Sandusky Properties v. Aveni

• Citation: 15 Ohio St.3d 273,15 OBR 408,473 N.E.2d 798
• Decision Date: 31 December 1984
• Docket Number: No. 83-1970,83-1970
• Parties: , 15 O.B.R. 408 SANDUSKY PROPERTIES, Appellee, v. AVENI et al., Appellants.
• Court: United States State Supreme Court of Ohio

Page 273

15 Ohio St.3d 273

473 N.E.2d 798, 15 O.B.R. 408

SANDUSKY PROPERTIES, Appellee, v. AVENI et al., Appellants.

No. 83-1970.

Supreme Court of Ohio.

Dec. 31, 1984.

Burke, Haber & Berick Co., L.P.A., Stephen T. Parisi, R. Jeffrey Pollock, Cleveland, Wagner & Wagner and Walter R. Wagner, Mansfield, for appellee.

Arter & Hadden, M. Neal Rains and David I. Hammond, Cleveland, for appellants.

PER CURIAM.

This cause stems from an action for specific performance and accounting for rents and profits. It is without question that an action for specific performance, any accounting that might be ancillary to it, and the award of any damages that may under the circumstances appear to be necessary, are matters in equity and may be determined by the trial court in its sound discretion. Quarto Mining Co. v. Litman (1975), 42 Ohio St.2d 73, 87, 326 N.E.2d 676 ; Sternberg v. Bd. of Trustees (1974), 37 Ohio St.2d 115, 118, 308 N.E.2d 457 ; 49 Ohio Jurisprudence 2d (1961) 493, Specific Performance, Section 5. In Spengler v. Sonnenberg (1913), 88 Ohio St. 192, 203, 102 N.E. 737, this court accordingly stated that:

"Specific performance of contracts is a matter resting in the sound discretion of the court, not arbitrary, but controlled by principles of equity, on full consideration of the circumstances of each particular case."

See, also, Huntington v. Rogers (1859), 9 Ohio St. 511, 515-516.

The standard of review in a case such as this is whether the trial court, sitting as a court of equity, abused its discretion. The term "abuse of discretion" has been defined by this court as a decision which is "arbitrary, unreasonable, or unconscionable." Dayton ex rel. Scandrick v. McGee (1981), 67 Ohio St.2d 356, 359, 423 N.E.2d 1095 ; State v. Adams (1980), 62 Ohio St.2d 151, 157, 404 N.E.2d 144 . In McGee, supra, we stated as follows:

" 'The meaning of the term "abuse of discretion" * * * connotes more than an error of law or of judgment; it implies an unreasonable, arbitrary or unconscionable attitude * * *.' Steiner v. Custer (1940), 137 Ohio St. 448 , paragraph two of the syllabus; Conner v. Conner (1959), 170 Ohio St. 85 ; Rohde v. Farmer (1970), 23 Ohio St.2d 82 ; and State v. Adams (1980), 62 Ohio St.2d 151 . 'Arbitrary' means 'without adequate determining principle; * * * not governed by any fixed rules or standard.' Black's Law Dictionary (5th Ed.). 'Unreasonable' means 'irrational.' * * * " Id. 67 Ohio St.2d at 359, 423 N.E.2d 1095.

An abuse of discretion connotes more than an error of judgment, State v. Adams, supra, and results "only when no reasonable man would take the view adopted by the trial court." Pembaur v. Leis (1982), 1 Ohio St.3d 89, 92, 437 N.E.2d 1199.

The general rule as to damages payable in specific performance actions is found in Annotation (1949), 7 A.L.R.2d 1204. This rule, which is recognized by virtually every jurisdiction, is best stated as follows:

"When specific performance is granted of a contract to convey real property, the court will enforce the equities of the parties in such manner as to put them as nearly as possible in the position they would have occupied had the conveyance been made when required by the contract. It will compensate the purchaser for any loss of the use of the property during the delay by awarding him the rental value of it, or the net rents and profits of it, for the period. It will compensate the vendor for any loss of the use of the purchase money during the delay by awarding him the appropriate interest for the proper period. To either party it will give credit for such expenditures in relation to the property, or otherwise occasioned by the delay, as should be borne by the other. * * * " Id. at 1211-1212.

See, also, Annotation (1982), 11 A.L.R. 4th 891, and cases cited therein; 71 American Jurisprudence 2d (1973) 147-149, Specific Performance, Sections 115 and 116.

This statement of law is an attempt to place the parties in the relative position that they would have been in had the sale of the real estate proceeded according to the agreement. The seller should be reimbursed for his added expenses, as well as the loss of his use of capital funds. Conversely, the purchaser should have the benefits of the property that he would have received had he been in possession. Hellkamp v. Boiman (1970), 25 Ohio App.2d 117, 122, 267 N.E.2d 323 ; Meineke v. Schwepe (1952), 93 Ohio App. 111, 115, 111 N.E.2d 765 ; 49 Ohio Jurisprudence 2d, supra, at 616, Section 90.

The object of a court in an equitable accounting ancillary to a decree for specific performance is to put the parties in the position which they would have been in had the contract been performed on the agreed date. Hellkamp v. Boiman, supra; 49 Ohio Jurisprudence 2d, supra, at Section 90. As the court stated in Hellkamp, supra:

"There appears to be no question that when a decree for specific performance in the sale of real estate is granted to the purchaser he is entitled to be put in the position he would have been in had the contract of sale and purchase been carried out on the date agreed upon." Id. 25 Ohio App.2d at 122, 267 N.E.2d 323.

In order to accomplish this end, courts in equity have long held that in determining the accounting ancillary to a decree of specific performance for the purchase of real property, the land is the equitable property of the vendee, but held by the vendor in trust for him, and the purchase price is the equitable property of the vendor, but held in trust for him by the vendee. McCrea v. Martien (1876), 32 Ohio St. 38, 42-43. Upon specific performance, the vendor holds the property in trust for the vendee and the vendee holds the earnings on the purchase price in trust for the vendor. See Pomeroy, Specific Performance of Contracts (3 Ed.1926) 892, Section 429.

In addition to decreeing specific performance, a court may award the parties further sums to which they are found to be entitled when it is necessary in order to attain complete justice and equity. A court of equity is authorized to render such awards on the principle that it may exercise its equitable jurisdiction to the extent of administering full relief which the case demands. Hull v. Bell Bros. & Co. (1896), 54 Ohio St. 228, 239, 43 N.E. 584.

Appellants set forth the basic argument here, as they did in the appellate court, that Sandusky Properties has received a "double interest" recovery in being awarded the statutory interest upon the unpaid balance of the purchase price; and also being awarded, by way of the accounting for rental profits, the interest it had paid upon its purchase money mortgage. Appellants contend that had the transaction closed on April 1, 1980, the balance to be received by appellee, after discharging the existing mortgage, would have been approximately $647,509 ($1,400,000 less approximately $752,491 principal due on the outstanding mortgage) and not the entire purchase price of $1,450,000 less $50,000 earnest money. Appellants proceed to argue that since appellee was awarded its mortgage interest then it should not have been awarded statutory interest on the entire purchase price but, rather, only on the equity balance of its mortgage.

Upon initial thought, such an argument would appear to possess a fair degree of soundness. However, upon a complete analysis of the attendant business and financial circumstances, the judgment of the trial court falls into equitable place. It is our opinion that appellants' position would take the vendor, Sandusky Properties, back to April 1, 1980, the contract closing date, but would not relate the effect of the delay in closing, as to itself, for the period between April 1, 1980 and June 15, 1982, the date the property was transferred. Had the transaction actually occurred as contracted on April 1, 1980, Sandusky Properties admittedly would have received a balance of approximately $647,509, and not $1,400,000. Title to the property, however, would have transferred and the appellants, not Sandusky Properties, would have henceforth managed it from April 1, 1980. In essence, appellants' argument assumes both that Sandusky Properties closed the deal and received payment in full on April 1, 1980, and at the same time did not sell the property but continued to manage it until June 15, 1982.

In reviewing the hypothetical...