Air Host Cedar Rapids, Inc. v. Cedar Rapids Airport Com'n, 89-925

• Decision Date: 19 December 1990
• Docket Number: No. 89-925,89-925
• Parties: AIR HOST CEDAR RAPIDS, INC., Appellee, v. CEDAR RAPIDS AIRPORT COMMISSION, Appellant.
• Court: Iowa Supreme Court

Page 450

464 N.W.2d 450

AIR HOST CEDAR RAPIDS, INC., Appellee, v. CEDAR RAPIDS AIRPORT COMMISSION, Appellant.

No. 89-925.

Supreme Court of Iowa.

Dec. 19, 1990.

Rehearing Denied Jan. 24, 1991.

Robert G. Allbee and Ivan T. Webber of Ahlers, Cooney, Dorweiler, Haynie, Smith & Allbee, Des Moines, and Robert R. Stefani, Frank S. Mitvalsky, and Thomas F. Ochs of Gray, Stefani & Mitvalsky, Cedar Rapids, for appellant.

Patrick M. Roby, Kevin H. Collins, and Kellee J. Britt of Shuttleworth & Ingersoll, P.C., Cedar Rapids, for appellee.

Considered en banc.

HARRIS, Justice.

This baffling case involves tangled questions of liability, damages, and error preservation. Defendant, Cedar Rapids airport commission, brought this appeal following a plaintiff's verdict for a former concessionaire at the Cedar Rapids airport. The concessionaire claimed both breach of contract and fraudulent representation. We conclude that the breach of contract claim is not viable, but that the fraudulent misrepresentation claim is. We affirm in part and reverse in part.

While planning a new airport terminal, the commission solicited concessionaires for the existing one. It was expected that the concessionaire selected would provide services for the existing terminal, participate in designing space for the new terminal, and continue serving in the new one. Plaintiff Air Host was selected and signed a written lease.

Air Host negotiated for the lease only because of the expectation by all parties that the successful concessionaire would be the likely concessionaire for the new terminal. The lease as signed did not however bear out the expectation. The lease contained two provisions which are crucial to the issues on appeal. They state:

Section 3.03--New Airport Terminal Building--In the event the Commission should construct the new Airport Terminal Building within the term provided herein, Company shall have the first right to lease space in the new Terminal for the purpose of providing the same services as provided herein, and that this lease shall terminate on the existing building at such time as Commission terminates occupancy of the building. However, the terms and conditions of such lease and license shall be as mutually agreed.

Section 7.06--Expenses Incurred by Company Regarding the New Airport Terminal--Company has and will incur expenses regarding the planning of the New Airport Terminal. If Company does not obtain leased premises in said New Airport Terminal, or is otherwise not allowed to provide services in said New Airport Terminal then Commission agrees to reimburse Company for all incurred expenses which are documented and do not exceed $20,000 without the written consent of the Commission.

After Air Host began operating in the existing terminal it participated in planning and designing the concession space for the new one. Air Host also began negotiating with the commission for a new lease in the facility. By this time the airport had new commissioners who hired a new director. The new officials had not been involved in the original negotiations with Air Host and took a belligerent view toward Air Host's expectations to continue in the new facility.

Evidence on the question is sharply conflicting, but it easily supports the jury finding that the new airport director determined that Air Host would not, under any circumstances, be awarded the new contract and that it would go to some rival concessionaire. He in fact advised the rivals to this effect, even though the notice soliciting bids stated that Air Host held a "first right" to provide services in the new facility.

On two occasions Air Host offered to meet the terms of the best bid solicited by the commission, but each time the commission deferred acting. Air Host thus became convinced that the commission would never accept its bid. The commission eventually made one offer to Air Host. Because it had become convinced of the commission's bad faith, Air Host responded by bringing this suit. The same offer was accepted by Sky Chefs, Inc., another concessionaire. The parties dispute the significance of Air Host's rejection of the one offer.

By special verdicts the jury found Air Host had established liability for both breach of contract and fraudulent misrepresentation. It allowed substantial actual and punitive damages and also found for Air Host on its claim for $20,000 for preparing plans under section 7.06 of the lease.

I. We can summarily deal with two controverted separate damage awards. In submitting the special verdict for punitive damages, the trial court did not have the guidance of our subsequent opinion in Parks v. City of Marshalltown, 440 N.W.2d 377 (Iowa 1989). In Parks, applying Iowa Code section 613A.4(5) (1989), we held that a municipality is not liable for punitive damages. Id. at 379. We are unwilling either to overrule Parks or to carve out an exception in this case because the commission's revenues are not generated by direct taxes in the same manner as other city revenues. The punitive damage award must be set aside.

II. By another special verdict the jury awarded $20,000 under section 7.06 of the lease agreement for planning the new facility. The commission's sole challenge to this award is grounded on the claim that Air Host's expenses were not documented and documentation, it is said, is a condition precedent for liability under the provision. Ample documentation for the claim was produced. The assignment is without merit.

III. The commission claims error in submitting Air Host's breach of contract claim. The claimed breach stands or falls on the meaning of the words "first right to lease" in section 3.03 of the lease agreement. The commission insists Air Host was accorded all rights it could possibly claim under the provision when it was offered and rejected the lease which was thereafter accepted by Sky Chefs.

The effect of Air Host's rejection of this offer becomes moot as it relates to the breach of contract claim because, as later explained, we find that claim to be not viable. As it relates to the false representation claim, to be discussed later, we think the rejection could not operate to bar Air Host's recovery.

The commission argues the words "first right to lease" are undermined by crucial language at the end of section 3.03: "However, the terms and conditions of such lease and license shall be as mutually agreed." This language, the commission contends, renders the entire provision an invalid agreement to agree.

Air Host contends the provision is no mere agreement to agree. It supports its contention by evidence that neither party treated it as such, that both considered it to be, and acted as if it were, a valid and binding option. Such evidence of the parties is admissible to interpret but not to vary the agreement under Hamilton v. Wosepka, 261 Iowa 299, 306-13, 154 N.W.2d 164, 168-72 (1967).

It is axiomatic that understandable or ascertainable terms are necessary ingredients for an enforceable contract. A contract generally is not found to exist where the parties agree to a contract on the basis to be settled in the future. See generally 17 C.J.S. Contracts § 49, at 702-03 (1963); 17 Am.Jur.2d Contracts § 26, at 362 (1964).

The principle has particular application as between landlord and tenant. It is said that "clauses in leases containing renewal covenants leaving renewal rental for the future agreement of the parties are generally held unenforceable for indefiniteness and uncertainty." 1 Williston on Contracts § 45 (3d ed. 1977).

We have applied this rubric in determining whether a lease exists. McCarter...