Rodney Hettinger v. City of Strawberry Point, Iowa ( 2016 )

IN THE COURT OF APPEALS OF IOWA
No. 15-0610
Filed May 11, 2016
RODNEY HETTINGER,
Plaintiff-Appellant,
vs.
CITY OF STRAWBERRY POINT, IOWA,
Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Clayton County, George L. Stigler,
Judge.
Rodney Hettinger appeals from summary judgment entered for the City of
Strawberry Point on his claims of breach of lease and damages. AFFIRMED IN
PART, REVERSED IN PART, AND REMANDED.
Zachary C. Herrmann, Elkader, for appellant.
Kevin R. Rogers of Swisher & Cohrt, P.L.C., Waterloo, for appellee.
Heard by Danilson, C.J., and Vaitheswaran and Tabor, JJ.
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DANILSON, Chief Judge.
Rodney Hettinger appeals from summary judgment entered for the City of
Strawberry Point on his claims of breach of a farm lease and damages. We
affirm the court’s conclusions that the lease was properly terminated and
Hettinger did not have a contractual right to bale the corn stover and to use it off
the leased property or sell it. However, we reverse the judgment with respect to
damages for the application of lime to the city farm, and remand for further
proceedings on this element of Hettinger’s claim for damages.
I. Facts and Background Proceedings.
The City of Strawberry Point, Iowa (hereinafter City), entered into a lease
on February 16, 2007, with Rodney Hettinger, a Clayton County farmer, for
eighty-five acres of farmland owned by the City (hereinafter the city farm). The
City’s efforts to terminate the lease spawned this litigation.
In April 2014, Hettinger filed an action seeking a declaration that he was
the proper tenant of the city farm for the year after March 1, 2014. He also
sought money damages for the value of corn stover he was not allowed to take
from the farm after harvest, as well as for the lime he applied in 2011. The City
filed a counterclaim for damages resulting from Hettinger’s baling and selling
corn stover following the harvest.
The written lease was approved by the city council on January 17, 2007.
The parties used the four-page form lease from the Iowa State Bar Association,
Form 135 Farm Lease—Cash or Crop Shares, revised January 2005.
The rent and terms related to lime application are set out in Paragraph 2
of the lease, entitled “RENT”, which provides:
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2. RENT. Tenant shall pay to Landlord as rent for the Real Estate
(the “Rent”):
a. Total annual cash rent of $17,680.00 . . . , or
b. Crop Share— _0_% of corn, 0_ % of soybeans, and _0 %
of all other crops raised on the Real Estate.
Paragraph 4, entitled “INPUT COSTS AND EXPENSES,” states:
. . . The following materials, in the amounts required by good
husbandry, shall be acquired by Tenant and paid for by the parties
as follows.
. . . Lime and trace minerals shall be allocated over _--_
years. If this Lease is not renewed, and Tenant does not therefore
receive the full allocated benefits, Tenant shall be reimbursed by
Landlord to the extent Tenant has not received the benefits.
Tenant agrees to furnish, without cost, all labor, equipment and
application for all fertilizer, lime, trace materials and chemicals
_______________________________.
The lease specifically addresses the ownership of “straw, stubble and
other plant materials” in paragraph 5 of the lease—entitled “PROPER
HUSBANDRY; HARVESTING OF CROPS, CARE OF SOIL, TREES, SHRUBS
AND GRASS”—and provides, in part:
Tenant shall farm the Real Estate in a manner consistent
with good husbandry, seek to obtain the best crop production that
the soil and crop season permit, properly care for all growing crops
in a manner consistent with good husbandry, and harvest all crops
on a timely basis. In the event Tenant fails to do so, Landlord
reserves the right, personally or by designated agents, to enter
upon the Real Estate and properly care for and harvest all growing
crops . . . .
....
Tenant shall distribute upon the poorest tillable soil on the
Real Estate, unless directed otherwise by Landlord, all of the
manure and compost from the farming operation suitable to be
used. Tenant shall not remove from the Real Estate, nor burn, any
straw, stalks, stubble, or similar plant materials, all of which are
recognized as the property of Landlord. Tenant may use these
materials, however, upon the Real Estate for the farming
operations. . . .
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In respect to automatic renewal of the lease, paragraph 9,
“TERMINATION OF THE LEASE,” reads:
This Lease shall automatically renew upon expiration from
year-to-year, upon the same terms and conditions unless either
party gives due and timely written notice to the other of an election
not to renew this Lease. If renewed, the tenancy shall terminate on
March 1 of the year following, provided that the tenancy shall not
continue because of an absence of notice in the event there is a
default in the performance of the Lease. All notices of termination
of this Lease shall be as provided by law.
In defending the claim for reimbursement of the lime expense, the City
relies upon paragraph 16 of the lease, entitled “EXPENSES INCURRED
WITHOUT CONSENT OF LANDLORD,” which states: “No expense shall be
incurred for or on account of the Landlord without first obtaining Landlord’s
written authorization. Tenant shall take no actions that might cause a mechanic’s
lien to be imposed upon the Real Estate.”
The lease was signed by Hettinger, the mayor, and city clerk, and
attached to the lease was a notarization that the lease was entered pursuant to
city council approval on January 17, 2007.
After signing the original lease in 2007, Hettinger told the city council that
he wanted to add lime to the cropland. An amendment to the lease was agreed
upon and signed on December 4, 2007. The amendment provided as follows:
1. Lime and trace minerals shall be allocated over 7 years. If
the Lease is not renewed and Tenant does not therefore receive
the full allocated benefits, Tenant shall be reimbursed by Landlord
to the extent Tenant has not received the benefits, on a pro rata
basis. Tenant agrees to furnish, without cost, all labor, equipment,
and application for all fertilizer, lime, trace materials and chemicals.
2. All of the terms of the original Lease shall remain the
same.
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Hettinger applied lime to the city farm land in 2011 at his cost of $6941.17
with the crop year 2012 as the base year.
At the February 6, 2013 city council meeting a budget workshop was held.
During this workshop session, the council reviewed the revenues for the budget
and it was suggested that the City obtain bids to rent the city farm for the 2014
crop year due to the general increase in farm rental rates. The council discussed
termination of Hettinger’s lease and the deadline for providing notice of
termination. At the March 6, 2013 city council meeting, public hearing was held
on the budget. The budget was approved by council vote, which included
termination of the Hettinger lease and placing the city farm up for bid.
On August 19, 2013, the city administrator sent Hettinger a certified letter,
which reads:
We will not be automatically renewing our farm lease with
you when it expires March 16, 2014. We will be going out for bids
yet this fall and you will be notified of the date the bids are due.
This will serve the notice that we will not be renewing our lease
agreement with you.
Hettinger acknowledged receipt of the letter.
On October 16, 2013, the city council met in regular session and
discussed the time frame for bids on leasing the city farm.
On December 4, the city council discussed Hettinger having baled stalks,
“which is not allowed per the lease,” as well as the date of lease expiration
(February 28, 2013), and the time and procedure for taking bids on the city farm
lease for the next crop year. The city council again discussed the baling of stalks
during its December 18 meeting, as well as Hettinger’s “notice of lime that was
spread.”
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On January 8, 2014, an attorney representing Hettinger sent a letter to the
mayor, stating the City owed Hettinger for lime applied to the city farm for five
years in the amount of $4958.35. In addition, his counsel asserted that Hettinger
was entitled to the value of the stover for the 2013 crop year pursuant to Iowa
Code section 562.5A (2013), arguing paragraph 5 of the lease did not apply to
the “upper part of the plant that is part of the crop, namely the leaves and upper
stalk which are the stover.”
On March 6, 2014, the City entered into a lease with Michael Hunt for the
city farm covering March 1, 2014, to March 1, 2017.
The City filed a motion for summary judgment, which Hettinger resisted.
The district court granted the City’s summary judgment with respect to the
termination of the lease and for the damages claimed. The court ruled Hettinger
was properly notified of the termination of the lease, and a formal vote of the city
council was not required to terminate the lease. It also ruled that because
Hettinger did not get written consent to incur the lime cost, he could not recover
any part of the lime costs; and, because the lease explicitly states that no
materials were to be removed from the farmland, he was not entitled to the
damages claimed for the baled stalks. However, the district court found the
City’s counterclaim for damages for the improper removal of corn stover was
“within the ambit of the small claims court” and transferred that counterclaim to
the small claims court.
Hettinger appealed.
Because the City’s counterclaim remained, the supreme court found that
to the extent the appeal was not from a final judgment it would treat the notice of
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appeal as an application for interlocutory appeal, which the court granted. The
case was then transferred to our court.
II. Scope and Standard of Review.
We review the district court’s ruling on a motion for summary judgment for
the correction of errors at law. See Iowa R. App. P. 6.907; Baker v. City of Iowa
City, 867 N.W.2d 44, 51 (Iowa 2015). The moving party is entitled to summary
judgment if there are no disputed issues of material fact. See Iowa R. Civ. P.
1.981(3); City of Fairfield v. Harper Drilling Co., 692 N.W.2d 681, 683 (Iowa
2005). “We can resolve a matter on summary judgment if the record reveals a
conflict only concerns the legal consequences of undisputed facts.” City of
Fairfield, 692 N.W.2d at 683.
III. Discussion.
Hettinger first argues that because the City must elect to not renew the
lease, a formal vote of the council was required. Because no vote was formally
taken, he contends the notice of termination of the lease was done without legal
authority. He next maintains that because he incurred no cost for or on account
of the City in applying the lime, the district court erred in concluding paragraph 16
was relevant to his claim for reimbursement. Finally, Hettinger contends he
baled the stover for six consecutive years without any interference from the City
and that under the doctrine of equitable estoppel, the City is deemed to have
acquiesced to his actions and cannot claim now claim the terms of the lease
have been broken.
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A. General principles.
A lease is a contract, so we apply ordinary contract principles to interpret
its meaning and legal effect. Alta Vista Props., LLC v. Mauer Vision Ctr.,
PC, 855 N.W.2d 722, 727 (Iowa 2014). We consider the lease as a whole, plus
any relevant extrinsic evidence. Id. When determining meaning or ambiguity, we
can take into account the relations of the parties, the subject matter of the
transaction, any preliminary negotiations, trade usages, and the course of
dealings between these parties. Pillsbury Co. v. Wells Dairy, Inc., 752 N.W.2d
430, 436 (Iowa 2008). But the most important evidence of the parties’ intent
remains the words of the agreement. Id.Iowa Code chapter 562 includes several provisions pertinent to the lease
at issue here. Section 562.5 provides that “[i]n the case of a farm tenancy, the
notice [of termination] must fix the termination of the farm tenancy to take place
on the first day of March, . . . .” Section 562.7 provides the method of service
and requires notice to be provided on or before September 1, although, if the
notice is served by certified mail, the notice must simply be mailed before
September 1.
Section 562.5A provides: “Unless otherwise agreed to in writing by a
lessor and farm tenant, a farm tenant may take any part of the aboveground part
of a plant associated with a crop, at the time of harvest or after the harvest, until
the farm tenancy terminates as provided in this chapter.”
B. Termination of lease.
We reject Hettinger’s claim that the City’s notice of termination of the lease
was void for failure to take a formal vote not to renew the lease. The lease itself
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provides that it would renew “unless either party gives due and timely written
notice to the other of an election not to renew this Lease.” The City gave such
written notice.
Hettinger notes that the lease between Hettinger and the City states that
“[a]ll notices of termination of this Lease shall be as provided by law.” Timely and
proper notice was provided pursuant to Iowa Code section 562.7.
Hettinger contends the notice was not properly authorized because the
notice was signed by the city clerk who also serves as the city administrator and
“[t]he law also requires a vote of the city council prior to termination.” We reject
this claim. Strawberry Point City Ordinance 10.02(1) provides, “All powers of the
City are vested in the council except as otherwise provided by law or ordinance.”
Ordinance 14.02(2) states the city administrator has the power of
“[a]dministration of all ordinances, resolutions, counsel proceedings and
directives.”
Ordinance 10.02(5) reads:
The council shall make or authorize the making of all
contracts, and no contract shall bind or be obligatory upon the city
unless either made by ordinance or resolution adopted by the
council, or reduced to writing and approved by the council, or
expressly authorized by ordinance or resolution adopted by council.
All contracts and all ordinances and resolutions making contracts or
authorizing the making of contracts shall be drawn or approved by
the City Attorney before the same are made or passed.
(Emphasis added.)
Here, we are not dealing with the making of a contract, but the termination
of the automatic renewal of an annual contract. The city clerk/administrator was
carrying out the directive of the city council in sending notice of termination. We
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agree with the district court that the City was entitled to summary judgment on
Hettinger’s claim that the lease was not terminated legally. Moreover the city
clerk or administrator’s act was ratified by the city council’s act on December 14,
2013, when it resolved to set a due date and advertise for bids for a new farm
lease.1
C. Lime application.
Hettinger asserts the district court erred in granting the City summary
judgment on the issue of whether he was entitled to a pro rata share of the lime
application costs. We agree. In December 2007, the City entered into an
amended agreement with Hettinger:
Lime and trace minerals shall be allocated over 7 years. If the
Lease is not renewed and Tenant does not therefore receive the full
allocated benefits, Tenant shall be reimbursed by Landlord to the
extent Tenant has not received the benefits, on a pro rata basis.
Tenant agrees to furnish, without cost, all labor, equipment, and
application for all fertilizer, lime, trace materials and chemicals.
The original lease, paragraph 4, also entitled the tenant to reimbursement if the
lease was not renewed and the tenant had not received the full benefits of the
lime application.
Notwithstanding, the City contends that it did not authorize the expense
and cannot now be responsible for the cost of the lime application. Because
Hettinger furnished the lime without cost to the City, paragraph 16 (“No expense
1
“[R]atification is equivalent to previous authorization and operates upon the act ratified
in the same manner as though authority had been given originally.” 10A McQuillen,
§ 29:110, at 131; see also Abodeely v. Cavras, 221 N.W.2d 494, 503 (Iowa 1974)
(“[F]ailure to repudiate the unauthorized action within a reasonable time after learning of
the transaction will be deemed a ratification or affirmance.”). Hettinger also claims the
ratification act after September 1 does not relate back to prior to September 1.
However, it has long been established that “[i]t is the general rule that the adoption by a
principal of the unauthorized acts of an agent goes back to the inception of the
transaction.” In re Estate of Johnson, 232 N.W. 282, 286 (Iowa 1930) (citation omitted).
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shall be incurred for or on account of the Landlord without first obtaining
Landlord’s written authorization.”) was not triggered. Moreover, the expense was
not incurred for or on the account of the landlord. Rather, Hettinger applied and
paid for the lime with the intent to increase his own productivity but did not
receive the full seven years’ benefit of the lime because his leasehold terminated.
The amendment to the lease controls and the district court erred in granting
summary judgment to the City on this claim.
D. Corn stover.
Hettinger asserts that the lease should be interpreted to include corn
stover as part of the crop, to which he was entitled for the 2013 crop year. He
also contends the City is estopped by acquiescence because it did not object to
his baling of stover in the past. Hettinger’s claim must be considered in light of
Iowa Code section 562.5A.
“Unless otherwise agreed to in writing by a lessor and farm tenant, a farm
tenant may take any part of the aboveground part of a plant associated with a
crop, at the time of harvest or after the harvest, until the farm tenancy terminates
as provided in this chapter.” Iowa Code § 562.5A. This court addressed this
code section in Slach v. Heick, No. 14-0539, 2015 WL 1546445, at *3-6 (Iowa Ct.
App. Apr. 8, 2015). Footnote 5 of the Slach opinion notes the definition of corn
stover is “corn stalks, leaves, and cobs remaining aboveground on the field after
the harvest of corn kernels.” 2015 WL 1546445, at *5 n.5 (quoting Jack W.
Leverenz, Corn Flakes Aren’t Just for Kellogg’s: A Look at Corn Stover and its
Effect on Leasing in the Landlord Tenant Relationship, 17 Drake J. Agric. L 511,
527 (2012)).
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We conclude the ordinary usage of the “crop” as used in paragraph 2 of
this lease excludes “corn stover.” The fact that corn stover has become a
valuable commodity is not in dispute in this action. But the fact that corn stover
has become an increasingly valuable commodity or crop, does not answer the
issue raised in this case.
First, we note the legislature determined new legislation was required to
address the commodity. In Slach, a case involving a farm lease that did not
address corn stover or stalks, this court addressed section 562.5A in relation to a
truncated version of the Iowa State Bar Association’s farm lease form, stating:
Because the lease did not address who had the right to use
the corn stalks remaining after the 2011 harvest and because the
parties to the lease did not intend to restrict Heick’s right to remove
the corn stalks, we examine whether recent legislation aids the
resolution of this appeal. See Norfolk & W. Ry. Co. v. Am. Train
Dispatchers Ass’n, 499 U.S. 117, 129–30 (1991) (“A contract
depends on a regime of common and statutory law for its
effectiveness and enforcement.”).
....
The legislature enacted the provision when corn stover
emerged as “a growing and valuable commodity in the biofuel
industry.” Leverenz, 17 Drake J. Agric. L. at 527; see also Neil D.
Hamilton, Harvesting the Law: Personal Reflections on Thirty Years
of Change in Agricultural Legislation, 46 Creighton L. Rev. 563, 589
n.63 (2013) (noting amendment occurred “as a result of interest in
producing cellulosic ethanol and the growing market for corn
stalks”). One legal commentator has opined: “It seems fairly
apparent section 562.5A is designed to favor the tenant farmer.
Analyzing the law, the tenant farmer by default has rights to the
‘aboveground parts of the plant’ unless the tenancy has ended or
another scenario was drafted in the written contract.” Leverenz, 17
Drake J. Agric. L. at 528–529.
2015 WL 1546445, at *4-5 (emphasis added) (footnote omitted).
Secondly, unlike the facts in Slach, the lease at issue specifically
references stalks and stubble as belonging to the landlord. In the case before
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us, the parties agreed in writing that, “Tenant shall not remove from the Real
Estate, nor burn, any straw, stalks, stubble, or similar plant materials, all of which
are recognized as the property of Landlord.” Hettinger contends that after
harvesting the corn stover he still left a measurable amount of corn stalks. We
acknowledge one commentator has suggested farm leases could provide for the
specific amount of corn stover or stubble to be left upon the ground. See
Leverenz, 17 Drake J. Agric. L. at 521. But here, the lease states “any” stalks or
stubble are the property of the landlord. This was a term agreed upon by
Hettinger.
Consequently, because the parties agreed otherwise, section 562.5A does
not afford relief to Hettinger. We agree with the district court that Hettinger did
not have a contractual right to bale the corn stover and to use it off the leased
property or sell it.
Hettinger complains that the parties subsequent conduct should have
been considered in interpreting this lease, citing Hamilton v. Wosepka, 154
N.W.2d 164 (Iowa 1967). But Hamilton stands for the proposition that “[e]xtrinsic
evidence that throws light on the situation of the parties, the antecedent
negotiations, the attendant circumstances and the objects they were thereby
striving to attain is necessarily to be regarded as relevant to ascertain the actual
significance and proper legal meaning of the agreement.”2 154 N.W.2d at 168(emphasis added). Thus, the fact that Hettinger removed corn stover from the
2
“Antecedent” is defined as: “Going before; preceding.” The American Heritage College
Dictionary 59 (4th ed. 2004).
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premises subsequent to the execution of the lease does not aid in our
interpretation of the lease terms.
E. Estoppel.
Hettinger also argues that the doctrine of estoppel by acquiescence
should apply and he should prevail because the City knew he had harvested the
corn stover in the past, did not complain, and, in essence, waived its rights under
the lease. This claim was not ruled on in the district court. “Consequently, ‘there
is nothing before us to review.’” In re Marriage of Okland, 699 N.W.2d 260, 270
(Iowa 2005) (citation omitted).
We affirm the court’s conclusions that the lease was properly terminated
and that Hettinger is not entitled to damages for corn stover retained by the City.
However, we reverse the judgment with respect to damages in relation to the
application of lime to the city farm, and remand for further proceedings on this
element of Hettinger’s claim for damages.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.