Opinion
No. 61924-1-I.
April 27, 2009.
Appeal from a judgment of the Superior Court for King County, No. 08-2-05491-8, Michael J. Fox, J., entered May 30, 2008.
Affirmed by unpublished opinion per Ellington, J., concurred in by Dwyer, A.C.J., and Agid, J.
Gordon Woodley and John Acheson are members and tenants of Eastgate I-90 Office Building Partnership. At issue here is whether a lease renewal clause creates more than a single right to renewal. We hold it does not, and affirm.
BACKGROUND
Eastgate I-90 Office Building Partnership (the Partnership) was formed for the purpose of acquiring and developing a tract of real property in Bellevue, Washington. The project lenders wanted a member of the Partnership to execute a long term lease for a substantial portion of the proposed building and personally guarantee the loan. In 1991, partner Martin Sandler approached Gordon and Denise Woodley and John Acheson and Lorraine Robertson about becoming partners and future tenants. At the time, attorneys Gordon Woodley and John Acheson were doing business as American Mediation in another Bellevue building.
As amended, the partnership agreement listed Thomas and Susan Myers, John Albright and Ann Marie Murnin, Gordon and Denise Woodley, John Acheson and Lorraine Robertson and Rudy Van Komen as general partners, and Martin Sandler as limited partner. Martin Sandler's share was subsequently bought and distributed among the remaining partners.
On December 12, 1991, Woodley and Acheson (Tenants) entered into a lease agreement with the Partnership to lease some 1,981 square feet of building space. The term of the lease was 110 months, starting on April 1994. An extensive lease addendum covered the details of rent, tenant improvements and other items, and included an expansion/right to renew clause, which provided simply that "Tenant has the right to renew the terms of this lease not later than three months before the expiration date."
Clerk's Papers at 23.
On December 2002, Tenants exercised their option to renew the lease. They refused to agree to a market price rent adjustment, and the rent reverted to 1994 levels and then increased according to the rent schedule.
The present controversy arose when the Partnership found a prospective buyer for the building. The Partnership learned that Tenants assert a continuing right to renew the lease every 110 months. The buyer balked. The Partnership then brought this action, seeking a declaration that the lease provides for only one renewal.
The action also included a breach of fiduciary duty claim, which the court dismissed without prejudice upon the Partnership's motion.
The Partnership moved for summary judgment, arguing that under Washington law, clear and unequivocal language is necessary to create a perpetual lease, and that the renewal clause does not qualify as such. Tenants responded that they claim renewal rights not in perpetuity, but only for the duration of their professional lives, and that a question of fact exists as to the meaning of the renewal clause. The court granted the motion.
Seeking reconsideration, Tenants submitted additional declarations and also argued the court should have exercised its equitable powers to deny summary judgment because the other partners had breached fiduciary duties to them. The court denied the motion for reconsideration.
Tenants appeal.
ANALYSIS
We apply the usual standard of review on summary judgment. While interpretation of a contractual provision is often an issue of fact, construction is always a question of law, amenable to summary judgment.
We review summary judgment decisions de novo, viewing the facts and all reasonable inferences from those facts in the light most favorable to the nonmoving party. Anderson v. State Farm Ins. Co., 101 Wn. App. 323, 329, 2 P.3d 1029 (2000). Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. CR 56(c).
Cf. Tanner Elec. Co-op. v. Puget Sound Power Light Co., 128 Wn.2d 656, 674, 911 P.2d 1301 (1996) ("Interpretation of a contract provision is a question of law only when (1) the interpretation does not depend on the use of extrinsic evidence, or (2) only one reasonable inference can be drawn from the extrinsic evidence.").
The distinction between contract interpretation and construction was made clear by our Supreme Court: "Interpretation is the process whereby one person gives a meaning to the symbols of expression used by another person. . . . Interpretation of a promise or agreement or a term thereof is the ascertainment of its meaning. . . . Construction of a contract determines its legal effect. Construction . . . is a process by which legal consequences are made to follow from the terms of the contract and its more or less immediate context, and from a legal policy or policies that are applicable to the situation. Berg v. Hudesman, 115 Wn.2d 657, 663, 801 P.2d 222 (1990) (citations omitted) (internal quotation marks omitted).
In re Marriage of Burke, 96 Wn. App. 474, 476, 980 P.2d 265 (1999).
The renewal clause at issue here provides:
Tenant shall have the right to lease any desired, remaining, unoccupied and available first floor space in Building "A" on the same terms of this Lease, with a right of first refusal on Yousefian's space if he does not renew. Tenant has the right to renew the terms of this lease not later than three months before the expiration date.
Clerk's Papers at 23.
Tenants note that this language does not expressly limit the right to renew. They contend the clause is ambiguous and must be construed against the Partnership as the drafter. They submitted their own declarations indicating their intent to bargain for renewal rights for the duration of their professional careers. Because they do not claim a right to perpetual renewal, they contend the cases setting forth the requirements for leases in perpetuity have no application here.
We find several difficulties with these arguments. First, the rule calling for construction of a contract against the drafter is a rule of last resort. As we discuss below, here, the case law provides a rule of construction that takes precedence. Further, the evidence does not support the conclusion that the Partnership was the drafter. The standard form lease contains multiple strikeouts and interlineations, and key terms, including those at issue here, are contained in a negotiated addendum which itself contains multiple interlineations.
See Roberts, Jackson Assocs. v. Pier 66 Corp., 41 Wn. App. 64, 69, 702 P.2d 137 (1985) (rule that ambiguity be resolved against the drafter applies only where intent of parties cannot be otherwise determined).
Second, the lease contains an integration clause, which strongly suggests the lease is the complete agreement between the parties.
M.A. Mortenson Co., Inc. v. Timberline Software Corp., 140 Wn.2d 568, 579-80, 998 P.2d 305 (2000).
Third, nothing in the language of the renewal clause or any other clause in the lease suggests that Tenants' renewal rights are circumscribed by their professional careers. Tenants specifically negotiated the right to sublet without consent, and to assign the lease with consent. Such rights are inconsistent with a tenancy measured by the tenants' personal occupancy. To the extent Tenants' declarations show they sought such a renewal right, they show an intent independent of the instrument and are inadmissible extrinsic evidence. Tenants therefore have either one renewal or a perpetual right to renew.
See Hollis v. Garwall, Inc., 137 Wn.2d 683, 695, 974 P.2d 836 (1999).
The governing Washington case law begins in 1904, in Tischner v Rutledge.
35 Wash. 285, 77 P. 388 (1904).
There, our supreme court construed an allegedly perpetual lease renewal clause. The lease provided "a term terminating on the 8th day of April, 1901, with the privilege at the same rate and terms each year thereafter from year to year." The court made clear that perpetual leases are disfavored and will be recognized only where intent to create such a right is manifest:
Id. at 286 (internal quotation marks omitted).
[T]he authorities are uniform on the propositions that the law does not favor perpetual leases of the character claimed for this one, and that the intention to create such a lease must be expressed in clear and unequivocal language, and not be left to mere inference. Courts will also, whenever it is possible without doing violence to the plain meaning of words, so construe the language used as to avoid a perpetuity by renewal.
Id. at 288-89.
The court held that the instrument in question, when examined as a whole, did not demonstrate a clear intent to provide for perpetual renewals. The court observed the absence of terms such as "'in perpetuity,' 'forever,' or words of similar import, such as one would expect to find in instruments granting perpetual rights," and noted that, with the exception of the quoted clause, the lease contained only covenants applicable to a short fixed term. The court held the renewal provision did not contain the direct and unequivocal language necessary to create a perpetual lease.
Id. at 289.
The rule announced in Tischner is consistent with that adopted by other jurisdictions and commentators.
See, e.g., 52 C.J.S. Landlord and Tenant, § 87 (2003); 49 Am.Jur. 2d, Landlord and Tenant, § 141 (2008); J.M. Zitter, Sufficiency of Provision of Lease to Effect Second or Perpetual Right of Renewal, 29 A.L.R. 4th 172 (1984).
In 1982, Tischner was quoted extensively by Division Two of this court in Oak Bay Props., Ltd. v Silverdale Sportsman's Center, Inc., involving a lease for one year "with renewable option." The lease also provided that if the lessee had fully performed, it had the option to renew for a specified one year period and "the right to renew annually thereafter." The trial court ruled on summary judgment that the lease created a perpetual right to renew.
32 Wn. App. 516, 519, 648 P.2d 465 (1982).
Id.
Division Two reversed. The court found the lease provisions more consistent with a short term lease than with a right of perpetual renewal, and concluded that the renewal language did not measure up to the "clear and unequivocal" Tischner standard and was therefore ambiguous as a matter of law The court remanded for trial as to whether a perpetual lease was intended.
Id. at 519-20.
Tenants argue that the renewal clause here is ambiguous and urge remand. We cannot agree. In ordinary reading, the language provides for a single renewal ("Tenant has the right to renew this lease not later than three months before the expiration date."). This single sentence is the entire expression of the parties' intent. The clause does not use the term "in perpetuity," "forever," or even "year after year," nor does it provide, as did the Oak Bay lease, for annual renewals. And all other provisions of the lease are either neutral or suggestive of a definite tenancy, including the provision requiring the landlord to furnish services and utilities.
Perhaps most telling, however, is the fact that despite the detailed statement of rent for the original term, which is enumerated by numbered months, the renewal clause does not provide for a rent escalation. Thus, when Tenants renewed in 2002, they refused to agree to a market rate rent adjustment. Instead, they demanded that the rent revert to the initial $2,700/month, April 1994 level. Under their interpretation of the lease, every 110 months for the balance of their professional careers, the rent would revert to the April 1994 level and would never exceed the 2003 level, and the landlord would continue to furnish services and utilities.
Cf. id. at 520 ("a rent escalation clause does not by itself indicate the parties intended a perpetual lease").
Tenants insist theirs is the commercially reasonable interpretation. We disagree.
In sum, nothing in the lease demonstrates by clear and unequivocal language the intent to create a perpetual lease. Nor is there ambiguity requiring remand. The trial court did not err in granting summary judgment.
Motion for Reconsideration
This court reviews a trial court's decision on a motion for reconsideration for abuse of discretion.
Drake v. Smersh, 122 Wn. App. 147, 151, 89 P.3d 726 (2004).
In their motion for reconsideration, Tenants for the first time argued that the trial court should have refused to grant summary judgment under its equitable powers because the other partners in the Partnership allegedly breached their fiduciary duties to them in commencing this litigation.
Although in their initial declarations Woodley and Acheson and their spouses stated that the suit was not authorized, Woodley and Acheson did not make a proper argument to that effect in their papers opposing the summary judgment order. When expounded on for the first time, the authorization issue was subsumed to the breach of fiduciary duty issue.
The clean hands doctrine does not apply here. Interpretation of a contract is an action at law, not in equity. Further, "the 'clean hands' principle does not repel a sinner from courts of equity, nor does it disqualify any claimant from obtaining relief there who has not dealt unjustly in the very transaction concerning which he complains." Tenants do not contend that the other partners' conduct in connection with the lease is reprehensible. Rather, they argue the filing of this lawsuit represents a breach of the duties of care and loyalty they owe each others as partners. This argument was not timely raised below and is not germane to the interpretation of the lease.
S.P.C.S., Inc. v. Lockheed Shipbuilding Const. Co., 29 Wn. App. 930, 934, 631 P.2d 999 (1981).
McKelvie v. Hackney, 58 Wn.2d 23, 31, 360 P.2d 746 (1961) (emphasis omitted).
Also for the first time in their motion for reconsideration, Tenants provided the court with a supplemental declaration of Gordon Woodley and three declarations from persons with experience in real estate, opining that the lease provides for unlimited renewals and that the Partnership should have specified a limit had it desired to avoid a perpetual lease. This evidence was not timely submitted, and the record contains nothing to suggest the declarations were not available when Tenants responded to the summary judgment motion. Further, the declarations do not demonstrate that any of the proposed experts reviewed the lease as a whole, which seriously undermines the value of their opinions. In any event, construction of a lease is a matter of law for the court, not a matter for opinion by real estate professionals. The court did not abuse its discretion in denying the motion for reconsideration.
See CR 59(a)(4); Morinaga v. Vue, 85 Wn. App. 822, 831, 935 P.2d 637 (1997). Tenants argue that the Partnership failed to move to strike the declarations, so they are properly before this court. However, the Partnership was not asked to respond to the motion for reconsideration. See King County Local Civil Rule 59(b) ("No response to a motion for reconsideration shall be filed unless requested by the court."). Additionally, this court may affirm on any ground supported by the record. Nast v. Michels, 107 Wn.2d 300, 308, 730 P.2d 54 (1986); see State v. Costich, 152 Wn.2d 463, 477, 98 P.3d 795 (2004).
In re Marriage of Burke, 96 Wn. App. 474, 476, 980 P.2d 265 (1999).
Everett v. Diamond, 30 Wn. App. 787, 791-92, 638 P.2d 605 (1981) (witnesses may not make conclusions of law).
Attorney Fees
The prevailing party in an action under the lease is entitled to reasonable attorney fees and expenses. Fees are awarded to the Partnership, to be determined under RAP 18.1.
Affirmed.
WE CONCUR.