### FILED SEPTEMBER 13, 2016 In the Office ofthe Clerk ofCourt WA State Court ofAppeals, Division Ill INTHE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION THREE RICKA. HOLMAN individually, and on ) behalfofWOLF CREEKHOLDINGS OF ) SPOKANE LLC, a WashingtonLimited Liability Company, Respondents,
V. BRIANW. BRADY and MOUNTAIN BROADCASTING, LLC, a Washington LimitedLiability Company, Appellants. 

### ) ) ) 

### ) ) ) ) ) 

### ) ) ) ) No. 33114-8-111

UNPUBLISHED OPINION

SIDDOWAY, J.

- Oneprocedural issue and two issues ofcontractconstruction, summarily resolved in the trial court, are raisedbythis dispute amongRickHolman and BrianBrady, theirjointly-owned limited liability company (LLC), and its lessee, which is controlledby Mr. Brady. We hold in Mr. Holman's favor thatthe trial courtproperly deniedthe motionto dismiss the derivative claims he asserted onbehalfoftheLLC. We hold inthe lessee's favor that its notice ofnonrenewal compliedwiththe terms ofits lease from thejointly-ownedLLC. Wehold inMr. Holman's favor thatunderthe terms ofthe LLC agreement, Mr. Brady lacked authority to agree, unilaterally, to new lease terms onthe LLC'sbehalf.No. 33114-8-III Holman v. Brady
We remand for further proceedings consistentwith this decision. 1 FACTS AND PROCEDURAL BACKGROUND Rick Holman and Brian Brady are each 50 percent member-owners ofWolfCreek Holdings ofSpokane LLC, which was established in October 1997. WolfCreek's sole asset is a building that it has leased at all relevanttimes to Mountain BroadcastingLLC
as a television studio and for related uses. Mountain is ownedby Northwest Broadcasting Inc. and Northwest BroadcastingLP both ofwhich are controlled by Mr. Brady.The original lease between WolfCreek and Mountainwas entered into on January 12, 1998, and it was amended on March 1, 1999. Itprovides for an initial 15- yearterm that is automatically extended for additional 5-yearterms "unlessthe Tenant shall give notice to the Landlord at least ninety (90) days priorto the Extension Date that the Tenant elects that the term ofthis Lease not be extended." Clerk's Papers (CP) at 39. Duringthe initial 15-yearterm ofthe lease, Mountain expressed unhappiness about the CPI2-adjusted rent, claiming it had become grossly out ofline with market rents. Jon Rand, the general manager ofMountain, wrote letters to Mr. Brady and Mr.

1During ourworkup ofthis appeal, we asked the parties to address whether the trial court had abused its discretion in certifying its summaryjudgmentdecisions as final under CR 54(b). 

### It may have, butboth sides askthat we decide the appeal, whichwe can and will do under RAP 2.3(b)(4). 2 Consumerprice index. 2No. 33114-8-111 Holman v. Brady
Holman in 2005 and 2009 seeking relief. Unmoved by the requests, Mr. Holman, on behalfofWolfCreek, periodically reminded Mountain ofthe rent increases that would go into effect on January 1ofthe upcoming year. In anticipation ofthe January 11, 2013 expiration ofthe original 15-year lease term, Mountain's lawyers dispatched a notice ofnonrenewal on September 20, 2012. It
was dated September 21, was signed by Mr. Rand, and was addressed to "Mr. Brian Brady, President, NorthwestBroadcasting, Inc.," at NorthwestBroadcasting's Okemos, Michigan, address. CP at 178. The letter said it was being sentto Mr. Brady "inyour position as a member ofWolfCreek Holdings ofSpokane LLC." CP at 178. Itwas sent for overnight delivery via Federal Express and was received by Mr. Brady on September 21. Consistent with Mountain'sprior complaints, the reason Mr. Rand gave for its decision not to renew was the above-marketrent. The letter said that Mountain was then paying $23.52 per square foot on a triple net basis, thatthe rent would increase to $24.35 per square foot ifthe lease were extended, and that market research indicatedthat the "market for similarproperties is in the $6-9 range (also on a triple net basis)." CP at 178. Mr. Rand proposed a newthree-year lease under which Mountainwouldpay $9 per square foot. On October 4, 2012, Mr. Brady responded to Mr. Rand, acknowledging Mountain's election not to extend the lease. He counterproposed a five-year lease at a 3No. 33114-8-III Holman v. Brady

rate of$15 per square foot with annual CPI adjustments as "more appropriate." CP at 131. Mountain made a further counterproposal and Mountain and Mr. Brady soon agreed
on a new three-year lease with a CPI-adjusted rental rate beginning at $14 per square foot. OnNovember 30, Mr. Holman learned for the first time ofMountain's nonrenewal notice and the resulting negotiations, through a letter from Mr. Brady. Despite Mr. Brady's representation that the rental rate underthe new lease "is more than 150% ofthe average market rate," CP at 127, Mr. Holman objected to the proposed terms for a new lease. Over Mr. Holman's objection, Mr. Brady signed a new lease with Mountain on behalfofWolfCreek on or about January 10, 2013. ProceduralHistory On March 8, 2013, Mr. Holman, individually and on behalfofWolfCreek, filed suit against Mr. Brady and Mountain. The complaint alleged five causes ofaction. The first, a derivative claim on behalfofWolfCreek, was that Mountain was in breach ofthe 1998 lease on and after January 11, 2013, by failing to pay the rent required by that lease. According to Mr. Holman, Mountain's attempted notice ofnonrenewal did not comply with the lease terms. The second-an alternative derivative claim, ifthe notice ofnonrenewal was effective-was that Mountain was in breach ofthe 1998 lease on and after January 11, 2013, by failing to pay holdoverrent required by that lease. Mr. Holman contendedthat 4

### No. 33114-8-III Holman v. Brady


### Mr. Brady lacked authority to bind WolfCreekto a new lease and Mountain was aware ofthat fact. The three remaining causes ofaction were asserted against Mr. Brady as both a derivative claim and a claim by Mr. Holman, and were all based on an asserted breach of the WolfCreek LLC agreement by Mr. Brady in unilaterally accepting the nonrenewal notice, entering into a new lease, and participating in Mountain's breach ofthe 1998 lease agreement for his personal gain. The legal claims asserted were for breach ofthe LLC agreement, breach ofthe covenant ofgood faith and fair dealing, and breach ofhis fiduciary duty. Mr. Brady unsuccessfully moved to dismiss the complaint on several grounds, including an asserted failure to comply with the requirements ofCR 23.1. The trial court construed the rule as not applying to LLCs. Over 15 months later, the parties filed cross motions for summaryjudgmentbased
on disputes over the meaning ofkey provisions ofthe LLC agreement and the lease. In December 2014, the court granted partial summaryjudgment in favor ofWolfCreek and Mr. Holman, concluding that they were entitledtojudgment as a matter oflaw that Mountain's attempted notice ofnonrenewal failed to comply with the notice provision of the lease, Mr. Brady breached the LLC agreement by treating Mountain's notice of nonrenewal as effective and negotiating a new lease, the 2013 lease was invalid, and Mountain was in breach ofthe 1998 lease. 

### 5No. 33114-8-III Holman v. Brady
Mr. Holman asked the court for a CR 54(b) certification and entry ofa final judgment on the two contract claims, which the courtprovided. Although damages for Mountain's failure to pay the rent required by the 1998 lease on and afterJanuary 11, 2013, were to be determined at a later date, ajudgmentwas entered awarding to Mr. Holman, individually, the fees and costs he had advanced in pursuing the derivative claim for breach ofthe lease. Mr. Brady and Mountain appeal. ANALYSIS Mr. Brady and Mountain assign errorto the trial court's (1) denial oftheir motion to dismiss the derivative claims against Mountain,3 (2) denial oftheir motion for summaryjudgment, (3) granting of

### Mr. Holman's motion for partial summaryjudgment, and (4) entry of judgmentin favor ofMr. Holman individually. We first address the trial court's denial ofthe motion to dismiss the derivative claims, then turn to its decision on both sides' summaryjudgmentmotions dealing withthe asserted breach ofthe 1998 lease, next tum to its decisions on both sides' summaryjudgmentmotions on the asserted breach ofthe LLC agreement, and finally turn to its entry of judgment in favor of

### Mr. Holman individually.

3 Although the decision on the motion to dismiss was not mentioned in the superior court's CR 54(b) certification, itprejudicially affects decisions thathave been appealed and Mr. Brady and Mountain are entitledto assign error to it. RAP 2.4(b). 6

### No. 33114-8-111 Holman v. Brady


### I. Motion to dismiss derivative claims 

### Mr. Brady's and Mountain's early motion to dismiss Mr. Holman's derivative claims contended that his complaint was required to comply with CR 23.1, but did not. 

### It also contended that it is improper for a plaintifftojoin derivative and personal claims. The trial courtrejected both arguments, as do we. A. CR23.1 does not apply CR 23.1 requires verification ofthe complaint in "aderivative action brought by
one or more shareholders or members to enforce a right ofa corporation 

### or ofan unincorporatedassociation." 

### (Emphasis added.) 

### It imposes the following pleading requirements: that the complaint allege the plaintiffwas a shareholder or member at the time ofthe complained-oftransaction or acquired its shares ormembership thereafterby operation oflaw; that the action is not a collusive one to conferjurisdiction on the court; and the plaintiffsparticular efforts, ifany, to obtain relieffrom the directors, shareholders, or members. With the exception ofthe allegation ofnoncollusiveness, the
same verification and virtually identical pleading requirements for derivative shareholder actions appear in the Washington Business Corporation Act, title 23B RCW, at RCW 23B.07.400(1) and (2). Mr. Brady and Mountain argue thatMr. Holman's complaint was not verified and did not allege that the action was not a collusive one to conferjurisdiction.

7

### No. 33114-8-III Holman v. Brady


### CR 23.1, in language virtually identical to the rule as it exists today, was adopted along with the other Civil Rules for Superior Court effective July 1, 1967. 71 Wn.2d xxiii, lxiii-lxiv. 4 

### At the time, limited liability companies did not exist. Wyoming and Florida would later enact legislation authorizing the creation oflimited liability companies in 1977 and 1982, respectively, but uncertainty as to whether an LLC would be classified as a partnership for federal tax purposes kept most state legislatures on the sidelines until the 1990s. Susan Pace Hamill, The Origins Behindthe LimitedLiability Company, 

### 59 OHIO 

### ST. L.J. 1459, 1465-70 (1998). In 1988, the Internal Revenue Service issued Revenue Ruling 88-76, holding that because an LLC established in Wyoming lacked the corporate characteristics ofcontinuity oflife and free transferability of interests, it would be classified as a partnership rather than as a corporation. 1988-2 C.B. 360. Broad enactment ofstate laws authorizing LLCs followed. Hamill, 59 OHIO 

### ST. L.J. at 1475-76. The Washington Legislature first authorized the formation oflimited liability companies in 1994. LAWS OF 

### 1994, ch. 211, §§ 1001-04, at 1054. The initial LLC legislation included provisions for derivative LLC member actions. Former RCW 25.15.370-.385 (1994). 5 

### But unlike the procedure for derivative corporate

4

### By an order ofthe Washington Supreme Court dated April 28, 2015, CR23.1 was amended so as to be gender-neutral. 182 Wn.2d 1233-34. 5 

### Legislation enacted in 2015 repealed all ofthe then-existing provisions of 8No. 33114-8-III Holman v. Brady
shareholder actions thatthe legislature had enacted only five years earlier,6 and unlike CR23.1, the derivative LLC member action provisions did not include a verification requirement. They also omitted any requirement to disclaim collusionto confer jurisdiction.7
chapter 25.15 RCW and adopted newprovisions. A staffsummary ofpublic testimony on the original bill explains: NewLLC filings in Washington outnumber new corporation filings by a 7: 1ratio. Washington's current LLC law is similarto the original LLC law passed in 1994. The current LLC law should be changed to bring Washington's laws in line with similar laws in leading states and with current LLC business practices. This bill is the work ofthe Washington State BarAssociation Partnership and LLC Law Committee in which 20 business lawyers from across the state tookpart in a line-by-line review of the current LLC law over several years. The proposed changes will make the LLC law more user friendly for many non-lawyers who form and operate LLCs. This bill promotes uniformity among LLCs and uniformity between Washington's LLC law and its otherbusiness entity laws. Senate Bill Report, SENATE BILL 5030, 64th Leg. (2015) (as reported bythe Senate Committee on Law & Justice). The law, based on later-proposed Substitute Senate Bill 5030, took effect on January 1, 2016. LAWS OF 2015, ch. 188, § 104. It does not affect actions commenced, proceedings brought, orrights accrued before that date. Id. at § 106. 6 The statutory provision addressingprocedure for derivative shareholder actions, codified at RCW 23B.07.400, was adopted by LAWS OF 1989, ch. 165, § 79. Theprior business corporation act, former chapter 23A RCW, had included a derivative action provision that contained standing requirements, but no pleading requirements. Former RCW 23A.08.460 (1965). 7 Professor Tegland has observed that a verified disclaimer ofcollusion is required by the federal rule on which CR 23 .1 was patterned in orderto preventparties from acquiring diversityjurisdictionwhere·federaljurisdiction would not otherwise exist, and that "[t]heprovision is unlikely to become an issue in Washington's superior courts, which are courts ofgeneraljurisdiction." 3AKARL B. TEGLAND, WASHINGTON PRACTICE: RULES PRACTICE CR23.1, at 561-62 (6th ed. 2013) (citing 7C CHARLES ALAN WRIGHT, ET AL., FEDERAL PRACTICE & PROCEDURE§ 1830). 9No. 33114-8-III 

### Holman v. Brady By its terms, CR 23.1 does not apply to Mr. Holman's action, which was not brought "to enforce a right ofa corporation or ofan unincorporated association" but was brought, instead, to enforce a right ofa limited liability company. A limited liability company is not a corporation8 and it is not an unincorporated association. 9 Mr. Brady nonetheless points to RCW 1.16.080, which was amended in 1996 to provide that "[ u]nless the context clearly indicates otherwise, the terms 'association,' 'unincorporated association,' and 'person, firm, or corporation,"' shall be construed to include LLCs. 

### See LA

### ws OF 1996, ch. 231, § 1. The statutory change is unpersuasive for two reasons. First, the purpose ofthe 1996 legislation was to make technical changes and clarifications to the 1994 LLC legislation based on a review by the Washington Bar Association, and the legislation was primarily devotedto making changes in chapter 25.15 RCW-yet the legislature made no change to the derivative LLC member action

8 "A limited liability company is not a corporation," but "ha[s] 'some features of corporations and some features ofpartnerships."' 

### UnitedStates v. Hagerman, 545 F.3d 579, 581 (7th Cir. 2008) (quoting

### McNamee v. Dep 't of the Treasury, 488 F.3d 100, 107 (2d Cir. 2007)). Washington's House Committee onthe Judiciary also explained the difference between LLCs, corporations, and other entities in support ofthe 1994 enactment ofwhatbecame chapter 25.15 RCW. FINAL B. 

### REP. ON SECOND SUBSTITUTE H.B. 1235, at 1-3, 53rd Leg. (Wash. 1994). 9 "An unincorporated association generally is formed by the voluntary action ofa number ofindividuals in associating themselves together under a commonname for the accomplishment ofa lawful purpose. It is 'abody ofindividuals acting together for the prosecution ofa common enterprise without a corporate charterbut upon methods and forms used by corporations."' 

### Ha/me v. Walsh, 192 Wn. App. 893,904,370 P.3d42 (2016) (quoting 6 AM. JUR. 2D Associations and Clubs§ 1 (2008)). 10No. 33114-8-111 Holman v. Brady prov1s10ns. FINAL B. 

### REP. ON ENGROSSED SECOND SUBSTITUTE S.B. 6168, 54thLeg. (Wash. 1996); LA

### ws OF 1996, ch. 231, 

### § § 1-13. Second, and more fundamentally, RCW 1.16.080 provides general definitions for purposes ofthe entire code, but does not purportto define terms for purposes ofcourtrules. In the 20 years since the legislature
saw fit to include LLCs in general definitions underRCW 1.16.080, our Supreme Court has not seen fit to amend CR23.1 to apply to derivative LLC member actions. Mr. Brady also cites two decisions by lower federal courts thathave applied Federal Rule ofCivil Procedure (FRCP) 23 .1 to derivative claims asserted by a member
on behalfofanLLC: Taylor v. Moskow, 2013 WL 5508157 at *4 (D. Mass. 2013), and Weeks LandingLLCv. RCMPEnterprises LLC, 439 B.R. 897,913 (Bankr. M.D. Fla. 2010). Neither decision engages in any critical examination ofthe issue. And neither involves the legislative history that we encounter: two statutes, adopted close in time and well after CR23.1, which explicitly impose differentpleading and verification requirements for derivative actions depending on whetherthe derivative claim is asserted by a shareholder on behalfofa corporation, orby a member onbehalfofan LLC. Court rules and statutory provisions should be harmonized and both given effect if possible. State v. Ryan, 103 Wn.2d 165,178,691 P.2d 197 (1984) (where they conflict, the court's rulemaking power is supreme). Theplain language ofa court rule does not require construction. State v. Punsalan, 156 Wn.2d 875, 879, 133 P.3d 934 (2006) (quoting State v. Delgado, 148 Wn.2d 723, 727, 63 P.3d 792 (2003)). Since 11No. 33114-8-III Holman v. Brady
CR 23.1 was adopted before LLCs were even a gleam in a tax lawyer's eye, and LLCs
are different from corporations in ways that could explain why the legislature would enact different derivative action procedures for them Uust as it has for limited partnerships10), we will not construe CR23 .1 as applying more broadly than its plain language. B. There was no improperjoinder ofclaims Mountain also alleges Mr. Holman improperlyjoined derivative and personal claims. He relies on two distinct lines ofcases: Hames v. Spokane-Benton County Natural Gas Co., 118 Wash. 156,203 P. 18 (1922) and other early Washington cases, and a more recent collection offederal decisions out ofthe Southern District ofNew York. Hames disallowed thejoinderofsuch claims based onprocedural requirements then imposed by statute: former Remington's Code § 296. As described by the court, the statute permitted thejoinder in the same suit oftwo causes ofaction in some cases, specifying the types ofcases in whichjoinderwas permitted but with alljoinder subject to the following proviso:

10 RCW 25.10.706, authorizing derivative actions to enforce a right ofa limited partnership, requires neither a verified complaint nor a disclaimer ofcollusion to confer jurisdiction. 12No. 33114-8-III Holman 

### v. Brady
"Butthe causes ofaction so united must affect all ofthe parties to the action, and not require differentplaces oftrial, and must be separately stated." 118 Wash. at 159 (quoting REM. CODE§ 296). The plaintiffin Hames pleaded a derivative shareholder claim in which he sought to recover, for the benefit ofall shareholders, certain excessive expenses, salaries and commissions that corporate officers and trustees were alleged to have paid themselves. Id. at 157. His second cause ofaction was to recover money he had loaned to the corporation, and to foreclose on collateral. Id. The court held it "tooplain for argument" that the causes ofactionjoinedby the plaintiffdid not"'affect all ofthe parties to the action."' Id. at 159. The only other Washington case that cites Hames for this holding onjoinder is Harmon & Co. v. Eastern Furniture Co., 144 Wash. 16, 22, 255 P. 964 (1927), which likewise held that Remington's Code§ 296 did notpermit the plaintiffto join claims against different defendants in the same suit, becausejoinderunder the rule
was only permitted "where all ofthe parties to the action are affected by all ofthe causes ofaction." The limitation onjoinderprovided by Remington's Code § 296 and addressed in Hames and Harmon no longer exists. Instead, CR 20(a) provides in relevantpart: All persons may bejoinedin one action as defendants ifthere is asserted against themjointly, severally, or in the alternative, any right to reliefin respect ofor arising out ofthe same transaction, occurrence, or series of transactions or occurrences and ifany question oflaw or fact common to all defendants will arise in the action. A plaintiffor defendant need notbe 13

### No. 33114-8-III Holman v. Brady
interested in obtaining or defending against all the reliefdemanded. Mr. Holman'sjoinder ofderivative and individual claims is permitted by CR20(a). The other cases relied on by Mountain involve the application by the federal district c?urt for the Southern District ofNew York ofits strict conflictjurisprudence under FRCP 23.1. As explained in Ryan v. AetnaLifeInsurance Co., 765 F. Supp. 133, 135 (S.D.N.Y. 1991)-oneofthe only reported decisions cited by Mountain-a dispute existed over whether the courts ofthe Southern District had formulated a "per se rule that prohibits a plaintifffrom pursuing simultaneous direct and derivative actions." Plaintiff Ryan not only disputed that aper se rule existed, he also argued that "the weight of authority, largely from other Circuits, is against aperse rule." Id. TheRyan court declined to decide whether atrue per se rule existed, but concludedthat in applying FRCP 23.1, courts in the Southern District ofNew York had applied a strict standard in scrutinizing simultaneous direct and derivative actions for signs ofactual conflict. It 

### concluded that the plaintiffbefore it had an actual conflict ofinterest that would prevent him from fairly and adequately representing the interests ofthe shareholders as required by the federal civil rule. Id. at 135-37. We are not in the Southern District ofNew York and are not applying FRCP 23.1, or, for that matter, CR 23.1. And unlike the defendants in Ryan, Mountain does not identify any actual conflict ofinterest on the part ofMr. Holman. Instead, it argues that this dispute between two 50 percent members ofan LLC is "notthe type ofmatter suited 14

### No. 33114-8-III Holman v. Brady


### for resolution by derivative action" and "[t]heproperprocedural mechanism for Holman to have utilized was a direct claim against Brady, seeking declaratory relief." Br. of Appellants at 28-29. We disagree. Insofar as Mr. 

### Holman was seeking to enforce a right ofWolfCreek, a derivative LLC member action was aproperway to proceed. fl Breach of lease

- allegedly ineffective nonrenewal 

### Mountain next challenges the trial court's ruling that it failed to give an effective notice ofnonrenewal and continues to be bound by the 1998 lease. When reviewing an order for summaryjudgment, we engage in the same inquiry
as the trial court. Folsom v. BurgerKing, 

### 135 Wn.2d 658, 663, 958 P.2d 301 (1998). Summaryjudgment is proper when a moving party shows there is "no genuine issue as to any material fact and that the moving party is entitled to ajudgment as a matter oflaw." CR 56(c). "Contract interpretation is a question oflaw only when ' (1) the interpretation does not depend on the use ofextrinsic evidence, or (2) only one reasonable inference can be drawn from the extrinsic evidence."' Dice v. City of Montesano, 

### 131 Wn. App. 675, 684, 128 P.3d 1253 (2006) (quoting Tanner Elec. Coop. v. Puget SoundPower &Light, 

### 128 Wn.2d 656, 674, 911 P.2d 1301 (1996)). With respect to the issues presented on appeal, no disputes ofmaterial fact have been identified that would prevent contract interpretation as a matter oflaw. Under Washington's objective manifestation theory ofcontracts, "[c]ourts ascertain the parties' intent by focusing on the 'objective manifestations ofthe 15No. 33114-8-III Holman v. Brady agreement, rather than on the unexpressed subjective intent ofthe parties,' giving terms their ordinary, usual, and popular meaning unless the agreement clearly demonstrates a contrary intent." Wash. Fed. Sav. &LoanAss 'n v. McNaughton Grp., 179 Wn. App. 319,326,319 P.3d 805 (2014) (quotingHearst Commc'ns, Inc. v. Seattle Times Co., 154 Wn.2d 493, 503, 115 P.3d 262 (2005)). When a contract involves repeated occasions for performance, our construction will also take into account any "'sequence ofprevious performance by eitherparty after an agreement has been entered into, '" that demonstrate
a common basis ofunderstanding. Spradlin RockProds. Inc. v. Pub. Util. Dist. No. 1 of Grays Harbor County, 164 Wn. App. 641,656,266 P.3d 229 (2011) (quoting BLACK'S LAW DICTIONARY 405 (9th ed. 2009)).

states: The general provision on notice included in the parties' lease, Article 

### XXIII,

All notices or demands ofany kind required or desired to be given by Landlord or Tenant hereunder shall be in writing and shall be deemed delivered 48 hours after depositing the notice or demand in the United States mail, certified or registered, postage prepaid, addressed to Landlord or Tenant respectively at the addresses set forth after their signature at the end ofthis Lease. CP at 60 (Article 

### XXIII). The trial court concluded that the nonrenewal notice provided by Mountain was deficient in two respects: it was not sent via certified or registered mail and, having been addressed only to "Mr. Brian Brady, President, Northwest Broadcasting, Inc.," at Mr.
16

### No. 33114-8-III Holman v. Brady 

### Brady's Michigan address, it was not provided to the "Landlord." CP at 178. A. Manner ofdelivery Mountain properly asks that our construction ofthe agreements at issue in this
case not be colored by evidence suggesting that it and Mr. Brady took advantage of contractual provisions in a manner that kept Mr. Holman in the dark and enabled Mr. Brady to unilaterally negotiate a new lease for Mountain. Mr. Holman has claims for reliefbased on breach offiduciary duty and breach ofthe covenant ofgood faith and fair dealing in which such evidence might be relevant, but those claims are notbefore us. In construing the lease and the LLC agreement, our objective is to discern the parties' intent in entering into the lease in 1998. Schorzman v. Kelly, 

### 71 Wn.2d 457,460,429 P.2d 217 (1967). Mountain contends the lease requirement that notice "shall be in writing and shall be deemed delivered 48 hours after depositing the notice
... in the United States mail, certified or registered" does not require that the notice be sentby certified orregistered mail; it means only that ifcertified or registered mail is used, the sender may rely on the deemed date ofdelivery for the time-sensitive notice and demand provisions included in the lease. 11 

### By being able to rely on a deemed date ofdelivery, a party will not need to

11 

### Among time-sensitive notice and demand provisions included in the lease are those requiring notice ofnonrenewal under Article II, notice ofunsatisfactory condition ofpremises under Article IV, landlord demand to remove improvements under Article VII, landlord notice ofintention to restore destroyed premises under Article XII, notices 17No. 33114-8-III 

### Holman v. Brady
determine or establish an actual delivery date. WolfCreek contends, and the trial court agreed, thatthe provision means that certified or registered mail is the only permitted method for giving notice. Given the plain structure ofthe provision, Mountain is correct. The critical language is that notices or demands 

### "shall be in writing and 

### shall be deemed delivered 48 hours after depositing the notice or demand in the United States mail, certified or registered, postage prepaid." CP at 60 (emphasis added). Readingthe noticeprovision
as an average person would, and giving the words their ordinary meaning, use ofthe words "shall be in writing" creates a requirementthatthe notice be provided in a written form. Use ofthe words "shall be deemed delivered," by contrast, does not create a requirement, it creates a presumption ofdelivery. We recognize that a casual reader might initially readthe provision as dictating a required form ofdelivery, iffor no otherreason thanprovisions ofthis sort often do. But
a careful (yet not hypertechnical) reading reveals otherwise. The trial court erred when it concluded Mountain's notice ofnonrenewal was ineffective because it was not sentvia certified or registered mail.

ofdefault under Article XVI, notice oftermination for failure to cure default under Article XVI, and notice ofrequest that tenantprovide estoppel certificate under Article XVII. 18

### No. 33114-8-III Holman v. Brady


### B. Delivery "to the Landlord" Article II ofthe lease provides for the initial 15-yearterm and automatic extension for successive 5-year terms unless the Tenant shall give notice to the Landlord

### at least ninety (90) days prior to the Extension Date that the Tenant elects that the term ofthis Lease not be extended (the "Term"), provided however, that such Term shall, in any event, expire on January 12, 2098. CP at 39 (emphasis added). Mountain contends that notice addressed to Mr. Brady and explicitly sent to him in his capacity as a 50 percent member-manager ofthe LLC was "notice to the Landlord" within the meaning ofArticle II. Mr. Holman contends, and the trial court agreed, that for notice to be given to the landlord, it had to be given to "WolfCreek," and had to be sent to both Mr. Brady and Mr. Holman. Article 

### XXIII, the previously-discussed general provision on notice, is the only lease provision that suggests where notice should be sent. 

### It provides that to be deemed delivered within 48 hours, a certified orregistered notice should be addressed to the landlord "atthe address[] set forth after [its] signature at the end ofthis Lease." CP at 60. A party could reasonably look to this provision as identifying an effective address for any 

### notice, yet no address was set forth under the signature ofMr. Brady, who signed the original lease. The 1999 amendment to the lease did not touch on where notices should be sent, nor was any address for WolfCreek set forth under the signature ofMr. Holman,
19No. 33114-8-III Holman v. Brady
who signed the amendment. The LLC agreement would be a possible source ofan address for WolfCreek. It states that "[t]he address ofthe principal place ofbusiness ofthe Company is 4600 South Regal Street, Spokane, Washington 99223." CP at 16. But at the time Mr. Rand's September 2012 notice ofnonrenewal was sent, WolfCreekhad no presence at that location; the South Regal address was for the television studio property WolfCreek was leasing to Mountain. IfMr. Rand's letter had been sent to WolfCreek'sprincipal place ofbusiness as set forth in the LLC agreement, then Mountain would have been sending the notice ofnonrenewal to itself. Because WolfCreek was a single-asset LLC, leasing its onlyproperty under a long-term lease, it hadno place ofbusiness as ofSeptember 2013. The lease is silent as to where notice "to the Landlord" should be directed. Mr. Holman argues that Mountain had "consistently" sent correspondence and necessary business informationto not only Brady, but also Holman, so its previous performance is relevant in construingthe requirementto provide notice ofnonrenewal to the Landlord. Br. ofResp't at 30. But ofthe 10 exhibits in the record thatMr. Holman cites for that proposition, only two-Mr. Rand's 2005 and 2009 letters complaining about the rent-were directed by Mountain to both Mr. Brady and Mr. Holman. 12 And neither

12 Two ofthe exhibits were e-mail communications between Mr. Brady and Mr. Holman. The remaining six exhibits are appraisal-related communications and materials 20No. 33114-8-III Holman v. Brady piece ofcorrespondence was a notice or demand required bythe parties' lease. Two pieces ofcorrespondence over 15 years, neither ofwhich was a notice or demand required by the lease, do not inform our construction ofwhat notice "tothe Landlord" under the lease requires. Here again, we seekto discern what WolfCreek and Mountain, both Washington LLCs, intendedto require in enteringinto the lease in 1998. Each was member-managed and owned by two members. Present and former provisions ofchapter 25.15 RCW dictate somerequirements for organizing and operating an LLC, contain a number ofdefault provisions on matters in the event an LLC agreement is silent, but largely permit members ofan LLC to fashion their own agreement. 

### See, e.g., former RCW 25.15.050 (1994); currentRCW 25.15.018; former RCW 25.15.800(2) (1994); and current RCW 25.15.801(2). In discerning the intent ofthe parties as to who could initiate or respond to business contacts on behalfof each LLC, we consider both the statutes in effect at the time, the parties' LLC agreements, and, whetherMountainwas aware ofany limitations on member authority provided by WolfCreek's LLC agreement.
created between January 6 and February 15, 2012, that, on their face, do not appear to have been provided to Mr. Holman. Mr. Holman's declaration, to which they are appended, describes them as information "providedto me by Defendants during discovery, and from [the appraiser] in response to a subpoena." CP at 421. Elsewhere in his declaration, Mr. Holman states that "[u]ntil November 30, 2012, I was unaware ofthe appraisal that was done in January 2012." CP at 422. 21No. 33114-8-III Holman v. Brady
We begin with the relevant statutes. Atthe time notice was given, former RCW 25.15.150(1) (1996) provided that for a member-managed LLC, "Management of the business or affairs ofthe limited liability company shall be vested in the members; and
... each member is an agent ofthe limited liability company for the purpose ofits business." As discussed in further detail below, the statute allowed restriction ofthe management right ofmembers in the LLC agreement and provided that a thirdparty who
was aware ofsuch a restriction could not enforce the restricted member's unauthorized agreement. WolfCreek's LLC agreement, ofwhich Mountain, through Mr. Brady, had notice, provided in its Managementprovision, Article V, that Section 1. Management. The Company will be operated by the members and no managerwill be appointed. No member, nor any group of members not including all themembers ofthe Company, shall have continuing exclusive authority to make independent management decisions. Section 2. Authority ofMembers to Bind Company. All members ofthe Company shall have the authority to obligate or bind the Company in connection with any matter. CP at 20. The LLC agreement thus did not negate eachLLC member's statutory agency for the LLC except to provide, as to "Management,"that no member (or group) had "continuing exclusive authority," and, as to "Authority ofMembers to Bind Company," that the authority was vested in "all members." The 1998 lease does not require that a notice ofnonrenewal be accepted by Wolf Creek in orderto be effective. In passively receiving notice, Mr. Brady did not make a 22

### No. 33114-8-III Holman v. Brady


### decision for WolfCreek, or obligate it, or bind it. Since each member ofWolfCreek was
an agent ofthe LLC for the purpose ofits business except as limited by the LLC agreement, and the WolfCreek LLC agreement did not limit a member~s agency to receive notice, the inferable intent ofthe parties to the lease was that notices and demands could be directed to a single member-manager ofthe landlord ortenant. Nothing in the lease suggests otherwise. And since each LLC could and might admit additional members, common sense suggests that no one intended that a party giving notice would be required to determine the identity and whereabouts ofall ofits contraparty's current members and dispatch notice to every one ofthem. A principle we bear in mind in construing contracts is to favor a reading that will avoid an absurd or unreasonable result. Lawrence v. Northwest Cas. Co., 

### 50 Wn.2d 282, 285, 311 P.2d 670 (1957). Having determined that notice to WolfCreek could be directed to its membermanager and agent Mr. Brady, we tum to Mr. Holman's argument that the notice was not addressed to WolfCreek. We find no problem with the fact that it was sent to Michigan, where Mr. Brady lives, since no business address for WolfCreek existed, and no deemed address for serving notice on WolfCreek had everbeen identified. We understand Mr. Holman to argue that even ifdirected to Mr. Brady in Michigan, the notice shouldhave included an address block ofthe following sort:

23No. 33114-8-111 Holman v. Brady


### WolfCreek Holdings ofSpokane, LLC Attn: Mr. Brian Brady, member 2111 

### University Park Drive Suite 650 

### Okemos, Michigan 48864 

### We see no substantive difference between that and Mr. Rand's letter to Mr. Brady, which opened with the statement, "I am writing you in yourposition as a member ofWolf Creek Holdings ofSpokane LLC." CP at 178. 

### Because Mr. Brady's statutory agency to accept notice was not limited by the WolfCreekLLC agreement and the parties' lease did not impose the technical address requirements urged by Mr. Holman, the trial court erred when it concluded that Mountain's notice ofnonrenewal was ineffective because it was sent only to Mr. Brady. Ill Breach of LLCagreement- unilateral execution of lease 

### Mr. Brady's next assignment oferror is to the trial court's summaryjudgment ruling that the lease between WolfCreek and Mountain executed by Mr. Brady in January 2013 

### is invalid because Mr. Brady entered into it without disclosing its terms to Mr. Holman and obtaining his consent. Here, we agree with the trial court. Afterproviding that "each member [ofa Washington LLC] is an agent ofthe limited liability company for the purpose ofits business," former RCW 25.15.150(1) 

### goes on to provide that

24

### No. 33114-8-III Holman v. Brady
the act ofany member for apparently carrying on in the usual way the business ofthe limited liability company binds the limited liability company unless the memberso actinghas infact no authority to act for the limited liability company in theparticular matter andtheperson with whom the member is dealing has knowledge of thefact that the member has no such authority. (Emphasis added.) Addressing authority to act, former RCW 25.15.150(1) provides that "the members shall have the right and authority to manage the affairs ofthe limited liability company and to make all decisions with respect thereto," with that right and authority "[s]ubject to any provisions in the limited liability company agreement orthis chapter restricting or enlarging the managementrights and duties ofany person or group or class ofpersons." Since the members ofWolfCreek made complete provision for Management in Article V oftheir LLC agreement, it is that provision that controls whether Mr. Brady had the actual authority to act for WolfCreek in negotiating and reaching agreement on new lease terms with Mountain. The relevant provision ofthe LLC agreement is Section 2 ofArticle V, which states, "All members ofthe Company shall have the authority to obligate or bind the Company in connection with any matter." CP at 20. While Section 1 ofthe article deals
more generally with operation ofthe LLC and management decisions, at issue here is authority to bind the LLC, so Section 2, as the more specific provision, controls. Diamond "B" Constructors, Inc. v. Granite Falls Sch. Dist., 117 Wn. App. 157, 165, 70
25

### No. 33114-8-III Holman v. Brady


### P.3d 966 (2003) (a specific contractterm controls over a general term). Theparties dispute whether "all members" in Section 2 means any member (Mountain's contention)
or all members acting collectively (Mr. Holman's). In Perkins Coie v. Williams, 

### a case involving statutory construction, the court stated that "[t]he plain and ordinary meaning of[the word 'all'] is '[b]eing or representing the entire or total number, amount, or quantity.'" 84 Wn. App. 733, 737, 929 P.2d 1215 (1997) (third alteration in original) (quoting theAmericanHeritage Dictionary of the English Language 

### 47 (3d ed. 1992)). 

### It is particularly clearthat "all" members should be plainly read to mean "the entire ortotal number ofmembers" in the
case ofthe WolfCreek LLC agreement, because elsewhere in the agreement-wherethe intent is to authorize any one ofthe LLC's members to act on its behalf-theterm "any member" is used. CP at 33 (Article XIII, Section 1, authorizing "[a]ny member" to execute and deliver certain agreements for and in the name ofthe LLC). The use ofthe phrase "all members" in one provision ofthe lease and the phrase "any member" elsewhere implies an intent that they have different meanings. To conclude otherwise fails to give effectto eachprovision ofthe contract. State Farm Mut. Auto. Ins. Co. v. Ruiz, 

### 134 Wn.2d 713,721,952 P.2d 157 (1998) (citingMcDonaldv. State Farm Fire & Cas. Co., 

### 119 Wn.2d 724, 734, 837 P.2d 1000 (1992)). Finally, requiring agreementby two 50 percent member owners in orderto obligate the LLC is a more reasonable approach to the challenge ofequal ownership than 26No. 33114-8-III Holman v. Brady
is the alternative ofequal rights in each memberto bind the LLC to conflicting agreements with differentparties. Implicit in the principle that we construe contracts to avoid absurd orunreasonable results is the beliefthat the parties do not intend to create unworkable agreements. Despite the Managementprovision that authority to obligate WolfCreekresides in "all members," Mountain asks us to considerthree otherprovisions it contends support its positionthat Mr. Brady could unilaterally commit WolfCreekto a new lease. All three
are inapposite. Mountain points to Article IV ofthe LLC agreement, dealing with Voting, which controls the voting power ofmembers. Subsection 2(a) ofthe Article requires majority approval ofmatters required by former chapter 25.15 RCWto be approved by members, and Subsection 2(b) requires majority approval offive actions that would alter members' rights, obligations, or interests provided by the LLC agreement. Because entering into a lease does not fall within the member actions requiring majority approval underArticle IV, Section 2, Mountain argues that Mr. Holman's agreementto the 2013 lease was not required. The argument conflates management authority with ownership rights. The distinction is clear in a corporation, in which the management group will ordinarily be different from the shareholder group. Even in a closely-held corporation, where the two groups will be overlapping or conceivably identical, management action is taken wearing 27No. 33114-8-III Holman v. Brady

a management hat (e.g., director, committee member, or officer) and pursuant to managementprocesses, while owner action is taken wearing an owner hat (shareholder), pursuant to shareholder action processes. In a member-managed LLC, the management group and the owner group will be identical and members will not have two hats, butthe distinction between the members-as-managers' conduct ofbusiness and members-asowners' approval oforganic changes still obtains. This is reflected in former chapter 25.15 RCW, which addresses management ofan LLC at former RCW 25.15.150 and separately (and differently) addresses voting rights at former RCW 25.15.120 (1994). WolfCreek's LLC agreement likewise addresses management and voting distinctly and differently in its Article IV (Voting) and Article V (Management). It is Article V, dealing with the members-as-managers' conduct ofbusiness, that controls when agreement to a lease is at issue-notArticle IV. Mr. Brady next points to Article XIII, Section 1ofthe LLC agreement, dealing with execution ofdocuments, whichprovides that "[a]ny member
... shall have the powerto execute and deliver
... leases
... for and in the name ofthe Company." CP at 33. As used in Article XIII, "execute" means "To make (a legal document) valid by signing; to bring (a legal document) into its final, legally enforceable form <each party executed the contract without a signature witness>." BLACK'S LAW DICTIONARY 689 (10th ed. 2014). When read together with the otherprovisions ofthe LLC agreement, this provision delegates ministerial execution authority. Otherwise, Article V, dealing 28No. 33114-8-III 

### Holman v. Brady
with Management, would be superfluous-and one ofthe principles we apply to ascertain the intent ofcontracting parties is to harmonize all ofthe provisions ofa contract so that
none is rendered superfluous. 

### Nishikawa v. US. Eagle High LLC, 138 Wn. App. 841, 849, 158 P.3d 1265 (2007). Authority to execute an agreement is not equivalent to authority to approve it. 

### See, e.g., Askinuk Corp. v. Lower Yukon Sch. Dist., 214 P.3d 259, 265 (Alaska 2009). IfMr. Bradyhad been dealing with a third party thatreasonably believed or assumed that he would only execute the lease ifithad been approved by all WolfCreek's members, Mr. Brady's authority to execute a lease on behalfofWolfCreek could bind the LLC. Former RCW 25.15.150(1) (ordinary course action by a member-agentbinds the LLC unless the member-agent lacks authority and the thirdparty knows it); 

### andsee RESTATEMENT (THIRD) OFAGENCY,§ 3.03, cmt. b (AM. LAW INST. 2006) ("[I]fa principal has authorized an agent to communicate the principal's decisions to a third party, the third party may reasonably believe the agent's reports. Reasonable beliefis not defeated by the third party's knowledge that the agent could not unilaterally make the decision that is the focus ofthe communicationto the thirdparty."). Buthere, Mountain could not reasonably believe that the 2013 lease hadbeen approved by all ofWolf Creek's members. Mr. Brady, who controlled Mountain, knew it had not been. Finally, Mr. Brady points to Article VI ofthe LLC agreement, which deals with Interested Membertransactions, and provides thatthey are notvoid or voidable intwo 29No. 33114-8-III Holman v. Brady instances, one being that "[t]he contract or transaction is fair as to the Company as ofthe time it is authorized, approved orratified by the members orthe committee thereof." CP at 21 (Article VI, Section l(b)). The other instance is where the transaction is approved, following disclosure ofa member's interest, by a majority ofdisinterested members. See CP at 20 (Article VI, Section l(a)). Mountain argues that WolfCreek can avoid the 2013 lease only ifit proves that it was unfair to the LLC at the time it was executed. Washington cases have long held in the context ofcorporate transactions that the "'general rule ofagency whichprohibits an agent from representing both himselfand his principal in a transaction in which their interests are adverse and antagonistic fully applies where a corporate officer or director attempts to represent both himselfand a corporation in a transaction in which his and the corporate interests are adverse and antagonistic."' Lycette v. Green River Gorge Inc., 21 Wn.2d 859, 865, 153 P.2d 873 (1944) (quoting 13 AM. JUR. § 1002, p. 955). As a result, an interested director or officer transaction can be set aside. Id. The same general rule ofagency could apply to Interested Membertransactions with an LLC but for the fact that in enacting the LLC act in 1994, the Washington Legislature provided that "[e]xcept as provided in a limited liability company agreement, a member or manager may ... transact ...business with a limited liability company and, subjectto other applicable law, has the same rights and obligations with respect to any such matter as a person who is not a member or manager."

30

### No. 33114-8-III 

### Holman v. Brady
Former RCW 25.15.035 (1994). 13 

### Article VI, Section I ofWolfCreek's LLC agreement merely responds to its statutory authority to limit Interested Member transactions that the statute would otherwise allow. 

### It allows Interested Membertransactions that either get the required informed, disinterested member approval or that prove to be fair. In doing so, Article VI does not supplantthe general Managementprovision at Article V. Rather, it identifies 

### additional approval requirements that apply solely to Interested Member transactions. Article V, Section 2 still applies, requiring that "all members" act in orderto obligate or bind the LLC. The trial court correctly concluded that Mr. Brady lacked authority to agree unilaterally to the 2013 lease terms. Because Mountain had knowledge through Mr. Brady that he lacked authority to agree to the new lease terms, Mr. Brady's execution of the lease does not bind WolfCreek. 

### IV. Form of judgmentandattorney fees on appeal Mountain's final assignment oferror is to the trial court's entry ofa money judgment in favor ofMr. Holmanrather than in favor ofWolfCreek. WolfCreek was the party to the lease with the attorney fee provision, and it was on WolfCreek's behalf that the breach oflease claim was asserted derivatively. Yet, it is Mr. Holman, not Wolf

13 

### Modern statutes also provide that corporate directors' conflicting interest transactions cannot be set aside ifthey are approved in compliance withprescribed procedures or are provedto have been fair. 

### See, e.g., RCW 23B.08.7I0(2), .720, .730. 31No. 33114-8-III 

### Holman v. Brady Creek, who advanced the attorney fees and costs incurred in pursuing the derivative claim. Mr. Holman responds that cases construing the Uniform Limited Liability Company Act hold that a member-plaintiffwho brings a successful derivative action is entitled to indemnification for the reasonable expenses individually incurred. Br. of Resp't at 48. That does not explain why Mr. Holman'sjudgment should not lie against WolfCreek, however. And since original adoption ofchapter 25.15 RCWpredated approval ofthe 1996 Uniform Limited Liability Company Act by two years, an argument from a case that construes the uniform act, without more, is unpersuasive. 14 6B UNIFORM LAWS ANNOTATED at 545 (2008); 

### but cfDragtv. Dragt/DeTrayLLC, 139 Wn. App. 560, 575, 161 P.3d 473 (2007) (stating that the former Washington act "is modeled substantially on the Uniform Limited Liability Company Act (ULLCA), 6A U.L.A. 568 (1996)"); 

### ChadwickFarms OwnersAss 'n v. FHC, LLC, 166 Wn.2d 178, 187 n.2, 207 P.3d 1251 (2009) (same; relying ultimately on 

### Dragt).

14 According to a contemporaneous law review article, The Washington Limited Liability Company Act, as it was originally proposed, was drafted by the Partnership Law Committee ofthe Washington State Bar Association's Business Law Section. Because a model LLC statute is not yet in existence, the drafters examined various state statutes before submitting one for consideration by the legislature. Washington's provisions were modeled primarily after the Delaware LLC statute. Jessica A. Eaves,

### A Step in the RightDirection: Washington Passes the LimitedLiability CompanyAct, 18 Seattle U. L. Rev. 197,204 (1994) (footnote omitted). 32

### No. 33114-8-III Holman v. Brady
Former RCW 

### 25.15.385 applies, and provides that "[i]fa derivative action is successful, in whole or in part, ...the court may award the plaintiffreasonable expenses, including reasonable attorneys' fees,from any recovery in any such action or from a limited liability company." (Emphasis added.) The "plaintiff' in a derivative LLC member action is the member, not the LLC. FormerRCW 

### 25.15.370, .375. Former RCW 

### 25.15.385 thus authorizes court-ordered indemnification ofMr. Holman by Wolf Creek or against WolfCreek's "recovery in [the] action" for the attorney fees and costs he advanced. The 

### 1998 lease provides IfTenant or Landlord shall bring any action for any reliefagainst the other, declaratory or otherwise arising out ofthis Lease, including any suit by Landlord for the recovery ofrent orpossession ofthe Premises, the losing party shall pay the successful party all costs and reasonable attorney's fees which shall be incurred whether or not any such action is prosecuted tojudgment. CP at 

### 60 (Article 

### XXIV). WolfCreek was entitled under the 

### 1998 lease to recover from Mountain all ofMr. Holman's fees and costs that it was court ordered to indemnify, since the action brought on its behalfsuccessfully asserted a breach ofMountain's obligationto pay rent at the holdover rate. Since former RCW 

### 25.15.385 authorizes an award offees to the plaintiff"from any recovery in any such action," we hold that the trial court could effectuate the award and recovery by entering a moneyjudgment against Mountain, in favor ofMr. Holman.


### 33No. 33114-8-III Holman v. Brady
Mr. Holman, individually and on behalfofWolfCreek, seeks an award of reasonable attorney fees and costs on appeal. When a party is entitled to fees onthe underlying action based on a statutory or contractual provision, it is similarly entitledto fees on appeal. RAP 18.1;Renfro v. Kaur, 156 Wn. App. 655, 666-67, 235 P.3d 800 (2010). We award Mr. Holman and WolfCreekreasonable fees and costs on appeal subject to compliance with RAP 18.1(d). Ifit is demonstratedthat Mr. Holman has advanced the fees and costs on appeal, our commissioner may make the awardto him. We reverse the trial court's partial summaryjudgment determination thatthe 1998 lease between Mountain and WolfCreekwas automatically renewed, affirm its partial summaryjudgment determination that the new lease signed by 

### Mr. Brady in 2013 was invalid, and remand the case to the trial court for further proceedings consistentwith this op1mon. A majority ofthe panel has determined this opinion will notbeprinted in the Washington Appellate Reports, but it will be filed for public recordpursuantto RCW 2.06.040. Siddoway, J. 7 WE CONCUR:

34