Opinion
No. 26114-0-III.
May 22, 2008.
Appeal from a judgment of the Superior Court for Spokane County, No. 06-2-04196-2, Salvatore F. Cozza, J., entered April 13, 2007.
Affirmed in part and reversed in part by unpublished opinion per Brown, J., concurred in by Kulik, A.C.J., and Sweeney, J.
This dispute arises from two billboard leases between landlord Devlin Enterprises and Terry Devlin ("Devlin") and tenant Lamar Obie Corporation ("Lamar"), and from Devlin's later sale of the leased realty to C 1031 Properties, Inc., and Nevada Land, LLC ("C 1031"). The trial court summarily concluded Devlin: (1) did not give agreed first-right-of-refusal notices to Lamar and improperly terminated the leases; (2) breached its statutory warranty deed; and (3) owed $200,000 in damages to C 1031 for the warranty breach. On appeal, Devlin contends (1) it properly terminated the leases because handwritten contract provisions eliminated the need to give first-right-of-refusal notices, (2) no statutory warranty was breached because the billboards were, by lease agreement, personal property not transferable by deed, and (3) no damages were suffered. We conclude Devlin improperly failed to give the first right of refusal, and that the handwritten paragraph can be harmonized, but agree with Devlin that the signs were, by lease agreement, not transferred fixtures. Accordingly, we affirm in part, and reverse in part without an award of attorney fees to either party.
FACTS
In 2002, Devlin owned 18.15 acres of real property near the intersection of Nevada Street and Hawthorne Road in Spokane. In December 2002, Lamar entered into a 20-year lease with Devlin, allowing Lamar to "erect" and "maintain" an outdoor billboard structure located on N. Nevada St. Clerk's Papers (CP) at 9. Lamar recorded the lease with the County Treasurer later that month. In February 2004, Lamar entered into a second 20-year lease with Devlin using identical language for a billboard on East Hawthorne Road. Lamar recorded a memorandum of the second lease agreement in March 2004. Both leases contain identical pre-printed and handwritten terms.
Pre-printed paragraph 1 defines "structure" as including: "fixtures, power poles, lines and connections." CP at 9, 13. Pre-printed paragraph 6 partly provides:
In the event of any potential change in ownership of the real property,
Lessor agrees to notify Lessee of such a potential change at least thirty (30) days prior to any change in ownership and to include the name and address of the prospective purchaser(s). Lessor further . . . grants to Lessee an unconditional right of first refusal to purchase the real property, said right to be exercised by Lessee no later than thirty (30) days after receipt of written notice of said potential change.
CP at 10, 14. Preprinted paragraph 11 provides: "The Lessee is and shall remain the owner of all structures placed by Lessee upon the real property and has the right to remove all above ground portion of the structures at any time." CP at 10, 14. Handwritten paragraph 16 provides: "Lessor may cancel lease upon 60-days written notification, if property is sold or developed by Lessor." CP at 10, 14.
On January 4, 2006, Devlin entered into an earnest money agreement with C 1031 for the sale of the Nevada Street/Hawthorne Road property. C 1031 received notice of the two Devlin-Lamar leases in a March 15, 2006 title report.
On February 8, 2006, Devlin sent Lamar a 60-day lease cancellation letter for both leases, stating the property would be sold by the end of the month. The letter provided Lamar less than 30 days' notice of a potential change in ownership, no notice of the potential purchasers, and no information about the potential offer. The record does not show any response from Lamar. Devlin forwarded a copy of the February 8 letter to C 1031 Properties.
On April 12, 2006, the real property sale closed, with Devlin having signed the statutory warranty deed on April 1, 2006. The statutory warranty deed was recorded on April 13, 2006; it did not expressly include or exclude the leases or the billboards.
On August 28, 2006, C 1031's attorney, by letter, returned two Lamar August 21, 2006 annual billboard rent checks payable to C 1031. The letter explained that C 1031 had acquired the real property from Devlin under a statutory warranty deed, and stated: "The signs were included in the sale and my client has fee simple title to both signs and consequently you are hereby notified not to trespass or remove the signs from my clients' property." CP at 107.
In September 2006, Lamar sued C 1031 and Devlin for relief, declaring its ownership of the billboards. C 1031 counter-claimed for declaratory relief settling its fee simple ownership under the statutory warranty deed and cross-claimed against Devlin for breach of the statutory warranty deed. On April 13, 2007, the trial court granted summary liability judgment to C 1031 and Lamar, and reserved its rulings on damages. The court concluded Devlin breached the lease agreements with Lamar in failing to provide adequate notice of a potential change in ownership and in not allowing Lamar to exercise its right of first refusal. It concluded C 1031 could not claim legal title to the billboards since it had received constructive notice of Lamar's ownership and because Devlin could not convey what it did not own. It further concluded Devlin breached the statutory warranty deed by warranting it had good title to the property.
In 2007, the court granted C 1031 summary damages against Devlin for breach of the statutory warranty deed, reasoning: "[Y]ou could remove them, [but] I am persuaded that, as a legal matter, that the [billboards] are considered permanent additions to the freehold." Report of Proceedings (June 1, 2007) at 13. The court awarded C 1031 $200,000 for the value of the billboards and $7,650 in attorney fees. Devlin appeals all three summary judgment rulings.
ANALYSIS
We review summary judgments de novo. Korslund v. DynCorp Tri-Cities Servs. Inc., 156 Wn.2d 168, 177, 125 P.3d 119 (2005). Summary judgment is proper where, viewing the facts in a light most favorable to the nonmoving party, no genuine issues of material fact exist and the issues can be resolved as a matter of law. Id.
A. Lease Liability
The issue is whether the trial court erred in granting summary judgment for liability to Lamar and concluding Devlin breached lease paragraph 6 by failing to comply with its termination notice and first right of refusal provisions when read together with the handwritten provisions of paragraph 16.
In interpreting a contract, we must ascertain the parties' intent by reviewing the contract as a whole. Felton v. Menan Starch Co., 66 Wn.2d 792, 797, 405 P.2d 585 (1965); Turner v. Wexler, 14 Wn. App. 143, 146, 538 P.2d 877 (1975). Unambiguous contract provisions must be enforced as written; contract provisions are not ambiguous "merely because the parties suggest opposite meanings." Martinez v. Kitsap Pub. Servs., Inc., 94 Wn. App. 935, 944, 974 P.2d 1261 (1999); Quadrant Corp. v. Am. States Ins. Co., 154 Wn.2d 165, 171, 110 P.3d 733 (2005). We construe any inconsistencies in the writing to harmonize with one another when possible. Turner, 14 Wn. App. at 146. Handwritten provisions control over pre-preprinted provisions only where they are clearly contradictory. Green River Valley Foundation, Inc. v. Foster, 78 Wn.2d 245, 249, 473 P.2d 844 (1970).
Devlin argues paragraph 16 essentially eliminates paragraph 6's applicability. Paragraph 6 provides an opportunity for either party to cancel before the end of the initial 20-year term, with specific notice "[i]n the event of any potential change in ownership of the real property," and "an unconditional right of first refusal to purchase the real property." CP at 10, 14 (emphasis added). Paragraph 16 provides: "Lessor may cancel lease upon 60-days written notification, if property is sold or developed by Lessor." CP at 10, 14 (emphasis added).
Based on the facts presented, paragraphs 6 and 16 are not ambiguous, inconsistent, or contradictory. Both paragraphs can be applied in harmony with one another. Turner, 14 Wn. App. at 146. The notice provision in paragraph 6 applies to potential changes in real property ownership prior to sale, giving Lamar the opportunity to exercise its first right of refusal. Paragraph 16's termination clause applies "if the property is sold"; assuming Lamar receives notice and chooses not to exercise its right to purchase the property. CP at 10, 14 (emphasis added). Paragraph 16 does not extinguish Lamar's contractual "unconditional right of first refusal." CP at 10, 14. The superior court did not err in granting summary judgment for liability in favor of Lamar.
B. Warranty Deed Liability
The issue is whether the trial court erred in granting summary judgment to C 1031 against Devlin for breach of statutory warranty and concluding the billboards were real property not excepted in and transferred by the deed.
Statutory warranty deeds warrant to the grantee, at the time of delivery, both present and future covenants of fee simple ownership, free from encumbrances. RCW 64.04.030. A grantee may rely on the warranty deed as written; mere knowledge by the grantee of a defect in the title does not bar recovery for a breach of warranty. Foley v. Smith, 14 Wn. App. 285, 292-93, 539 P.2d 874 (1975). Any defects in title, including real property not conveyed or current leaseholds, must be expressly excluded from the conveyance in the warranty deed. See RCW 64.04.030; Foley, 14 Wn. App. at 292-93.
Generally, personal property becomes a fixture and part of the real property if: "(1) it is actually annexed to the realty, (2) its use or purpose is applied to or integrated with the use of the realty it is attached to, and (3) the annexing party intended a permanent addition to the freehold." Glen Park Assocs., L.L.C. v. Dep't of Revenue, 119 Wn. App. 481, 487, 82 P.3d 664 (2003) (emphasis added) (citation omitted). The annexing party's objective intent is the most important factor; subjective intent will not be considered. Id. at 490-91; SSG Corp. v. Cunningham, 74 Wn. App. 708, 711, 875 P.2d 16 (1994). An annexor's intent is determined at installation. Glen Park Assocs., 119 Wn. App. at 487. Factors to be considered include "the nature of the article affixed, [and] the relation and situation to the freehold of the annexor." Id. at 488; SSG Corp., 74 Wn. App. at 711. An annexor may be an owner, tenant, or stranger to the freehold. SSG Corp., 74 Wn. App. at 711.
"'When a property owner [annexes] the article to the land he is rebuttably presumed to have annexed it with the intention of enriching the freehold.'" Id. (quoting Western Ag Land Partners v. Dep't of Revenue, 43 Wn. App. 167, 173, 716 P.2d 310 (1986)); Glen Park Assoc., 119 Wn. App. at 490. "When a tenant erects a [structure] on leased land, absent an agreement to the contrary[,] the improvement becomes a part of the real property as soon as it is constructed and title passes to the owner of the realty." SSG Corp., 74 Wn. App. at 711-12 (emphasis added). "'When a person with no interest in the land affixes an article thereto in the furtherance of his own purposes, the presumption is that he intends to reserve title to the chattel in himself.'" Id. at 712 (quoting Liberty Lake Sewer Dist. 1 v. Liberty Lake Utils. Co., 37 Wn. App. 809, 813, 683 P.2d 1117 (1984)). Generally, "if the annexor's relationship to the land is such that by making a permanent accession to the land he will lose title to the chattel, evidence of an intent to retain ownership of the chattel is evidence of an intent not to make a permanent accession to the freehold." Id.
Here, Lamar signed leases with Devlin allowing Lamar to erect and maintain the billboards with Lamar retaining sole structure ownership. Thus, the billboards were not intended to become part of the realty, or fixtures. SSG Corp., 74 Wn. App. at 711-12. Notably, the record shows C 1031 received constructive notice of the leases in the title report giving it notice of the personal property nature of the billboards. And, C 1031 received a copy of Devlin's February 8, 2006 lease termination letter to Lamar. Therefore, C 1031 unpersuasively argues Lamar and Devlin intended permanent fixtures. C 1031 cannot rely upon facts presented in the later damages hearing and mentioned in a later billboard appraisal report to argue for permanent structures. The facts support Devlin's position that no intent existed to permanently affix the billboards.
Given this record, the superior court erred in granting summary judgment in favor of C 1031. The damages award is reversed. It follows that no attorney fees are due C 1031 for breach of the statutory warranty deed.
C. Attorney Fees
We have discretion to grant attorney fees under RAP 18.1(a) "[i]f applicable law grants to a party the right to recover reasonable attorney fees or expenses on review before either the Court of Appeals or Supreme Court."
Lamar requests an equitable award of attorney fees on appeal under Aldrich Hedman, Inc. v. Blakely, 31 Wn. App. 16, 19, 639 P.2d 235 (1982), contending its only involvement in this appeal is through the wrongful acts of Devlin and C 1031. As a general rule, attorney fees are recoverable solely by contract, statute, or a recognized ground of equity. Id. The Aldrich Hedman, Inc. court awarded attorney fees on equitable grounds as an element of consequential damages for a party's negligence. Id. at 19-20. Here, no consequential damages or negligence principles are involved. Lamar sued Devlin for breach of lease agreements containing no attorney fee provisions. Accordingly, we deny Lamar attorney fees.
C 1031 requests attorney fees on appeal under Double L. Props., Inc. v. Crandall, 51 Wn. App. 149, 153, 751 P.2d 1208 (1988), contending fees are appropriate since Devlin refused a tender of defense, requiring C 1031 Properties to defend its title. Based on the analysis above, C 1031 has not shown a defect in title requiring an action under the statutory warranty deed. Accordingly, we deny C 1031's attorney fee request.
Affirmed in part, reversed in part, attorney fee requests denied.
A majority of the panel has determined this opinion will not be printed in the Washington Appellate Reports, but it will be filed for public record pursuant to RCW 2.06.040.
Kulik, A.C.J., Sweeney, J., Concur.