Gibbons Ranches v. Bailey
289 Neb. 949
Neb.2015Background
- Gibbons Ranches (landlord) executed nearly identical 5-year written farm leases (2011–2015) with Circle B Farms and Joel & Jaimee Bailey; leases included a clause calling for an "annual review of rental rates and terms" in January each year.
- Leases specified an annual cash rent for the first year and a stated 5-year term; parties negotiated and agreed a modified rent for 2012, and tenants (including Circle B) paid the modified rates for 2012, though Circle B did not sign a revised lease.
- The parties failed to agree on rental rates for 2013; tenants paid based on the 2012 rates and continued farming the land.
- Gibbons Ranches sued for declaratory relief claiming the leases were unenforceable beyond the years where rent was fixed (arguing the review clause created an unenforceable agreement to agree) and sought entitlement to fair rent for 2013; tenants asserted the written leases controlled.
- The district court held the leases were unambiguous and enforceable through 2015 at the last agreed-upon rent; Gibbons Ranches’ motions for new trial were denied and it appealed.
Issues
| Issue | Plaintiff's Argument (Gibbons Ranches) | Defendant's Argument (Tenants) | Held |
|---|---|---|---|
| Whether the leases were valid/enforceable for the 5-year term when parties failed to fix post-2012 rent | The "annual review" clause left rent to be agreed later, creating an unenforceable agreement to agree, so no binding lease beyond years with fixed rent | The leases unambiguously set a 5-year term with specified rent that continues unless and until parties agree to modify it | The court held rent is an essential term but the leases unambiguously provided a 5-year term; absent a new agreement, the last agreed rent continues for the term |
| Whether rent is an essential term of an express lease requiring its amount to be in writing under the statute of frauds | Rent amount is not necessarily essential; parties can imply reasonable rent | Where a lease contemplates monetary rent, the amount is an essential term that must appear in the writing | Court held that when an express lease contemplates monetary rent, the rent amount is an essential term and an agreement to agree is unenforceable |
| Whether the phrase "annual review of rental rates and terms" is ambiguous | The clause is ambiguous because it does not specify consequences if parties do not reach agreement | "Review" means examination and does not require agreement; clause is unambiguous | Court held "review" is not ambiguous and does not require the parties to reach a new agreement; parol evidence was excluded |
| Whether parol evidence could be used to vary the written leases | Extrinsic testimony should determine parties' intent about the review clause | The written leases are unambiguous; parol evidence is barred | Court held parol evidence was properly excluded because the contracts were unambiguous |
Key Cases Cited
- Folden v. State, 13 Neb. 328, 14 N.W. 412 (1882) (historical discussion that monetary rent is not always characterized as "rent" but context matters)
- Quinn v. Godfather's Investments, 213 Neb. 665, 330 N.W.2d 921 (1983) (lease term "financing" found ambiguous in different factual context)
- T.V. Transmission v. City of Lincoln, 220 Neb. 887, 374 N.W.2d 49 (1985) (adjustment/review clause construed as an agreement to agree; absent agreement, original rent continued for contract term)