Opinion
No. 93-CV-13195.
Decided November 30, 1993.
Suzanne Schloss, pro se. Kohnen Patton and James G. Petrie, for defendants.
Plaintiff has sued the defendants claiming breach of an oral agreement. Defendants have moved pursuant to Civ.R. 12(B)(6) to dismiss the complaint on the basis that the alleged agreement constitutes a lease that is governed by the Statute of Frauds, R.C. 1335.04 and 1335.05, and must be in writing to be enforceable. Under Civ.R. 12(B)(6), the court should dismiss plaintiff's complaint if it appears that no facts are alleged that would entitle the plaintiff to relief. Treft v. Leatherman (1991), 74 Ohio App.3d 655, 600 N.E.2d 278. Plaintiff has once amended her complaint in response to defendants' motion, and has filed a well-researched memorandum in opposition to defendants' likewise erudite memorandum.
I Facts
Construing plaintiff's complaint liberally in her favor, as the court must under a Civ.R. 12(B)(6) motion, the plaintiff alleges the following facts. The plaintiff, Suzanne Schloss, proprietor of Sweets in Bloom, "a small but growing company that makes theme candy bouquets," negotiated with defendant Steven Sachs about operating a kiosk in a downtown Cincinnati shopping mall known as Tower Place Mall. Steven Sachs is an agent of defendant Faison Associates, the property manager of Tower Place Mall. The plaintiff asserts that defendants orally agreed to rent plaintiff mall space for a kiosk from which she could operate her business. The term was to be for six months at a rental payment of $75 per week, plus twelve percent of monthly gross sales in excess of $4,500 per month. However, after plaintiff indicated she could not afford the $4,000 construction costs of a kiosk, defendants also orally agreed to pay one half of that cost. The kiosk was to become property of Tower Place Mall "at the end of Sweets in Bloom's six months use."
Plaintiff alleges that shortly before plaintiff was to begin business, defendants breached their agreement to pay half the kiosk construction cost. Plaintiff then did not move her business into the mall. Plaintiff has now brought this suit for breach of the agreement.
II Discussion
The Ohio version of the Statute of Frauds applying to real estate is contained in two code sections. R.C. 1335.04 states, "No lease, estate, or interest, either of freehold or term of years, or any uncertain interest of, in, or out of lands, tenements, or hereditaments, shall be assigned or granted except by deed or note in writing, signed by the party assigning or granting it, or his agent thereunto lawfully authorized, by writing, or by act and operation of law." R.C. 1335.05 states, "No action shall be brought whereby to charge the defendant, * * * upon a contract or sale of lands, tenements, or hereditaments, or interest in or concerning them * * * unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith." (Emphasis added.) Together, R.C. 1335.04 and 1335.05 are known as the Statute of Frauds and they require that leases, among other transactions, be in writing. The purpose of the Statute of Frauds is "to ensure that transactions involving realty interests are commemorated with sufficient solemnity. A signed writing provides greater assurance that the parties and public can reliably know when such a transaction occurs. It supports the public policy favoring clarity in determining real estate interests and discourages indefinite or fraudulent claims about such interests." N. Coast Cookies, Inc. v. Sweet Temptations, Inc. (1984), 16 Ohio App.3d 342, 348, 16 OBR 391, 398, 476 N.E.2d 388, 395.
R.C. Chapter 5301, known as the Statute of Conveyances, outlines the formal requirements of a written lease. These requirements include acknowledgment, writing, and notarization. R.C. 5301.01. However, R.C. 5301.08 provides for an exception to the conveyancing formalities for those leases that are less than three years in length. In this case, since the alleged agreement is for less than three years, the conveying formalities are not required, but the agreement, if it be a lease, still must be in writing under the Statute of Frauds. R.C. 1335.04 and 1335.05. The law is undisputed on that point — plaintiff, even if she were able to prove all of her assertions in the complaint, cannot prevail unless (1) the agreement is not a lease or (2) some theory removes this situation from the Statute of Frauds.
Lease or License
Plaintiff creatively contends that the alleged agreement between the parties was not a lease but actually a license to use space in Tower Place Mall and therefore not subject to the Statute of Frauds. The threshold question, then, is whether this agreement is a license or a lease.
In bygone days, when the law of property was formed and certainly before shopping malls were created, it may have been easier to distinguish between a lease and other interests in land. However, with today's commercial complexities, the lines of the various types of legal interests being conveyed and created may become blurred and difficult to distinguish. The Ohio Supreme Court expresses the difference between a license and a lease as follows: "A license to do an act upon land involves the exclusive occupation of the land by the licensee so far as is necessary to do the act and no further, whereas a lease gives the right of possession of the land and the exclusive occupation of it for all purposes not prohibited by its terms." (Emphasis added.) DiRenzo v. Cavalier (1956), 165 Ohio St. 386, 60 O.O. 13, 135 N.E.2d 394, paragraph one of syllabus. "It has been said that the essential feature distinguishing a lease of an interest in land from such other conveyances as licenses, easements and profits, is the fact of exclusive possession for a determinable term of years — the right to physical control to the exclusion of others." (Emphasis sic.) Cuvier Press Club v. Fourth Race Street Assoc. (1981), 1 Ohio App.3d 30, 34, 1 OBR 150, 154, 439 N.E.2d 443, 448, citing I American Law of Property (1952), at 175-184. A synopsis of the various definitions of "license" in Black's Law Dictionary would be that a license grants only permission to use land, but does not convey any interest therein. Black's Law Dictionary (6 Ed. 1990) 919-920.
As far as this court can determine, the lease/license distinction in the context of the urban shopping mall has yet to arise in reported case law in Ohio or any other jurisdiction. Therefore, we must examine what meager case law exists.
In People v. Chicago Metro Car Rentals, Inc. (1979), 72 Ill. App.3d 626, 28 Ill.Dec. 843, 391 N.E.2d 42, the city of Chicago and Metro Car Rental, Inc. entered into an airport concession agreement to operate a car rental business at O'Hare International Airport. The city retained the right of entry for purposes of future installation, maintenance, and repair. Metro was granted counter space in two terminals and temporary and permanent service areas totaling 255,000 square feet in which Metro was to expend $750,000 for construction of certain improvements. The city was to receive ten percent of the gross receipts with a minimum guarantee, plus $268.67 per month as rental for the two counter areas and $433.56 per month as rental for the temporary service areas.
The Metro court held that even though the parties contended that this agreement constituted a license, it was actually a lease. Id. at 629, 28 Ill.Dec. at 845, 391 N.E.2d at 45. Despite the fact that the city had considerable control over Metro's operations, even to the extent of changing the location of the counters in the terminals, the court still found that the agreement met the essentials of lease. "In the instant case, Metro does not argue that the agreement fails to establish a definite and agreed term and price of rental. Rather it argues only that the agreement fails to pass a possessory interest in specific property. However, the agreement clearly grants Metro exclusive possession of both temporary service area A and counter space in the terminals." Id.
Another Illinois case, Stevens v. Rosewell (1988), 170 Ill. App.3d 58, 120 Ill.Dec. 187, 523 N.E.2d 1098, held that an agreement between a McDonald's franchise and a community college to operate a McDonald's restaurant in the student union constituted a lease and not a license. The McDonald's was to be operated in a specific area and McDonald's was to be responsible for development of kitchen area, including installation and maintenance of equipment, and for maintenance of dining area. The common element of these cases is that the lessee was given possession of a space.
Two other cases with slightly different facts, where courts held that the agreement constituted a license, are also helpful in understanding the difference between a license and a lease. First, in Bewigged by Suzzi, Inc. v. Atlantic Dept. Stores, Inc. (1976), 49 Ohio App.2d 65, 3 O.O.3d 125, 359 N.E.2d 721, the plaintiff engaged in the business of selling wigs in defendant department stores. The court held that the plaintiff had a license and not a lease on the basis that the agreement specified amounts of space to be utilized by plaintiff in various stores, but did not set aside specific portions of the store for her use — there was not exclusive possession of the space to the exclusion of others. Id. at 70, 3 O.O.3d at 128, 359 N.E.2d at 726.
Second, in United Coin Meter Co. v. Gibson (1981), 109 Mich. App. 652, 311 N.W.2d 442, United Coin Meter entered into an agreement to place coin-operated washers and dryers in apartment complexes owned by the defendant. In Gibson, the court held that the agreement was not specific enough to be a lease. Id. at 657-658, 311 N.W.2d at 445. The description of the laundry area was too indefinite and the agreement failed to specify the number of machines which would be placed in the different laundry areas. Id. Finally and most important, the agreements did not give exclusive possession or control of the laundry areas to United Coin. The coin machines were allowed to occupy the space, but the laundry area was not the domain of United Coin. Id. The mere right to place a coin machine on defendant's property required only a license.
In synthesizing the above cases, the key fact in determining whether an agreement constitutes a license or a lease is whether the lessee/licensee has exclusive possession and the power to exclude the lessor/licensor from a specific area. If the lessee/licensee has the right of exclusive possession, irrespective of how much control the lessor/licensor has over the lessee/licensee or the operation of its business, then the agreement constitutes a lease since a possessory interest in real estate has been conveyed. This is true even if the lessor/licensor has the power to change the specific area of exclusive possession of the lessee/licensee. See People v. Chicago Metro Car Rentals, Inc., supra.
One test of whether there is a license or a lease is whether the place or space involved can be described without regard to the use to which the licensee/lessee will make of the space or place. In cases of licenses, the place or space is most easily described in terms of the licensee's use — the selling of wigs in Bewigged by Suzzi, Inc.; or the placing of washing machines in United Coin Meter Co. In cases of leases, the space or place is easily and ordinarily described in physical terms independent of any specific use. Thus, to this court, a license connotes much less than a lease. A vendor with a cart may have a license to peddle his wares, or to sell coffee and donuts on the factory floor, but the vendor does not have a defined space to operate his business. A mall may grant a license to a roving vendor, but a fixed space over which the vendor has possession to the exclusion of others amounts to a leasehold. Especially concerning real estate, a "bright line" must be drawn somewhere, and this court believes that the essential factors requiring a written lease are (1) a defined space or place, however small, which the lessor occupies, (2) to the exclusion of others, and (3) that the use of the space or place is not merely incidental to the performance of the contract.
This court concludes that the agreement between the parties in this case is a lease. Plaintiff would have had exclusive possession and control over the kiosk. A "kiosk" is defined as a light ornamental structure, used for the sale of newspapers, for a bandstand, or for other purposes. VII Oxford English Dictionary (2 Ed. 1989), at 455. A kiosk is a place, albeit small, which permits many different uses. A space is no less a space just because it is small. A quantum of real estate may be small, but it is nonetheless real estate. Defendants obviously had requirements on the quality of construction of the kiosk, would have control over the hours of operation, and perhaps over the exact location of the kiosk in Tower Place Mall. Nonetheless, plaintiff would have had exclusive possession and control of the area within the kiosk to the exclusion of others and it is obvious that the use of the property was not "clearly incidental to the main purpose of the license" as required by Bewigged by Suzzi, Inc. v. Atlantic Dept. Stores, Inc., supra. This constitutes a conveyance of a possessory interest in real property, and must comply with the Statute of Frauds to be enforceable.
Partial Performance
Plaintiff, in her memorandum in opposition to defendants' motion to dismiss, states that if the agreement is deemed a lease, then the doctrine of partial performance is applicable and saves the lease from the application of the Statute of Frauds. Plaintiff's reliance on this doctrine is misplaced.
The equitable doctrine of partial performance applies to both R.C. Chapter 5301 and R.C. 1335.04 and 1335.05; and, when applicable, removes a lease from the operation of the Statute of Frauds. Cuvier Press Club v. Fourth Race Street Assoc., supra, 1 Ohio App.3d at 35-36, 1 OBR at 156, 439 N.E.2d at 449. Partial performance exists when "unequivocal acts by the party relying upon the agreement, which are exclusively referable to the agreement and which have changed his [the party's] position to his detriment and made it impossible or impractical to place the parties in statu quo." (Emphasis sic.) Delfino v. Paul Davies Chevrolet, Inc. (1965), 2 Ohio St.2d 282, 287, 31 O.O.2d 557, 560, 209 N.E.2d 194, 198, citing Hughes v. Oberholtzer (1954), 162 Ohio St. 330, 55 O.O. 199, 123 N.E.2d 393, Tier v. Singrey (1951), 154 Ohio St. 521, 43 O.O. 492, 97 N.E.2d 20, Myers v. Croswell (1888), 45 Ohio St. 543, 548, 15 N.E. 866, 869. See, also, Weishaar v. Strimbu (1991), 76 Ohio App.3d 276, 284, 601 N.E.2d 587, 592; Manifold v. Schuster (1990), 67 Ohio App.3d 251, 254-255, 586 N.E.2d 1142, 1144.
However, in order for partial performance to remove a real estate matter from the Statute of Frauds, there must be much more than a breach of contract. "`The fraud against which the courts grant relief, notwithstanding the statute of frauds, consists in a refusal to perform an agreement upon the faith of which the plaintiff has been misled to his injury or made some irretrievable change of his position, especially where the defendant has secured an unconscionable advantage, and not in the mere moral wrong involved in the refusal to perform a contract which by reason of the statute cannot be enforced. When one party induces another, on the faith of a parol contract, to place himself in a worse situation than he could have been if no agreement existed, and especially if the former derives a benefit therefrom at the expense of the latter, and avails himself of his legal advantage, he is guilty of fraud, and uses the statute for a purpose not intended — the injury of another — for his own profit.'" (Emphasis added.) Delfino, supra, 2 Ohio St.2d at 287-288, 31 O.O.2d at 561, 209 N.E.2d at 198, quoting Tier v. Singrey (1951), 154 Ohio St. 521, 526, 43 O.O. 492, 494, 97 N.E.2d 20, 23.
In this case, the plaintiff's acts in reliance on the lease do not rise to a level to make it impractical or impossible to restore the parties to the status quo. In fact, the parties never really changed position, except that plaintiff alleges that she turned down other mall space while negotiating with defendants, and incurred expenses training staff. This is preparation to perform, not partial performance — "the mere purchase of furniture and fixtures in anticipation of taking possession under an oral lease is not sufficient to take the lease out of the statute." American Jurisprudence 2d (1974) 109, Statute of Frauds, Section 481. Though that fact would not be controlling, plaintiff does not even allege that she incurred the cost of the kiosk. Much more is required to constitute partial performance sufficient to avoid the Statute of Frauds. "The majority of cases hold that possession and payment of the rent are not sufficient to relieve the parties from the requirements of the statute [of frauds]." Delfino, supra, 2 Ohio St.2d at 289, 31 O.O.2d at 561, 209 N.E.2d at 199; Weishaar v. Strimbu, supra, 76 Ohio App.3d at 284, 601 N.E.2d at 592. Here, the plaintiff neither took possession of the kiosk nor paid any rent to the defendants. Even if plaintiff had taken possession under an alleged oral agreement, because of the Statute of Frauds, the agreement would have been only a tenancy at will as a matter of law. Weishaar v. Strimbu, supra, 76 Ohio App.3d at 284, 601 N.E.2d at 592. Therefore, the doctrine of partial performance is inapplicable and does not save the lease from the application of the Statute of Frauds.
Promissory Estoppel
In addition, though it is not clear from the plaintiff's complaint, a liberal construction of her complaint could raise the doctrine of promissory estoppel to save the lease from the application of the Statute of Frauds. The doctrines of promissory estoppel and partial performance are somewhat similar and may overlap. The Ohio Supreme Court has never explicitly determined this issue, but the United States Sixth Circuit Court of Appeals analyzed Ohio law and determined that Ohio law does not allow promissory estoppel to defeat the Statute of Frauds in a real estate context. Seale v. Citizens S. L. Assn. (C.A.6, 1986), 806 F.2d 99, 103-104. After Seale, at least two Ohio appellate districts have confirmed the Seale court's holding. See Nethero v. Poulson (Aug. 7, 1991), Wayne App. No. CA-2634, unreported, 1991 WL 150982; N. Canton Centre, Inc. v. Fleming Co., Inc. (Jan. 19, 1993), Stark App. No. CA-8995, unreported, 1993 WL 35566.
The policy considerations for requiring a writing in real estate transactions are strong. This court agrees with the United States Sixth Circuit Court of Appeals when it stated the following: "This case amply illustrates the important policy consideration underlying the statute of frauds in the real estate context. The absence of a writing makes the existence and the terms of the agreement * * * uncertain. Indeed, the statute of frauds was designed precisely to prevent litigation such as this, where the parties are entangled in a dispute over what was or was not promised. * * * The conflicting evidence and arguments presented to this Court illustrate well the dangers posed by permitting oral real estate transactions. If a court allows parol evidence of an unwritten contract, it can never be certain that it is not perpetuating rather than preventing a fraud. Had the agreement been reduced to writing, however, there would be little opportunity for fraud or mistake to arise." Seale, 806 F.2d at 103. This court agrees with the Seale court's analysis that Ohio law does not permit promissory estoppel to prevent the application of the Statute of Frauds, but even if it did, the facts of this case do not present a situation where promissory estoppel would be appropriate.
III Conclusion
"In order for a court to dismiss a complaint for failure to state a claim upon which relief can be granted (Civ.R. 12(B)(6)), it must appear beyond all doubt from the complaint that the plaintiff can prove no set of facts entitling him to recovery." O'Brien v. University Community Tenants Union, Inc. (1975), 42 Ohio St.2d 242, 71 O.O.2d 223, 327 N.E.2d 753, syllabus. After construing the plaintiff's complaint liberally in her favor, plaintiff's complaint has not set forth facts which state a claim for which relief can be granted. The agreement between the parties is a lease and is governed by the Statute of Frauds. Additionally, the doctrines of partial performance and promissory estoppel are inapplicable and do not save the lease from the Statute of Frauds. Therefore, the defendants' motion to dismiss is hereby granted.
Motion granted.