Johnson Lakes Development, Inc. v. Central Nebraska Public Power & Irrigation Dist.
| Decision Date | 10 April 1998 |
| Docket Number | Nos. S-95-1380,S-95-1388,s. S-95-1380 |
| Citation | 576 N.W.2d 806,254 Neb. 418 |
| Parties | JOHNSON LAKES DEVELOPMENT, INCORPORATED, Appellee, v. CENTRAL NEBRASKA PUBLIC POWER & IRRIGATION DISTRICT, A Political Subdivision and Public Corporation of Nebraska, Appellant. R. Daniel NIEMOTH and Lois M. Niemoth, Appellees and Cross-Appellants, v. CENTRAL NEBRASKA PUBLIC POWER & IRRIGATION DISTRICT, A Political Subdivision and Public Corporation of Nebraska, Appellant and Cross-Appellee. |
| Court | Nebraska Supreme Court |
Syllabus by the Court
1. Contracts: Appeal and Error. The construction of a contract is a matter of law, in connection with which an appellate court has an obligation to reach an independent, correct conclusion irrespective of the determinations made by the court below.
2. Leases: Contracts. A lease agreement is to be construed as any other contract.
3. Contracts. In interpreting a contract, a court must first determine, as a matter of law, whether the contract is ambiguous.
4. 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.
5. Contracts. The determination of whether a contract is ambiguous is to be made on an objective basis, not by the subjective contentions of the parties suggesting opposing meanings of the disputed language.
6. Contracts. The terms of a contract are to be accorded their plain and ordinary meaning as ordinary, average, or reasonable persons would understand them.
7. Contracts. A contract must be construed as a whole, and if possible, effect must be given to every part thereof.
8. Contracts. A party may not pick and choose among the clauses of a contract, accepting only those that advantage it.
9. Contracts: Rescission: Words and Phrases. When used in reference to a contract, the terms "abrogate," "annul," and "cancel" mean to rescind the contract and thereby nullify its existence.
10. Property: Leases. As a general rule, the owner of property is entitled to terminate a lease of that property so long as the termination is accomplished in accordance with the law and in a timely fashion.
11. Contracts: Notice: Equity. When the right to terminate a contract on notice is reserved without any fraud or mistake, but with the actual knowledge and consent of all parties to the agreement, it is as valid in law as any other clause of the instrument; and the courts, when called upon, will enforce it, unless to do so would be manifestly contrary to equity and good conscience.
12. Contracts. An agreement which depends upon the wish, will, or pleasure of one of the parties is illusory and does not constitute an enforceable promise.
13. Contracts. Generally, mutuality of obligation is an essential element of every enforceable contract and consists in the obligation on each party to do, or permit something to be done, in consideration of the act or promise of the other. Mutuality is absent when only one of the contracting parties is bound to perform, and the rights of the parties exist at the option of one only.
14. Contracts. A unilateral power to terminate does not render a contract illusory so long as the party reserving the power to terminate is irrevocably bound for any appreciable period of time or has materially changed any of his legal relations or otherwise rendered some performance capable of operating as consideration.
15. Contracts: Notice. Even a slight restriction on the exercise of the right of termination, such as the requirement that advance notice be given, is sufficient to prevent a unilateral right of termination from being regarded as illusory in nature.
Michael C. Klein and Robert J. McCormick, of Anderson, Klein, Peterson, Swan & Bogle Louthan, Holdrege, for appellant.
Patrick W. Healey, of Healey & Wieland Law Firm, Lincoln, and E. Bruce Smith, Lexington, for appellees.
These cases involve the interpretation of a lease agreement between the Central Nebraska Public Power & Irrigation District (Central) and Johnson Lakes Development Incorporated (JLDI), which was incorporated in subleases between JLDI and various individuals who own cabins situated on the lake-front property owned by Central which is the subject of the lease agreement. In an action commenced in the district court for Dawson County, JLDI obtained an injunction preventing Central from exercising a reserved power of termination contained in the lease agreement (JLDI action). A similar action filed by R. Daniel Niemoth and Lois M. Niemoth was dismissed as moot by virtue of the injunction entered in favor of JLDI (Niemoth action). On appeal, the Nebraska Court of Appeals consolidated the cases and reversed in part the district court's judgments, finding as a matter of law that the power of termination was unambiguous and valid. See Johnson Lakes Dev. v. Central Neb. Pub. Power, 5 Neb.App. 957, 568 N.W.2d 573 (1997). Upon further review, we conclude that the judgment of the Court of Appeals with respect to each case was correct, and we therefore affirm the judgments of the Court of Appeals.
Central is a public corporation and political subdivision of the State of Nebraska. See Neb.Rev.Stat. § 70-601 et seq. (Reissue 1996 & Supp.1997). On July 30, 1937, Central was granted a license by the Federal Power Commission, now known as the Federal Energy Regulatory Commission (FERC), to construct, operate, and maintain project No. 1417, which included dams, reservoirs, canals, power plants, transmission lines, and related improvements along the North Platte and Platte Rivers in several Nebraska counties. The license was issued for a period of 50 years.
On May 1, 1978, Central and JLDI entered into a written lease agreement pertaining to land owned by Central in conjunction with project No. 1417, which borders reservoirs commonly known as Johnson Lake and Plum Creek Lake (Johnson Lakes) in Gosper and Dawson Counties. The following provisions of the lease are pertinent to the issue before us:
WHEREAS, the DISTRICT [Central] desires to provide a new Agreement for a thirty-one (31) year term with automatic renewal extension at the end of the first year and each successive year, resulting in a thirty-one (31) year maximum and a thirty (30) year minimum Agreement ... [.]
....
NOW THEREFORE, in consideration of the mutual covenants, promises and agreements herein contained, the parties do hereby covenant, promise and agree as follows:
(1) The DISTRICT does hereby lease to JLDI for a period of thirty-one (31) years from this date the various properties or lands owned by the DISTRICT....
(2) Said thirty-one (31) year period shall take effect on the date of this Agreement and shall include an automatic renewal period of one (1) year. This renewal period shall take effect at the end of the first year and at the end of each successive year in which the Agreement is in existence, resulting in a thirty-one (31) year maximum term and a thirty (30) year minimum term. Any and all leasing or sub-leasing done by JLDI under this Agreement shall not extend beyond the terms or period of this Agreement.
(3) Within one (1) year from the effective date of this Agreement, JLDI and all sub-lessees shall enter into new agreements based on the thirty/thirty-one (30/31) year period....
(4) Within one-hundred-twenty (120) days from the effective date of this Agreement, JLDI shall furnish all sublessees with copies of this new Agreement between the DISTRICT and JLDI and copies of the revised lease between JLDI and its sublessees.
....
(11) ... Said subleases, leases or agreements shall also provide that the holders thereof shall be bound by all of the terms of this Agreement as herein written and that any violation of these terms and conditions of this Agreement shall be adequate and sufficient grounds for the termination or breach of said sublease, lease or agreement on the part of JLDI.
....
(17) ... All subleases or agreements made in the future by JLDI or any renewals of existing agreements concerning these [Johnson Lakes] properties shall be subject to all of the terms and provisions of this Agreement, as though this Agreement were fully set forth in the same.
....
31) It is understood and agreed by the parties to this Agreement that the powers of the DISTRICT are under limitation and restriction by reason of the Federal Energy Regulatory Commission (formerly Federal Power Commission) license dated July 30, 1937, and expiring fifty (50) years thereafter with the rights as thereon granted and agreed to, and in the event said FERC license is not renewed, that upon the expiration of such license this Agreement shall deliver full and complete possession of all leased areas to the DISTRICT by JLDI.
....
(33) The DISTRICT shall have complete power and authority to cancel or terminate this Agreement at any time it so desires by giving JLDI written notice of such intentions at least six (6) months in advance addressed to JLDI at its last known corporate address....
....
(35) All prior existing agreements between the DISTRICT and JLDI shall be and whereby [sic] are terminated and this Agreement shall be the entire and only Agreement between these parties. This Agreement cannot be changed, modified, abrogated or annulled, except that the same be in writing and signed by the parties hereto, after the officers of the DISTRICT are authorized to do so by the Board of Directors of the DISTRICT.
(Emphasis supplied.) The lease agreement contained no provisions for rent.
JLDI subsequently entered into subleases with individuals, including the Niemoths, who own cabins situated on the lake-front property. The subleases contained the following pertinent provisions:
1. That JLDI has this day leased to TENANT, for cabin lot purposes only ... on a 30 year minimum/31 year maximum,...
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