Court Opinion

ID: 2772603
Source: CourtListenerOpinion
Date Created: 2015-01-23 14:17:35.569693+00
Date Added: 2024-06-11T11:27:47.467923
License: Public Domain

Nebraska Advance Sheets
	                         GIBBONS RANCHES v. BAILEY	949
	                              Cite as 289 Neb. 949

             Gibbons R anches, L.L.C., appellant, v.
               Joel D. Bailey and Jaimee Bailey,
                  husband and wife, appellees.

         Gibbons R anches, L.L.C., appellant, v. Circle B
             Farms, Inc., doing business as Circle B
                Farms, a Nebraska corporation,
                   and Tom Bailey, appellees.
                                    ___ N.W.2d ___

                 Filed January 23, 2015.     Nos. S-14-109, S-14-110.

 1.	 Leases: Judgments: Appeal and Error. The interpretation of a lease is a ques-
      tion of law that an appellate court decides independently of the district court.
 2.	 Motions for New Trial: Appeal and Error. An appellate court reviews a denial
      of a motion for new trial for an abuse of discretion.
 3.	 Contracts: Parties: Intent. To create a contract, there must be both an offer and
      an acceptance; there must also be a meeting of the minds or a binding mutual
      understanding between the parties to the contract.
  4.	 ____: ____: ____. A contract is not formed if the parties contemplate that some-
      thing remains to be done to establish contractual arrangements or if elements are
      left for future arrangement.
 5.	 Contracts: Parties. When an agreement stipulates that certain terms shall be
      settled later by the parties, such terms do not become binding unless and until
      they are settled by later agreement.
  6.	 ____: ____. A fundamental and indispensable basis of any enforceable agreement
      is that there be a meeting of the minds of the parties as to the essential terms and
      conditions of the proposed contract.
 7.	 Statute of Frauds: Contracts: Evidence. The written evidence required by the
      statute of frauds must contain the essential terms of the contract.
 8.	 Leases. When an express lease agreement contemplates the payment of rent in
      money, the amount of rent is an essential term of the agreement.
 9.	 ____. Because rent is an essential term in a lease agreement, an agreement to
      agree on it in the future is not enforceable.
10.	 Contracts. In interpreting a contract, a court must first determine, as a matter of
      law, whether the contract is ambiguous.
11.	 Contracts: Words and Phrases. A contract is ambiguous when a word, phrase,
      or provision in the contract has, or is susceptible of, at least two reasonable but
      conflicting interpretations or meanings.
12.	 Contracts. When the terms of a contract are clear, a court may not resort to rules
      of construction, and the terms are to be accorded their plain and ordinary mean-
      ing as an ordinary or reasonable person would understand them.
13.	 ____. The fact that the parties have suggested opposing meanings of a disputed
      instrument does not necessarily compel the conclusion that the instrument
      is ambiguous.
14.	 ____. A contract is viewed as a whole in order to construe it.
    Nebraska Advance Sheets
950	289 NEBRASKA REPORTS

15.	 Parol Evidence: Contracts. The general rule is that unless a contract is ambig­
     uous, parol evidence cannot be used to vary its terms.
16.	 Contracts: Intent. An unambiguous contract is not subject to interpretation or
     construction, and in such a contract, the intention of the parties must be deter-
     mined from its contents alone.

  Appeals from the District Court for Custer County: Karin L.
Noakes, Judge. Affirmed as modified.
  Bradley D. Holbrook and Nicholas A. Buda, of Jacobsen,
Orr, Lindstrom & Holbrook, P.C., L.L.O., for appellant.
  Christopher P. Wickham, of Sennett, Duncan, Jenkins &
Wickham, P.C., L.L.O., for appellees.
  Heavican, C.J., Wright, Connolly, Stephan, McCormack,
Miller-Lerman, and Cassel, JJ.
   Cassel, J.
                     I. INTRODUCTION
   A landlord leased separate properties to different tenants
using nearly identical written documents. The parties dispute
whether the leases were enforceable for their stated 5-year
terms or whether a clause providing for “annual review of rental
rates” resulted in unenforceable “agreements to agree.” In the
landlord’s appeals from declaratory judgments for the tenants,
we conclude that the leases unambiguously contemplated only
an annual “review” and did not require annual agreement. With
a minor modification, we affirm the judgments.
                      II. BACKGROUND
                           1. Parties
   Gibbons Ranches, L.L.C., is a ranching entity in Custer
County, Nebraska. For many years, it leased its farm ground
to Joel D. Bailey and Jaimee Bailey, husband and wife, and
to B Agri-Services, Inc., doing business as Circle B Farms
(Circle B). We refer to the Baileys and Circle B collectively as
“the tenants.”
                          2. Leases
   On March 7, 2011, Gibbons Ranches and Circle B entered
into a 5-year lease agreement retroactive to March 1. Later in
                   Nebraska Advance Sheets
	                  GIBBONS RANCHES v. BAILEY	951
	                       Cite as 289 Neb. 949

March and April, Gibbons Ranches and the Baileys entered
into 5-year lease agreements with the same beginning date as
the Circle B lease.
    For convenience, we quote from the Circle B lease. We
have italicized the numbers which were different from those
in the Bailey leases. Otherwise, the language in each lease was
identical. With this understanding, the provisions concerning
rent stated:
         1. The term of this lease shall be five (5) years. An
      annual review of rental rates and terms will be completed
      in January of each year. The final year of this contract
      will be 2015. Less[o]r hereby leases to Lessee to occupy
      and use for agricultural purposes only during the crop
      year (year one) March 1, 2011 to March 1, 2012, the land
      of Less[o]r in Custer County, Nebraska, consisting of
      approximately 561 (190$) acres irrigated and 240 (80$)
      acres of dry land and grass as described on Exhibit “A”
      attached hereto (hereinafter referred to as the “Property”).
      Rental agreement also includes full use of the Quonset
      and grain bins located on said property.
         2. Lessee agrees to pay Less[o]r as rent for said land
      the annual sum of $125,790.00, which shall be paid in
      two installments as follows: first half $62,895.00, due
      April 15 and second half, $62,895.00, due November 1st.
      The consideration for this lease is cash in the amount of
      $125,790.00 regardless of the correct number of acres
      and the price assigned to each acre. Delinquent pay-
      ment shall bear interest at the rate of 10% per annum
      until paid.
    During the winter of 2011-12, Gibbons Ranches and
Circle B’s president reviewed and negotiated a modification of
the rental rates for the 2012 crop year. The Baileys agreed to
the same new rates and signed a new lease in April 2012 which
reflected the new rental amount. A new lease with the modi-
fied rental rates for irrigated acres and for dryland acres was
prepared for Circle B, but Circle B’s president refused to sign
it. Despite the absence of a revised lease for Circle B, all of the
tenants paid rent in accordance with the new rates.
    Nebraska Advance Sheets
952	289 NEBRASKA REPORTS

   The parties did not reach an agreement on rental rates
for the 2013 crop year. The tenants submitted checks based
on the 2012 rental rates and proceeded to farm Gibbons
Ranches’ land.
                            3. Lawsuits
   In June 2013, Gibbons Ranches sued the tenants in separate
actions. In the complaints, Gibbons Ranches sought, among
other things, a declaratory judgment to determine its rights
under the leases, including the rental rates and terms for the
2013 crop year. Gibbons Ranches alleged that the tenants
refused to negotiate in good faith the terms of the leases for the
2013 crop year and that the tenants farmed its ground for the
2013 crop year at rental rates that were less than what was fair
and reasonable. The tenants alleged in their respective answers
that Gibbons Ranches’ rights, status, and legal relations were
sufficiently stated in the leases.
                  4. District Court Judgment
   After a consolidated trial, the district court entered a declar-
atory judgment in each case. The court found that the leases
were valid and enforceable agreements through 2015. The
court determined that the tenants were not under an obligation
to agree to alter the terms, that the leases were unambiguous,
and that the parol evidence rule applied to exclude extrinsic
evidence from being considered to interpret the parties’ respec-
tive rights and obligations under the leases.
   Gibbons Ranches moved for a new trial in each case, and the
district court overruled the motions. Gibbons Ranches timely
appealed, and we moved the cases to our docket under our
statutory authority to regulate the caseloads of the appellate
courts of this state.1 The cases were consolidated for briefing,
argument, and disposition.
              III. ASSIGNMENTS OF ERROR
  Gibbons Ranches assigns that the district court erred in (1)
determining that the leases were valid and enforceable through
2015; (2) determining that the leases were unambiguous as

 1	
      See Neb. Rev. Stat. § 24-1106(3) (Reissue 2008).
                       Nebraska Advance Sheets
	                       GIBBONS RANCHES v. BAILEY	953
	                            Cite as 289 Neb. 949

a matter of law; (3) determining that the parol evidence rule
applied to exclude extrinsic evidence to interpret the parties’
intent in entering into the leases, including the annual review
provision; (4) failing to determine the parties’ respective rights
and duties under the leases, including the amount of fair and
reasonable rent to be paid by the tenants to Gibbons Ranches
for the 2013 crop year and who had the right to retain pos-
session of the roughage; and (5) overruling Gibbons Ranches’
motions for new trial.

                 IV. STANDARD OF REVIEW
   [1] The interpretation of a lease is a question of law that an
appellate court decides independently of the district court.2
   [2] An appellate court reviews a denial of a motion for new
trial for an abuse of discretion.3

                         V. ANALYSIS
                1. Validity and Enforceability
                            of Leases
   The central issue on appeal is whether the leases were valid
if the parties did not agree to a rental rate after the second
year. The district court determined that the leases were valid
and enforceable through 2015. But Gibbons Ranches asserts
that the leases were not valid, because they did not include the
amount of rent to be paid after the second year or a method by
which to definitively calculate it.

                 (a) General Principles of Law
   [3-5] The law regarding contractual agreements, such as a
lease, is well established. To create a contract, there must be
both an offer and an acceptance; there must also be a meet-
ing of the minds or a binding mutual understanding between
the parties to the contract.4 A contract is not formed if the
parties contemplate that something remains to be done to

 2	
      See Beveridge v. Savage, 285 Neb. 991, 830 N.W.2d 482 (2013).
 3	
      See Hike v. State, 288 Neb. 60, 846 N.W.2d 205 (2014).
 4	
      City of Scottsbluff v. Waste Connections of Neb., 282 Neb. 848, 809
N.W.2d 725 (2011).
    Nebraska Advance Sheets
954	289 NEBRASKA REPORTS

establish contractual arrangements or if elements are left
for future arrangement.5 When an agreement stipulates that
certain terms shall be settled later by the parties, such terms
do not become binding unless and until they are settled by
later agreement.6

                        (b) Essential Terms
   [6,7] A fundamental and indispensable basis of any enforce-
able agreement is that there be a meeting of the minds of the
parties as to the essential terms and conditions of the proposed
contract.7 Under the statute of frauds, “[e]very contract for the
leasing for a longer period than one year . . . shall be void
unless the contract . . . be in writing and signed by the party by
whom the lease . . . is to be made.”8 And the written evidence
required by the statute of frauds must contain the essential
terms of the contract.9
   The case law in Nebraska is not clear regarding whether
rent is an essential term in a lease agreement. The Nebraska
Court of Appeals recently stated in an unpublished memoran-
dum opinion that the monthly rent to be paid was an essential
term of an alleged lease extension.10 But the tenants point
to Folden v. State,11 where we long ago made a statement to
the effect that rent is not essential to a valid lease of land.
However, our statement must be put in context. The agreement
in Folden provided in part that the lessor leased the premises
“‘in consideration of the covenants’” of the lessee.12 We then

 5	
      Nebraska Nutrients v. Shepherd, 261 Neb. 723, 626 N.W.2d 472 (2001),
      abrogated in part on other grounds, Sutton v. Killham, 285 Neb. 1, 825
N.W.2d 188 (2013).
 6	
      Id.
 7
Pet. v. Halligan, 182 Neb. 51, 152 N.W.2d 103 (1967).
 8	
      Neb. Rev. Stat. § 36-105 (Reissue 2008).
 9	
      See K & K Farming v. Federal Intermediate Credit Bank, 237 Neb. 846,
      468 N.W.2d 99 (1991).
10	
      Zeeck v. Starman, No. A-11-1056, 2012 WL 3870307 (Neb. App. Sept. 4,
      2012) (selected for posting to court Web site).
11	
      Folden v. State, 13 Neb. 328, 14 N.W. 412 (1882).
12	
      Id. at 330, 14 N.W. at 413.
                        Nebraska Advance Sheets
	                        GIBBONS RANCHES v. BAILEY	955
	                             Cite as 289 Neb. 949

stated: “While it is true that the consideration mentioned does
not fall within what is commonly understood by the term rent,
that is not at all important. Rent, properly speaking, is not
essential to a valid lease of land.”13 In that context, we inter-
pret our statement to be that monetary rent is not necessary.
Some 20 years later, citing Folden, we stated that “[r]ent is
not essential to a valid lease of land.”14 But that case involved
a situation in which the tenant remained in possession of the
leased premises even though his term had expired, and we rea-
soned that even if no definite agreement as to the amount of
rent had been reached, the law would imply a promise to pay
a reasonable rent.
   [8,9] To clarify the law in Nebraska, we now hold that when
an express lease agreement contemplates the payment of rent
in money, the amount of rent is an essential term of the agree-
ment. This conclusion appears to be generally accepted else-
where.15 And because rent is an essential term, an agreement to
agree on it in the future is not enforceable.16
                   (c) Ambiguous Contracts
   [10-13] In interpreting a contract, a court must first deter-
mine, as a matter of law, whether the contract is ambiguous.17
A contract is ambiguous when a word, phrase, or provision
in the contract has, or is susceptible of, at least two reason-
able but conflicting interpretations or meanings.18 When the
terms of a contract are clear, a court may not resort to rules
of construction, and the terms are to be accorded their plain
and ordinary meaning as an ordinary or reasonable per-
son would understand them.19 The fact that the parties have

13	
      Id.
14	
      Schickendantz v. Rincker, 75 Neb. 312, 315, 106 N.W. 441, 442 (1905).
15	
      See, 49 Am. Jur. 2d Landlord and Tenant § 22 (2006); 37 C.J.S. Frauds,
      Statute of § 135 (2008).
16	
      See, e.g., Gerhold Concrete Co. v. St. Paul Fire & Marine Ins., 269 Neb.
692, 695 N.W.2d 665 (2005).
17	
      Bedore v. Ranch Oil Co., 282 Neb. 553, 805 N.W.2d 68 (2011).
18	
      Beveridge v. Savage, supra note 2.
19	
      Coffey v. Planet Group, 287 Neb. 834, 845 N.W.2d 255 (2014).
    Nebraska Advance Sheets
956	289 NEBRASKA REPORTS

suggested opposing meanings of a disputed instrument does
not necessarily compel the conclusion that the instrument
is ambiguous.20
                         (d) Application
   Gibbons Ranches argues that the district court erred in
determining that the leases were unambiguous. According to
Gibbons Ranches, the provision requiring the parties to con-
duct an annual review of the rental rates and terms in January
of each year is ambiguous. We disagree.
   The rental rates and terms of the leases were subject to an
annual “review.” A definition of “review” is “a looking over or
examination with a view to amendment or improvement.”21 By
definition, a “review” is an examination. The examination may
lead to an agreement, but a requirement that the parties reach a
new agreement is not part of the commonly accepted meaning
of the term. We find no ambiguity in this regard.
   Gibbons Ranches asserts that the annual review provision is
ambiguous because it does not specify the consequence of the
parties’ failure to reach an agreement on the rental rates and
terms. But because a new agreement is not a necessary result
of the review, the rate currently in effect would continue in the
absence of an agreement to modify it. The absence of a specific
provision addressing the effect of a review without any change
to the contract did not introduce ambiguity.
   Gibbons Ranches also relies upon an opinion of this court
finding ambiguity in the word “financing,” which Gibbons
Ranches argues is comparable to “review.” In Quinn v.
Godfather’s Investments,22 the lease authorized the tenant
to terminate the contract if the tenant was unable to obtain
“‘financing’” for construction of contemplated improve-
ments. Although this court affirmed the trial court’s f­inding

20	
      Bedore v. Ranch Oil Co., supra note 17.
21	
      Webster’s Third New International Dictionary of the English Language,
      Unabridged 1944 (1993).
22	
      Quinn v. Godfather’s Investments, 213 Neb. 665, 667, 330 N.W.2d 921,
      923 (1983).
                         Nebraska Advance Sheets
	                        GIBBONS RANCHES v. BAILEY	957
	                             Cite as 289 Neb. 949

that “financing” was ambiguous, our decision ultimately
turned upon the trial court’s alternative finding that even if
a valid contract existed, the tenant made a good faith effort
to accomplish financing for construction of the improve-
ments. Gibbons Ranches’ reliance on the Quinn decision
is misplaced.
   The leases here bear similarities to the lease in T.V.
Transmission v. City of Lincoln.23 In that case, a contract for a
term of 20 years set forth a rental rate of $3 per pole per year.
The contract provided for adjustment of the rent:
         “The annual rental and/or expense deposit payable by
      [the lessee] under this agreement may be adjusted at any
      time after five (5) years from the date of this agreement
      upon the written request of any party hereto. In case of
      adjustment any new rental or expense deposit agreed
      upon shall continue in effect for five (5) years thereafter,
      at which time such rental and/or expense deposit shall
      again be subject to review and readjustment upon the
      written request of any party thereto.”24
Over 10 years into the contract, the lessor notified the lessee
that it wished to establish a new rental charge, but the par-
ties were unable to agree on a new rate. This court observed
that the contract did not specify what would happen if agree-
ment could not be reached on a new rental rate. We stated
that the modification provision was “nothing more than an
agreement to agree in the future” and that “[i]n the absence
of such a future agreement, the provision is of no effect and
is therefore unenforceable.”25 We stated that if there was no
future agreement, the contract would “continue for at least
20 years at the $3 rental specified upon execution.”26 We
reasoned that “[a]ny other interpretation would completely
ignore the clause providing for a minimum 20-year duration,

23	
      T.V. Transmission v. City of Lincoln, 220 Neb. 887, 374 N.W.2d 49 (1985).
24	
      Id. at 888-89, 374 N.W.2d at 52.
25	
      Id. at 892, 374 N.W.2d at 53-54.
26	
      Id. at 892, 374 N.W.2d at 54.
    Nebraska Advance Sheets
958	289 NEBRASKA REPORTS

as well as the default provision which specifically enumerates
when the contract can be terminated before the expiration of
that period.”27
   Similarly, the lease agreements in the instant appeals were
for 5-year terms and the specified rent was to apply to the
entire lease term, unless the parties agreed to modify the rent.
The leases set forth the rental rate for the first year, March
2011 to March 2012, and were clearly valid for that year. The
leases were also valid and enforceable for the 2012 crop year,
despite the change in rental rates, because the parties agreed
to a new rental rate for that year. But because the parties’
“review” did not result in an agreement on a new rate for 2013,
the leases continued at the last agreed-upon rate.
   [14] A reading of the contract as a whole supports our
conclusion that the contract was for a 5-year term rather than
an annual lease. A contract is viewed as a whole in order to
construe it.28 Although section 1 specified the initial rent for a
particular crop year, that section explicitly stated that the term
was for 5 years and that the final year of the contract would be
2015. Further, section 2 identified a set amount of “annual” rent
to be paid in two installments on “April 15” and “November
1” without any reference to a particular year. We conclude that
the rent specified in section 2 and all of the other terms in the
leases were to apply to the entire 5-year term unless the parties
agreed to alter the terms.
   We agree with the district court that the leases were for
terms of 5 years, but we make a slight modification to
its judgments. The district court adjudged that the “Farm
Lease Agreement is valid and enforceable through 2015.”
However, that statement did not take into account the pos-
sibility of changed circumstances after the date of judgment.
For example, if the tenants later defaulted in the payment of
rent, Gibbons Ranches would have grounds to terminate the
leases. Because the record on appeal discloses the situation
concerning enforcement of the leases from 2011 to 2013 only,

27	
      Id.
28	
      Gridiron Mgmt. Group v. Travelers Indemnity Co., 286 Neb. 901, 839
N.W.2d 324 (2013).
                      Nebraska Advance Sheets
	                      GIBBONS RANCHES v. BAILEY	959
	                           Cite as 289 Neb. 949

our decision regarding the enforceability of the leases does not
take into account any circumstances that may have changed
and that are not contained in our record.
                       2. Parol Evidence
   Gibbons Ranches also claims that the district court erred
in determining that the parol evidence rule applied to exclude
extrinsic evidence. It argues that the court should have con-
sidered trial testimony to ascertain the intent of the parties.
We disagree.
   [15,16] The general rule is that unless a contract is ambig­
uous, parol evidence cannot be used to vary its terms.29 An
unambiguous contract is not subject to interpretation or con-
struction, and in such a contract, the intention of the parties
must be determined from its contents alone.30 Because the
contract was not ambiguous, the district court did not err in
disregarding the testimony at trial.
                   3. Motions for New Trial
   Finally, Gibbons Ranches argues that the district court erred
in overruling its motions for new trial. It asserts that the court’s
declaratory judgments were contrary to the law and evidence
for the same reasons set forth in its previous arguments.
Because we conclude that the district court did not err with
respect to those issues, the court did not abuse its discretion in
overruling the motions for new trial.
                     VI. CONCLUSION
   We hold that rent is an essential term in an express lease
which contemplates the payment of monetary rent and that
the leases in the case before us specified an amount of rent
for the 5-year term of the leases—an amount that could be
modified by further agreement of the parties. Because the
terms of the leases were clear and unambiguous, the court
properly excluded parol evidence regarding the intentions of
the parties. We modify a sentence in each of the district court’s

29	
      See Sack Bros. v. Tri-Valley Co-op, 260 Neb. 312, 616 N.W.2d 786
      (2000).
30	
      See T.V. Transmission v. City of Lincoln, supra note 23.
    Nebraska Advance Sheets
960	289 NEBRASKA REPORTS

declaratory judgments by adding a clause at the beginning of
the sentence, such that the modified sentence states, “Except
for a change in circumstances arising after the date of this
judgment, this Farm Lease Agreement is valid and enforceable
through 2015.” As so modified, we affirm the judgments of the
district court.
                                      Affirmed as modified.

        Paul M. Schwarz, appellant, v. K risti L. Schwarz,
          now known as K risti L. H endrickson, appellee.
                                    ___ N.W.2d ___

                       Filed January 23, 2015.     No. S-14-122.

 1.	 Modification of Decree: Child Support. Modification of child support is
     entrusted to the discretion of the trial court.
 2.	 Modification of Decree: Child Support: Appeal and Error. An appellate court
     reviews proceedings for modification of child support de novo on the record and
     will affirm the judgment of the trial court absent an abuse of discretion.
 3.	 Judges: Words and Phrases. A judicial abuse of discretion exists when reasons
     or rulings of a trial judge are clearly untenable, unfairly depriving a litigant of a
     substantial right and denying just results in matters submitted for disposition.
 4.	 Child Support: Rules of the Supreme Court. Interpretation of the Nebraska
     Child Support Guidelines presents a question of law.
 5.	 Judgments: Appeal and Error. An appellate court resolves questions of law
     independently of the lower court’s conclusion.
 6.	 Courts: Child Support. The trial court has discretion to choose whether and
     how to calculate a deduction for subsequent children.
 7.	 Child Support. No precise mathematical formula exists for calculating child
     support when subsequent children are involved, but the court must perform
     the calculation in a manner that does not benefit one family at the expense of
     the other.
 8.	 Modification of Decree: Child Support: Proof. The party requesting a deduc-
     tion for his or her obligation to support subsequent children bears the burden of
     providing evidence of the obligation, including the income of the other parent of
     the child.
 9.	 Child Support: Appeal and Error. A party may raise two separate issues
     on appeal when a trial court allows a deduction for the obligor’s support of
     subsequent children: (1) whether the court abused its discretion by allowing
     a deduction and (2) whether the court’s method of calculation was an abuse
     of discretion.