Opinion
No. 63733-9-I.
Filed: September 7, 2010. UNPUBLISHED OPINION.
Appeal from a judgment of the Superior Court for King County, No. 08-2-06112-4, Douglass A. North, J., entered June 26, 2009.
Affirmed in part and remanded by unpublished opinion per Cox, J., concurred in by Ellington and Appelwick, JJ.
Stat Medical, Inc. appeals the trial court's order granting partial summary judgment, the order granting summary judgment, and final judgment in favor of its former landlord, G I IV Kirkland LLC (G I Kirkland). In our de novo review of the partial summary judgment order, we conclude that Stat Medical did not raise any genuine issues of material fact below. G I Kirkland was entitled to judgment as a matter of law. The final judgment, based on that order, the subsequent unopposed motion for summary judgment for common area maintenance (CAM) charges, and attorney fees was proper. We affirm.
Stat Medical leased commercial space from Riggs Company for its home medical equipment business at the Kirkland 405 Corporate Center. The lease was for a term of 84 months and was amended twice in ways that are not material to this appeal. The lease expired of its own terms on July 31, 2006.
Beginning in November 2005, Stat Medical began to seek other locations for its business in anticipation of the lease expiration. In April 2006, Stat Medical signed a letter of intent to lease space in Bothell after its lease at the Kirkland 405 Corporate Center was scheduled to expire.
In May 2006, G I Kirkland purchased the Kirkland 405 Corporate Center and became the successor in interest to the lessor under the lease with Stat Medical. After learning that Stat Medical intended to move elsewhere at the expiration of the lease, a representative of G I Kirkland contacted Stat Medical's real estate broker. The purpose of the contact was to inquire whether Stat Medical would be interested in entertaining a new lease at the Kirkland 405 Corporate Center. Following further communications, Stat Medical agreed to meet with representatives of G I Kirkland.
At that meeting, on June 6, 2006, G I Kirkland proposed various options to keep Stat Medical at the Kirkland 405 Corporate Center, including moving Stat Medical out of its then location and into another building. On June 6, 2006, G I Kirkland sent Stat Medical a written proposal to lease space at a different location in the Kirkland 405 Business Center. Stat Medical did not accept the proposal, signing a lease for space in a new Bothell location on June 19, 2006. This space had been the subject of the April 2006 letter of intent that Stat Medical signed.
The lease with G I Kirkland expired of its own terms on July 31, 2006. Stat Medical did not vacate the property until October 19, 2006, and never paid the full amount of holdover rent prescribed by the lease.
G I Kirkland sued Stat Medical, alleging breach of the lease due to Stat Medical's failure to pay the full amount of holdover rent for the months following expiration of the lease. It also claimed damages for failure to pay base rent for November, failure to pay CAM charges, and attorney fees and costs. Among the affirmative defenses that Stat Medical raised was equitable estoppel.
G I Kirkland moved for summary judgment on all claims. Following oral argument, the trial court granted partial summary judgment for G I Kirkland for holdover rent from August 2006 through November 2006 and base rent for November 2006. The trial court later granted G I Kirkland's unopposed summary judgment motion for CAM charges. Thereafter, the trial court entered final judgment for the amounts due under the lease as well as attorney fees and costs.
Stat Medical appeals.
HOLDOVER RENT
Stat Medical argues that the trial court erred in granting summary judgment for holdover rent following expiration of the lease on July 31, 2006. Specifically, it claims there is a genuine issue of material fact whether G I Kirkland orally agreed to modify the lease to allow Stat Medical to holdover without monetary penalty. We disagree.
Brief of Appellant at 16.
A motion for summary judgment may be granted when there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law. "A material fact is one that affects the outcome of the litigation." When considering a summary judgment motion, the court must construe all facts and reasonable inferences in the light most favorable to the non-moving party. "[T]he moving party bears the burden of showing the absence of a material issue of fact." Further, "[q]uestions of fact may be determined on summary judgment as a matter of law where reasonable minds could reach but one conclusion."
Owen v. Burlington N. Santa Fe R.R., 153 Wn.2d 780, 789, 108 P.3d 1220 (2005).
Lybbert v. Grant County, 141 Wn.2d 29, 34, 1 P.3d 1124 (2000).
Swinehart v. City of Spokane, 145 Wn. App. 836, 844, 187 P.3d 345 (2008) (citing Redding v. Virginia Mason Med. Ctr., 75 Wn. App. 424, 426, 878 P.2d 483 (1994)).
Id. (citing Alexander v. County of Walla Walla, 84 Wn. App. 687, 692, 929 P.2d 1182 (1997)).
This court reviews a summary judgment order de novo, engaging in the same inquiry as the trial court.
Khung Thi Lam v. Global Med. Sys., 127 Wn. App. 657, 661 n. 4, 111 P.3d 1258 (2005).
Oral Lease Modification
Stat Medical argues on appeal that the parties agreed to modify the terms of the lease that require payment of holdover rent at twice the base monthly rent. This agreement allegedly arose from communications between the parties prior to and during a meeting in June 2006.
While parties may orally modify a contract by subsequent agreement, an oral modification to a written contract must be shown by clear and convincing evidence. The burden of proving that the parties intended to modify the earlier agreement rests upon the party asserting the modification.
Ebling v. Gove's Cove, Inc., 34 Wn. App. 495, 499, 663 P.2d 132 (1983); see also Tonseth v. Serwold, 22 Wn.2d 629, 644, 157 P.2d 333 (1945); Dinsmore Sawmill Co. v. Falls City Lumber Co., 70 Wash. 42, 44, 126 P. 72 (1912).
Hanson v. Puget Sound Navigation Co., 52 Wn.2d 124, 127, 323 P.2d 655 (1958).
In support of its motion for summary judgment, G I Kirkland relied on Section 3.6 of the lease agreement to establish Stat Medical's default for failure to pay holdover rent. In opposition to this claim below, Stat Medical relied on the "without the prior consent" language in that section of the lease. Section 3.6 provides:
Holdover. If Tenant, without the prior consent of Landlord , holds over after the expiration or termination of the Lease Term, Tenant shall be deemed to be occupying the Premises under a month-to-month tenancy, which tenancy may be terminated as provided by the laws of the state in which the Premises are located. During such tenancy, Tenant agrees to pay to Landlord twice the rate of Base Rent in effect on the expiration or termination of the Lease Term , plus all Additional Rent and other sums payable under this Lease, and to be bound by all of the other covenants and conditions specified in this Lease, so far as applicable. The preceding provisions shall not be construed as consent for Tenant to hold over.
Clerk's Papers at 43 (emphasis added).
Stat Medical's argument was that G I Kirkland's representatives had orally represented that Stat Medical would not be "financially hurt" in the form of holdover rent if it met to discuss lease options to remain at the Kirkland 405 Corporate Center.
In reply to this argument, G I Kirkland pointed to another section of the lease that required that any consent of the landlord must be in writing:
Landlord's Consent. Unless otherwise provided in this Lease, whenever Landlord's consent, approval or other action is required under the terms of this Lease, such consent, approval or action shall be subject to Landlord's judgment or discretion exercised in good faith and shall be delivered in writing.
Clerk's Papers at 56 (emphasis added).
Nowhere in the record did Stat Medical assert that this latter provision is unenforceable. There is no reference to this claim either in the four page brief in opposition to the summary judgment motion or in either of the two cases cited in that brief. Likewise, during colloquy with the judge at the summary judgment hearing there was no claim that the term in this lease requiring the landlord's written consent is unenforceable.
For the first time on appeal, Stat Medical now argues that the lease term requiring the landlord's written consent to modification of the lease is unenforceable. In doing so, it relies on Pacific Northwest Group A v. Pizza Blends, Inc. Nowhere in the materials below did Stat Medical cite this case or anything like it.
90 Wn. App. 273, 951 P.2d 826 (1998).
The essence of this new argument on appeal is that a lease modification striking the requirement to pay holdover rent allegedly arose from oral representations by representatives of G I Kirkland. In short, Stat Medical claimed that G I Kirkland represented that if Stat Medical agreed to meet to discuss "what [G I Kirkland] had to offer [that] would not result in damaging [Stat Medical] in the form of holdover rent." It is unclear from the briefing whether this alleged agreement was for an indefinite period.
Clerk's Papers at 338.
Significantly, Stat Medical does not argue that the alleged modification of the lease arose from negotiations at the June 6, 2006, meeting. As it admits in its brief, it chose not to accept the written proposal that came out of that meeting. The uncontroverted evidence in the record shows that the proposal conditioned any waiver of holdover rent on Stat Medical executing a new lease, for different space. The record also shows that Stat Medical signed a lease with a new landlord shortly after the meeting with G I Kirkland. Because Stat Medical chose to go elsewhere shortly after the meeting with G I Kirkland and because striking holdover rent was contingent on executing a new lease with G I Kirkland, reasonable minds could not differ in concluding that there was no genuine issue of material fact whether the lease was modified by virtue of negotiations at the June 6 meeting.
Rather, the claim on appeal is that the lease modification striking the requirement to pay holdover rent arose merely from Stat Medical's agreement to meet to hear lease options from the new owners of the Kirkland 405 Corporate Center. The record does not support this new argument on appeal.
Stat Medical claims that G I Kirkland's representation that Stat Medical would not be "financially hurt" by considering a proposal for a new lease constituted an oral agreement to amend the existing lease agreement to waive the holdover provision of the lease. But the representation that Stat Medical would not be "financially hurt" cannot reasonably be interpreted as an agreement to waive the holdover provision of the lease agreement.
The only other evidence that Stat Medical points to in support of its position that G I Kirkland agreed to an oral modification of the lease agreement is a series of three letters from G I Kirkland's property manager that post-dated the expiration of the lease. Stat Medical claims that these letters evidenced the parties' agreement to orally modify the lease to waive the holdover provisions.
On August 16, 2006, G I Kirkland's property manager sent a letter to Stat Medical confirming that the lease had expired and stating:
It is our understanding that Stat Medical would like to continue leasing Suite 180 on a month-to-month Holdover basis.
Pursuant to the Master Lease Agreement dated June 5, 1999, Section 3, paragraph 3.6 Holdover, the monthly Base Rent for Suite 180 during the Holdover period is twice the rate of Base Rent in effect on the expiration of the Lease, plus Additional Rent and other sums payable under the Lease.
This letter serves as [the] Landlord's thirty day notice effective October 1, 2006, the monthly Base Rent for Suite 180 will increase from $11,503.00 NNN to $23,006.00 NNN.
Clerk's Papers at 81 (emphasis added).
Six days later, the property manager sent a second letter to Stat Medical marked "revised." This letter was identical in all respects but changed the date on which rent would increase to September 1, 2006.
Stat Medical responded on August 28, 2008. That letter reads in relevant part,
It is our intention to be out of the space by the end of September.
. . . . In our discussion with [G I Kirkland], we expressed our concern that entertaining a new proposal was likely to take us beyond the end of our lease on the new project, should we decide not to renew at the current location. My broker Daran Davidson and I were told we would not be penalized for taking the time to explore any proposals they had for us.
. . . .
I am hopeful that you will take this into consideration with regard to the holdover amounts that would be charged to us. I have enclosed a check equivalent to a 50% increase (which is certainly within the parameters of an appropriate holdover charge) to hopefully fulfill this obligation.
Clerk's Papers at 85 (emphasis added).
Sometime in September, Linda Kaivola sent a final letter to Stat Medical after receiving Stat Medical's response, indicating that her first two letters in August had incorrectly represented that no holdover rent would be charged.
I consulted the Landlord regarding your month-to-month "Holdover" tenancy. In the event that Stat Medical renewed their tenancy at Kirkland 405, the Landlord was willing to waive the Holdover rental rate during the time it took to secure a new lease for your existing space. However, it is our understanding that you plan to vacate Suite 180 on approximately 9/30/06. Pursuant to the Lease, the monthly base rent for the Holdover period, August 2006 and monthly thereafter until Stat Medical vacates the Premises will be increased from $11,503.00 NNN per month to $23,006.00 NNN per month.
Thank you for remitting . . . partial Holdover rent for the month of August 2006. The [remaining] monthly base rent due for August 2006 is $17,254.50. The total monthly base rent due for September 2006 is $23,006.00.
Our correspondence to you dated August 16, 2006 and August 22, 2006 states an incorrect date for the Holdover rental rate increase.
Clerk's Papers at 88.
No response to this letter is in the record.
These letters do not raise a genuine issue of material fact. First, there is no reference in any of the letters Stat Medical received from G I Kirkland's property manager to an agreement to waive the holdover provision of the lease. Rather, all three of the letters expressly cite the holdover provision of the lease.
Second, Stat Medical's response does not state there was any agreement to waive holdover rent. Significantly, Stat Medical stated that it was hopeful that G I Kirkland would take the earlier negotiations regarding a possible new lease "into consideration with regard to the holdover amounts that would be charged to us." It also tendered a check toward the holdover rent, "to hopefully fulfill this obligation." This attempt to negotiate the amount of holdover rent due is inconsistent with Stat Medical's claim on appeal that there was an oral agreement to waive holdover rent.
Finally, the fact that there is no response to G I Kirkland's last letter reinforces the conclusion that Stat Medical accepted that the holdover provision of the lease was still in effect. This conclusion is further supported by an internal e-mail sent by Stat Medical's CEO on September 19, stating, "Attached is the letter from our landlord about our attempt to negotiate the hold over rent. It is not what we hoped for." This admission that it was attempting to negotiate the amount of holdover rent due under the lease is entirely inconsistent with the claim Stat Medical now asserts on appeal.
Even if we were inclined to agree that there is any genuine issue of material fact whether the parties orally agreed to modify the lease to strike holdover rent, the Pizza Blends case, on which Stat Medical heavily relies, is distinguishable.
There, the lease agreement between Pizza Blends and Pacific Group included a holdover provision calling for one and a half times the base rent for any holdover period after the lease expired. Pizza Blends and the marketing director of the property management company entered into negotiations for a new lease agreement prior to the expiration of Pizza Blends' existing lease. Because the parties could not agree to a term for the new lease, a new written lease was never executed. But prior to the expiration of its current lease, Pizza Blends and the property manager discussed that Pizza Blends could stay on as a month-to-month tenant at the same rental rate if the landlord consented. The property manager agreed to call Pizza Blends if the landlord did not consent. Pizza Blends did not receive a call and sent a written letter memorializing the new terms to the property manager. The property manager confirmed receipt of the letter and the terms contained therein.
Pizza Blends, 90 Wn. App. at 275.
Id.
Id.
Id.
Id. at 276.
Id.
Id.
Shortly after the above events transpired, a different representative of the property management company sent Pizza Blends a letter indicating that rent for the month-to-month holdover period would be charged at one and a half times the base rent, as specified in the expired written lease. Pacific Group sued Pizza Blends for the holdover rent and the trial court granted summary judgment finding no genuine issue of material fact as to the enforceability of the holdover provision of the lease agreement.
Id. at 277.
Id.
On appeal, this court reversed, holding that a clause in a lease agreement prohibiting oral modifications is unenforceable. The court went on to conclude that Pizza Blends raised a genuine issue of material fact whether the parties orally modified the lease given the testimony and evidence presented. The court noted specifically Pizza Blends' letter to property management documenting the terms of the new month-to-month tenancy.
Id. at 279-80.
Id. at 280.
Id.
Stat Medical can point to no such compelling evidence of oral modification here. Its argument is that the oral modification arose from its agreement to attend a meeting to listen to lease options. In Pizza Blends, there was testimony that the parties expressly negotiated for a new lease agreement, could not reach agreement on the term for the new lease, and orally agreed to a month-to-month lease at the same rate as the existing lease before the expiration of the initial lease agreement.
Id. at 275-80.
Here, on the other hand, Stat Medical relies solely on its agreement to meet with G I Kirkland based on an assurance that it would not be financially damaged. This is an excellent example of the criticism of the common law rule noted in the lead opinion in Pizza Blends. This is a commercial lease between presumably sophisticated parties who should be free to agree in the lease to restrict the means of modification of its terms. If this term were enforceable, as written, it would have avoided the substantial time and expense arising from litigating the claims of oral modification asserted here. Nevertheless, Pizza Blends is currently the law. And it does not require a different result in this case.
Id. at 279 (noting criticism of the common law rule that a contract may be modified in any way the parties chose, notwithstanding provisions prohibiting modifications except in a particular manner).
For all these reasons, Stat Medical failed to show the existence of a genuine issue of material fact below. The trial court properly granted partial summary judgment on the holdover rent claims.
Equitable Estoppel
For the first time on appeal, Stat Medical also claims there is a genuine issue of material fact regarding its affirmative defense of equitable estoppel. We disagree.
Issues that were neither raised by the parties nor considered by the trial court at summary judgment will not be considered for the first time on appeal. This is especially true for summary judgment proceedings, where "the appellate court will consider only evidence and issues called to the attention of the trial court."
RAP 2.5(a).
RAP 9.12.
Here, Stat Medical raised the affirmative defense of equitable estoppel in its answer. But nowhere in its "Memorandum in Opposition to Plaintiff's Motion for Summary Judgment" does it mention this defense or cite to Pizza Blends, the case on which it now relies on appeal. For this reason alone, we could decline to address the substance of the argument.
We note that during colloquy with the court at oral argument on G I Kirkland's motion for summary judgment, Stat Medical stated that "promissory estoppel" was relevant to a question the judge raised. There was no explanation of what the elements of promissory estoppel are or how they expressly address the question the judge asked.
Clerk's Papers at 453-54.
"A party seeking recovery under a theory of promissory estoppel must prove five prerequisites: (1) A promise that (2) the promisor should reasonably expect to cause the promisee to change his position and (3) that does cause the promisee to change his position (4) justifiably relying upon the promise, in such a manner that (5) injustice can be avoided only by enforcement of the promise."
Kim v. Dean, 133 Wn. App. 338, 348, 135 P.3d 978 (2006) (citing Elliott Bay Seafoods, Inc. v. Port of Seattle, 124 Wn. App. 5, 13, 98 P.3d 491 (2004)).
Equitable estoppel, on the other hand, requires: (1) an admission, statement, or act inconsistent with a claim afterward asserted; (2) action by another in reasonable reliance on that act, statement, or admission; and (3) injury to the party who relied on the act, statement, or admission if the court allows the first party to contradict or repudiate the prior position. Equitable estoppel is not favored, and the party asserting estoppel must prove each element by clear, cogent, and convincing evidence.
Peterson v. Groves, 111 Wn. App. 306, 310, 44 P.3d 894 (2002) (citing Robinson v. City of Seattle, 119 Wn.2d 34, 82, 830 P.2d 318 (1992)).
Id. (citing Robinson, 119 Wn.2d at 82).
Stat Medical appears to have abandoned the promissory estoppel theory first mentioned at oral argument below. It now asserts for the first time that there are genuine issues of material fact regarding its affirmative defense of equitable estoppel. We disagree.
First, the representation that Stat Medical would not be "financially hurt" by meeting to discuss lease options two months before the lease expired of its own terms cannot reasonably be interpreted as a modification of the written terms of the lease requiring holdover rent. Thus, G I Kirkland's later suit to enforce payment of that rent is not inconsistent with this prior statement. Stat Medical has not been hurt by agreeing to meet and discuss lease options with G I Kirkland. It is being sued because it failed to pay holdover rent due under Section 3.6 of the lease.
Second, Stat Medical's claim that it acted in reasonable reliance on this statement also fails to raise a genuine issue of material fact. As discussed above, Stat Medical's correspondence and actions in August and September indicate that it was aware of its obligations under the holdover provision in the lease with G I Kirkland. This is supported by Stat Medical's attempt to negotiate the amount of holdover rent due under the lease and it's tender of a check in partial fulfillment of the obligation under the holdover provision. Reasonable minds could not differ — Stat Medical did not rely on G I Kirkland's representation to waive the holdover provision. Rather, Stat Medical accepted that it would be responsible for holdover rent under the lease.
Termination of Month-to-Month Tenancy
Stat Medical next argues that summary judgment was improper because there was a genuine issue of material fact whether its month-to-month tenancy terminated earlier than November 30. We again disagree.
The lease agreement provided that a month-to-month tenancy "may be terminated as provided by the laws of the state in which the Premises are located." RCW 59.04.020 provides that a tenancy from month-to-month "shall be terminated by written notice of thirty days or more, preceding the end of any of said months or periods."
Here, the first evidence Stat Medical points to as indicating notice of termination is its letter of August 28, 2006, to G I Kirkland's property manager, stating in part, "It is our intention to be out of the space by the end of September." This letter is not adequate notice under the statutory requirements because Stat Medical did not vacate the premises by the end of September, but rather continued to occupy the space until October 19, thereby creating a new month-to-month tenancy.
Moreover, the lease agreement required that notice of termination be communicated to the landlord via certified or registered mail. Because the provisions of a written lease continue to apply when a tenant holds over on a month-to-month basis, the August letter was also ineffective notice because it was delivered to the property manager rather than the landlord.
March-McLennan Bldg., Inc. v. Clapp, 96 Wn. App. 636, 643-48, 980 P.2d 311 (1999) (citing the general rule that the terms of a fixed lease apply to the terms of a holdover tenancy).
Stat Medical also cites its e-mail to G I Kirkland, dated October 3, 2006, as notice of termination. This, too, is inadequate and untimely notice under the statute. The e-mail was neither timely nor served pursuant to the notice provision of the lease. RCW 59.04.020 provides that a tenancy from month-to-month "shall be terminated by written notice of thirty days or more, preceding the end of any of said months or periods. " October 3, 2006, was not 30 days before the end of the month of October. Therefore, the e-mail served as notice effective November 30, 2006, not earlier.
(Emphasis added.)
The trial court properly concluded that Stat Medical did not give notice sufficient to terminate its month-to-month tenancy prior to November 30, 2006.
ATTORNEY FEES
The trial court awarded fees and expenses to G I Kirkland under the provision of the lease agreement providing, "in the event suit is brought for the recovery of Base Rent, Additional Rent, or any other sums payable under the Lease . . . the non-breaching party shall be entitled to a reasonable sum for attorney's and paralegal's fees." Stat Medical argues that this court should vacate that award of fees because the trial court did not enter findings of fact establishing the reasonableness of the fees as required by Mahler v. Szucs. We disagree.
Clerk's Papers at 54.
135 Wn.2d 398, 957 P.2d 632 (1998).
While Mahler does require the trial court to enter written findings of fact and conclusions of law where attorney fees and costs are disputed, there is no corresponding rule that the trial court is required to enter written findings of fact and conclusions of law where attorney fees are not disputed. Because this court will generally not consider an issue that is raised for the first time on appeal, there would be no rationale for requiring the trial court to enter findings of fact and conclusions of law where the amount and basis for fees were not disputed below.
Id. at 435.
Draper Mach. Works, Inc. v. Hagberg, 34 Wn. App. 483, 488, 663 P.2d 141 (1983).
G I Kirkland requests attorney fees on appeal pursuant to RAP 18.1 and the lease agreement. A contractual provision supporting the award of fees at trial supports an award of attorney fees on appeal. Such a provision is present in the lease here. We award G I Kirkland attorney fees on appeal, the amount of which shall be determined by the trial court on remand pursuant to RAP 18.1(i).
See Schmitt v. Matthews, 12 Wn. App. 654, 664-65, 531 P.2d 309 (1975).
We affirm and remand for determination of reasonable attorney fees on appeal in favor of G I Kirkland.