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BRICK DEVELOPMENT v. CNBT II

Cite as 301 Neb. 279

Brick Development, appellant, v. CNBT II LLC

and The Cattle National Bank & 

Trust Co., appellees.

___ N.W.2d ___

Filed October 12, 2018. No. S-17-865.

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 

Nebraska Supreme Court Online Library

www.nebraska.gov/apps-courts-epub/

11/23/2018 12:11 AM CST
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Cite as 301 Neb. 279

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, P.C., L.L.O., 

for appellees.
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Cite as 301 Neb. 279

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 
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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 language concerning the parking lot 

parking property; nor did it identify the parking lot lease as 

an encumbrance.

On the same day, TTE assigned the parking lot lease to 

Raasch. Raasch accepted the assignment and assumed the 

liabilities and duties to perform the terms and conditions of 

the parking lot lease. The Smiths gave their written consent to 

the assignment.

Default and Sale of

Office Building

After Raasch failed to timely pay indebtedness secured by 

the deed of trust, the Bank issued a notice of default. As a 
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result of Raasch’s default, a trustee’s sale was arranged. The 

published notice of trustee’s sale stated that the property “will 

be sold subject to any and all . . . leases, subleases, assignments, amendments, and other rights and interests, if any, 

which are specifically announced by the Trustee at the sale.” 

According to the sale announcement, the real estate would be 

subject to the parking lot lease, the 2006 assignment of lease, 

and the lease between TTE and DAS.

CNBT II LLC (CNBT), whose sole member is the Bank, 

purchased the office building at the trustee’s sale. In February 

2012, the Bank filed a trustee’s deed conveying the office 

building to CNBT. In conformity with the sale announcement, 

the deed stated that the property transfer was “subject to” the 

parking lot lease along with the 2006 assignment of the lease 

and the lease between TTE and DAS. The deed further stated 

that the transfer was subject to those leases “provided that the 

Grantee is not assuming any liabilities, and shall not be liable, 

for any act or omission of the landlord or any other party 

under, without limitation, any of the Leases.” The president of 

the Bank signed the deed. CNBT used the parking lot and paid 

rent to the Smiths.

Brick Becomes Lessor

In December 2012, the Smiths conveyed to Brick 

Development (Brick), via a quitclaim deed, the parking lot. 

Brick is the successor in interest to the Smiths as lessor under 

the parking lot lease.

Proposed Sale of Office Building

In 2013, CNBT received an offer to purchase the office 

building. It gave notice to Brick of the offer “[p]ursuant to” 

the right of first refusal interest contained in the parking lot 

lease. The notice stated, “Per the lease you have 30-days 

from the date of this notice to notify us of your intent to purchase the Property on the same terms and conditions as the 

Buyer . . . .”
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Brick notified CNBT of a concern. Brick stated that it had 

“not been able to find any language in the Real Estate Purchase 

Agreement which refers to the Buyer’s assumption of the existing lease on the parking lot . . . which language [Brick] would 

have expected to see as a Buyer’s Condition of Closing.” 

CNBT’s president responded: “I believe the terms of the previous lease on the parking lot carry over to . . . the new owner. If 

you would like us to get a written agreement to this affect [sic] 

as a condition of closing we can do this.”

Brick later sent a letter to CNBT along with a proposed 

assignment of lease between CNBT and the buyer. The proposed assignment had been signed by Brick, as lessor, giving its consent, and Brick requested that CNBT sign it. The 

letter further stated, “In the event the proposed sale does not 

close, then we will of course continue to look to CNBT . . . 

as successor-in-interest from Raasch . . . to fulfill the obligations of the [parking lot lease].” Ultimately, the sale did 

not occur.

Other Communications Between

Brick and CNBT

In January 2014, Brick sent a letter to the Bank and CNBT 

“to both reconcile unpaid previously scheduled monthly rental 

increases and inform [them] of the new monthly lease payment for the five year period of September of 2013 through 

September of 2018 for the parking lot.” The letter pointed out 

that under the parking lot lease, the monthly lease payment was 

scheduled to increase every 5 years beginning in 1988, but that 

the increase to begin in September 2008 had not been implemented. Brick also sent an email to counsel for CNBT and 

the Bank. It stated, in part, “[W]e’d like to get something on 

record that your client has assumed, or has accepted an assignment of, the [parking lot lease].”

In February 2014, Brick filed with the register of deeds a 

notice of lease and right of first refusal. The document contained Brick’s signature only. The purpose of the notice was to 
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confirm that the parking lot lease “is currently in full force and 

effect, and has not been modified other than by conveyance of 

the interest of the original Lessor to the current owners of the 

Property, and from the original Lessee . . . to CNBT . . . , the 

current Lessee and owner of [the office building].”

On August 7, 2015, CNBT sent Brick a notice of termination 

and cancellation of the parking lot lease effective September 

10. There is no dispute that CNBT paid rent to Brick through 

September 10.

Pleadings

Brick sued CNBT and the Bank. Brick alleged that as of 

February 2012, CNBT assumed the parking lot lease as lessee. According to Brick, CNBT had paid rent and taxes, had 

maintained the property, and had complied with the right of 

first refusal terms of the lease. Brick claimed that CNBT’s 

actions were “tantamount to and act as an assumption of the 

[lease].” Brick also alleged that CNBT was equitably estopped 

from asserting that it was not contractually bound as the lessee because CNBT acquiesced to or accepted a benefit under 

the lease.

CNBT responded that it did not receive an assignment or 

transfer of interest by Raasch and that it did not assume the 

parking lot lease. CNBT and the Bank both alleged that the 

conveyance stated CNBT was not assuming any liabilities 

under the lease. They also both alleged that Brick’s claims 

were barred by the statute of frauds, including Neb. Rev. Stat. 

§§ 36-105 and 36-202 (Reissue 2016). CNBT claimed that 

its use of the parking lot property was on a month-to-month 

basis from the time that it became the owner of the office 

building.

CNBT, the Bank, and Brick each moved for summary 

judgment.

District Court’s Decision

In resolving the motions for summary judgment, the district 

court first considered whether the trustee’s deed to CNBT 
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satisfied the statute of frauds. It noted that neither Brick nor 

CNBT was a party to the trustee’s deed and that it was signed 

by the Bank only. The court determined that “the documents do 

not show CNBT’s assumption of the obligations of the [parking lot lease].”

Next, the court addressed whether CNBT was estopped from 

asserting the statute of frauds defense. The court found no 

evidence that CNBT induced Brick to believe that CNBT had 

assumed future obligations of the parking lot lease. It found 

that Brick qualified as a sophisticated business entity and that 

sophisticated business entities are charged with knowledge of 

the statute of frauds. The court determined that any reliance 

by Brick that CNBT had assumed the obligations under the 

lease was unreasonable. The court concluded that CNBT’s liability ceased with its cessation of possession and that thus, it 

was not liable for its obligations as a tenant beyond September 

10, 2015. The court sustained CNBT’s and the Bank’s motions 

for summary judgment.

Brick appealed, and we moved the case to our docket.1

ASSIGNMENTS OF ERROR

Brick assigns two errors. First, Brick alleges that the court 

erred in denying its motion for summary judgment for several 

reasons. Second, Brick claims that the court erred in granting 

CNBT’s and the Bank’s motions for summary judgment.

STANDARD OF REVIEW

[1,2] 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 In reviewing a summary judgment, an appellate court views the evidence in the 

1 See Neb. Rev. Stat. § 24-1106 (Supp. 2017).

2 Jordan v. LSF8 Master Participation Trust, 300 Neb. 523, 915 N.W.2d 399 

(2018).
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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

ANALYSIS

Statute of Frauds

Brick argues that the district court erred by concluding that 

CNBT and the Bank did not assume the parking lot lease and 

that the statute of frauds precluded the lease’s enforcement. 

Under Nebraska’s statute of frauds, “Every contract for the 

leasing for a longer period than one year . . . shall be void 

unless the contract or some note or memorandum thereof be 

in writing and signed by the party by whom the lease . . . is to 

be made.”4

In this case, a relationship complying with the statute of 

frauds developed a new wrinkle: The 50-year parking lot lease 

between the Smiths and TTE complied with the statute of 

frauds. So, too, did TTE’s assignment of the lease to Raasch. 

And at the time of the assignment, TTE also conveyed the 

office building to Raasch. Thus, for approximately 6 years, 

Raasch owned the office building and, as assignee of the parking lot lease, was entitled to use the nearby parking lot. The 

statute of frauds problem crept in with Raasch’s executing the 

deed of trust to secure the loan from the Bank and the subsequent trustee’s sale of the property.

[3] Section 36-105 requires a signature by the party to be 

charged by the writing.5 Brick seeks to have CNBT bound by 

the parking lot lease. But as Brick forthrightly conceded at 

oral argument, there is no direct writing between Brick and 

CNBT that is also signed by CNBT. And neither the deed of 

trust nor the trustee’s deed is signed by CNBT.

3 Id.

4 § 36-105.

5 See Walters v. Sporer, 298 Neb. 536, 905 N.W.2d 70 (2017).
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Brick directs us to the trustee’s deed, which stated that the 

property was “subject to” the parking lot lease. However, the 

deed of trust contains no reference to the parking lot property 

or to the parking lot lease. A deed of trust is a mortgage.6 In 

the context of mortgages, we have stated that a mortgage foreclosure sale transfers to the purchaser every right and interest 

of all parties to the foreclosure suit in the mortgaged property.7

It follows then that a trustee’s sale transfers to the purchaser 

every right and interest of the parties to the property described 

in the deed of trust. And because the deed of trust concerned 

the office building only and not the parking lot, we reject 

Brick’s contention that the parking lot lease fell within the 

deed of trust’s clause where Raasch assigned to the Bank “all 

the right, title and interest in . . . existing or future leases . . . 

for the use and occupancy of the Property.” 

We briefly digress to distinguish Walters v. Sporer.

8

 In that 

case, the original grantor sought to enforce a right of first 

refusal contained in a warranty deed. We stated that the right 

of first refusal was within Neb. Rev. Stat. § 36-103 (Reissue 

2016) of the statute of frauds, which required a signature by 

the party to be charged by the writing. But we determined 

that acceptance of the deed satisfied the statute of frauds. We 

reasoned that “[t]o hold otherwise would be a misapplication 

of the statute of frauds by inequitably allowing the [original 

grantees] to retain the benefit of the deed while escaping 

a clear statement of intent on its face.” 9 But in the instant 

case, there is no such clear statement of intent. The deed of 

trust did not specifically mention the parking lot lease. Thus, 

there is no inequity in not binding the grantee to the terms of 

the lease.

6 Fiske v. Mayhew, 90 Neb. 196, 133 N.W. 195 (1911).

7 See Clements v. Doak, 140 Neb. 265, 299 N.W. 505 (1941).

8 Walters v. Sporer, supra note 5.

9 Id. at 558, 905 N.W.2d at 86.
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In an attempt to circumvent the statute of frauds, Brick 

focuses on CNBT’s actions. For over 3 years, CNBT made 

monthly rent payments for use of the parking lot, including 

rental increases called for in the parking lot lease. CNBT also 

reaped the benefits of the 2004 lease that TTE entered into 

with DAS and that expired on August 30, 2015. And CNBT 

complied with the right of first refusal language contained in 

the parking lot lease. Brick points to language in cases from 

other jurisdictions stating that possession plus paying rent 

gives rise to a presumption of an assignment sufficient to satisfy the statute of frauds.10 But those jurisdictions also make 

clear that an assignee will be liable for covenants that run with 

the land only while in privity of estate.11

[4,5] A lease of real property implicates principles of both 

privity of contract and privity of estate. 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.12 Privity of contract, however, 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.13

10 See, Gateway I Group v. Park Ave. Physicians, 62 A.D.3d 141, 877 N.Y.S.2d 

95 (2009); 8182 Maryland Associates v. Sheehan, 14 S.W.3d 576 (Mo. 

2000); Abbott v. Bob’s U-Drive et al, 222 Or. 147, 352 P.2d 598 (1960).

11 See, Beltrone Marital Trust v. Lavelle and Finn, 22 A.D.3d 936, 803 

N.Y.S.2d 211 (2005); 8182 Maryland Associates v. Sheehan, supra note 

10; Abbott v. Bob’s U-Drive et al, supra note 10.

12 Mayer v. Dwiggins, 114 Neb. 184, 206 N.W. 744 (1925).

13 Id.
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[6-9] If privity of estate is present, a party is typically 

liable only for covenants that run with the land. A landlord is 

not necessarily entitled to enforce all of the terms of a lease 

merely because there is privity of estate; rather, such privity 

only gives the landlord the right to enforce covenants that run 

with the land.14 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.15

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.16 Liability 

for covenants which run with the land cease with cessation 

of possession.17

[10] Privity of contract does not run with the land. Privity 

of contract is not transmitted to the purchaser of a leasehold.18

Thus, unless a new tenant assumes the lease, the tenant will 

not be bound under privity of contract.19 An express assumption of a real property lease requires specific affirmation by 

the assignee to bind itself to the lease obligations.20 CNBT 

has not specifically stated, orally or in writing, that it agreed 

14 See Excel Willowbrook v. JP Morgan Chase Bank, 758 F.3d 592 (5th Cir. 

2014).

15 Regency Homes Assn. v. Egermayer, 243 Neb. 286, 296, 498 N.W.2d 783, 

789 (1993).

16 Hogg v. Reynolds, 61 Neb. 758, 86 N.W. 758 (1901).

17 See Kelly v. Tri-Cities Broadcasting, Inc., 147 Cal. App. 3d 666, 195 Cal. 

Rptr. 303 (1983).

18 See Mayer v. Dwiggins, supra note 12.

19 See Kelly v. Tri-Cities Broadcasting, Inc., supra note 17.

20 Landlord v. Farmers & Merchants, 14 Cal. App. 5th 992, 222 Cal. Rptr. 3d 

435 (2017).
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to be bound by the parking lot lease. Because CNBT did not 

expressly assume the lease, it is not bound by the obligations 

contained therein, other than covenants which run with the land 

during CNBT’s occupancy. We conclude that paying rent while 

in possession is not an exception to the requirement under the 

statute of frauds that an assumption of a lease for a period 

greater than 1 year must be in writing.

Equitable Estoppel

[11] Brick assigns that the district court erred in determining that equitable estoppel did not apply. It contends 

that CNBT should be estopped from relying on the statute 

of frauds as a defense. 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.21 Brick contends 

that CNBT both acquiesced to and received benefits as a lessee under the parking lot lease agreement and should not now 

be allowed to disclaim it.

[12,13] Equitable estoppel does not apply under the circumstances. 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.22 There is no evidence that 

CNBT induced Brick to believe that CNBT assumed the longterm obligations of the lease or that Brick changed its position 

to its disadvantage in reliance upon such a belief. Further, 

the district court found that Brick qualified as a sophisticated 

21 Becher v. Becher, 299 Neb. 206, 908 N.W.2d 12 (2018).

22 Fast Ball Sports v. Metropolitan Entertainment, 21 Neb. App. 1, 835 

N.W.2d 782 (2013). See Farmland Service Coop, Inc. v. Klein, 196 Neb. 

538, 244 N.W.2d 86 (1976).
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business entity, and Brick does not challenge this finding on 

appeal. Sophisticated business entities are charged with knowledge of the statute of frauds and cannot reasonably rely on oral 

statements or conduct.23 Because Brick was a sophisticated 

business entity, CNBT is not estopped from raising the statute 

of frauds as a defense.

No Genuine Issue

Finally, Brick argues that an issue of fact remained regarding whether CNBT and the Bank intended to assume the 

assignment of the parking lot lease by continuing to rent the 

parking lot and complying with all provisions of the lease 

agreement. But there is no genuine issue of material fact that 

CNBT never signed anything expressly assuming the obligations of the parking lot lease. Because the statute of frauds bars 

Brick’s claims, CNBT’s conduct and intent are irrelevant.

CONCLUSION

Because there is no privity of contract and CNBT did not 

expressly assume the lease, Brick’s breach of contract claim is 

barred by the statute of frauds. We further conclude that CNBT 

is not estopped from raising the statute of frauds as a defense. 

And because there was no genuine issue of material fact, the 

district court did not err in granting summary judgment in 

favor of CNBT. We affirm.

Affirmed.

Stacy, J., not participating.

23 See 168th and Dodge, LP v. Rave Reviews Cinemas, LLC, 501 F.3d 945 

(8th Cir. 2007).