Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

K.C. Air Cargo Services, Inc. v. City of Kansas City

Court of Appeals of Missouri, Western District, First Division

March 7, 2017

K.C. AIR CARGO SERVICES, INC., Respondent,
v.
THE CITY OF KANSAS CITY, MISSOURI, Appellant.

         Appeal from the Circuit Court of Jackson County, Missouri The Honorable Sandra Midkiff, Judge

          Before James Edward Welsh, P.J., Anthony Rex Gabbert, and Edward R. Ardini, Jr., JJ.

          James Edward Welsh, Presiding Judge.

         The 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.

         The 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.

         When 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.[1] 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."

         As a 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.[2] KCACS acts a sub-landlord on the leasehold, renting warehouse space to subtenants.

         As set 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."

         On July 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.

         Following 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.

         Allyssa D. Dudley, City settles with cargo company over water leak, Missouri Lawyers Weekly, March 26, 2015.[3]

         Thereafter, 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."

         Shortly 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 City's Charter.

         KCACS 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 this case."

         On 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's actions.

         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.

         In its 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.

         In its 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.

         Our 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 ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.