DeJong v. Sioux Center, Iowa
| Decision Date | 24 February 1999 |
| Docket Number | 97-4015,Nos. 97-3900,s. 97-3900 |
| Citation | 168 F.3d 1115 |
| Parties | James DeJONG, Sr.; James DeJong, Jr., Appellees/Cross-Appellants, v. SIOUX CENTER, IOWA, Appellants/Cross-Appellees, Cotter & Company, Objector. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Michael R. Hellige, Sioux City, IA, argued, for Appellant.
Michael W. Ellwanger, Sioux City, IA, argued, for Appellee.
Before: BEAM and LAY, Circuit Judges, and SIPPEL, 1 District Judge.
James DeJong, Sr. and his son, James DeJong, Jr., leased space and opened a hardware store in a new city-owned shopping center. Although the DeJongs opened their store, the rest of the shopping center remained under construction for the next eight months, resulting in low customer traffic and low sales. The DeJongs lost money and had to close the store. They subsequently sued the city of Sioux Center (the City) for their losses. A jury awarded damages for breach of contract and promissory estoppel. The district court 2 granted judgment as a matter of law to the City on the promissory estoppel claim, but not on the contract claim. The City appeals, claiming that the district court erred in denying its motion for judgment as a matter of law on the contract claim, and the DeJongs cross appeal the court's ruling on the promissory estoppel claim. We affirm.
We relate the facts in a light most favorable to the jury verdict. See Norton v. Caremark, Inc., 20 F.3d 330, 334 (8th Cir.1994). James DeJong, Sr. (James Sr.) had worked in the real estate industry in Lansing, Illinois, for twenty-seven years. His son, James DeJong, Jr. (James Jr.) worked in a hardware store throughout high school, earned a degree in business administration at Dordt College in Sioux Center, Iowa, then joined his father in the real estate business. In late 1989, the DeJongs began to explore the possibility of owning and operating a hardware store. They learned that the DeRuyter hardware store in Sioux Center was for sale. The DeRuyter building was scheduled to be torn down to make room for the parking area of a new mall planned by the City 3 and Mr. DeRuyter was going to retire. The DeJongs offered to buy DeRuyter's inventory and hire his store manager when the business closed.
In 1990, the DeJongs held discussions with the City and the realty company hired to market and negotiate leases for the new mall. They also contacted Cotter & Company, the company that controls the use of the True Value Hardware name. 4 Stan Steinert, the regional retail support representative for True Value, evaluated the market in Sioux Center and determined that it would be suitable for a store. He prepared several reports essentially projected budgets and business plans. These business plans indicated that the DeJongs could expect gross sales of $375,000 in their first year. The plans also indicated the DeJongs would lose approximately $12,000 the first year of operations, less than $700 the second year, and operate in the black from that point on.
As the negotiations between the DeJongs, assisted by True Value, and the City continued, the DeJongs were given a promotional pamphlet stating that the mall would open in the spring of 1991. The DeJongs were also told that the opening date had been set for July 1991. The City sent a lease to the DeJongs and to True Value for their review on behalf of the DeJongs.
In November 1990, the DeJongs learned that DeRuyter had decided not to close his hardware store and sell the inventory to them, but instead sold the business as a going concern to the local Co-op which planned to move the store to a different location and continue operating the hardware business. Because this would result in more competition than they had initially anticipated, the DeJongs decided to call off the deal. On November 21, the mayor of Sioux Center called James Sr. in an effort to get the DeJongs to reconsider. He stated that there was a significant loyalty to downtown merchants, and that the DeJongs should not be concerned about competition from the Co-op, which was on the "wrong side of the tracks." The mayor further stated that the DeRuyter store's sales had been $575,000 in 1988, and that the True Value business plans projecting sales of $375,000 were far too conservative, even with competition from the Co-op. In December, four representatives from the City flew to Lansing to visit the DeJongs at the home of James Sr. They echoed the mayor's statements and belief that, if the DeJongs opened a True Value store in the mall, the sales would easily exceed the $375,000 predicted by True Value. They also restated that the mall was scheduled to be ready for tenants by July of 1991. The discussion then turned to the terms of the lease. James Sr. had a son who would begin his last year of high school in the fall of 1991. Concerned about the impact that changing schools might have on his son, he asked if the start of the lease could be postponed until June 1992. The City responded that postponement would be unacceptable. They had sixty percent of the mall rented and the opening scheduled for September 1. If the DeJongs could not open as originally planned, the City would have to lease the space to another party it had lined up.
The DeJongs consulted Steinert of True Value, who stated that, considering the market demographics, the DeJongs should be able to attain the conservative sales projection of $375,000 even with competition from the Co-op store. The DeJongs signed a standard form lease with the City in February 1991. The lease called for an opening date of "[a]pproximately 1 September 1991." In March, the DeJongs received a newsletter from the mall's leasing agent. It stated that the mall "will be built as one unit with expected grand opening scheduled for approximately October 1, 1991."
After selling two homes and his business, James Sr. moved to Sioux Center with James Jr. and their respective families in late July 1991. On arrival, the DeJongs discovered that the mall would not be completed on time. Although there were walls in place, there were no doors or windows in the mall entrances, and the floors were nothing but dirt. There was no wall or door between the DeJongs' space and the rest of the empty mall, the marquee sign was not built, and aside from twenty-four parking spaces for the hardware store, the parking lot was mostly dirt.
The DeJongs finished the interior of their store and eventually opened on November 6, 1991. There were no other tenants doing business at the time. There remained no doors or windows at the mall entrances and no concrete floors in the corridors. The DeJongs had to construct an entryway and door made of plywood. They had to hang plastic sheets across the entryway between the store and the interior of the mall in order to prevent cold wind and dirt from blowing in from the rest of the mall. The parking lot was unlit as well as unfinished. The buildings that were supposed to have been razed to make room for the mall parking lot were still standing, effectively blocking any view of the mall and the DeJongs' store from the main street in town. These buildings were not demolished until sometime in December 1991. Construction continued slowly. In May and June of 1992, much of the front parking area remained unpaved, scaffolding surrounded the marquee being built, and there were piles of dirt, construction tape and plywood signs along the roads abutting the mall. The mall's grand opening was finally held on July 16, 1992, more than nine months after the planned event.
From the time the DeJongs' store opened, customer traffic and sales were far below expectations. The store lost money every month. In June 1992, the DeJongs decided to liquidate their inventory and close the store. They had been open for less than a year, and rather than being on track to lose the projected $12,000, the store had already lost over $150,000, and James Sr. was deeply in debt.
The DeJongs attribute their business failure and financial losses directly to the fact that the mall was not complete. They sued the City, claiming damages under several theories; fraudulent misrepresentation, negligent misrepresentation, promissory estoppel, and breach of contract. The fraudulent misrepresentation, promissory estoppel, and contract claims were presented to the jury which found for the City on the fraud claim and for the DeJongs on the remaining two claims. The court granted the City's post-trial motion for judgment as a matter of law on the promissory estoppel claim, but denied the motion as to the contract claim. The City appeals, arguing that the court erred when it determined the term "opening date" in the lease was ambiguous, thus allowing the contract claim to reach the jury, and also claims that there is insufficient evidence of damages. The DeJongs cross appeal the court's grant of judgment as a matter of law to the City on the promissory estoppel claim.
The initial section of the lease entitled "Basic Lease Information," contains the essential terms of the contract. It identifies the parties, the mall (known as "The Centre"), the amount of basic annual rent due during different time periods, the amount of percentage rent, and common area charges. The term "Rent Commencement Date" is defined as "Approximately 1 September 1991 or 60 days after Landlord turns building over to tenant for set up." On the next line is the term "Opening Date," which is stated to be "Approximately 1 September 1991." The DeJongs argue that the term "opening date" refers to the opening of the mall, the date the City committed to completing the mall. The City claims that it had no obligation to complete the mall by a certain date, and that the term refers only to the opening of the DeJong's store.
A federal court sitting in diversity jurisdiction applies the law of the forum state, in this case, Iowa. See First Bank of...
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