Jubitz Corp., App/cross-resp V. Vancouver Hospitality Partners, Resp/cross-app ( 2021 )

Filed
Washington State
Court of Appeals
Division Two
November 9, 2021
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION II
JUBITZ CORPORATION, an Oregon No. 53256-5-II
Corporation,
Appellant/Cross-Respondent,
v.
VANCOUVER HOSPITALITY PARTNERS, UNPUBLISHED OPINION
LLC, a Washington limited liability company,
Respondent,
ROBERT HOLMSTROM and ELIZABETH
HOLMSTROM, individuals,
Respondents/Cross-Appellants.
LEE, C.J. — Jubitz Corporation leased a piece of property from Robert and Elizabeth
Holmstrom. Jubitz also entered into an agreement with the Holmstroms to purchase the property
in 2023. After Jubitz entered the lease and purchase agreements, it learned the property was
burdened by Reciprocal Parking Agreements (RPAs) with the adjacent property, which is owned
by Vancouver Hospitality Partners, LLC.
Jubitz sued Vancouver Hospitality and the Holmstroms, seeking a judgment declaring the
RPAs invalid and for damages. The trial court ruled that Jubitz had no actual notice of the RPAs
and that the RPAs incorrectly identified the affected properties. However, the trial court found
that Jubitz had constructive notice of the RPAs. The trial court then reformed the RPAs between
Vancouver Hospitality and Jubitz to correctly identify the properties based on the evidence of the
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parties’ intent and ruled that the RPAs were enforceable as between Jubitz and Vancouver
Hospitality. The trial court also awarded damages to Jubitz from the Holmstroms for the reduction
in property value resulting from enforcement of the RPAs.
Jubitz appeals the trial court’s order reforming and enforcing the RPAs. The Holmstroms
cross-appeal the trial court’s judgment awarding Jubitz damages and attorney fees. We reverse
the trial court’s order reforming and enforcing the RPAs, reverse the trial court’s judgment
awarding Jubitz damages and attorney fees, and remand for further proceedings consistent with its
opinion.
FACTS
A. PROCEDURAL FACTS
On February 27, 2017, Jubitz filed a complaint against Vancouver Hospitality and the
Holmstroms. Jubitz sought judgment declaring the RPAs invalid, and quieting title to the property.
Jubitz also alleged claims for breach of contract and fraud against the Holmstroms.1
Vancouver Hospitality filed counterclaims against Jubitz, seeking reformation of the
flawed RPAs and to quiet title to the RPAs. Alternatively, Vancouver Hospitality asserted a
prescriptive easement for parking. Vancouver Hospitality also raised a claim for trespass and
sought injunctive relief to prevent Jubitz from interfering with the RPAs. Later, Vancouver
Hospitality amended its answer to assert cross-claims against the Holmstroms including
negligence, indemnification, and breach of contract. Vancouver Hospitality’s amended answer
1
The trial court granted the Holmstroms’ motion for partial summary judgment dismissing
Jubitz’s claims for quiet title and anticipatory breach of the purchase and sale agreement because
Jubitz had not yet purchased the property and the claims were premature. Jubitz does not appeal
the trial court’s order granting partial summary judgment.
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included reformation in the section titled counterclaims and cross-claims, but it did not specify
whether the claim for reformation was a counterclaim against Jubitz or a cross-claim against the
Holmstroms.
The Holmstroms also filed counterclaims of rescission of the purchase and sale agreement
(PSA) against Jubitz. In its counterclaims, the Holmstroms sought to the have the PSA declared
void. The Holmstroms also asserted indemnification from Jubitz for the claims filed by Vancouver
Hospitality.
By stipulation, the trial was bifurcated, allowing any claims regarding damages to be tried
after determination of the merits of the claims.
B. UNCHALLENGED FINDINGS OF FACT2
Following the liability phase of trial, the trial court entered written findings of fact. The
trial court found that the Holmstroms were the owners of commercial real property it identified as
the original parcel. The Holmstroms participated in a boundary line adjustment with the owner of
the adjacent property, Krenzler Corporation. As part of the boundary line adjustment, the
Holmstroms divided their original parcel into two separate parcels. The northern property was
used for a card lock oil company. The southern property was to be developed into a hotel.
The trial court also found that “to assist with the development of the southern parcel, the
Holmstroms prepared a reciprocal parking agreement.” Clerk’s Papers (CP) at 2119. The trial
court described the RPAs as follows:
2
None of the parties assign error to the trial court’s findings of fact. Unchallenged findings of
fact are verities on appeal. Herring v. Pelayo, 198 Wn. App. 828, 833, 397 P.3d 125 (2017).
Therefore, the trial court’s findings of fact are verities on appeal.
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The initial [RPA] was originally recorded on July 8, 1999. An amended RPA was
recorded on August 6, 1999. Both of the RPAs attached the legal description of the
original [combined] parcel, but referenced this description as the northern property.
At that time, the Holmstroms continued to own the original parcel as a single
property. Both of the RPAs attached the legal description of the Krenzler property,
and incorrectly referenced this description as the southern property.
CP at 2119-20 (emphasis added). The trial court also found that after the RPAs were recorded,
the Holmstroms sold the southern portion of their property to Salmon Creek Lodging, LLC, which
was created to own and operate the hotel. The Holmstroms were members of Salmon Creek
Lodging, but they did not retain an individual interest in the southern property. Salmon Creek
Lodging was referenced in the RPAs but had not been created at the time the RPAs were executed
and recorded.
The trial court also made findings regarding the use of each property for parking. The hotel
began operating on the southern property and the card lock oil company business continued
operating on the northern property. Each business maintained its own parking areas. However,
each property’s parking area was accessible to the other property. Occasionally, hotel customers
would park on the northern property or oil company employees would park on the southern
property. Neither the hotel management nor the oil company management asserted rights under
the RPAs.
In April 2007, Salmon Creek Lodging sold the southern property to Vancouver Hospitality.
The trial court found that the deed transferring the southern property to Vancouver Hospitality
from Salmon Creek referenced the RPAs.
In 2012, the Holmstroms agreed to lease, then sell, the northern property and the oil
company to Jubitz. Jubitz agreed to lease the northern property until 2023. In 2023, Jubitz would
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purchase the property under the terms of the executed PSA. Jubitz had no actual knowledge of the
RPAs prior to entering the lease or PSA. The trial court found:
The Holmstroms warranted their ability to provide Jubitz with quiet enjoyment of
the northern property during the lease, and with clear title to the northern property
at closing on the PSA, except for a list of encumbrances provided by a title
insurance company and included in the PSA.
CP at 2122. The list of exceptions in the PSA based on information from the title insurance
company did not reference the RPAs.
In 2016, Vancouver Hospitality’s occupancy at the hotel improved and hotel customers
were more frequently parking on the northern property. Jubitz complained and eventually began
towing some of the cars. In response, Vancouver Hospitality asserted the right to park on the
northern property under the RPAs.
C. TRIAL COURT’S CONCLUSIONS ON MERITS OF CLAIMS
On July 16, 2018, the trial court entered conclusions of law based on the above
unchallenged findings of fact (July 16 Order). Based on its findings of fact, the trial court
concluded that the RPAs were within the chain of title for the northern property, and therefore,
Jubitz had constructive notice of the RPAs; although the RPAs did not accurately describe which
properties benefitted from the agreements, sufficient information existed to provide inquiry notice;
and the RPAs are not void because Salmon Creek Lodging did not exist at the time the RPAs were
recorded. The court also concluded that as between Jubitz and Vancouver Hospitality, the RPAs
are enforceable according to their terms and that the RPAs should be reformed to correct the
mistake concerning the legal descriptions. The trial court also concluded that the Holmstroms
were bound by the representations and warranties they made in the lease and PSA.
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D. DAMAGES AND JUDGMENT
The trial court later held a second trial on damages. On February 5, 2019, the trial court
entered findings of fact and conclusions of law on damages (February 5 Order). The trial court
found that the RPAs reduced the fair market value of the lease and PSA by $295,000. However,
Vancouver Hospitality’s use of the northern property did not cause Jubitz any monetary damages,
only annoyance and inconvenience.
Based on the trial court’s findings of fact, the trial court entered the following, relevant,
conclusions of law:
4. The failure of the Holmstroms to remove the encumbrance imposed
on the northern parcel by the existence of the RPAs breached the warranty for quiet
enjoyment and possession in the lease. Jubitz has not waived its right to seek
monetary damages resulting from this breach.
5. The failure of the Holmstroms to remove the encumbrance imposed
on the northern parcel by the existence of the RPAs breached the warranty to
provide Jubitz with clear title at the time of sale, free of any encumbrance not
approved by Jubitz, as provided in the PSA. Jubitz has not waived its right to seek
monetary damages resulting from this breach.
CP at 2184-85.
The trial court entered judgment in favor Jubitz for $295,000. The trial court also entered
judgment reforming the RPAs consistent with its findings of fact and conclusions of law.
Specifically, the trial court granted Vancouver Hospitality’s claim for reformation against Jubitz
and reformed the RPAs to reflect the correct property descriptions. The trial court’s judgment also
defined “reciprocal non-exclusive parking rights” between Vancouver Hospitality and Jubitz. CP
at 2195.
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Following entry of the judgment, Jubitz filed a motion for costs and attorney fees. The
trial court granted Jubitz’s request for costs and attorney fees. Jubitz was awarded $209,601.50 in
attorney fees and $61,326.31 in costs.
Jubitz appeals the trial court’s July 16 Order enforcing the RPAs entered after the first trial.
The Holmstroms cross-appeal the trial court’s order on damages entered after the second trial. The
Holmstroms also cross-appeal the trial court’s order awarding Jubitz attorney fees and costs.
ANALYSIS
A. STANDARDS OF REVIEW
We review a trial court’s decision following a bench trial to determine whether the findings
are supported by substantial evidence and whether those findings support the conclusions of law.
Herring v. Pelayo, 198 Wn. App. 828, 832, 397 P.3d 125 (2017). Unchallenged findings of fact
are verities on appeal. Id. at 833. We then review the trial court’s conclusions of law de novo to
determine if they are supported by the findings of fact. Scott’s Excavating Vancouver, LLC v.
Winlock Props., LLC, 176 Wn. App. 335, 341, 308 P.3d 791 (2013), review denied, 179 Wn.2d
1011 (2014).
We use a two-step inquiry when reviewing an award of attorney fees. Bill & Melinda
Gates Found. v. Pierce, 15 Wn. App. 2d 419, 446, 475 P.3d 1011 (2020), review denied, 197
Wn.2d 1006 (2021). First, we review the legal basis for awarding attorney fees de novo. Id. at
446-47. Second, we review the decision to award attorney fees and the reasonableness of the
attorney fee award for an abuse of discretion. Id. at 447.
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B. JUBITZ’S APPEAL
Jubitz makes various arguments that the trial court erred because the RPAs could not have
been considered within the recorded chain of title of the northern property and that the failure to
properly identify the parcels in the RPAs renders them void on their face. We hold that regardless
of whether the RPA’s were within the chain of title or the parcels were properly identified, the
RPA’s were void.
An easement is a property right that is separate from an ownership right and allows one to
use another’s land without compensation. Johnson v. Lake Cushman Maint. Co., 5 Wn. App. 2d
765, 778, 425 P.3d 560 (2018). Because the RPAs allows Vancouver Hospitality to use the Jubitz
property without compensation to Jubitz, the RPAs are a form of an easement. However, one
cannot have an easement in his or her own property. Id; see also, Coast Storage Co. v. Schwartz,
55 Wn.2d 848, 853, 351 P.2d 520 (1960).
Here, the trial court’s unchallenged findings show that at the time the RPAs were recorded,
“the Holmstroms continued to own the original parcel as a single property.” CP at 2120. One
cannot have the same rights twice in the form of an ownership interest and an easement interest.
See 17 WILLIAM B. STOEBUCK & JOHN W. WEAVER, WASHINGTON PRACTICE: REAL ESTATE:
PROPERTY LAW § 2.12, at 120 (2d ed. 2004) (“[A]n owner, whose title encompasses all the rights
included within the easement, simply cannot own the same rights twice.”). Therefore, because the
Holmstroms owned both parcels of property at the time the RPAs were recorded, no valid easement
was created. Johnson, 5 Wn. App. 2d at 778; see also M.K.K.I., Inc. v. Krueger, 135 Wn. App.
647, 659, 145 P.3d 411 (2006) (“[W]hen the dominant and servient estates of an easement are
commonly owned, the easement is extinguished because a person cannot have an easement in his
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or her own property.”), review denied, 161 Wn.2d 1012 (2007). Accordingly, we hold that the
undisputed findings show that the RPAs are void, and reverse the trial court’s rulings reforming
and enforcing the RPAs.
C. HOLMSTROMS’ CROSS-APPEAL3
1. Attorney Fees For Breach Of Warranty Of Quiet Enjoyment
The Holmstroms argue that Jubitz waived the right to monetary damages for breach of the
lease because the lease contained an exclusive remedy provision. We agree.
In its commercial lease with Jubitz, the Holmstroms made the following relevant
representations in paragraph 5(c)(iv):
To the Knowledge of Landlord, no Person, other than Landlord and the respective
Seller, has a present or future right to possession of all or any part of the Premises.
CP at 15. And in paragraph 10(l), the commercial lease states:
Quiet Enjoyment. Landlord represents and warrants that Tenant, on paying the
rents and observing and keeping all covenants, agreements, and conditions of this
Lease on Tenant’s part to be kept, shall quietly have and enjoy the Premises during
the Term without hindrance or molestation by anyone, subject, however, to the
exceptions, reservations, and conditions of this Lease.
CP at 28. The commercial lease also contained the following clause in paragraph 5(d):
No Other Representations. Except as provided in this Lease, no representations,
statement, or warranties, express or implied, have been made by or on behalf of
either party in respect to the Premises and the Improvements. . . . . Tenant’s sole
and exclusive remedy for Landlord’s breach of any representation or warranty in
this Lease will be to terminate this Lease.
CP at 15-16.
3
To the extent the Holmstroms’ arguments in their cross appeal relies on the existence of valid
RPAs, we do not address them because we hold that the RPAs are invalid.
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The warranty of quiet enjoyment protects the possession of property and guarantees that
the person entitled to possession will not be actually or constructively evicted under a paramount
title. Foley v. Smith, 14 Wn. App. 285, 290-91, 539 P.2d 874 (1975). In the commercial lease,
the traditional warranty of quiet enjoyment is contained in the Holmstroms’ representation that no
person “has a present or future right to possession of all or any part of the Premises.” CP at 15.
“An easement is a nonpossessory right to use the land of another.” McColl v. Anderson, 6 Wn.
App. 2d 88, 92, 429 P.3d 1113 (2018) (emphasis added). An easement cannot violate the general
warranty of quiet enjoyment because it does not interfere with possession.
But the commercial lease also contains a second warranty of quiet enjoyment which
specifically guarantees that Jubitz “shall quietly have and enjoy the Premises during the Term
without hindrance or molestation by anyone.” CP at 28. Although contained in the
“Miscellaneous” section of the lease, the provision specifically states that “Landlord represents
and warrants . . .” CP at 28. Thus, while the RPAs did not interfere with Jubitz possession of the
property, Vancouver Hospitality’s use the northern property for parking caused Jubitz annoyance
and inconvenience. Because annoyance and inconvenience is a hindrance to Jubitz’s enjoyment
of the Premises, the trial court correctly concluded that the Holmstroms breached the lease
agreement.
The lease agreement clearly states that Jubitz’s “sole and exclusive remedy for Landlord’s
breach of any representation or warranty in this Lease will be to terminate this Lease.” CP at 16.
Because the Holmstroms violated a representation and warranty in the lease, Jubitz’s “sole and
exclusive remedy” is termination of the lease. CP at 16. Thus, Jubitz was not entitled to damages
for any reduction of value of the lease; Jubitz’s only remedy was to terminate the lease agreement.
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Therefore, we hold that the trial court erred in concluding that Jubitz did not waive the ability to
seek monetary damages.
2. Damages Based On No Clear Title Under The PSA
The Holmstroms argue that Jubitz waived its right to seek monetary damages under the
terms of the PSA. The Holmstroms also argue the trial court erred in awarding Jubitz prospective
damages as a purchaser of the property. We agree.
The PSA provided:
7.6 Notice of Developments. The Sellers will give prompt written
notice to the Buyer of any adverse development occurring after the Effective Date
which would result in a Closing Date Representation and Warranty being materially
inaccurate effective as of the Closing Date. If any Closing Date Representation and
Warranty will be inaccurate due to any adverse development between the Effective
Date and the Closing Date, the Buyer shall have no obligation to consummate the
Closing, but (provided that the Sellers have properly notified the Buyer pursuant to
this Section 7.6), if the Buyer elects to waive (or is deemed to waive) the inaccuracy
of the Closing Date Representation and Warranty, the Closing Date Representation
and Warranty shall be deemed to be amended, qualified, supplemented and
corrected by the information contained in the notice for purposes of the Closing
Date Representations and Warranties. Within five (5) business days of receipt of
notice from any of the Sellers of any event resulting in any Closing Date
Representation and Warranty of the Seller becoming inaccurate, the Buyer must
either elect to terminate this Agreement, or the Buyer will be deemed to have
waived the inaccuracy of such Closing Date Representation and Warranty for all
purposes. If any Effective Date Representation or Warranty is inaccurate as of the
Effective Date and the Closing Date, the Buyer shall have no obligation to
consummate the Closing, but if the Buyer elects to consummate the Closing, the
Buyer will not be deemed to have waived the inaccuracy of such Effective Date
Representation and Warranty and may pursue any remedy available under
applicable law.
CP at 42-43.
Section 7.6 provides the terms in case one of the Holmstroms representations or warranties
becomes inaccurate prior to the date of closing. The Holmstroms were required to give Jubitz
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notice of the inaccuracy, after which Jubitz has 5 days to decide to terminate the agreement or
waive the inaccuracy.
Here, Jubitz undisputedly received notice of the RPAs, which were not previously
disclosed and affected the property’s title, and, rather than terminate the PSA, Jubitz decided to
pursue this legal action. Because Jubitz became aware of the RPAs prior to the closing date, the
terms of the PSA do not allow for monetary damages. Instead, Jubitz’s remedies prior to closing
are either to terminate the PSA or to waive the inaccuracy and close under the terms of the PSA.
The PSA does not allow for damages in the amount of the reduction of fair market value, especially
when Jubitz has not yet paid the purchase price under the terms of the PSA. Accordingly, we hold
that the trial court erred in awarding Jubitz damages for the reduction of the fair market value of
the purchase price under the PSA.
The trial court erred in awarding damages to Jubitz. Therefore, we reverse the trial court’s
damages award to Jubitz.
3. Attorney Fees And Costs
The Holmstroms argue that the trial court erred by awarding Jubitz costs and attorney fees
because Jubitz was not the prevailing party. We reverse the trial court’s award of attorney fees.
Both the lease and the PSA allow for an award of attorney fees to the prevailing party in
an action under either agreement. “A party is entitled to attorney fees on appeal if a contract,
statute, or recognized ground of equity permits recovery of attorney fees at trial and the party is
the substantially prevailing party.” Hwang v. McMahill, 103 Wn. App. 945, 954, 15 P.3d 172(2000), review denied, 144 Wn.2d 1011 (2001).
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Here, because we reverse the trial court’s ruling regarding damages, we also reverse the
award of attorney fees to Jubitz.
ATTORNEY FEES ON APPEAL
Jubitz requests attorney fees on appeal under the RPAs, the lease, and the PSA. Vancouver
Hospitality also requests attorney fees on appeal under the terms of the RPAs.
RAP 18.1 provides for an award of attorney fees on appeal, “[i]f applicable law grants to a
party the right to recover reasonable attorney fees or expenses on review.” “A party is entitled to
attorney fees on appeal if a contract, statute, or recognized ground of equity permits recovery of
attorney fees at trial and the party is the substantially prevailing party.” Hwang, 103 Wn. App. at
954.
Here, because we hold that the RPAs are invalid, Jubitz is the prevailing party in its appeal.
However, the Holmstroms’ also prevail on their cross-appeal on the issue of damages. Therefore,
Jubitz cannot be considered the prevailing party under the lease or the PSA and we decline to
award Jubitz attorney fees on appeal. Further, because we hold the RPAs are void, Vancouver
Hospitality cannot recover attorney fees under the RPAs.
We hold that the RPAs are invalid, and therefore, reverse the trial court’s order reforming
the RPAs and awarding Jubitz damages and attorney fees, and remand for further proceedings
consistent with this opinion.
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A majority of the panel having determined that this opinion will not be printed in the
Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06.040,
it is so ordered.
Lee, C.J.
We concur:
Worswick, J.
Sutton, J.P.T.
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