Ledaura, LLC v. Gould, No. 38832-4-II (Wash. App. 4/27/2010)

• Court: Washington Court of Appeals
• Writing for the Court: Hunt
• Decision Date: 27 April 2010
• Docket Number: No. 38832-4-II.,38832-4-II.
• Citation: Ledaura, LLC v. Gould, No. 38832-4-II (Wash. App. 4/27/2010), No. 38832-4-II. (Wash. App. Apr 27, 2010)
• Parties: LEDAURA, LLC, a Washington limited liability company, Respondent. v. RANDY GOULD and "JANE DOE" GOULD, husband and wife; BRET DRAGER and "JANE DOE" DRAGER, husband and wife; and GREG JOHNSON and "JANE DOE" JOHNSON, husband and wife, Appellants.

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LEDAURA, LLC, a Washington limited liability company, Respondent. v. RANDY GOULD and "JANE DOE" GOULD, husband and wife; BRET DRAGER and "JANE DOE" DRAGER, husband and wife; and GREG JOHNSON and "JANE DOE" JOHNSON, husband and wife, Appellants.

No. 38832-4-II.

Court of Appeals of Washington, Division Two.

Filed: April 27, 2010.

Appeal from Pierce County Superior Court. Docket No: 08-2-10151-2. Judgment or order under review. Date filed: 01/16/2009. Judge signing: Honorable James R Orlando.

Counsel for Appellant(s), Mark Ronald Roberts, Roberts Johns & Hemphill, PLLC, 7525 Pioneer Way Ste 202, Gig Harbor, WA, 98335-1166.

Counsel for Respondent(s), Douglas N Kiger, Blado Kiger PS, 3408 S 23rd St, Tacoma, WA, 98405-1609.

HUNT, J.

In this action to enforce an option agreement to purchase real property, business partners Bret Drager and "Jane Doe" Drager, Greg Johnson and "Jane Doe" Johnson, and Randy Gould and "Jane Doe" Gould (Buyers)¹ appeal the trial court's denial of their motion for summary judgment and its grant of partial summary judgment in favor of seller Ledaura, LLC (Ledaura). Buyers argue that the trial court erred in finding that the parties' separate lease and option agreements formed a single contract and that terminating the lease agreement also terminated the option agreement. We reverse the trial court's grant of partial summary judgment to Ledaura and remand.

FACTS

I. Lease, Option, and Addenda

Leah Caruthers and her sister formed the David W. Smith Revocable Living Trust (Trust) to manage their father's assets after he suffered a stroke in December 2004. The sisters served as co-trustees. Between November 2005 and January 2006, Buyers negotiated with the Trust to lease two adjacent lots and a commercial warehouse (the Property) in the City of Tacoma's St. Helen's neighborhood. With assistance from their real estate agents, Buyers and Caruthers² negotiated an eight-year lease agreement, which they signed on December 2005 and extinguished shortly thereafter.

A. January 24, 2006 Lease and Lease Addendum

Next, Caruthers negotiated and Buyers drafted a new three-year lease agreement (Lease), which the parties executed on January 24, 2006. The Lease identified Buyers as "Tenants" and the Trust as "Landlord," set the rent at $4,500 per month, and required Buyers to "prepay" $9,000 rent for the first and last months. The Lease provided: (1) "Tenants shall not assign" or transfer their interest in the Lease without the landlord's consent, Clerk's Papers (CP) at 166; (2) "This Lease contains all of the covenants and agreements between Landlord and Tenant relating to the Premises. No prior or contemporaneous agreements or understanding pertaining to the Lease shall be valid or of any force or effect . . .," CP at 171; (3) "Any provision of this Lease which shall prove to be invalid, void or illegal shall in no way affect, impair or invalidate any other provision of this Lease," CP at 171; and (4) "The following exhibits and riders are made part of this Lease[:] Exhibit A—Legal Description[,] Exhibit B Addendum DATED January 24th, 2006." CP at 172.

On the same day that the parties signed the Lease, they also executed a "Lease Addendum." CP at 24. This Lease Addendum provided as follows: (1) The Trust "shall not alter the Lease Agreement or any other real estate related agreements (The `Agreements') without the express written permission of (Lessee) [Gould, Drager, and Johnson]"; (2) "Tenant [Lessee] shall have months (2) through (11) of the first year of the lease free of rent"; (3) "Lessee retains the option to renew the lease with all terms and conditions outlined in Agreements remaining the same (with the exception of a free rent provision) for a period of up to (5) years"; and (4) "[t]his agreement supersedes all previous agreements." CP at 24.

B. January 25, 2006 Option To Buy, Purchase and Sale Agreement, and Addendum

The next day, on January 25, the parties signed an agreement entitled "OPTION TO BUY REAL ESTATE" (Option), for which Buyers paid $35,000 in consideration for an option to buy the Property for $1,060,000. CP at 186. The Option neither mentioned the Lease nor referenced any Lease terms.

The Option provided:

In consideration of: $35,000 paid by Buyer to Seller; Seller grants to Buyer, and Buyer's successors and assigns, the right to buy the Property on or before the 25th day of January, 2014, (the `expiration date') without grace or extension of said date.

CP at 186. Unlike the Lease, which prohibited Buyers from assigning their interest in the Lease, the Option provided for "Buyer, and Buyer's successors and assigns." CP at 186 (emphasis added). The Option further provided:

Buyer may exercise this Option, only by written notice delivered or sent (postmarked) by certified mail, to Seller . . . at least thirty (30) days in advance of the expiration date of this Option.

CP at 186. The Option also provided that the property's legal description was "Attached." CP at 186.

The Option's "OTHER AGREEMENTS" provision noted only two items—a purchase and sale agreement and an addendum. The Option provided:

Buyer and Seller have completed and attached a Purchase and Sale Agreement. If Buyer exercises this Option, Buyer and Seller agree to proceed with the transaction according to the terms and conditions set forth [i]n the attached Purchase and Sale Agreement.

CP at 186. This standard form purchase and sale agreement, which the parties signed on the same day as the Option, contained much of the same information as the Option, including the purchase price, the $35,000 "earnest money" payment, and the January 25, 2014 expiration date for exercising the Option. CP at 176. In contrast to the Lease but like the Option, the purchase and sale agreement provided, "Buyer may assign this Agreement, or Buyer's rights hereunder, without Seller's prior written consent, unless provided otherwise herein." CP at 182. The purchase and sale agreement also identified the property as "601 Saint Helens" in Tacoma, Washington, "legally described on attached Exhibit A." CP at 176. And it included in its "POSSESSION" provision that "[b]uyer shall be entitled to possession, subject to existing tenancies (if any), See Attached Lease³ (on closing, if not completed)." CP at 180.

Under "EXHIBITS AND ADDENDA," the purchase and sale agreement listed 10 documents, including Buyers' earnest money promissory note and the Property's deed of trust. CP at 177. Another handwritten note listed the following additional documents: "Option to Purchase 1-25-06, Lease Agreement 1-24-06, Purchase & Sale 1-25-06, Addendum 1-25-06, Revocable Trust 4-18-05 [and] Power of Attorney 4-18-05." CP at 177. Although the purchase and sale agreement twice referenced the parties' Lease agreement in handwritten additions to the printed document, it contained no information about whether this Lease affected the Option or vice versa.⁴

Also on January 25, the parties executed an "ADDENDUM," the heading of which included the Property's street address and the notation "Lease, Option to Buy Real Estate and Purchase and Sale Agreement" (January 25 Option Addendum). CP at 190. Although this January 25 Addendum contained much of the same information as the January 24 Lease Addendum, it provided several additional provisions, including: (1) "This agreement supersedes all previous agreements including the lease addendum dated January 24, 2006," CP at 24, 190 (No. 10); (2) "Earnest/Option monies ($35,000.00) provided pursuant to Agreements shall be either paid into escrow and shall be made available to seller upon request or directly to Seller within [three] weeks of mutual acceptance of Agreements," CP at 190 (No. 9); and (3) "Both the Buyer and Seller shall equally share the Listing commission of approximately $30,000 upon the successful completion of the sale of the property." CP at 190 (No. 11).

The January 25 addendum also provided that the Trust

shall have the exclusive right to occupy the bottom floor of the building rent free, except for expenses, for a period of up to (8) years or until [Smith's] demise," and "shall be responsible for utilities, insurance, maintenance, repairs and net costs pertaining to the bottom floor only.

CP at 190 (No. 4).

In addition, the January 25 Addendum listed the following "Other Documents included herewith:

1. Exhibit A Legal Description

2. A copy of the David W Smith Revocable Living Trust dated April 18, 2005.

3. A copy of the "Durable Power of Attorney" designating Laura A. Kuhl and Leah Caruthers as co-attorneys-in-fact.

4. Lease Agreement dated January 24, 2006

5. Purchase and Sale Agreement dated January 25, 2006

6. Option to Buy Real Estate both dated January 25, 2006[.]"

CP at 190-91.

C. Possession/Transfer of Property/Dispute

Shortly after executing these agreements, Caruthers formed Ledaura on February 16, 2006 and transferred ownership of the Property from the Trust to Ledaura. In January, Buyers took actual possession of the Property under the Lease. They occupied the upper and middle floors of the warehouse as tenants and began making significant improvements to the building by demolishing and removing old walls, building an office, painting the exterior, and repairing the water system, glass panels, and garage doors. According to Buyers, the value of these improvements exceeded $100,000.

In 2007, a dispute arose about the rent owed under the Lease. During the parties' negotiations to resolve the dispute, Ledaura proposed a new addendum, which provided, "Tenants have the option to purchase the property on the terms set forth in the . . . Purchase and Sale Agreement so long as there has been no default at any time in their obligations under the lease, option, or any addenda thereto." CP at 80-81. Buyers rejected this proposal, believing it would jeopardize their ability to exercise their 2006 Option to Buy the Property. Thus, this proposed additional addendum making exercise of the...