Pacific Market Internat'l., Llc, Resp. v. Tcam Core Property Fund Operating, App.

• Court: Court of Appeals of Washington
• Decided: April 13, 2015
• Docket: 71707-3
• Status: Unpublished

Opinion

2015 APR 13 All 9=3u

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

PACIFIC MARKET INTERNATIONAL, LLC, a Washington limited liability company, No. 71707-3-1

Respondent, DIVISION ONE

TCAM CORE PROPERTY FUND UNPUBLISHED OPINION OPERATING LP, a Delaware limited partnership, FILED: April 13,2015

Appellant.

Becker, J. — This is an appeal from an order granting summary judgment

in a contract dispute involving the interpretation of a parking agreement. We

reverse and hold that the landlord agreed to provide parking on a "must take"

rather than an "as needed" basis. The plain language of the agreement obligates

the tenant to pay for a certain number of spaces every month whether or not the

tenant actually needs them.

The landlord, appellant in this matter, is TCAM Core Property Fund

Operating LP (TCAM). The tenant, respondent, is Pacific Market International

LLC (PMI). They entered into a 132-month commercial real estate lease, which

began on October 1, 2010, and is set to expire on September 30, 2021. TCAM has been billing PMI for the right to the nonexclusive use of 34 parking stalls

every month. PMI has been paying under protest, while contending that the No. 71707-3-1/2

parking payment obligation in the lease agreement is variable, covering only the number of spaces PMI needs to use in any given month.

In February 2012, PMI initiated this declaratory judgment action. On cross

motions for summary judgment, the trial court ruled in favor of PMI. PMI was

awarded damages, attorney fees, costs, and postjudgment interest. TCAM

appeals.

This court reviews orders granting summary judgment de novo.

Silverhawk. LLC v. KevBank Nat'l Ass'n. 165 Wn. App. 258, 264-65, 268 P.3d

958 (2011). The material facts underlying this litigation are essentially

undisputed.

WRC Wall Street LLC began constructing the World Trade Center North

office building on Elliott Avenue in Seattle in 1997. WRC Wall Street leased the

entire building to RealNetworks Inc. from October 2000 through September 2010.

That lease required RealNetworks to assume one of the ownership obligations by

paying the Port of Seattle for 133 parking spaces the Port owned below the

building.

In April 2005, RealNetworks subleased part of the building's fourth floor to

PMI. The sublease obligated PMI to pay for parking on an as-needed basis. The

operative language was that PMI, the subtenant, "shall have the right, but not an

obligation" to lease 1.2 parking stalls for each 1,000 rentable square feet

described in the sublease. PMI had to advise RealNetworks 33 days in advance

of each calendar month if it wanted to alter the number of spaces rented during

the following calendar month. No. 71707-3-1/3

In 2007, TCAM bought the World Trade Center North building from WRC

Wall Street and assumed the master lease between WRC Wall Street and

RealNetworks. By this purchase, TCAM became subject to WRC Wall Street's

obligation to pay the Port of Seattle for 133 parking spaces each month.

Keith Awad, TCAM's asset management director, came to Seattle in the

summer of 2009. During that trip, Awad introduced himself to PMI's Chief

Executive Officer, Rob Harris, and its Chief Financial Officer, Brian Shea. PMI,

acting through Shea, expressed an interest in leasing space from TCAM after its

sublease with RealNetworks expired in September 2010. The parties began to

negotiate through brokers.

In September 2009, TCAM's brokers presented a draft letter of intent to

PMI. The draft proposed a set of material terms that TCAM wanted to govern its

future landlord-tenant relationship. It described a number of terms, including one

that described the "parking requirement" of 1.2 spaces per 1,000 rentable square

feet (RSF):

Parking: The parking requirement for the building is 1.2:1000 RSF leased at market rates, current $220 per stall per month. The parking structure is controlled by the Port of Seattle, but the allocation will remain for the duration of the lease. The landlord is exploring locating some visitor parking in the loading area and will keep tenant informed of the progress/results. Additionally the landlord is also exploring where Bike Parking could be located.

This language remained unchanged over the next several months as the parties

exchanged, modified, and finalized the terms of the letter of intent. TCAM used

the final version as a guide when drafting the actual lease. No. 71707-3-1/4

TCAM contends the reference to the building's parking "requirement"

manifested an intent to pass on to PMI a proportionate share of TCAM's

obligation to pay the Port of Seattle for 133 spaces. PMI contends the language

is too obscure to express such an intent. The parties' differing interpretations of

the letter of intent, however, are not particularly relevant. This issue here is the

meaning of the actual lease.

The parties exchanged, commented on, and redlined at least eight lease

drafts before signing the final version. Each draft was divided into two sections:

the Basic Lease Provisions and the Standard Lease Provisions. According to

Standard Lease Provision 19(u), the lease "is the result of arms-length

negotiations between Landlord and Tenant and their respective attorneys," which

"shall not be construed against either party."

Basic Lease Provision item 13 and paragraph 18(a) of the Standard Lease

Provisions contain the lease's only references to parking. For this dispute, the

most important language in item 13 states that PMI "shall lease" 34 parking

spaces.

13. Number of Parking Spaces: Tenant shall lease thirty four (34) parking spaces in the Garage, pursuant to the provisions of Paragraph 18(a) below. All such parking shall be on an unassigned self-park basis at the rate established by the Port of Seattle (its successors or assigns) or its parking operator from time to time (collectively, the "Garage Owner"), which rate is currently $220 per month per stall. Tenant's lease of parking spaces is pursuant to a ratio of 1.2 spaces per 1,000 rentable square feet of No. 71707-3-1/5

Premises, and thus Tenant's lease of parking spaces hereunder shall increase on a proportionate basis upon addition of each Pocket Space as set forth in Paragraph 21.

At one point during the negotiations, PMI sent a letter asking TCAM to modify

item 13 "to conform to Section 18 which correctly describes the agreement

between the parties." But TCAM did not agree to any modification of item 13,

and PMI eventually signed the lease with the "shall lease" language quoted

above.

The "shall lease" obligation in item 13 is "pursuant to" paragraph 18(a) in

the Standard Lease Provisions. Paragraph 18(a) discusses the obligations

created by item 13 in greater detail. Paragraph 18(a) is presented below in its

final form. The underlining and stricken portions track the modifications made

during the negotiation process. For the present dispute, the most important

language in paragraph 18(a) states that PMI "shall have the right to the

nonexclusive use" of 34 parking spaces.

Tenant shall have the right to the nonexclusive use of the number of parking spaces located in the parking areas of the Building specified in Item 13 of the Basic Lease Provisions for the parking of operational motor vehicles used by Tenant, its officers and employees only. In addition, there will be two (2) visitor parking spaces available to visitors of tenants of the Building on a non exclusive basis. Parking fees for each month shall be paid to Landlord simultaneously with Rent. Parking fees shall equal the parking fees charged by the Garage Owner. In addition, Tenant shall have the right to one (1) executive parking stall located in the loading area of the Building at a cost of one hundred and fifty percent (150%) of the parking fees charged by the Garage OwnerT which; such cost is $330 per stall as of the date of this Lease amounts to a monthly charge of $330 por stall. Landlord.. J_he visitor spaces and the executive parking stall shall also provide a r.nnnrnrl nrnn for thn r.torago of bicycles be striped, numbered and No. 71707-3-1/6

marked with signs that state such spaces shall not be blocked. Tenant acknowledges that because Landlord does not own the parking garage, Landlord cannot guarantee the condition or availability of the same; provided that Landlord agrees to use reasonable efforts to assist Tenant in obtaining the right to use its parking spaces hereunder. Tenant agrees at all times to comply with reasonable rules and regulations established by the Garage Owner and/or Landlord with respect to use of the parking garagea including without limitation hours of availability. A default by Tenant, its officers or employees with respect to such rules and regulations shall constitute a material default by Tenant hereunder. Tenant shall not permit or allow any vehicles that belong to or are controlled by Tenant or Tenant's officers, employees, suppliers, shippers, customers or invitees to be loaded, unloaded or parked in areas other than those designated by Landlord or Garage Owner for such activities. If Tenant permits or allows any of the prohibited activities described in this Paragraph, then Landlord or Garage Owner shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove or tow away the vehicle involved and charge the cost to Tenant, which cost shall be immediately payable upon demand by Landlord.111

This court must interpret the lease "in a manner that gives effect to all the

contract's provisions." Nishikawa v. U.S. Eagle High. LLC. 138 Wn. App. 841,

849, 158 P.3d 1265 (2007). review denied, 163 Wn.2d 1020 (2008). We may not

"disregard language that the parties have used." Snohomish County Pub.

Transp. Benefit Area Corp. v. FirstGroup Am., Inc.. 173 Wn.2d 829, 840, 271

P.3d 850 (2012). Applying these principles, we conclude the parking provision is

on a "must take" rather than an "as needed" basis. The meaning of "Tenant shall

lease thirty four (34) parking spaces" is plain and unambiguous. It creates an

obligation to lease 34 spaces. The effect is to pass on to PMI a proportionate

share of TCAM's obligation to pay the Port of Seattle for 133 spaces.

1Compare Clerk's Papers at 282 (TCAM's first proposed lease) with Clerk's Papers at 40 (executed lease). No. 71707-3-1/7

We reject PMI's argument that paragraph 18(a) gives it the right but not

the obligation to pay for 34 spaces. This was the arrangement that PMI had

when it was a subtenant of RealNetworks, but it is not the arrangement reflected

in its lease with TCAM. PMI's suggested interpretation would reduce the phrase

"shall lease" in item 13 to mere surplusage.

PMI offers the RealNetworks sublease as extrinsic evidence that the intent

of the present lease is to create a similar as-needed arrangement. Extrinsic

evidence can be used to discern contractual intent, but it cannot be used to

subtract, vary, or contradict the written words of a contract. Berg v. Hudesman,

115 Wn.2d 657, 667-78, 801 P.2d 222 (1990). Unlike the PMI sublease, neither

item 13 nor paragraph 18(a) specifies how and when PMI would need to advise TCAM of its fluctuating need for parking. PMI's preferred interpretation would

require this court to redraft the lease by including such language. This we cannot

do. "Extrinsic evidence is to be used to illuminate what was written, not what was

intended to be written." Hollis v. Garwall. Inc., 137 Wn.2d 683, 697, 974 P.2d

836(1999).

PMI contends the "shall lease" obligation in item 13 conflicts with the

language in paragraph 18(a) and must therefore give way under a term

specifying that the Standard Lease Provisions shall control in the event ofa conflict with the Basic Lease Provisions:

This Lease consists of the foregoing introductory paragraphs and Basic Lease Provisions, the provisions of the Standard Lease Provisions (the "Standard Lease Provisions") (consisting of Paragraph 1 through Paragraph 25 which follow) and Exhibits A-1 through Exhibits A-2 and Exhibits B through Exhibit G, all of which are incorporated herein by this reference. In the event of any No. 71707-3-1/8

conflict between the provisions of the Basic Lease Provisions and the provisions of the Standard Lease Provisions, the Standard Lease Provisions shall control.

According to PMI, conflict arises from the fact that paragraph 18(a) speaks only

in terms of PMI's "right" to parking spaces, not its obligation to pay for them. We

disagree. Item 13 in the Basic Lease Provisions creates PMI's obligation to take

34 parking spaces, and paragraph 18(a) in the Standard Lease Provisions adds

details to that arrangement. No conflict is apparent. Nowhere in paragraph 18(a)

does one find language suggesting that PMI's obligation is limited to the number

of parking spaces it may need in any given month.

PMI attempts to escape the "must take" interpretation by invoking the

Restatement (Second) of Contracts § 201. If it is possible that the parties

have attached different meanings to certain terms used, the rules set out in

Restatement (Second) of Contracts § 201 provide guidance. Berg. 115

Wn.2d at 669. PMI contends the parties ascribed different meanings to the

general parking language that carried through the various iterations of the letters

of intent and the lease. In that situation, section 201(2) applies:

Where the parties have attached different meanings to a promise or agreement or a term thereof, it is interpreted in accordance with the meaning attached by one of them if at the time the agreement was made (a) that party did not know of any different meaning attached by the other, and the other knew the meaning attached by the first party; or (b) that party had no reason to know of any different meaning attached by the other, and the other had reason to know the meaning attached by the first party.

Restatement (Second) of Contract § 201(2).

8 No. 71707-3-1/9

PMI invokes subsection (b) to argue that the contract must be interpreted

in accordance with its understanding, not TCAM's. This is so, according to PMI,

because PMI did not know that TCAM believed the contract created a "must

take" obligation, but TCAM knew PMI attached an "as needed" meaning to the

lease's parking provisions.

The record does not support PMI's argument. At one point during their

negotiations, PMI sent TCAM a letter with "comments and proposed changes"

regarding the draft lease. One of the many items on this list stated: "The

provisions of Section 13 should be modified to conform to Section 18 which

correctly describes the agreement between the parties. Tenant should also be

entitled to use two visitor stalls in the loading area free of charge." The comment

did not specifically refer to the "shall lease" language in item 13, nor did it

communicate PMI's desire for an "as needed" arrangement. Therefore, it cannot

be deduced that TCAM, upon reading this letter, should have realized PMI

interpreted item 13 to create "as needed" arrangement. In addition, PMI's

internal communications reflect the company's awareness that item 13, as

drafted, "makes it an obligation." Clerk's Papers at 343.

PMI claims that even if TCAM's interpretation prevails, this matter must be

remanded for trial because TCAM has failed to mitigate its damages. According

to PMI, TCAM failed to make reasonable efforts to avoid damages from PMI's

inability to use all 34 parking spaces and even affirmatively ignored expressions

of interest from a third party. No. 71707-3-1/10

The doctrine of avoidable consequences, or mitigation of damages,

prevents an injured party from recovering damages that the party could have

avoided through reasonable efforts. TransAlta Centralia Generation LLC v.

Sicklesteel Cranes. Inc.. 134 Wn. App. 819, 825-26, 142 P.3d 209 (2006), review

denied. 161 Wn.2d 1013 (2007). TCAM has not been injured. PMI has been

paying under protest for the parking spaces it does not use. Because TCAM has

not incurred a duty to mitigate, there is no reason to remand this matter for trial.

In summary, the trial court erred by entering judgment for PMI. The case

is remanded with instructions to enter judgment in favor of TCAM and to award

TCAM its attorney fees and costs in accordance with the attorney fee provision of

the lease. That award shall include TCAM's reasonable attorney fees for this

appeal.

Reversed.

^Jceg, (. WE CONCUR: J

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