Cornerstone Equities, LLC v. Mahlen Investments, Inc. ( 2017 )

FILED
SEPTEMBER 26, 2017
In the Office of the Clerk of Court
WA State Court of Appeals, Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION TI1REE
CORNERSTONE EQUITIES, LLC, a )
Washington Limited Liability Company, ) No. 34828-8-111
)
Respondent/Cross Appellant, )
)
v. )
)
MAHLEN INVESTMENTS, INC. a )
Washington Corporation, CRAIG L. ) UNPUBLISHED OPINION
MAHLEN and KAREN L. MAHLEN, )
husband and wife and DOES 1-10, )
)
Appellants/Cross Respondents, )
)
KEITH SCRIBNER and JANE DOE )
SCRIBNER, husband and wife, )
)
Respondents. )
SIDDOWAY, J. -A real estate tenant, Mahlen Investments, Inc. (Mahlen), and its
landlord, Cornerstone Equities, LLC (Cornerston¢), appeal and cross appeal the outcome
of a bench trial. The trial court awarded Cornerstone damages for Mahlen's breach by
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anticipatory repudiation of the parties' commercial ~ease, but in an amount less than
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requested. Mahlen argues that substantial evidencej does not support a handful of the trial
court's findings and its findings do not support its ~onclusion that Mahlen, rather than
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Cornerstone, breached the lease. Cornerstone argu¢s that the court erred in measuring its
damages by a discounted rental rate it agreed to acdept temporarily, rather than the full
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rate provided by the original lease.
We find no error, affirm, and award Cornerstone its attorney fees and costs on
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appeal.
FACTS AND PROCEDURAL! BACKGROUND
The following facts are principally based on/the trial court's unchallenged findings
of fact (FF), which are verities on appeal. Findings! challenged by Mahlen will be
highlighted and discussed as appropriate. 1
In spring 2013, Mahl en purchased the assets! of a business that operated two dry-
cleaning locations in Spokane-one that served only as a drop-off and pickup location,
and one where the dry cleaning was performed. FF 16-17, 20-21. Mr. Mahlen, the
corporation's owner, had no prior dry cleaning experience, but had owned a laundromat
in the past, and at the time owned a 46,000 square foot business park in Indiana.
FF 18-19.
1
See Clerk's Papers (CP) at 859-82 (Am. Findings of Fact & Conclusions of Law
- Following Bench Trial).
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Mr. Mahlen quickly discovered that he had ~ufficient staff and resources to
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process additional clothing at a small incremental cost and he began searching for an
additional drop-off and pickup location downtown. FF 22, 77, 80. He was particularly
interested in leasing a space from which he could offer drive-through service because
customers liked the convenience and a downtown competitor offered drive-through
service at both of its locations. FF 26, 79.
After rejecting properties that did not have drive-through capacity, Mr. Mahlen
settled on a commercial property owned by Corner$tone. FF 81, 8, 9. That property,
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located at 1101 North Division, had no existing driye-through capacity, but by July Mr.
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Mahlen and Keith Scribner, one of Cornerstone's partners, signed a nonbinding letter of
intent that contemplated paving a drive-through lane and constructing a service window.
FF 29-30.
On August 2, 2013, Mahlen and Cornerston~ executed a retail center lease for the
North Division property for a term of five years, eflfective September 1. FF 31, 34.
Paragraph 3 .1 (a) of the lease provided that improvements to the premises would be
constructed by Cornerstone "pursuant to and upon ~he time frame set forth on [an
attached] Exhibit 'C' ," which stated:
EXHIBI'If "C"
(Landlord'~ Work)
Landlord agrees to complete the following:
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1) Install ADA restroom. Restrobm to be completed with
handicapped bars but does not include towel, toilet and soap
dispensers
2) Sheet rock exterior walls inside space, tape mud and prime
ready for paint ·
3) Provide electrical box every 12 feet in exterior walls
4) Install grid ceiling
5) Install Ceiling tile and lighting
6) Install back door approx. 3ft by 7ft in rear of space next to
bathroom (South wall) ·
7) Add a 5ft by 5ft window in redr side of space approximately
10 feet from the rear west wall
8) Pave or asphalt around west siµe of building approximately
12 feet wide from the front of building to rear of building
(This item cannot be completed [by] possession date but
will be completed within 90 ~ays after the possession date)
9) Provide washer dryer hookup in east wall next to restroom
with hot and cold water, gas s~pply, 110 outlet for washer,
230 volt outlet for dryer, drye~ vent, gas vent and gas line for
dryer, and a gas or electric 40 ~allon hot water heater.
Ex. P 1-9, P 1-44 (emphasis added); see FF 47.
Paragraph 5.3 of the lease provided that "[i]f for any reason whatsoever landlord
has not delivered the Premises to Tenant with Landlord's Work substantially complete on
or before December 1st, 2013," then, "as Tenant's sole and exclusive remedy, this Lease
shall be deemed automatically cancelled, and shall ,'have no force or effect .... " Ex. P 1-
11; FF 39. Mahlen ultimately took possession oft~e premises on October 18, 2013, and
Cornerstone completed eight of the nine items listed in exhibit C of the lease by the third
week of October. FF 48, 87. Only item 8, the paving of the drive-through lane, remained
uncompleted. FF 48. By the term of exhibit C highlighted above, the paving was not
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required to be completed until January 16-90 days after the possession date and 7 weeks
after the "automatic cancellation" date provided by ~aragraph 5 .3. Ex. P 1-11; FF 4 7-48,
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87.
.Cornerstone took the position that its obligat~on to complete the paving was
extended beyond January 16 by article 20 of the leajse, after it learned from the city of
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Spokane that a city-owned alley adjacent to Corner$tone's property-two feet of which
fell within the 12-foot lane Cornerstone had agreed ;to pave-had to be vacated before the
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paving could be done. Clerk's Papers (CP) at 6. Article 20 excuses a party's delayed
performance in certain circumstances, including w~en the delay has a cause "beyond [the
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party's] reasonable control." Ex. P 1-25. 2 And on February 24, 2014, the parties
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executed a written amendment to the lease that recdgnized Cornerstone's lease obligation
2
Article 20, captioned "Delaying Causes," ~rovides:
If either party is delayed in the perfortnance of any covenant of this
Lease because of any of the following cause~ (referred to elsewhere in this
Lease as a "delaying cause"): acts of the otijer party, action of the
to
elements, war, riot, labor disputes, inability procure or general shortage
of labor or material in the normal channels of trade, delay in transportation,
delay in inspections, or any other cause beyond the reasonable control of
the party so obligated, whether similar or dissimilar to the foregoing,
financial inability excepted, then, such performance shall be excused for the
period of the delay; and the period for such performance shall be extended
for a period equivalent to the period of such delay, except that the foregoing
shall in no way affect Tenant's obligation to pay rent or any other amount
payable hereunder, or the length of the term ,of this Lease.
Ex. P 1-25 (second emphasis added).
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to pave or asphalt around the west side of building but stated, "Due to unforeseen
circumstances, Lessor, to date, has not yet received;the necessary permits from the City
of Spokane to complete this improvement." Ex. P 5-1; FF 66. The amendment
continued:
Therefore, Lessor has agreed to lower the total base rent to half of the base
rent to $1092.50 ... each month beginning March 1st 2014, until the proper
permits are issued and this improvement is completed.
Ex. P 5-1. After providing that Cornerstone would increase its promised improvements
to include a pylon sign as well, the amendment statFd:
The month this improvement and the pylon sign referred in second
paragraph of this addendum are completed, tent shall be prorated for the
month and Lessor will provide Lessee an accounting of that prorated
month.
Id. The amendment finally provided that "except ajs herein modified, all terms and
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conditions of said Lease dated September 1st, 2013, shall be the same and remain in full
force and effect." Id. Although Mr. Mahlen attempted to negotiate a completion date for
the drive-through in the February amendment, none was included in the amendment as
finalized and signed. FF 67.
Several months later, in June 2014, Mr. Ma~len called Mr. Scribner and said: "I
have found out that that drive-thru will never get paved and I'm moving out." Report of
Proceedings (RP) at 32; FF 68.
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Mahlen did not pay rent for July. FF 70. 3 Rent was due the first day of each
month pursuant to paragraph 6.1 of the lease, and article 27, section 1 of the lease
provided that Mahlen's failure to pay rent when due would constitute a material breach
and result in default. Ex. P 1-12, P 1-29; FF 35-36. On July 16, 2014, a Cornerstone
agent e-mailed a written notice of default to Mr. Mahlen for the nonpayment of the rent
due on July 1. FF 71.
On August 1, 2014, Mahlen, through counsel, gave formal notice that it would
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vacate the premises by August 31, 2014, which it did. FF 72-73, 94.
The trial court's conclusions of law (CL) entered following the bench trial
contained a number of findings of fact. On appeal, we review findings of fact
erroneously labeled as conclusions of law as the fa~tual findings that they are. E.g.,
Willener v. Sweeting, 107 Wn.2d 388,394, 730 P.2d 45 (1986). Among the findings of
fact included in the trial court's conclusions were the following:
• That both Mr. Scribner and Mr. Mahlen are experienced in negotiating and
executing commercial leases, see CL 2;
• That the lease amendment of February 24, 2014, was supported by mutual
consideration in that Cornerstone received an extension of time for completion of
the paving in exchange for Mahlen receivitj.g a 50 percent reduction in rent until
paving was completed and the installation Of pylon signage at no cost to Mahlen,
see CL 9;
3 As discussed below, Mahlen disputes the trial court's finding that it failed to pay
rent after June because it claims it had "sufficient funds on deposit" to cover rent July and
August 2014. Br. of Appellant at 46.
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• That the parties to the lease amendment had equal opportunity to negotiate
the contractual terms, see CL 1O;
• That before Mr. Mahlen's June 2014 phone call notifying Mr. Scribner of
his intent to vacate the premises at the end tjf August 2014, Mr. Mahlen had not
expressed frustration with the delays in con$tructing the drive-through nor
provided written notice of the alleged default as required under article 3 7 of the
lease, and Mr. Scribner was unaware of Mr. Mahlen's frustrations, see CL 21-22;
and
• That considering the nature of the coqtract, the position of the parties, their
intent, and the circumstances surrounding p~rformance, Cornerstone was in the
process of performing its obligation to complete the drive-through in good faith
and in a reasonable time through the time Mahlen gave notice of its intent to
vacate the premises. See CL 17-18.
On December 1, 2014, Cornerstone filed suit for damages for breach of the lease
and to enforce a personal guarantee. In an answer and third party complaint against Mr.
Scribner and his wife, Mahlen contended it had bee:n fraudulently induced to enter into
the lease and refrained from terminating it by Cornerstone's assurances that the drive-
through could be built and was being diligently pursued. It also contended that its
performance was excused by Cornerstone's failure to complete the paving within 90 days
of possession, as a result of which it claimed it had a continuing right under paragraph 5.3
to terminate the lease.
Cornerstone contended that even if its progr¢ss on the drive-through had arguably
been insufficient, the parties' lease afforded Corner:stone the opportunity to cure in the
event it defaulted, and a written notice of default was required. Article 3 7 of the lease
provides:
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In the case of a default by Landlord, Landloid shall commence promptly
to cure such default immediately after receir1t of written notice from Tenant
specifying the nature of such default and shall complete such cure within
thirty (30) days thereafter, provided that if the nature of such default is such
that it cannot be cured within said thirty (30) day period, Landlord shall
have such additional time as may be reasonably necessary to complete its
performance, so long as Landlord has proceeded with diligence after receipt
of Tenant's notice and is then proceeding with diligence to cure such
default.
Ex. P 1-29; FF 43. Article 22 of the lease mandates that all notices, requests, and
demands be in writing. FF 41.
Following a bench trial, the trial court found that Mahlen was the breaching party
and entered judgment in favor of Cornerstone, awatding damages measured by the full
monthly rental provided by the original lease. Mahlen moved for reconsideration that
was granted in part; the trial court reduced the damage award by half, relying on the
reduced rental amount provided by the February 2014 amendment.
Mahlen appeals and Cornerstone cross appeals.
ANALYSIS
APPEAL
Following a bench trial and the trial court's weighing of the evidence, our review
is limited to ascertaining whether the findings of fact are supported by substantial
evidence and, if so, whether the findings support the conclusions of law and the
I judgment. City of Tacoma v. State, 117 Wn.2d 348, 361, 816 P.2d 7 (1991). The
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I appellant's brief must include a separate assignment of error for each finding of fact a
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party contends was improperly made. RAP 10.3(g). Unchallenged findings are verities
on appeal. Moreman v. Butcher, 126 Wn.2d 36, 39, 891 P.2d 725 (1995). Of the trial
court's 97 findings, Mahlen assigns error to only 5: findings 58, 59, 60, 70, and 97. Its
overarching objection to the trial court's conclusions are to its conclusion that
Cornerstone did not breach a duty to complete the drive-through within the reasonable
time a court will imply when a contract-here the lease amendment-is silent as to time
for performance. It also contends that the trial cou~ erred by finding that Mr. Scribner
and Cornerstone did not negligently or intentionally misrepresent an intention to
complete construction of the promised drive-through.
Sufficiency of evidence and conclusions in support of the trial
court's findings on breach
Mahl en challenges finding 5 8 on the basis that architectural designs the court
found were obtained by Mr. Scribner from Martin 1. Hill Architecture between February
and April 2014 were in fact obtained by Mr. Scribner earlier, according to the architect's
invoice indicating his work was limited to the period between April 2013 and January 20,
2014. Br. of Appellant at 31. Mahlen concedes the trial court's finding that structural
calculations were obtained by Mr. Scribner in the February-April 2014 time frame, but
argues they were sign-related, not drive-through related, and were an inconsequential
amount of the work that needed to be done. Id. at 32.
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Finding 59, that "[s]ometime between November 2013, and January 2014, Mr.
Scribner learned that Cornerstone owned only 10 feet between the building and west
property line, not the 12 feet required for the drive-thru," is challenged. The finding is
supported by Mr. Scribner's testimony that he learned that Cornerstone owned 10 rather
than 12 feet after the city stopped excavation by Cornerstone's contractor on November
4, 2013. Mr. Scribner explained that he had thought Cornerstone owned 12 feet because
it had demolished what he thought was a 12-foot building that extended west to the alley
from the western wall of the existing building.
Mahlen's only citation to the record in support of its challenge to the trial court's
finding that Mr. Scribner was unaware of the true distance to the property line is to
exhibit P 82, a site plan for a remodel of the North Division property by Martin Hill
produced in 2012. Br. of Appellant at 39. The exhibit itself tells us nothing about when
or how carefully the plan was reviewed by Mr. Scribner. Mahlen does not cite any
admission by Mr. Scribner that the site plan put him on notice of the true distance to the
relevant property line. A cropped portion of exhibit P 82 is reproduced below and is
distorted horizontally to remain legible but to better fit the page. The lower left corner of
the plan is where the drive-through would be, and as can be seen, it does not clearly
reveal that there is only 10 feet between the building and the property line:
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No. 34828-8-III
Cornerstone Equities v. Mah/en Investments
y 7 - - · '" . -- --__._. ,, __ -------------------
; rF····
- ----- -- .SJ --V - ~------ ---------f~
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I a = 2'::'.? ' Spoknne c·,ounty No.: I•
Cornerstone v. Muhlcn
Finding 59 is thus supported by substantial evidence.
Finding 60 is challenged for its statement that vacation of the city's alley adjoining
Cornerstone's property "would require approval from the landowners abutting the alley
and from the Spokane City Council," based on Mahlen's contention that it would only
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No. 34828-8-111
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require approval from one other owner, who, together with Cornerstone, owned a
majority of the land abutting the alley. Br. of Appellant at 33-34.
Mr. Scribner testified inconsistently on this issue. He twice stated the city told
him he would need approval from all of the neighboring property owners. He also stated
that when evidence was presented at trial that only majority ownership of the abutting
property was required, he was "really surprised," because it was the first time he had
heard that information. RP at 368. But in exhibit D-102, a time line Mr. Scribner
prepared and that Mahlen cites in challenging finding 60, Mr. Scribner wrote, with
reference to January 2014:
[Mr. Johnson] told me I had to get a list of all the property owners and have
all them involved in the vacation process as the majority would need to
improve this and the entire alley would need to be vacated.
Ex. D-102, at 6. When cross-examined about this statement, Mr. Scribner testified:
A Okay. A list of the property owners and have them all involved in a
vacation process as majority would need to approve this and the entire
alley would need to be vacated.
Q The majority, right?
A Correct.
Q And the majority is what Eric Johnson testified to yesterday?
A That's not what he told me.
Q And then you wrote in your timeline that you knew as of January 2014
that it would be a majority; isn't that correct?
A That is correct.
RP at 369-70 (emphasis added). While Mr. Scribner's testimony is somewhat confusing,
given the ambiguity of the time line entry, undisputed evidence that Mr. Scribner suffers
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from memory issues, and his actions in requesting a title map and trying to contact
multiple neighboring property owners, the trial court could reasonably find that he
believed in 2014 that unanimous consent was required. It is also possible that Mr.
Scribner understood "majority" to mean the numerical majority of the abutting
landowners rather than only those who owned a majority of the abutting property,
however few that might be. Either way, finding 60 is supported by substantial evidence.
Mahlen challenges finding 70's statement that it only paid rent through June 2014
on the basis that it paid a deposit at the outset of the lease that was sufficient, if applied,
to cover July and August rent. Br. of Appellant at 46. But under paragraph 5.4 of the
lease, the deposit on which Mahlen relies was applicable to its defaults in Cornerstone's
"sole discretion." Ex. P 1-11. If Cornerstone chose not to apply the deposit to defaults, it
was not required to return it to Mahlen until a reasonable time after expiration of the
lease, which would be, at the earliest, five years after the beginning lease date. Finding
70 is supported by substantial evidence.
Finally, Mahlen does not contest the accuracy of the trial court's finding 97, which
states in relevant part that in conjunction with efforts to vacate the alley after the
February 2014 amendment, Cornerstone "contacted various neighbors seeking to inquire
as to their thoughts on the vacation." CP at 871. Mahlen merely argues that these
contacts were not evidence of "progress" toward vacating the alley since a majority of the
land abutting the alley was owned by Cornerstone and a single other neighbor.
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Even if we ignore all of the findings that are challenged by Mahlen, the trial
court's remaining findings support its conclusions oflaw, which in tum support its
judgment in Cornerstone's favor. Substantial evidence supports the court's finding that
the February 24, 2014 lease amendment modified the requirement of the original lease
that the paving or asphalting around the west side of the building be completed by 90
days after possession. This is clear from the amendment's plain language that "[d]ue to
unforeseen circumstances, Lessor, to date, has not yet received the necessary permits
from the City of Spokane to complete this improvement. Therefore, Lessor has agreed to
lower the total base rent to half of the base rent ... until the proper permits are issued and
this improvement is completed." Ex. P 5-1. It is frivolous to argue, as Mahlen does, that
the concluding statement, "[E]xcept as herein modified, all terms and conditions of [the
original] Lease ... remain in full force and effect," preserved Mahlen's right to terminate
the lease under paragraph 5 .3 for failure to meet the original deadline.
Applying Washington law, the court correctly concluded that with the elimination
of a date for completion of the drive-through improvement, it was to impose a reasonable
time determined by the nature of the contract, the positions of the parties, their intent, and
the circumstances surrounding performance. See Pepper & Tanner, Inc. v. KEDO, Inc.,
13 Wn. App. 433, 435, 535 P.2d 857 (1975). "What may be considered a reasonable time
is usually a mixed question oflaw and fact. Normally, a determination of what
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constitutes a reasonable time is a question for the trier of fact." Jarstad v. Tacoma
Outdoor Recreation, Inc., 10 Wn. App. 551,558,519 P.2d 278 (1974) (citation omitted).
We need not review the trial court's numerous findings addressing the
reasonableness of the time taken by Cornerstone because Mahlen's failure to provide
notice and an opportunity to cure is an independently sufficient basis on which to uphold
the trial court's conclusion that only Mahlen breached the lease. 4
The trial court's findings support its conclusion that Mahlen never provided
written notice to Cornerstone that it had (allegedly) defaulted by failing to complete the
paving or asphalting within a reasonable time. Written notice followed by a period of 30
days to cure (or longer if, despite diligence, additional time is necessary) is required by
article 37. Ex. P 1-35. Article 22 reinforces that all notices must be in writing. Mahlen
argues that it substantially complied by waiting over 30 days after its June telephone call
to move out. But its notice in June was not written. See Mike M Johnson, Inc. v. County
of Spokane, 150 Wn.2d 375, 388, 78 P.3d 161 (2003) (affirming the well established
4
Mahlen makes much of finding 95, that "[t]he Court does not find that
[Cornerstone] substantially performed the work that was required of it by the parties'
Lease and their February 2014 amendment." That finding was added after Mahl en
moved for reconsideration and argued that the February 2014 reduction of rent by half
demonstrated that the construction of the drive-through was a material part of the
promised improvements. The court agreed. Finding 95 is inconsequential, since it is
undisputed that Cornerstone abandoned construction of the drive-through. It was
permitted to, as a result of Mahlen's breaches by anticipatory repudiation and
nonpayment of rent.
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principle that procedural contract requirements such as written notice must be enforced
absent waiver or modification). Nor would the June communication reasonably be
understood by Cornerstone as affording it the right and opportunity to cure the default.
Similarly, the August 1, 2014 letter stating that Mahlen would vacate on August
31 provided 30 days' notice and this time was written, but it did not state that it was a
notice of default under the lease nor did it acknowledge any right of Cornerstone to cure.
Also, by the time of the August letter, Mahlen had done more than breach by anticipatory
repudiation-it had defaulted in payment of rent. (A default of which it was given notice
and never cured.).
The trial court's findings support its conclusion that Cornerstone was deprived of
the opportunity to cure the asserted default within 30 days. They support its conclusion
that even if Mahlen did not breach by anticipatory repudiation by announcing an
intention to vacate at the end of August, it breached the lease by ceasing to pay rent and
vacating the premises without ever having adhered to the requirements of article 3 7.
Misrepresentation
Mahlen argues the trial court erred when it found no negligent or intentional
misrepresentation by Cornerstone-misrepresentation it asserted both as an affirmative
defense to breach of contract and as tort counterclaims.
The tort of negligent misrepresentation requires proof that (1) a defendant supplied
information for the guidance of others in their business transactions that was false, (2) the
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defendant knew or should have known that the information was supplied to guide the
plaintiff in business transactions, (3) the defendant was negligent in obtaining or
communicating false information, (4) the plaintiff relied on the false information supplied
by the defendant, (5) the plaintiffs reliance on the false information supplied by the
defendant was justified, and (6) the false information was the proximate cause of
damages to the plaintiff. Lawyers Title Ins. Corp. v. Baik, 147 Wn.2d 536, 545, 55 P.3d
619 (2002). Intentional misrepresentation-fraud-requires proof of (1) a representation
of an existing fact, (2) materiality, (3) falsity, (4) the speaker's knowledge of the
representation's falsity, (5) intent of the speaker that it should be acted on by the plaintiff,
(6) plaintiffs ignorance of its falsity, (7) plaintiffs reliance on the truth of the
representation, (8) plaintiffs right to rely on the representation, and (9) damages suffered
by the plaintiff. W Coast, Inc. v. Snohomish County, 112 Wn. App. 200, 206, 48 P.3d
997 (2002). Both torts must be proved by clear, cogent, and convincing evidence. Baik,
147 Wn.2d at 545 (negligent misrepresentation); Elcon Constr., Inc. v. E. Wash. Univ.,
174 Wn.2d 157,166,273 P.3d 965 (2012) (fraud).
Mahlen argues that Cornerstone was negligent in determining whether or not it
could construct the drive-through and the process by which that would happen; falsely
representing first, that the drive-through could be completed by August 31, 2013, and
later, that it could be completed within 90 days of Mahlen's possession. Br. of Appellant
at 38. The trial court did not make express findings of any of the facts material to
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Mahl en's tort claims, so those facts are deemed to have been found against Mahl en.
State v. Souza, 60 Wn. App. 534, 541, 805 P.2d 237 (1991) (citing Crites v. Koch, 49
Wn. App. 171,176,741 P.2d 1005 (1987) for the "long-standing rule in civil cases").
And the trial court's conclusion oflaw 39 contains findings of fact in support of its
determination that Mahlen failed to prove the elements of its negligent misrepresentation
and fraud claims.
Mr. Scribner testified at trial that before entering into the lease with Mahlen, he
had never received any information from any source that caused him to believe a drive-
through of the sort he and Mr. Mahlen had discussed could not be incorporated into the
property. He testified that even before signing the lease with Mahlen, he had begun to
take steps toward getting the drive-through constructed. The trial court made the
following subsidiary findings of fact in support of its finding (labeled as a conclusion)
that Mr. Scribner never provided false information but merely underestimated the work
required to complete the drive-through:
Mr. Scribner never provided false information to the Defendants ....
Once the degree of work was realized, Mr. Mahlen acquiesced to the delay
by negotiating and executing the Amendment without the addition of
completion date. More compellingly, not only did Mr. Scribner complete
eight of the nine obligations contained in "Exhibit C" to the Lease, in
attempting to complete the drive-thru, and prior to Mr. Mahlen's
anticipatory breach, Mr. Scribner enlisted contractor Gerald Kofmehl to
provide a bid regarding a drive-thru, received a bid from Arrow Concrete &
Asphalt concerning the construction of the drive-thru, realized the need for
a retaining wall on Boone Court, LLC's, property line, received a bid from
All Star Excavation to excavate drive-thru, authorized All Star Excavation
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to begin work on the drive through area, enlisted Metro Engineering to
create a grading plan, submitted the grading plan to the City, obtained
architectural designs from Martin J. Hill Architecture, Inc., obtained
structural calculations from Inland Northwest Engineering, Inc., received
information from Stewart Title of Spokane on who all of the property
owners were with land abutting the alley, contacted all of the property
owners to seek approval for the vacation, and obtained an application to
vacate the alley from the City.
CP at 879.
The representations about which Mahlen complains concerned future events. As
such, they did not concern "presently existing fact[ s]"-an explicit element of a fraud
claim and also a prerequisite for a negligent misrepresentation claim:
Although promises of future conduct may support a contract claim (or
similar claim such as promissory estoppel in an appropriate case), failure
to perform them cannot alone establish the requisite negligence for
negligent misrepresentation. This is because of the absence of any false
representation as to a presently existing fact, a prerequisite to a
misrepresentation claim.
Havens v. C&D Plastics, Inc., 124 Wn.2d 158, 182, 876 P.2d 435 (1994) (citation
omitted).
Mahlen also contends Cornerstone committed negligent misrepresentation when it
stated that the delay in the project was the result of waiting on the city to issue permits.
The portion of the record it cites for support is testimony that Cornerstone made this
representation in June 2014, after both the lease and amendment had been executed. See
RP at 131. There is no evidence Mahlen relied on that information to its detriment. Far
from relying on the statement, Mr. Mahlen undertook his own investigation in June, and
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No. 34828-8-111
Cornerstone Equities v. Mah/en Investments
on learning that only one permit was pending at the city, notified Mr. Scribner that
Mahlen would vacate in August.
Mahlen further contends Mr. Scribner could not have intended to construct the 12-
foot drive-through because he knew Cornerstone only owned 10 feet of the width of
property needed. We rejected that argument in finding sufficient evidence to support
finding 59.
Damage issues
Mahlen's brief raises two damage issues, one of which was never raised in the trial
court until Mahlen moved for reconsideration.
Mahlen argues that even if Cornerstone is entitled to damages, the trial court erred
by awarding Cornerstone rent for July and August 2014, in light of the deposit Mahlen
was required to make under the lease. As previously discussed, the deposit was available
to be applied to defaults at Cornerstone's discretion, with the balance, if any, to be
returned to Mahlen within a reasonable time following expiration of the lease term. Any
part of the deposit that was not taken into consideration in the court's October 2016
judgment5 therefore needs to be taken into consideration before a final disposit!on of the
parties' rights and interests. Mahlen does not show that it will not be. Cornerstone points
out that it did not elect to accelerate rent, the premises have not been relet, the lease term
5
See CP at 885 (J. After Trial) (crediting Mahl en with $2,643 for "deposit").
21
No. 34828-8-111
Cornerstone Equities v. Mah/en Investments
has not expired, and future litigation is contemplated. Second Am. Br. of Resp't at 38.
That argument is a sufficient explanation. Mahlen offers no argument in reply.
Mahlen also raises a challenge to common area maintenance charges. For the first
time in a motion for reconsideration, it argued ( 1) that the tenants, not Cornerstone, did
all of the maintenance work, and (2) under Viking Bank v. Firgrove Commons 3, LLC,
183 Wn. App. 706, 334 P.3d 116 (2014), Cornerstone cannot recover management fees
that it unilaterally incurred for its own benefit.
Viking Bank turned on construction of language of the parties' lease in that case.
IfMahlen contends that Cornerstone's damage claim included common area maintenance
charges or management fees that Mahlen never agreed to pay, it needed to rely on its own
lease, not a 2014 construction of Viking Bank's lease. It also needed to present evidence
during the trial of the amount and nature of the fees and argument of why they were not
owed.
The trial court denied Mahl en's motion for reconsideration on this point. We find
no error or abuse of discretion in that denial.
CROSS APPEAL
Cornerstone cross appeals the trial court's decision that reduced its award of
unpaid rent damages to 50 percent as provided by the February amendment, arguing that
the trial court originally found, correctly, that once Mahlen breached by anticipatory
repudiation, Cornerstone was excused from its obligation to construct the drive-through
22
No. 34828-8-III
Cornerstone Equities v. Mah/en Investments
and was therefore entitled to the full monthly rent amount called for by the original lease.
Br. ofResp't & Cross Appellant at 41-42. 6
We agree that the trial court correctly found that Mahlen's breach by anticipatory
repudiation excused Cornerstone from further efforts to complete the drive-through. But
we disagree that it revived the original amount of the rent. The effect on the rent is
governed by the terms of the parties' lease, as amended. And the lease amendment
provides, in relevant part:
Lessor has agreed to lower the total base rent to half of the base rent to
$1092.50 ($2185 divided by 2 equals $1092.50) each month beginning
March 1st 2014, until the proper permits are issued and this
improvement is completed. This shall include the pylon sign as well. The
month this improvement and the pylon sign referred in second paragraph of
this addendum are completed, rent shall be prorated for the month and
Lessor will provide Lessee an accounting of that prorated month. Common
area expense charges each month shall remain the same per the lease
agreement.
Ex. P 5-1 (emphasis added).
The present contingency might not have been contemplated by the parties. But we
will not rewrite their agreement and impose an outcome different from that literally
6
Mahlen argues that RAP 2.5(b) precludes Cornerstone from appealing this issue
because it accepted the benefits of the trial court's decision without posting security. The
rule provides in relevant part that a party may accept the benefits of a trial court decision
without losing the right to obtain review "if, regardless of the result of the review based
solely on the issues raised by the party accepting benefits, the party will be entitled to at
least the benefits of the trial court decision." RAP 2.5(b)(iii). That is the case with
Cornerstone and the issues it raises. It has not lost the right to appeal the allegedly
insufficient award of damages.
23
No. 34828-8-111
Cornerstone Equities v. Mah/en Investments
provided by their agreement. See Wagner v. Wagner, 95 Wn.2d 94, 101, 621 P.2d 1279( 1980) (In construing a contract, a court must interpret it according to the intent of the
parties as manifested by the words used; we neither disregard contract language ... nor
revise the contract under a theory of construing it.). The event that triggers a renewed
obligation to pay the full amount of rent has not occurred.
ATTORNEY FEES
Both parties request attorney fees and costs on appeal under RAP 18.1 and their
lease, which provides for an award of reasonable attorney fees and costs to the prevailing
party. As the prevailing party, Cornerstone is awarded reasonable fees and costs on
appeal subject to its compliance with RAP 18.l(d).
Affirmed.
A majority of the panel has determined this opinion will not be printed in the
Washington Appellate Reports, but it will be filed for public record pursuant to RCW
2.06.040.
d]Uw ~.~-
dow•y.J.
WE CONCUR:
Pennell, J.
24