Court Opinion

ID: 2785122
Source: CourtListenerOpinion
Date Created: 2015-03-10 18:09:59.378554+00
Date Added: 2024-06-11T11:28:34.884668
License: Public Domain

COURT FILED
                                                                                                    OF
                                                                                                           APPEALS

                                                                                             2015KR10 Ail 8 : 40
                                                                                             ST
                                                                                                               TO
                                                                                             BY

    IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

                                           DIVISION II

 MICHAELS        STORES,      INC.,   a   Delaware                        No. 46071 -8 -II
 corporation,

                                Respondent,

         v.

 RPAI LAKEWOOD, L.L.C., f/k/ a INLAND                             UNPUBLISHED OPINION
 WESTERN LAKEWOOD, L.L.C., a Delaware
 limited liability company,

                                Appellant.

        LEE, J. —   RPAI Lakewood LLC ( RPAI) appeals the superior court' s order granting

summary judgment to its tenant, Michaels Stores, Inc. ( Michaels),          in this declaratory judgment

action. Because the commercial lease provisions at issue are unambiguous and show that RPAI' s

termination notice was untimely, we affirm the order granting summary judgment and the final

judgment awarding damages and attorney fees to Michaels. We also award Michaels attorney fees

on appeal.

                                               FACTS

         On August 10, 2001, Michaels entered into a lease agreement with RPAI' s predecessor for

space   in the Lakewood Towne Center,     a retail   shopping   center   located in Lakewood. The lease
No. 46071 -8 -II

was due to expire on February 28, 2012, but contained options for three five -year extensions. By

exercising the first of these options, Michaels extended the lease to February 28, 2017.

         Section 16. 3         of   the lease   contains   an "   On -Going Co- Tenancy Requirement."            Clerk' s

Papers ( CP)     at   37, 233.       Under this provision, RPAI must lease at least 70 percent of the total

square   footage      of the   shopping   center    to " Anchor Tenants,"   as defined in the lease. CP at 37, 233.

If RPAI cannot do so for any six -month period, Michaels can choose to pay an " Alternative Rent"

in lieu of the higher " Minimum Rent" until RPAI satisfies the co- tenancy requirement. CP at 37-

38, 233 -34.

         Section 16. 3 allows either party to terminate the lease following nonsatisfaction of the co-

tenancy requirement. It describes Michaels' right to terminate as follows:

         In   addition   to the     rights of   Tenant to pay " Alternative Rent ", if ... non   -satisfaction

         of the On -Going Co- Tenancy Requirement shall continue for a period of twelve
          12) months beyond the initial failure to meet the On -Going Co- Tenancy
         Requirement and for so long as such non -satisfaction shall continue, ... Tenant
         shall have the right to terminate this Lease
                                                      by sixty ( 60) days' written notice
         delivered to Landlord.

CP at 234. Section 16. 3 then describes RPAI' s right to terminate:

         Landlord shall likewise have a right to terminate this Lease, at the end of the
         fourteenth ( 14th) month following the initial nonsatisfaction of the Co- Tenancy
         Requirement           by   giving sixty ( 60)     days prior written notice to Tenant of the
         termination.

CP at 234. Upon receiving such notice, section 16. 3 provides that Michaels may avoid termination

by agreeing to resume paying the full minimum rent.

         Section 16. 3 was triggered when Gottschalks, a defined anchor tenant, closed its store at

the shopping center in May 2009. Six months later, when RPAI had failed to obtain another anchor

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No. 46071 -8 -II

                                                                                                            1
tenant, Michaels informed RPAI that it               would   begin paying the lower     alternative rent.       By May

2010, RPAI      still   had   not obtained another anchor         tenant.   But neither party exercised its right to

terminate the lease at that time.

          On December 14, 2012, RPAI notified Michaels that it would terminate the lease in 60

days   unless   Michaels      agreed   to   resume   paying the     minimum rent.      By that time, Michaels had

extended its lease to February 2017. Michaels responded that it would keep paying the alternative

rent until RPAI satisfied the co- tenancy requirement, but RPAI refused to rescind its termination

notice.    Beginning January 30, 2013, Michaels began paying the minimum rent under protest,

reserving its right to pursue available remedies against RPAI.

          Michaels subsequently filed a declaratory judgment action seeking a determination that

RPAI failed to timely exercise any right it had to terminate the lease under section 16. 3. Michaels

also sought an award of damages for the difference between the minimum rent it had been paying

under protest and the alternative rent. RPAI responded that the lease allowed it to give notice of

termination at any time after the end of the 14th month following the initial co- tenancy failure.

RPAI agreed with Michaels that the end of the 14th month was July 31, 2010.

          Michaels moved for summary judgment, arguing that the language of section 16. 3 did not

give RPAI an ongoing right to terminate the lease. RPAI responded that Michaels' interpretation

was unfair and that section 16. 3 granted the landlord and tenant similar termination rights.

          The   superior court agreed with       Michaels' interpretation: " I think [ RPAI] did have a right

to terminate [ the. Lease] at the end of the 14th month. They waived that, and I' m going to grant

1 The alternative rent is approximately one third of the minimum rent.
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No. 46071 -8 -II

summary judgment to Michaels                 on ...   the language in the   contract."       Report of Proceedings ( RP)

at   36.   The superior court entered an order granting summary judgment in favor of Michaels,

prohibiting RPAI from terminating the lease, and awarding Michaels damages in the amount of

the difference between the alternative rent and the minimum rent it had been paying since January

2013. . The      superior court       also    entered   final judgment in favor         of   Michaels for $ 279,466. 56,

including an award of attorney fees.

           RPAI appeals, arguing that issues of fact remain concerning the meaning of the lease' s

termination provisions and that this court should reverse the order of summary judgment and

remand this case for trial.

                                                         ANALYSIS

A.         STANDARD OF REVIEW

           Our   review on   summary judgment is de            novo.     Trimble   v.   Wash. State Univ., 140 Wash. 2d
88, 92, 993 P.2d 259 ( 2000).          Summary judgment is appropriate only where there are no genuine

issues of material fact and the moving party is entitled to judgment as a matter of law. CR 56( c);

Hearst Commc'       ns,   Inc.   v.   Seattle Times Co., 154 Wash. 2d 493, 501, 115 P.3d 262 ( 2005).                 The

moving party has the initial burden to show that there is no genuine issue as to any material fact.

Yakima Fruit & Cold Storage Co.                v.   Cent. Heating   & Plumbing Co., 81 Wash. 2d 528, 530, 503 P.2d
108 ( 1972).      If the moving party satisfies its burden, the nonmoving party must present evidence

demonstrating that material facts are               in dispute. CR 56( e); Vallandigham v. Clover Park Sch. Dist.

No 400, 154 Wash. 2d 16, 26, 109 P.3d 805 ( 2005).                   If the nonmoving party fails to do so, summary

judgment is      appropriate.     CR 56( e); Vallandigham, 154 Wash. 2d at 26.

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No. 46071 -8 -II

           The interpretation of a contract provision is a question of law when the interpretation does

not depend on the use of extrinsic evidence, or when only one reasonable inference can be drawn

from the        extrinsic evidence.       Lokan &      Assocs., Inc. v. Am. Beef Processing, LLC, 177 Wash. App.
490, 499, 311 P.3d 1285 ( 2013). "              If a contract is unambiguous, summary judgment is proper even

if the   parties   dispute the legal      effect of a certain provision."    Voorde Poorte v. Evans, 66 Wash. App.
358, 362, 832 P.2d 105 ( 1992).

B.         INTERPRETATION OF THE CONTRACT

           1.              Underlying Principles

           The primary objective of contract interpretation is to ascertain the parties' mutual intent at

the time        they   executed    the   contract.     Viking Bank v. Firgrove Commons 3, LLC, 183 Wash. App.
706, 712, 334 P.3d 116 ( 2014).                 Washington follows the "      objective manifestation     theory"   of

contract interpretation, under which the focus is on the reasonable meaning of the contract

language to determine the             parties'   intent. Hearst, 154 Wash. 2d      at   503. "   We generally give words

in a contract their ordinary, usual, and popular meaning unless the entirety ofthe agreement clearly

demonstrates           a   contrary intent." Hearst, 154 Wash. 2d at 504.

           To assist in determining the meaning of contract language, Washington courts also apply

the "   context rule."         Viking Bank, 183 Wash. App. at 713 ( citing Berg v. Hudesman, 115 Wash. 2d 657,

667 -68, 801 P.2d 222 ( 1990)).                 This rule allows examination of the context surrounding a

contract' s execution, including the consideration of extrinsic evidence, to help understand the

parties'    intent. Hearst, 154 Wash. 2d             at   502.   Extrinsic evidence is to be used only to determine or

clarify the meaning of specific words and terms in the contract, and not to show an intent

independent of the instrument or to vary the words used. Hearst, 154 Wash. 2d at 503; King v. Rice,

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No. 46071 -8 -II

146 Wn.     App.    662, 671, 191 P.3d 946 ( 2008),             review       denied, 165 Wash. 2d 1049 ( 2009). Admissible

extrinsic evidence does not include evidence of a party' s unilateral or subjective intent as to the

contract'   s meaning. Lynott v. Nat'             l Union Fire Ins. Co., 123 Wash. 2d 678, 684, 871 P.2d 146 ( 1994).

Courts do not interpret what was intended to be written but what was written. Hearst, 154 Wash. 2d

at 504.

          2.         Section 16. 3

          The parties agree that this case turns on the interpretation of the termination provisions in

section   16. 3   of the   lease   agreement and,         in   particular,        the meaning     of the word " likewise."   This

word follows the description of the tenant' s termination rights and prefaces the description of the

landlord' s termination rights.

          As stated, section 16. 3 provides that a tenant may terminate the lease 12 months after the

landlord fails to satisfy the co- tenancy requirement " and for so long as such non -satisfaction shall

continue" upon        giving the landlord 60 days'               notice.      CP    at   234.    Section 16. 3 then states that the

landlord shall " likewise" have a right to terminate the lease " at the end of the fourteenth ( 14th)

month following the initial nonsatisfaction" of the co- tenancy requirement by giving the tenant 60

days' prior notice. CP at 234.

          RPAI      contends       that   it is   reasonable      to       read   the   word "   likewise" to convey the same

termination       rights   to the landlord        as   to the tenant.        RPAI argues that it therefore has an ongoing

right to terminate the lease that takes effect on the last day of the 14th month following

nonsatisfaction of the co- tenancy requirement, and that this right continues " for so long as" the

nonsatisfaction       lasts.   RPAI asserts that if the parties had intended its termination rights to be

waived if not exercised at the end of the 14th month, they would have so stated, as shown by

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No. 46071 -8 -II

another lease provision stating that if the landlord ceases to claim reimbursement for certain

expenses within a certain        timeframe, its   right   to   recover   is " deemed to have been       waived."     CP at

26.

           Michaels responds that " likewise" simply means that RPAI also has termination rights and

that section 16.3 clearly shows the parties' intent to limit RPAI' s right of termination to its exercise

at   the   end   of   the 14th   month    following   nonsatisfaction      of   the   co-   tenancy   requirement.    See

WEBSTER' S THIRD NEW INT' L DICTIONARY,                   at   1310 ( 1969) ( " likewise"       means " moreover"       or

 similarly ").    Michaels contends that RPAI is attempting to rewrite the contract by ( 1) substituting

 after" for " at" in the phrase allowing it to terminate " at the end of the 14th month" following

nonsatisfaction of the co- tenancy requirement, (2) adding the " for so long as" modifier to RPAI' s

termination clause so that both Michaels and RPAI have the right to terminate as long as the

nonsatisfaction continues, and ( 3) reading " likewise" as a single word that grants RPAI the same

termination      rights as   Michaels despite the different language            used.   See Markel Am. Ins. Co. v.

Dagmar' s Marina, LLC, 139 Wash. App. 469, 480, 161 P.3d 1029 ( 2007) when drafter of agreement

employs different terms instead ofparallel terminology, the presumption is that the change in usage

was purposeful and reflects different meaning).

           As support for its interpretation of section 16. 3, Michaels cites a federal district court

decision that examined a similar provision after another shopping center attempted to terminate its

lease   with a   Michaels    store.   Regency Realty Group, Inc. v. Michaels Stores, Inc., 2012 WL 954639
No. 46071 -8 -II

 E. D. Mich.) ( court          order).2 In granting Michaels summary judgment on its declaratory relief

claim, the district court held that the different language used to describe the parties' termination

rights was determinative:

          Regency and Michaels are both sophisticated parties that have presumably
          negotiated and entered into numerous commercial leases. Presumably, both parties
          acted upon the advice of counsel in drafting, negotiating, and entering into the
          Lease. The fact that the parties used language granting a continuing option in
          Michael'      s[    sic]   termination provision and did not use that same language in
          Regency' s option to terminate is convincing evidence that Regency does not have
          an ongoing option.

Regency, 2012 WL 954639, at * 7. The district court then rejected the landlord' s argument that the

word "   likewise"          in section 16. 3 gave the both the landlord and the tenant an ongoing right to

terminate:

          The use of the word likewise indicates that Landlord also has the right to terminate;
          it does not indicate that Landlord' s termination right is procedurally identical to
          Tenant' s. After the term likewise, the contract describes the procedures by which
          Landlord may exercise its termination right. These procedures are materially
          different from those granted Tenant. Landlord essentially asks the Court to alter
          the plain language of the contract by changing " at the end of the twelfth month" to
              after   the   end of the   twelfth   month."   The Court, however[,] must honor the parties'
          bargain and respect the plain language of the contract as written.

Regency,       2012 WL 954639,             at *   7.   The district court concluded that the lease unambiguously

granted the landlord a one -time option to terminate the lease, that the landlord did not timely

exercise that right, and that judgment on the termination issue should enter for Michaels as a matter

of law. Regency, 2012 WL 954639, at * 8.

2 The Michigan lease provision was identical to the provision at issue except for the different time
periods that triggered the parties' termination rights. Regency, 2012 WL 954639, at * 2. We may
cite   this   unpublished        decision because the federal        rules allow   its   citation.   GR 14. 1( b); Fed. R.

App. P. 32. 1.
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No. 46071 -8 -II

       RPAI complains that this interpretation considers the words used in section 16. 3 totally

divorced from any facts,          circumstances,       and extrinsic   evidence.   RPAI cites the commercial

context of the lease in arguing that there is no indication that the parties intended to impose a major

disparity in termination rights where the tenant' s right to terminate would never end, but the

landlord' s right would last only one day. RPAI contends that its interpretation of section 16. 3 is

more reasonable than Michaels' because it gives each party the opportunity to adjust to market

conditions as   they   exist   in the   commercial world.       See Byrne v. Ackerlund, 108 Wash. 2d 445, 453-

54, 739 P.2d 1138 ( 1987) (           where one construction would make a contract unreasonable, and

another, equally consistent with its language, would make it reasonable, the latter construction

must prevail).     According to RPAI, Michaels' interpretation of section 16. 3 is punitive and a

 disconnect   with commercial          reality." Br. of Appellant at 10.

       Michaels responds that it is commercially reasonable to give the tenant greater termination

rights because satisfaction of the co- tenancy requirement was a major part of the parties' bargain

and because it was RPAI' s duty to satisfy that requirement. Michaels points out that if RPAI had

a continuing right to terminate in the event of nonsatisfaction, it would have far less incentive to

satisfy the co- tenancy requirement.

        Both parties' references to extrinsic evidence focus on their own observations of what is

commercially     reasonable.      Although the parties engaged in some discovery before the superior

court considered Michaels' motion for summary judgment, there is no evidence in the record

concerning the     parties'    lease   negotiations.    The only additional facts provided consist of RPAI' s

description of its difficulties in obtaining another anchor tenant and its assertion that Michaels'

yearly sales increased after Gottschalks closed.

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No. 46071 -8 -II

          As stated, the context rule allows the use of extrinsic evidence only to determine the

meaning of specific words used in the contract and not to vary or modify the language used. See

McCormick      v.   Dunn & Black, P. S., 140 Wn.          App. 873,        891, 167 P.3d 610 ( 2007) (        courts do not

have the   power, under       the   guise of   interpretation, to   rewrite contracts),       review denied, 163 Wash. 2d
1042 ( 2008).       In Hearst, the court held that extrinsic evidence concerning the defendant' s acts

following adoption of the contract did not shed meaning on the words in the contract and was

irrelevant to their interpretation. 154 Wash. 2d   at   510   n.   14;   see also   Hollis   v.   Garwall, Inc., 137
Wash. 2d 683, 697, 974 P.2d 836 ( 1999) ( "[ e] xtrinsic evidence is to be used to illuminate what was

written ").   Here, too, the difficulty of obtaining a new anchor tenant and Michaels' revenues

following Gottschalks' departure are irrelevant to the meaning of the words used in section 16. 3.

Because the language of the contract is unambiguous and clearly shows that RPAI did not exercise

its termination rights in a timely manner, we affirm the superior court' s grant of summary judgment

in favor of Michaels.

C.        ATTORNEY FEES

          Michaels    requests an award of         attorney fees      on appeal.      A prevailing party may recover

such fees if permitted by applicable law, which includes contractual fee provisions in commercial

leases.    RAP 18. 1(   a);   City of Puyallup v. Hogan, 168 Wash. App. 406, 430, 277 P.3d 49 ( 2012).

Section 14. 5 of the lease provides that following an action between the landlord and the tenant

relating to the lease, the prevailing party may                   recover        reasonable   attorney fees.      We grant

Michaels' request for reasonable attorney fees on appeal.

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No. 46071 -8 -II

        We affirm.

        A majority of the panel having determined that this opinion will not be printed in the

Washington Appellate Reports, but will be filed for public record in accordance with RCW 2. 06.040,

it is so ordered.

 We concur:

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