United States Court of Appeals

For the Eighth Circuit

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No. 16-3228

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Davenport Chester, LLC

lllllllllllllllllllll Plaintiff - Appellant

v.

Abrams Properties, Inc; SCIenergy, Inc.

lllllllllllllllllllll Defendants - Appellees

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Appeal from United States District Court 

for the Southern District of Iowa - Davenport

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 Submitted: April 5, 2017

 Filed: September 5, 2017 

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Before WOLLMAN and LOKEN, Circuit Judges, and ROSSITER, District Judge. *

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LOKEN, Circuit Judge.

This is an action by landlord Davenport Chester, LLC (Chester or Landlord),

against tenant Abrams Properties, Inc. (Abrams or Tenant), for breach of a terminated

lease agreement and waste under Iowa law, seeking as damages reasonable costs to

The Honorable Robert F. Rossiter, Jr., United States District Judge for the

*

District of Nebraska, sitting by designation. 
repair the leased building, loss of fair market value caused by Tenant’s waste, and

expenses incurred to acquire adjacent land on which the building encroached. After

Abrams removed the action, the district court granted summary judgment dismissing 1

Chester’s claims, concluding that an Exculpation provision, Section 26.01 ofthe lease

agreement, unambiguously limits Landlord’s remedies to termination of the lease. 

Davenport Chester, LLC v. Abrams Props., Inc., 2015 WL 12866991, at *9-10 (S.D.

Iowa Dec. 23, 2015). Landlord appeals, arguing the Exculpation provision as

interpreted by the district court is ambiguous, conflicts with other lease provisions,

and should be disregarded. Under Iowa law, “an alleged ambiguity in the provisions

of a lease [is] generally resolved as a matter of law,” so our review is de novo. Walsh

v. Nelson, 622 N.W.2d 499, 502 (Iowa 2001). We affirm.

I.

In April 1977, Abrams entered into an agreement with S. S. Kresge Company

to construct a K-Mart store on Abrams’ land in Davenport, Iowa; lease the store to

K-Mart for twenty-five years from the date of K-Mart’s occupancy; and manage the

store for tenant K-Mart. Chester’s predecessor in interest purchased the land and

building from Abrams in August 1977. Chester and Abrams entered into a twentyfive-year lease agreement on November 16, 1977, the date that K-Mart’s term of

occupancy began. Under the three-tiered arrangement, Abrams, as Chester’s tenant,

managed the store for Operating Tenant K-Mart, collected rent fromK-Mart, and held

the rent in trust for landlord Chester. Abrams received $255,308 in annual rent from

K-Mart, plus an additional amount if store sales exceeded a threshold. Abrams paid

property taxes, insurance, and maintenance costs, and paid $204,405 in annual rent

to Chester, plus twenty-five percent of any additional rent received from K-Mart. 

The Honorable Stephanie M. Rose, United States District Judge for the

1

Southern District of Iowa. 

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The parties twice extended their relationship for five-year renewal periods,

extending the Chester-Abrams lease agreement until November 30, 2012. K-Mart

closed the store in early 2012 and did not renew its sublease for another period. 

When Abrams failed to pay the June 2012 rent, Chester terminated the lease effective

September 12, 2012. Chester retook possession of the property, and its inspector

determined that the former K-Mart store needed repairs that would cost more than

two million dollars. Chester asserted that the lease agreement obligated Abrams to

pay for these repairs. In selling the property to a third party, Chester discovered that

Abrams had built the store at least five feet outside the property line. Chester

purchased that parcel to remove a cloud on the title and close the sale. 

Whether Abrams must pay Chester damages to repair the store premises and

to acquire the adjacent parcel is the principal issue in this lawsuit. The district court

did not decide whether Abrams breached the lease agreement because it concluded

that Chester exercised its only remedy for the alleged breaches when it terminated the

lease. This remedy issue turns primarily on proper interpretation of the following

provisions in the forty-five-page lease agreement:

 

Section 6.01 - The Landlord shall not be required to furnish any

services or . . . make any repairs or alternations . . . throughout the term

of this Lease, the Tenant hereby assuming the full and sole

responsibility for the condition, renovation, operating, repair,

replacement, maintenance and management of the Demised Premises.

Section 6.04 - The Tenant shall . . . maintain and keep the said

Demised Premises and the parking lots and driveways in firstclass order,

repair and condition.

Section 6.06 - The Tenant will not do or permit or suffer any

waste . . . to or upon the Demised Premises or any part thereof.

Section 13.01 - If Tenant shall default in the observance or

performance of any term or covenant . . . Landlord . . . may remedy such

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default for the account and at the expense of Tenant . . . . [S]uch sums

paid or obligations incurred . . . shall be deemed to be additional rent

hereunder and shall be paid to [Landlord] by Tenant.

Section 26.01 - Tenant shall have no personal liability for the

performance of the obligations of Tenant hereunder, and in the event of

a default by Tenant in the performance of its obligations, the sole

remedy of Landlord shall be to terminate this Lease.

Section 26.02 - Landlord shall have no personal liability for the

performance of the obligations of Landlord hereunder, and in the event

of a default by Landlord . . . the sole remedy of Tenant shall be the right

to off-set against rent due Landlord by Tenant of any sums expended by

Tenant to cure any such Landlord default.

II.

The district court concluded that Section 26.01 unambiguously states that

Abrams “shall have no personal liability” and limits Chester to the “sole remedy” of

terminating the lease for Abrams’ alleged defaults. On appeal, Chester argues the

district court erred in interpreting Section 26.01 for a number of reasons.

1. Chester argues that Section 26.01 is ambiguous because one reasonable

interpretation of the term “personal liability” is to protect Abrams’ officers and

shareholders from personal liability, not to protect Abrams, a corporation. Like the

district court, we conclude the term is unambiguous. A corporation is a “person”

under Iowa law and thus can have personal liability. See Iowa Code § 4.1(13) (1977). 

Section 26.01 provides that “[Abrams] shall have no personal liability,” not that its

officers and shareholders shall have no personal liability (which Iowa law would in

any event preclude). Moreover, Article 5 of the lease providesthat, if Tenant Abrams

failed to hold K-Mart rent payments in trust for Chester, “Tenant shall have full

personal liability to Landlord, the provisions of Section 26.01 of the Lease

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notwithstanding.” This exception to Section 26.01, and the reciprocal provisions in

Article 26 exculpating both partiesfrompersonal liability, confirm that Section 26.01

exculpates the tenant corporation from personal liability. Finally, Chester presented

no probative extrinsic evidence reflecting a contrary intent of the parties in 1977. 

“When no relevant extrinsic evidence exists, the resolution of any ambiguity in a

written contract is a matter of law for the court.” Alta Vista Props., LLC v. Mauer

Vision Ctr., PC, 855 N.W.2d 722, 726 (Iowa 2014) (quotation omitted).

2. Chester argues that Section 26.01 as construed by the district court conflicts

with (i) the provisions in Article 6 requiring tenant Abrams to maintain the leased

store, make necessary repairs and alterations, and indemnify Chester from claims

resulting from Tenant’s failure to perform, and (ii) Section 13.01, which expressly

provides that landlord Chester may remedy defaults at tenant Abrams’ expense. 

Landlord argues that these lease provisions “are rendered meaningless if Landlord’s

only remedy is to terminate the Lease, rather than recover damages from Tenant’s

defaults.” Like the district court, we disagree. 

The limitation on remedies in Section 26.01 is perfectly sensible in context. 

Abrams agreed to manage the store for K-Mart. Under the lease agreement, Abrams

retained approximately $50,000 of K-Mart’s annual rent payments in exchange for

this undertaking. The provisions in Article 6 confirmed that store maintenance and

repair was solely Abrams’ responsibility. If Abrams failed to maintain the store “in

firstclass order,” putting the relationship with Operating Tenant K-Mart at risk, the

lease agreement gave Landlord Chester two potent remedial options. Under Section

13.01, it could perform Tenant’s duties and count any expenditures as “additional

rent” for which Abrams would be liable, a remedyChester never invoked. Or it could

exercise its right to terminate the lease under Section 26.01, take over Abrams’ store

management role, and receive K-Mart’s entire rent payments. There is no conflict

between the tenant-obligation provisions and the “sole remedy” provided Landlord

in Section 26.01. We further conclude that the district court, in this context, properly

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interpreted the lease’s “indemnification” provisions “to invoke the ordinary meaning

of‘indemnify’ and obligate Tenant to reimburse Landlord for third-party claims -- not

direct claims brought by Landlord.” Chester, 2015 WL 12866991, at *7; see C & J

Vantage Lease Co. v. Wolfe, 795 N.W.2d 65, 77 (Iowa 2011) (Iowa courts “strive to

give effect to all the language of a contract”). 

3. Chester argues that Section 26.01 as interpreted by the district court falls

within “the rule that a proviso or clause which isrepugnant to the general purpose and

intent of a contract will be disregarded.” Mealey v. Kanealy, 286 N.W. 500, 502

(Iowa 1939). Chester posits that Section 26.01 is “repugnant” because it “renders

several provisions in the Lease designed to protect Landlord illusory.” We conclude

this argument borders on the frivolous.

The Supreme Court of Iowa has construed the repugnancy principle narrowly.

A contract provision “may not be disregarded as being repugnant to the purpose of

the contract [if it] may be interpreted as modifying and limiting an element of the

earlier provision.” Id. at 506. Here, Chester purchased the property fromAbrams and

entered into a long term lease agreement under which it received over $6,500,000 in

rent from K-Mart and the return of a depreciated building when the K-Mart store was

no longer viable, property which Chester then sold. Section 26.01 provided Chester

a “sole remedy” that protected its ability to maintain a lease relationship with K-Mart

while the store was viable but limited Abrams’ liability exposure to lease termination

and payment of the rent it owed Chester. There is nothing unconscionable or

repugnant about this remedial limitation. “Contracting parties have wide latitude to

fashion their own remedies for a breach of contract and to deny full effect to such

express contractual provisions is ordinarily impermissible because it would

effectively reconstruct the contract contrary to the intent of the parties.” C & J

Vantage, 795 N.W.2d at 77 (quotation omitted). 

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Under Section 26.01, as properly interpreted by the district court, Chester’s

“sole remedy” is lease termination. Therefore, it cannot recover the alleged contract

damages. Its claim for waste must also fail, because the parties expressly contracted

for that liability in Sections 6.06 and 26.01 of the lease. Accordingly, the judgment

of the district court is affirmed. 

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