Van Sloun v. Agans Bros., Inc.

• Decision Date: 05 February 2010
• Docket Number: No. 07-1852.,07-1852.
• Citation: 778 N.W.2d 174
• Parties: Bill VAN SLOUN d/b/a Superior Staffing, Appellant, v. AGANS BROTHERS, INC., Appellee.
• Court: Iowa Supreme Court

778 N.W.2d 174

Bill VAN SLOUN d/b/a Superior Staffing, Appellant, v. AGANS BROTHERS, INC., Appellee.

No. 07-1852.

Supreme Court of Iowa.

February 5, 2010.

N. Tre' Critelli of Nicholas Critelli, P.C., Des Moines, for appellant.

Douglas A. Fulton of Brick Gentry P.C., West Des Moines, for appellee.

BAKER, Justice.

This case arises from a dispute between former tenant, Superior Staffing, and landlord, Agans Brothers, Inc., over the refusal of Agans Brothers to approve a subtenancy. Superior Staffing challenges the district court's findings in a declaratory judgment action that Agans Brothers did not unreasonably withhold consent to a subtenancy. Superior Staffing claims the district court's findings of fact are not supported by substantial evidence, the court incorrectly applied the law, and the court erred in awarding Agans Brothers attorney fees.

We hold sufficient evidence exists in the record to support the district court's finding that Agans Brothers reasonably withheld its consent to the sublease and the district court applied the correct legal standard. We, therefore, affirm the district court's findings on those issues. Because we hold that Agans Brothers' failure to file an affidavit was waived, we affirm the district court's award of attorneys fees for the district court proceedings; however, we hold that Agans Brothers' failure to file an affidavit precludes the award of attorney fees on appeal.

I. Background Facts and Proceedings.

On December 5, 1997, Superior Staffing entered into a written commercial lease with landlord West University Center. This lease contained the following provision:

9. ASSIGNMENT AND SUBLETTING. Any assignment of this lease or subletting of the premises or any part thereof, without the Landlord's written permission shall, at the option of the Landlord, make the rental for the balance of the lease term due and payable at once. Such written permission shall not be unreasonably withheld.

Agans Brothers took over the lease as landlord. In August 2002, Superior Staffing and Agans Brothers entered into an addendum to the original commercial lease. Under this agreement, the lease term was extended to July 31, 2007. This addendum was signed by Bill Van Sloun, on behalf of Superior Staffing, and John Agans, on behalf of Agans Brothers. The record demonstrates Van Sloun had a good working relationship with the owners of Agans Brothers.

In April 2005, Van Sloun informed Agans Brothers of his intent to purchase office space and to sublet the premises he was renting. Van Sloun understood that Agans Brothers had to consent in writing to any sublease. He further understood that, while Agans Brothers could not unreasonably withhold consent, valid reasons for refusing consent could exist.

After several months of futile efforts to obtain a new tenant, in October 2005, Van Sloun met with Madhuri Sadhu to discuss the possibility of her subletting the premises. Sadhu wanted to run an Indian grocery store on the premises that would involve preparation of some snack foods. The food preparation would require altering the premises to install kitchen equipment. The two discussed rental price for the space, and, as a result of that discussion, Van Sloun understood he would need to pay Agans Brothers $175 per month in rental payments during the remaining term of the sublease, which he was willing to do.

Van Sloun met with John Agans to discuss the sublease. Van Sloun testified that Agans indicated he would consent to the sublease but needed more information. A few days after his conversation with John Agans, Van Sloun spoke to Sadhu. She stated that Agans was not willing to rent her the space but recommended she consider renting a different property owned by Agans Brothers. Sadhu eventually leased the property recommended by Agans Brothers.

About a month after Agans Brothers refused its consent to the sublease, Superior Staffing relinquished the space to Agans Brothers and moved into the space it purchased. Superior Staffing ceased paying rent to Agans Brothers at that time. Agans Brothers continued to look for a new tenant, but, like Superior Staffing, had a difficult time finding a new tenant. Agans Brothers was not able to find a replacement tenant until March 2007.

Superior Staffing filed a declaratory judgment petition seeking a determination that its obligations under the lease were discharged because Agans Brothers unreasonably withheld its consent to the sublease. Agans Brothers counterclaimed seeking contract damages for Superior Staffing's failure to pay rent and attorney fees.

After a bench trial, the district court found that Agans Brothers' consent was reasonably withheld. Both parties filed posttrial motions, and the district court subsequently issued a ruling that modified its initial ruling. Among the issues addressed in the posttrial motions was Superior Staffing's contention that Agans had found a new tenant to rent the premises five months before the leasehold period ended. In response, the district court reduced Agans Brothers' damage award by the amount of rent for this five-month period, awarding $28,031.25 in damages. The ruling was also modified to award Agans Brothers $12,046.58 in attorney fees. Prior to requesting attorney fees, Agans Brothers did not file an affidavit as required under Iowa Code section 625.24. Iowa Code § 625.24 (2007). Superior Staffing appealed.

II. Reasonableness of Withholding Consent.

A. Standard of Review. The parties disagree on the standard of review. Superior Staffing filed the case as a declaratory judgment action. The court's review of a declaratory judgment action depends upon how the action was tried to the district court. Passehl Estate v. Passehl, 712 N.W.2d 408, 414 (Iowa 2006). "To determine the proper standard of review, we consider the `pleadings, relief sought, and nature of the case [to] determine whether a declaratory judgment action is legal or equitable.'" Id. (quoting Nelson v. Agro Globe Eng'g, Inc., 578 N.W.2d 659, 661 (Iowa 1998)). "Where there is uncertainty, a litmus test we have applied is whether evidentiary objections were ruled on by trial court." Citizens Sav. Bank v. Sac City State Bank, 315 N.W.2d 20, 24 (Iowa 1982); accord Passehl, 712 N.W.2d at 414. If so, the action is one in law. Passehl, 712 N.W.2d at 414 n. 6; Stanley v. Fitzgerald, 580 N.W.2d 742, 744 (Iowa 1998). Another indication that the action is a legal one is the parties' filing of motions normally made in legal actions. See Citizens Sav. Bank, 315 N.W.2d at 24. Further, a trial court generally issues a "decree" in an equitable action and a "judgment" in a legal action. See id.

It is not significant that the action was brought as a declaratory judgment action. See Passehl, 712 N.W.2d at 414. The relief requested by Superior Staffing was a court declaration that its obligations under the lease agreement with Agans Brothers were discharged by Agans Brothers' breach. Agans Brothers brought a counterclaim for contract damages based on Superior Staffing's breach of the lease.

"Generally, an action on contract is treated as one at law." Atlantic Veneer Corp. v. Sears, 232 N.W.2d 499, 502 (Iowa 1975). Where the basic rights of the parties derive from the nonperformance of a contract, where the remedy is monetary, and where the damages are "full and certain, remedies are usually provided by actions at law, and equity has no jurisdiction." Berry Seed Co. v. Hutchings, 247 Iowa 417, 422, 74 N.W.2d 233, 237 (1956). "If ... both legal relief and equitable relief are demanded, the action is ordinarily classified according to what appears to be its primary purpose or its controlling issue." Mosebach v. Blythe, 282 N.W.2d 755, 758 (Iowa Ct.App.1979).

The essential character of both Superior Staffing's petition and Agans Brothers' counterclaim involved breach of contract claims. The controlling issue below was which party breached the contract. At trial, the court ruled on objections. In addition, the court issued a ruling and judgment entry, not a decree.

In view of these factors, we find that the case was tried at law, and the scope of review is for errors at law. Iowa R.App. P. 6.907 (2009); Johnson v. Kaster, 637 N.W.2d 174, 177 (Iowa 2001). Under this standard of review, the trial court's findings carry the force of a special verdict and are binding if supported by substantial evidence. Johnson, 637 N.W.2d at 177. We are not, however, bound by the trial court's legal conclusions. Am. Family Mut. Ins. Co. v. Petersen, 679 N.W.2d 571, 575 (Iowa 2004).

B. Legal Standards. "Because leases are contracts as well as conveyances of property, ordinary contract principles apply." Walsh v. Nelson, 622 N.W.2d 499, 503 (Iowa 2001). We first look to see what the lease provides. The lease provides that an assignment of the lease or sublet of the premises "shall not be unreasonably withheld." "Where, as here, the dispute centers on the meaning of certain lease terms, we engage in the process of interpretation, rather than construction." Id. (citing Fausel v. JRJ Enters., 603 N.W.2d 612, 618 (Iowa 1999) (holding interpretation is a process of determining meaning of contract terms while construction is a process of determining legal effect of such terms)). "Our goal in interpreting a lease is to ascertain the meaning and intention of the parties." Petty v. Faith Bible Christian Outreach Ctr., Inc., 584 N.W.2d 303, 306 (Iowa 1998).

The clause "shall not be unreasonably withheld" is not ambiguous. "If the court finds that no ambiguity exists, contract interpretation and its legal effect are questions of law for the court." Pillsbury Co. v. Wells Dairy, Inc., 752 N.W.2d 430, 439 (Iowa 2008). We have not previously addressed the issue of reasonableness in a lease provision. In assessing the reasonableness of Agans Brothers' refusal, the district court applied a reasonably prudent person standard, relying on List v. Dahnke, 638 P.2d 824, 825 (Colo.Ct.App. 1981),...