisive principles of equity recited above. *309