Abraham v. Fioramonte

Decision Date16 July 1952
Docket NumberNo. 32813,32813
Citation107 N.E.2d 321,158 Ohio St. 213,33 A.L.R.2d 1267
Parties, 33 A.L.R.2d 1267, 48 O.O. 159 ABRAHAM v. FIORAMONTE et al.
CourtOhio Supreme Court

Syllabus by the Court.

1. A lease of real estate for a term of years constituting an estate less than a freehold estate is a chattel real which passes present interest in real property and therefore can not be made subject to a chattel mortgage.

2. A leasehold estate less than a freehold estate is property which can be made the subject of a mortgage provided such mortgage is executed with all the formality required with respect to a mortgage on real estate and is recorded as a real estate mortgage.

3. A judgment lien does not attach to a leasehold estate prior to the filing of a certificate of such judgment, in accordance with Section 11656, General Code, or seizure by the levy of an execution.

4. Where the lessee in a nonassignable lease for a term of five years surrenders the lease seven months before its expiration, a new lease is executed by the owner to a third person, and a creditor of the original lessee institutes a proceeding under Section 11104, General Code, subsequent to the execution of the new lease, chaiming fraudulent conduct of the original and new lessees, such creditor can not in such proceeding procure execution against, and sale of, the new lease, where the owner-lessor was not a party to such alleged fraudulent conduct.

5. Permits issued by the Department of Liquor Control of Ohio pursuant to the statutes of Ohio, commonly referred to as the Liquor Control Act, are personal licenses and are not property which can be mortgaged or seized under execution or court order for the satisfaction of debt.

The questions here considered arise out of prolonged and involved litigation which originated in the Common Pleas Court of Summit County. It involves the ownership and operation of the Anchor Cafe in Akron and the construction of certain mortgages executed by the purported owners of the cafe. The cause was heard in the Court of Appeals on appeal on questions of law and fact. It was admitted to this court on motion to certify the record but with the understanding that the issues to be considered by this court include only matters relating to the lease upon the premises occupied by the cafe and the liquor permits held by the operator of the cafe. The facts are stated in the opinion.

Bailey & Bailey, Akron, for appellee.

William A. Slater and Englebeck & Kaufmann, Akron, for appellant.

MIDDLETON, Judge.

During the period since May 2, 1945, various individuals appear to have been interested in or partial owners of the Anchor Cafe. They came and went with a frequency that added only confusion to the factual situation and it is unnecessary in considering the questions now before this court to give further attenction to them. It is sufficient to note that Medio Fioramonte appears to have been interested in the business at all times under consideration. The said Fioramonte also operated an independent juke box and pinball machine under the name of Exchange Novelty Company on the cafe premises. Charles Wallace, husband of Jessie Wallace, appears to have had some interest with Fioramonte in the juke box and pinball machine business.

Jessie Wallace claims to have been a half owner of the cafe business at least as early as September 1948 and to have purchased the other half interest in that business from Fioramonte on March 31, 1949.

On September 21, 1948, Fioramonte and Charles Wallace executed a note in the amount of $38,000 to J. M. Abraham who is the plaintiff in the present case. To secure that note both Fioramonte and Charles Wallace executed a chattel mortgage in favor of Abraham which covered all equipment in the Exchange Novelty Company owned by Fioramonte and which mortgage purported to cover the following:

'All the assets, equipment not hereinafter specifically mentioned, goodwill, accounts, and business of the establishment known as the Anchor Cafe located at 137-139 South street, in the city of Akron and in the above mentioned county and state, with the following equipment: One fifty-foot bar, one thirty-foot back bar, one twelve-foot bottle cooler, one six-foot bottle cooler, two compressors, one twelvecubic-foot refrigerator, six booths, twelve tables, forty eight chairs, one cigar case, one safe, one National cash register, and miscellaneous kitchen equipment.'

That mortgage was witnessed but not acknowledged and was filed in the office of the county recorder as a chattel mortgage but was not recorded as a mortgage on real estate.

Jessie Wallace claims to have known nothing of the execution of the note or mortgage.

On March 31, 1949, an agreement was executed by and between Fioramonte and Jessie Wallace under which Fioramonte purported to sell to Jessie Wallace his entire interest in the Anchor Cafe. That instrument enumerated many items of personal property, including equipment and stock of liquor, the ownership of which was to pass under the agreement. The purchase price recited therein was $18,000. The agreement recited that the seller was the lessee of the real estate occupied by the cafe and the seller agreed to assign the lease so held by him to the buyer. The agreement recited also that the seller was the holder and owner of the liquor permits enumerated therein; that the contract of sale was conditioned upon the granting by the Department of Liquor Control of corresponding permits to the purchaser, Jessie Wallace; and that the sale was to be handled by way of escrow and should be finally effected only upon the issuance of liquor permits to Jessie Wallace, the purchaser. On March 31, 1949, consistent with the agreement of sale Fioramonte placed upon the original lease a formal assignment of it to Jessie Wallace.

The lease so held by Fioramonte was dated May 2, 1945, and covered a term of five years expiring May 1, 1950. It contained the following provision with respect to assignment:

'* * * that the premises aforesaid, or any part thereof, shall not be underlet, nor shall this lease be assigned, without the consent, in writing, of the first parties, under pain of forfeiting the residue of the term hereby granted, at the election of the first parties.'

Under date of March 16, 1949, Fioramonte formally notified the Department of Liquor Control that he had entered into an agreement to sell the Anchor Cafe to Jessie Wallace; and that he was surrendering his liquor permits and was enclosing them with the communication with the request that they be cancelled without refund when permits were issued to Jessie Wallace. Promptly thereafter, corresponding liquor permits were issued to Jessie Wallace and those formerly held by Fioramonte were cancelled.

On August 24, 1949, Abraham reduced to judgment the cognovit note for $38,000, which had been executed by Fioramonte and Charles Wallace. In October 1949, levy was made under that judgment upon all specific items of property belonging to the Anchor Cafe, which were included in the mortgage, and those items were seized by the sheriff. That action upon the note was independent of the present action and the levy did not purport to include either the leasehold estate or the liquor permits.

On September 30, 1949, the owners of the property occupied by the cafe, who were the lessors in the original lease above referred to, executed a new lease to Jessie Wallace as lessee. It made no mention of the previous lease which had been held by Fioramonte. Though containing many terms similar to those in the original lease it was different in form and it was for a term of three years expiring October 1, 1952. It was not merely for the unexpired term of the former lease. The new lease contained also a provision denying the right of assignment and reading as follows:

'3. Lessee agrees that no part of said premises shall be underlet or assigned without consent, in writing, of the lessors. Any such assignment or underletting shall constitute a forfeiture of the balance of the term herein granted at the election of the lessors.'

On November 30, 1949, the present action was instituted by Abraham against Fioramonte, Charles Wallace, Jessie Wallace and one Mary Sartori (who purported to be the holder of a second mortgage). This action is to foreclose the mortgage which was given to secure the note on which judgment had previously been taken as hereinabove recited. This petition recites the purported sale and transfer of March 31, 1949, from Fioramonte to Jessie Wallace and avers that such purported sale was made with intent to defraud Abraham with respect to the property subject to the mortgage. Pending determination of the issues raised in the petition, the plaintiff requested the appointment of a receiver. That request was granted, a receiver was appointed and he took possession of the cafe and thereafter operated it.

Trial in the Common Pleas Court of the issues raised in this foreclosure suit terminated July 27, 1950, and its judgment was entered on that date. The court found that the purported sale by Fioramonte to Jessie Wallace in March 1949 was fraudulent. Nevertheless, that court held that subsequent to the levy which was made in October 1949 and the resulting sale of the physical property belonging to the cafe, Jessie Wallace had installed new items of property not covered by the mortgage. The trial court also held:

'The plaintiff, Abraham, is not entitled to subject to his claim the present leasehold interest in the real estate where the Anchor Cafe is now located. Such interest is the sole interest of Jessie Wallace independent and free of any claims of the plaintiff.

* * *

* * *

'The defendant, Jessie Wallace, and her business, known as the Anchor Cafe, is released and discharged from any further control or claims of the receiver, and the plaintiff is barred from asserting any claim in or to any of the property now in the Anchor Cafe, the leasehold interests and permits and...

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