City gamble on hotel debt pays off

The Riverwalk Inn at the Port of Astoria.

The city of Astoria has likely secured nearly an extra $152,000 from the Astoria Riverwalk Inn settlement after a wise gamble on the outcome of the lawsuit.

Brad Smithart operated the inn between 2012 and 2015, racking up a massive amount of back-due rent with the Port of Astoria, transient room taxes with the city and property taxes to Clatsop County.

In 2016, he confessed in court to owing the city and agreed to a monthly repayment plan. He has never made a payment, and the city obtained judgment against him for more than $118,000.

Param Hotel Corp., a Portland hotelier that had tried and failed to take over Smithart’s lease on the hotel in exchange for paying his debts, successfully sued the Port for breach of contract. Clatsop County Circuit Court Judge Dawn McIntosh in December ordered the Port to hand over the hotel to Param by Nov. 1, and for the hotelier to pay Smithart’s existing debts through an escrow account totaling $580,000. Smithart was to receive an estimated $186,327 after debts to the Port, city and county were paid off. The Port appealed the ruling.

To help collect on the debt, City Attorney Blair Henningsgaard secured a writ of garnishment in January against what Smithart was owed by Param. The city put the debt up for public auction at the county courthouse in February and was the only bidder, paying $34,500 for the right to Smithart’s payout.

If the Port’s appeal was successful, the city would have been out $34,500. But the Port recently dropped the appeal and settled with Param. The hotel was transferred from Astoria Hospitality Ventures to Param Nov. 1.

The Port’s drop of the appeal and the city’s purchase of Smithart’s proceeds means it is entitled to his $186,327 — minus the $34,500 it paid for the debt — along with the original $115,858 worth of transient room taxes owed under the Port’s settlement with Param, for a total of more than $267,000. Smithart, who has since moved to New York, has never responded to the city’s efforts.

In a letter to the court, Colin Hunter, Param’s attorney, called the city’s move a “double recovery” from the original settlement and Smithart.

“While this result is contrary to what the court intended when it entered a decree of specific performance, Param is required by law to comply with the writ of garnishment by delivering to the city all of the proceeds to which Mr. Smithart would have been entitled,” Hunter wrote.

The fact that the city’s purchase is now bearing fruit does not make the extra award inequitable, Henningsgaard wrote to the court in response to Hunter.

“Smithart was given a credit for the City’s bid of $34,500,” Henningsgaard wrote. “If anyone else had been willing to bid, the amount paid would have been applied to the judgment, the successful bidder would own this right to payment, and Smithart would still recover nothing.”

Hunter and the Port’s attorney, Luke Reese, called in Thursday with Circuit Court Judge Dawn McIntosh and Henningsgaard to discuss the matter. Reese had nothing to add.

While she doesn’t think the city’s extra award is equitable, it might be a result of Smithart running off to the East Coast, sitting on his hands and expecting everything to work out, McIntosh said.

“Slick move,” she told Henningsgaard with a laugh.

While the city has added to its bounty from Smithart’s debts, the Port has lost most of its award.

The Port was to receive $273,180 for Smithart’s back-due rent and revenue sharing under the original agreement with Param, but has to pay the company $145,000 for legal fees out of its portion after losing in court. The Port also paid Hospitality Ventures $50,000 to prevent the company from suing over being forced out of the hotel.

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