Court of Appeals of Missouri, Western District, First Division
K.C. AIR CARGO SERVICES, INC., Respondent,
THE CITY OF KANSAS CITY, MISSOURI, Appellant.
from the Circuit Court of Jackson County, Missouri The
Honorable Sandra Midkiff, Judge
James Edward Welsh, P.J., Anthony Rex Gabbert, and Edward R.
Ardini, Jr., JJ.
Edward Welsh, Presiding Judge.
City of Kansas City, Missouri, appeals the circuit
court's grant of summary judgment in favor of K.C. Air
Cargo Services, Inc. (KCACS) and the denial of the City's
cross-motion for summary judgment in a declaratory judgment
action concerning the meaning and validity of a clause in a
lease agreement between the parties for land at Kansas City
International Airport. The circuit court granted KCACS's
motion for summary judgment declaring that the clause in
question gave KCACS the unqualified right to renew the lease
at its election under all circumstances in perpetuity and
that the clause created a definite and enforceable mechanism
for determining the rental rate of the renewal. The circuit
court also awarded KCACS attorneys' fees based upon its
finding of special circumstances.
City asserts four points on appeal. First, it contends that
the circuit court erred in declaring the lease clause to be a
valid and enforceable option to renew because the clause is
void ab initio as beyond the scope of authority of the City.
Second, even if the clause in the lease is a valid option,
the City claims that the circuit court erred as a matter of
law in declaring that the lease gave KCACS a perpetual option
to renew the lease. Third, the City asserts that the circuit
court erroneously declared and misapplied the law in awarding
attorneys' fees to KCACS. Fourth, the City contends that
the circuit court erred in denying the City's
cross-motion for summary judgment because the clause in the
lease was not an option to renew but was a right of first
refusal. We affirm in part and reverse and remand in part.
considering appeals from summary judgments, we view the
record in the light most favorable to the party against whom
judgment was entered, and we afford that party the benefit of
all reasonable inferences. ITT Commercial Fin. Corp. v.
Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo.
banc 1993). The record established that KCACS is a Missouri
corporation and that the City is a municipal corporation.
KCACS and the City are parties to a lease for a tract of real
property owned by the City and located at the Kansas City
International Airport. The original lease was entered into on
June 18, 1986, but has been amended four times: First
Amendment dated September 15, 1987; Second Amendment dated
December 28, 1987; Third Amendment dated December 16, 1994;
and Fourth Amendment dated January 1, 2015. The lease
permitted KCACS to use the leased premises to construct air
cargo facilities, including a building and aircraft apron.
According to the lease, KCACS desired to lease the land to
construct "certain buildings, facilities and
improvements described as the Air Cargo Terminal"
"for use by others."
tenant, KCACS constructed substantial improvements on the
property, including a single-story shipping warehouse
approximately 70, 000 square feet in size and an abutting air
cargo apron approximately 500, 000 square feet in
size. KCACS acts a sub-landlord on the
leasehold, renting warehouse space to subtenants.
forth in the First Amendment to the lease, the base term of
the lease is for 30 years. The lease provides: "The
Lease Term shall commence on October 1, 1987 . . . and shall
run for a period of thirty (30) years." The lease also
provides this clause, which is at issue in this case:
"At the end of the Lease Term, Lessee shall be given the
opportunity to lease the Premises at the then fair market
rental rate or the rental rate which has been offered to the
City by another party, whichever is higher."
17, 2013, KCACS filed a lawsuit against the City alleging
that the City was liable for certain physical damage to the
leasehold premises caused by subsurface water migration from
City property. KC. Air Cargo Services, Inc. v. City of
Kansas City, Missouri, Case No 1316-CV17929 (Jackson
Cty. Cir. Ct.). In this litigation, KCACS claimed that the
physical damage to the premises had deprived it of
profit-generating opportunities by preventing it from
attracting or keeping certain sub-tenants, and KCACS sought
lost profits extending past the expiration of the lease on
September 30, 2017. The City filed a motion in limine asking
the Court to exclude damages for lost profits allegedly
suffered after the expiration of the base term of the lease.
The City claimed that the alleged renewal clause in the lease
was unenforceable and was "a void lease provision."
In overruling the City's motion in limine, the circuit
court stated that the renewal clause was "sufficiently
detailed . . . enough that it would be enforceable for a
period of 10 years, " "so the motion in limine to
eliminate that 10-year extension in a damage calculation is
overruled[.]" The lawsuit was eventually settled and in
connection therewith the Fourth Amendment to the lease was
signed by the parties.
the settlement of the lawsuit, an article appeared in the
Missouri Lawyers Weekly on March 26, 2015, concerning the
settlement of the litigation. The article attributed the
following statements to Assistant City Attorney Chad Stewart,
an attorney for the City in the litigation:
The city doesn't know if KCACS will be able to renew its
lease, even if it wanted to. The city has a good relationship
with the company, Stewart said, but that may not be a factor.
If the city cut out the middle-man and rented the property
directly, instead of the ground lease to KCACS, the city
could make back the cost of the settlement in three to four
years, according to Stewart.
"[The City] can't just go out and spend $1.75
million and not make it back, " he said.
D. Dudley, City settles with cargo company over water
leak, Missouri Lawyers Weekly, March 26,
on April 21, 2015, counsel for KCACS sent a letter to the
City seeking confirmation that the City would honor the
renewal option under the lease. On April 22, 2015, counsel
for the City responded by e-mail stating that, since the
lease was not ending until 2017, the City had not "made
any final business decision" whether it would allow
KCACS to renew the lease. The e-mail stated "I am sure
someone from the Aviation Department staff will let your
client know within a reasonable time prior to the end of the
Lease what the City intends to do."
after receiving the City's e-mail, KCACS file its
declaratory judgment action with the circuit court requesting
a declaration regarding the construction and enforceability
of the lease and the renewal option clause. KCACS also
claimed that the City's email response to its inquiry
seeking confirmation that the City would honor the renewal
option under the lease was inconsistent with the circuit
court's order in the prior lawsuit, which gave KCACS the
option to extend the term of the lease. In response, the City
filed an answer and an amended answer claiming that the
clause was a right of first refusal and that, if the clause
were an option to renew, it was void because it violated a 50
year lease term limitation set forth in section 82 of the
filed a motion for summary judgment and suggestions on
September 11, 2015. KCACS attached to its motion for summary
judgment the affidavit of Myron Haith, KCACS President. Haith
stated that "the City's refusal to commit to
honoring the renewal provision in the Lease threatens to
derail KCACS' negotiations with potential subtenants who
require subleases with KCACS longer than the approximately
two years remaining on the base term of the Lease that
expires in September, 2017." In response to KCACS's
statement of uncontroverted facts, the City said that it was
without sufficient information or belief to admit or deny the
allegations appearing in Haith's affidavit and,
therefore, denied the allegations. The City filed a
cross-motion for summary judgment and response to KCACS's
motion for summary judgment. The City requested that the
circuit court declare that the clause at issue was a right of
first refusal or declare that, if the clause were an option
to renew, it violated a 50 year lease term limitation set
forth in section 82 of the City's Charter. On March 17,
2016, the circuit court granted KCACS's motion for
summary judgment and denied the City's cross-motion for
summary judgment. The circuit court declared that the renewal
clause granted KCACS the unqualified right to renew the Lease
at its election in all circumstances in perpetuity. In its
order, the circuit court stated that KCACS could "submit
further briefing on the issue of whether special
circumstances support[ed] an award of attorneys' fees in
April 8, 2016, KCACS filed a motion for attorneys' fees
and costs. After considering the parties suggestions in
support of and in opposition to the motion for attorneys'
fees, the circuit court granted KCACS's motion for
attorneys' fees. The court stated:
[B]ased on the facts set forth in the Court's prior Order
and Judgment and discussed at length in KCACS' papers,
the Court finds special circumstances for the award of
attorneys' fees stemming from the lack of substantial
grounds for the City's position, the improper
interference with KCACS' property rights, the shifting
position of the City on the meaning and interpretation (if
any) to be given to the disputed renewal provision of the
Lease, and the apparent financial motivation for the
City did not dispute the amount of attorneys' fees and
costs requested by KCACS. The circuit court, therefore, found
that the requested amounts of $66, 196.00 for attorneys'
fees and $3, 248.80 in costs were reasonable. The City
appeals, presenting four points on appeal. We address the
points out of order by considering the fourth point relied on
first and then considering the remaining three points relied
on in order.
fourth point on appeal, the City contends that the circuit
court erred in denying its cross-motion for summary judgment
because the clause in the lease was not an option to renew
but was a right of first refusal. Generally, an order denying
a motion for summary judgment is an interlocutory order and
is not reviewable on appeal. James v. Paul, 49
S.W.3d 678, 682 (Mo. banc 2001). However, "the
overruling of a party's motion for summary judgment can
be reviewed when its merits are intertwined completely with a
grant of summary judgment in favor of an opposing
party." Bob DeGeorge Assocs., Inc. v. Hawthorn
Bank, 377 S.W.3d 592, 596-97 (Mo. banc 2012). Because
the issue presented by the City in its cross-motion for
summary judgment is so intertwined with the issues granting
KCACS's motion for summary judgment, we review the
City's point relied on challenging the circuit
court's denial of its cross-motion for summary judgment.
cross-motion for summary judgment, the City claimed that this
case presented an issue of contract interpretation that the
court was able to decide as a matter of law and that, under
the law, the lease clause at issue was not an option to
extend the lease but was a right of first refusal to lease
the premises. The circuit court disagreed and granted summary
judgment in favor of KCACS, declaring as a matter of law that
the renewal clause set forth in the lease was definite and
enforceable; that, pursuant to the terms of the clause, KCACS
had the unqualified ability to renew the lease at its
election; that, if KCACS exercised its option to renew the
lease, the renewal would commence a 30-year tenancy under the
same terms and conditions as the current tenancy with the
rental rate to be determined in accordance with the renewal
clause; and that KCACS's right of renewal existed
perpetually such that every 30 years KCACS had the
unqualified ability to renew the lease again for another 30
years if it so elected.
review of a summary judgment is de novo. ITT
Commercial, 854 S.W.2d at 376. We review the record in
the light most favorable to the party against whom judgment
was entered, and we afford that party the benefit of all
reasonable inferences. Id. "The propriety of
summary judgment is purely an issue of law."
Id. We will affirm the circuit court's grant of
summary judgment if no genuine issues of ...