Seattle-First Nat. Bank v. Earl
| Decision Date | 21 June 1977 |
| Docket Number | No. 1360-III,SEATTLE-FIRST,1360-III |
| Citation | 565 P.2d 1215,17 Wn.App. 830 |
| Parties | NATIONAL BANK, Trustee for the Martin Penhallick Trust, Appellant, v. Ken EARL and LuDeen Earl, husband and wife, Robert Yerxa and Divona M. Yerxa, husband and wife, and the Estate of Ottillie Herrmann, successor in interest to the interest of Phil Herrmann and Ottillie Herrmann, Respondents. |
| Court | Washington Court of Appeals |
Richard A. Derham and Davis, Wright, Todd, Riese & Jones, Seattle, for appellant.
Ken Earl, pro se.
Douglas Earl, Ries & Kenison, Ralph Kenison, Moses Lake, Shine, Rein, Stiles, Cathcart & Urquhart, Patrick K. Shine, and John D. Urquhart, Jr., Spokane, for respondents.
What effect is to be given a rental escalation clause contained in a long-term lease where the index necessary to effectuate the escalation is nonexistent? The trial court held that the escalation clause was without effect and the trial court could not rewrite an unambiguous contract, except to the extent that the parties' subsequent conduct evidenced an agreement to escalate the rent an additional $52.50 per month. The Seattle-First National Bank, as trustee and lessor, appeals from this judgment. We find the nonexistence of the index upon which the parties agreed causes the escalation clause to be unenforceable at this time. We reverse and modify the judgment in part as it pertains to two of the lessees.
In 1958, Martin Penhallick placed in a living trust certain real property located in Moses Lake. The Seattle-First National Bank, along with other individuals, was named as cotrustee for the benefit of Mr. Penhallick's daughters. This property was leased by the trustees in 1958 to Messrs. Phil Herrmann, Robert Yerxa and Wally Edwards for a period of 49 years with an option to renew for an additional 20 years. 1 During negotiation of the lease, one of the issues was whether to include a rental escalation clause. Ultimately, the lessees agreed in principle to the inclusion of an escalation clause. The lessees sought to tie that escalation to a cost-of-living index for the Moses Lake area, but were advised by the trustees that no such index existed. The trustees then suggested they use a cost-of-living index for the City of Spokane. This suggestion was accepted.
The trustees retained counsel to draft the instrument. The lease was then approved by the negotiator for the trustees, his superior, the trust committee at the Spokane and Eastern Branch of the Seattle-First National Bank, consisting of four senior trust officers and two commercial loan officers, and ultimately by the trust committee of the Seattle main office. Only after approval by these various trust officers and committees was the lease submitted to the lessees for execution; lessees approved and signed the lease on June 14, 1958. 2 The clause in issue reads as follows:
2. As rental therefor, Tenants agree to pay Lessors, . . . the sum of Three Hundred Fifty Dollars ($350.00 per month payable in advance on the 15th day of each month during the term of this lease, . . . provided further, that the parties agree that at the end of each year during the term of this lease, such monthly rent shall be increased five per cent (5%) for each total of five per cent (5%) increase in the cost-of-living figures for the City of Spokane, issued by the United States Bureau of Labor Statistics, above the figures issued nearest to the 15h day of June, 1958.
(Italics ours.)
Subsequently these events occurred:
August, 1960 Trustee wrote Messrs. Herrmann and Edwards advising them that a review of the labor statistics from the United States Bureau of Labor indicated that there had been no increased cost of living for the city of Spokane; hence no additional rent would be due.
February, 1963 Mr. Earl acquired the Edwards' interest, which acquisition was approved by the trustee.
May, 1963 The lease payments were apportioned between the lessees in an agreed partition decree.
December, 1963 Representative of the trustee wrote the bureau requesting an update of cost-of-living statistics and learned there was no index for the city of Spokane. 3
April, 1964 Trust officer in Wenatchee, an attorney, inquired of Mr. Herrmann's counsel of the possibility of utilizing the cost-of-living index for the city of Seattle. A reply to his inquiry stated that you had "better use the Spokane Index, or Phil Hermann (sic ) will have you in a law suit."
October and November, 1964 Wenatchee trust officer spoke personally with Mr. Herrmann but without reaching a conclusive agreement. Apparently Mr. Herrmann at one time leaned toward adoption of the Seattle index but ultimately rejected it. These conversations were preceded by a letter from a trust officer indicating the increased rental pursuant to the Seattle index as of June 15, 1963, would be $367.50. There was no response of record to that demand.
July 10, 1965 Mr. Herrmann died.
November 2, 1967 Wenatchee trust officer wrote Mr. Herrmann's widow asserting that the escalation clause was tied to the Consumer Price Index of the Bureau of Labor Statistics and demanded an amount of rent due based upon that index in excess of the base rental owing as of June, 1963.
Between 1967 and 1969, Mrs. Herrmann's attorney and the trustees' attorney reached an agreement on the alleged past-due rent based upon the United States Consumer Price Index and a remittance for the difference between the base rent and that amount was paid to the trustees. Counsel for trustees' attorney forwarded the remittance on July 8, 1969, stating in part:
It is also my understanding with Mr. Clifton Collins that you will deal directly with Mrs. Hermann (sic ) in regard to any anticipated increase in rental due to the National Index going up in the future.
The monthly rental as a result of this settlement was established at $402.50, pursuant to the National Consumer Price Index, a $52.50 increase over the base monthly rental of $350. Thereafter, the following occurred:
September 7, 1972 The bank made additional demand for increased rent.
December, 1972 Trustee's attorney notified all lessees demanding an increase in rent to the amount of $1,942.50 for the years of 1970, 1971 and 1972, based on the United States Consumer Price Index.
March, 1973 The difference between $402.50 and the bank's claimed escalated rental was paid under protest and with the reservations of right.
Shortly after the increased rent was paid under protest in 1973, this action was commenced.
A multitude of legal theories are expressed by all parties to this action. The appellant trustee concedes, notwithstanding his 35 assignments of error, that there is only one issue involved: namely, the interpretation of the escalation clause. The respondents Earl and Yerxa cross appeal contesting only that portion of the judgment which requires them to pay the difference between $350 and $402.50 per month in increased rent based on a compromise settlement between Mrs. Herrmann and the trustees.
It is a longstanding rule that courts cannot, and ought not, make a contract for the parties which they did not make for themselves or impose upon one party an obligation which was not assumed. Puget Sound Power & Light Co. v. Shulman, 84 Wash.2d 433, 439, 526 P.2d 1210 (1974); Grant County Constructors v. E. V. Lane Corp., 77 Wash.2d 110, 121, 459 P.2d 947 (1969); Nowoj v. Mulalley, 1 Wash.App. 939, 943, 465 P.2d 194 (1970). This lease is a complete and accurate integration of the terms mutually agreed upon during negotiations. There is no basis for reformation because the lease accurately reflects the agreement of the parties. Carlson v. Druse,79 Wash. 542, 140 P. 570 (1914). The language, "cost of living figures for the City of Spokane," is not ambiguous thus, the rules of construction relative to ambiguous instruments are not applicable. The parties are governed by the language of their agreement. Grant County Constructors v. E. V. Lane Corp., supra.
It is evident that these parties made a mistake when they presumed a cost-of-living index was in existence for the city of Spokane. The only cost-of-living index in this state upon which statistics are compiled by the Bureau of Labor Statistics is for the Seattle area. The trustee contends that the mistake is a mutual mistake, one involving both parties made independently by each party, requiring rescission of the lease. We disagree. If one party has no independent knowledge and accepted another's analysis and opinion, the mistake is unilateral. Finch v. Carlton, 84 Wash.2d 140, 524 P.2d 898 (1974).
Here, the lessees acquiesced in the trustees' recommendation for the use of this particular index; lessees had no independent knowledge of its existence or nonexistence and accepted the recommendation of the trustees' representative. The lease was prepared by the trustees' attorney and approved by numerous representatives of the trustee bank before submission to the lessees for signature. The trial court's finding that there was a unilateral mistake is supported by substantial evidence.
The effect of finding a unilateral mistake is that the rent cannot escalate as long as there is no cost-of-living index compiled by the Bureau of Labor Statistics for the city of Spokane. If, during the term of the lease or its extension, such an index comes into existence, then the lessees shall be obligated to pay any increase in rent as established by that index in accordance with the terms of their agreement.
This court is not unmindful of the trustee's contention that the named index was a result of a mutual mistake, nor that: ...
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Table of Cases
...P.3d 658 (2002): 17.8(1) Seattle-First Nat'l Bank v. Brommers, 89 Wn.2d 190, 570 P.2d 1035 (1977): 2.5 Seattle-First Nat'l Bank v. Earl, 17 Wn.App. 830, 565 P.2d 1215 (1977), review denied, 89 Wn.2d 1017 (1978): 18.1(2) Seattle-First Nat'l Bank v. Hart, 19 Wn.App. 71, 573 P.2d 827 (1978): 2......
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Table of Cases
...P.2d 1035 (1977): 8.4(1) Seattle-First Nat'l Bank v. Crosby, 42 Wn.2d 234, 254 P.2d 732 (1953): 1.7(2) Seattle-First Nat'l Bank v. Earl, 17 Wn. App. 830, 565 P.2d 1215 (1977), review denied, 89 Wn.2d 1017 (1978): 7.4(1)(f) Shaw v. Yakima, 183 Wash. 200, 48 P.2d 630 (1935): 8.4(1) Sherman Mi......
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§ 7.4 - Wind
...Consumer Price Index (CPI), care should be taken to designate a CPI that actually exists. See, e.g., Seattle-First Nat'l Bank v. Earl, 17 Wn.App. 830, 835, 565 P.2d 1215 (1977), review denied, 89 Wn.2d 1017 (1978) (parties designated Spokane CPI for rent escalations on Moses Lake property, ......
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§18.1 - Introduction, Scope, and Definitions
...and geographical areas. Care must be taken to select an index that is appropriate and actually exists. Seattle-First Natl Bank v. Earl, 17 Wn.App. 830, 565 P.2d 1215 (1977), review denied, 89 Wn.2d 1017 (1978), is a cautionary tale of the effect of selecting an index that does not exist (in......