2015 APR 13 All 9=3u
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
PACIFIC MARKET INTERNATIONAL, LLC,
a Washington limited liability company, No. 71707-3-1
Respondent, DIVISION ONE
TCAM CORE PROPERTY FUND UNPUBLISHED OPINION
OPERATING LP, a Delaware limited
partnership, FILED: April 13,2015
Appellant.
Becker, J. — This is an appeal from an order granting summary judgment
in a contract dispute involving the interpretation of a parking agreement. We
reverse and hold that the landlord agreed to provide parking on a "must take"
rather than an "as needed" basis. The plain language of the agreement obligates
the tenant to pay for a certain number of spaces every month whether or not the
tenant actually needs them.
The landlord, appellant in this matter, is TCAM Core Property Fund
Operating LP (TCAM). The tenant, respondent, is Pacific Market International
LLC (PMI). They entered into a 132-month commercial real estate lease, which
began on October 1, 2010, and is set to expire on September 30, 2021. TCAM
has been billing PMI for the right to the nonexclusive use of 34 parking stalls
every month. PMI has been paying under protest, while contending that the
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parking payment obligation in the lease agreement is variable, covering only the
number of spaces PMI needs to use in any given month.
In February 2012, PMI initiated this declaratory judgment action. On cross
motions for summary judgment, the trial court ruled in favor of PMI. PMI was
awarded damages, attorney fees, costs, and postjudgment interest. TCAM
appeals.
This court reviews orders granting summary judgment de novo.
Silverhawk. LLC v. KevBank Nat'l Ass'n. 165 Wn. App. 258, 264-65, 268 P.3d
958 (2011). The material facts underlying this litigation are essentially
undisputed.
WRC Wall Street LLC began constructing the World Trade Center North
office building on Elliott Avenue in Seattle in 1997. WRC Wall Street leased the
entire building to RealNetworks Inc. from October 2000 through September 2010.
That lease required RealNetworks to assume one of the ownership obligations by
paying the Port of Seattle for 133 parking spaces the Port owned below the
building.
In April 2005, RealNetworks subleased part of the building's fourth floor to
PMI. The sublease obligated PMI to pay for parking on an as-needed basis. The
operative language was that PMI, the subtenant, "shall have the right, but not an
obligation" to lease 1.2 parking stalls for each 1,000 rentable square feet
described in the sublease. PMI had to advise RealNetworks 33 days in advance
of each calendar month if it wanted to alter the number of spaces rented during
the following calendar month.
No. 71707-3-1/3
In 2007, TCAM bought the World Trade Center North building from WRC
Wall Street and assumed the master lease between WRC Wall Street and
RealNetworks. By this purchase, TCAM became subject to WRC Wall Street's
obligation to pay the Port of Seattle for 133 parking spaces each month.
Keith Awad, TCAM's asset management director, came to Seattle in the
summer of 2009. During that trip, Awad introduced himself to PMI's Chief
Executive Officer, Rob Harris, and its Chief Financial Officer, Brian Shea. PMI,
acting through Shea, expressed an interest in leasing space from TCAM after its
sublease with RealNetworks expired in September 2010. The parties began to
negotiate through brokers.
In September 2009, TCAM's brokers presented a draft letter of intent to
PMI. The draft proposed a set of material terms that TCAM wanted to govern its
future landlord-tenant relationship. It described a number of terms, including one
that described the "parking requirement" of 1.2 spaces per 1,000 rentable square
feet (RSF):
Parking: The parking requirement for the building is 1.2:1000
RSF leased at market rates, current $220 per stall per
month. The parking structure is controlled by the Port
of Seattle, but the allocation will remain for the
duration of the lease. The landlord is exploring
locating some visitor parking in the loading area and
will keep tenant informed of the progress/results.
Additionally the landlord is also exploring where Bike
Parking could be located.
This language remained unchanged over the next several months as the parties
exchanged, modified, and finalized the terms of the letter of intent. TCAM used
the final version as a guide when drafting the actual lease.
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TCAM contends the reference to the building's parking "requirement"
manifested an intent to pass on to PMI a proportionate share of TCAM's
obligation to pay the Port of Seattle for 133 spaces. PMI contends the language
is too obscure to express such an intent. The parties' differing interpretations of
the letter of intent, however, are not particularly relevant. This issue here is the
meaning of the actual lease.
The parties exchanged, commented on, and redlined at least eight lease
drafts before signing the final version. Each draft was divided into two sections:
the Basic Lease Provisions and the Standard Lease Provisions. According to
Standard Lease Provision 19(u), the lease "is the result of arms-length
negotiations between Landlord and Tenant and their respective attorneys," which
"shall not be construed against either party."
Basic Lease Provision item 13 and paragraph 18(a) of the Standard Lease
Provisions contain the lease's only references to parking. For this dispute, the
most important language in item 13 states that PMI "shall lease" 34 parking
spaces.
13. Number of Parking Spaces: Tenant shall lease thirty four (34)
parking spaces in the Garage,
pursuant to the provisions of
Paragraph 18(a) below. All such
parking shall be on an unassigned
self-park basis at the rate established
by the Port of Seattle (its successors
or assigns) or its parking operator
from time to time (collectively, the
"Garage Owner"), which rate is
currently $220 per month per stall.
Tenant's lease of parking spaces is
pursuant to a ratio of 1.2 spaces per
1,000 rentable square feet of
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Premises, and thus Tenant's lease of
parking spaces hereunder shall
increase on a proportionate basis
upon addition of each Pocket Space
as set forth in Paragraph 21.
At one point during the negotiations, PMI sent a letter asking TCAM to modify
item 13 "to conform to Section 18 which correctly describes the agreement
between the parties." But TCAM did not agree to any modification of item 13,
and PMI eventually signed the lease with the "shall lease" language quoted
above.
The "shall lease" obligation in item 13 is "pursuant to" paragraph 18(a) in
the Standard Lease Provisions. Paragraph 18(a) discusses the obligations
created by item 13 in greater detail. Paragraph 18(a) is presented below in its
final form. The underlining and stricken portions track the modifications made
during the negotiation process. For the present dispute, the most important
language in paragraph 18(a) states that PMI "shall have the right to the
nonexclusive use" of 34 parking spaces.
Tenant shall have the right to the nonexclusive use of the number
of parking spaces located in the parking areas of the Building
specified in Item 13 of the Basic Lease Provisions for the parking of
operational motor vehicles used by Tenant, its officers and
employees only. In addition, there will be two (2) visitor parking
spaces available to visitors of tenants of the Building on a non
exclusive basis. Parking fees for each month shall be paid to
Landlord simultaneously with Rent. Parking fees shall equal the
parking fees charged by the Garage Owner. In addition, Tenant
shall have the right to one (1) executive parking stall located in the
loading area of the Building at a cost of one hundred and fifty
percent (150%) of the parking fees charged by the Garage OwnerT
which; such cost is $330 per stall as of the date of this Lease
amounts to a monthly charge of $330 por stall. Landlord.. J_he
visitor spaces and the executive parking stall shall also provide a
r.nnnrnrl nrnn for thn r.torago of bicycles be striped, numbered and
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marked with signs that state such spaces shall not be blocked.
Tenant acknowledges that because Landlord does not own the
parking garage, Landlord cannot guarantee the condition or
availability of the same; provided that Landlord agrees to use
reasonable efforts to assist Tenant in obtaining the right to use its
parking spaces hereunder. Tenant agrees at all times to comply
with reasonable rules and regulations established by the Garage
Owner and/or Landlord with respect to use of the parking garagea
including without limitation hours of availability. A default by
Tenant, its officers or employees with respect to such rules and
regulations shall constitute a material default by Tenant hereunder.
Tenant shall not permit or allow any vehicles that belong to or are
controlled by Tenant or Tenant's officers, employees, suppliers,
shippers, customers or invitees to be loaded, unloaded or parked in
areas other than those designated by Landlord or Garage Owner
for such activities. If Tenant permits or allows any of the prohibited
activities described in this Paragraph, then Landlord or Garage
Owner shall have the right, without notice, in addition to such other
rights and remedies that it may have, to remove or tow away the
vehicle involved and charge the cost to Tenant, which cost shall be
immediately payable upon demand by Landlord.111
This court must interpret the lease "in a manner that gives effect to all the
contract's provisions." Nishikawa v. U.S. Eagle High. LLC. 138 Wn. App. 841,
849, 158 P.3d 1265 (2007). review denied, 163 Wn.2d 1020 (2008). We may not
"disregard language that the parties have used." Snohomish County Pub.
Transp. Benefit Area Corp. v. FirstGroup Am., Inc.. 173 Wn.2d 829, 840, 271
P.3d 850 (2012). Applying these principles, we conclude the parking provision is
on a "must take" rather than an "as needed" basis. The meaning of "Tenant shall
lease thirty four (34) parking spaces" is plain and unambiguous. It creates an
obligation to lease 34 spaces. The effect is to pass on to PMI a proportionate
share of TCAM's obligation to pay the Port of Seattle for 133 spaces.
1Compare Clerk's Papers at 282 (TCAM's first proposed lease) with
Clerk's Papers at 40 (executed lease).
No. 71707-3-1/7
We reject PMI's argument that paragraph 18(a) gives it the right but not
the obligation to pay for 34 spaces. This was the arrangement that PMI had
when it was a subtenant of RealNetworks, but it is not the arrangement reflected
in its lease with TCAM. PMI's suggested interpretation would reduce the phrase
"shall lease" in item 13 to mere surplusage.
PMI offers the RealNetworks sublease as extrinsic evidence that the intent
of the present lease is to create a similar as-needed arrangement. Extrinsic
evidence can be used to discern contractual intent, but it cannot be used to
subtract, vary, or contradict the written words of a contract. Berg v. Hudesman,
115 Wn.2d 657, 667-78, 801 P.2d 222 (1990). Unlike the PMI sublease, neither
item 13 nor paragraph 18(a) specifies how and when PMI would need to advise
TCAM of its fluctuating need for parking. PMI's preferred interpretation would
require this court to redraft the lease by including such language. This we cannot
do. "Extrinsic evidence is to be used to illuminate what was written, not what was
intended to be written." Hollis v. Garwall. Inc., 137 Wn.2d 683, 697, 974 P.2d
836(1999).
PMI contends the "shall lease" obligation in item 13 conflicts with the
language in paragraph 18(a) and must therefore give way under a term
specifying that the Standard Lease Provisions shall control in the event ofa
conflict with the Basic Lease Provisions:
This Lease consists of the foregoing introductory paragraphs and
Basic Lease Provisions, the provisions of the Standard Lease
Provisions (the "Standard Lease Provisions") (consisting of
Paragraph 1 through Paragraph 25 which follow) and Exhibits A-1
through Exhibits A-2 and Exhibits B through Exhibit G, all of which
are incorporated herein by this reference. In the event of any
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conflict between the provisions of the Basic Lease Provisions and
the provisions of the Standard Lease Provisions, the Standard
Lease Provisions shall control.
According to PMI, conflict arises from the fact that paragraph 18(a) speaks only
in terms of PMI's "right" to parking spaces, not its obligation to pay for them. We
disagree. Item 13 in the Basic Lease Provisions creates PMI's obligation to take
34 parking spaces, and paragraph 18(a) in the Standard Lease Provisions adds
details to that arrangement. No conflict is apparent. Nowhere in paragraph 18(a)
does one find language suggesting that PMI's obligation is limited to the number
of parking spaces it may need in any given month.
PMI attempts to escape the "must take" interpretation by invoking the
Restatement (Second) of Contracts § 201. If it is possible that the parties
have attached different meanings to certain terms used, the rules set out in
Restatement (Second) of Contracts § 201 provide guidance. Berg. 115
Wn.2d at 669. PMI contends the parties ascribed different meanings to the
general parking language that carried through the various iterations of the letters
of intent and the lease. In that situation, section 201(2) applies:
Where the parties have attached different meanings to a promise or
agreement or a term thereof, it is interpreted in accordance with the
meaning attached by one of them if at the time the agreement was
made
(a) that party did not know of any different meaning attached
by the other, and the other knew the meaning attached by the first
party; or
(b) that party had no reason to know of any different
meaning attached by the other, and the other had reason to know
the meaning attached by the first party.
Restatement (Second) of Contract § 201(2).
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No. 71707-3-1/9
PMI invokes subsection (b) to argue that the contract must be interpreted
in accordance with its understanding, not TCAM's. This is so, according to PMI,
because PMI did not know that TCAM believed the contract created a "must
take" obligation, but TCAM knew PMI attached an "as needed" meaning to the
lease's parking provisions.
The record does not support PMI's argument. At one point during their
negotiations, PMI sent TCAM a letter with "comments and proposed changes"
regarding the draft lease. One of the many items on this list stated: "The
provisions of Section 13 should be modified to conform to Section 18 which
correctly describes the agreement between the parties. Tenant should also be
entitled to use two visitor stalls in the loading area free of charge." The comment
did not specifically refer to the "shall lease" language in item 13, nor did it
communicate PMI's desire for an "as needed" arrangement. Therefore, it cannot
be deduced that TCAM, upon reading this letter, should have realized PMI
interpreted item 13 to create "as needed" arrangement. In addition, PMI's
internal communications reflect the company's awareness that item 13, as
drafted, "makes it an obligation." Clerk's Papers at 343.
PMI claims that even if TCAM's interpretation prevails, this matter must be
remanded for trial because TCAM has failed to mitigate its damages. According
to PMI, TCAM failed to make reasonable efforts to avoid damages from PMI's
inability to use all 34 parking spaces and even affirmatively ignored expressions
of interest from a third party.
No. 71707-3-1/10
The doctrine of avoidable consequences, or mitigation of damages,
prevents an injured party from recovering damages that the party could have
avoided through reasonable efforts. TransAlta Centralia Generation LLC v.
Sicklesteel Cranes. Inc.. 134 Wn. App. 819, 825-26, 142 P.3d 209 (2006), review
denied. 161 Wn.2d 1013 (2007). TCAM has not been injured. PMI has been
paying under protest for the parking spaces it does not use. Because TCAM has
not incurred a duty to mitigate, there is no reason to remand this matter for trial.
In summary, the trial court erred by entering judgment for PMI. The case
is remanded with instructions to enter judgment in favor of TCAM and to award
TCAM its attorney fees and costs in accordance with the attorney fee provision of
the lease. That award shall include TCAM's reasonable attorney fees for this
appeal.
Reversed.
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WE CONCUR: J
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