Case Name: Naughton v. The Morford-Wood Company
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1914-03-03
Citations: 90 Ohio St. 61
Docket Number: No. 13729
Parties: Naughton v. The Morford-Wood Company.
Judges: Johnson, Donahue, Newman and Wilkin, JJ., concur.
Reporter: Ohio State Reports, New Service
Volume: 90
Pages: 61–67

Head Matter:
Naughton v. The Morford-Wood Company.
Equity—Specific performance of contract—Will be denied, when.
Relief by specific performance being within the discretion of the court to be exercised in accordance with the established doctrines and principles of equity, it will be denied when the conduct of the party seeking it has been violative of the reasonable and known expectations of his adversary and the purpose for which it is sought is oppressive and inequitable
(No. 13729
Decided March 3, 1914.)
Error to the Circuit Court of Franklin county.
March 18, 1911, The Morford-Wood Company brought suit in the court of common pleas to enjoin Naughton from bringing an action in forcibly entry and detainer to recover possession of real estate in the city of Columbus owned by him, it claiming the right of possession under a lease executed by him March 19, 1906, containing stipulations with reference to renewal thereof, and further suing for the specific performance of said obligation to execute a renewal of said lease.
The record to be reviewed was made in the circuit court to which the cause was appealed after judgment in the court of common pleas.
From the evidence adduced upon appropriate issues joined, the circuit court made a finding of facts of which the following are deemed material:
On July 24, 1905, Naughton, who had then been for forty years engaged in the business of selling dry goods and notions on High street in the city of Columbus, entered into an agreement with C. E. Johns- ten and W. F. Morford for the incorporation of The Naughton-Johnston Dry Goods Company, each of them taking $5,000 of its stock, and-that by March, 1906, Naughton should reduce his stock of goods to $15,000 in value and sell it to the corporation and lease to it the storeroom which he then owned and occupied, the lease to be for five years at an annual rental of $4,000, Naughton to turn over the good will of his business to the corporation and to be an officer of the company and take an active management in its business at an annual salary stipulated. The parties on March 14, 1906, incorporated the company according to the agreement, the purpose for which the corporation was formed being manufacturing and buying, selling and dealing in dry goods, notions, ready-made goods and general merchandise at wholesale and retail; also acquiring by lease or purchase such property, both real and personal, as may be deemed necessary or convenient for the aforesaid purposes, and doing such other things and business as may be necessary, convenient or incident to the mam business of such corporation.
Upon the incorporation of the company the three persons named each subscribed $5,000 to its capital' stock and an inventory of Ñaughton’s stock of merchandise was taken and $5,000 of it was turned into the company at the invoice price in payment of' his stock subscription. Johnston purchased from Naughton $5,000 additional of his stock of merchandise and that was turned in in payment of his subscription. Morford paid his subscription in merchandise also purchased from Naughton. ■ ■ ■
On March 18, 1906, Naughton executed and delivered to the corporation a lease for a term of, five years at an annual rental of $4,000, the lease containing a covenant that “The Naught on-Johnston Company shall have the privilege and option to renew this lease for a further term of five years from the end of the term herein granted upon the same terms and conditions as are contained in this leasej except that the yearly rental shall not exceed the sum of four thousand five hundred ($4,500) dollars per year, payable in equal monthly installments,” provided “that said The Naughton-Johnston Company shall notify the said lessor or his heirs or assigns at least 60 days before the termination of this lease of the desire of the said company to renew the term, for a further term of five years.” And thereupon the company entered into possession. •
Naughton shortly thereafter became dissatisfied with conditions and his health was not good and he desired to retire and thereupon sold his stock at par to. Johnston and Morford in equal amounts,1 and thereafter ceased his connection with the company-About the same time Johnston sold his holdings to Charles F. Wood, whereby Morford and Wood became the sole owners of the stock of the corporation, with ’ the exception of a few shares conveyed to members of their families to qualify them as directors.
On May 21, 1906, Naughton made a sale of the furniture and fixtures to Wood and Morford.
, In July, 1906, the stockholders of The NaughtomJohnston Company took the necessary steps to change the name of the company to The MorfordWood Company. ;
In April, 1910, the company removed its remaining stock of merchandise out of the premises to a smaller storeroom on High street in the northern part of the city and sublet the south half of the storeroom for other purposes, since which time it has not occupied said premises or any part thereof.
The company has entered into a written lease conditioned upon the legal right so to do,, subletting the south one-half of the storeroom at an annual rent of $3,900 for a corset store and other liks purposes. It sublet by monthly tenancy the north half of the storeroom for restaurant purposes at a monthly rental of $300. The use of the north storeroom operated to increase the fire hazard, whereby the defendant has been and is compelled to pay an increased rate of fire insurance upon the entire building in which it is situated, which im creased rate plaintiff company refused to pay.
On January 5, 1911, Naughton received through the mail from The Morford-Wood Company the following notice: “Dear Sir: We desire to renew our lease Nos. 120-124 South High street for a further term of five years from March 19, to March' 18, 1916, as per agreement. Would like to see you and fix up this lease at once.”
On March 15, 1911, the plaintiff company served a further notice and demand upon the defendant more specifically reciting a desire and election for an extension of the lease and naming the rent which it was willing to pay at $4,500 per annum.
Upon these facts the circuit court rendered judgment in favor of the company that Naughton execute a renewal of the lease for the said term,of five years.
To reverse that judgment this petition m .error is prosecuted.
Mr. Thomas E. Powell and Mr. George B. Okey, for plaintiff in error. •
Mr. J. F. Rogers and Mr. T. J. Keating, for defendant in error. ■

Opinion:
Siiaucic, J
Omitting the consideration.of questions not material to a determination of the case, there appear in the foregoing statement, ample grounds for refusing the equitable relief which was awarded to the defendant in error by the judgment under review. To whatever extent its conduct may have been within its legal rights, it is clear that it has ceased to use the premises for the purpose of carrying on the previously established business of the owner under the name agreed upon, that it has changed the character of the building by constructing a partition through its entire length, that by subletting it has devoted one-half of the premises to a use wholly different from that to which it had been devoted by the owner himself and whose continuance was within the contemplation of the parties at the time of making the original contract. In making these changes it has added to the fire hazard of the building, thus laying upon the owner the burden of paying larger premiums for the insurance against fire. Having acted in this manner with reference to the subject of the contract, and having wholly abandoned the premises as a place to carry on the sale of merchandise for which alone it was incorporated, and in which the lessor was specially interested, it proposes to use the premises only as the subject of lease and re-lease, and it asks a court of equity to aid in enforcing a construction of the original contract which would secure to it during an extended term of five years $15,000 more than it pays to the owner. There are many definitions of equity, but none of them suggests that the mission of the system is to augment the rigors and asperities of the law. To the contrary their mitigation is conspicuous among its objects.
Relief by specific performance has always been regarded as discretionary. This does not mean that the relief may be awarded or denied according to a chancellor's whims but from considerations of justice and fair dealing, and that the relief will often be denied because of unfairness and injustice much less grave than would be required to set aside an executed contract. Two requirements are indispensable to the relief: The conduct of the plaintiff with reference to the transaction must have been honorable and fair, and the relief must be sought for a purpose that is just and equitable. In Seymour v. Delancey, 6 Johns. Ch., 222, Chancellor Kent has discussed the subject with clearness and authority, and illustrated it with numerous cases decided by the masters of equity. Later and pertinent cases are Chicago, Burlington & Quincy R. R. Co. v. Reno, 113 Ill., 39; O'Brien v. Pintz, 48 Md., 562; Kimberley v. Jennings, 6 Sim., 339. From these considerations and from these authorities it is entirely clear that neither the conduct of the plaintiffs with reference to the subject of the contract nor the purpose for which it asks a decree of specific performance can be reconciled with the principles of equity.
Judgment reversed and original petition dismissed.
Johnson, Donahue, Newman and Wilkin, JJ., concur.