Where the City of Buena Vista, Virginia issued bonds to refinance its debt on a golf course and bond repayment depended on the City making rent payments on the golf course lease, the City’s obligation to pay that rent was not legally enforceable when the lease expressly made rent subject to the City’s annual decision to appropriate funds.
The lease agreement is dispositive on this issue, stating that the City shall pay the rent to the appellant-bank on behalf of the City’s recreational facilities authority. But if the City did not appropriate funds, which it did not, the City had no obligation to make the rent payments. A party cannot be sued for breaching an obligation it never had in the first place. To make this even more clear, the lease provides that the City’s failure to make rent payments when no appropriations are made does not constitute default. Aside from the rent payments from the City, the recreational facilities authority had no independent contractual obligation to make the bond payments.
Contrary to arguments by the bank and its insurer, the City didn’t act arbitrarily and unfairly by failing to appropriate funds when it could afford to do so. The complaint doesn’t allege as much, and in any event the lease’s “subject to appropriation” language is not ambiguous. The bank and its insurer are sophisticated commercial entities engaged in a multi-million dollar municipal finance transaction. They ask us to impose new terms to their deal that save them from the consequences of the express terms of their agreements. The court declines to do so.
The bank and its insurer also can’t recover under equitable theories. The financing documents aren’t unenforceable; the court simply holds that the express terms of the contract make repayment subject to appropriations by the City.
Thus, the complaint fails to allege claims for which relief could be granted.