BeWigged by Suzzi, Inc. v. Atlantic Dept. Stores, Inc.

Citation359 N.E.2d 721,3 O.O.3d 125,49 Ohio App.2d 65
Parties, 3 O.O.3d 125, 20 UCC Rep.Serv. 1337 BEWIGGED BY SUZZI, INC., Appellant, v. ATLANTIC DEPT. STORES, INC., et al., Appellees.
Decision Date01 July 1976
CourtUnited States Court of Appeals (Ohio)

Syllabus by the Court

1. A license is a permission to do some act or series of acts on the land of the licensor, without having any permanent interest in it. A license is not assignable (Fairbanks v. Power Oil Co. (1945), 81 Ohio App. 116, 123, 77 N.E.2d 499).

2. A license to do an act upon land involves exclusive occupation of the land by the licensee so far as is necessary to do the act and no further. A lease gives the right of possession of the land and the exclusive occupation of it for all purposes not prohibited by its terms (Di Renzo v. Cavalier (1956), 165 Ohio St. 386, 135 N.E.2d 394).

3. A license and not a leasehold is created where an agreement is executed which the parties title a license, and said agreement provides that the party therein identified as the licensee will be permitted to establish a wig department in a department store for the sole purpose of selling wigs, but clearly does not grant any interest in the land or premises.

4. A license is terminable at the will of the licensor, unless there is an agreement that the license should exist for a specific term and that agreement is supported by consideration.

5. At the expiration of a license for a term, the action of the licensee in continuing to exercise rights previously granted under a license agreement gives rise to a license at will by implication and does not result in the renewal of the original license for another term.

6. A security interest is an interest in personal property or fixtures which secures payment or performance of an obligation (R.C. 1301.01(KK)).

7. In order for a security interest to be enforceable the debtor must have signed a security agreement which contains a description of the collateral (R.C. 1309.14(A)(2)).

8. R.C. 1301.01, et seq., sets forth the exclusive manner in which an enforceable security interest may be created.

9. Where an enforceable security interest is created by a written agreement which is terminable at a specific date, the security interest is valid only until the expiration date. Thereafter, in order for there to be an enforceable security interest, a new security agreement must be executed.

Reminger & Reminger and William V. Valis, Cleveland, for appellant.

Charles M. Rosenberg, Cleveland, for appellee.

JACKSON, Judge.

The appellant is a corporation engaged in the business of selling wigs to retail customers. At trial it was stipulated that Atlantic Department Stores, Inc., is the only defendant and that the names used to identify other purported defendants were simply other names under which appellee conducted its business of operating discount department stores. Prior to November 15, 1973, appellant was conducting its business from the premises of eight different Atlantic Department Stores located in various parts of northern Ohio. On that date the appellee seized the inventory and fixtures of the appellant in all eight locations. When the appellant complained about the seizure, the appellee stated that the seizure was made pursuant to the provisions of a 1970 license agreement under which it claimed a lien upon the property seized for the payment of 'rent' which was alleged to be in arrears. After the parties had been unable to resolve their dispute, plaintiff appellant commenced this action on March 27, 1974, by filing a complaint in replevin and conversion in the Cuyahoga County Court of Common Pleas. By that action appellant sought to recover its goods or, in the alternative, to receive $16,129.39 as damages for the loss of those goods; an additional amount of $30,337.42 as damages for the loss of the use of the property in question; and $100,000 for punitive damages.

On April 8, 1974, appellee filed an answer denying any wrongful conduct on its part, and a counter-claim demanding $10,550 from appellant as payment for monies due under the license agreement. After pre-trial negotiations the seized property was returned to plaintiff appellant and $3,000 was settled upon as the sum due under the license agreement for 'rent' in arrears. On February 24, 1975, a trial was had without a jury upon appellant's claims of wrongful seizure of the property in question; damages in the amount of the claimed loss of value to the property while in the hands of the appellee; and a request by appellant for punitive damages. The trial court granted judgment for the defendant appellee upon plaintiff's complaint and judgment for the defendant appellee upon the counterclaim by defendant appellee in accordance with the previous agreement. From that judgment the appellant has assigned four errors which are as follows:

'1. The Court erred in holding plaintiff corporation bound by the provisions of the License Agreement, where said agreement was made between defendant and plaintiff corporation's sole shareholder in her individual capacity, by treating the corporation and the shareholder as one and the same entity.

'2. The Court erred in finding that the provision of the License Agreement creating a lien in favor of the Licensor, on Licensee's property, authorized Licensor's taking of plaintiff's property without notice, hearing or court order.

'3. The Court erred in granting defendant's Motion to Quash plaintiff's subpoena duces tecum requesting the defendant to produce recent profit and loss statements and balance sheets showing all of the assets of the defendant.

'4. The judgment of the Court was contrary to the weight of the evidence.'

We overrule the third assignment of error by appellant for the reason that the prejudice of alleged error has not been demonstrated. With respect to the other assignments of error, we find each meritorious as set forth below.

I.

On August 25, 1970, a document entitled 'License Agreement' was executed between two parties identified as a licensor and a licensee. The document discloses that the licensor was Spartan Department Stores, Inc., which is one of the names under which appellee conducts its business. The license was C. S. Brunetti, who was established by testimony at trial as the president and sole shareholder of plaintiff appellant corporation.

Both the license agreement and the attached rider state that the license agreement was between Spartan Department Stores and Carolyn Sue Brunetti. It was executed as follows:

'Spartan Department Stores

By: S/Edward L. Friedman

Carolyn Sue Brunetti

By: S/C. S. Brunetti'

Paragraph 32 of that license agreement provided that the licensor was to have a '* * * first lien upon and shall be a preferred creditor with respect to all of the stock, fixtures, equipment and other property owned by Licensee or located on the premises for all sums due from Licensee to Licensor hereunder, whether for minimum or percentage payments, or otherwise.'

By its own terms that agreement expired on September 1, 1971.

Without regard to whether the August, 1970 license agreement was such as to make Ms. Brunetti or BeWigged by Suzzi, Inc., the licensee, 1 we hold that under the common law relating to licenses and Article 9 of the Uniform Commercial Code as adopted in Ohio, that the appellees, on November 15, 1973, held no enforceable lien against either Ms. Brunetti or BeWigged by Suzzi, Inc.

Under Ohio law a license has been defined as

'* * * a permission to do some act or series of acts on the land of the licensor, without having any permanent interest in it; it is founded on personal confidence, and is not assignable. It may be given in writing or by parol; it may be with or without consideration, but in either case it is usually subject to revocation, though constituting a protection of the party acting under it until the revocation takes place.' Fairbanks v. Power Oil Co. (1945), 81 Ohio App. 116, 123, 77 N.E.2d 499, 503.

A license may be created either by express or implied agreement. While it always confers a privilege which is in some way connected with the use of land, that use of the land is clearly incidental to the main purpose of the license. Burby, Real Property, Section 38 (3d ed. 1965). Unlike a lease, a license gives the licensee no estate or other interest in land. As expressed by the Ohio Supreme Court, the major difference between a license and a lease is:

'1. 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.' Di Renzo v. Cavalier (1956), 165 Ohio St. 386, 135 N.E.2d 394.

Accord, Pitts v. Housing Authority (1953), 160 Ohio St. 129, Syl. 2, 113 N.E.2d 869; Ohio Valley Advertising Corp. v. Linzell (1957), 107 Ohio App. 351, 152 N.E.2d 380.

A further distinguishing feature is the difference in the expected duration of a tenancy as opposed to a license. Under property law there is an estate identified as a tenancy at will, which is terminable at the will of either the landlord or the tenant. Unless, however, there is an agreement specifically stating that the tenancy is one at will, the common law rules will change this tenancy into a periodic tenancy based upon the periodic payments the tenant makes for his rent. Thus, in dealing with leasehold estate, the estate will be initially terminable only upon the expiration of a specific period of time, unless the parties specifically make an agreement to the contrary. See generally Burby, Real Property, Sections 48-51 (3d ed. 1965). The rule is exactly the opposite in licenses, where a license is terminable at will unless the parties specifically provide to the contrary and the licensee holds a license coupled with an interest. See Fowler v. Delaplain (1909),79 Ohio St. 279, 87 N.E....

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