Gibbons Ranches, L. L.C. v. Bailey
| Decision Date | 23 January 2015 |
| Docket Number | S–14–110,Nos. S–14–109,s. S–14–109 |
| Citation | 857 N.W.2d 808 |
| Parties | Gibbons Ranches, L.L.C., appellant, v. Joel D. Bailey and Jaimee Bailey, husband and wife, appellees. Gibbons Ranches, L.L.C., appellant, v. Circle B Farms, Inc., doing business as a Nebraska corporation, and Tom Bailey, appellees. |
| Court | Nebraska Supreme Court |
Bradley D. Holbrook, Kearney, and Nicholas A. Buda, of Jacobsen, Orr, Lindstrom & Holbrook, P.C., L.L.O., for appellant.
Christopher P. Wickham, Broken Bow, of Sennett, Duncan, Jenkins & Wickham, P.C., L.L.O., for appellees.
3. Contracts: Parties: Intent.To create a contract, there must be both an offer and an acceptance; there must also be a meeting of the minds or a binding mutual understanding between the parties to the contract.
4. Contracts: Parties: Intent.A contract is not formed if the parties contemplate that something remains to be done to establish contractual arrangements or if elements are left for future arrangement.
5. Contracts: Parties.When an agreement stipulates that certain terms shall be settled later by the parties, such terms do not become binding unless and until they are settled by later agreement.
6. Contracts: Parties.A fundamental and indispensable basis of any enforceable agreement is that there be a meeting of the minds of the parties as to the essential terms and conditions of the proposed contract.
7. Statute of Frauds: Contracts: Evidence.The written evidence required by the statute of frauds must contain the essential terms of the contract.
8. Leases.When an express lease agreement contemplates the payment of rent in money, the amount of rent is an essential term of the agreement.
9. Leases.Because rent is an essential term in a lease agreement, an agreement to agree on it in the future is not enforceable.
10. Contracts.In interpreting a contract, a court must first determine, as a matter of law, whether the contract is ambiguous.
11. Contracts: Words and Phrases.A contract is ambiguous when a word, phrase, or provision in the contract has, or is susceptible of, at least two reasonable but conflicting interpretations or meanings.
12. Contracts.When the terms of a contract are clear, a court may not resort to rules of construction, and the terms are to be accorded their plain and ordinary meaning as an ordinary or reasonable person would understand them.
13. Contracts.The fact that the parties have suggested opposing meanings of a disputed instrument does not necessarily compel the conclusion that the instrument is ambiguous.
14. Contracts.A contract is viewed as a whole in order to construe it.
15. Parol Evidence: Contracts.The general rule is that unless a contract is ambiguous, parol evidence cannot be used to vary its terms.
16. Contracts: Intent.An unambiguous contract is not subject to interpretation or construction, and in such a contract, the intention of the parties must be determined from its contents alone.
A landlord leased separate properties to different tenants using nearly identical written documents. The parties dispute whether the leases were enforceable for their stated 5–year terms or whether a clause providing for “annual review of rental rates” resulted in unenforceable “agreements to agree.” In the landlord's appeals from declaratory judgments for the tenants, we conclude that the leases unambiguously contemplated only an annual “review” and did not require annual agreement. With a minor modification, we affirm the judgments.
Gibbons Ranches, L.L.C., is a ranching entity in Custer County, Nebraska. For many years, it leased its farm ground to Joel D. Bailey and Jaimee Bailey, husband and wife, and to B Agri–Services, Inc., doing business as Circle B Farms (Circle B). We refer to the Baileys and Circle B collectively as “the tenants.”
On March 7, 2011, Gibbons Ranches and Circle B entered into a 5–year lease agreement retroactive to March 1. Later in
March and April, Gibbons Ranches and the Baileys entered into 5–year lease agreements with the same beginning date as the Circle B lease.
For convenience, we quote from the Circle B lease. We have italicized the numbers which were different from those in the Bailey leases. Otherwise, the language in each lease was identical. With this understanding, the provisions concerning rent stated:
During the winter of 2011–12, Gibbons Ranches and Circle B's president reviewed and negotiated a modification of the rental rates for the 2012 crop year. The Baileys agreed to the same new rates and signed a new lease in April 2012 which reflected the new rental amount. A new lease with the modified rental rates for irrigated acres and for dryland acres was prepared for Circle B, but Circle B's president refused to sign it. Despite the absence of a revised lease for Circle B, all of the tenants paid rent in accordance with the new rates.
The parties did not reach an agreement on rental rates for the 2013 crop year. The tenants submitted checks based on the 2012 rental rates and proceeded to farm Gibbons Ranches' land.
In June 2013, Gibbons Ranches sued the tenants in separate actions. In the complaints, Gibbons Ranches sought, among other things, a declaratory judgment to determine its rights under the leases, including the rental rates and terms for the 2013 crop year. Gibbons Ranches alleged that the tenants refused to negotiate in good faith the terms of the leases for the 2013 crop year and that the tenants farmed its ground for the 2013 crop year at rental rates that were less than what was fair and reasonable. The tenants alleged in their respective answers that Gibbons Ranches' rights, status, and legal relations were sufficiently stated in the leases.
After a consolidated trial, the district court entered a declaratory judgment in each case. The court found that the leases were valid and enforceable agreements through 2015. The court determined that the tenants were not under an obligation to agree to alter the terms, that the leases were unambiguous, and that the parol evidence rule applied to exclude extrinsic evidence from being considered to interpret the parties' respective rights and obligations under the leases.
Gibbons Ranches moved for a new trial in each case, and the district court overruled the motions. Gibbons Ranches timely appealed, and we moved the cases to our docket under our statutory authority to regulate the caseloads of the appellate courts of this state.1 The cases were consolidated for briefing, argument, and disposition.
Gibbons Ranches assigns that the district court erred in (1) determining that the leases were valid and enforceable through 2015; (2) determining that the leases were unambiguous as
a matter of law; (3) determining that the parol evidence rule applied to exclude extrinsic evidence to interpret the parties' intent in entering into the leases, including the annual review provision; (4) failing to determine the parties' respective rights and duties under the leases, including the amount of fair and reasonable rent to be paid by the tenants to Gibbons Ranches for the 2013 crop year and who had the right to retain possession of the roughage; and (5) overruling Gibbons Ranches' motions for new trial.
The interpretation of a lease is a question of law that an appellate court decides independently of the district court.2
An appellate court reviews a denial of a motion for new trial for an abuse of discretion.3
The central issue on appeal is whether the leases were valid if the parties did not agree to a rental rate after the second year. The district court determined that the leases were valid and enforceable through 2015. But Gibbons Ranches asserts that the leases were not valid, because they did not include the amount of rent to be paid after the second year or a method by which to definitively calculate it.
The law regarding contractual agreements, such as a lease, is well established. To create a contract, there must be both an offer and an acceptance; there must also be a meeting of the minds or a binding mutual understanding between the parties to the contract.4 A contract is not formed if the parties contemplate that something remains to be done to
establish contractual arrangements or if elements are left for future arrangement.5 When an agreement stipulates that certain terms shall be settled later by...
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