Financial Assistance, Inc. v. Byron Slack

• Court: Court of Appeals of Washington
• Decided: November 10, 2014
• Docket: 72361-8
• Status: Unpublished

Opinion

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IN THE COURT OF APPEALS FOR THE STATE OF WASHINGTON

FINANCIAL ASSISTANCE, INC., No. 72361-8-1 a Washington Corporation, DIVISION ONE Appellant,

BYRON SLACK, MICHAEL BUCKNER UNPUBLISHED OPINION and MAUREEN BUCKNER, and the marital community composed of MICAHEL BUCKNER and MAUREEN BUCKNER,

Respondents. FILED: November 10, 2014

Spearman, C.J. — Financial Assistance, a collections agency and

assignee under a commercial lease, filed suit to recover back rent from Byron Slack. The trial court denied Financial Assistance's claims and granted an award

of attorney fees and costs to Slack. Finding no error, we affirm the judgment. FACTS

In the spring of 2004, Michael and Maureen Buckner approached the

Hazel Dell Development Company (Hazel Dell) and its principal, Milton Brown,

about leasing a commercial space in Vancouver, Washington. Clerk's Papers

(CP) at 65. The Buckners negotiated the lease with Hazel Dell's property manager, John Steiger. As a condition to entering the lease, Hazel Dell required No. 72361-8-1/2

the Buckners to provide an additional signer as security for payment. The

Buckners approached their associate, Byron Slack, who agreed to co-sign the

lease. The Buckners and Slack signed the lease on April 30, 2004. See, Exhibit

(Ex.)1.

The lease identified the "Lessee" as "Byron C. Slack and Michael and

Maurine Buckner, Husband and wife, all jointly and severally...without regard to

number or gender." Ex. 1 at 1. Paragraph 3 established a finite lease term of "one

(1) year (plus such additional days, if necessary, so that the termination date will

be the last day in the last calendar month of the lease term) which lease term

shall begin on the 5th day of May, 2004." Ex. 1 at 1. Paragraph 5, Minimum

Rental, set forth the amount and terms under which "Lessee" was obligated to pay

rent under the lease. Ex. 1 at 1-2. Paragraph 41, Holding Over, provided in

relevant part: "In the event the Lessee for any reason shall hold over after the

expiration of this Lease, such holding over shall not be deemed to operate as a

renewal or extension of this Lease, but shall only create a tenancy from month-to-

month based upon the same terms and conditions contained in this Lease

Ex. 1 at 12.

During the course of the lease, the Buckners made timely rental payments

and, when the lease expired in May 2005, they were current in their rent

obligation. Upon termination of the lease and, as provided by the holdover

provision, the Buckners retained possession of the property and began a month-

to-month tenancy. It is undisputed that Slack was neither in possession of the

property nor did he pay rent during the holdover tenancy. Neither the Buckners, 2 No. 72361-8-1/3

who had lost contact with Slack, nor Hazel Dell informed Slack that the Buckners

had held over. As month-to-month tenants, the Buckners had difficulty paying the

rent and by January 2007 had accumulated $4,893.75 in overdue rent. Hazel

Dell claimed it mailed notices of past due rent to Slack at the contact address

Slack provided in the lease. However, in an unchallenged finding, the trial court

concluded that Slack did not receive any notice of the arrearages and was

unaware of them.

In January 2007, Hazel Dell asked the Buckners to sign a promissory note

for their then-outstanding rent obligation. The promissory note contained a

signature block for Slack. The Buckners never presented the promissory note to

Slack for signature and, instead, forged his signature on the note before

providing it to Hazel Dell. After conveying the promissory note, the Buckners' inability to make the rent payments continued. In August 2007, they terminated the tenancy and vacated the property.

Subsequently, Hazel Dell attempted to collect the amounts owed on the promissory note and the additional rent arrearages from the Buckners, but was unable to locate them. On July 28, 2009, Hazel Dell assigned its right to the

delinquent rent payments, which totaled $8,709.12, to Financial Assistance for collection.

In October 2009, Financial Assistance filed suit against Slack and the

Buckners to recover the outstanding obligation under the lease.1 Financial

1Although the Buckners were named in the complaint, they were never served and it does not appear that Financial Assistance actually sought recovery from them. 3 No. 72361-8-1/4

Assistance did not seek recovery under the forged promissory note. On June 24,

2013, a one-day bench trial was held before Clark County Superior Court Judge

David E. Gregerson.

Before the trial began, Judge Gregerson informed the parties that

approximately ten years earlier, before he became a judge, he represented Hazel

Dell's principal, Milton Brown, in an action to enforce a commercial lease. VRP at

4. The judge also told the parties that his involvement in the prior litigation would

not affect his judgment in the present case, stating: "[i]t doesn't make a difference

from my standpoint, but I didn't want the parties to go forward unless they were

made aware of that even though [Brown is] not the actual named party since he

was the assignor." Verbatim Report of Proceeding (VRP) at 4. The judge allowed

the parties time off the record to confer with counsel regarding this disclosure.

Financial Assistance's attorney was permitted a recess of over forty minutes to

contact its client and its witnesses to inquire into any potential conflict of interest

between Judge Gregerson and Financial Assistance or bias arising from the

judge's prior involvement in litigation with Brown. When proceedings reconvened,

neither Financial Assistance nor Slack objected to Judge Gregerson presiding

over the case.

At trial, Slack and Steiger testified about the circumstances surrounding

the lease signing, including the one year term and Hazell Dell's requirement that

the Buckners provide a co-signer. Financial Assistance also submitted a ledger

purporting to track the Buckners' arrearages. See, Ex. 3. The trial court admitted

the document, but did not find it credible because it was missing a page and was 4 No. 72361-8-1/5

not corroborated by testimony or evidence regarding the accounting methods or

accuracy of the document.

At the end of the trial, the court concluded that Financial Assistance had

no legal or equitable basis to recover the claimed arrearages from Slack. The

court reasoned:

When the landlord continued to accept rent from only the Buckners, communicated only with the Buckners, and apparently tried to work out a concession on arrearages (the promissory note) in an effort to keep them as tenants, it did so without a written contract securing the continued security of Mr. Slack's prospective legal liability. ... If plaintiff's position were taken to its logical conclusion Mr. Slack would be exposed to infinite perpetual liability with no cutoff.

CP at 53-54. Additionally, citing the infirmities with Financial Assistance's ledger,

the only evidence offered on the issue of damages, the trial court also concluded

that Financial Assistance failed to meet its burden of establishing damages by a

preponderance of the evidence. The trial court entered judgment in favor of Slack

and awarded him attorney fees and costs pursuant to a prevailing party attorney

fee provision in the lease. Financial Assistance appeals.

DISCUSSION

Slack's Liability on the Month to Month Tenancy

This case involves a dispute over the legal effect of a holdover provision in

a commercial lease agreement. Financial Assistance contends that, pursuant to

the holdover provision, Slack is jointly and severally liable with the Buckners for

arrearages in the rent accrued during the month-to-month tenancy from June

2005 to August 2007. Slack argues that, notwithstanding the holdover provision,

he was liable only during the one-year term provided for in the lease. He 5 No. 72361-8-1/6

contends that when the lease expired, his obligations thereunder were

discharged. We agree with Slack.

The interpretation of an unambiguous lease is a question of law reviewed

de novo. Duvall Highlands, LLC v. Elwell. 104 Wn. App. 763, 771 n.18, 19 P.3d

1051 (2001) (citing Carlstrom v. Hanline. 98 Wn. App. 780, 785, 990 P.2d 986

(2000).

It is well established in Washington that a fixed term tenancy expires

automatically at the end of the term upon which the parties agree. Our legislature

has codified this rule at RCW 59.04.030, which provides: "In all cases where

premises are rented for a specified time, by express or implied contract, the

tenancy shall be deemed terminated at the end of such specified time."

If a tenant holds over after the expiration of a fixed term lease and pays

rent that is accepted by the landlord, a periodic tenancy results based on the

frequency of rental payments. Worthington v. Moreland Motor Truck Co., 140

Wash. 528, 532, 250 P. 30, (1926). This periodic tenancy is regarded as a new

tenancy, separate from the preceding fixed-term tenancy. Lowman v. Russell,

133 Wash. 10, 11-12, 233 P.9 (1925). However, some of the provisions of the

lease may carry over to the periodic tenancy ifthe parties manifest an intent that

they do so. See e.g., Whitney v. Hahn, 18 Wn.2d 198, 200-05, 138 P.2d 669

(1943); Marsh-Mclennan Bldq.. Inc. v. Clapp, 96 Wn. App. 636, 644, 980 P.2d

311 (1999).

Our Supreme Court applied these rules in Lowman. In that case, an

unlawful detainer action, the appellant tenant had occupied the leased premises 6 No. 72361-8-1/7

under a five year written lease, with rent payable monthly, jd. at 11. Upon

expiration of the five year lease term, the tenant remained in possession of the

property for five months and continued paying rent monthly, as before, which the

landlord accepted. Id. In the sixth month, the landlord provided notice to the

tenant to vacate the premises or face liability for unlawful detainer. Id. The tenant

argued that the landlord's action constituted unlawful eviction because, in his

view, his continuance in possession and payment of rent, which the landlord had

accepted, created a new five year tenancy governed by the original lease

agreement. Id. The Court disagreed, explaining:

At... the end of the five-year term ... not only the term ended but the tenancy itself, that is, the relation of landlord and tenant between the parties, ceased. Thereafter the relation between the parties with reference to the occupancy of the premises was fixed by their conduct as it occurred from month to month. The fact that appellant continued in possession and paid a monthly rental on demand in the same amount as the monthly rental theretofore paid during the five years did not create a new term for five years....

Id. at 11-12. The Court held that the only remaining relationship between the

parties was a month to month tenancy, governed by their conduct, i.e., the

monthly tender and acceptance of the agreed rent. jd.

We reached a similar conclusion in Carlstrom, 98 Wn. App. at 786-87, in

which a tenant alleged violation of a just cause eviction ordinance, retaliatory

eviction and constructive wrongful eviction. Jd. As in Lowman, the tenant argued

that he was entitled, pursuant to a written, fixed term lease, to continued

possession of the leased premises at the time of his eviction. Id. We disagreed,

noting that the written lease agreement expressly provided for a six month lease No. 72361-8-1/8

term, and explaining that the tenancy had terminated automatically at the end of

that period. Id. at 787. The landlord was within his rights to evict the tenant after

expiration of the six month period. Id.

The parties to the periodic tenancy are defined by possession of the

premises and the tender and acceptance of rent, not a prior written agreement.

Worthington is instructive on this point. In that case, the defendant, who was not

initially party to the lease agreement, took possession of a property when the

rightful lessees vacated prior to the expiration of their written lease term. 140

Wash, at 531-32. After the lease term expired, the defendant held over and

continued to pay rent, which the landlord accepted. Id. at 532. In consideration of these acts of possession, payment, and acceptance of rent, the Court concluded that the relation between the landlord and defendant after the formal lease

expired was a month to month tenancy. Id.

In this case, the written lease agreement expressly defined a term from

May 5, 2004 to May 31, 2005. It also provided that holding over "shall not be deemed to operate as a renewal or extension ofthis Lease,..." Ex. 1 at 12. This language created a fixed-term lease, which terminated automatically on the expiration ofthe term. The parties' obligations under the lease, including Slack's joint and several liability with the Buckners, were discharged on May 31, 2005. It is undisputed that the Buckners commenced a month to month tenancy

when the fixed term tenancy expired. They maintained possession of the

property and paid rent, which was accepted by Hazel Dell. This tenancy lasted

8 No. 72361-8-1/9

from June of 2005 to August of 2007. It is undisputed that Slack was neither in

possession during this time, nor paying rent.

Financial Assistance contends that, under the holdover provision of the

lease, Slack's joint and several liability with the Buckners continued in perpetuity

for as long as any of the three co-lessees possessed the premises. However, this

interpretation of the contract language plainly conflicts with Washington law. As

previously discussed, the parties' liability under the initial lease agreement

terminated when the lease term ended-May 31, 2005. The holdover provision

expressly disclaimed that holding over constituted a renewal or extension of this

obligation. Nor did it create the month-to-month tenancy or define the parties

thereto. The holdover provision merely manifested an intent to define the terms

and conditions if a holdover occurred. But the terms and conditions are only

binding on a party who undertakes to establish a month-to-month tenancy by

maintaining possession and by paying or accepting rent.

Here, there is no question but that the only parties to engage in the

conduct necessary to create a month to month tenancy are the Buckners and

Hazell Dell. There is no evidence that Slack undertook any act that would bind

him as a lessee under the month to month tenancy. He never possessed the

premises, paid rent, or otherwise availed himself ofthe premises during the Buckners' month to month tenancy. He had no involvement or communication

with the Buckners, his purported co-lessees, for the duration of the month to

month tenancy. Nor did he have any contact with Hazel Dell, his purported No. 72361-8-1/10

landlord, who accepted rent payments exclusively from the Buckners and worked

only with the Buckners to cure rent arrearages.

We conclude that Slack was not party to the Buckners' month to month

tenancy and, therefore, had no contractual obligation to pay rent during this

tenancy.2

Judicial Bias

Financial Assistance also argues that the trial court's dismissal of

its claims was motivated by bias on the part of the trial judge, which arose

from the judge's allegedly contentious attorney-client relationship with

Milton Brown, the principal of Hazel Dell, Financial Assistance's assignor.

We conclude that Financial Assistance has waived this argument.

A litigant who proceeds to trial without objection knowing of a

reason for potential disqualification of the judge waives the objection and

cannot challenge the court's qualifications on appeal. State v. Perala, 132

Wn. App. 98, 113, 130 P.3d 852; see also Williams & Mauseth Ins.

Brokers. Inc. v. Chappie, 11 Wn. App. 623, 626, 524 P.2d 431 (1974) (a

litigant "may not, after learning of grounds for disqualification, proceed with

the trial until the court rules adversely to him and then claim the judge is

2The trial court dismissed Financial Assistance's claims on the grounds that: (1) even if Slack was contractually liable as a co-lessee for the rent arrearages that arose during this period, under the circumstances of this case, equity demanded relief from this obligation; and (2) Financial Assistance failed to establish its claimed damages by preponderance of the evidence. Because we find Slack had no liability in this case, we need not consider whether he was entitled to equitable relief. Ourdecision also renders moot any claimed error relating to Financial Assistance's proof of damages. See, Kimball v. Otis Elevator Co., 89 Wn. App. 169, 175, 947 P.2d 1275 (1997) (where defendant is found not liable error relating to damages will be harmless).

10 No. 72361-8-1/11

disqualified") (citing State ex rel LeFebvre v. Clifford. 65 Wash. 313, 118

P. 40(1911)).

In this case, the trial judge disclosed his relationship to Financial

Assistance's assignor before trial and gave the parties and their attorneys

nearly an hour to consider any potential conflicts of interest or bias arising

from this relationship. At the close of the recess, Financial Assistance

offered no objection to the judge's continuing to preside over the trial. On

appeal, Financial Assistance contends that the judge's disclosure was

incomplete because he "neglected to disclose the details of the

relationship and more specifically, the negative aspects of it." Brief of

Appellant at 11. But other than the judge's disclosure, which is

memorialized in the verbatim report of proceedings, the record is entirely

devoid of any evidence bearing on the nature and quality of the

relationship between the trial judge and Financial Assistance's principal.

Thus, we decline to consider this characterization of the relationship. We

conclude that Financial Assistance waived any challenge to the trial

court's alleged bias when it proceeded to trial without objection after the

trial judge's disclosure.

Attorney Fees

Slack requests an award of reasonable attorney fees and costs on

appeal pursuant to RAP 18.1 and paragraph 47, Attorney's Fees, of the

lease, which provides in relevant part: "[i]f either party commences action

... in connection with this lease, the prevailing party shall be entitled to 11 No. 72361-8-1/12

have and recover from the losing party reasonable attorney's fees ...

including cost of appeal." Ex. 1 at 12. Because Slack is the prevailing

party on appeal, we grant his request for an award of attorney fees,

subject to compliance with the requirements of RAP 18.1(d).

Affirmed.

)jfW£Yw^ AVI WE CONCUR:

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