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Brick Development v. CNBT II LLC

Supreme Court of Nebraska

October 12, 2018

Brick Development, Appellant,
v.
CNBT II LLC and The Cattle National Bank & Trust Co., Appellees.

         1. Summary Judgment. Summary judgment is proper when the pleadings and evidence admitted at the hearing disclose no genuine issue regarding any material fact or the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law.

         2. Summary Judgment: Appeal and Error. In reviewing a summary judgment, an appellate court views the evidence in the light most favorable to the party against whom the judgment is granted and gives such party the benefit of all reasonable inferences deducible from the evidence.

         3. Contracts: Real Estate: Leases. Neb. Rev. Stat. § 36-105 (Reissue 2016) requires a signature by the party to be charged by the writing.

         4. Landlord and Tenant: Assignments. A lessee, during his occupancy of the demised premises, holds both by privity of estate and of contract. Assignment of the lease by the lessee divests him of this privity of estate and transfers it to his assignee, who thereafter holds in privity of estate with the lessor.

         5. Landlord and Tenant: Assignments: Breach of Contract. Privity of contract is not transmitted to the purchaser of the leasehold by an assignment of the lease alone; for the express covenants of the lessee contained in the lease will remain, during the continuance of the terms, obligatory upon the lessee. These obligations extend to breaches of covenant which have occurred after the assignment, and the lessee is not relieved therefrom by the mere acceptance of rent by the lessor from the person to whom such assignment has been made.

         6. Landlord and Tenant: Leases. A landlord is not necessarily entitled to enforce all of the terms of a lease merely because there is privity of [301 Neb. 280] estate; rather, such privity only gives the landlord the right to enforce covenants that run with the land.

         7. Contracts: Real Estate: Words and Phrases. Generally, the three essential requirements for a covenant of any type to run with land are (1) the grantor and the grantee intend that the covenant run with the land, as determined from the instruments of record; (2) the covenant must "touch and concern" the land with which it runs; and (3) the party claiming the benefit of the covenant and the party who bears the burden of the covenant must be in privity of estate.

         8. Contracts: Real Estate: Landlord and Tenant: Liability. The covenant to pay rent runs with the land, and a party in privity of estate with the landlord is directly liable to him for the installments accruing while that relation exists.

         9. Contracts: Real Estate: Liability. Liability for covenants which run with the land cease with cessation of possession.

         10. Real Estate: Leases. An express assumption of a real property lease requires specific affirmation by the assignee to bind itself to the lease obligations.

         11. Estoppel. The doctrine of equitable estoppel is applied to transactions in which it is found that it would be unconscionable to permit a person to maintain a position inconsistent with one in which he or she has acquiesced or of which he or she has accepted any benefit.

         12. Contracts: Fraud: Estoppel. Only where a party to a written contract within the statute of frauds induces another to waive some provision upon which he is entitled to insist and thereby change his position to his disadvantage because of that party's inducement will the inducing party be estopped to claim that such oral modification is invalid because not in writing.

         13. Contracts: Fraud. Sophisticated business entities are charged with knowledge of the statute of frauds and cannot reasonably rely on oral statements or conduct.

          Appeal from the District Court for Lancaster County: Robert R. Otte, Judge. Affirmed.

          Randall L. Goyette and Phoebe L. Gydesen, of Baylor. Evnen, Curtiss, Grimit & Witt, L.L.P, for appellant.

          John M. Guthery, Haleigh B. Carlson, and Derek A. Aldridge, of Perry, Guthery, Haase & Gessford, PC, L.L.O., for appellees.

          [301 Neb. 281] Heavican, C.J., Miller-Lerman, Cassel, Funke, Papik, and Freudenberg, JJ.

          Cassel, J.

         INTRODUCTION

         An owner of one property seeks to bind a purchaser of another property to the terms of a 50-year lease agreement entered into between different parties. Because there is no privity of contract and the purchaser did not expressly assume the lease, the statute of frauds bars the owner's claim for breach of contract. We further conclude that equitable estoppel does not prevent the purchaser from raising the statute of frauds as a defense and that there is no genuine issue of material fact. We affirm.

         BACKGROUND

         Parking Lot Lease

         In 1978, D. William Smith and Joyce Smith owned a parking lot located on N Street in Lincoln, Nebraska. Two Twenty Enterprises, L.L.C. (TTE), owned an office building located on 17th Street west of the parking lot. The Smiths, as lessors, entered into a lease agreement with TTE, as lessee, to lease the parking lot to TTE (parking lot lease). The original term of the lease was for 50 years.

         One section of the parking lot lease allowed the lessee to encumber the leasehold interest by mortgage or other proper instrument. The lease provided in part:

The execution of any such mortgage or other instrument, or the foreclosure thereof, or any sale thereunder, . . . shall not be held as a violation of the terms or conditions hereof, or as an assumption by the holder of such indebtedness of the obligations hereof. No such encumbrance, foreclosure, conveyance, or exercise of right shall relieve LESSEE of its liability hereunder.

         The parking lot lease contained several other sections pertinent to this appeal. One section authorized assignment of [301 Neb. 282] the lease. A different section set forth a right of first refusal in the event that either the lessor or the lessee decided to sell its property or the lessee wished to transfer its interest in the leasehold. And under a rent escalation clause, the rent was to be adjusted in the 11th year and every 5th year thereafter.

         Lease With DAS

         On May 24, 2004, TTE entered into a lease with the Nebraska Department of Administrative Services (DAS) on behalf of a tenant. TTE agreed to lease space at the office building and to provide parking stalls in the parking lot for use by the tenant's clients. The lease was set to end on August 30, 2015.

         Purchase and Assignment

         In 2006, Raasch Enterprises, Inc. (Raasch), purchased the office building from TTE. The purchase was financed by a loan from The Cattle National Bank & Trust Co. (the Bank), and Raasch executed a deed of trust to secure the loan. The deed of trust, signed only by Raasch, stated that Raasch "irrevocably assigns, grants and conveys" to the Bank "all the right, title and interest" in existing or future leases "for the use and occupancy of the Property." The deed of trust identified the "Property" as the office building. The deed of trust did not contain any ...


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