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Workshops Portland Carson, L.L.C. v. Carson Oil Co., Inc.

United States District Court, D. Oregon, Portland Division

March 24, 2017

WORKSHOPS PORTLAND CARSON, L.L.C., a Washington limited liability company, Plaintiff,
v.
CARSON OIL CO., INC., an Oregon corporation, Defendant.

          OPINION AND ORDER

          ACOSTA, United States Magistrate Judge.

         Plaintiff Workshops Portland Carson, L.L.C. ("Workshops"), brings a claim for breach of commercial lease against Defendant Carson Oil Co., Inc. ("Carson"), to recover damages related to holdover rent and environmental remediation. Carson brings counterclaims for breach of the implied covenant of good faith and fair dealing, and promissory estoppel. Workshops moves for partial summary judgment as to both counterclaims.

         The court held oral argument on February 28, 2017. For the following reasons, Workshops' motion for partial summary judgment as to breach of the implied covenant of good faith and fair dealing (ECF No. 30) is denied, and Workshops' motion for partial summary judgment as to promissory estoppel (ECF No. 35) is granted.

         Background

         Workshops is a Washington limited liability company managed by ActivSpace, LLC. Compl. (ECF No. 1) ¶ 3; Zahniser Dec. (ECF No. 31), Ex. 1, p. 11, 91:5-7. ActivSpace runs facilities that artisans, small builders, and contractors may rent work space to conduct business activities. Zahniser Dec, Ex. 1, p. 3, 7:10-16. Carson is an Oregon corporation that operates a petroleum distribution business in the Portland area. Compl. ¶ 4; Zahniser Dec, Ex. 2, p. 6, 61:3-20. The property at issue ("the Premises") encompasses the entire city block located at SE Eighth Avenue and SE Main Street in Portland. Zahniser Dec, Ex. 1, p. 3, 8:12-17.

         Beginning in 1980, Carson operated a cardlock station on the Premises and dispensed petroleum products to customers and employees. Am. Answer to Compl. (ECF No. 29) ¶ 23;. Zahniser Dec, Ex. 2, p. 6, 61:3-20. In February 1998, Workshops purchased the Premises. Am. Answer to Compl. ¶ 25. As a part of the sale, Workshops leased back to Carson approximately 12, 000 square feet of the property to retain existing petroleum products storage and dispensing facilities. Zahniser Dec, Ex. 2, p. 8, 67:3-9. The remaining portion of the Premises was developed into an ActivSpace facility. Zahniser Dec, Ex, 1, pp. 8-9, 53:16-54:9.

         Carson's rent payment under the 1998 lease started at $3, 500 per month, and annual increases were tied to the consumer price index. Zahniser Dec, Ex. 3, p. 1. The lease was for a ten-year term and granted two five-year options for Carson to extend the initial term. Zahniser Dec, Ex. 3, pp. 1, 8. In late 2007, Carson elected to exercise the first five-year option, extending the term to 2013. Zahniser Deck, Ex. 2, p. 9, 70:7-71:5. In 2013, however, Carson did not timely notify Workshops of its intent to exercise the second five-year option, and the lease terminated. Zahniser Dec, Ex. 2, 71:20-72:20. By March 31, 2013, Carson had become a holdover tenant on a month-to-month lease term. Zahniser Dec, Ex. 3, p. 4. Carson wanted to remain an occupant at the facility for a longer period of time, and after unsuccessfully trying to exercise the second five-year option, the parties entered into negotiations that resulted in the lease at issue in this case. Sramek Dec (ECF No. 34), Ex. A, pp. 8-10; Zahniser Dec, Ex. 2, p. 9, 73:1-23.

         In May 10, 2013, Workshops sent Carson a draft lease, effective April 1, 2013, for a one-year term that would expire March 31, 2014, Sramek Dec, Ex. B. The lease included a rental rate of $4, 750.43 per month. Sramek Dec, Ex. B, p. 3. The draft did not contain an option for Carson to extend the lease beyond the one-year term, and on May 15, 2013, Carson requested that two five-year options be included in the lease. Sramek Dec, Ex. C. In September 2013, Workshops added one five-year option ("the Option") as "Exhibit C" to the draft lease, which reads:

To Commercial Lease Between Workshops Portland Carson, LLC ("Landlord") and Carson Oil Company, Inc. ("Tenant")
Option to Extend:
Provided that Tenant is not in default of the Lease, Tenant shall have one (1) option to extend the Term of the lease for one (1) period of five (5) years (the "Option Period") commencing at the end of the initial one (1) year term. All terms and conditions of the original Lease shall remain unchanged with the exception of rent.
Tenant may exercise this option by notifying Landlord of its intent in writing no later than 90 days prior to the expiration of the initial one (1) year term. Within thirty (30) days after Landlord receives Tenant's written notice of intent, Landlord shall provide Tenant with the rental structure for the Option Period. If Landlord and Tenant are unable to agree upon the rental structure by the 60th day after Landlord receives Tenant's written notice of intent, this option shall expire and will then be deemed null and void.

Zahniser Decl., Ex. 4, p. 22.

         On October 3, 2013, after reviewing the Option, Carson emailed Workshops and asked how rent would be determined. Zahniser ...


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