L~D
CDUST OF APPEALS DIV I
STATE OF WASfHN&TON
ZOI9FEB—5 AHIO:37
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
KILO 6 OWNERS ASSOCIATION, a
Washington nonprofit corporation; and ) No. 77365-8-I
KILO SIX, LLC, a Washington
limited liability company, ) DIVISION ONE
)
Appellants,
UNPUBLISHED OPINION
V.
EVERETT HANGAR LLC, a
Washington limited liability company,
)
Respondent. ) FILED: February 5, 2019
LEACH, J. — Kilo 6 Owners Association (the Association) and Kilo Six LLC
(collectively Kilo) appeal the trial court’s decision that Kilo Six’s certification of lot
13 as “substantially complete” under the covenants, conditions, and restrictions
(the CC&Rs) governing the Association is null and void. Kilo contends that
judicial estoppel bars Everett Hangar’s challenge to this certification. Kilo also
claims that the trial court’s interpretation of “substantially complete” conflicts with
the express terms of the CC&Rs and with the parties’ course of performance.
First, because Everett Hangar and Kilo both adopted positions in their
earlier litigation inconsistent with their current positions, the trial court did not
abuse its discretion by declining to apply the equitable doctrine of judicial
estoppel to bar Everett Hangar’s challenge. Second, the trial court gave the
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words ‘complete” and “completion” their ordinary, usual, and popular meaning by
adopting their dictionary definitions and adopted a common industry definition of
“substantial completion.” Using these definitions, the trial court did not err in
finding that lot 13 was not substantially complete. We affirm.
BACKGROUND
Snohomish County (County) owns neighboring lots 11, 12, and 13 at the
Snohomish County Airport (Paine Field). Historic Hangars LLC leases lot 11 and
Kilo Six LLC leases lot 13. The Historic Flight Foundation (Foundation), a
nonprofit entity that runs an aviation museum, subleases lot 11 from Historic
Hangars. John Sessions owns all three of these entities. Dean Weidner owns
Everett Hangar LLC, which leases lot 12. Historic Hangars and Everett Hangar
own the hangars on lots 11 and 12, respectively. Lot 13 remains empty. Kilo Six
has used lot 13 periodically for Paine Field and Foundation events and as
parking for aircraft and vehicles.
To facilitate separate ownership and operation of the three lots, Kilo Six
and the County executed the CC&Rs. The CC&Rs created the Association,
which, in turn, enforces them. The Association has three members, Historic
Hangars, Everett Hangar, and Kilo Six, each of which has a leasehold interest in
one of the three lots. The CC&Rs assign voting rights to each member. These
are equal to that member’s “Percentage Interest” of the “Property” comprised of
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No. 77365-8-I / 3
lots 11, 12, and 13. Historic Hangars has 20 percent of the Association’s voting
rights, Everett Hangar has 34 percent, and Kilo Six has 46 percent. Section 9.1
of the CC&Rs limits voting eligibility:
The Association is hereby authorized to levy assessments
against each Lot for Association expenses as the Board may
specifically authorize from time to time. There shall be three types
of assessments: (a) Base Assessments to fund Common
Expenses for the general benefit of all Lots, allocated in
accordance with the respective Percentage Interests of the
Lots. . [Hjowever, no Base Assessments shall be levied against
. .
any Lot unless and until Declarant has certified to the Board that
development of such Lot is substantially complete, and such Lot’s
Percentage Interest of Common Assessments shall, until such time,
be allocated among the Lots for which such certification of
substantial completion has been made by Declarant, pro rata in
accordance with such Lots’ relative Percentage Interests, and untU
such certification of substantial completion the Owner shall be a
Member, but shall not be entitled to vote on Association matters.
(Emphasis added.) Kilo Six is the “Declarant” that has the authority to certify a
lot as substantially complete.
In 2014, Everett Hangar sued Kilo Six, the Association, Historic Hangars,
and the Foundation in Snohomish County Superior Court (Snohomish County
lawsuit), claiming they violated multiple provisions of the CC&Rs. After a bench
trial, the trial court awarded Everett Hangar some injunctive relief. But the court
denied Everett Hangar’s request to erect a fence around the lot 12 parking lot.
After the trial, Everett Hangar asked that the Association hold a
membership meeting to vote on its proposal to build a perimeter fence. The day
before this meeting, Everett Hangar e-mailed Sessions, stating that it wanted the
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No. 77365-8-I / 4
Association to apportion the common expenses previously allocated only to lots
11 and 12 to all three lots in the “same Tot percentage allocation as the rest of the
expenses.” Sessions rejected this request. He stated that because lot 13 was
undeveloped, Kilo Six should not be required to share in costs for services that it
did not use, including landscape maintenance, parking maintenance, and
garbage collection.
On January 12, 2016, during the meeting, Everett Hangar asserted that lot
13 was ineligible to vote on Association matters because Kilo Six had not
certified it as substantially complete under section 9.1 of the CC&Rs. Kilo Six
had not declared any of the lots substantially complete. Sessions adjourned the
meeting without a vote on the fence proposal. On January 21, Sessions sent a
letter to the Association board members, certifying lots 11, 12, and 13 as
substantially complete under section 9.1 of the CC&Rs. Everett Hangar
responded that the certificate was ineffective because Kilo Six had not yet built a
hangar on lot 13.
Kilo then filed this lawsuit, asking the court to declare that lot 13 is eligible
to vote on Association matters. Everett Hangar filed a counterclaim, asking the
court to declare that Kilo Six is not eligible to vote on Association matters until the
development of lot 13 is substantially complete as required by the CC&Rs.
Everett Hangar also asserted that Kilo Six violated its duty of good faith and fair
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No. 77365-8-I I 5
dealing by issuing the certificate of substantial completion for lot 13.
After a bench trial, the trial court (1) denied plaintiffs’ request for
declaratory relief, (2) declared the Association’s lot 13 certification null and void
because lot 13 is not substantially ccmplete, (3) concluded that judicial estoppel
did not bar Everett Hangar from challenging Kilo Six’s right to vote, (4) held that
the Association breached the duty of good faith and fair dealing it owed to Everett
Hangar by certifying lot 13’s development as substantially complete, and (5)
awarded Everett Hangar attorney fees. Kilo appeals.
ANALYSIS
Judicial Estoppel
First, Kilo claims that the trial court abused its discretion by not applying
judicial estoppel to bar Everett Hangar’s challenge to Kilo Six’s right to vote. We
disagree.
The equitable doctrine of “[j]udicial estoppel ‘precludes a party. from
asserting one position in a court proceeding and later seeking an advantage by
taking a clearly inconsistent position.’ It is intended to protect the integrity of the
courts but is not designed to protect litigants.”1 Courts examine three factors to
decide whether judicial estoppel applies: (1) did a party assert a position
inconsistent with an earlier one, (2) would acceptance of the position create the
Arp v. Riley, 192 Wn. App. 85, 91, 366 P.3d 946 (2015) (internal
quotation marks omitted) (quoting Arkison v. Ethan Allen, Inc., 160 Wn.2d 535,
538, 160 P.3d 13 (2007)).
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perception that a party misled a court in either proceeding, and (3) would the
party asserting the inconsistent position receive an unfair advantage or impose
an unfair detriment.2 But these factors are not an “exhaustive formula.”3
“[C]ourts must apply judicial estoppel at their own discretion; they are not bound
to apply it but rather must determine on a case-by-case basis if applying the
doctrine is appropriate.”4 This court reviews a trial court’s decision to apply
judicial estoppel for abuse of discretion.5 A trial court abuses its discretion when
it bases its decision on untenable grounds or reasons.6
A. Inconsistent Positions
Kilo asserts that Everett Hangar’s claim that Kilo Six is ineligible to vote is
inconsistent with the position that it asserted throughout the Snohomish County
lawsuit. We agree.
In the Snohomish County lawsuit, Everett Hangar sought injunctive relief,
claiming that the Association, Kilo Six, Historic Hangars, the Foundation, and
Sessions violated an easement and safety and security provisions of the CC&Rs.
Everett Hangar asserted in its amended complaint, at summary judgment, and at
trial that Sessions controlled two thirds of the Association’s voting interest.
Everett Hangar, in its opening statement at trial, stated,
2~, 192 Wn. App. at 92.
~ 192 Wn.App. at 92.
“&Q, 192 Wn. App. at 92.
5arn, 192
6 Harris v.
Wn. App. at9l.
Fortin, 183 Wn. App. 522, 527, 333 P.3d 556 (2014).
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No. 77365-8-I / 7
Mr. Sessions, through the various defendant entities he controls,
owns and exercises complete domination—complete dominion
rather over Lot 11 and Lot 13 and controls the owners association
that manages all the lots. That is not in controversy. Documents
are set up to give him control over the association, because voting
rights are based on the square footage of the leasehold, and ~
combination of the Lot 11 leasehold, which is the smallest of the
three and Lot 13 vacant lot adds up to 66 percent. So he has
complete control over the owners association, and that will become
significant in a moment.
(Emphasis added.)
Here, Everett Hangar claims that because lot 13 is not substantially
complete, Kilo Six does not have the right to vote lot 13’s percentage interest on
Association matters. As a result, Sessions does not have the controlling votes
on the Association’s board. This position is inconsistent with its previous position
that Sessions controlled the Association. Substantial evidence supports the trial
court finding that Everett Hangar asserted an inconsistent position in the
Snohomish County litigation.
B. Reliance
Kilo next claims that the Snohomish County Superior Court’s acceptance
of Everett Hangar’s inconsistent position creates a perception that either the
Snohomish County court or the trial court in this litigation was misled. We
disagree.
The Snohomish County Superior Court did, in fact, accept Everett
Hangar’s inconsistent position. The court concluded that “Mr. Sessions has the
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controlling votes on [the Association’s] Board, by virtue of the number of shares
he holds for Lots 11 and 13. Accordingly, the Court finds that Mr. Sessions is
functionally in control of all four organizations.” But, here, the trial court found
that Everett Hangar’s inconsistent position does not create the perception that
either court was misled because the record does not show that the inconsistency
was material to the outcome of the Snohomish County lawsuit or that Kilo Six
relied on Everett Hangar’s inconsistent position to its detriment. Judicial estoppel
does not require that the previously accepted pos ition be material to the outcome
in the later proceeding. But the materiality of the position can affect whether the
inconsistency creates the perception that either court was misled.
The parties did not dispute Kilo Six’s voting rights in the Snohomish
County lawsuit. In response to Everett Hangar’s change of venue request in this
litigation, Kilo Six stated, “The [Snohomish County] trial had nothing to do with
the parties’ voting rights in the Association.” In addition, the Snohomish County
Superior Court entered the amended permanent injunction against only Historic
Hangars and the Foundation based on violations of the easement and the safety
and security provisions of the CC&Rs. The court did not enjoin conduct by the
Association or Kilo Six. Because the earlier lawsuit was unrelated to Kilo Six’s
voting rights and the trial court in this lawsuit reviewed de novo whether Kilo Six
had the right to vote lot 13’s percentage interest, substantial evidence supports
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No. 77365-8-I / 9
its finding that Everett Hangar’s inconsistent position did not create the
perception that either the Snohomish County Superior Court or the trial court was
misled.
C. Equity
Kilo also claims that Everett Hangar’s inconsistent position benefited it.
We disagree.
Kilo asserts that Everett Hangar will receive an unfair benefit if this court
affirms the trial court’s decision because Kilo Six cannot exercise lot 13’s voting
percentage interest. They claim that this judgment would not have been
available to Everett Hangar in the Snohomish County lawsuit in which it
successfully asserted that Sessions controlled the Association’s votes.
But, consistent with the trial court’s finding, Kilo also took a position in the
Snohomish County lawsuit that is inconsistent with their position here. There, the
parties did not contest that lot 13 remained undeveloped and “vacant.”7
Similarly, in response to the Association’s 2016 proposed budget, Everett Hangar
e-mailed Sessions, stating that it would like the Association to allocate expenses
previously assigned to only lots 11 and 12 to all three lots “in the same lot
percentage allocation as the rest of the expenses” because “so much time has
passed and . . . Lot [13] . . . has not yet been constructed.” Sessions responded
~ Everett Hangar, LLC v. Kilo 6 Owners Ass’n, No. 73504-7-I, slip op. at 3
(Wash. Ct. App. Aug. 8, 2016) (unpublished),
http://www.courts.wa.gov/opinions/pdf/735047.pdf.
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No. 77365-8-I / 10
that because lot 13 remained undeveloped, it did not require the same
maintenance as lots 11 and 12. But “[w]hen developed, it should participate pro
rata as it will cause all of [the maintenance] expenses to increase.” By contrast,
just 10 days after this e-mail exchange, and after Everett Hangar asserted that lot
13 was ineligible to vote on Association matters because Kilo Six had not
certified lot 13 as substantially complete, Kilo Six certified lot 13 as substantially
complete. Similar to the trial court, we conclude that because both parties have
taken inconsistent positions, not applying judicial estoppel to bar Everett
Hangar’s claims would not provide either party an unfair advantage or cause
either party an unfair detriment.
The trial court did not abuse its discretion by deciding not to apply judicial
estoppel to bar Everett Hangar’s claim.
The CC&Rs
Kilo next challenges the trial court finding that Kilo Six abused its
discretion when it certified lot 13 as “substantially complete.” We disagree.
To interpret a restrictive covenant, a court looks to the intent of the
drafters.8 To determine the intent of the contracting parties, a court applies
contract interpretation rules.9 This means it “view{s] the contract as a whole, its
subject matter and objective, the circumstances surrounding its making, the
~ Wimberly v. Caravello, 136 Wn. App. 327, 336, 149 P.3d 402 (2006).
~ Wimberly, 136 Wn. App. at 336.
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No. 77365-8-I / 11
subsequent acts and conduct of the parties, and the reasonableness of the
interpretations advocated by the parties.”1° A court “generally give{s] words in a
contract their ordinary, usual, and popular meaning unless the entirety of the
agreement clearly demonstrates a contrary intent.”1 A court may consider
extrinsic evidence about the circumstances under which the parties formed the
contract to help it decide the parties’ intent.12
A. Standard of Review
An appellate court reviews challenged findings of fact for substantial
evidence.13 Substantial evidence requires “a sufficient quantum of evidence in
the record to persuade a reasonable person that a finding of fact is true.”4 This
court reviews questions of law de novo.15 “The parties’ intentions [in entering into
a contract] are questions of fact, while the legal consequences of such intentions
are questions of law.”6 We review de novo mixed questions of law and fact
when the parties do not dispute the facts.17
10Wimberly, 136 Wn. App. at 336.
~ Hearst Commc’ns, Inc. v. Seattle Times Co., 154 Wn.2d 493, 504, 115
P.3d 262 (2005).
12 Wimberly, 136 Wn. App. at 336.
13 Pardee v. Jolly, 163 Wn.2d 558, 566, 182 P.3d 967 (2008).
14 Pardee, 163 Wn.2d at 566.
~ Pardee, 163 Wn.2d at 566.
16 Pardee, 163 Wn.2d at 566.
‘~ Brundridge v. Fluor Fed. Servs., Inc., 164 Wn.2d 432, 441, 191 P.3d
879 (2008).
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No. 77365-8-I / 12
Here, Everett Hangar asserts that this court should use the substantial
evidence standard because Kilo disputes same factual issues. Because Kilo
does not dispute the facts underlying the parties’ intent or course of performance
and this court reviews mixed questions of law and fact de novo, we use the de
nova standard.
B. The Plain Language of the CC&Rs
First, Kilo asserts that the trial court’s use of a statutory definition of
“substantial completion” contradicts express terms in the CC&Rs. We reject this
claim.
The CC&Rs do not define “substantially complete.” The trial court .relied
on the dictionary definitions of “completion” and “complete.” “Completion’ is
defined as the ‘act or action of completing, becoming complete, or making
complete.” “Complete’ is, in turn, defined as ‘possessing all necessary parts,
items, components, or elements’; ‘brought to an end or to a final or intended
condition’; and ‘fully realized’ or ‘carried to the ultimate.”18 Because the trial
court found that “substantial completion” was a term commonly used in the
construction industry, it also relied on the definition from RCW 4.16.310, a statute
about claims arising from construction. RCW 4.16.310 defines “substantial
completion” as “the state of completion reached when an improvement upon real
Mattingly v. Palmer Ridge Homes LLC, 157 Wn. App. 376, 394, 238
18
P.3d 505 (2010) (quoting WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 465
(2002)).
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No. 77365-8-1/13
property may be used or occupied for its intended use.” Applying these
definitions to section 9.1 of the CC&Rs, the trial court found that a “Lot,” as
defined in the CC&Rs, is “substantially complete when the improvements have
been completed sufficient to allow the property to be occupied for its intended
use.”
The trial court viewed the CC&Rs holistically and concluded that the
circumstances surrounding the drafting of the CC&Rs, including evidence about
why the parties incorporated “substantially complete” into the CC&Rs, support
using the ordinary and usual meaning of “substantially complete.” The court also
concluded that witness testimony, the lot 13 lease, and other governing
documents discussed below also show that lot 13 is substantially complete only
with a hangar.
First, the trial court relied on the testimony of Roger Collins, cofounder and
former comanager of Kilo Six. Collins testified that he asked Sessions to add the
“substantially complete” language to section 9.1 when Sessions stated that he
did not believe that lot 13 should have to pay for certain base assessments as
long as it remained undeveloped. Collins told Sessions that because the project
was undeveloped, Sessions should be free from paying dues, but, consequently,
Sessions could not vote those shares on Association business. Sessions did not
dispute this testimony.
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No. 77365-8-I / 14
Collins also testified that he and Sessions leased the lots from Paine Field
to build three separate hangars, inàluding one on lot 13. He stated that at no
point during his tenure as coowner and comanager of Kilo Six did the
development of lot 13 contemplate a lot without a hangar on it. And he stated
that Everett Hangar purchased the lot 12 hangar, in part, based on the promised
construction of a hangar on lot 13. Collins testified that as it sits today, lot 13 is
not substantially complete.
Additional witness testimony and the lot 13 lease also show that the
parties intended lot 13 to be substantially complete only with a hangar. Weidner
testified that Kilo Six repeatedly represented to him that lot 13 would be
developed with a hangar. Similarly, Sessions and the witnesses for Paine Field
testified that the lot 13 lease requires Kilo Six to build a hangar on it, and Paine
Field expects Sessions to do so. Although the lot 13 lease gives Kilo Six the
right to decide when to construct the hangar, it requires Kilo Six to build a hangar
on the lot when economically feasible to do so.
In addition, a number of other governing documents show that Kilo Six
intended lot 13 to have a hangar:
1.. The original lease between Kilo Six and the County shows a hangar
on what is now lot 13.
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No. 77365-8-I / 15
2. The purchase and sale agreement between Weidner and Kilo 6 for
Weidner’s purchase of the lot 12 hangar states, “[Kilo 6] intends to improve the
leased property so that there will be three separate hangars on the leased
property.”
3. The CC&Rs state, “Because of the nature of the anticipated use of
the Property as an aircraft hangar facility for working aircraft, safety and security
are of particular concern.”
4. Kilo Six’s amended operating agreement states, “[Kilo Six] shall
continue, to pursue efforts to construct an aircraft hangar on Lot 13, and
thereafter shall operate or lease Lot 13 and the hangar constructed thereon, or
shall sell and transfer such Lot 13 Lease and hangar.”
Kilo contends that the trial court’s interpretation of “substantially complete”
conflicts with two express CC&R provisions. First, Kilo notes that the CC&Rs do
not say that a building must be constructed on lot 13 for it to be substantially
complete and do not limit the Association’s sole discretion to certify lot 13 as
substantially complete. But the CC&Rs do limit the Association’s discretion to
certify a lot as substantially complete until the lot is actually substantially
complete. And the CC&Rs do not define “substantially complete.” So the trial
court followed contract interpretation principles to “define substantially complete.”
It adopted the phrase’s ordinary meaning by relying on both the dictionary
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No. 77365-8-I / 16
definitions of “completion” and “complete” and the common industry definition of
“substantial completion.” We find Kilo’s claim of conflict unpersuasive.
Second, Kilo maintains that the CC&Rs state that the Association need
certify only a lot, not a building, as substantially complete. The CC&Rs define
“Lot” as the “ground leasehold interest in such Lot.” They define “Building” as
“[a]ny building, aircraft hangar, storage shed, or other improvement on the
Property that has one or more walls and a roof or overhead cover.” Section 9.1
states, “tN]o Base Assessments shall be levied against any Lot unless and until
Declarant has certified to the Board that development of such Lot is substantially
complete.” (Emphasis added.) Kilo asserts that the CC&Rs assignment of
different definitions to “Lot” and “Building” means that the Association need
certify only a Lot as substantially complete to levy base assessments on it and
that it need not have a hangar on it to qualify for this certification. But, again,
because the CC&Rs do not define “substantially complete” and the provisions
that Kilo relies on do not establish what the drafters intended it to mean, this
argument is unpersuasive.
Kilo does not show that the definitions the trial court relied on or the
court’s finding that lot 13 is not substantially complete conflict with any provisions
of the CC&Rs.
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No. 77365-8-I / 17
C. The Parties’ Course of Performance
Kilo also asserts that the trial court misapplied the parties’ course of
performance doctrine. We disagree.
A court may explain or supplement contractual terms with the parties’
course of dealing, usage of trade, or course of performance.19 The parties’
“course of performance’ refers to ‘[a] sequence of previous performance by
either party after an agreement has been entered into, when a contract involves
repeated occasions for performance.”2° “[T]he express terms of an agreement
and any applicable course of performance . . . must be construed whenever
reasonable as consistent with each other.”21 If unreasonable, “[e]xpress terms
prevail over course of performance.”22
The trial court concluded that the parties’ course of performance did not
support Kilo Six’s claim that all members accepted lot 13 as substantially
complete or that Kilo Six has the right to vote. Kilo claims that the trial court
improperly disregarded the parties’ course of performance. It notes that lot 13
paid some base assessments that it would not have done if the parties did not
consider it substantially complete.
19 Morgan v. Stokely-Van Camp, Inc., 34 Wn. App. 801, 805, 663 P.2d
1384 (1983).
20 Spradlin Rock Prods., Inc. v. Pub. Util. Dist. No. 1 of Grays Harbor
County, 164 Wn. App. 641, 661, 266 P.3d 229 (2011) (alteration in original)
(quoting BLACK’S LAW DICTIONARY 405 (9th ed. 2009)).
21 RCW 62A.1-303(e).
22 RCW 62A.1-303(e)(1).
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No. 77365-8-I / 18
Kilo relies on Everett Hangar’s answers to certain allegations in their
complaint to show that Everett Hangar admitted that Kilo Six paid some base
assessments and not others with Everett Hangar’s permission. Kilo alleged in
their complaint,
Since the Association’s inception, each Member has paid
Association base assessments. With Everett Hangar’s consent,
Kilo Six paid Association base assessments only for services Kilo
Six consumed, such as mowing and irrigation. With Everett
Hangar’s consent, Kilo Six did not contribute to assessments for
other services, such as landscaping and garbage collection, that
were not consumed by Kilo Six. This was true even under
Association budgets originally prepared and proposed by Everett
Hangar.
In Everett Hangar’s answer, it “admit[ted] the allegations in this paragraph.”
Kilo also relies on Everett Hangar’s answer that to the allegation that
Everett Hangar took the position on January 12, 2016 that the
development of Lot 13—which was originally intended to include an
aircraft hangar for Historic Flight Foundation—is not substantially
complete, and that Lot 13’s Owner, Kilo Six, therefore cannot vote
an Association matters pursuant to Section 9.1 of the CC&Rs, even
though Kilo Six had been charged and had paid base assessments
since the Association’s inception.
Everett Hangar responded, “[It] admits the allegations of this paragraph, and
further responds that it was Kilo Six who, at the January 12, 2016 meeting, stated
and confirmed that development of Lot 13 was not substantially complete.”
Further, Kilo alleged in their complaint that “[a]t the January 12, 2016
meeting, Everett Hangar argued that Kilo Six was entitled to a refund of all
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No. 77365-8-I / 19
Association assessments paid by Kilo Six to date.” Kilo relies on Everett
Hangar’s response:
[It] admits that, at the January 12, 2016 meeting, it offered to vote in
favor of refunding the Association base assessments paid for [by]
undeveloped Lot 13 provided that Kilo Six abide by the other
consequences of its failure to develop the lot pursuant to Section
9.1 of the CC&Rs. Everett Hangar otherwise denies the allegations
in this paragraph.
Everett Hangar’s responses show that the Association charged lot 13
some base assessments. But consistent with the trial court’s reasoning, the
parties’ course of performance does not clarify whether the parties’ believed that
lot 13 was substantially complete; it. does not support Kilo Six’s position that the
parties’ dourse of performance establishes that the parties treated lot 13 as
substantially complete for two reasons.
First, substantial evidence supports the trial court finding that the parties’
course of performance was inconsistent with the clear and express terms of the
CC&Rs. Although whenever possible the express terms of the agreement and
the parties’ course of performance should be construed as consistent with one
another, this is not possible here. The parties agree that Kilo Six first certified
lots 11, 12, and 13 as substantially complete on January 21, 2016, after Everett
Hangar challenged lot 13’s voting eligibility. Even so, as discussed above, the
parties annually assessed at least some base assessments to the owners of
each lot. This conduct conflicts with section 9.1. Until Kilo Six certified any lot to
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No. 77365-8-I / 20
be substantially complete, the Association should not have assessed any base
assessments against that lot. When the express terms of the CC&Rs and the
parties’ bourse of performance cannot be reconciled, the express terms prevail.
And, as discussed above, based on the dictionary and common industry
definitions of “substantially complete,” lot 13 was not substantially complete.
Second, the trial court noted that although lot 13 paid some of the
maintenance costs levied against the lots, it refused to pay all of the base
assessments that lots 11 and 12 paid. As discussed above, in January 2016,
Kilo Six refused to pay for a number of base assessments, including landscape
maintenance, parking lot maintenance, storm drain maintenance, and garbage
costs. And that same month, Everett Hangar offered to vote in favor of refunding
lot 13 the base assessments that it had paid. Because the parties’ course of
performance shows that lot 13 paid only some base assessments and Everett
Hangar was in favor of lot 13 paying more or less base assessments at different
periods, the trial court did not err in concluding that the parties’ course of
performance does not show that all members considered lot 13 substantially
complete.
D. The Duty of Good Faith and Fair Dealing
Last, Kilo challenges the trial court decision that Kilo Six violated its duty
of good faith and fair dealing by certifying lot 13 as substantially complete.
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“[Wjhen a party has discretion over a future contract term, it has an implied duty
of good faith and fair dealing in setting and performing that contractual term.”23
This court reviews a breach of contract finding, including the implied duty of good
faith and fair dealing, for substantial evidence.24
Kilo challenges the trial court’s conclusion that Kilo Six violated its duty of
good faith and fair dealing on one ground—that the trial court erred in concluding
that lot 13 must have a hangar to be substantially complete. As discussed
above, we conclude that the trial court did not err in deciding that lot 13 is not
substantially complete without a hangar. Accordingly, we reject Kilo’s claim.
Attorney Fees
Everett Hangar requests attorney fees on appeal under the CC&Rs and
RAP 18.1. RAP 18.1 allows a reviewing court to award a party reasonable
attorney fees if applicable law grants a party the right to recover them. Here, the
CC&Rs state, ‘In any action to enforce the provisions of this Declaration or
Association rules, the prevailing party shall be entitled to recover all costs,
including, without limitation, reasonable attorneys’ fees and court costs,
reasonably incurred in such action.” Because this lawsuit concerns whether lot
13 is substantially complete under the CC&Rs, we award Everett Hanger
23Rekhterv. Dept of Soc. & Health Servs., 180 Wn.2d 102,115,323 P.3d
1036 (2014).
24 Frank Coluccio Constr. Co. v. King County, 136 Wn. App. 751, 762,
764, 150 P.3d 1147 (2007).
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No. 77365-8-I / 22
attorney fees on appeal as the substantially prevailing party, subject to its
compliance with RAP 18.1(d).
CONCLUSION
Judicial estoppel does not bar Everett Hangar’s challenge to Kilo Six’s
voting. The trial court did not err in finding that lot 13 is not “substantially
complete” based on the ordinary and usual meaning of the phrase and the
parties’ intended use of lot 13. We affirm.
WE CONCUR:
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