William Lee Pitz and Lynn S. Pitz v. United States Cellular Operating Company of Dubuque

• Court: Court of Appeals of Iowa
• Decided: November 2, 2022
• Docket: 22-0038
• Status: Published

Opinion

IN THE COURT OF APPEALS OF IOWA

No. 22-0038 Filed November 2, 2022

WILLIAM LEE PITZ and LYNN S. PITZ, Plaintiffs-Appellants/Cross-Appellees,

vs.

UNITED STATES CELLULAR OPERATING COMPANY OF DUBUQUE, Defendant-Appellee/Cross-Appellant. ________________________________________________________________

Appeal from the Iowa District Court for Dubuque County, Michael J.

Shubatt, Judge.

William and Lynn Pitz appeal the ruling on their petition for declaratory

judgment while United States Cellular Operating Company of Dubuque cross-

appeals the denial of its request for attorney fees. AFFIRMED ON BOTH

APPEALS.

Todd J. Locher of Locher & Davis PLC, Farley, for appellants.

Bret A. Dublinske and Brandon R. Underwood of Fredrikson & Byron, P.A.,

Des Moines, for appellee.

Heard by Schumacher, P.J., Chicchelly, J., and Gamble, S.J.*

*Senior judge assigned by order pursuant to Iowa Code section 602.9206

(2022). 2

GAMBLE, Senior Judge.

This case involves an option to renew a lease on land containing a cellular

telecommunication tower. William and Lynn Pitz (the Pitzes) appeal the ruling on

their petition for declaratory judgment requesting, among other things, a

declaration that United States Cellular Operating Company of Dubuque (US

Cellular) did not exercise a valid option to renew the lease. US Cellular cross-

appeals the denial of its request for attorney fees. We affirm on appeal and cross-

appeal.

I. Background Facts and Prior Proceedings

On November 14, 1988, William’s parents, Robert and Dorothy Pitz, entered

into a lease, leasing a portion of their farmland to US Cellular. US Cellular was to

build a telecommunications tower on the property. The lease lasted thirty years

(terminating on November 13, 2018) and included an option to renew for one

additional term of thirty years. If US Cellular wanted to exercise the option, the

lease required it to give written notice at least sixty days prior to expiration of the

original lease term.

On April 14, 2009, Robert and Dorothy transferred their farmland, including

the portion leased to US Cellular, to the Pitzes. No one informed US Cellular of

the property transfer.

Assuming Robert and Dorothy still owned the farmland, US Cellular sent a

letter to them on September 1, 2017, notifying them it was exercising its option to

renew the lease. Of note, the letter stated Dubuque Cellular Telephone, L.P.

(DCT) was exercising the option contained in the original lease, and the letter was

on the US Cellular letterhead and included supporting documents identifying US 3

Cellular. William received the letter from one of his parents. However, William did

nothing in response to the letter.

Once US Cellular discovered the Pitzes purchased the farmland from

Robert and Dorothy, it sent a letter dated September 11, 2018, to William informing

him it exercised its option to renew by way of the September 2017 letter and

needed him to supply it with a recorded copy of the deed, a W-9 form, a direct

deposit form, and contact information for the new owners. The letter stated once

US Cellular had the required information, it could make the rental payment. Once

again, William did nothing in response to the letter.

Because US Cellular never received a W-9 form or direct deposit

information, it sent the Pitzes a rent check for the full amount less tax withholdings.

In response, an attorney for the Pitzes informed US Cellular that the Pitzes

believed US Cellular did not properly exercise its option to renew and returned the

rent check. US Cellular responded by claiming the option was properly exercised

and issued the Pitzes a 1099-MISC tax form documenting the rental income from

US Cellular as miscellaneous income.

The Pitzes then initiated this action seeking declaratory judgment that US

Cellular failed to validly exercise its option to renew the lease because it did not

pay the full amount of the rent due at the time it exercised the option; it incorrectly

provided notice to Robert and Dorothy Pitz; and DCT was not the proper party to

exercise the option. The Pitzes also sought declaratory judgment that the lease

expired on November 13, 2018; that US Cellular be ordered to remove all

structures from their land; to establish fair rent for the period from November 13, 4

2018, to the date of removal; that US Cellular issue an updated 1099-MISC form;

and that they are entitled to court costs, attorney fees, and interest.

Following a bench trial, the district court determined US Cellular properly

exercised its option to renew the lease because its written notice was not defective

and payment of the rent due was not a condition precedent to the renewal option.

The court denied “[a]ll associated claims for relief” and dismissed the action. After

the court issued its ruling, US Cellular filed a motion for costs ($1300.27) and

attorney fees ($38,303.00). The court determined US Cellular was required to

“specifically plead that it was seeking attorney fees” and that “attorney fees are not

recoverable even if [US Cellular] was not required to specifically plead the relief.”

The Pitzes appeal, and US Cellular cross-appeals.

II. Standard of Review

“Because a lease is a contract, we apply ordinary contract principles to

determine its meaning and legal effect.” Alta Vista Props., LLC v. Mauer Vision

Ctr., PC, 855 N.W.2d 722, 727 (Iowa 2014). “[O]ur review of the district court’s

contract interpretation and construction is at law.” Homeland Energy Sols., LLC v.

Retterath, 938 N.W.2d 664, 683 (Iowa 2020). “The district court’s factual findings

have the effect of a special verdict and are binding on us if supported by substantial

evidence.” Metro. Prop. & Cas. Ins. Co. v. Auto-Owners Mut. Ins. Co., 924 N.W.2d

833, 839 (Iowa 2019).

As to our review of the district court’s denial of attorney fees, we review for

an abuse of discretion. Boyle v. Alum-Line, Inc., 773 N.W.2d 829, 832 (Iowa 2009).

“Reversal is warranted only when the court rests its discretionary ruling on grounds 5

that are clearly unreasonable or untenable.” Id. (quoting Gabelmann v. NFO, Inc.,

606 N.W.2d 339, 342 (Iowa 2000)).

III. Discussion

A. Direct Appeal

We begin with the Pitzes’ claims on appeal. First, they argue US Cellular

failed to timely renew the lease because it did not provide the rent payment with

the notice of renewal. Because US Cellular did not pay the rent at the time of the

renewal notice, if payment of the rent amounted to a condition precedent to the

renewal option, then US Cellular’s renewal notice did not transform the option into

a contract. SDG Macerich Props., L.P. v. Stanek Inc., 648 N.W.2d 581, 586 (Iowa

2002) (“Any conditions precedent to the option provision must be fulfilled according

to the agreement for the option to become a contract between the parties.”).

At its heart, this case presents a simple contract dispute. So we look to the

terms of the lease to determine if US Cellular was required to pay rent in tandem

with its renewal notice to trigger the renewal option. See Manatt v. Manatt, No. 21-

0319, 2022 WL 1232226, at *6 (Iowa Ct. App. Apr. 27, 2022). Section 3.2 of the

lease provided:

Option to Renew. Lessee shall have the option to renew this Lease Agreement for one (1) additional term of thirty (30) years, at the rental rate set forth in Article Four and upon all the other terms and conditions hereof. Lessee may exercise such option by giving written notice to Lessor at least sixty (60) days before the expiration of the initial term of this Lease Agreement.

(Emphasis added.) Section 4.2 provided:

Option Term Rent. Lessee shall pay to Lessor as full consideration for use of the Leased Premises during the option term, payable in a lump sum in advance at the exercise of the option, the amount of Twenty Thousand Dollars ($20,000.00), adjusted upward 6

by the percentage of increase in the Consumer Price Index (“CPI”) from the Commencement Date to the first day of the last month of the current lease term. For purposes of the Lease Agreement, the “Consumer Price Index” shall mean the Consumer Price Index- Urban Wage Earners and Clerical Workers, U.S. City Average, All Items (1982-1984 equals 100) published by the United States Department of Labor, Bureau of Labor Statistics, for the month preceding the Commencement Date or Adjustment Date (as the case may be). If the amount of the CPI increase is not known at the time the option is exercised, Lessee shall pay Lessor Twenty Thousand Dollars ($20,000.00) at the time of exercise and the balance of the option term rent within thirty (30) days of the Lessor’s notice of calculation. If the CPI shall become unavailable, then a reasonably comparable index of the increase and decrease in United States consumer prices shall be substituted in its place. Notwithstanding the foregoing, the CPI adjustment shall never exceed more than 5% per lease year, cumulatively.

(Emphasis added.)

The Pitzes highlight that we interpret contracts as a whole and in a manner

that gives reasonable, lawful, and effective meaning to each provision of the

contract. Iowa Fuel & Mins., Inc. v. Iowa State Bd. of Regents, 471 N.W.2d 859,

863 (Iowa 1991). US Cellular’s attorney agreed with this proposition at oral

argument. But the parties’ agreement ends there. The Pitzes assert that—when

giving full meaning to the terms of the contract—for US Cellular “to exercise its

option[,] it was required to give the Pitzes notice of its intent to renew in writing on

or before September 14, 2018[,] and ‘pay to Lessor as full consideration for the

use of the Leased Premises during the option term payable in a lump sum in

advance at the exercise of the option.’” (Emphasis added.) US Cellular counters

there is no conjunction between sections 3.2 and 4.2 and highlights the “Option

Term Rent” requirements are contained in a “separate provision, under a different

heading, in a distinct article, on another page” of the lease from the “Option to

Renew” requirements. Cf. Lyon v. Willie, 288 N.W.2d 884, 888–89 (Iowa 1980) 7

(concluding payment was a condition precent to a renewal contract because the

payment provision of the contract was linked to the notice requirement with a

conjunctive “and”). We agree with US Cellular that the lack of conjunctive

language between the sections is telling, and we do not think we are required to

read an implicit conjunction between the sections in order to give full meaning to

the lease.

Ultimately, the district court correctly determined payment of the rent was

not a condition precedent to renewal of the lease. Section 3.2 specifically stated

the option would be exercised “by giving written notice to Lessor at least sixty (60)

days before the expiration of the initial term of this Lease Agreement.” (Emphasis

added.) “It may be that under the terms of a given option the only proper and

binding method of election or acceptance is by the payment or a tender of the

purchase price.” Breen v. Mayne, 118 N.W. 441, 443 (Iowa 1908). But by the

plain language of this particular lease, there is no requirement that US Cellular

also pay the rent at the same time to effectuate the renewal option. Peak v.

Adams, 799 N.W.2d 535, 544 (Iowa 2011) (“The most important evidence of the

parties’ intentions at the time of contracting is the words of the contract.”).

We understand section 4.2 of the contract required the rent to be “payable

in a lump sum in advance at the exercise of the option.” However, this does not

create a condition precedent. Instead, it clarifies the time that the rent payment is

due, i.e., it must be made upon exercise of the option. So it created an obligation

of performance once the option to renew was exercised. It also specified this

contract required a lump sum rental payment instead of the common practice of

monthly installments and that the payment would come at the beginning of the 8

lease as opposed to the end.1 It does not tack on a condition to the renewal terms,

which are contained in an entirely different section of the lease.

Next, the Pitzes argue the renewal was defective because it was exercised

by the wrong party. They complain the renewal notices reference DCT as the party

attempting to exercise the renewal option, not US Cellular. And they point out

article thirteen of the lease required any assignment of US Cellular’s rights under

the contract be made by written assignment and notice be provided to the lessors,

which did not occur here.

But looking at the documents sent, both on September 1, 2017, and

September 11, 2018, it is clear DCT was exercising the renewal option on behalf

of US Cellular. Below are images of some of the paperwork sent.2

1 For example, the Pitzes’ expert witness testified he reviewed similar contracts that included monthly rental terms, and a US Cellular representative also testified that this contract is unique because it requires rent payment in a lump sum as opposed to monthly installments. Peak, 799 N.W.2d at 544 (permitting us to look to extrinsic evidence including the subject matter of the transaction when interpreting the terms of a contract). 2 We have redacted addresses referenced in the documents. 9

These communications also came with return envelopes addressed to U.S.

Cellular. 10

Contrary to the Pitzes’ assertions, this is not an instance of US Cellular

improperly assigning its rights to a third party. Instead, it’s a case of US Cellular

exercising its option to renew through DCT. US Cellular’s representative testified,

“United States Cellular Corporation is the owner of United States Cellular

Operating Company of Dubuque who in town is the Dubuque Cellular, LP.” The

Pitzes understood this. William testified at trial that he made no distinction

between DCT and US Cellular because US Cellular was clearly identified on the

paperwork. And it is clear from the record that US Cellular was intending to

exercise its option to renew—that is all we require. See Figge v. Clark, 174 N.W.2d

432, 436 (Iowa 1970) (“[I]n this jurisdiction anything amounting to an unqualified

manifestation of an optionee’s determination to accept is sufficient.”).

So we conclude US Cellular exercised its option to renew the contract and

there is a valid contract between the parties. Accordingly, the Pitzes’ claims that

they are entitled to fair market value for a holdover period and US Cellular should

issue a new 1099-MISC form are moot.

With respect to their claim for attorney fees, they point to the indemnification

clause as the basis for their claim.3 That provision states:

Lessee shall indemnify and hold harmless Lessor herein from any and all costs, claims, damages and suits arising out of or resulting from or in connection with Lessee’s or Lessee’s employees’, agents’, invitees’, sub-lessees’ or assignees’ occupancy, possession, use or management of the Leased Premises and the License areas of the Real Estate or any portion thereof or the exercise or enjoyment of their rights and breach of their

3 US Cellular argues the Pitzes’ request for attorney fees is not preserved because the court did not explicitly rule on it. But the court did state, “All associated claims for relief are denied.” We think this is minimally sufficient to show the court considered the Pitzes’ request for attorney fees contained in their petition and denied it. See Lamasters v. State, 821 N.W.2d 856, 864 (Iowa 2012). 11

obligations under this Lease Agreement, including reasonable attorneys’ fees. Lessor shall indemnify and hold harmless Lessee herein from any and all costs, claims, damages and suits arising out of or resulting from or in connection with Lessor’s or Lessor’s employees’, agents’, invitees’, sub-lessees’ or assignees’ occupancy, possession, use or management of the Leased Premises and the License areas of the Real Estate or any portion thereof or the exercise or enjoyment of their rights and breach of their obligations under this Lease Agreement, including reasonable attorneys’ fees.

However, that section does not provide for recovery of attorney fees in actions

between the parties. See NevadaCare, Inc. v. Dep’t of Hum. Servs., 783 N.W.2d

459, 471 (Iowa 2010) (“In Iowa, we have held an indemnification clause that uses

the terms ‘indemnify’ and ‘hold harmless’ indicates an intent by the parties to

protect a party from claims made by third parties rather than those brought by a

party to the contract. Therefore, a party to a contract cannot use an indemnity

clause to shift attorney fees between the parties unless the language of the clause

shows an intent to clearly and unambiguously shift the fees.” (internal citation

omitted)).

B. Cross-Appeal

Next, we address US Cellular’s cross-appeal claiming it is entitled to

attorney fees. Because US Cellular did not specifically plead for attorney fees prior

to the court’s ruling, it cannot recover. This court previously explained, “We can

find no reason to separate attorney fees from other kinds of special damages or to

establish separate rules allowing them to be raised after the trial.” Nelson

Cabinets, Inc. v. Peiffer, 542 N.W.2d 570, 573 (Iowa Ct. App. 1995).

Moreover, US Cellular would not be entitled to attorney fees even if it had

specifically pleaded for attorney fees at the proper time. “Generally, attorney fees 12

are recoverable only by statute or under a contract.” NCJC, Inc. v. WMG, L.C.,

960 N.W.2d 58, 62 (Iowa 2021) (citation omitted). US Cellular points to no statute

in support of its request for attorney fees; instead, it points to article nine of the

contract. This provision of the contract is the same indemnification clause we

determined could not provide the Pitzes with attorney fees. Likewise, it does not

provide US Cellular with the ability to recover attorney fees in this instance. See

NevadaCare, 783 N.W.2d at 471.

IV. Conclusion

We find no error of law in the ruling of the district court. Payment of the rent

was not a condition precedent to the renewal option, and US Cellular’s renewal

notice was not defective. So there is a valid contract between the Pitzes and US

Cellular. And the district court did not abuse its discretion in determining neither

party is entitled to attorney fees.

AFFIRMED ON BOTH APPEALS.