Alta Vista Properties, LLC v. Mauer Vision Center, Pc

IN THE SUPREME COURT OF IOWA
No. 13–0496
Filed October 31, 2014
ALTA VISTA PROPERTIES, LLC,
Appellant,
vs.
MAUER VISION CENTER, PC,
Appellee.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Black Hawk County,
David F. Staudt, Judge.
A commercial landlord appeals a summary judgment ruling
interpreting the parties’ lease as prohibiting the landlord from showing
the property to prospective purchasers until ninety days before the end
of the lease term. DECISION OF COURT OF APPEALS VACATED;
DISTRICT COURT JUDGMENT REVERSED AND CASE REMANDED
WITH INSTRUCTIONS.
Corey R. Lorenzen and Kate B. Mitchell, Beecher, Field, Walker,
Morris, Hoffman & Johnson, P.C., Waterloo, for appellant.
Diane Kutzko, Donald L. Johnson, and Scott M. Wadding,
Shuttleworth & Ingersoll, PLC, Cedar Rapids, for appellee.
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MANSFIELD, Justice.
This case requires us to interpret a commercial lease. Our task is
to determine whether the landlord is authorized to enter the leased
property to show it to potential buyers. The tenant argues that access is
not permitted until ninety days before the end of the lease term. The
tenant relies on a lease provision entitled “SIGNS,” which provides that
the landlord may erect “For Rent” or “For Sale” signs during the last
ninety days of the tenancy and that the tenant must permit prospective
tenants or buyers to enter during that time. The tenant maintains this is
the only time the landlord can access the property to show it to potential
buyers.
The landlord disagrees. The landlord relies on lease provisions
that make the tenant’s use of the premises “non-exclusive” and give the
landlord the right to sell the property, mortgage it, or assign the lease
interest at any time during the lease term. The landlord contends that
the right to sell the property encompasses the right to show the property
during the lease term at reasonable times to prospective buyers.
Upon our review, we agree with the landlord’s interpretation of the
lease. Therefore, we vacate the decision of the court of appeals, reverse
the judgment of the district court, and remand with instructions to the
district court to enter summary judgment in favor of the landlord.
I. Background Facts and Proceedings.
On October 23, 2003, Mauer Vision Center, PC as tenant and I4NI,
L.L.C. as landlord entered into a written lease for a building located at
124 Second Street N.E. in Waverly, together with the use of the
improvements thereon. The lease had a term of fifteen and one-half
years. The lease included the following provisions:
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12. SIGNS.
A. Tenant shall have the right and privilege of attaching,
affixing, painting or exhibiting signs on the Leased Premises,
provided only:
(1) Any and all signs shall comply with the
ordinances of the [City of Waverly] and the laws
of the State of Iowa;
(2) Such signs shall not change the structure of the
building; and
(3) Such signs, if and when taken down, shall not
damage the building.
B. Landlord, during the last ninety (90) days of this Lease,
or any extension, shall have the right to maintain in the
windows or on the building or on the premises a “For Rent”
or “For Sale” sign, and Tenant will permit, at such time,
prospective tenants or buyers to enter and examine the
premises.
13. ASSIGNMENT AND SUBLETTING. Landlord may assign
all or any part of its rights under this Lease to any grantee or
mortgagee. . . .
....
18. COVENANT FOR QUIET ENJOYMENT. Landlord
covenants that Landlord’s estate in said Premises is in fee
simple; and that the Tenant on paying the rent herein
reserved and performing all the agreements by the Tenant to
be performed as provided in this Lease, shall and may
peaceably have, hold and enjoy, the non-exclusive use of the
Leased Premises for the term of this Lease.
19. RIGHT TO MORTGAGE. Landlord shall have the right to
mortgage all of its right, title, and interest in said Premises
at any time without notice, subject to this Lease.
....
24. CHANGES TO BE IN WRITING. . . . This Lease contains
the whole agreement of the parties.
....
27. RIGHT OF FIRST REFUSAL. In the event Landlord
receives an offer to purchase the building that includes the
Leased Premises during the term of this Lease or any
renewal term which Landlord is willing to accept, Landlord
shall first give notice of such offer to Tenant. Tenant shall
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have the right to elect to purchase the building that includes
the Leased Premises on the same terms and conditions
contained in such offer by giving written notice of its
intention to exercise its right within five (5) days after receipt
of written notice of such offer from Landlord. Tenant’s
failure to give notice of its intention to exercise its right of
first refusal within the five (5) day period shall cause this
right of first refusal to lapse and Landlord shall then have
the right to proceed to sell the building to the party which
submitted the offer to purchase the same.
The lease also provided in paragraphs 5 and 7 respectively that the
landlord had a right to regain possession on termination of the lease and,
during the lease term, the tenant and not the landlord was responsible
for maintenance and repair of the building. Additionally, paragraph 16
authorized the landlord to take possession of the premises in the event of
certain defaults.
Dr. Richard Mauer was the president of Mauer and a member of
I4NI at the time the lease was executed in 2003. He signed the lease for
both entities. 1
On June 15, 2006, I4NI transferred its interest in the lease to Alta
Vista Properties, LLC. The parties agree that Alta Vista became Mauer’s
landlord following the sale and assumed all the rights and
responsibilities of the landlord under the lease. It is also undisputed
that prior to the 2006 sale, I4NI had access to the premises to show it to
prospective buyers, including Alta Vista.
In May 2012, Alta Vista became interested itself in selling the
underlying real estate. Its representatives contacted representatives of
Mauer, who refused to allow Alta Vista access to the building to show it
to potential purchasers. On June 27, Alta Vista filed a petition for a
declaratory judgment, seeking a ruling that it could have reasonable
1Another individual also signed on behalf of I4NI as vice president.
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access to the property to show it to prospective buyers. Mauer answered,
disputing Alta Vista’s interpretation of the lease.
The parties both moved for summary judgment. Mauer relied on
paragraph 12 of the lease. It said that this provision unambiguously
limited the landlord’s access to the premises for purposes of showing it to
potential buyers to the last ninety days of the lease term. Alta Vista, by
contrast, argued that the lease taken as a whole—especially paragraphs
13, 18, 19, and 27—gave it a reasonable right of access to show the
premises to prospective buyers throughout the lease term.
The district court found the contract to be unambiguous and
granted summary judgment to Mauer. The court reasoned,
In interpreting paragraph No. 12, the court finds no
ambiguity to exist. . . . Paragraph 12(b) provides that the
“tenant will permit prospective tenants or buyers to enter
and examine the premises.” The time period allowed to
permit entry relates back to the term “last 90 days of this
lease.” Paragraph 12 provides a specific and determinative
time, place, and setting that allows prospective buyers to
view the property.
The court further views paragraph 18 as not
ambiguous in nature. The portion of paragraph 18 cited by
the plaintiff, “The nonexclusive use of the leased premises for
the term of this lease” is not ambiguous. The term
“nonexclusive use” may well be describing the effect of
paragraph 12. The right of the landlord to show the property
within the final 90 days of the lease term easily fits within a
logical definition of “nonexclusive use.”
The court added,
The court does find the terms of the lease allowing the
tenant the opportunity to prevent a landlord from allowing a
[prospective] purchaser the opportunity to inspect the
property to be rather onerous. However, the mere fact that a
term to a commercial business lease is onerous does not
make it ambiguous or unenforceable. It appears to the court
that a standard lease term such as paragraph 12 entitled
“signs” was inserted into this business lease that included
an extremely lengthy lease term. In any event, sophisticated
business entities such as Alta Vista may contract away any
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right or responsibility. . . . The court concludes that Mauer
may exclude Alta Vista Properties . . . from showing the
property until 90 days remain in the term of the lease.
Alta Vista appealed the ruling. We transferred the case to the
court of appeals.
The court of appeals affirmed the district court’s grant of summary
judgment in Mauer’s favor. It agreed with the district court that the
lease unambiguously limits the landlord’s access to the property to show
it to potential buyers to the last ninety days of the lease term.
We granted Alta Vista’s application for further review.
II. Standard of Review.
We review grants of summary judgment for correction of errors at
law. Peak v. Adams, 799 N.W.2d 535, 542 (Iowa 2011). “Interpretation
of a contract is a legal issue unless the interpretation of the contract
depends on extrinsic evidence.” Pillsbury Co. v. Wells Dairy, Inc., 752
N.W.2d 430, 435 (Iowa 2008); see also Hartig Drug Co. v. Hartig, 602
N.W.2d 794, 797 (Iowa 1999) (“[W]hen no relevant extrinsic evidence
exists, the resolution of any ambiguity in a written contract is a matter of
law for the court.”).
III. Analysis.
This case requires us to determine whether the lease permits the
lessor to enter the property at reasonable times to show it to prospective
purchasers during the lease term. Mauer argues that because paragraph
12 provides that “Tenant will permit, [during the last 90 days of the lease
term], prospective tenants or buyers to enter and examine the premises,”
it thereby denies access at other times. Alta Vista counters that
paragraph 18 provides Mauer with only “non-exclusive use” of the
premises, and paragraphs 13, 19, and 27 expressly give Alta Vista the
rights to sell the property, mortgage the property, or assign the lease
7
interest at any time—thus carrying along the right to show the property
to such potential buyers or financiers. 2
Because a lease is a contract, we apply ordinary contract principles
to determine its meaning and legal effect. See Walsh v. Nelson, 622
N.W.2d 499, 503 (Iowa 2001). We thus consider the lease as a whole as
well as any pertinent extrinsic evidence. See Fausel v. JRJ Enters., Inc.,
603 N.W.2d 612, 618 (Iowa 1999); Fashion Fabrics of Iowa, Inc. v. Retail
Investors Corp., 266 N.W.2d 22, 26 (Iowa 1978).
“[A]ny determination of meaning or ambiguity should only be
made in the light of relevant evidence of the situation and
relations of the parties, the subject matter of the transaction,
preliminary negotiations and statements made therein,
usages of trade, and the course of dealing between the
parties. But after the transaction has been shown in all its
length and breadth, the words of an integrated agreement
remain the most important evidence of intention.”
Pillsbury, 752 N.W.2d at 436 (quoting Fausel, 603 N.W.2d at 618)
(internal quotation marks omitted).
In this case, there is relatively little extrinsic evidence. We agree
with Mauer that a conclusory sworn statement from a principal of I4NI
as to what was “understood” or “wanted” at the time the lease was signed
brings little to the table. See Peak, 799 N.W.2d at 544 (declining to give
weight to one party’s undisclosed unilateral intent); cf. Kroblin v. RDR
2Mauer argues that Alta Vista did not preserve error on its contention that the
lease terms by implication give Alta Vista a right of access to show the property at
reasonable times to prospective purchasers. We disagree. In its petition, Alta Vista
alleged that the “[l]ease infers a reasonable right of access to Alta Vista and/or Alta
Vista’s agents to show Property to prospective buyer(s), in light of the explicit right given
for Alta Vista to sell Property and assign Lease to such grantee.” Additionally, in its
cross-motion for summary judgment, Alta Vista again urged,
The explicit terms of the Lease, as well [as] what is necessarily
implied from the terms of the Lease, show that I4NI and Mauer intended
at the time the Lease was executed that the landlord be permitted access
to the premises to show prospective buyers and mortgagees.
8
Motels, Inc., 347 N.W.2d 430, 432–33 (Iowa 1984) (authorizing
consideration of written and oral communications between the parties as
an aid to contract interpretation). However, the fact that Mauer
permitted I4NI to show the property to potential buyers before the 2006
sale to Alta Vista is some evidence of a relevant course of dealing. See
Restatement (Second) of Contracts § 202(5), at 86–87 (1981) (referring to
the parties’ course of dealing as one interpretive tool). In any event, our
primary focus will be on the language of the lease.
Several principles of interpretation are pertinent here. “[A]n
interpretation which gives a reasonable, lawful, and effective meaning to
all terms is preferred to an interpretation which leaves a part
unreasonable, unlawful, or of no effect.” Fashion Fabrics, 266 N.W.2d at
26 (citing Restatement (Second) of Contracts § 229 (Tentative Draft No.
1–7)). Additionally, a lease includes not only what is expressly stated by
its terms but also what is necessarily implied to give effect to its express
terms. See id. at 27 (“Contractual obligations may arise from implication
as well as from the express writing of the parties.”). Courts imply
contractual terms where the obligation “arise[s] from the language used
or [is] indispensable to give effect to the intent of the parties.” Id.
Applying these principles here, we respectfully disagree with the
district court’s and the court of appeals’ interpretation of the lease. In
our view, paragraph 12 does not unambiguously bar the landlord’s
access to the premises to show the property to potential buyers prior to
the last ninety days of the lease term. True, it says the tenant must
allow prospective tenants and buyers to enter and examine the premises
during the last ninety days. Yet it does not say this is the only time they
are permitted on the premises. Of course, we have the rule of contract
interpretation that “expressio unius est exclusio alterius—‘[T]he
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expression of one thing of a class implies the exclusion of others not
expressed.’ ” Peak, 799 N.W.2d at 548 (quoting Maytag Co. v. Alward,
253 Iowa 455, 460, 112 N.W.2d 654, 656 (1962)). But this is only one
principle of interpretation, not necessarily a legal trump card.
Paragraph 12, as its heading indicates, deals primarily with the
subject of “signs.” Several clauses in subparagraph A of that paragraph
address the tenant’s right to put signs on the premises. Subparagraph B
then confers on the landlord the right to put “For Rent” or “For Sale”
signs on the premises during the last ninety days of the lease term, while
requiring the tenant to permit prospective buyers or tenants to enter and
examine the premises during that time. In context, one could conclude
that subparagraph B is intended to address the landlord’s need to find a
new occupant for the premises, either a lessee or a buyer, as the lease
nears expiration. At the same time, one could conclude that the
subparagraph is not intended to restrict the landlord’s ability to sell,
finance, or refinance the property subject to the lease.
Moreover, paragraph 12 does not refer to the landlord’s ability to
enter the building (conceivably with a prospective buyer in tow), but only
to prospective tenants and buyers (potentially unaccompanied by the
landlord) being able to enter and examine the premises. Once signs are
displayed as permitted by paragraph 12, prospective tenants and buyers
might see them and want to approach the tenant to look at the property,
even when the landlord or its representative is unavailable. Seemingly,
paragraph 12 requires the tenant to admit them and thereby serves a
significant purpose even if the landlord retains the right to show the
property outside the ninety-day window.
The view that paragraph 12 is a relatively narrow provision dealing
with marketing the property to new occupants during the final ninety
10
days, as opposed to a broad ban on landlord access to show the
underlying real estate to prospective buyers during the rest of the lease
term, finds support in other lease provisions. Paragraph 18 states that
Mauer’s use of the premises during the lease term is “non-exclusive.”
While there are various ways of reconciling this provision with the rest of
the lease, paragraph 18 undermines any presumption that Alta Vista can
only enter the property when a paragraph of the lease expressly permits
it to do so. Such a restriction on Alta Vista’s access would result in
exclusive use for Mauer rather than the non-exclusive use described in
paragraph 18. 3
Moreover, as Alta Vista points out, paragraphs 19 and 27 give it
the express right to sell and mortgage the underlying property (subject to
the lease) during the lease term. Who would buy or finance something
he or she could not look at? See Fashion Fabrics, 266 N.W.2d at 26
(disfavoring lease interpretations that render a provision of “no effect”).
In addition, Mauer’s interpretation seemingly leads to an unfair
outcome. See id. at 26 (disfavoring interpretations that leave a part of
the lease “unreasonable”). The inconvenience to Mauer if Alta Vista is
allowed to show the property at a reasonable time to a prospective buyer
is minimal. Yet the potential loss to Alta Vista if it cannot show the
property is substantial: Alta Vista would likely be unable to sell the
property to or finance the property with any bona fide third party. See
Midwest Mgmt. Corp. v. Stephens, 291 N.W.2d 896, 913 (Iowa 1980) (“An
3Notably, the district court’s interpretation of the “non-exclusive use” provision
would make it redundant of paragraph 12, thereby violating the rule against
interpreting contract provisions to have no independent effect. See Fashion Fabrics,
266 N.W.2d at 26.
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agreement will not be given an interpretation which places one party at
the mercy of another unless the contract clearly requires that result.”).
In effect, Mauer’s interpretation of the lease operates as a restraint
on alienation. See Restatement (Second) of Prop.: Landlord & Tenant
§ 15.1 & cmt. a, at 85–86 (1977) (noting “the undesirability of restraints
on alienation” and indicating that a landlord’s interest in the leased
property is “freely transferable, unless[] (1) a tenancy at will is involved;
(2) the lease requires significant personal services from either party and a
transfer . . . would substantially impair the other party’s chances of
obtaining those services; or (3) the parties . . . agree otherwise”). 4
In sum, as we read the lease, the parties expressly contracted to
limit the more intrusive aspects of advertising and resale to the last
ninety days of the term, but the lease also allows Alta Vista to exhibit the
building to prospective buyers of the underlying real estate at reasonable
times outside that period. A sign advertising the property for sale could
adversely affect Mauer’s business. Thus, paragraph 12 confines such
signs to the final ninety days. But temporary, reasonable access to show
the property to a potential buyer would not affect Mauer’s business and
is a logical corollary to paragraphs 13, 19, and 27 of the lease.
It is true that the lease has a brief integration clause in paragraph
24. That clause states, “This Lease contains the whole agreement of the
parties.” Such clauses are “one factor we take into account in
4Mauer further argues that paragraphs 5 and 16, authorizing Alta Vista to gain
“possession” of the premises on the happening of certain events, impliedly foreclose Alta
Vista from having access to the premises on other occasions. However, these provisions
grant Alta Vista exclusive possession. We are talking here about something different—
temporary access. Mauer also invokes paragraph 7 concerning the duty of
maintenance and repair, but again the issue here is a distinct one not related to
maintenance or repair of the premises.
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determining whether an agreement is fully integrated.” C & J Vantage
Leasing Co. v. Wolfe, 795 N.W.2d 65, 85 (Iowa 2011). However, even if
we assume the lease here is fully integrated, the present dispute is one of
lease interpretation. See 5 Margaret N. Kniffin, Corbin on Contracts
§ 24.12, at 108 (Joseph M. Perillo, ed., rev. ed. 1998) (“[I]f the court seeks
merely to interpret a contract term, which is to discern the meaning of a
term already contained in the contract, the question of whether the
parties intended their agreement to be integrated is not relevant.”). The
issue, in other words, is how we should reconcile and give proper effect
to arguably conflicting terms that (1) provide the tenant with “non-
exclusive use” of the premises for the entire lease term, (2) require the
tenant to allow access to prospective tenants and buyers during the last
ninety days, and (3) authorize the landlord to sell or mortgage the
premises or assign its lease interest at any time during the lease term.
Reading an existing contractual provision as having an essential
corollary is different from adding a new implied term to a contract. The
former is an interpretive exercise and is permissible even if the
agreement is integrated. “An integrated contract can contain an implicit,
unstated, but necessary term . . . .” Acoustic Processing Tech., Inc. v.
KDH Elec. Sys. Inc., 697 F. Supp. 2d 146, 161 (D. Me. 2010). “The
salutary purpose of [an integration clause] is to preclude consideration of
matters extrinsic to the agreement. It is of no relevance if the promise,
albeit imperfectly expressed, is implicit in the contract as written.” Havel
v. Kelsey–Hayes Co., 445 N.Y.S.2d 333, 336 (App. Div. 1981); see also
U.S. Gypsum Co. v. Schiavo Bros., Inc., 668 F.2d 172, 175 (3d Cir. 1981)
(concluding that the presence of an integration clause did not negate any
implied covenants contained in the lease agreement); Dorset Indus., Inc.
v. Unified Grocers, Inc., 893 F. Supp. 2d 395, 407 (E.D.N.Y. 2012) (“While
13
independent obligations beyond those stated in the contract will not be
inferred, a plaintiff adequately states an implied covenant claim by
alleging conduct that subverts the contract’s purpose without violating
its express terms.” (Internal quotation marks omitted.)); Seashore
Performing Arts Ctr., Inc. v. Town of Old Orchard Beach, 676 A.2d 482,
484 (Me. 1996) (“Even an integrated contract, such as the purchase and
sale agreement [here], may include an unwritten implied term.”). 5
This principle is related to the implied duty of good faith and fair
dealing, which inheres in all contracts and cannot be disclaimed through
an integration clause or otherwise. See Fogel v. Trs. of Iowa Coll., 446
N.W.2d 451, 456 (Iowa 1989) (noting that the duty is “recognized in all
contracts”); Restatement (Second) of Contracts § 205, at 99 (1981)
(“Every contract imposes upon each party a duty of good faith and fair
5We said in Fashion Fabrics that “an implied covenant cannot be found when the
contract is fully integrated.” 266 N.W.2d at 28. We later quoted this statement in East
Broadway Corp. v. Taco Bell Corp., 542 N.W.2d 816, 819 (Iowa 1996). We believe that
as a categorical statement, this language may be too broad and inconsistent with the
overall approach taken by the Second Restatement of Contracts. When a contract is
integrated, terms may not be added to the contract, whether express or through a
process of implication. See Restatement (Second) of Contracts § 212, at 125 (1981).
However, even when a contract is integrated, its express terms may carry necessary
implications, e.g., things that must be implied so a party does not lose the negotiated
benefit of the express term. And even when a contract is integrated, a court may have
to sort through and reconcile express terms that are seemingly inconsistent in order to
determine the parties’ ultimate rights. Those are matters of interpretation that form the
present dispute.
In Fashion Fabrics, the sublessee’s case for an implied covenant was weaker.
The lease called for the sublessor to receive the greater of a flat rent or a percentage of
the sublessee’s gross sales. 266 N.W.2d at 24. The sublessee sought to imply a
covenant by the sublessor to continue operating its adjacent business. Id. at 26. In
that situation, one could not say that the sublessor’s staying in business was necessary
to give meaning to a provision in the sublease. The sublessee could operate its own
business and make sales regardless. Hence, although we ultimately implied the
covenant requested by the sublessee, we reasoned it made a difference whether the
contract was integrated or not. Id. at 28–29. Here, the implied right to show the
property is necessary to give effect to an express term authorizing sale. Additionally, in
Fashion Fabrics there were no seemingly inconsistent provisions to reconcile.
14
dealing in its performance and its enforcement.”); see also Nw., Inc. v.
Ginsberg, 572 U.S. __, __ & n.2 134 S. Ct. 1422, 1432 & n.2, 188 L. Ed.
2d 538, 550 & n.2 (2014) (identifying ten jurisdictions that preclude a
party from waiving the obligations of good faith and fair dealing). “ ‘The
underlying principle is that there is an implied covenant that neither
party will do anything which will have the effect of destroying or injuring
the right of the other party to receive the fruits of the contract.’ ” Am.
Tower, L.P. v. Local TV Iowa, L.L.C., 809 N.W.2d 546, 550 (Iowa Ct. App.
2011) (quoting 13 Richard A. Lord, Williston on Contracts § 38.15, at 437
(4th ed. 2000)).
The Second Restatement of Contracts provides a helpful
illustration: If A, the owner of a shopping center, were to lease part of the
premises to B with the exclusive right to conduct a supermarket, it would
be a breach of the implied duty of good faith and fair dealing for A to
acquire the adjoining land and lease it to C to run a competing
supermarket. Restatement (Second) of Contracts § 205, illus. 2, at 101.
Although leasing the adjoining land to C would not literally violate the
express terms of A’s lease with B, it would nevertheless constitute a
breach of contract by implication for violating the obligation of good faith
and fair dealing. See id. The point is: The express right to operate the
only supermarket on the premises carries with it the implied right not to
have the landlord go into competition next door.
The implied covenant of good faith and fair dealing, however, “does
not give rise to new substantive terms that do not otherwise exist in the
contract.” Bagelmann v. First Nat’l Bank, 823 N.W.2d 18, 34 (Iowa 2012)
(internal quotation marks omitted). For example, in Bagelmann, we
declined to find a breach of the implied good-faith-and-fair-dealing
obligation when the mortgagee did not promptly provide the mortgagors
15
with updated and more accurate flood zone information determinations.
Id. at 22. The mortgage contained no promise the mortgagee would
provide notification or otherwise guarantee the property’s flood hazard
status and so we determined “any allegation of bad faith here lacks a
contract term to which it can be attached.” Id. at 34.
The present case is analogous to the circumstances described
above in the Second Restatement of Contracts, and is distinguishable
from Bagelmann. As in the Restatement example, the implied right in
the present case follows logically from certain express terms of the
agreement—i.e., the landlord’s right to sell or mortgage the property.
And unlike in Bagelmann, the contract here contains an express term
(the right to sell) to which the implied obligation (the right to show the
property) can be attached. It would “destroy[] or injur[e] the right of [Alta
Vista] to receive the fruits of the contract” if we were to decline to find an
implied right to show the premises to prospective buyers. See Am.
Tower, 809 N.W.2d at 550.
Other courts have agreed that the right to sell property implicitly
includes the right to show it to prospective purchasers. See, e.g.,
Magliocco v. Olson, 762 P.2d 681, 685 (Colo. App. 1987) (holding the
landlord did not trespass when his agent entered the premises for the
purpose of showing them to a potential tenant); Glenn v. Keyes, 154 P.2d
642, 644 (Utah 1944) (stating a landlord has the right to show the
premises to prospective buyers unless the landlord and tenant
specifically agree to limit that right). In a case from the District of
Columbia, a law gave the landlord the express right to sell the property.
Nat’l Metro. Bank of Wash. v. Judge, 37 A.2d 446, 446–47 (D.C. 1944).
The act did not explicitly grant a right to show the premises to
16
prospective buyers, but the court nevertheless held the landlord should
be able to do so:
We think it is beyond dispute that the tenant’s refusal
to permit inspection seriously hampers sale of the
property. . . . No argument is necessary to show that the
great majority of prospective purchasers of improved real
estate will not buy unless they are afforded a thorough
inspection of the premises. . . .
....
Our conclusion is that since the landlord has the right
to sell and, because sale without inspection is impracticable
and perhaps impossible, the right to sell includes the right to
show the premises at reasonable times.
Id. at 447.
More recently, a California court framed a similar issue in terms of
the balancing of tenants’ and landlords’ conflicting interests in rented
property. See Dromy v. Lukovsky, 161 Cal. Rptr. 3d 665, 669 (Ct. App.
2013). It first recognized the importance of the tenant’s right to quiet
enjoyment, but went on to explain that a landlord attempting to sell its
property also enjoyed a right worthy of protection:
[L]andlords have a strong interest in being able to sell their
property if they choose to do so. The law generally favors
free alienability of property. A landlord’s ability to sell his or
her property may be negatively impacted if the landlord
cannot exhibit the property to prospective buyers at
reasonable times.
Id. at 669–70 (citations omitted).
The Uniform Residential Landlord and Tenant Act (URLTA),
adopted in Iowa, also acknowledges the importance of the landlord’s
ability to show property that he or she has the right to sell or finance.
See Iowa Code § 562A.19(1) (2011). It provides, “The tenant shall not
unreasonably withhold consent to the landlord to enter into the dwelling
unit in order to . . . exhibit the dwelling unit to prospective or actual
17
purchasers, mortgagees, [or] tenants . . . .” Id. Although the URLTA only
governs residential leases, its underlying logic is no less applicable in a
commercial context: Where a landlord has the right to sell the premises,
he or she needs to be able to enter the property to show it to prospective
purchasers. Without a clearer directive in the lease to the contrary, we
should not read a commercial lease as denying this access to a landlord
who already possesses the underlying right to sell or mortgage the
property.
In addition, courts have recognized a landlord’s right to show
property to prospective tenants as well as prospective buyers. See, e.g.,
Eight W. Thirtieth St. Corp. v. Zelart Drug Co., 107 N.Y.S.2d 324, 324
(Sup. Ct. 1951) (permitting a landlord to exhibit commercial property
where a statute gave the landlord the right to seek a prospective tenant).
The Illinois Appellate Court held that a landlord had the
reasonable right to show the premises to prospective tenants upon
receiving notice that the current tenant was terminating his tenancy.
Gronek v. Neuman, 201 N.E.2d 617, 618 (Ill. App. Ct. 1964). Because the
lease apparently did not grant the landlord the right to re-let or sell the
property at any time as does the lease here, the Gronek court limited the
landlord’s right to show the property to the period after the tenant gave
notice of his intent to vacate. See id. The court concluded the right to
exhibit the property to potential tenants during this time was implicit in
the right to re-let the premises. See id. As the court put it,
We feel that the month’s notice the law requires would be a
meaningless protection, in terms of the lessor, if it did not
carry with it the right to reasonably exhibit the premises
durin[g] that period. Were this not the case, the landlord
would suffer a month’s loss in rental since no one would rent
the property without the right to first examine the premises.
Id. The same principle applies in the present case.
18
For the foregoing reasons, we hold the lease gives Alta Vista the
right to access the premises temporarily at reasonable times to show the
property to prospective buyers. 6 Because we have reached this
conclusion without considering extrinsic evidence and the only available
extrinsic evidence further supports Alta Vista’s interpretation, we can
interpret the lease as a matter of law even though it is ambiguous. See
Pillsbury Co., 752 N.W.2d at 435 (holding interpretation is a matter of law
for the court when it does not depend on extrinsic evidence); Restatement
(Second) of Contracts § 212, at 125 (indicating interpretation of an
integrated agreement is a question of law unless it “depends on the
credibility of extrinsic evidence or on a choice among reasonable
inferences to be drawn from extrinsic evidence”). Accordingly, we reverse
the district court’s judgment and remand the case with instructions to
grant summary judgment in favor of Alta Vista. The decision of the court
of appeals is vacated.
6We emphasize that access must be on reasonable terms so as not to interfere
with Mauer’s rights of possession. The D.C. Municipal Court of Appeals recognized this
principle when it stated, “The right of the landlord to show the premises must, of
course, be exercised reasonably and in good faith and cannot be used to harass the
tenant or unreasonably interfere with his enjoyment of possession.” Nat’l Metro. Bank
of Wash., 37 A.2d at 447. The Gronek court stated that the landlord showing the
property to prospective tenants did not breach the tenant’s right to enjoy the property
when it was done at the tenant’s convenience. 201 N.E.2d at 618. Iowa’s URLTA
requires the landlord to give “at least twenty-four hours’ notice . . . and enter only at
reasonable times.” Iowa Code § 562A.19(3).
We agree that Alta Vista’s right to show the property to prospective purchasers
should be exercised reasonably and with minimal interference with Mauer’s rights of
possession and enjoyment of the property. In particular, because Mauer is a health
care provider, the parties should work together to ensure that any showing of the
property complies with the privacy provisions of the Health Insurance Portability and
Accountability Act of 1996 (“HIPAA”). Pub. L. No. 104-191, 110 Stat. 1936 (1996)
(codified as amended in scattered sections of 42 U.S.C.).
19
IV. Conclusion.
For the foregoing reasons, we reverse the summary judgment
entered in favor of defendant Mauer Vision Center, PC and remand for
the district court to enter summary judgment in favor of plaintiff Alta
Vista Properties, LLC.
DECISION OF COURT OF APPEALS VACATED; DISTRICT
COURT JUDGMENT REVERSED AND CASE REMANDED WITH
INSTRUCTIONS.
All justices concur, except Appel, J., who takes no part.