Kelly v. Tri-Cities Broadcasting, Inc.

In 1965, S. L. Kelly leased land to Gordon and Irene Bambrick to operate a radio station. The lease was to run for 20 years. The lease stated that if the lessee ever assigned the lease, the lessee would warrant that the assignee would assume all the lessee’s obligations under the lease. Additionally, the lease provided that all disputes would be subject to final and binding arbitration. Kelly died, and his interest in the lease passed to his sons Robert and Richard (plaintiffs). In 1970, the Bambricks sold the station to Far West Broadcasting Corp., which was aware of the lease at the time of purchase and operated the station in accordance with the lease. In 1975, Far West sold the radio station to Tri-Cities Broadcasting, Inc. (defendant). Tri-Cities operated the radio station for at least nine months, but abandoned the site in 1977. When it purchased the radio station from Far West, Tri-Cities acknowledged that the lease existed and that it would be assigned from Far West to Tri-Cities, but that the lease’s assignability would be subject to its terms. No representative of Tri-Cities ever read the lease or expressly agreed to be bound by the lease. After Tri-Cities abandoned the property, the Kellys filed suit for unpaid rent. The trial court granted the Kellys’ motion to compel arbitration, and the arbitrator found that Tri-Cities had assumed the lease and was bound to pay rent to the Kellys. The trial court confirmed the arbitrator’s award. Tri-Cities then appealed, arguing that it had not assumed the lease.