Baker Car and Truck Rental, Inc. v. The City of Little Rock

BAKER CAR AND TRUCK RENTAL, INC.; Arelco,
Inc., d/b/a National Car Rental; and Carco
Rentals, Inc. v. The CITY OF LITTLE ROCK,
Arkansas, acting by and through the Little
Rock Municipal Airport Commission

95-1128                                            ___ S.W.2d ___

                    Supreme Court of Arkansas
                 Opinion delivered July 15, 1996


1.   Landlord & tenant -- perpetual renewal -- right not conferred
     unless language is so plain as to admit no doubt of purpose --
     leases provided for no automatic term extensions. -- A lease
     provision will not be construed as conferring a right to a
     perpetual renewal unless the language is so plain as to admit
     of no doubt of the purpose to provide for perpetual rule;
     here, the plain wording of a 1971 lease entered into between
     appellant-lessee and appellee-lessor provided for no automatic
     term extensions.

2.   Contracts -- chancellor correctly found that lease was free of
     ambiguity and did not automatically extend termination date. -
     - Noting that, under the plain language of its 1971 lease,
     appellant could have negotiated or filed suit in an effort to
     enforce its rights under the most-favored-nations clause but
     simply failed to do so, the supreme court held that the
     chancellor was correct in her findings that the 1971 lease was
     free of ambiguity, that extrinsic evidence was irrelevant, and
     that, when construing the entire agreement, the most-favored-
     nations clause in appellant's lease did not automatically
     extend the termination date to coincide with the termination
     date of another car-rental business's lease.

3.   Courts -- speculation and abstract questions of law --
     premature and advisory to render decision. -- Courts do not
     sit for the purpose of determining speculation and abstract
     questions of law or laying down rules for the future conduct
     of individuals in their business and social relations; 
     because the issue presented by appellant concerning appellee's
     proposed new lease depended on a state of facts that was
     future, contingent, or uncertain, the supreme court agreed
     with the chancellor that it would have been premature and
     advisory to render a decision on the issue.


     Appeal from Pulaski Chancery Court; Annabelle C. Imber,
Chancellor; affirmed.
     Friday, Eldredge & Clark, by:  Harry A. Light, for appellant
Baker Car and Truck Rental, Inc.
     Stark, Dininger & Smith, by: William K. Byrum; and Davidson,
Horne & Hollingsworth, by: Garland W. Binns, for appellant Arelco,
Inc., d/b/a National Car Rental.
     Hardin, Dawson & Terry, by: Robert M. Honea, for appellant
Carco Rentals, Inc.
     Kaplan, Brewer, & Maxey, P.A., by: Philip E. Kaplan and JoAnn
C. Maxey, for appellee.

     Tom Glaze, Justice.
     *ADVREP*SC6*



BAKER CAR AND TRUCK RENTAL,
INC.; ARELCO, INC., D/B/A
NATIONAL CAR RENTAL, AND CARCO
RENTALS, INC.,
                    APPELLANTS,

V.

THE CITY OF LITTLE ROCK,
ARKANSAS, ACTING BY AND THROUGH
THE LITTLE ROCK MUNICIPAL
AIRPORT COMMISSION,
                    APPELLEE.



95-1128

Opinion Delivered:  7-15-96

APPEAL FROM THE CHANCERY COURT
OF PULASKI COUNTY, ARKANSAS,
NO. 95-2419; HONORABLE
ANNABELLE C. IMBER, CHANCELLOR 





AFFIRMED



                  TOM GLAZE, Associate Justice

     This litigation arises out of leases entered into between the
Little Rock Municipal Airport Commission and Avis, Hertz, and
National car-rental businesses having concessions at the Little
Rock Airport.  These three car-rental businesses first entered into
identical leases in 1971, and each had a ten-year rental term with
an additional ten-year option, ending in 1991.  In 1973, Hertz and
National obtained a second option to renew for a five-year period,
extending their lease terms to 1996.  All of these and later leases
entered into between the Commission and car-rental businesses
contained a clause referred to as a "most-favored-nations (MFN)
clause."   What interpretation and effect this clause should be
given is the focus of this litigation.  The clause reads as
follows:
          That the concession granted by this agreement is not
     exclusive and lessor [Commission] shall have the right to
     deal with and perfect arrangements with any other
     individual company or corporation for engaging in like
     activity at the Airport; provided, however, no other
     concession for auto rental operation shall be granted on
     more favorable terms and conditions than granted to the
     concessionaires [car-rental lessees] herein.  (Emphasis
     added.)
     Avis, a franchisee of Baker Car and Truck Rental, Inc.
(Baker), never invoked the MFN clause in its 1971 lease in an
attempt to extend its 1971 lease to comport with the extended five-
year term in the Hertz and National supplemental leases. 
Significantly, the Baker, Hertz, and National leases all contained
concessionaire fees based upon a rate of $ .03 "per deplaning
airline passenger" for the first 30,000 passengers per month and
$2.75 for all deplaning passengers over 30,000.
     What led to this legal dispute was the Commission's 1986
concessionaire lease with Budget Rent-A-Car.  This lease gave
Budget a ten-year term with two five-year renewal options,
extending Budget's concession rights to 2006.  Budget's lease
contained the MFN clause and other terms and provisions in the
above-mentioned, prior car-rental leases, including the
concessionaire fee rate based upon deplaning airline passengers. 
However, by the time Baker's 1971 lease expired in 1991, the
Commission was reconsidering its car-rental concessionaire fees and
how they should be computed.  It proposed basing the
concessionaire's fee upon the "percentage of the concessionaire's
gross receipts" rather than upon the "number of deplaning
passengers."  This new formula or gross-receipts percentage rate
concededly represents an increase in costs to the appellants' car-
rental businesses by establishing a higher fee rate than that
required under the Commission's deplaning-passenger formula.  As a
consequence, Baker rejected the Commission's new formula rate in
the proposed new lease.  Instead, Baker submitted that, under the
MFN clause of its 1971 lease, its existing lease terms and
conditions (including the "deplaning-passenger formula rate") had
been automatically extended to 2006 when the Commission executed
its twenty-year lease with Budget in 1986.
     The Commission agreed to extend Baker's lease to 1996 to
coincide with Hertz's and National's 1973 amended leases, but Baker
rejected such an extension agreement because Baker believed its
lease was automatically extended to the 2006 date provided in
Budget's lease.  After Baker rejected the Commission's proposed
extension agreement, the Commission approved a new concession
agreement providing that concession fees be based upon a percentage
of gross receipts.  It then informed Baker, Hertz, National, and
Budget that, if they did not execute the Airport's new lease
agreement when their existing agreements terminated, their rental
space would be put up for bid.  About nine months later, the
Commission notified Baker that its tenancy would be terminated.  
     Baker filed suit in chancery court, seeking declaratory
judgment and specific performance of the MFN clause and requesting
its 1971 lease terms be extended to the 2006 termination date
provided in Budget's lease.  It also asked the chancery court to
declare the new proposed "percentage of gross receipts" formula an
illegal exaction.  Hertz and National intervened, reasserting
Baker's claims.  The parties filed motions for summary judgment,
but the chancellor granted the Commission's, thereby dismissing
Baker's and its co-plaintiffs' complaint with prejudice.
     On appeal, Baker, Hertz, and National (hereafter collectively
referred to as Baker) question the chancellor's finding that the
parties' lease agreements, particularly the MFN clause, are
unambiguous, and as a matter of law, reflect the parties never
intended the car-rental leases to be automatically extended by a
competing company's separate and later lease.  
     The chancellor relied heavily on the case of Eveleth Taconite
Co. v. Minnesota Power & Light Co., 221 N.W. 157 (Minn. 1974),
where the Minnesota Supreme Court was faced with a similar issue. 
There, Eveleth Taconite Company entered into two contracts that
called for the Minnesota Power & Light Company to provide all
necessary electric power to Eveleth's plant and mine.  Both
companies settled on a three-year contract for providing power to
Eveleth's plant, and a five-year contract for providing power to
its mine.  The contracts contained a MFN clause which provided as
follows:
          Company [defendant Minnesota Power] agrees that, if
     at any time during the term of this agreement it has in
     effect an agreement which gives or grants to any other
     customer, similarly engaged in the taconite industry and
     who receives the same class and type of electric service
     as Eveleth Taconite Company, more favorable treatment for
     the purchase of said electric service or otherwise gives
     or grants to any such customer more favorable price,
     terms or conditions, with respect to said other
     customer's purchase of said electric service, Company
     shall notify Eveleth Taconite Company in writing with
     respect to said more favorable treatment, price, terms or
     conditions and said Eveleth Taconite Company, at its
     election, may request Company to substitute for this
     agreement such more favorable agreement in its entirety
     or on an equivalent basis to amend this agreement to give
     effect to such substitution.
Subsequent to the signing of Eveleth's contracts, Minnesota Power
executed contracts with other taconite producers, and the terms and
conditions of those contracts were the same as Eveleth's except
they were for a period of ten years, and being later in time
contained different termination dates.  When the time came for
cancellation of Eveleth's contracts, Eveleth insisted the MFN
clause in its contracts entitled it to the same termination date as
that contained in the longest contract in which Minnesota Power had
entered with other taconite producers.  Without this requested
extension of its term of contract, Eveleth was required to pay a
higher rate for electricity than that paid by the other competing
companies.  The Minnesota Supreme Court rejected Eveleth's
contention and gave the following reasoning:
          In our judgment, there is little doubt that the
     parties intended that the most-favored-nations clause
     would protect plaintiff [Eveleth] from being placed in a
     noncompetitive position by provisions in its contracts
     with defendant [Minnesota Power], including the price of
     its electricity, which were less advantageous than
     provisions its competitors might be granted by defendant
     at a later time during the agreed-upon span of
     plaintiff's contracts.  We do not believe that the period
     of duration of the contract was intended to be included
     in the phrase "terms or conditions" because to do so
     would create a situation in which the contract could be
     indefinitely extended at plaintiff's election if
     defendant continued to enter contracts with other
     taconite companies.  In other words, these contracts
     would be perpetual if defendant entered other agreements
     with taconite producers because plaintiff, if it so
     chose, could continually assume the longer term of those
     contracts.  That result appears inconsistent with the
     intent of the parties, particularly in light of the
     evidence concerning the pre-contract negotiations in
     which plaintiff successfully resisted defendant's
     preference for a 10-year contract.  In addition, the fact
     that the most-favored-nations clause uses the two
     separate phrases, "term" and "terms or conditions," in
     different parts of the clause and in different contexts,
     gives further evidence that the parties intended those
     words to have different meanings.  (Emphasis added.)
     Like the holding in the Eveleth case, the chancellor here
simply determined that, when construing the MFN clause in Baker's
and the Commission's 1971 lease agreement, the parties never
intended the length of their agreement would be extended.  In fact,
the 1971 lease contained another provision separate from the MFN
clause that established (1) a ten-year term commencing with August
24, 1971, and (2) a renewable period of ten years upon the same
terms and conditions.  No language in either the length of term
provision or the MFN clause of the 1971 lease specifically provided
for an automatic extension of Baker's lease term for any reason. 
To accept Baker's argument that its lease should be "automatically
extended" requires one to rewrite the parties' agreement, which we
refuse to do.  Also, if we were to approve Baker's "automatic
extension" theory, these car-rental leases would be perpetual,
since Baker would continually assume the longer lease term given
any existing or new competitor.  Our court of appeals has held a
lease provision will not be construed as conferring a right to a
perpetual renewal unless the language is so plain as to admit of no
doubt of the purpose to provide for perpetual rule.  Pults v. City
of Springdale, 23 Ark. App. 182, 745 S.W.2d 144 (1988).  That
holding makes sense, is applicable here and negates Baker's theory
because the plain wording of the 1971 lease provides for no
automatic term extensions.
     Baker suggests its 1971 lease is ambiguous, and the chancellor
erred in not finding so.  Baker points to parole evidence it
offered to show the Commission had long manifested an intention to
treat car-rental concessionaires equally and to have uniform
commencement and termination dates for all such concessionaires. 
Again, uniform termination dates were never mentioned in the
Baker/Commission lease, nor was there any language providing for
automatic term extensions for any reason.  
     In fact, a fair reading of the MFN clause of the
Baker/Commission 1971 lease reflects merely that the Commission
could not give concessions, containing more favorable terms and
conditions, to other car-rental operations.  Under this provision,
Baker had every right to enforce its contractual rights when it
received disparate treatment, but it never did so until after its
lease expired.  Having delayed such action, Baker now argues its
1971 lease should be construed to mean it had been automatically
extended when Budget's 1986 lease was executed, thus making Baker's
expiration date to be 2006, rather than the 1991 date actually
provided in Baker's lease.  
     In sum, Baker, under the plain language of its 1971 lease,
could have negotiated or filed suit in an effort to enforce its
rights under the MFN clause, but it simply failed to do so.  The
chancellor was correct in her holdings -- the 1971 lease was free
of ambiguity, extrinsic evidence was irrelevant, and when
construing the entire agreement, the MFN clause in Baker's lease
did not automatically extend the termination date to coincide with
the termination date of the Budget lease.
     Finally, we consider Baker's argument that, aside from the
trial court's ruling regarding the MFN clause issue, the trial
court erred in refusing to reach Baker's other argument that the
commission's proposed new lease constituted an illegal exaction
because it contained an unlawful new rental rate based upon each
concessionaire's gross receipts.  The chancellor reasoned that,
because Baker continued to operate under a year-to-year agreement
and had not, as yet, executed the Commission's proposed new lease
agreement containing the asserted unlawful rental rate, it would be
merely advisory on the chancellor's part to decide the rental rate
issue.  We agree.  Suffice it to say, courts do not sit for the
purpose of determining speculation and abstract questions of law or
laying down rules for the future conduct of individuals in their
business and social relations.  Micklish v. Grand Lodge of the
Loyal Star, 162 Ark. 71, 25 S.W. 353 (1924); see also Andres v.
First Ark. Development Finance Corp., 230 Ark. 294, 324 S.W.2d 97
(1959).  Because this issue presented by Baker depends on a state
of facts which is future, contingent or uncertain, we agree with
the chancellor that it would be premature and advisory to render a
decision at this time.
     Special Justice James A. Ross, Jr., joins this opinion.
     Special Chief Justice Josephine L. Hart, Newbern and Brown,
JJ., dissent. 
     Jesson, C.J., and Dudley, J., not participating.July 15, 1996   *ADVREP*SC6-A*

                                    95-1128
                                    Opinion delivered:
BAKER CAR AND TRUCK 
RENTAL, et al. 

               Appellants

          v. 

LITTLE ROCK MUNICIPAL
AIRPORT COMMISSION

               Appellee             Dissenting Opinion



                     David Newbern, Justice.


     The words of a contract are to be taken and understood in
their plain meaning.  First Nat. Bank of Crossett v. Griffin, 310
Ark. 164, 832 S.W.2d 816 (1992), cert. denied, 507 U.S. 919 
(1993), appeal after remand, 318 Ark. 848, 888 S.W.2d 306 (1994);
Farm Bureau Mut. Ins. Co. of Arkansas, Inc. v. Milburn, 269 Ark.
384, 601 S.W.2d 841 (1980).  To hold that the term (duration) of a
contract is not one of its terms and conditions raises legal
sophistry to a new level.     
     The evidence before the Chancellor included J. Dan Baker's
affidavit and the deposition of Harry Don Denton, assistant manager
of the airport.  Mr. Baker stated his intention was that the
duration of the 1971 concession agreement was to be one of the
terms and conditions subject to the "most-favored-nation clause." 
Mr. Denton stated that, when the car-rental concession agreements
were entered in 1971, all were of the same duration.  At one point
of his deposition, as abstracted, Mr. Denton also said:

          My concern was generated as a result of the words in the
     contract with really little understanding of the concept of
     the most favored nation clause.  There were two principal
     concerns: one, the actual reading of the sentence.  The words
     in the contract implied to me that terms and conditions meant
     what it said.

His other principal concern was the other facilities contracts at
the airport which had similar terms.  He said the "[i]ntention of
the 7/94 agreement was to have all the concessionaires sign new
agreement[s] to eliminate the controversy over varying maturities."
     The Airport Commission has entered an agreement with Budget
with rental rate terms more favorable to Budget than those it now
wishes to impose on the other concessionaires.  The Budget lease
was apparently entered without consideration of the fact that its
duration exceeded the durations of the leases to the other
concessionaires and might well violate the provision prohibiting
the Airport Commission from granting to Budget terms and conditions
more favorable than those granted to Baker and the others.  
     In Eveleth Taconite Co. v. Minnesota Power & Light Co., 221 N.W.2d 157 (1974), the Minnesota Supreme Court rejected the
invitation to define the meaning of "terms or conditions" in the
context of whether it includes "term" or duration of the contract
in all fact situations.  The "most favored nation clause" in that
contract provided, "if at any time during the term of this
agreement it [the electric company] has in effect an agreement
which gives or grants to any other customer ... more favorable
treatment ... or otherwise  gives or grants to any such customer
more favorable price, terms or conditions ..." Eveleth would be
entitled to obtain the same terms [emphasis by the Court].   
Explaining its decision to differentiate  the two references to
"term" and "terms and conditions" in the case before it, the Court
said:

     In our judgment, there is little doubt that the parties
     intended that the most-favored-nations clause would protect
     plaintiff from being placed in a noncompetitive position by
     provisions in its contracts with defendant, including the
     price of its electricity, which were less advantageous than
     provisions its competitors might be granted by defendant at a
     later time during the agreed-upon span of plaintiff's
     contracts.  We do not believe that the period of duration of
     the contract was intended to be included in the phrase "terms
     or conditions" because to do so would create a situation in
     which the contract could be indefinitely extended at
     plaintiff's election if defendant continued to enter contracts
     with other taconite companies.  In other words, these
     contracts would be perpetual if defendant entered other
     agreements with taconite producers because plaintiff, if it so
     chose, could continually assume the longer term of those
     contracts.  That result appears inconsistent with the intent
     of the parties, particularly in light of the evidence
     concerning the pre-contract negotiations in which plaintiff
     successfully resisted defendant's preference for a 10-year
     contract.  In addition, the fact that the most-favored-nations
     clause uses the two separate phrases, "term" and "terms or
     conditions," in different parts of the clause and in different
     contexts, gives further evidence that the parties intended
     those words to have different meanings."


     To begin, the article of the contract before us containing the
"most-favored-nation clause," Article I.C.3., does not have in it
both "term" and "terms and conditions."  Their appearance together
in Article V having to do with the duration of the agreement is
virtually irrelevant to the "most-favored-nation clause."  This
difference robs the Eveleth case of much of its precedential value
for this case.  In addition, we have here no negotiating history of
either party seeking leases of longer duration in 1971.  To be
noted carefully is the Minnesota Supreme Court's recognition that
the lease in question would be perpetuated only to the extent that
other leases were entered with longer terms.  
     The fear of "perpetual" agreements is ill-founded.  There is
nothing perpetual about the Budget lease.  Honoring the "most-
favored-nation clause" will not extend the Baker lease beyond the
term of the Budget lease.  As long as the Airport Commission
remembers not to enter any other leases with durations past 2006,
the leases of the other concessionaires will not endure beyond that
point.
     The Airport Commission has made a mistake and has placed
itself in a position of having to violate its agreement with its
concessionaires in order to institute concessionaire rental rates
more favorable to it.  While it may, perhaps, be able to extricate
itself from that position through negotiation with the
concessionaires, it should not be allowed to do so by tortured
interpretation of plain contract language.
     I respectfully dissent.
     Brown, J., and Special Justice Josephine L. Hart, join.