GLOBAL ACQUISITIONS v. BROADWAY PARK LTD.
| Decision Date | 20 March 2001 |
| Docket Number | No. 20000132.,20000132. |
| Citation | 623 N.W.2d 442,2001 ND 52 |
| Parties | GLOBAL ACQUISITIONS, LLC, Plaintiff and Appellee, v. BROADWAY PARK LIMITED PARTNERSHIP, CNA Insurance d/b/a Firemen's Insurance Company of Newark, U.S. Bank, National Association, City of Fargo, a Municipal Corporation, Defendants, and REO Properties, LLC, Defendant and Appellant. |
| Court | North Dakota Supreme Court |
Joseph A. Turman, DeMars & Turman, Fargo, ND, for plaintiff and appellee.
Douglas A. Christensen (argued) and Margaret Moore Jackson (on brief), Pearson Christensen, Grand Forks, ND, for defendant and appellant REO Properties, LLC.
[¶ 1] REO Properties, LLC ("REO"), appealed from a judgment evicting it from a commercial building in Fargo. We hold the trial court's findings of fact are adequate to support its conclusion REO did not meet its burden of establishing equitable estoppel against Global Acquisitions, LLC ("Global"), and we affirm.
[¶ 2] The Northern Pacific Railway Company ("Railway Company")1 owned certain land in downtown Fargo. Herbst, Inc., rented the land and owned the commercial buildings situated on it. In 1983, Herbst, Inc., assigned its lessee rights under its amended 1968 lease with the Railway Company and transferred its interest in the commercial buildings to Broadway Park Limited Partnership. That partnership arranged M.I.D.A. (Municipal Industrial Development Act of 1955, N.D.C.C. ch. 40-57) bond financing with the City of Fargo and Fireman's Fund Insurance Company ("Fireman's Fund") on the commercial buildings located on the property. The partnership defaulted on the loan, and in July 1992 Firemen's Fund redeemed the bonds and took a security interest in the buildings.
[¶ 3] In February 1999, REO purchased the underlying note and security interest from the Firemen's Fund. REO took over management of the buildings and began collecting rents from the building tenants of the commercial building.
[¶ 4] One of the building tenants is Old Broadway Corporation, which operates the Old Broadway Bar and Restaurant. In November 1999, Global purchased from the Railway Company the land upon which the Broadway Office Park is located. As part of the sale, the Railway Company assigned its lessor's interest in the ground lease on the property to Global. Old Broadway Corporation and Global have overlapping ownership. When Global acquired the land, Old Broadway Corporation discontinued paying its monthly building lease rent to REO for the Old Broadway Bar and Restaurant operation. REO demanded Old Broadway Corporation pay past due rent and future monthly rent of $5400.
[¶ 5] Broadway Park Limited Partnership failed to make ground lease payments to Global. On January 10, 2000, Global served a notice of termination of the ground lease upon the defendants in this action, including Broadway Park Limited Partnership and REO, for non-payment of rent. On February 11, 2000, Global served upon the defendants a notice of intent to evict.
[¶ 6] On February 28, 2000, Global's eviction action was tried to the court. Warren Ackley is the vice president and a shareholder of the Old Broadway Corporation, and he is a managing owner of Global. Todd Nedberg, the manager of REO, testified he and Ackley discussed Global purchasing the building in which the Old Broadway Bar and Restaurant was being operated and REO purchasing from Global some of the Broadway Office Park land. Nedberg testified Ackley led him to believe Global and REO would offset the monthly rents Old Broadway Corporation owed REO against the ground lease rent REO owed Global. Ackley testified he and Nedberg did not discuss rent offsets and no deals were made.
[¶ 7] At the close of the trial, REO was allowed to amend its answer to include an affirmative defense of equitable estoppel, claiming Global should be precluded from asserting non-payment of the ground lease rent by REO, because Ackley misled Nedberg there was a rent offset agreement.
[¶ 8] The trial court found that REO, by reason of its security interest in the lease, "has taken some form of possession of the property and has been collecting rents from some of the tenants." This finding has not been challenged by REO. The trial court concluded it would not terminate "the security interest of REO Properties, LLC and whatever security interest REO Properties, LLC, has continues to exist." However, the trial court also concluded Global proved the tenants breached their agreement to pay rent under the ground lease, entitling Global to evict Broadway Park Limited Partnership and to evict REO from whatever possessory interest REO had assumed in the property. Judgment of eviction was entered, from which REO appealed.
[¶ 9] The trial court had jurisdiction under N.D. Const. art. VI, § 8, and N.D.C.C. § 33-06-01. REO's appeal is timely under N.D.R.App.P. 4(a). This Court has jurisdiction under N.D. Const. art. VI, §§ 2 and 6, and N.D.C.C. § 28-27-01.
[¶ 10] REO asserts the trial court failed to resolve the equitable estoppel issue and the court's findings of fact are inadequate to support any conclusion the court may have made regarding that issue.
[¶ 11] Under N.D.C.C. § 33-06-01(4), an eviction action to recover the possession of real estate is authorized when a lessee fails to pay rent for three days after the rent is due. An eviction action cannot be brought in the district court in connection with any other action, and no counterclaim can be interposed "except as a setoff to a demand made for damages or for rents and profits." N.D.C.C. § 33-06-04.2 The trial court found REO failed to pay rent on the ground lease for three days after it was due, thereby entitling Global to a judgment of eviction under N.D.C.C. § 33-06-01(4).
[¶ 12] The doctrine of equitable estoppel is codified in N.D.C.C. § 31-11-06:
When a party, by that party's own declaration, act, or omission, intentionally and deliberately has led another to believe a particular thing true and to act upon such belief, that party shall not be permitted to falsify it in any litigation arising out of such declaration, act, or omission.
[¶ 13] To establish equitable estoppel, a plaintiff must show, on the part of the defendant: (1) conduct which amounts to a false representation or concealment of material facts, or, at least, which is calculated to convey the impression that the facts are other than those which the defendant subsequently attempts to assert; (2) the intention, or at least the expectation, that such conduct will be acted upon by, or will influence, the plaintiff; and (3) knowledge, actual or constructive, of the real facts. Matter of Helling, 510 N.W.2d 595, 597 (N.D.1994). Reliance on the conduct of the party against whom equitable estoppel is asserted must be reasonable, and there must be some form of affirmative deception by that party. Narum v. Faxx Foods, Inc., 1999 ND 45, ¶ 24, 590 N.W.2d 454. The party asserting equitable estoppel has the burden of proving the elements of that defense. American Ins. Co. v. Midwest Motor Express, Inc., 554 N.W.2d 182, 188 (N.D.1996).
[¶ 14] REO, after acquiring a security interest in the building housing the Old Broadway Bar and Restaurant, began collecting rents from the tenants of the building. Global, after acquiring title to the real estate in December 1999 from the Railway Company, became the lessor of the ground lease under which REO and the other commercial building tenants had an obligation to pay land rent. Nedberg testified there was an agreement or understanding between himself and Ackley to offset rents:
The trial court then questioned Nedberg to clarify his testimony on this issue:
[¶ 15] Later in the hearing, Ackley testified there was never any discussion or agreement about rent setoff:
The trial court also questioned Ackley about his testimony on this issue:
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