John Pavone and Signature Management Group, L.L.C. v. Gerald M. Kirke and Wild Rose Entertainment, L.L.C. , 2011 Iowa Sup. LEXIS 46 ( 2011 )

IN THE SUPREME COURT OF IOWA
No. 08–0180
Filed July 1, 2011
JOHN PAVONE and SIGNATURE
MANAGEMENT GROUP, L.L.C.,
Appellees,
vs.
GERALD M. KIRKE and WILD ROSE
ENTERTAINMENT, L.L.C.,
Appellants.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Polk County, Arthur E.
Gamble, Judge.
The owners and operators of a casino appeal from an adverse
district court judgment entered against them on a contract claim.
COURT OF APPEALS DECISION VACATED; DISTRICT COURT
JUDGMENT AFFIRMED.
Mark McCormick, David Swinton, and David W. Nelmark of Belin
McCormick, P.C. (trial and appellate counsel), Des Moines, Brent B.
Green and Mariclare Thinnes Culver of Duncan, Green, Brown &
Langeness (appellate counsel), Des Moines, and Thomas D. Waterman
(until withdrawal) of Lane & Waterman LLP (appellate counsel),
Davenport, for appellants.
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Maurice B. Nieland of Rawlings, Nieland, Killinger, Ellwanger,
Jacobs, Mohrhauser & Nelson, L.L.P., Sioux City, Stanley E. Munger and
Jay E. Denne of Munger, Reinschmidt & Denne, L.L.P., Sioux City, and
Glenn L. Norris of Hawkins & Norris, P.C., Des Moines, for appellees.
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WIGGINS, Justice.
A district court jury determined the owners and operators of a
casino breached a management agreement and awarded damages to the
prospective management team. The owners and operators appealed the
verdict. We transferred the case to the court of appeals. The court of
appeals reversed the judgment of the district court. On further review,
we find the district court did not commit any error in the trial of the
matter. Accordingly, we vacate the decision of the court of appeals and
affirm the judgment of the district court.
I. Facts.
In 2003 John Pavone returned to Iowa with the intent to manage
casinos through his company, Signature Management Group, L.L.C.
(SMG). Pavone had extensive experience in the gaming and
hospitality/hotel industries. At about the same time, Gerald Kirke and
Dr. Michael Richards formed Wild Rose Entertainment, L.L.C. (Wild
Rose), with the intent to obtain gaming licenses, and subsequently,
develop and own new casinos throughout Iowa. Prior to forming Wild
Rose, Kirke and Richards had no experience in the gaming industry.
On April 29, 2004, Pavone entered into a consulting agreement
with Wild Rose to assist Wild Rose in obtaining gaming licenses in the
counties surrounding the Des Moines area. The consulting agreement
also provided, if Wild Rose obtained a gaming license, Wild Rose would
engage in good faith negotiations with SMG for SMG to manage the newly
developed casino. Thus, with Pavone’s assistance, Wild Rose turned its
focus to obtaining gaming licenses in the state of Iowa.
One city that was interested in providing gaming was the city of
Ottumwa. On July 15, Pavone sent an email to Kirke asking to meet
with him and discuss their future business relationship should the
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Ottumwa nonprofit organization seeking the license choose to collaborate
with Wild Rose. Subsequently, on July 19, Pavone met with Kirke and
Richards at a restaurant Kirke owned, and they discussed SMG’s future
business relationship with Wild Rose. Pavone claims that at this meeting
the parties generally agreed SMG would manage all casinos Wild Rose
operated. Kirke admits the parties discussed an eventual partnership
but claims the specific terms of an agreement were not discussed.
After this meeting, Pavone met with his attorney, Ryan Ross, and
instructed him to contact Wild Rose’s attorney, Jim Krambeck, about
memorializing the parties’ agreement. Subsequently, on July 28, Ross
sent Krambeck a number of “discussion points” which he believed were
the terms the parties had agreed to and asked Krambeck to confirm the
generally agreed upon terms so he could begin to memorialize the
agreement. One of the discussion points included a right of first refusal
in favor of SMG with regard to managing the Ottumwa casino or any
other casino for which Wild Rose obtained a gaming license.
On August 3, Wild Rose Ottumwa (a subsidiary of Wild Rose) and
the Ottumwa nonprofit organization executed three agreements—a
memorandum of intent, a gaming development agreement, and an
operator’s contract. Within the “scope of work” portion of the
memorandum of intent it states, “Wild Rose shall manage the facility for
a fee equal to 2% of revenue plus 10% of operating income, not to exceed
4% of revenue pursuant to a management agreement.” In early August,
Pavone learned of these agreements and was concerned that Wild Rose
had named itself manager of the Ottumwa casino rather than SMG.
Pavone discussed his concerns with Kirke and Richards and was told not
to worry because the parties would execute an agreement ensuring SMG
would manage the Ottumwa casino.
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Throughout August, September, and October, Ross and Krambeck
regularly conversed and exchanged numerous drafts of a proposed
agreement between SMG and Wild Rose. Ross’s first draft of the
agreement was entitled “Letter of Intent.” The draft detailed both
Pavone’s provision of future consulting services to Wild Rose as well as
Pavone’s management of the Ottumwa casino, should Wild Rose obtain a
gaming license. On September 20, Krambeck suggested the parties
execute a straightforward consulting agreement as well as a separate
letter of intent or option agreement pertaining to the future ownership
and management arrangements, should Wild Rose receive any gaming
licenses. Krambeck also provided another draft of the agreement with
his corrections simply entitled “Agreement.” The parties never executed
two separate agreements, and on October 22, 2004, the parties executed
a document, entitled “Agreement,” that is the subject of this lawsuit. The
parties to the agreement were SMG, Wild Rose, Pavone, and Kirke.
The October 22 agreement states the material terms and
conditions by which Pavone will provide consulting services to Wild Rose
through the opening of a casino in Ottumwa, as well as the ownership
and management relationship between the parties upon the opening of
the Ottumwa casino and other casino projects within the state of Iowa.
The first two paragraphs of the agreement concern the consulting
services Pavone is to provide Wild Rose prior to a license award for the
Ottumwa casino and through the opening of the Ottumwa casino.
Paragraph three of the October agreement states in pertinent part:
3. Ownership in Ottumwa Project and Management
Entity. If Wild Rose is awarded a license to operate a casino
in Ottumwa, Iowa, then upon completion of the development
of the Ottumwa Project, the parties shall grant and convey
an interest to each other as follows:
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A. Management Agreement. Upon completion of the
Ottumwa Project, Wild Rose shall enter into an
exclusive management agreement with an entity to be
solely owned by Pavone (subject to rights of Wild Rose
under paragraph C below) for the management of the
Ottumwa Project. This Management Agreement shall
provide for an annual management fee equal to four
percent (4%) of the Adjusted Gross Revenue of the
Ottumwa Project. The terms of the Management
Agreement shall be similar to the terms of the gaming
development agreement between Wild Rose and the
City of Ottumwa, Iowa.
Paragraph five of the October agreement provides:
5. Future Casino Development Opportunities.
A. First Look and Good Faith Negotiation as to Future
Casino Development and Management Opportunities.
i. If Wild Rose has the opportunity to develop or
operate any other casino in Iowa, Wild Rose will use
good faith best efforts to involve SMG when the
opportunity is first known, and to negotiate in good
faith a Management Agreement consistent with the
terms outlined in Wild Rose’s gaming development
agreement with the City of Ottumwa, Iowa. It being
understood that the award of any management
agreement must also be satisfactory to third party
community and non-profit organizations. And it being
further understood that any casino in the Central Iowa
area will likely require the involvement of a
management company, other than SMG.
Ross testified the October agreement established a binding
consulting and management relationship and established a good-faith
relationship between the parties for future projects within Iowa.
Conversely, Krambeck testified the October agreement established a
binding consulting agreement and a nonbinding letter of intent
concerning the parties’ relationship in connection with any future
gaming opportunities. Whatever the parties’ true intent, Wild Rose
placed the October 22 agreement within its application to the Iowa
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Racing and Gaming Commission (IRGC) for a gaming license in
Ottumwa.
On November 2, 2004, the referendum to allow gaming in the
counties surrounding Des Moines failed. The next morning, Pavone met
with Kirke, Richards, and others to discuss their business strategy going
forward. They collectively decided to attempt to obtain a gaming license
in Emmetsburg in addition to Ottumwa. Moreover, Kirke and Richards
told Pavone that the October agreement, which originally only covered
the Ottumwa casino, would also apply to the Emmetsburg casino.
Accordingly, Wild Rose placed the October 22 agreement in its
application to the IRGC for a gaming license in Emmetsburg. Kirke
claims Wild Rose placed the October agreement in the Emmetsburg
application merely to demonstrate to the IRGC that it had a consulting
agreement with SMG and intended to enter into a management
agreement with SMG for the Emmetsburg casino at a later time.
Subsequently, on November 10, Pavone and Wild Rose submitted
its Ottumwa and Emmetsburg applications to the IRGC. Both of the
applications represented under oath that SMG would be managing the
Ottumwa and Emmetsburg casinos by stating:
The facility operations will be managed by Signature
Management Group, L.L.C. (SMG). John Pavone, founder
and president of SMG, has been a proactive leader in the
Iowa gaming industry since 1989. He was co-founder and
former president of the Iowa Riverboat Association and
served as Iowa’s representative for the American Gaming
Association. Pavone will be responsible for ensuring that the
resort is built and managed with adherence to the highest
standards in the industry for quality and operations.
On December 8, an accountant for the Division of Criminal
Investigation (DCI), in connection with doing a background check with
the IRGC, sent a letter to DCI Special Agent David Button detailing a
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number of questions Wild Rose needed to answer for the accountant to
complete his analysis of Wild Rose’s Ottumwa and Emmetsburg
applications. One of the accountant’s questions stated, “Agreement with
Pavone and Signature Management Group, LLC (SMG) makes reference
to the Ottumwa project not Emmetsburg. I assume this is just an
oversight in assembling the two applications. Need to get copy of
Emmetsburg Agreement with SMG.” Richards received this document
and in response to this question, he claims he sent a copy of the
October 22, 2004 agreement to Button.
On January 28, 2005, Button sent a follow-up email to Richards
stating:
I’m responsible for the class D background on Signature Mgt
for the DCI. I’m in possession of the agreement between
Wild Rose and SMG for the Ottumwa project [i.e., the
October 22, 2004 Agreement], but do not have the agreement
for the Emmetsburg project. Are the agreements identical?
For my report, I will need a copy of the agreement for
Emmetsburg. . . .
Richards forwarded this email to Pavone and discussed it with him. As a
result of this conversation, Richards and Pavone agreed to provide the
DCI with “additional information.” Subsequently, Pavone asked Ross to
begin conversing with Krambeck about drafting such a document.
Moreover, Button never received a response from Wild Rose with regard
to his January 28 email.
On February 4, Ross emailed Krambeck:
John Pavone contacted me today, it appears that he and
Mike [Richards] agreed that Signature and Wild Rose will
enter into a new letter of intent for Emmetsburg using the
same form as the letter of intent on file with DCI as to the
Ottumwa property (signed by the parties on 10-2[2]-04).
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I anticipate that there would be date changes and a few
other minor changes, but that the existing letter of intent is
to [ ] otherwise be fine for Emmetsburg.
....
John has asked me to prepare a draft management
agreement for the parties review next week. I will get
something put together and get you a copy to look at.
Krambeck never revised the October 22, 2004 agreement to apply to
Emmetsburg. Subsequently on February 21, 2005, Ross drafted a more
detailed management agreement using an Isle of Capri casino
management agreement as a template and forwarded the draft to
Krambeck for his review. A few days later, Krambeck responded to the
draft with numerous discussion points, indicating Wild Rose was not
pleased with a number of items in the agreement.
On February 16, the IRGC held an informational meeting for the
gaming license applicants about further information the applicants
needed to provide to the IRGC. At this meeting, Wild Rose was asked
whether they had a management agreement. Wild Rose responded, “[W]e
are negotiating it.” Moreover, on March 2, Wild Rose sent a letter to the
IRGC stating:
The management agreement between Signature Management
Group and Wild Rose Entertainment is currently under
review with our attorneys and will be provided once it has
been executed between the parties. As stated in the license
applications, this agreement will be consistent with the
terms as reflected within the agreement dated October 22,
200[4] and will be applicable to both projects managed for
Wild Rose Entertainment in Ottumwa and Emmetsburg by
the Signature Management Group.
On March 14, Ross sent Krambeck a second draft of the agreement
addressing most of Wild Rose’s initial concerns and complaints. On
March 18, Ross, Pavone, Richards, and Krambeck held a conference call
to discuss the length of the management agreement and the amount of
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payment SMG was to receive. Ross felt the parties were close to an
agreement at this time. However, as the negotiations continued to
progress through March and April, Wild Rose allegedly continued to
demand more and more concessions from Pavone. At trial, Pavone
described the negotiations deteriorating as follows:
My goal was to satisfy whatever DCI needed and so that
Dr. Richards and I would get this issue moving forward, and
then it became kind of a downhill slide on a, quote,
renegotiation of everything, and that became a very, very
long and very painful process for us of not understanding
what was happening.
Sometime between late January and late March, Wild Rose hired
Kevin Preston as an operations consultant. Preston had extensive
experience in the gaming industry and had experience as a general
manager of a casino. Ross and Pavone learned that while they were
negotiating the management agreement, Wild Rose was also negotiating a
general manager agreement with Preston. Kirke and Richards claim that
if they received a gaming license for the Ottumwa casino, they planned to
hire Preston as its general manager, who would in turn report to
Pavone/SMG as the company charged with the overall management of
the facilities. After Pavone learned Wild Rose was planning on hiring
Preston as the Ottumwa casino’s general manager, he confronted Kirke
and Richards about it in a meeting. At some point during the meeting,
Kirke allegedly asked Pavone, “[W]hy should I pay you 4 percent if I could
get somebody to do it for $160,000 a year and 2 percent?” From this
point on, Pavone felt Wild Rose was attempting to get out of the
October 22, 2004 agreement and squeeze Pavone/SMG out of the
management deal. As the negotiations wore on, Ross also felt Wild Rose
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was stalling until after it received a gaming license from the IRGC, after
which they could sever their ties with Pavone/SMG.
By late April 2005, Ross and Pavone began to worry that they had
made misrepresentations to the IRGC about who was going to manage
the Ottumwa and Emmetsburg facilities. Accordingly, Pavone told Ross
that he felt he needed to notify the IRGC that the parties did not, as of
that date, have a management agreement.
Ross notified Krambeck that Pavone would be contacting the IRGC
and informing the IRGC the parties’ had not yet renegotiated a
management agreement for the Ottumwa and Emmetsburg facilities.
Subsequently, on May 3, 2005, Pavone sent a letter to the IRGC stating:
This correspondence is in response to the request by the
IRGC staff for an executed copy of the management
agreement between Wild Rose Ottumwa, LLC and the
Signature Management Group, L.L.C. for casino operations
in Emmetsburg Iowa and Ottumwa Iowa. During our
meeting with IRGC Staff on February 16th 2005, we were
asked to provide the commission staff with an executed copy
of the management agreement consistent with the terms and
conditions as outlined between the parties within the letter
of intent dated October 22nd 2004. This agreement is
contained within our license application as submitted to the
IRGC.
After several weeks of negotiations the parties have
unfortunately failed to reach an agreement between the
parties. Signature Management Group, L.L.C. remains
hopeful that the parties may be able to reach an agreement
that will be acceptable to both parties however given the
state of current negotiations; I would be less than candid if
Signature did not express its doubts as to the successful
resolution of this matter.
I am proud of my relationship with the IRGC and my many
years of service within the Iowa gaming and legislative
communities and certainly hope that the current situation
with Wild Rose Ottumwa, LLC will not affect my ongoing
ability to continue as a valued member of the Iowa gaming
and legislative families.
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The IRGC viewed this letter as a notification that they would not be
receiving a management agreement from Wild Rose to review before they
made their gaming license determinations. Kirke believed Pavone sent
this letter in an attempt to prevent Wild Rose from receiving gaming
licenses for both the Ottumwa and Emmetsburg casinos. In response to
this letter, the parties suspended negotiations on a management
agreement until after the IRGC awarded the gaming licenses.
On March 11, the IRGC announced which applicants would receive
gaming licenses. Wild Rose did not receive a gaming license for
Ottumwa, but was awarded a license for the development of the
Emmetsburg casino. Subsequently, on May 24, Wild Rose sent a letter
to Pavone terminating the October 22, 2004 agreement and any future
relationship between the parties. The Emmetsburg casino opened at the
end of May 2006. At the time of the casino’s opening, Wild Rose
Entertainment, L.L.C. was the manager of the facilities and Preston was
the acting general manager.
II. Procedural History.
On March 31, 2006, Pavone and SMG filed a civil action against
Kirke and Wild Rose alleging they breached the October 22, 2004
agreement, as well as numerous other claims. The case proceeded to a
jury trial, and after SMG completed its case-in-chief, Kirke and Wild Rose
filed a motion for a directed verdict. In ruling on the motion, the district
court allowed the breach of contract claims pertaining to paragraphs 3A
and 5A of the October agreement to be presented to the jury, but
sustained Kirke’s and Wild Rose’s motion on Pavone’s and SMG’s
remaining claims. After Kirke’s and Wild Rose’s case-in-chief, they
renewed their motion for a directed verdict on the remaining claims,
which the court overruled.
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On September 6, 2007, the jury returned a verdict finding Wild
Rose breached both paragraphs 3A and 5A of the October agreement.
The jury awarded Pavone and SMG ten million dollars in damages. Kirke
and Wild Rose filed a motion for judgment notwithstanding the verdict or
for a new trial. On December 31, the district court overruled this
motion.
Kirke and Wild Rose filed a notice of appeal. We transferred the
case to the court of appeals. The court of appeals reversed the judgment
in favor of Pavone and SMG and remanded the case for entry of judgment
in favor of Kirke and Wild Rose. The court of appeals found, as a matter
of law, paragraph 3A of the October agreement constituted an
unenforceable agreement to agree and that the record was devoid of any
evidence that Kirke and Wild Rose breached its contractual duty of good
faith negotiations under paragraph 5A of the October agreement.
Consequently, the court of appeals concluded the district court erred in
overruling Kirke’s and Wild Rose’s motion for a directed verdict on
Pavone’s and SMG’s paragraphs 3A and 5A breach of contract claims.
Pavone and SMG filed an application for further review, which we
granted.
III. Issues Raised on Appeal.
Kirke and Wild Rose raise numerous issues on appeal. They are:
(1) whether the district court erred in overruling Kirke’s and Wild Rose’s
motion for directed verdict on Pavone’s and SMG’s paragraph 3A breach
of contract claim; (2) whether the statute of frauds precluded testimony
the parties orally agreed paragraph 3A of the contract would apply to the
Emmetsburg casino; (3) whether the district court erred in overruling
Kirke’s and Wild Rose’s motion for directed verdict on Pavone’s and
SMG’s paragraph 5A breach of contract claim; (4) whether the district
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court erred in instructing the jury Pavone and SMG could recover
expectation damages on its paragraph 5A breach of contract claim, as
opposed to reliance damages; (5) whether Pavone’s and SMG’s claims are
barred because the IRGC never approved a management agreement
between the parties; (6) whether the district court erred in allowing the
jury to award damages for a period of as much as thirty years because
the extension of the contract for such a period was speculative; and (7)
whether the district court erred in denying Kirke’s and Wild Rose’s
motion for a new trial because the jury’s verdict was inconsistent.
IV. Whether the District Court Erred in Overruling Kirke’s and
Wild Rose’s Motion for Directed Verdict on Pavone’s and SMG’s
Paragraph 3A Breach of Contract Claim.
A. Scope of Review. We review a district court’s ruling on a
motion for directed verdict for correction of errors at law. Deboom v.
Raining Rose, Inc., 772 N.W.2d 1, 5 (Iowa 2009). “A directed verdict is
required ‘only if there was no substantial evidence to support the
elements of the plaintiff’s claim.’ ” Id. (quoting Bellville v. Farm Bureau
Mut. Ins. Co., 702 N.W.2d 468, 472 (Iowa 2005)). Evidence is substantial
“[w]hen reasonable minds would accept the evidence as adequate to
reach the same findings.” Easton v. Howard, 751 N.W.2d 1, 5 (Iowa
2008). “Where reasonable minds could differ on an issue, directed
verdict is improper and the case must go to the jury.” Stover v. Lakeland
Square Owners Ass’n, 434 N.W.2d 866, 873 (Iowa 1989). Thus, our role
is to determine whether the trial court correctly determined if there was
substantial evidence to submit the issue to the jury. Easton, 751 N.W.2d
at 5. In doing so, we must “view the evidence in the light most favorable
to the nonmoving party and take into consideration all reasonable
inferences that could be fairly made by the jury.” Id.15
Our review is limited to those grounds raised in the moving party’s
motion for a directed verdict. Royal Indem. Co. v. Factory Mut. Ins. Co.,
786 N.W.2d 839, 844 (Iowa 2010). “Error must be raised with some
specificity in a directed verdict motion.” Id. at 845. Furthermore, “[a]
motion for judgment notwithstanding the verdict must stand on grounds
raised in the directed verdict motion.” Id. Thus, on appeal from such
judgment, our review is limited to those grounds raised in the directed
verdict motion. Id.B. Analysis. The district court instructed the jury on the law the
jury should use to determine if the parties entered into a binding
agreement. The instructions provided:
Instruction No. 10
Concerning their claim for breach of contract, plaintiffs
must prove all of the following numbered propositions:
1. The existence of a contract.
2. The terms of the contract.
3. The plaintiffs have done what the contract required.
4. The defendants breached the contract in one or
both of the following ways:
a. In failing to enter into and perform a
management agreement of the Emmetsburg
casino under paragraph 3(A) of the October 22,
2004 agreement.
b. In failing to use good faith best efforts to
negotiate a management agreement for the
Emmetsburg casino under paragraph 5(A) of
the October 22, 2004 agreement.
5. The amount of any damage defendants have
caused.
If the plaintiffs have failed to prove any of these
numbered propositions, the plaintiffs are not entitled to
damages. If the plaintiffs have proved all of these numbered
propositions, they are entitled to damages in some amount.
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Instruction No. 11
The existence of a binding contract requires a meeting
of the minds on the material terms. This means the parties
must agree upon the same things in the same sense.
“Material” terms are those that are significant to the
contract. You are to determine if a contract existed from the
words and acts of the parties, together with all reasonable
inferences you may draw from the surrounding
circumstances.
A binding contract may be oral or written or may be
inferred from the conduct of the parties. Plaintiffs contend
Paragraph 3(A) of the October 22, 2004 agreement was orally
modified to include Emmetsburg and that Paragraph 5(A)
includes Emmetsburg. Neither real nor apparent intention
that a promise be legally binding is essential to the formation
of a contract, but an intention that a promise shall not be
binding prevents the formation of a contract. An expression
of willingness to enter into a contract is not an offer if the
party to whom it is addressed knows or has reason to know
that the person making it does not intend to be bound until
the conclusion of further negotiations. Manifestations of
assent that are sufficient to form a contract will not be
prevented from being binding by the fact that the parties also
state an intention to prepare a written memorial of their
agreement; but the circumstances may show that the
agreements are preliminary negotiations.
You shall also consider whether the parties intended to
be bound prior to the execution of a separate formal written
management contract. The factors you may consider as to
whether the parties intended to be bound before the
execution of a separate, formal written management contract
include but are not limited to the following:
1. Whether the contract is of a class usually found to
be in writing.
2. Whether it is of a type needing a formal writing for
its full expression.
3. Whether it has few or many details.
4. Whether the amount involved is large or small.
5. Whether the contract is common or unusual.
6. Whether all details have been agreed upon or some
remain unresolved.
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7. Whether the negotiations show a further writing
was discussed or contemplated.
Instruction No. 12
Wild Rose claims that sections 3(A) and 5(A) of the
October 22, 2004 agreement are merely non-binding
agreements to agree. In determining whether the October
agreement is a binding contract or merely a non-binding
agreement to agree, you shall consider the following
principles:
A binding contract must contain mutual assent. The
mode of assent is termed offer and acceptance. An offer is a
manifestation of willingness to enter into a bargain. A
binding contract requires acceptance of the offer.
Acceptance of the offer is indicated by a manifestation of
assent to the terms of the offer made by the party to whom it
is addressed in a manner invited or required by the offer.
Mutual assent is based on objective evidence, not the hidden
intent of the parties.
A binding contract generally does not exist when the
parties agree to a contract on a basis to be settled in the
future. An agreement to agree to enter into a contract is of
no effect unless all of the material terms and conditions are
agreed on and no material terms and conditions are left to
future negotiations.
However, a contract need not contain definitely and
specifically every fact in detail to which the parties may
agree. The contract need only be certain and unequivocal in
its material terms. Absolute certainly is not required. Only
reasonable certainty is necessary.
The jury must determine whether the October
agreement contained mutual assent with reasonable
certainty to all of its material terms or whether it is merely a
non-binding agreement to agree on a basis to be settled in
future negotiations.
Instruction No. 13
Parties may have a meeting of the minds as to the
material terms of a portion or portions of a contract but not
as to others. The fact that a meeting of the minds occurred
as to the material terms of some portion or portions of a
contract does not mean that there was a meeting of the
minds as to all portions of the alleged contract.
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You may not award damages based on a section of an
alleged contract as to which you do not find that there was a
meeting of the minds.
Instruction No. 14
In determining the terms of the contract, you may
consider the following:
1. The intent of the parties along with a reasonable
application of the surrounding circumstances.
2. The intent expressed in the language used prevails
over any secret intention of either party.
3. The intent may be shown by the practical
construction of a contract by the parties and by the
surrounding circumstances.
4. You must attempt to give meaning to all language
of a contract. Because an agreement is to be interpreted as
a whole, assume that all of the language is necessary. An
interpretation which gives a reasonable, effective meaning to
all terms is preferred to an interpretation which leaves a part
of the contract unreasonable or meaningless.
5. The meaning of a contract is the interpretation a
reasonable person would give it if they were acquainted with
the circumstances both before and at the time the contract
was made.
6. Ambiguous language in a written contract is
interpreted against the party who selected it.
7. Where general and specific terms in the contract
refer to the same subject, the specific terms control.
Kirke and Wild Rose failed to raise on appeal any error in the
instructions given to the jury on the breach of contract claims.
Therefore, right or wrong, the instructions become the law of the case.
Northrup v. Miles Homes, Inc., 204 N.W.2d 850, 856 (Iowa 1973).
On our review of the record, we find under the instructions given to
the jury, that substantial evidence is contained in the record to support
the jury’s findings that the October 22, 2004 agreement is a binding
management agreement between the parties. A jury could find that the
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agreement contains all the material terms and that the parties intended
to be bound by those terms. The agreement identified the parties as
Pavone, SMG, Wild Rose, and Kirke. The purpose of the agreement was
for Pavone and SMG to provide management services to Kirke and Wild
Rose for the Emmetsburg casino. The agreement specified that Wild
Rose would own the casino. The duration of the agreement, through the
incorporation by reference of the Ottumwa Gaming Development
Agreement, was for an initial term of ten years, which could be extended
for three-year terms at the option of Wild Rose for a term of up to thirty
years. The agreement set forth the compensation of the manager would
be four percent of adjusted gross revenue together with an equity swap
and reciprocal buy-sell agreements. Additionally, the agreement
contained a clause allowing termination for cause.
Finally, the jury could have found Kirke’s and Wild Rose’s
manifestation of assent for the agreement in the application filed with the
IRGC. The application publicly acknowledged “[t]he facility operations
will be managed by Signature Management Group, LLC. . . . Pavone will
[be] responsible for ensuring the resort is built and managed with
adherence to the highest standards in the industry for quality and
operations.” Even though Kirke and Wild Rose backed off its
manifestation of assent for an Emmetsburg management agreement
when pressed, a reasonable person could conclude they had agreed to
the Emmetsburg deal when it first communicated its deal to the
commission and later reneged by attempting to negotiate new terms.
It is true that Kirke and Wild Rose presented evidence that this
agreement was only an agreement to agree. Kirke and Wild Rose relied
heavily on a letter Pavone wrote to the IRGC on May 3, 2005, indicating
the parties did not have a management agreement as of May 3, 2005. As
20
did the district court, we do not view this one letter to be dispositive of
this issue. We must consider the record as a whole in the light most
favorable to the nonmoving party and take into consideration all
reasonable inferences that could be fairly made by the jury when
determining if substantial evidence supports a verdict. Easton, 751
N.W.2d at 5. We agree with the district court, when it overruled Kirke’s
and Wild Rose’s posttrial motion and stated:
A reasonable finder of fact could conclude that Wild Rose
agreed to enter into and perform a management agreement
with Pavone on these terms and that no other terms were
essential to the transaction. As Pavone puts it, Wild Rose
was going to own and Pavone was going to manage. Wild
Rose later determined it wanted concessions from plaintiff.
For example, Wild Rose wanted the ability to hire and fire
key management employees. This is evidenced by the fact
Gary Kirke hired Kevin Preston as general manager of the
casino without consulting Pavone. However, a reasonable
jury could conclude that Pavone’s agreement to manage the
casino addressed this issue. A jury could reasonably
conclude that the authority to manage the casino included
the authority to control the hiring and termination of key
management employees. A reasonable finder of fact could
conclude that when Pavone refused to surrender control of
management employees to the owner, the defendants refused
to enter into and perform a management agreement on the
material terms set forth in the October Agreement thereby
breaching paragraph 3(A) of the contract. This was a
legitimate jury question. Defendants are not entitled to
judgment notwithstanding the verdict.
In other words, the jury could have decided from this record that
the parties had a binding contract as of October 22; that Kirke and Wild
Rose reneged on its contractual obligations and sought to renegotiate the
deal; and that when Pavone realized that Kirke and Wild Rose reneged
and would not enter into a formal agreement, Pavone informed the IRGC
that, as of May 3, the parties did not have an agreement due to Kirke’s
and Wild Rose’s failure to honor the October 22 agreement. As Pavone’s
letter stated, the application as filed with the IRGC stated that Pavone
21
and SMG were going to manage the Emmetsburg casino and the
October 22 agreement was the management agreement the parties
agreed to follow. In order to avoid any misrepresentations in the original
application, Pavone wrote the May 3 letter to inform the IRGC that Kirke
and Wild Rose would no longer abide by the October 22 agreement and
that the IRGC should be aware of that change of circumstances. In the
context of the record as a whole, the jury was not required to construe
the May 3 letter to mean the parties never had a management agreement.
For these reasons, we affirm the decision of the district court and
vacate the decision of the court of appeals on this issue.
V. Whether the Statute of Frauds Precluded Testimony the
Parties Orally Agreed Paragraph 3A of the Contract Would Apply to
the Emmetsburg Casino.
A. Scope of Review. Kirke and Wild Rose argue the statute of
frauds precluded Pavone’s testimony that the parties orally agreed
paragraph 3A of the contract would apply to the Emmetsburg casino.
“We review a decision by the district court to admit oral evidence of a
contract under an exception to the statute of frauds for correction of
errors at law.” Kolkman v. Roth, 656 N.W.2d 148, 151 (Iowa 2003).
B. Analysis. The district court overruled the statute of fraud
objections, finding the statute of frauds did not apply because the
decision to allow Pavone and SMG to manage the Emmetsburg casino
could be performed within one year of its making, or alternatively, the
statute of frauds was satisfied because there were written affirmations of
the parties’ oral agreement.
On appeal, Kirke and Wild Rose argue the October agreement was
for a fixed period of more than one year, bringing it within the statute of
22
frauds. Wild Rose also argues the writings identified by the court were
not sufficient to satisfy the statute of frauds.
Iowa’s statute of frauds provides:
Except when otherwise specially provided, no evidence
of the following enumerated contracts is competent, unless it
be in writing and signed by the party charged or by the
party’s authorized agent:
....
4. Those that are not to be performed within one year
from the making thereof.
Iowa Code § 622.32 (2003). “The Iowa statute of frauds does not render
oral promises invalid. Rather, the statute is a rule of evidence that
renders incompetent oral proof of such promises.” Olson v. Nextel
Partners, Inc., 317 F. Supp. 2d 972, 978 (S.D. Iowa 2004).
In deciding whether a particular oral contract is
governed by the [performance within one year] rule, the
question is not whether performance must actually be
completed within a year but whether it would be possible to
perform the contract within that time frame. Put another
way, “[c]ontracts of uncertain duration are simply excluded;
the provision covers only those contracts whose performance
cannot possibly be completed within a year.”
Garland v. Branstad, 648 N.W.2d 65, 71 (Iowa 2002) (citations omitted)
(quoting Restatement (Second) of Contracts § 130 cmt. a, at 328 (1981));
accord Johnson v. Ward, 265 N.W.2d 746, 747 (Iowa 1978).
First, we must determine whether the statute of frauds applies to
this case. Kirke and Wild Rose claim the statute of frauds applies
because the October agreement could not possibly be performed within
one year. However, they are focused on the wrong agreement. The
agreement at issue is the oral agreement to modify the October
agreement to apply to the Emmetsburg casino, not the October
agreement itself. It is clear that this oral modification agreement was
23
possible of being performed within one year. Moreover, the fact that the
October agreement was included within the Emmetsburg application on
November 10, 2004, is strong evidence that this oral agreement was, in
fact, performed a few days after its making.
Thus, we conclude the oral modification agreement between the
parties falls outside the scope of the statute of frauds because it was
capable of being performed within one year.
VI. Whether the District Court Erred in Overruling Kirke’s and
Wild Rose’s Motion for Directed Verdict on Pavone’s and SMG’s
Paragraph 5A Breach-of-Contract Claim.
A. Scope of Review. The basis for Kirke’s and Wild Rose’s motion
for directed verdict was that there was insufficient evidence to support a
finding Kirke and Wild Rose failed to negotiate in good faith under
paragraph 5A. Thus, the scope of review is the same as in division IV of
this opinion.
B. Analysis. The court instructed the jury on this issue as
follows:
Paragraph 5(A) of the October 22, 2004 agreement
imposes upon the defendants a duty of good faith in the
negotiation of a management agreement for future casino
developments including Emmetsburg. A party breaches a
duty of good faith by violating community standards of
decency, fairness, and reasonableness.
The fact the parties may have failed to reach an
agreement as to material terms of a management contract
regarding Emmetsburg other than those terms the plaintiffs
contend were required by Paragraph 5(A) of the October
agreement does not necessarily mean that the defendants
acted in bad faith.
You shall consider all of the surrounding facts and
circumstances in determining whether the defendants
breached a duty of good faith.
24
Kirke and Wild Rose did not appeal the instruction. Accordingly, it is the
law of the case. Northrup, 204 N.W.2d at 856.
Viewing the evidence in the light most favorable to Pavone and
SMG under the instructions given, and taking into consideration all
reasonable inferences that could be made by the jury, we conclude there
was substantial evidence by which the jury could conclude Wild Rose
refused to negotiate in good faith.
In the October agreement, the parties agreed on the following
major terms: (1) Wild Rose would enter into an exclusive management
agreement with SMG; (2) SMG’s management fee would equal four
percent of the adjusted gross revenue of the Emmetsburg project; and
(3) the period of the management agreement would last until March 31,
2014, and thereafter SMG would have the right to renew the agreement
for succeeding three-year-periods, with the last period terminating on
March 31 of the 30th year following commencement of operations. The
jury could have found the negotiations for the Emmetsburg management
agreement wore on for months and every time Pavone and SMG believed
they were close to an agreement, Kirke and Wild Rose would raise new
objections or demand more concessions.
The jury could also conclude from the evidence that Kirke and Wild
Rose were stalling the negotiations while attempting to negotiate a more
beneficial management agreement with Preston. This is supported by
Pavone’s testimony that Kirke asked him, “[W]hy should I pay you 4
percent if I could get somebody to do it for $160,000 a year and 2
percent?”
Moreover, the jury could have also found that as the attorneys for
the parties exchanged numerous drafts of the management agreement,
Kirke and Wild Rose forced Pavone and SMG to concede terms that the
25
parties had already agreed to in the October agreement. For example, in
the fourth draft and subsequent drafts of the proposed Emmetsburg
management agreement, the term was for ten years with no right to
renew the agreement and the management fee was 3.24 percent of
adjusted gross revenue. Finally, the jury could have inferred a lack of
good faith on Kirke’s and Wild Rose’s part due to Kirke’s and Wild Rose’s
termination of their relationship with Pavone and SMG shortly after they
received a gaming license. This fact could have supported a finding that
Kirke and Wild Rose never intended to enter into a formal management
agreement with Pavone and SMG and were simply using Pavone and
SMG to procure a gaming license for the Emmetsburg casino.
For these reasons, we affirm the decision of the district court and
vacate the decision of the court of appeals on this issue.
VII. Whether the District Court Erred in Instructing the Jury
Pavone and SMG Could Recover Expectation Damages on Its
Paragraph 5A Breach-of-Contract Claim, as Opposed to Reliance
Damages.
Kirke and Wild Rose next argues the district court erred in
instructing the jury Pavone and SMG could recover expectation damages
on its paragraph 5A breach-of-contract claim, as opposed to reliance
damages. The court submitted this case with special interrogatories.
The first interrogatory asked the jury to determine if Kirke and Wild Rose
breached paragraph 3A of the October 22 agreement. The jury answered
yes to this interrogatory. The second interrogatory asked the jury to
determine if Kirke and Wild Rose breached paragraph 5A of the
October 22 agreement. The jury also answered yes to this interrogatory.
Kirke and Wild Rose did not appeal the right of Pavone and SMG to
recover expectation damages for a breach of paragraph 3A. Therefore,
the award of expectation damages is proper for a breach of paragraph 3A.
26
Thus, it makes no difference under this record that the jury may have
awarded expectation damages for a breach of paragraph 5A because
Pavone and SMG were entitled to expectation damages for a breach of
paragraph 3A.
Accordingly, we need not reach this issue because any error in the
instructions would be harmless.
VIII. Whether Pavone’s and SMG’s Claims Are Barred Because
the IRGC Never Approved a Management Agreement Between the
Parties.
In its motion for judgment notwithstanding the verdict, Kirke and
Wild Rose stated the evidence was insufficient to submit paragraphs 3A
and 5A claims because Iowa law requires IRGC approval of any
management agreement, and no such approval was ever received. “We
review the denial of a motion for judgment notwithstanding the verdict
for correction of errors at law.” Van Sickle Constr. Co. v. Wachovia
Commercial Mortg., Inc., 783 N.W.2d 684, 687 (Iowa 2010). However, it
appears we need not reach the merits of this issue because Kirke and
Wild Rose have failed to preserve this issue for review.
“A motion for judgment notwithstanding the verdict must stand on
grounds raised in the directed verdict motion.” Royal Indem. Co., 786
N.W.2d at 845; accord Van Sickle Constr. Co., 783 N.W.2d at 687 (“[T]he
motion for judgment notwithstanding the verdict must rely on the
matters raised in a previous motion for directed verdict.”); Dutcher v.
Lewis, 221 N.W.2d 755, 760 (Iowa 1974) (“A motion for judgment
notwithstanding the verdict cannot be sustained on any ground not
asserted in an earlier motion for directed verdict.”). “On appeal from
such judgment, review by an appellate court is limited to those grounds
27
raised in the directed verdict motion.” Royal Indem. Co., 786 N.W.2d at
845.
At the close of Pavone’s and SMG’s case-in-chief, Wild Rose filed a
motion for directed verdict. This motion did not raise the issue of the
IRGC’s approval. Subsequently, at the close of Kirke’s and Wild Rose’s
case-in-chief, they renewed their motion for directed verdict on the same
grounds as previously identified. The court overruled the motion.
After the jury returned a verdict in favor of Pavone and SMG, Kirke
and Wild Rose filed a motion for judgment notwithstanding the verdict,
for the first time raising its IRGC-approval argument. Therefore, because
Kirke’s and Wild Rose’s IRGC-approval argument is not based on
grounds raised in its directed verdict motion, Kirke and Wild Rose failed
to preserve this issue for appellate review.
Kirke and Wild Rose argue it preserved error on this issue based
on its general statement that “no reasonable jury could find that the
October agreement was a binding management agreement” in its motion
for a directed verdict. Kirke and Wild Rose also claim that the principles
underlying the error preservation rules have been satisfied here because
the IRGC-approval issue was brought to the attention of the district court
and ruled on in the motion for judgment notwithstanding the verdict.
However, the statement in Kirke’s and Wild Rose’s motion for directed
verdict is too general to preserve the IRGC-approval issue. See, e.g.,
Royal Indem. Co., 786 N.W.2d at 845 (“Error must be raised with some
specificity in a directed verdict motion.”).
Consequently, we refuse to consider the merits of this issue due to
Kirke’s and Wild Rose’s failure to preserve it for appellate review.
28
IX. Whether the District Court Erred in Allowing the Jury to
Award Damages for a Period of as Much as Thirty Years Because the
Extension of the Contract for Such a Period Was Speculative.
A. Scope of Review. Kirke and Wild Rose argue the district court
erred in allowing the jury to award damages for a period of as much as
thirty years because the extension of the contract for such a period was
speculative. We review a claim that the district court gave an instruction
not supported by the evidence for correction of errors at law. Summy v.
City of Des Moines, 708 N.W.2d 333, 340 (Iowa 2006). “We review the
related claim that the trial court should have given a party’s requested
instructions for abuse of discretion.” Id. It is reversible error to submit
an instruction that has no support in the record. Waits v. United Fire &
Cas. Co., 572 N.W.2d 565, 575 (Iowa 1997). “ ‘When considering
whether evidentiary support for an instruction exists, we give the
evidence the most favorable construction it will bear.’ ” Id. (quoting
Hughes v. Massey-Ferguson, Inc., 522 N.W.2d 294, 295 (Iowa 1994)).
B. Analysis. The jury awarded Pavone and SMG ten million
dollars in expectation damages resulting from Kirke’s and Wild Rose’s
breaches of paragraphs 3A and 5A of the October agreement. Kirke and
Wild Rose argue the district court erred in failing to instruct the jury that
Pavone and SMG could recover damages only for the initial term of the
contract and thereby allowed the jury to award speculative damages
beyond the initial term of the alleged agreement. In response, Pavone
and SMG claim sufficient evidence supports the agreement was for a
thirty-year term, and alternatively, there is no basis to conclude the jury
awarded thirty years worth of expectancy damages.
“There is a distinction between proof of the fact that damages have
been sustained and proof of the amount of those damages.” Olson v.
Nieman’s, Ltd., 579 N.W.2d 299, 309 (Iowa 1998). If the evidence is
29
speculative and uncertain whether damages have been sustained,
damages are denied. Id. However, if the uncertainty merely lies in the
amount of damages sustained, “ ‘recovery may be had if there is proof of
a reasonable basis from which the amount can be inferred or
approximated.’ ” Id. (quoting Orkin Exterminating Co. v. Burnett, 160
N.W.2d 427, 430 (Iowa 1968)). Thus, some speculation on the amount of
damages sustained is acceptable; however, overly speculative damages
cannot be recovered. Id.There is a reasonable basis in the record from which the amount of
damages awarded by the jury can be inferred or approximated. At trial,
there was testimony that, for the first five years of the Emmetsburg
casino management agreement between the parties, it was conservatively
projected Pavone and SMG would earn $6,597,029 in management fees.
This management fee projection was included in the Emmetsburg
application to the IRGC. Assuming the casino’s revenue remained flat for
the next three years, the projected management fees for eight years—the
shortest period Kirke and Wild Rose argued for—would total
$10,889,108, which is $889,108 more than what the jury awarded
Pavone and SMG. Moreover, Pavone testified that at 3.2 percent, Pavone
and SMG would have earned approximately $9.7 million in management
fees over the initial ten-year term of the management agreement.
We agree with the district court when it held,
The parties may have their theories as to how the jury
arrived at a damage figure of $10 Million, but the bottom line
is that the damages awarded by the jury fall within a
reasonable verdict range based on this record and it is
impossible to know what duration the jury found. This
finding inheres in the verdict.
30
Accordingly, we find the court did not error in the manner in which
it submitted the damage issue.
X. Whether the District Court Erred in Denying Kirke’s and
Wild Rose’s Motion for a New Trial Because the Jury’s Verdict Was
Inconsistent.
A. Preservation of Error. We have serious doubts as to whether
Kirke and Wild Rose preserved error on this issue. In its motion for a
new trial, Kirke and Wild Rose argued there was an inconsistency
between the verdicts on Pavone’s and SMG’s paragraphs 3A and 5A
claims, which requires a new trial. Pavone and SMG argue Kirke and
Wild Rose failed to preserve this claim for review. They base this
argument on the fact that Kirke and Wild Rose failed to object to the jury
instructions and/or to the verdict forms that were given, as well as failed
to propose any alternative jury instructions and/or verdict forms that
would have required the jury to find liability on either the paragraph 3A
or paragraph 5A claim, but not both.
Instruction 10 told the jury that it could find Kirke and Wild Rose
breached the contract by finding a breach of paragraph 3A and
paragraph 5A. The special interrogatories also did not preclude a finding
by the jury of a violation of both paragraphs. Kirke and Wild Rose failed
to object to the submission of the instructions in this manner. The court
clearly instructed the jury that it could find for Pavone and SMG on both
claims. The manner in which the court instructed the jury caused the
alleged inconsistent verdict and Kirke and Wild Rose should have
foreseen the problem. A review of the proposed instructions would have
indicated that the alleged inconsistent verdict was not only possible, but
probable.
Our rules of civil procedure require
31
all objections to giving or failing to give any instruction must
be made in writing or dictated into the record, out of the
jury’s presence, specifying the matter objected to and on
what grounds. No other grounds or objections shall be
asserted thereafter, or considered on appeal.
Iowa R. Civ. P. 1.924 (emphasis added). The purpose of the rule is to
enable trial counsel to correct any errors in the instructions before the
court submits the case to the jury. Briney v. Tri-State Mut. Grain Dealers
Fire Ins. Co., 254 Iowa 673, 688, 117 N.W.2d 889, 897 (1962). It would
be unfair to approve a trial tactic to allow counsel to implant a ground for
a new trial should the jury verdict later prove objectionable.
In light of our doubt, we will still reach the merits of this issue. In
the future, counsel should make the appropriate objection when it is
clear the instructions invite inconsistent verdicts.
B. Scope of Review. In its motion for a new trial, Kirke and Wild
Rose argued there was an inconsistency between the verdicts on Pavone’s
and SMG’s paragraphs 3A and 5A claims, which requires a new trial.
The district court overruled this motion, finding there was no
inconsistency between the verdicts. “The scope of our review of a district
court’s ruling on a motion for new trial depends on the grounds raised in
the motion.” Channon v. United Parcel Serv., Inc., 629 N.W.2d 835, 859
(Iowa 2001). “ ‘To the extent the motion is based on a discretionary
ground, we review it for an abuse of discretion. But if the motion is
based on a legal question, our review is on error.’ ” Id. (quoting Roling v.
Daily, 596 N.W.2d 72, 76 (Iowa 1999)). Here, one of the underlying
grounds for Kirke’s and Wild Rose’s motion for a new trial was based on
a claim of inconsistent answers in the verdict.
Generally, the trial court has some discretion when faced
with inconsistent answers in a verdict. However, the
question whether a verdict is inconsistent so as to give rise
to the exercise of that discretion is a question of law.
Therefore, we review the district court’s conclusion as to
32
whether answers are inconsistent for correction of errors at
law.
Clinton Physical Therapy Servs., P.C. v. John Deere Health Care, Inc., 714
N.W.2d 603, 609 (Iowa 2006) (citations omitted). Therefore, we will
review this issue for corrections of error at law.
C. Analysis. Jury verdicts can be in the form of a general verdict,
special verdict, or general verdict with special interrogatories. Id. at 610.
“A special verdict consists entirely of questions that elicit special written
answers to resolve the material issues of fact in the case, and the court
then enters judgment based on the findings made by the jury.” Id.;
accord Iowa R. Civ. P. 1.933; Pexa v. Auto Owners Ins. Co., 686 N.W.2d
150, 160 (Iowa 2004). The jury’s answers become special written
findings of fact. Clinton Physical Therapy Servs., 714 N.W.2d at 610.
The jury does not enter a general verdict and does not consider the effect
of its special findings. Id. “Instead, the court enters judgment by
applying the law to the findings.” Id.Here, the district court submitted a special verdict form to the jury,
which asked the following questions:
1. Do you find the defendants breached Paragraph 3(A) of
the October 22, 2004 agreement?
Answer: Yes ____
No ____
2. Do you find the defendants breached paragraph 5(A) of
the October 22, 2004 agreement?
Answer: Yes ____
No ____
[If your answers to both Special Interrogatories 1 and 2 are
“no” do not answer any more questions. If your answers to
either or both of Special Interrogatories 1 and 2 is “yes”
answer Special Interrogatories Nos. 3 and 4.]
33
3. State the amount of damages caused by the breach?
Answer: _____________
4. Do you find defendant Gerald M. Kirke individually liable
for any breach of contract by defendant Wild Rose
Entertainment, L.L.C., under a personal guarantee?
Answer: Yes ____
No ____
In response to questions one and two, the jury found Kirke and
Wild Rose breached both paragraphs 3A and 5A of the October
agreement. In response to question three, the jury awarded Pavone and
SMG ten million dollars in damages. In response to question four, the
jury answered yes. Accordingly, the district court entered judgment for
ten million dollars in favor of Pavone and SMG against Kirke and Wild
Rose.
After the return of the verdict, Kirke and Wild Rose filed a motion
for a new trial, claiming the jury’s answers to questions one and two were
inconsistent. The district court overruled this motion, finding the jury’s
answers could be read in a consistent manner.
Kirke and Wild Rose argue the conflicting theories of breach under
paragraphs 3A and 5A of the October agreement are inconsistent with
one another, meaning if the jury found a breach under paragraph 3A it
could not have logically found a breach under paragraph 5A. Kirke and
Wild Rose make this argument claiming that for the jury to find a breach
under paragraph 3A it necessarily had to find paragraph 3A constituted
a binding management contract for the Emmetsburg casino. Therefore,
for the jury to find a breach under paragraph 5A it necessarily had to
find Kirke’s and Wild Rose’s bad faith negotiations prevented the parties
from entering into a management agreement for the Emmetsburg casino.
34
Thus, Kirke and Wild Rose argue the jury’s special written findings of
fact are fatally inconsistent, necessitating a new trial.
In the case of special verdicts, the district court enters judgment
based on the jury’s special written findings of fact. Clinton Physical
Therapy Servs., 714 N.W.2d at 611. The evidence presented at trial must
support each of the jury’s findings of fact. Id. Furthermore, the jury’s
findings of fact cannot be internally inconsistent. Id.; accord Bangs v.
Pioneer Janitorial of Ames, Inc., 570 N.W.2d 630, 632 (Iowa 1997) (“If a
verdict is internally inconsistent . . . and there is no way to determine the
jury’s intent, the proper remedy is a new trial.”); 89 C.J.S. Trial § 992, at
603 (2001) (stating, when findings in special verdicts “are utterly and
irreconcilably inconsistent with, or repugnant to, each other, they
neutralize, nullify, or destroy each other”). If the jury’s special findings of
fact are internally inconsistent with each other, the district court may
either send the jury back for additional deliberations or grant a new trial.
Iowa R. Civ. P. 1.934 (providing if answers to interrogatories are
inconsistent court can either send the jury back or order new trial);
Clinton Physical Therapy Servs., 714 N.W.2d at 612–13 (recognizing the
rules governing internally inconsistent special interrogatory answers
apply equally to internally inconsistent answers in a special verdict).
However, “[i]f the answers are not inconsistent, the court . . . is permitted
to enter judgment consistent with the jury’s answers.” Clinton Physical
Therapy Servs., 714 N.W.2d at 613. Accordingly, on review, we must
first determine whether an internal inconsistency in the jury’s answers to
the special verdict exists.
“[A] verdict is not inconsistent if it can be harmonized in a
reasonable manner consistent with the jury instructions and the
evidence in the case, including fair inferences drawn from the evidence.”
35
Id.; accord Hoffman v. Nat’l Med. Enters., Inc., 442 N.W.2d 123, 126–27
(Iowa 1989). This test recognizes the court must consider how the jury
could have viewed the evidence and how that view of the evidence fits
into the requirements of the instructions, when determining whether two
answers are internally inconsistent. Clinton Physical Therapy Servs., 714
N.W.2d at 613 (citing 66 C.J.S. New Trial § 82, at 172 (1998)). In the
end, “two answers are not inconsistent if they can be harmonized under
the evidence and the instructions.” Clinton Physical Therapy Servs., 714
N.W.2d at 613. “When, under this analysis, two answers or findings by
the jury would compel the rendition of different judgments, the answers
are inconsistent.” Id.; accord Hoffman, 442 N.W.2d at 127 (“Only where
the verdicts are so logically and legally inconsistent that they cannot be
reconciled will they be set aside.”). When deciding if a verdict is
inconsistent, we liberally construe the jury’s verdict to give effect to the
jury’s intention and harmonize the jury’s answers if possible. Hoffman,
442 N.W.2d at 126. We also must determine whether the verdicts can be
reconciled in a manner reasonably consistent with the evidence and the
jury instructions. Id. at 126–27.
We find the jury’s special interrogatory answers can be harmonized
in a reasonable manner consistent with the jury instructions and the
evidence in the case, including fair inferences drawn from the evidence.
The instructions given by the court allowed the jury to find a breach of
paragraphs 3A and 5A. The instructions did not make such a finding
mutually exclusive.
The jury could have concluded the October 22 agreement was a
binding management agreement. The jury could have also concluded
that another document had to be executed by the parties to include the
nonmaterial terms normally found in an integrated agreement. The jury
36
could have further found that the parties needed to submit the later
document to the IRGC. Finally, the jury could have concluded that Kirke
and Wild Rose breached paragraph 5A of the agreement by not
negotiating a formal final agreement in good faith with Pavone and SMG.
As we previously held, the record contained substantial evidence that the
October 22 agreement was a binding management agreement and that
Kirke and Wild Rose did not conduct any negotiations after October 22 in
good faith.
Accordingly, the district court was correct for denying Kirke’s and
Wild Rose’s motion for a new trial on this ground.
XI. Disposition.
The district court did not commit any error in the trial of this
matter; therefore, we vacate the decision of the court of appeals and
affirm the judgment of the district court.
COURT OF APPEALS DECISION VACATED; DISTRICT COURT
JUDGMENT AFFIRMED.
All justices concur except Appel, Waterman, and Mansfield, JJ.,
who take no part.