Gov't of Guam v. WSTCO Quality Feed & Supply, (2019)

• Docket Number: Supreme Court Case No.: CVA17-017
• Decision Date: 31 July 2019
• Citation: 2019 Guam 16
• Parties: GOVERNMENT OF GUAM, Plaintiff-Appellant/Cross-Appellee, v. WSTCO QUALITY FEED & SUPPLY, Defendant-Appellee/Cross-Appellant.
• Court: Guam Supreme Court

2019 Guam 16

GOVERNMENT OF GUAM, Plaintiff-Appellant/Cross-Appellee, v. WSTCO QUALITY FEED & SUPPLY, Defendant-Appellee/Cross-Appellant.

Supreme Court Case No.: CVA17-017

SUPREME COURT OF GUAM

Argued and submitted: May 18, 2018

July 31, 2019

Superior CourtCase No.: CV1379-10

OPINION

Appeal from the Superior Court of Guam

Argued and submitted on May 18, 2018

Hagåtña, Guam

Appearing for Plaintiff-Appellant/

Cross-Appellee:

David J. Highsmith, Esq.

Assistant Attorney General

Office of the Attorney General

Litigation Division

590 S. Marine Corps Dr., Ste. 802

Tamuning, GU 96913

Appearing for Defendant-Appellee/

Cross-Appellant:

Joseph C. Razzano, Esq.

Joshua D. Walsh, Esq.

Civille & Tang, PLLC

330 Hernan Cortez Ave., Ste. 200

Hagåtña, GU96910 BEFORE: KATHERINE A. MARAMAN, Chief Justice; F. PHILIP CARBULLIDO, Associate Justice; JOSEPH N. CAMACHO, Justice Pro Tempore.

CARBULLIDO, J.:

[1]Plaintiff-Appellant/Cross-Appellee the Government of Guam ("Government") appeals from a final judgment entered by the Superior Court.In the proceedings below, the Government filed a quiet title suit against Defendant-Appellee/Cross-Appellant WSTCO Quality Feed & Supply ("WSTCO").Following a bench trial, the Superior Court found for WSTCO.We reverse and remand for further proceedings not inconsistent with this opinion.

I.FACTUAL AND PROCEDURAL BACKGROUND

[2] In 2006, the Guam Ancestral Lands Commission("GALC") and WSTCO entered into a lease ("Lease"), under which WSTCO leased a portion of land in Barrigada from GALC to construct and operate a slaughterhouse business.The Lease was captioned as a "license," but the Superior Court found that the intended effect and operation of the instrument was to establish a leasehold, a finding that the Government concedes on appeal, seeAppellant's Br.at 5(Oct. 17, 2017).The initial term of the Lease was one year; the term was renewable annually at the option of WSTCO.The Lease contemplated that WSTCO would eventually pay GALC a percentage of the gross sales derived from operating the slaughterhouse.To exercise its option, WSTCO was required to give notice to GALC sixty days prior to April 30 of each year.

[3] In 2007, 2008 and 2009, WSTCO made payments to renew the Lease, and in each case also filed a "Notice of Renewal" with the Department of Land Management("DLM"); these Notices of Renewal were then purportedly forwarded to GALC.SeeRecord on Appeal ("RA"), tab 155at 2(Finds. Fact & Concl.L., June 2, 2017);see alsoTranscript ("Tr.")at 102:7-104:10(Trial, Sept. 15, 2016);Tr. at 72:15-25(Trial, Sept. 14, 2016); RA, tab 60, Exs. 8, 20, 23(Def.'s Am. Ex. List, July 23, 2013).These payments were late, but were accepted without objection.RA, tab 155 at 2(Finds. Fact & Concl.L.).The parties have not produced copies of cashed checks for these years; however, WSTCO filed a Notice of Renewal for 2007 in May—after April 30—allegedly because of a miscommunication between WSTCO and its then-attorney.SeeRA, tab 60, Ex. 8(Def.'s Am. Ex. List);see alsoTr. at 102:15-103:8(Trial, Sept. 15, 2016).The 2008 and 2009 Notices of Renewal were each filed with DLM in March.SeeRA, tab 60, Exs. 20, 23(Def.'s Am. Ex. List);see alsoRA, tab 155at 2(Finds. Fact & Concl.L.).

[4] On May 26, 2009, GALC informed WSTCO that Guam Economic Development Authority ("GEDA") had taken over management of the Lease under a Memorandum of Understanding between GALC and GEDA, and that all communications and payments regarding the Lease were to be routed through GEDA acting as GALC's agent.SeeRA, tab 155at 3(Finds. Fact & Concl.L.);see alsoTr. at 35:4-22(Trial, Sept. 14, 2016); RA, tab 60, Exs. 4, 9(Def.'s Am. Ex. List).Approximately two months later, counsel for GALC sent a letter to WSTCO stating that GALC intended to terminate the Lease and requesting discussions to arrange for termination.Nothing in the record indicates WSTCO responded to these letters.In June 2010, however, WSTCO filed another Notice of Renewal with DLM, and in July 2010, WSTCO attempted to deliver the related annual payment to GEDA, which GEDA rejected.¹SeeRA, tab 155at 5-6(Finds. Fact & Concl.L.)("In July 2010, WSTCO attempted . . . ."); RA, tab 60, Ex. 11(Def.'s Am. Ex. List);Tr. at 131:21-133:24(Trial, Sept. 15, 2016)(Gina Mendiola testifying she attempted delivery to GEDA in July 2010).On July 12, 2010, GALC's counsel sent a letter to WSTCO's counsel stating that the Lease was revoked and canceled, noting thatGALC had not received timely notice of renewal.RA, tab 155 at 5(Finds. Fact & Concl.L.); RA, tab 60, Ex. 13(Def.'s Am. Ex. List).

[5] Subsequently, the Government filed a quiet title action.WSTCO counterclaimed, alleging monetary damages because of the Government's actions.The Superior Court dismissed WSTCO's counterclaim for lack of subject matter jurisdiction.

[6] After a bench trial, the Superior Court ruled that WSTCO's leasehold interest was reinstated.The Government timely appealed.WSTCO timely cross-appealed the dismissal of its counterclaim.

II.JURISDICTION

[7]This court has jurisdiction over appeals from a final judgment.See48 U.S.C.A. § 1424-1(a)(2)(Westlaw through Pub. L. 116-29(2019));7 GCA §§ 3107(b), 3108(a)(2005).

III.STANDARD OF REVIEW

[8]"Findings of fact made following a bench trial are reviewed for clear error."Guam Resorts, Inc., v. G.C. Corp., 2013Guam 18¶ 33.Legal conclusions and issues of contract interpretation are reviewed de novo.Id.¶¶ 33-34.In general, mixed questions of law and fact are reviewed de novo.Hawaiian Rock Prods. Corp. v. OceanHous., Inc., 2016Guam 4¶ 13.

IV.ANALYSIS

A.The Option to Renew the Lease Expired Under Its Terms in 2010

[9] The first issue we must address is whether the Lease terminated on April 30, 2010, according to its terms.The Government argues that "if the agreement terminated on April 30, 2010, as the government intended, what happened after April 30, 2010, is irrelevant," and that WSTCO did not respond to the Government's overtures requesting Lease termination until after the Lease expired.Appellant's Br.at 12;see alsoRA, tab 20at 2-3(Am. Compl., Jan. 4, 2012)(claiming GALC considered the license terminated on April 30, 2010);Tr. at 27:7(Trial, Sept. 15, 2016)(testimony of Anita Orlino that the "license expired").This specific contention requires that we address whether the Lease had expired under its terms when WSTCO had attempted to renew it.

[10] Whether the Lease expired on April 30, 2010, depends on the language of the Lease, which we interpret de novo.SeeHRC Guam Co. v. Bayview IIL.L.C., 2017Guam 25¶ 55.Under de novo review, we first look to the plain meaning of the contract.Id.¶ 60;see alsoRamiro v. White, 2016 Guam 6¶ 19(quotingWasson v. Berg, 2007 Guam 16¶ 10);18 GCA §§ 87104-87105(2005).

[11]Section 1(a) of the Lease explicitly states that WSTCO retained the option to extend the initial annual lease term for successive annual terms and that WSTCO "shall exercise each such option to extend the terms of this [Lease]by giving notice in writing to [GALC] at least 60 days prior to the end of the term of this [Lease] then in effect."RA, tab 60, Ex. 3at 4(Def.'s Am. Ex. List)(emphases added).According to the Lease, each term expired on April 30 of each year.Id.We find nothing ambiguous about this language, as it "supports only one reasonable interpretation"—namely, that WSTCO had to give notice sixty days before April 30 of each year if it intended to exercise the option to renew.SeeLeon Guerrero v. Leon Guerrero, 2014 Guam 6¶ 18;cf.Duenas v. George & Matilda Kallingal, P.C., 2012Guam 4¶¶ 13-14(rejecting interpretation that contract language meant something other than its plain meaning);Bank of Guam v. Flores, 2004 Guam 25¶¶ 18-21(rejecting parol evidence intended to alter plain meaning of contract).Even WSTCO does not contest that this provision is susceptible to only one interpretation, and its arguments presuppose that this provision should operate as written.SeeAppellee's Br.at 4-28.Questions of breach and related termination rights that might arise therefrom, as argued at some length, are therefore inapposite if the offer to renew for a successive term expired, under the Lease, because of failing to satisfy the condition precedent in Section 1(a).

[12] As for all offers, "[b]y requiring acceptance within a stated period of time, the expiration of that period automatically terminates the power of acceptance."3 Corbin on Contracts § 11.8(1996)(collecting cases).Where an option "specifies the time for notice of acceptance, it is almost universally held, in both law and equity, that the stated time is to be regarded as of the essence, whether expressly so stated or not."Id.§ 11.17(collecting cases).Courts uniformly recognize the general rule that failing to give timely notice, when required, results in expiration of the option under its terms.See, e.g., SDG Macerich Props., L.P. v. Stanek Inc., 648 N.W.2d 581, 585-86(Iowa2002);Romain v. A. Howard Wholesale Co., 506 N.E.2d 1124, 1127-28(Ind. Ct. App.1987);Brick Plaza, Inc. v. Humble Oil & Ref. Co., 526 A.2d 1139, 1140-41(N.J. Super. Ct. App. Div.1987);Simons v. Young, 155 Cal. Rptr. 460, 466(Ct. App.1979);Conrad Milwaukee Corp. v. Wasilewski, 141 N.W.2d 240, 243(Wis.1966);Koch v. H & S Dev. Co., 163 So. 2d 710, 722(Miss.1964);Wachovia Bank & Tr. Co. v. Medford, 128 S.E.2d 141, 144(N.C.1962);Mathews v. Kingsley, 100 So. 2d 445, 446, 449(Fla. Dist. Ct. App.1958).This accords with the general rule that options may be exercised only in strict compliance with their terms.See, e.g., JWS Refrigeration & Air Conditioning, Ltd. v. Charles Young Constr. Co., D.C. CV.No. 86-0059A, S. C. CV.No. 1262-85, 1987 WL 109891, at *2(D. Guam App. Div.July 16, 1987).

[13] Some jurisdictions recognize special equitable considerations that excuse strict compliance.SeeSDG Macerich, 648 N.W.2d at 588-89(collecting cases...