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The Watkins Company, LLC, An Idaho v. Michael Storms and Kathy Burggraf

March 2, 2012

THE WATKINS COMPANY, LLC, AN IDAHO LIMITED LIABILITY COMPANY, PLAINTIFF/RESPONDENT/CROSS-APPELLANT,
v.
MICHAEL STORMS AND KATHY BURGGRAF, DEFENDANTS/APPELLANTS/CROSS-RESPONDENTS.



Appeal from the District Court of the Seventh Judicial District, State of Idaho, Bonneville County. Hon. Joel E. Tingey, District Judge.

The opinion of the court was delivered by: Burdick, Chief Justice

2012 Opinion No. 41

Stephen W. Kenyon, Clerk

District court decision regarding commercial lease, affirmed in part and vacated in part.

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.

I. FACTUAL AND PROCEDURAL BACKGROUND

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:

* In May 2007, a bridge providing access to Brownstone was damaged and Watkins diverted traffic away from the bridge.

* The bridge remained closed until April 2008.

* Between November 2007 and March 2008, Storms withheld partial rent in response to Watkins' alleged failure to repair the bridge.

* Storms also withheld partial rent during 2008 for Watkins' alleged failure to repair the Brownstone leaking roof.

* Watkins' attorney sent Storms a notice on June 12, 2008, which addressed many issues and demanded Storms to pay $34,025.00 and requested gross sales information.

* Storms did not pay the requested amount or provide gross sales information.

* On July 10, 2008, Watkins' attorney sent Storms a notice labeled "Three Day Notice to Pay Rent or Quit the Premises" demanding $17,900.00 in unpaid rent, stating that "if Storms paid the full amount listed therein within three days, then he 'may remain in ...


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