D.C. Park Golf Course Inc. v. City of Kennewick

• Decision Date: 10 February 2011
• Docket Number: No. 28357–7–III.,28357–7–III.
• Citation: 248 P.3d 1067,160 Wash.App. 66
• Parties: COLUMBIA PARK GOLF COURSE, INC., a Washington corporation, Respondent,v.CITY OF KENNEWICK, a municipal corporation in and for the State of Washington, Appellant.
• Court: Washington Court of Appeals

160 Wash.App. 66

248 P.3d 1067

COLUMBIA PARK GOLF COURSE, INC., a Washington corporation, Respondent,

v.CITY OF KENNEWICK, a municipal corporation in and for the State of Washington, Appellant.

No. 28357–7–III.

Court of Appeals of Washington, Division 3.

Feb. 10, 2011.

Michael B. Tierney, Michael B. Tierney PC, Mercer Island, WA, Lisa M. Beaton, Attorney at Law, Kennewick, WA, for Appellant.Nicholas D. Kovarik, Robert Allan Dunn, Dunn & Black PS, Spokane, WA, for Respondent.SIDDOWAY, J.

[160 Wash.App. 69] ¶ 1 We are asked in this case to set aside a jury's damage award to Columbia Park Golf Course Inc. (Columbia) following trial of its claims against the city of Kennewick (City) for breach of a development option agreement and the implied covenant of good faith and fair dealing. The City does not appeal the jury's determination that it breached the agreement but contends that the damages awarded were not recoverable as a matter of law, principally because at the time of the breach Columbia had not secured the permits, approvals, and agreements needed to succeed and because it characterizes the damages as future profits from a new business. The City also argues instructional error and that the trial judge should have ordered remittitur. We agree with the trial judge that Columbia presented substantial evidence in support of its claims and was entitled to submit its claim for presently measurable damages, not lost profits, to the jury. The trial court did not err in instructing the jury and substantial evidence supports the verdict. We affirm.

FACTS AND PROCEDURAL BACKGROUND

¶ 2 The federal government owns Columbia Park, 363 acres of recreational property located along the Columbia River shoreline. Federal ownership arose with construction of the McNary Lock and Dam, which created a reservoir whose shorelines are administered by the Secretary of the Army and the Army Corps of Engineers (Corps). The Secretary leased the park and other shorelines to Benton County, mandating that they be used for park and recreational purposes. After property comprising the park was annexed by the City, the Corps terminated its lease to Benton County and entered into a 50–year lease to the City. The Corps' master lease agreements with local governments require the governments and their sublessees to administer Corps property for park and recreational purposes, guided by an annual plan proposed by the local government and agreed to by the Corps. Among uses for the park that have been deemed suitable by the Corps for many years are as a golf course, as an overnight campground, and as a marina.

¶ 3 After the City acquired an interest in the park, it adopted development plans. A master development plan approved and adopted by the city council in February 2000 was controlling during all periods relevant to Columbia's claims. The master development plan was arrived at through a public process and was used as a guideline for decision-making about the park. The 2000 master development plan described a golf course and driving range that had long existed in the east end of the park, as well as plans for expanding and improving the course and course facilities.

[160 Wash.App. 71] ¶ 4 Prior to 2000, city employees operated the golf course and driving range. In the late 1990s, the City issued a request for qualifications seeking a private “partner” to undertake improvements and privatize course operations. Columbia's controlling shareholder and president, Gary Long, Jr., submitted a proposal on its behalf. Mr. Long's background included management of retail golf stores, pro shops, driving ranges, and miniature golf courses. Mr. Long was also part owner of a software company that offered sales accounting and tracking software for golf course and food and beverage operations, including for golf course resorts offering recreational vehicle (RV) camping.

¶ 5 Columbia was selected by the City to be the developer and operator of improved golf course operations. In March 2000, the City and Columbia executed a 25–year sublease, which included an option to renew for 5 years. The property included in Columbia's sublease included the golf course, driving range, other itemized buildings and facilities, and additional property east and west of existing operations. For the first five years of the sublease, the parties agreed that Columbia would make $50,000 in capital improvements annually, in lieu of rent.

¶ 6 By September 2001, Columbia had constructed over $300,000 worth of improvements and decided it wanted to construct a larger clubhouse and restaurant than originally envisioned. It approached the City with revised plans and a request for lease modifications in its favor, to compensate for its increased investment. The City agreed to extend the term of the sublease through September 2031 with options running to January 2050, and to extend the period for capital improvements in lieu of rent to 10 years. It also agreed that Columbia would own any new improvements and to revise the assignment clause to make Columbia's rights more freely assignable. An addendum reflecting these changes was executed in April 2003 and approved by the Corps.

¶ 7 Columbia then encountered problems designing the larger building, given site constraints and difficulties relocating the driving range. Mr. Long was working through the driving range problems with city staff when he became interested in a second development opportunity in the park.

¶ 8 West of the golf course in the park was an old campground. The Corps' 1982 plan for the park identified the campground location as a problem, since physical constraints imposed by a levee resulted in a roundabout access route making the campground hard to find. By 2003 the amenities were outdated, the campground had lost money under city operation, and it had to be closed due to an inadequate septic system. The City's 2000 master development plan stated, with respect to the campground, that a “relocated recreational vehicle (RV) campground shall be designed, built and operated by a private owner on a long-term lease from the City” and in April 2004, the City published a request for qualifications seeking a qualified “partner” to design, construct, and operate a new RV campground. Ex. 1–M (Ex. C at 00038); Ex. 1–L. It received only one proposal, which was nonresponsive. At that point the City began exploring its own development of a campground, and favored finding a different location in the park.

¶ 9 In February 2005, Mr. Long, having heard of the lack of response, approached the City's director of parks and recreation, Cindy Cole, and expressed interest in submitting a proposal. He assumed the RV park would remain at the former campground location, but soon learned from Ms. Cole that the City preferred to move it. He was keenly interested in the potential of a resort-type RV park as part of the golf course redevelopment, if the City would agree to an RV park replacing the existing driving range. Columbia's leasehold was zoned open space and designated open space under the City's comprehensive plan, thereby allowing development of an RV park. Ms. Cole and other city staff believed the proposal had merit and city staff encouraged Mr. Long to include moorage for overnight boater camping. City staff began working with Mr. Long on the concept and design of an RV park, shoreline improvements, and boat moorage at Columbia's existing leasehold.

[160 Wash.App. 73] ¶ 10 By August 2005, Columbia had prepared and provided the City with an initial development plan, and Columbia and the City entered into a development option agreement (DOA) “for the purpose of granting an exclusive option for the development of a recreational vehicle park, shoreline improvements and boat moorage within Columbia Park.” Ex. 1–AA at 1. The agreement recognized Columbia's desire to “protect its substantial investment in the feasibility plan” and promised that during the term of the agreement the City would not “entertain or negotiate any alternate proposals for development of a recreational vehicle park, shoreline improvements, and boat moorage within Columbia Park.” Id. at 1, 2. The DOA required Columbia to provide a project site plan, pursue site plan approval, and, upon final site plan approval, construct the development. The term of the DOA was six months, with options to extend. Through later exercise of the options, the agreement remained in effect through February 15, 2007.

¶ 11 The Corps indicated support for the revised development plan. Mr. Long and Ms. Cole had a predevelopment meeting with representatives of the Corps in September 2005 and Corps representatives confirmed that they considered campgrounds a normal shoreline use and even agreed to consider the RV park for a pilot program that would allow greater–than–30–day stays. A city staff report thereafter prepared for the planning commission stated that “the Corps of Engineers have expressed support of this project as a recreational use.” Ex. 2–GG at 10684.

¶ 12 City staff and officials indicated support for the project. Columbia engaged engineers and submitted an application under the State Environmental Policy Act (SEPA), chapter 43.21C RCW, to the City in September 2005 and an application for a shoreline substantial development permit and attached site plan in October 2005. City staff found that the RV park proposal met the intents and goals of the City's master development plan and the criteria established in the plan for an RV park, and recommended that the City's parks and recreation commission approve it with identified conditions. The parks and recreation commission voted to recommend approval of the permit application on March 9, 2006.

¶ 13 Notice of the application and the City's likely issuance of a mitigated determination of nonsignificance under SEPA was mailed to involved agencies and affected property owners on March 29, 2006. Only one letter of concern—from a...