Amarjit Sandhu & American Pizza & Pasta, Inc. v. Seattle Children's Hospital
74433-0
| Wash. Ct. App. | Feb 27, 2017Background
- In 2005 Amarjit Sandhu and American Pizza and Pasta, Inc. (collectively Sandhu) leased retail space for 10 years with two optional 5‑year extensions; the lease barred exercising an extension if the tenant "has ever been in default beyond any applicable cure period more than two (2) times in any twelve (12) month period."
- Rent consisted of Base Rent plus Additional Rent (operating expenses and taxes); timely monthly payment (by the 1st) was required and monetary defaults had a three‑day written‑notice cure period.
- Beginning in 2010 Sandhu underpaid rent repeatedly; Seattle Children’s (successor landlord) sent written letters on March 25, 2010 and November 26, 2010 demanding payment and directing correct monthly payment going forward. Sandhu continued to pay less than the full rent and in June 2011 received a three‑day pay‑or‑vacate notice, which he later cured by payment.
- In February 2015 Sandhu attempted to exercise the extension option; Seattle Children’s sued for declaratory relief, arguing Sandhu had been in default beyond cure more than twice in a 12‑month period and so could not extend.
- The trial court granted partial summary judgment for Seattle Children’s, holding Sandhu ineligible to exercise the extension; the parties stipulated to final judgment and Sandhu appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Sandhu was in "default beyond any applicable cure period" more than twice in any 12‑month period, disqualifying extension exercise | Seattle Children’s: letters triggered the 3‑day cure period; Sandhu failed to cure within three days on multiple occasions, exceeding two defaults in 12 months | Sandhu: letters were procedurally defective (not served by methods in lease) and substantively defective (no specific amount demanded or stated cure period), so cure period never triggered | Held for Seattle Children’s: letters were received (Sandhu conceded receipt), lease did not require demanded amount or explicit cure period in notice, Sandhu failed to cure within three days more than twice in 2010, so extension option barred |
| Whether service method requirement (Section 36.1) invalidated notices when method is not shown in record | Seattle Children’s: method need not be proved where receipt is undisputed | Sandhu: absence of proof of certified/registered/mail or courier renders notice invalid | Held for Seattle Children’s: Sandhu conceded receipt and cannot rely on speculation about delivery method; notices were effective to trigger cure period |
| Whether the March/November letters were substantively deficient (must demand specific amount or state cure period) | Sandhu: notices missing explicit demanded sum and explicit cure period are legally defective | Seattle Children’s: lease contains cure mechanics and monetary default cure period; letters sufficiently informed tenant of underpayment and directed payment | Held for Seattle Children’s: lease does not require those particular elements; letters adequately notified tenant of default |
| Whether court should apply equitable relief to allow extension despite defaults (avoid forfeiture) | Sandhu: equitable relief warranted to avoid forfeiture of business | Seattle Children’s: equitable relief inappropriate given persistent defaults | Held for Seattle Children’s: court properly declined equitable relief; persistent late/under payments bars relief |
Key Cases Cited
- Hearst Commc'ns, Inc. v. Seattle Times Co., 154 Wn.2d 493 (contract interpretation focuses on parties' objective manifestation in writing)
- Citizens All. for Prop. Rights Legal Fund v. San Juan County, 184 Wn.2d 428 (summary judgment standards)
- Scrivener v. Clark Coll., 181 Wn.2d 439 (summary judgment practice)
- Young v. Key Pharms., Inc., 112 Wn.2d 216 (view evidence in light most favorable to nonmoving party)
- White v. State, 131 Wn.2d 1 (nonmoving party may not rely on speculation at summary judgment)
- Elcon Constr., Inc. v. E. Wash. Univ., 174 Wn.2d 157 (summary judgment and contract interpretation principles)
- Berg v. Hudesman, 115 Wn.2d 657 (primary goal in contract interpretation is to ascertain parties' intent)
- 4105 1st Ave. S. Invs., LLC v. Green Depot WA Pac. Coast, LLC, 179 Wn. App. 777 (lease interpretation principles)
- Lenci v. Owner, 30 Wn. App. 800 (equitable relief denied where tenant consistently defaulted)
- Recreational Equip., Inc. v. World Wrapps Nw., Inc., 165 Wn. App. 553 (trial court's equitable discretion standard)