Watkins Co. v. Storms
| Decision Date | 02 March 2012 |
| Docket Number | No. 37685.,37685. |
| Citation | 272 P.3d 503,152 Idaho 531 |
| Court | Idaho Supreme Court |
| Parties | The WATKINS COMPANY, LLC, an Idaho limited liability company, Plaintiff/Respondent/Cross–Appellant, v. Michael STORMS and Kathy Burggraf, Defendants/Appellants/Cross–Respondents. |
Cox, Ohman & Brandstetter, Chartered, Idaho Falls, for appellant. Dean C. Brandstetter argued for appellants/cross-respondents Michael Storms and Kathy Burggraf.
Smith, Driscoll & Associates, PLLC, Idaho Falls, for respondent. B.J. Driscoll argued for respondent/cross-appellant The Watkins Company, LLC.
This case concerns a commercial lease between Michael Storms and Kathy Burggraf and the Watkins Company, LLC's predecessor in interest, Watkins and Watkins for a restaurant and microbrewery in Idaho Falls, Idaho. Watkins filed a lawsuit seeking to enforce the lease after Storms and Burggraf failed to timely pay the rent. The issues were tried before the district court, which found that Storms and Burggraf had materially breached the lease and that Watkins could regain possession of the property. The district court also found that Storms and Burggraf had been unjustly enriched by failing to pay rent for additional storage space. Further, the district court found that the lease's provision for accelerated rent was a liquidated damages clause and found it be unconscionable. Storms and Burggraf now appeal the district court's decision, arguing that an accord and satisfaction had been reached between the parties and that the court erred in its finding of the rent for the upstairs storage area above the restaurant. Watkins argues on cross-appeal that the district court based its finding regarding the accelerated rent on insufficient evidence. Because of an error in the district court's finding regarding the upstairs storage area, we vacate that part of the court's order but uphold the remaining issues addressed in the court's decision.
On November 19, 2008, the Watkins Company, LLC (Watkins), successor in interest to Watkins and Watkins, filed a ten-count complaint with demand for jury trial against Michael Storms and Kathy Burggraf (Storms) that included causes of action for breach, unjust enrichment, and eviction in relation to a thirty year commercial lease for a restaurant and microbrewery (Brownstone) operated by Storms in Idaho Falls, Idaho. The lease had an affirmative clause stating any disputes were to be settled in a court trial. An addendum to the lease states that Storms was to pay the greater of either the base rent indicated in the lease or 5% of the gross sales of the entire operation on the premises each month, excluding the initial months covered by prepaid rent. An additional addendum provided for the responsibility of maintenance costs for the leased building's roof. Watkins sought damages for Storms' failure to timely pay rent, failure to provide monthly sales figures, and failure to pay an appropriate percentage of roof repairs. Watkins also alleged that Storms had been unjustly enriched by receiving the benefit of storage without pay, and sought acceleration of the rent and eviction. Storms filed an answer also demanding a jury trial.
After filing a motion for partial summary judgment, Watkins received permission to file an amended complaint and added a count for breach, alleging Storms had failed to provide a monthly food and drink credit. On August 13, 2009, the district court granted in part and denied in part, Watkins' partial summary judgment motion. The district court denied Watkins' request to evict Storms from using the sidewalk and curb area for outdoor dining, but granted eviction from an upstairs storage space and a contiguous space to Brownstone in the building that Storms was using for storage without paying rent. The district court also ruled as moot the request to evict Storms from an outdoor area described as the "pipeyard" where Storms stored a walk-in cooler because he had removed the cooler.
On January 8, 2010, the district court ruled on the parties' cross-motions for partial summary judgment filed in December 2009. The district court granted Watkins' request that the court rule that the addendum regarding the 5% gross sales to be paid in rent if greater than the base amount was an unambiguous provision. The district court, based on the doctrine of accord and satisfaction, rejected Storms' argument that he did not owe any amounts prior to September 12, 2008. The district court ruled that the three day notices that Storms based this argument on were vague and ambiguous and would be left to the interpretation of a trier of fact at trial.
An Order was filed January 12, 2010, enforcing the parties' agreement in the lease for a court trial, ruling that there had not been a mutual understanding to modify the agreement and allow a jury trial. A court trial was held February 9–10, 2010, and the district court filed its Findings of Fact and Conclusions of Law on March 16, 2010. The district court concluded that Storms materially breached the contract, awarding $43,096.25 in damages to Watkins for the breach and unjust enrichment. Watkins was entitled to evict Storms and regain possession of the property.
In its findings of fact, the district court found that Storms had failed to pay $21,880.00 of rent since November 2003 when the 5% of gross sales exceeded the base rent and that Storms had overpaid $923.00 in base rent. Storms had also failed to provide Watkins with a food and drink credit since December 2007. Additionally, pursuant to an oral agreement, the district court found that Storms stored goods in an upstairs storage area, paying $100 per month, even after Watkins increased the rent by letter for the upstairs area to $750 in June 2008. Also, in June 2008, Watkins no longer allowed Storms to store items in a contiguous suite and asked them to vacate the space.
Surrounding the issue of the back rent owed by Storms, the district court made the following findings of fact:
Interpreting the lease, the district court concluded that no provision in the lease allowed Storms to withhold rent and that failure to pay the rent was a breach. The district court also interpreted the three day notices as being based on a calculation of the base rent, and that the language used did not "unequivocally indicate" the payment would represent full payment of the rent, but only that Storms "may" remain in compliance. Further, Storms did not meet his burden of proving all elements for accord and satisfaction regarding any amount that might be owed pursuant to the 5% gross sales rent provision; nor had he shown that a conspicuous statement of full satisfaction of all claims had been made on the negotiable instrument. However, Storms did show that an accord and satisfaction had been met as to the amount that would be owed under the base rent. During that time, the district court found that Storms had failed to pay the 5% gross pay rent and that this failure was a breach. The district court found that a lease provision for 1% fee on delinquent rent applied, as well as a provision for late fees of $100 for each late payment. As to the cooler storage in the "pipeyard," no inequity was shown to exist pre-notice for non-payment of rent for storage, but post-notice, the district court found unjust enrichment and ruled that $100 per month was fair value for the cooler's storage until its removal. As to the remaining issues, the district court also concluded that the accelerated rent provision was unenforceable, that Storms owed nothing further than what he had already forwarded for roof maintenance, and that Storms had not been unjustly enriched by using the outside dining area.
Following briefing on the issues of prejudgment interest and costs and attorney fees, the district court filed an Order on April 21, 2010. The district court ruled that Watkins was the prevailing party because it had prevailed on what the court viewed as the main issue—breach of contract and failure to pay the agreed amount of rent. Accordingly, the district court awarded Watkins costs under I.R.C.P. 54(d)(1)(C) and attorney fees under I.C. § 12–120(3) since the main issues at trial were based on a commercial transaction. The district court also concluded that Watkins was entitled to prejudgment interest on those claims where the damages were "mathematically ascertainable." A timely notice of appeal was filed, followed by a notice of cross-appeal.
On review by this Court, a trial court's conclusions following a bench trial will be limited to a determination of whether the evidence supports the trial court's findings of...
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