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Peyton Bldg., LLC v. Niko's Gourmet, Inc.

Court of Appeals of Washington, Division 3

April 24, 2014

Peyton Building, LLC, Respondent,
v.
Niko's Gourmet, Inc., et al., Appellants

Reconsideration denied May 22, 2014.

Page 630

Appeal from Spokane Superior Court. Docket No: 11-2-01768-5. Date filed: 04/18/2012. Judge signing: Honorable Kathleen M O'connor.

Joseph P. Delay (of Delay Curran Thompson Pontarolo & Walker ), for appellants.

Brad E. Smith (of Ewing Anderson PS ), for respondent.

AUTHOR: Stephen M. Brown, J. WE CONCUR: Kevin M. Korsmo, J., Robert E. Lawrence-Berrey Jr., J.

OPINION

Page 631

Stephen M. Brown, J.

[180 Wn.App. 676] ¶ 1 Tenant Niko's Gourmet Inc. and its personal guarantors, Abir and Laith Elaimy, appeal the [180 Wn.App. 677] trial court's summary judgment granting breach of lease damages to Peyton Building LLC. Peyton is the successor in interest to the leased property by a purchase agreement but is not an assignee of the lease or guarantee. Even so, the court enforced Niko's relevant lease obligations and the Elaimys' personal guarantee in Peyton's favor on summary judgment. Niko's and the Elaimys contend the court erred in rejecting their challenges to Peyton's standing and real party in interest status, and in deciding no genuine issue of material fact remains regarding the amount of Niko's default and the amount, if any, to credit or pay Niko's for the value of personal property Peyton retained under its landlord's lien.

¶ 2 Considering Peyton's reversionary estate in the leased property, we conclude the trial court correctly acknowledged Peyton's status as de facto landlord. But because Peyton did not receive a contractual assignment of rights for the lease or guarantee, it may enforce solely those lease covenants running with the land. While Niko's relevant lease obligations run with the land, the Elaimys' personal guarantee does not. For this reason, we conclude the court erred by enforcing the guarantee in Peyton's favor on summary judgment. We decide genuine issues of material fact remain regarding both the amount of unpaid rent and the value of retained personal property. Therefore, the trial court erred in granting Peyton summary judgment on the rent default and landlord's lien amounts. Accordingly, we affirm in part, reverse in part, and remand for further proceedings.

FACTS

¶ 3 On May 20, 2002, Niko's signed a 10-year agreement leasing commercial property from Pacific Security Financial Inc. and promising to continuously occupy the premises while operating it as a restaurant. Niko's promised to pay escalating rent totaling, as relevant here, $7,933 monthly [180 Wn.App. 678] beginning in September 2010 and $8,171 monthly beginning in September 2011. Additionally, Niko's promised to pay a five percent late charge for rent due but unpaid by the fifth day of each month. In the same document, the Elaimys personally guaranteed to pay for Niko's default. Later, Peyton bought the building from Pacific Security.

¶ 4 Niko's did not pay the full $7,933 monthly rent in February 2011 and vacated the premises in March 2011. At the time, Niko's owed additional money to Washington Trust Bank and the Internal Revenue Service (IRS). As a secured creditor, Washington Trust held a security interest in Niko's " inventory, chattel paper, accounts, equipment, general intangibles, and fixtures." Clerk's Papers (CP) at 60. As a priority lienholder, the IRS held a tax lien on all Niko's property, including " [f]ixtures, furnishings, and equipment." CP at 63.

¶ 5 On March 11, 2011, Peyton sued Niko's for unlawful detainer. Ten days later, Peyton and Niko's signed a stipulated eviction order stating,

[Niko's] agrees to surrender the Property to [Peyton] together with all non-perishable inventory (specifically including all wine and other alcoholic beverages), restaurant equipment and trade fixtures. [Niko's] specifically recognizes [Peyton]'s claim to a lien on such inventory, equipment and fixtures pursuant to RCW 60.72.010. [Niko's] also acknowledges the security interest of Washington Trust ... in such property identified in this paragraph, and that [Peyton] and Washington

Page 632

Trust ... will be negotiating in the future over the disposition of such property. The IRS makes ...

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