Viking Bank v. Firgrove Commons 3, LLC
| Decision Date | 16 September 2014 |
| Docket Number | No. 44925–1–II.,44925–1–II. |
| Citation | 183 Wash.App. 706,334 P.3d 116 |
| Court | Washington Court of Appeals |
| Parties | VIKING BANK, Respondent, v. FIRGROVE COMMONS 3, LLC, Appellant. |
OPINION TEXT STARTS HERE
Affirmed. Barton Louis Adams, Adams & Adams Law PS, Tacoma, WA, for Appellant.
Gary John Krohn, Northgate Executive Center II, Seattle, WA, for Respondent.
¶ 1 Firgrove Commons 3, LLC (Firgrove) appeals the trial court's declaratory judgment that its tenant, Viking Bank, does not owe management fees Firgrove incurred with respect to its lease with Viking Bank. Firgrove argues that Viking Bank is responsible for the management fees because the lease provides for “triple net” rent,1 and states that the tenant will pay all costs and expenses incurred in connection with the leased property. Clerk's Papers (CP) at 16. However, we hold that when viewed as a whole, the lease does not require Viking Bank to pay management fees. Accordingly, we affirm.
¶ 2 Firgrove owns a parcel in a four-parcel business development in Puyallup known as the Firgrove Commons Shopping Center. A fast food restaurant and an office/retail building occupy two of the other parcels in the shopping center, and the fourth parcel remains undeveloped. The four parcels share common areas, including areas used for ingress and egress.
¶ 3 In 2008, Firgrove entered into a long term commercial ground lease of the parcel with Viking Bank. As contemplated in the lease, Viking Bank constructed a building on the leased premises for use as a retail banking facility. In March 2010, Viking Bank moved into its newly constructed building and began paying rent to Firgrove.
¶ 4 The lease provides that Viking Bank will be responsible for the base annual rent. The lease states that the rent shall be paid as “ ‘triple net’ rent without deduction or offset.” CP at 102. It further explains that
[i]t is the intent of the parties, except as is otherwise provided in this Lease, that Base Annual Rent provided to Landlord shall be absolutely net to Landlord, and Tenant shall pay all costs, charges, insurance premiums, taxes, utilities, expenses, and prorated share of maintenance for common area CAM expenses, and assessments of every kind and nature incurred for, against, or in connection with the Ground Leased Premises and Property.
¶ 5 Under the lease Viking Bank also must pay a portion of the common area maintenance (CAM) expenses. The lease defines “CAM Expenses” as “the reasonable costs and expenses of maintaining or repairing any entrances to or sidewalks within [the development].” CP at 16. But Viking Bank otherwise is responsible for maintaining the non-common leased premises. Section 7.1 of the lease expressly provides that Viking Bank will maintain its leased premises at its own expense. And CAM expenses do not include the cost or expense of snow removal, landscaping, or other work done on or around the leased premises itself. Further, the lease requires Viking Bank to pay the parcel's property taxes directly to Pierce County and either pay or cause to be paid all utilities used on the premises, including sewer and trash disposal.
¶ 6 Without consulting Viking Bank, Firgrove hired a property manager to manage the Firgrove Commons Shopping Center. The property manager maintained the common areas through its employees or hired independent contractors to do maintenance, and billed the tenants/owners for their shares of CAM expenses. The property manager also negotiated a contract with a company to do sweeping and snow/ice removal for the common area driveways. The property manager performed other administrative functions regarding Viking Bank's lease, such as billing Viking Bank for monthly rent, property taxes, and sewer charges. Firgrove agreed to pay the property management company a fee equal to five percent of Viking Bank's rent for work relating to Viking Bank's lease.
¶ 7 In November 2010, the management company (on behalf of Firgrove) billed Viking Bank for the five percent property management fee. Viking Bank refused to pay the fee. Viking Bank then filed a complaint for declaratory judgment seeking the trial court's determination of whether or not it owed Firgrove the management fees under the terms of the lease. Firgrove filed a counterclaim alleging that Viking Bank breached the lease by failing to pay the management fee.
¶ 8 After a one-day bench trial, the trial court concluded that the lease does not expressly or implicitly require Viking Bank to pay the management fee Firgrove incurred for the leased property, and that Viking Bank was not in breach of the lease. Firgrove appeals.
¶ 9 The parties dispute whether the terms of the lease require Viking Bank to reimburse Firgrove for the fee it paid the property management company for work relating to Viking Bank's lease. The lease does not expressly address responsibility for management fees. Viking Bank argues that the lease does not contemplate management fees because the parties intended the bank to manage its own premises. It further argues that Firgrove's interpretation creates uncertainty by allowing the landlord to alter the terms of the agreement by unilaterally hiring a third party to perform administrative tasks that it could do itself and negotiating a management fee that is not related to the time, efforts, or costs expended for the work performed on the leased premises. Viking Bank contends that if Firgrove intended to hire a management company and pass along that cost to the tenant, it should have negotiated that term and specifically addressed it in the lease.
¶ 10 Firgrove argues that the plain language of section 3.5 of the lease requires Viking Bank to pay the management fee. Firgrove emphasizes that under section 3.5, the rent Viking Bank pays will be “triple net” and “absolutely net” to Firgrove. Br. of Appellant at 15. Firgrove argues that if Viking Bank does not pay the management fee, the rent will not be absolutely net. Further, Firgrove points out that section 3.5 expressly provides that Viking Bank must pay “all costs, charges ... expenses ... of every kind and nature incurred ... in connection with the Ground Leased Premises and Property,” and argues that the management fee is such an expense. CP at 16.
¶ 11 We agree with Viking Bank and hold that the lease does not require Viking Bank to reimburse Firgrove for the management fee it unilaterally incurred for its own benefit and convenience.
¶ 12 When a court relies on inferences drawn from extrinsic evidence, interpretation of a contract is a question of fact. Berg v. Hudesman, 115 Wash.2d 657, 667–68, 801 P.2d 222 (1990). But contract interpretation is a question of law when the interpretation does not depend on the use of extrinsic evidence. Wash. State Major League Baseball Stadium Pub. Facilities Dist. v. Huber, Hunt & Nichols–Kiewit Constr. Co., 176 Wash.2d 502, 517, 296 P.3d 821 (2013); see also Mut. of Enumclaw v. USF Ins. Co., 164 Wash.2d 411, 424 n. 9, 191 P.3d 866 (2008) (); Keystone Masonry, Inc. v. Garco Const., Inc., 135 Wash.App. 927, 932, 147 P.3d 610 (2006) ().
¶ 13 We review a trial court's decision following a bench trial by asking whether substantial evidence supports the trial court's findings of fact and whether those findings support the trial court's conclusions of law. Casterline v. Roberts, 168 Wash.App. 376, 381, 284 P.3d 743 (2012). Substantial evidence is the quantum of evidence sufficient to persuade a rational, fair-minded person the premise is true. Sunnyside Valley Irrigation Dist. v. Dickie, 149 Wash.2d 873, 879, 73 P.3d 369 (2003). The application of the law to the facts is a question of law that this court reviews de novo. Brundridge v. Fluor Fed. Servs., Inc., 164 Wash.2d 432, 441, 191 P.3d 879 (2008). Therefore, we review the trial court's conclusions of law pertaining to contract interpretation de novo. See Mitchell v. Wash. State Inst. of Pub. Policy, 153 Wash.App. 803, 814, 225 P.3d 280 (2009).
¶ 14 Here, the trial court heard testimony and considered documentary evidence before interpreting the lease provisions. However, the court did not rely on any extrinsic evidence as contemplated in Berg in interpreting the lease. Accordingly, we interpret the lease as a matter of law based on a de novo standard of review.
¶ 15 The primary objective in contract interpretation is to ascertain the mutual intent of the parties at the time they executed the contract. Int'l Marine Underwriters v. ABCD Marine, LLC, 179 Wash.2d 274, 282, 313 P.3d 395 (2013). Washington follows the “objective manifestation theory” of contract interpretation, under which the focus is on the reasonable meaning of the contract language to determine the parties' intent. Hearst Commc'ns, Inc. v. Seattle Times Co., 154 Wash.2d 493, 503, 115 P.3d 262 (2005). “We generally give words in a contract their ordinary, usual, and popular meaning unless the entirety of the agreement clearly demonstrates a contrary intent.” Hearst, 154 Wash.2d at 504, 115 P.3d 262. And we view the contract as a whole, interpreting particular language in the context of other contract provisions. See Weyerhaeuser Co. v. Commercial Union Ins. Co., 142 Wash.2d 654, 669–70, 15 P.3d 115 (2000).
¶ 16 To assist in determining the meaning of contract language, we also apply the “context rule” adopted in Berg, 115 Wash.2d at 666–69, 801 P.2d 222. This rule allows examination of the context surrounding a contract's execution, including the consideration of extrinsic evidence to help understand the parties' intent. Hearst, 154 Wash.2d at 502, 115 P.3d 262. However, extrinsic evidence is to be used “ ‘to...
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