# U ni te d S ta te s Co ur t of A pp ea ls For the Eig hth Circu it

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No. 1 6- 32 28

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Dav en po rt C he st er, LLC

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el la nt

v.

Abr am s Pr op ert ie s, In c; SCIe ne rg y , Inc

.

ll ll ll ll ll ll ll ll ll ll l Defe nd

an ts - App el le es

__ __ __ __ __ __ App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e So ut he rn Dis tri ct of I owa - Dav en po rt

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Su bm it te d: Apri l 5 , 20 17 Fil ed : Se pt em

be r 5, 2 01 7

__ __ __ __ __ __ Befo re WOL LMAN an d LOKEN, Circ ui t J ud ge s, an d R OSSITER, Dis tri ct Ju dg e. *

__ __ __ __ __ __ LOKEN, Ci rcu it Ju dg e.

Thi s is an act io n by la nd lo rd Dav en po rt Che st er, L LC (Ch es te r or Lan dl or d)
, ag ai ns t te na nt Abr am s Pro pe rti es , In c. (Ab ram s or Ten an t), fo r br each of a te rm in at ed le as e ag reem en t an d was te un de r Io wa la w, see ki ng as dam ag es reas on ab le co st s to

The Hon or ab le Ro be rt F. Ro ss it er, Jr
., Uni te d St at es Dis tri ct Ju dg e fo r th e * Dis tri ct of Ne br as ka , si tt in g b y de si gn at io n.rep ai r th e le as ed bu il di ng , lo ss of fai r m ark et va lu e cau se d by Ten an t’s was te , an d

ex pe ns es in cu rred to acq ui re ad jacen t la nd on whi ch th e bu il di ng en cro ach ed

. Afte r Abr am s rem ov ed th e act io n, th e di st ric t co ur t gr an te d su m m ary jud gm en t di sm is si ng 1
Ch es te r’s cl ai m s, co nc lud ing tha t an Exc ul pa ti on pr ov is io n, Sect io n 26 .01 of th e le as e
ag reem en t, un am

bi gu ou sl y li m it s Lan dl or d’s rem ed ie s to te rm in at io n of th e l e as e. Dav en po rt Ch es te r, LLC v. Abr am s Pro ps ., In c., 20 15 W L 12 86 69 91
, at *9 -1 0 (S.D.
Io wa Dec. 23
, 20 15 ). Lan dl or d ap pe al s, arg ui ng th e Exc u l p a t i o n pr ov is io n as in te rp ret ed by t he di st ric t co ur t i s ambig uo us , con fli ct s wi th ot he r le as e pr ov is io ns ,
an d sh ou ld be di sr eg ard ed

. Und er Io wa la w, “ an al le ge d am bi gu it y in th e pr ov is io ns of a le as e [is ] ge ne ral ly res ol ve d as a m at te r of la w,” so ou r rev ie w is de no vo

. W al sh v. Nel so n, 6 22 N.W .2d 49 9, 5 02 (Io wa 20 01 ). W e aff irm.

I.

In Apr il 19 77
, Abr am s en te red in to an ag reem en t wit h S. S. Kres ge Co m pa ny
to co ns tru ct a K-Mar t s t o r e o n A b ram s’ l an d in Dav en po rt, Io wa; le as e th e st or e to K-Mar t fo r twen ty-fiv e y ears fro m th e da te of K-Mar t’s oc cu pa nc y ; an d m an ag e th e
st or e fo r te na nt K-Mar t. Ch es te r’s p r ed eces so r in in te res t pu rch as ed th e la nd an d bu il di ng fro m

Abra m s i n Au gu st 19 77 . Che st er an d Ab ram s en te red in to a twen tyfiv e-year le as e ag reem en t on Nov em be r 16
, 19 77
, th e da te th at K-Mar t’s te rm of

oc cu pa nc y be ga n. Und er th e th ree- ti ered arra ng em en t, Abr am s, as Ch es te r’s te na nt ,
m an ag ed th e st or e fo r Ope rat in g Ten an t K-Mar t, co ll ect ed ren t fro m K-Mar t, an d he ld th e ren t in tru st fo r la nd lo rd Ch es te r. Abr am s rece iv ed $2 55 ,30 8 in an nu al ren t fro m K-Mar t, pl us an ad di ti on al am ou nt if st or e sa le s ex ceed ed a th res ho ld

. Abr am s pa id

pr op ert y tax es , in su ran ce, an d m ai nt en an ce co st s, an d p ai d $ 20 4,4 05 in an nu al ren t
to Ch es te r, pl us twen ty-fiv e p erce nt of a ny add it io na l re nt rece iv ed fro m K-Mar t.

The Hon or ab le St ep ha ni e M. Ro se , Uni te d S t a te s Dis tri ct Ju dg e fo r th e 1 So ut he rn Dis tri ct of I owa

.
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-The pa rti es twi ce e x t en de d th ei r rel at io ns hi p fo r fiv e-year ren ewal pe rio ds
,

ex te nd in g th e Ch es t e r

- A b r a m s le as e ag reem en t un ti l Nov em be r 30
, 20 12

. K-Mar t cl os ed th e st or e in earl y 20 12 a n d di d no t ren ew it s su bl eas e fo r an ot he r pe rio d.
W he n Abr am s fai le d to pa y th e Ju ne 20 12 ren t, Ch es te r te rm in at ed th e le as e effe ct iv e Sep te m be r 12
, 20 12

. Ch es te r ret oo k po ss es si on of t h e p r o p ert y , an d it s in sp ect or de te r mi ne d th at th e fo rm er K-Mar t st or e ne ed ed rep ai rs th at wou ld co st m or e th an
two m il li on do ll ars . Che st er as se rte d t ha t t he le as e ag reem en t ob li ga te d Abr am s to
pa y fo r th es e rep ai rs

. In se ll in g th e pr op ert y to a th ird pa rty, Ch es te r di sc ov ered th at Abr ams h a d bu il t th e st or e at le as t fiv e feet ou ts id e th e pr op ert y li ne

. Ch es te r
pu rch as ed th at pa rcel to rem ov e a cl ou d o n t he ti tl e an d c lo se th e sa le

.

W he th er Abr am s m

us t pa y C h e s t e r da m ag es to rep ai r th e st or e pr em is es an d

to acq ui re th e ad

jacen t pa rcel is th e pr in ci pa l is su e in th is la wsu it

. The di st ric t co ur t di d no t de ci de whe th er Abr am s br each ed th e le as e ag reem en t be cau se it co nc lu de d th at Ch es te r ex erci se d it s on ly rem ed y fo r th e al le ge d br each es whe n it te rm in at ed th e le as e. Thi s rem ed y is su e tu rn s pr im ari ly on pr op er in te r p r e t at io n of th e fo ll owi ng
pr ov is io ns in th e fo rty-fiv e-p ag e le as e ag reem en t:

Sect io n 6 .01 - The Lan dl or d s ha ll no t b e req ui red to fu rn is h a ny
se rv ic es or

. . . m ak e an y rep ai rs or al te rn at io ns

. . . th ro ug ho ut th e te rm of th is Leas e, th e Ten an t he reb y as su m in g th e fu ll an d so le

res po ns ib il it y fo r th e co nd it io n, ren ov at io n , o pe rat in g, rep ai r, rep la cem en t, m ai nt en an ce an d m an ag em en t o f th e Dem is ed Prem is es

.

Sect io n 6.0 4 - The Ten an t sh al l

. . . m ai nt ai n an d ke ep th e sa id Dem is ed Prem is es an d th e pa rk in g lo ts an d dr iv eways in fir st cl as s or de r, rep ai r an d c on di ti on

.

Sect io n 6.0 6 - The Ten an t w i l l no t do or pe rm it or su ffer an y
was te

. . . to or u po n t he Dem is ed Prem is es or a ny part th ereo f.

Sect io n 13 .01 - If Ten an t sh al l de fau lt in th e ob s e r v a nc e or pe rfo rm an ce of an y te rm or co ve na nt

. . . Lan dl or d

. . . m ay rem ed y su ch

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-de fau lt fo r th e acco un t an d a t th e ex pe ns e of Ten an t

. . . . [S]uch su m s

pa id or ob li ga ti on s i n c u r r e d

. . . sh al l be de em ed to be ad di ti on al ren t he reu nd er an d s ha ll be pa id to [Lan dl or d] by T en an t.

Sect io n 26 .01 - Ten an t sh al l ha v e n o p ers on al li ab il it y fo r th e pe rfo rm an ce of th e ob li ga ti on s of Ten an t he reu nd er, an d in th e ev en t of

a de fau lt by Ten an t i n th e pe rfo rm an ce of it s ob li ga ti on s, th e so le

rem ed y of Lan dl or d s ha ll be to ter m in at e th is Leas e.

Sect io n 2 6 .02 - Lan dl or d sh al l ha ve no pe rs on al li ab il it y fo r th e pe rfo rm an ce of th e ob li ga ti on s of Lan dl or d he reu nd er, an d in th e ev en t of a de fau lt by Lan dl or d

. . . th e so le rem ed y of Ten an t sh al l be th e rig ht to of f-s et ag ai ns t ren t du e Lan dl or d by Ten an t of an y su m s ex pe nd ed by Ten an t t o c ur e an y

su ch Land lo rd de fau lt

.

II

.

The di st ric t co ur t co nc lu de d th at Sect io n 26 .01 un am bi g uo us ly st at es th at Abr am s “ sh al l ha ve no pe rs on al li ab il it y ” an d li m it s Ch es te r to th e “ so le rem ed y ” of

te rm in at in g th e le a s e f

o r A br am s’ al le ge d de fau lt s. On ap pe al
, Ch es te r arg ue s th e di st ric t co ur t er red in in te rp ret in g S ect io n 2 6.0 1 fo r a n um be r of reas on s.

1. Ch es te r arg ue s th at Sect io n 2 6

. 0 1 is am bi gu ou s be cau se on e reas on ab le in te rp ret at io n of th e te rm “ pe rs on al li ab il it y ” i s to pr ot ect Abr am s’ of fic ers an d sh areh ol de rs fro m pe rs on al li ab il it y , no t to pr ot ect Abr am s, a co rp or at io n. Lik e th e di st ric t co ur t, we co nc lu de th e te rm is un am bi gu ou s. A co rp or at io n is a “ pe rs on ”

un de r Io wa la w an d th us can ha ve pe rs on al li ab il it y

. See Io wa Co de § 4.1 (1 3) (1 97 7)

. Sect io n 2 6.0 1 p ro vi de s th at “ [Ab ram s] s ha ll ha ve no pe rs on al li ab il it y ,” no t t ha t i ts of fic ers an d sh areh ol de rs sh al l hav e no pe rs on al li ab il it y (wh ic h Iowa law w ou ld in

an y ev en t pr ecl ud e). Mo reo ve r, Arti cl e 5 of th e le as e pr ov id es th at , if Ten an t Abr am s fai le d t o ho ld K-Mar t ren t pa y m en ts in tru st fo r Ch es te r, “ Ten an t sh al l ha ve fu ll

pe rs on al li ab il it y to Lan dl or d, th e pr ov is io ns of Sect io n 26 .01 of th e Leas e

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-no twi th st an di ng .” Thi s ex cep ti on to Sect io n 26 .01
, an d th e reci pr oc al pr ov is io ns in

Arti cl e 26 ex cu lp at in g bo th pa rti es fro m pe rs on al li ab il it y , co nf irm th at Sect io n 26 .01

ex cu lp at es th e te na nt co rp or at io n fro m pe rs on al li ab il it y

. Fi na ll y , Ch es te r pr es en te d

no pr ob at iv e ex tri ns ic ev id en ce refl ect in g a co nt rary in te n t o f th e pa rti es in 19 77

.

“ W he n no rel ev an t ex tri ns ic ev id en ce ex is ts , th e r e s o l u t i on of an y am bi gu it y in a writ te n co nt ract is a m at te r of la w fo r th e co ur t.” Alt a Vis ta P r op s., LLC v. Mau er Vis io n C tr., PC , 85 5 N.W.2d 7 22 , 72 6 (I owa 20 14 ) (q uo ta ti on om it te d)

.

2. Ch es te r arg ue s th at Sect io n 26 .01 as co ns tru ed by th e di st ric t co ur t co nf li ct s wit h (i) th e pr ov is io ns in A r t i c l e 6 req ui rin g te na nt Abr am s to m ai nt ai n th e le as ed

st or e, m ak e ne ces sa ry rep ai rs an d al te rat io ns , an d in de m ni fy C h e st er fro m cl ai m s

res ul ti ng fro m Ten an t’s fai lu re to pe r f o rm , an d (ii ) Sect io n 13 .01
, whi ch ex pr es sl y
pr ov id es th at la nd lo rd Ch es te r m ay rem ed y de fau lt s a t t e n a nt Abr am s’ ex pe ns e. Lan dl or d arg ue s th at th es e le as e pr ov is io ns “ are ren de red m ean in gl es s if Lan dl or d’s

on ly rem ed y is to te rm in a t e th e Leas e, rat he r th an reco ve r da m ag es fro m Ten an t’s de fau lt s.” Li ke th e d is tri ct co ur t, we d is ag ree.

The li m it at io n on rem ed ie s in Sect io n 26 .01 is pe rfec tl y se n s i b le in co nt ex t. Abr am s ag reed to m an ag e th e st or e fo r K-Mar t. Und er th e le as e ag reem en t, Abr am s
ret ai ne d ap pr ox im at el y $5 0,0 00 of K-Mar t’s an nu al ren t p a y m en ts in ex ch an ge fo r th is un de rta ki ng

. The pr ov is io ns in Arti cl e 6 con fir m ed th at st or e m ai nt en an ce and

rep ai r was so le ly Abr am s’ res po ns ib il it y

. If Abr am s fai le d to m ai nt ai n th e st or e “ in fir st cl as s or de r,” pu tt in g th e rel at io ns hi p wit h Ope rat in g Ten an t K-M art at r is k, t he le as e ag reem en t ga ve Lan dl or d Ch es te r two po te nt rem ed ia l op ti on s. Und er Sect io n 13 .01
, it co ul d pe rfo rm Ten an t’s du ti es an d co un t an y ex pe nd it ur es a s “ ad di ti on al

ren t” fo r whi ch Abr am s wou ld be li ab le
, a rem ed y Ch es te r ne ve r in vo ke d. Or it co ul d

ex erci se it s rig ht to te rm in at e th e le as e un de r Sect io n 26 .01
, ta ke ov er Abr am s’ st or e

m an ag em en t ro l e , a n d rece iv e K-Mar t’s en ti re ren t pa y m en ts

. The re is no co nf li ct be twee n t he ten an t-o bl ig at io n p ro vi si on s an d th e “ so le rem ed y ” p ro vi de d Lan dl or d in Sect io n 26 .01

. W e fu rth er co nc lu de th at th e di st ric t co ur t, in th is co nt ex t, pr op erl y

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-in te rp ret ed th e le as e’s “ in de m ni fic at io n” pr ov is io ns “ to in vo ke th e or di na ry m ean in g of ‘ind em ni fy ’ an d ob li ga te Ten an t to rei m bu rs e Lan dl or d fo r th ird -p art y cl ai m s -- no t di rect cl ai m s br ou gh t by Lan dl or d.” Ch es te r, 20 15 W L 12 86 69 91
, at *7 ; se e C & J
Van ta ge Leas e Co

. v. W ol fe, 79 5 N.W .2d 65
, 77 (Io wa 20 11 ) (Io wa co ur ts “ st riv e to gi ve effe ct to all th e la ng ua ge of a co nt ract ”).

3. Ch es te r arg u e s t h a t Sect io n 26 .01 as in te rp ret ed by th e di st ric t co ur t fal ls wit hi n “ th e ru le th at a pr ov is o or cl au se whi ch is rep ug na nt to th e ge ne ral pu rp os e an d in te nt of a co nt ract wil l be di sr eg ard e d

. ” Mea le y v. Kan eal y , 28 6 N.W

. 50 0, 50 2 (Io wa 19 39 ). Ch es te r po si ts th at Sect io n 26 .01 is “ rep ug na nt ” b e c a u s e it “ ren de rs

se ve ral pr ov is io ns in th e Leas e de si gn ed to pr ot ect Lan dl or d il lu so ry .” W e co nc lu de th is arg um en t b or de rs on th e fri vo lo us

.

The Su pr em e Co ur t of Io wa ha s co ns tru ed th e rep ug na nc y pr in ci pl e na rro wly.
A c on tra ct pr ov is io n “ m ay no t be di sr eg ard ed as be in g rep ug n a n t to th e pu rp os e of th e co nt ract [if it ] m ay be in te rp ret ed as m od ifyin g an d l i m it in g an el em en t of th e earl ie r pr ov is io n.” Id

. at 50 6. Here, Ch es te r pu rch as ed th e pr op ert y fro m Abr am s an d

en te red in to a lo ng te rm le as e ag reem en t un de r whi ch it rece iv ed ov er $6 ,50 0,0 00 in

ren t fro m K-Mar t an d th e ret ur n of a de pr eci at ed bu il di ng whe n th e K-Mar t st or e was

no lo ng er vi ab le
, pr op ert y whi ch Ch es te r th en so ld

. Sect io n 26 .01 pr ov id ed Ch es te r

a “ so le rem ed y ” th at pr ot ect ed it s ab il it y to m ai nt ai n a le as e rel at io ns hi p wit h K-Mar t whi le th e st or e was vi ab le bu t li m it ed Abr am s’ li ab il it y ex po su re to le as e te rm in at io n

an d pa y m en t of th e ren t it owe d Ch es te r. The re is no th i n g un co ns ci on ab le or
rep ug na nt ab ou t th is rem ed ia l li m it at io n. “ Co nt ract in g pa rti es ha ve wid e la ti tu de to fas hi on th ei r own r e med i e s f o r a br each of co nt ract an d to de ny fu ll effe ct to su ch

ex pr es s co nt ract ua l pr ov is io ns is o r d in ari ly im pe rm is si bl e be cau se it wou ld effe ct iv el y reco ns tru ct th e c o n t ract co nt rary to th e in te nt of th e pa rti es .” C & J
Van ta ge , 79 5 N.W.2d a t 7 7 (q uo ta ti on om it te d)

.

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-U n d er Sect io n 26 .01
, as pr op erl y in te rp ret ed by th e di st ric t co ur t, Ch es te r’s

“ so le rem ed y ” is le as e te rm in at io n. The refo re, it can no t reco ve r th e al le ge d co nt ract da m ag es

. Its cl ai m fo r was te m us t al so fai l, be cau se th e pa rti es ex pr es sl y co nt ract ed fo r th at li ab il it y in Sect io ns 6.0 6 an d 26 .01 of th e le as e. Acco rd in gl y , th e jud gm en t of th e d is tri ct co ur t i s af

fir m ed

.

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