Thomas Ctr. Owners Ass'n v. Robert E. Thomas Trust

• Decision Date: 03 January 2022
• Docket Number: No. 81987-9-I,81987-9-I
• Parties: THOMAS CENTER OWNERS ASSOCIATION, Respondent, v. The ROBERT E. THOMAS TRUST and Michael Hytopoulos, Trustee, Appellant. Hadley Improvements Owner LLC, Intervenor Plaintiff, v. The John's Real Estate Corporation, a Washington corporation, Respondent, The Robert E. Thomas Trust and Michael Hytopoulos, Trustee, Thomas Center Owners Association, a Washington Nonprofit Corporation, Estates of Robert L. Pollock, and Thomas A. Wolthausen, Personal Representative, Intervenor Defendants. Estates of Robert L. Pollock, and Thomas A. Wolthausen, Personal Representative, Third Party Plaintiff, v. Hadley Land Owner, LLC, a Delaware Limited Liability Company, Whirlpool Corporation, a Delaware Corporation, Syhadley LLC, a Delaware Limited Liability Company, and Keeler 2013, LLC, a Washington Limited Liability Company, Third Party Defendants. Whirlpool Corporation, a Delaware Corporation, Fourth Party Plaintiff, v. Borg Warner Morse Tech LLC, Fourth Party Defendant.
• Court: Washington Court of Appeals

501 P.3d 608

THOMAS CENTER OWNERS ASSOCIATION, Respondent,

v.The ROBERT E. THOMAS TRUST and Michael Hytopoulos, Trustee, Appellant.

Hadley Improvements Owner LLC, Intervenor Plaintiff,

v.The John's Real Estate Corporation, a Washington corporation, Respondent,The Robert E. Thomas Trust and Michael Hytopoulos, Trustee, Thomas Center Owners Association, a Washington Nonprofit Corporation, Estates of Robert L. Pollock, and Thomas A. Wolthausen, Personal Representative, Intervenor Defendants.

Estates of Robert L. Pollock, and Thomas A. Wolthausen, Personal Representative, Third Party Plaintiff,

v.Hadley Land Owner, LLC, a Delaware Limited Liability Company, Whirlpool Corporation, a Delaware Corporation, Syhadley LLC, a Delaware Limited Liability Company, and Keeler 2013, LLC, a Washington Limited Liability Company, Third Party Defendants.

Whirlpool Corporation, a Delaware Corporation, Fourth Party Plaintiff,

v.Borg Warner Morse Tech LLC, Fourth Party Defendant.

No. 81987-9-I

Court of Appeals of Washington, Division 1.

FILED January 3, 2022

Matthew Thomas Adamson, Jameson Pepple Cantu PLLC, 801 2nd Ave., Ste. 700, Seattle, WA, 98104-1573, for Appellant.

Mark Mclean Myers, Attorney at Law, 601 Union St., Ste. 4100, Seattle, WA, 98101-1368, Bridget Tomlinson Schuster, Williams Kastner, 601 Union St., Ste. 4100, Seattle, WA, 98101-1368, Christopher Ian Brain, James M. Bulthuis, Tousley Brain Stephens PLLC, 1200 5th Ave., Ste. 1700, Seattle, WA, 98101-3147, for Respondent.

PUBLISHED OPINION

Dwyer, J.

¶ 1 The Robert E. Thomas Trust (the Trust) appeals from the judgment entered in an action initiated by the Thomas Center Owners Association (the Association) pursuant to the Model Toxics Control Act (MTCA).¹ The Trust contends that the trial court erred by concluding that an indemnity clause contained within a 99-year ground lease did not cover liability arising under MTCA. Additionally, the Trust asserts that the trial court erred by (1) concluding that the Association qualified for the third party exemption to liability under MTCA, (2) awarding the Association remedial action costs that were proved through documentary evidence submitted after the trial court entered an order regarding each party's equitable share of liability, (3) denying the Trust's request that John's Real Estate Corporation (John's Real Estate) pay its equitable share of liability for certain remedial action costs that were incurred by the Trust, and (4) not awarding attorney fees and costs to the Trust and against John's Real Estate pursuant to MTCA.²

¶ 2 We hold that the trial court erred by concluding that the indemnity clause did not cover MTCA liability. Accordingly, we vacate both the trial court's allocation of each party's equitable share of MTCA liability and the trial court's award of remedial action costs and attorney fees and costs to the Association. On remand, the trial court must determine whether and how the parties’ equitable shares of liability are impacted by the obligations of the Association and John's Real Estate pursuant to the indemnity clause.

¶ 3 We further hold that the trial court erred by denying the Trust's request that John's Real Estate be ordered to pay its equitable share of certain remedial action costs that were incurred by the Trust. Because the Trust is entitled to an award of remedial action costs, the Trust, on remand, is also entitled to an award of reasonable attorney fees and costs to be assessed against John's Real Estate under MTCA.

¶ 4 Giving perhaps some solace to the trial court, we affirm its ruling that the Association qualified for the third party exemption to liability under MTCA. We also affirm the trial court's order authorizing the parties to prove the amount of remedial action costs that each party claimed to be entitled to through documentary evidence after the trial court entered its order on liability.

I

¶ 5 In the 1950s, Robert Thomas acquired the property on Mercer Island that is the subject of this dispute (the Thomas Property). In 1961, Thomas constructed two commercial buildings on the property and, that same year, leased a commercial unit in one of those buildings to Robert and Inez Pollock. From 1961 to 1974, the Pollocks operated a dry cleaning business on the property. The Pollocks subsequently transferred operation of the dry cleaning business to the Kerk Company, which operated the business until sometime between 1976 and 1978.

¶ 6 In 1963, Thomas entered into a ground lease with Charles and Vincenta Sparling and George and Jean Donnally. The ground lease provided that "[t]he term of this lease shall be ninety-nine (99) years, commencing on the 1st day of September, 1963." The ground lease also contained the following indemnity clause:

(8) Indemnity: The Lessees shall keep the premises and all the appurtenances thereto and improvements thereon including the sidewalks, and street area surrounding the same in a safe and secure condition and free from all obstructions and clean and sanitary to the satisfaction of the officials of any governmental agency and the Lessees will save and hold the Lessor harmless from any and all damages, costs, fees and expenses or suits by public officials or private parties on account of any defective conditions of said premises, sidewalks and street areas or on account of any business, use or occupation of the said premises or any part thereof. However, the obligations of the Lessees under this paragraph shall not inure to the benefit of any one other than the Lessor and his successors in title and in no way shall create a duty upon the part of the Lessees as to strangers which the Lessees would not have in absence of this paragraph.

¶ 7 From August 1963 through July 1975, Thomas was the landlord under the ground lease. In 1976, Thomas died and the Robert E. Thomas Trust was created by his will. Through Thomas's will, the fee title interest in the property and the landlord interest in the ground lease was transferred to the Trust.

¶ 8 In July 1975, the Sparlings and Donnallys assigned their tenant interest in the ground lease to John's Real Estate. John's Real Estate remained as the tenant under the ground lease until June 1985.

¶ 9 In January 1976, John's Real Estate recorded a declaration of covenants, conditions, restrictions, and reservations to create a commercial condominium complex, the Thomas Center Condominiums. The recording of this declaration also created the Thomas Center Owners Association. Pursuant to the declaration, John's Real Estate reserved control over the common areas of the buildings located on the property for six months. In July 1976, the Association assumed the authority to manage the common areas of these buildings.

¶ 10 John's Real Estate reserved assigning its interest in the ground lease to the Association so that it could construct a third building on the property. In June 1985, John's Real Estate assigned its interest in the ground lease to the Association.

¶ 11 In January 2014, the owner of a neighboring property (the Hadley Property) notified the Trust that the Thomas Property was contaminated with Tetrachloroethylene (PCE) and that the contamination was spreading to the Hadley Property. In April 2014, the Trust received a letter from the Department of Ecology in which the Department notified the Trust that the Thomas Property was added to a list of known or suspected contaminated properties.

¶ 12 The Trust subsequently hired Pacific Groundwater Group (PGG) to investigate the potential contamination of the Thomas Property. PGG issued a report confirming that the Thomas Property was contaminated with PCE and that its likely release occurred from the dry cleaning business.³

¶ 13 In the meantime, the Association hired a commercial real estate expert, Gus Levin, to investigate potential contamination on the Thomas Property. In April 2014, Levin informed the Association that the Thomas property was potentially contaminated with a hazardous substance. All parties believe that the contamination on the Thomas Property was caused by the dry cleaning business, which operated from 1961 until sometime between 1976 and 1978.

¶ 14 In January 2015, the Association sued the Trust, seeking, in part, a declaratory judgment that it had no liability related to the contamination on the Thomas Property under MTCA. In June 2015, both the Association and the Trust filed motions for summary judgment. In the Trust's motion, the Trust sought summary judgment determinations that the Association was a potentially liable person under MTCA and that the ground lease's indemnity clause required the Association to indemnify the Trust for liability arising under MTCA. In the Association's motion, the Association sought a summary judgment determination that it was not a potentially liable person under MTCA.

¶ 15 The trial court granted the Trust's motion in part and denied the Association's motion. The trial court granted the Trust's motion insofar as it sought a determination that the Association was a potentially liable person under MTCA. However, the trial court denied the Trust's motion with respect to the indemnity clause, reasoning that the "issue of the intent and expectations of the parties ... precludes a determination that, as a matter of law, [the indemnity clause] would apply in the present context."

¶ 16 The Trust subsequently moved to join John's Real Estate as a third party defendant. The trial court granted the motion.⁴ On November 12, 2019, the case proceeded to a bench trial.

¶ 17 Following the trial proceeding on liability, the trial court entered findings of fact and conclusions of law. The trial court found that the indemnity clause "was not intended to and did not contemplate indemnification for subsurface environmental conditions." Finding of Fact 56. Additionally, the trial court concluded that the Association was not liable under MTCA because it qualified for the third party exemption to liability under former RCW 70.105D.040 (2013), recodified as RCW...