K.C. Air Cargo Services, Inc. v. City of Kansas City
523 S.W.3d 1
| Mo. Ct. App. | 2017Background
- KCACS leased airport land from Kansas City under a 30-year ground lease (commencing Oct. 1, 1987) and built substantial cargo improvements; KCACS subleases space to tenants.
- The lease (First Amendment) contained a renewal clause: “At the end of the Lease Term, Lessee shall be given the opportunity to lease the Premises at the then fair market rental rate or the rental rate which has been offered to the City by another party, whichever is higher.”
- KCACS sued the City in 2013 over property damage; that suit settled and the parties executed a Fourth Amendment in 2015. After settlement KCACS sought confirmation the City would honor the renewal clause; the City declined to commit.
- KCACS filed a declaratory-judgment action seeking construction/enforcement of the renewal clause; the City countered that the clause was a right of first refusal or was void because it would exceed a 50-year charter limit on municipal leases.
- The trial court granted KCACS summary judgment, declaring the clause an unconditional option to renew perpetually (successive 30-year terms) and later awarded KCACS attorneys’ fees based on “special circumstances.”
- The appellate court affirmed in part, reversed in part, and remanded: it held the clause is an option (not a right of first refusal) and does not violate the City Charter as written, but the option is limited to one additional 30-year renewal (not perpetual); the attorneys’ fees award was reversed and remanded for further fact-finding on special circumstances.
Issues
| Issue | Plaintiff's Argument (KCACS) | Defendant's Argument (City) | Held |
|---|---|---|---|
| Whether clause is an option to renew or a right of first refusal | Clause creates an option/"opportunity" to lease at stated rents, compelling City to lease at renewal | Clause is a right of first refusal (City may decide whether to lease; contingent on third-party offer) | Option to renew — language compels renewal right; not a mere right of first refusal |
| Whether the renewal option is valid given municipal authority/50-year charter limit | Option is a valid renewal provision and does not create a >50-year lease because renewals create new leases for new terms | Option would permit successive terms exceeding 50 years and so is void as beyond City power | Valid: renewal construed as creating a new lease term, so it does not by itself violate the 50-year limit |
| Whether the option permits perpetual successive renewals | KCACS argued renewal was available repeatedly (court below found perpetual renewals) | City argued law disfavors perpetuities and clause should not be read to allow perpetual renewals | Not perpetual: renewal construed (as a matter of law) to authorize one additional term only; perpetual renewal not clearly and unequivocally expressed |
| Whether attorneys’ fees were properly awarded under "special circumstances" exception | KCACS sought fees arguing City lacked substantial grounds, interfered with property rights, shifted positions, and had financial motive | City disputed existence of special circumstances and sufficiency of proof | Reversed and remanded: trial court lacked adequate factual record to find special circumstances; factual development required before awarding fees |
Key Cases Cited
- ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371 (Mo. banc 1993) (summary-judgment standard; view record most favorably to nonmovant)
- Anderson v. Parker, 351 S.W.3d 827 (Mo. App. 2011) (distinguishing an option from a right of first refusal)
- Bussen v. Del Commune, 199 S.W.2d 13 (Mo. App. 1947) (renewal v. extension; renewals create a new tenancy)
- Software A.G. of N. Am., Inc. v. City of Columbia, 903 S.W.2d 641 (Mo. App. 1995) (city ordinance limiting contract duration interpreted to prevent evasion by labeling extensions as new contracts)
- Kilbourne v. Forester, 464 S.W.2d 770 (Mo. App. 1970) (courts disfavor perpetuities; perpetual renewal must be unequivocally expressed)
- Smith v. City of St. Louis, 395 S.W.3d 20 (Mo. banc 2013) (attorney-fee awards in declaratory-judgment actions: "costs" may include fees only upon special circumstances)