WERTHEIM, Associate Judge:
In this action between a commercial landlord and its trade association tenant, the landlord appeals from a mandatory injunction requiring specific performance of the landlord's obligation to consent to a sublease. The dispute centers on the tenant's right to exercise an option to lease additional space and then sublet all the additional space to a third party at a rate double that payable under the prime lease. Relying upon a clause in the lease permitting subletting only with the landlord's consent, which may not "unreasonably" be withheld, the landlord contends that the lease's option and subleasing provisions were not intended to permit the tenant to enter into the real estate business in competition with the landlord by "flipping" the option and subleasing for economic gain in this manner. It is undisputed that the subtenant was otherwise unobjectionable and that the landlord was itself prepared to offer the same space to the same subtenant at the higher rate. Errors are asserted in the trial court's construction of the lease, in its consideration of parol evidence of the parties' intentions, in the admission of evidence of a pre-litigation offer by the landlord to split the sublease profit with the tenant, and in the grant of equitable relief without an adequate showing of irreparable injury. We affirm.
In the fall of 1977, appellee Grocery Manufacturers of America, Inc. (GMA), a national trade association, was seeking new quarters for its District of Columbia offices. At that time GMA occupied 7,800 square feet at 1425 K Street, N.W., but desired about 10,000 square feet to meet both its current needs and the need for additional space for future growth and expansion. The local supply of available commercial space then exceeded demand, creating a "soft" real estate market. Among the buildings with substantial space available was the Waterfront Center at 1010
The eighth floor of the Waterfront Center contained about 16,000 square feet. GMA proposed to lease, for an initial term of ten years with a renewal term of an additional five years, 12,000 square feet of the eighth floor with options to take the remaining space on that floor in two segments of 2,000 square feet each at the end of the fourth and seventh years.
GMA agreed to this, and the lease was executed accordingly on November 29, 1977, providing for annual rental payments of $12 per square foot for the initial 12,000 square feet of space.
The subleasing clause, contained in a printed lease form furnished by the landlord, provided in Paragraph 5 that GMA could sublet or assign "the demised premises or any part thereof" only with the prior written consent of the landlord, "which consent shall not be unreasonably withheld." Paragraph 32 of the lease reflected GMA's concern for the quality not only of
There is no dispute that the option granted by Paragraph 30 of the lease was exercised by GMA in a timely manner in February 1981, and that proper notice was given to appellants Potomac and Safer, who by then had succeeded to the landlord's interest. Both before and after exercising its option, GMA sought unsuccessfully to find a subtenant for part of the option space for a two- to three-year period and for that purpose showed the additional space with Potomac's consent to several prospective subtenants, including appellee (intervenor below) Seymour, Seefried & Hoffman, Chartered (Seymour), a law firm specializing in antitrust litigation. Seymour concluded that it needed all of the option space for its business operations and that it desired a long-term lease for the entire remaining six and one-half years of GMA's initial lease term, due to the substantial investment required on Seymour's part in fixturing the premises.
GMA and Seymour then negotiated, and on June 11, 1981, GMA submitted to Potomac for its consent, a sublease of the entire 4,000 square feet of GMA's option space commencing November 1, 1981, for the balance of GMA's initial term at an annual sublease rental of $24 per square foot. In reliance upon the sublease, Seymour negotiated the termination of its current office lease effective October 31, 1981, and began steps to prepare the option space at the Waterfront Center for its occupancy.
Within a few weeks Potomac's attorney, at a meeting with GMA's general counsel, advised GMA that Potomac and Safer were willing to consent to the sublease only if GMA would split with them the differential in rent due under the prime lease and the sublease. When GMA declined this offer, Potomac and Safer by letter dated August 6, 1981, refused to consent to the proposed sublease and asserted that GMA's option under Paragraph 30 was limited to GMA itself "expanding" into, rather than subletting, the additional space. However, appellants then stated their intention to offer the same space to Seymour on the same terms and conditions as GMA had offered.
GMA thereupon commenced this action seeking a declaratory judgment, specific performance, and preliminary and permanent injunctive relief. Seymour was granted leave to intervene as a party plaintiff. After a hearing, the trial court denied GMA's application for a temporary restraining order, and thereafter it ordered the trial on the merits to be advanced and consolidated with the hearing on appellee's motion for preliminary injunction. The evidence at trial included testimony of GMA's officers and brokers who participated in the 1977 lease negotiations and that of appellant Safer, who freely acknowledged that the sole basis for appellants' withholding of consent to the sublease was "essentially economic in nature."
Judge Revercomb found the lease terms to be unambiguous and the phrase "option to expand" in Paragraph 30 to mean an option to expand the demised premises subject to the lease rather than, as Potomac and Safer contended, an option only to expand GMA's own business operations into the additional space. Reasoning that the sublease fully protected the landlord's bargain under the prime lease and that Potomac and Safer were not entitled to improve upon that bargain, Judge Revercomb concluded that unstated economic conditions cannot be used by the landlord as a basis for withholding consent to an otherwise valid sublease. The trial court therefore
Appellants (referred to jointly as "landlord") contend that the lease did not entitle GMA to exercise its option for additional space and then immediately to sublet the entire option space for the balance of GMA's initial lease term to a third party for profit, and that the landlord therefore did not act unreasonably in withholding consent to the sublease to Seymour. The landlord asserts that the trial court's contrary conclusion was based on an erroneous factual finding as to the intent of the parties to the lease. However, the trial court made no such factual finding; as the landlord concedes, the trial court found no ambiguity in the lease. It is clear that the landlord's disagreement is not with any finding of fact but rather with the trial court's interpretation of the lease as a matter of law.
Since the interpretation of an integrated contract is a question of law unless it depends on the credibility of extrinsic evidence or on a choice among reasonable inferences to be drawn from extrinsic evidence, International Brotherhood of Painters v. Hartford Accident & Indemnity Co., 388 A.2d 36, 43 (D.C.1978); 1901 Wyoming Avenue Cooperative Ass'n v. Lee, supra note 6, 345 A.2d at 461 n. 8; RESTATEMENT (SECOND) OF CONTRACTS § 212(2) (1981), and no party contends that interpretation is so dependent in this case, we review the trial court's construction of the lease to determine whether it was erroneous.
The first step in contract interpretation is determining what a reasonable person in the position of the parties would have thought the disputed language meant. Intercounty Construction Corp. v. District of Columbia, 443 A.2d 29, 32 (D.C. 1982). The meaning must be ascertained in light of all the circumstances surrounding the parties at the time the contract was made. Id.; RESTATEMENT (SECOND) OF CONTRACTS §§ 202(1), 212(1) (1981). The writing must be interpreted as a whole, giving a reasonable, lawful, and effective meaning to all its terms. Vicki Bagley Realty, Inc. v. Laufer, 482 A.2d 359, at 366 (D.C.1984); Davis v. Davis, 471 A.2d 1008, 1009 (D.C. 1984); RESTATEMENT (SECOND) OF CONTRACTS §§ 202(2), 203(a) (1981). If the document is facially unambiguous, its language should be relied upon as providing the best objective manifestation of the parties' intent. Bolling Federal Credit Union v. Cumis Insurance Society, Inc., 475 A.2d 382, 385 (D.C.1984). Extrinsic evidence of the parties' subjective intent may be resorted to only if the document is ambiguous. Id.; Davis v. Davis, supra, 471 A.2d at 1009. However, extrinsic evidence may be considered to determine the circumstances surrounding
According to the landlord, Paragraph 30 of the lease, in granting GMA an option to lease the balance of the eighth floor, was intended only, or at least primarily, to enable GMA to utilize that additional space for expansion of GMA's own business operations. Although no such limitation was expressed in the terms of the lease itself, which conditioned the option only on the requirement that the lease not be in default at the time the option is exercised, the landlord relies for this interpretation on the phrase "said option to expand," which appears in the final sentence of Paragraph 30 (as set forth in the margin at note 5, supra). This phrase, it is contended, imports a qualification on the option itself, denoting that the option was intended only for expansion of GMA's own operations.
Looking first to the express terms of the contract itself, we find nothing in the lease to support the meaning which the landlord attributes to the phrase "said option to expand." The term "said" in that phrase indisputably refers to the option terms more fully set forth in the immediately preceding paragraph of Paragraph 30, where the option is particularly described as an "option to lease the balance of the Eighth floor consisting of approximately 3,970 square feet," and is made subject only to the proviso that GMA not be in default. The landlord's effort to graft the second paragraph's shorthand phrase "option to expand" onto the first paragraph's more complete description of the option, as an otherwise unexpressed condition of that option, would produce a strained and obscure reading of that phrase. Since all of Paragraph 30 is identified in the left margin of the lease's first page as an Addendum to Paragraph 1 describing the "Premises," and Paragraph 30 itself refers to the option space as "the expansion area" in the sentence immediately preceding the phrase "said option to expand," we think the trial court was plainly correct in interpreting the phrase "option to expand" as an option
This conclusion becomes all the more compelling when the remaining terms of the lease are taken into account, as they must be in construing the lease as a whole. If the "expansion area" referred to in Paragraph 30 is not descriptive of the demised premises which are subject to all of the general lease provisions, including the broad subleasing authority of Paragraph 5, then uncertainty would be introduced as to the applicability to that area of numerous other general provisions such as "Use of the Premises" (Paragraph 3),
Absent any language in the lease itself which limits any sublease to a specific time period, business purpose, or portion of the demised premises, the landlord's interpretation would leave the rights of GMA and its subtenants too uncertain to be predictable with any reasonable degree of business security. An interpretation of the lease that so imperiled the security of commercial transactions dependent on it would not give reasonable and effective meaning to all the lease terms. See Vicki Bagley Realty, Inc. v. Laufer, supra, at 366. Not only does the lease contain no language warranting such an interpretation, but none of the circumstances surrounding its execution suggest that any such ill-defined restriction on GMA's subleasing authority was contemplated by either party.
The landlord's reliance on Gilbert v. Van Kleeck, 284 App.Div. 611, 132 N.Y.S.2d 580, motion to modify denied, 284 App. Div. 857, 134 N.Y.S.2d 193 (1954), is misplaced. In that case a lease giving the tenant a right of first refusal to purchase both the demised premises and the entire
We have no doubt that the trial court was correct in concluding that the option clause unambiguously entitled GMA to expand the demised premises and to utilize all or any part of those premises for any purpose permitted by the remaining provisions of the lease, and that the subleasing clause qualified GMA's right to sublet only by the requirement of the landlord's consent, which was not to be unreasonably withheld. Nothing in the lease prohibited GMA from exercising those contract rights as it did here. The landlord's contrary assertion is not a reasonable interpretation of the lease.
Having concluded that the lease itself did not prohibit GMA's sublease to Seymour, we next consider whether the trial court erred in determining that the landlord breached its lease obligation not to act "unreasonably" in refusing to consent to the sublease.
The trial court found that the landlord's refusal was based on economic considerations, i.e., the landlord's desire to improve upon the rental bargain negotiated in the prime lease so as to share in the benefits of the substantially increased market value of the premises. This finding is amply supported by the evidence. During the months preceding GMA's submission of the proposed sublease to the landlord in June 1981, the landlord was on notice that GMA contemplated a sublease of the option space
The question of whether a landlord's consent to a sublease may reasonably be withheld for economic advantage has apparently not been considered previously in this jurisdiction. However, the other jurisdictions of which we are aware that have addressed a similar question
The landlord argues that its offer to split the sublease rent differential was irrelevant.
The landlord also seeks to distinguish Ringwood Associates, Ltd. v. Jack's of Route 23, Inc., supra, on the theory that the tenant in that case had outgrown the premises and thus risked forfeiting the lease if not allowed to sublet, whereas GMA had no obligation to exercise its option for additional space which it did not need. However, GMA had already obligated itself for the option space by notice to the landlord before it proposed the sublease to Seymour. Had GMA not timely exercised its option to acquire the entire expansion area at the end of the third lease year, pursuant to the option clause demanded by the landlord's predecessor in interest in the original lease negotiations (despite GMA's preference for staggered options at the end of the fourth and seventh lease years),
We agree with the California and New Jersey courts in Bedford Investment
The landlord here was assured of the benefits of all the provisions of GMA's lease.
At varying times throughout the trial, the landlord objected to, or moved to strike, testimony of GMA's officers and brokers as to the course of the negotiations between GMA and the landlord's predecessor in interest prior to and surrounding the execution of the lease. The landlord characterized such testimony as parol evidence, arguing that it was inadmissible unless the lease terms were found ambiguous. At the conclusion of the trial, the trial court found that there was no ambiguity in the lease but denied the landlord's renewed motion to strike the testimony, ruling that the evidence was admissible not to show the parties' subjective intent but to illuminate the circumstances surrounding the negotiations.
Despite its name, the parol evidence rule is not a rule of evidence but a rule of substantive law defining the subject matter of interpretation. RESTATEMENT (SECOND) OF CONTRACTS § 213 comment a (1981). Its purpose is to promote the stability of transactions by preventing disgruntled parties from avoiding obligations by alleging oral understandings that conflict with their written agreements when those agreements were reduced to writing in order to forestall just such contentions. 2 MORGAN, BASIC PROBLEMS OF EVIDENCE 414 (1961); 4 WILLISTON ON CONTRACTS § 631 at 963 (3d ed. 1961).
While courts have long described the rule as precluding such testimony except when the terms of the written contract are "ambiguous," e.g., Dixon v. Wilson, 192 A.2d 289, 291 (D.C.1963), a finding of no ambiguity may sum up several distinct determinations: that the contract was integrated, that the contract was complete, and that the oral term is inconsistent with the written agreement, is within its scope, does not bear on its interpretation, and would not naturally be omitted from the writing. RESTATEMENT (SECOND) OF CONTRACTS, Introductory Note to Chapter 9, at
However, the testimony which the landlord sought to strike was not evidence of any oral understanding in conflict with the written lease. Nor was it evidence of any oral statements by the parties of what they intended the words of the lease to mean.
Appellants' remaining contentions merit only brief discussion.
The landlord asserts that its June 1981 offer to split the sublease rent differential with GMA was inadmissible as an offer to compromise. But the landlord made no objection when the evidence was presented, and appellant Safer then testified himself that the offer was indeed made with his approval. The landlord thus waived the protection of the exclusionary rule, if otherwise available, Joyner v. Jonathan Woodner Co., 479 A.2d 308, 312 n. 5 (D.C.1984), and also failed to preserve the issue for appeal. Moreover, the offer was made before any controversy had arisen, two months before GMA initiated this action, and for that reason was not within the exclusionary rule. Id.; Crain v. Allison, 443 A.2d 558, 565 (D.C.1982). In addition, in Auxier v. Kraisel, 466 A.2d 416, 419-420 (D.C.1983), we held that when evidence of a settlement offer is introduced not as an admission of liability or to establish the amount of damages in the instant action, the traditional rule of inadmissibility is inapplicable. Here, the landlord's offer was admissible to show the reason for its refusal to consent to the sublease, see text at note 15, supra, and hence was not subject to the exclusionary rule.
Lastly, the landlord contends that the harm to Seymour from the landlord's withholding consent to the sublease was wholly compensable by money damages and, in any event, would result only
While it is true that the immediate source of harm to Seymour would be GMA's failure to perform its sublease obligations to Seymour, rather than breach of any direct obligation of the landlord to Seymour, a court of equity need not be blind to the realities of the situation. Seymour would be entitled to specific performance from GMA, and GMA would be entitled to specific performance from the landlord with respect to the identical sublease agreement. Since Seymour was a party intervenor as of right in this action, Super. Ct.Civ.R. 24(a), Seymour had the same right to complete and effective equitable relief that GMA had. See Ross v. Bernhard, 396 U.S. 531, 541 n. 15, 90 S.Ct. 733, 740 n. 15, 24 L.Ed.2d 729 (1970); Marcaida v. Rascoe, 569 F.2d 828, 831 (5th Cir.1978); In re Raabe, Glissman & Co., 71 F.Supp. 678, 680 (S.D.N.Y.1947). But see Kirkland v. New York State Department of Correctional Services, 711 F.2d 1117, 1126 (2d Cir.1983), cert. denied, ___ U.S. ___, 104 S.Ct. 997, 79 L.Ed.2d 230 (1984).
The lease term was originally to commence April 1, 1978, but actual commencement was delayed until June 11, 1978.
1901 Wyoming Avenue Cooperative Ass'n v. Lee, 345 A.2d 456, 461 n. 8 (D.C.1975), quoting 4 K. DAVIS, ADMINISTRATIVE LAW TREATISE § 30.02 at 197 (1958). See also RESTATEMENT (SECOND) OF CONTRACTS § 212 comment d (1981).