Buffalo Ridge Corp. v. Lamar Advertising of South Dakota, Inc.

#25604-rev & rem-JKK
2011 S.D. 4IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
* * * *
BUFFALO RIDGE CORPORATION, Plaintiff and Appellant,
v.
LAMAR ADVERTISING OF
SOUTH DAKOTA, INC., Defendant and Appellee.
* * * *
APPEAL FROM THE CIRCUIT COURT OF
THE SECOND JUDICIAL CIRCUIT
MINNEHAHA COUNTY, SOUTH DAKOTA
* * * *
HONORABLE STUART L. TIEDE
Judge
* * * *
DANIEL K. BRENDTRO of
Zimmer Duncan & Cole, LLP Attorneys for plaintiff
Sioux Falls, South Dakota and appellant.
JOHN K. NOONEY
AARON T. GALLOWAY of
Nooney, Solay & Van Norman, LLP Attorneys for defendant
Rapid City, South Dakota and appellee.
* * * *
CONSIDERED ON BRIEFS
ON JANUARY 10, 2011
OPINION FILED 01/26/11
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KONENKAMP, Justice
[¶1.] In this dispute over billboard leases, we reverse and remand for
further proceedings.
Background
[¶2.] In 2001, Flynn Advertising contracted with Buffalo Ridge Corporation
to lease certain real property along Interstate 90, near Sioux Falls, South Dakota.
Flynn would construct several billboards on the leased property. The parties
executed four written lease agreements, encompassing five billboard sites. The
agreements identified the specific mile markers where the billboards were to be
located. Each lease had a three-year term, with an automatic renewal for an
additional three years, unless Buffalo Ridge gave notice of termination in the final
month of the lease. The rental rates were $250 per sign, per month, paid quarterly.
Each lease had the following provision: “[i]n the event that the lease is not renewed
at a mutually agreed on term and price, the Lessor [Buffalo Ridge] shall, at [its]
option, have the right to purchase from the Lessee [Flynn, or its successors], at the
current replacement value, all materials which are located on the structure and
owned by the Lessee.”
[¶3.] Flynn later assigned its interest in the leases to Lamar Outdoor
Advertising of South Dakota, Inc. In 2006, Buffalo Ridge began terminating its
leases with Lamar. One lease was set to expire on September 1, 2006, two on
November 1, 2006, and one on February 1, 2007. Buffalo Ridge informed Lamar
that if it wished to continue leasing the property, the new rental rate would be $750
per month for each lease, on a month-to-month basis, with interest at 1.5% per
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month for late payments. Lamar declined the new rental terms, and negotiations
for different terms were unsuccessful.
[¶4.] On November 1, 2006, a Lamar employee, Doug Rumpca, tried to
remove one or more of the billboard structures from Buffalo Ridge’s property. Brad
Songstad, the president of Buffalo Ridge, told Rumpca not to take the billboard
structures down. Songstad reminded Rumpca that Buffalo Ridge had a purchase
option under the lease agreements. Songstad also proposed different lease terms:
$650 per month for each billboard site. 1 Again Lamar declined. Despite Lamar’s
most recent rejection of Buffalo Ridge’s new lease terms, it continued to negotiate
with Buffalo Ridge. Lamar continued to collect revenue from its billboard
advertising, while paying Buffalo Ridge $250 per month on each of the leases.
Buffalo Ridge did not cash any of the checks.
[¶5.] On June 20, 2007, Buffalo Ridge served a notice to quit on Lamar and
then brought suit a week later for (1) a writ of eviction against Lamar, (2) an order
enjoining Lamar from removing any of the materials or structures, (3) an order
allowing Buffalo Ridge to exercise its purchase option under the leases, and (4) an
award of “all past due rent, lost profits, damages, late fees, and interest in an
amount to be determined at the time of trial.” Lamar answered claiming that the
1. There are two other billboard sites leased to Lamar by Buffalo Ridge. Those
billboards are not at issue in this case because they automatically renewed
(July 1, 2006) before Buffalo Ridge indicated its intent to change the lease
terms. Songstad’s proposal to Rumpca for $650 per month for all billboards
included the two billboards not part of this case.
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leases were still valid and enforceable and moved to dismiss Buffalo Ridge’s
complaint.
[¶6.] Following a court trial in November 2007, the circuit court issued its
oral findings and conclusions.2 It found that Lamar “is the owner of everything
that was used to erect each of those billboards except the material located on the
east side but subject to the option right of the lessor to purchase certain materials.”
It concluded that although Buffalo Ridge did not expressly terminate the leases, it
gave notice to Lamar that the rental terms were going to change. Negotiations
never resulted in a “meeting of the minds or an agreement as to those terms and
conditions and particularly the amount of the rent.” The court recognized that the
parties were in limbo: “Lamar was unwilling to pay the rent demanded by the
landlord. The landlord was unwilling to accept the rent offered by the tenant and
the landlord wouldn’t permit the tenant to remove.” Because the parties could not
reach an agreement, the court ruled that Buffalo Ridge was entitled to have its land
back and granted Lamar an opportunity to remove the billboard structures, subject
to Buffalo Ridge’s option to purchase them. The court allowed “a period of thirty
days within which [Buffalo Ridge], if it’s going to exercise its option, to indicate that
it intends to exercise it[.]” If, after thirty days, Buffalo Ridge failed to exercise its
option, the court gave “an additional thirty days to Lamar to then remove all of the
property that belongs to it[.]”
2. The transcript of this trial is not in the record.
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[¶7.] In the course of the court’s oral ruling, the parties and court also
discussed when the court’s decision would take effect. It was agreed that the court
would issue a judgment of eviction, but delay signing it. The delay would allow
settlement negotiations on the value of the replacement cost of the billboard
structures if Buffalo Ridge decided to exercise its option to purchase. At the
conclusion of the hearing, it was decided that the thirty/sixty day time frame would
start the day the order was signed.
[¶8.] From November 28, 2007 until May 15, 2008, Buffalo Ridge and Lamar
continued negotiations, which proved unsuccessful. On May 15, 2008, Buffalo Ridge
tendered to Lamar what it considered the replacement value of the billboard
structures. As part of its tender, it gave Lamar the uncashed rent checks Lamar
had sent Buffalo Ridge, amounting to $35,250.00, along with a Buffalo Ridge
corporate check for $2,667.17, all totaling $37,917.17. Lamar did not accept the
tender.
[¶9.] On July 16, 2008, Buffalo Ridge executed the court’s November 28,
2007 judgment for delivery of possession. A court trial was held on October 5, 2009,
to determine the “current replacement value” of the billboard materials and what
damages Buffalo Ridge may be entitled to. At trial, the parties stipulated that
Buffalo Ridge exercised its option to purchase on December 27, 2007, which
stipulation was accepted by the court. 3 At the conclusion of the trial, the court
3. After an off-the-record discussion about the effective date of the stipulation,
the court stated, “Mr. Nooney [counsel for Lamar] has admitted and
stipulated to the effective date of the exercise of the options; is that what you
are telling me?” Mr. Nooney: “Yes, Your Honor, that’s correct.” The court:
(continued . . .)
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directed Buffalo Ridge and Lamar to address the damages issue in their proposed
findings and conclusions.
[¶10.] On February 3, 2010, the court issued findings of fact and conclusions
of law. Contrary to the parties’ stipulation, the court found that Buffalo Ridge
exercised its option to purchase on November 1, 2006. It also found that after
November 1, 2006, Buffalo Ridge and Lamar “continued intermittent
negotiations[.]” During the negotiation period, Lamar continued to pay Buffalo
Ridge $250 per month into 2009 and Buffalo Ridge refused to cash or negotiate the
rent checks. The court acknowledged that, on November 28, 2007, it entered oral
findings and conclusions on Buffalo Ridge’s action for eviction, an injunction, and
declaratory relief, and gave “Buffalo Ridge thirty days to exercise the option to
purchase all the materials located on the billboard structures[.]” It declared that
“Buffalo Ridge had first informed Lamar of the intention of Buffalo Ridge to exercise
its option to purchase the materials on the structures on or about November 1,
2006[.]”
[¶11.] According to the court, as of November 1, 2006 “Buffalo Ridge had the
exclusive possession and control of the billboard structures and was free to do with
them what it pleased subject only to its obligation to pay replacement value for
certain materials on the billboard structures.” Therefore, Lamar’s continued receipt
of income on its use of these billboards was, in the court’s words, “a fortuitous
__________________
(. . . continued)
“And that was contained in my earlier findings and conclusions.” Mr.
Nooney: “Yes, in the earlier Judgment entered by this [c]ourt.”
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circumstance for Lamar arising solely from the neglect or failure of Buffalo Ridge”
to act.
[¶12.] On the issue of the replacement value, the court found that “[t]he
parties did attempt to negotiate the replacement value in the period between
December 2007 and the tender by Buffalo Ridge on May 15, 2008, but failed to
reach an agreement.” The court ruled that the current replacement value for the
billboard structures was $37,917.17, due and owing by Buffalo Ridge to Lamar. The
court awarded Lamar prejudgment interest at the statutory rate of 10% beginning
after May 15, 2008. It further found that the attempted tender by Buffalo Ridge on
May 15, 2008 was “conditional.” Finally, it held that “Buffalo Ridge shall recover no
damages from Lamar.”
[¶13.] Buffalo Ridge submitted written objections to the court’s findings and
conclusions. It argued that the court’s ruling that the option was exercised on
November 1, 2006 was not supported by the evidence and was contrary to the
parties’ stipulated date at trial, a stipulation the court accepted. Buffalo Ridge
further asserted that the court failed to set off or give partial satisfaction to Buffalo
Ridge for Lamar’s uncashed rent checks, paid after the expiration of the leases. It
then provided to the court its requested damages: $24,750 representing uncashed
rent checks from the expiration of the leases until May 15, 2008; $14,250
representing uncashed rent checks from May 15, 2008 to 2009; and $19,500 for
payments made by Lamar with the uncashed rent checks for billboards not part of
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this lawsuit. 4 Lastly, Buffalo Ridge challenged the court’s award of prejudgment
interest. The court overruled Buffalo Ridge’s objections and refused its request for
damages.
[¶14.] On appeal, Buffalo Ridge advances multiple issues, restated as follows:
the court erred when it (1) held that Buffalo Ridge exercised its option to purchase
on November 1, 2006; (2) failed to find that Lamar was a willful holdover tenant
under SDCL 21-3-8; (3) held that Buffalo Ridge’s tender on May 15, 2008 was
conditional; and (4) failed to award Buffalo Ridge damages or restitution for
Lamar’s use of the billboards for three years. 5
Analysis and Decision
[¶15.] Buffalo Ridge first argues that the court erred when it held that it
exercised its option to purchase on November 1, 2006. Not only did the parties
stipulate that the option was exercised on December 27, 2007, but the court
accepted the stipulation. 6 Moreover, the court, on November 28, 2007, more than
4. Lamar sent Buffalo Ridge $250 per month on the two billboards not part of
this suit. Buffalo Ridge did not cash or accept the payments because Lamar
included the payments within the checks for the expired leases.
5. Standard of Review: We review a circuit court’s findings of fact for clear error
and conclusions of law de novo. Hofeldt v. Mehling, 2003 S.D. 25, ¶ 9, 658
N.W.2d 783, 786 (citations omitted).
6. Some courts have held that an option to purchase under a lease agreement
expires upon expiration of the lease. See, e.g., Mr. Sign Studios, Inc. v.
Miguel, 877 So. 2d 47, 50 (Fla. Ct. App. 2004); Synergy Gas Corp. v. H.M.
Orsburn & Son, Inc., 689 S.W.2d 594, 596 (Ark. Ct. App. 1985). Therefore,
Buffalo Ridge’s options to purchase under the leases arguably expired when
each lease expired: September 1, 2006, November 1, 2006, and February 1,
2007. The parties, however, do not bring up this issue and we need not
address it.
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one year past November 1, 2006, specifically gave Buffalo Ridge thirty days to
exercise its option. While Lamar concedes the parties stipulated that the option
was exercised on December 27, 2007, it maintains that the court was entitled to
change its mind after the October 2009 trial, even though it accepted the
stipulation. Second, while Lamar acknowledges that on November 28, 2007 the
court gave Buffalo Ridge thirty days to exercise its option, the court’s ultimate
judgment for delivery and possession, issued on July 16, 2008, contemplated that
Buffalo Ridge may have already exercised that right. Thus, Lamar maintains that
the court’s November 1, 2006 date was not erroneous.
[¶16.] Why the court declared the option exercised on November 1, 2006 is
unclear. There is no evidence indicating exactly when Buffalo Ridge gave Lamar
notice of its intent to exercise its option to purchase. But the parties disposed of
this question by stipulating that Buffalo Ridge exercised its option on December 27,
2007. “It is well-established that parties, by stipulation, may bind themselves on all
matters except those affecting jurisdiction and prerogatives of the court.” Cobbs v.
Allied Chem. Corp., 661 A.2d 1375, 1377 (Pa. Super. Ct. 1995); see also Gerlach v.
State, 2008 S.D. 25, ¶ 11, 74 N.W.2d 662, 667 (quoting the above language from
Cobbs). That the option was exercised on December 27, 2007, rather than
November 1, 2006 coincides, not only with the parties’ stipulation, but with the
court’s oral findings and conclusions from November 28, 2007. Because, on
November 28, 2007, the court gave Buffalo Ridge thirty days to exercise its option,
there was no way for Buffalo Ridge to exercise it any earlier than November 28,
2007. Moreover, on November 1, 2006, one lease was still valid and enforceable, not
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due to expire until February 1, 2007. Therefore, the option for that lease could not,
as a matter of law, have been exercised on November 1, 2006. Finally, it is
undisputed that on November 1, 2006, and for a considerable time thereafter, the
parties were negotiating new lease terms, not the “current replacement value” owed
by Buffalo Ridge after it exercised its option. Because there is no support for the
November 1, 2006 date, the court erred when it entered findings reflecting that the
option was exercised on any other date than December 27, 2007.
[¶17.] Buffalo Ridge next argues that the court erred when it failed to declare
Lamar a holdover tenant under SDCL 21-3-8. Buffalo Ridge claims that Lamar’s
continued occupation of the billboards after the leases expired was willful and
entitles Buffalo Ridge to double damages. Indeed, Lamar continued to occupy the
leased billboards under the expired lease agreements. Mere occupation, however,
does not constitute “willfully holding over real property” under SDCL 21-3-8. A
claim for willfully holding over requires a “notice to quit . . . duly given, and demand
of possession made[.]” Id. Here, after the leases expired Buffalo Ridge and Lamar
negotiated new lease terms in contemplation that new leases would be executed.
With this period of negotiation, Buffalo Ridge did not give its notice to quit until
June 20, 2007. Additionally, there is no evidence that Buffalo Ridge made a
demand for possession. Rather, it exercised its option to purchase the billboard
materials. SDCL 21-3-8 not being satisfied, the court did not err when it declined to
find Lamar a holdover tenant under any of the expired leases.
[¶18.] Buffalo Ridge next argues that the court erred when it held that its
May 15, 2008 tender to Lamar was conditional. It maintains that the tender of the
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uncashed rent checks previously issued by Lamar ($35,250.00) and a Buffalo Ridge
corporate check for $2,667.17 was unconditional, which would stop the running of
interest on its obligation to Lamar. See SDCL 20-5-18.
[¶19.] Only when a tender is unconditional will interest toll on an obligation.
Id. Yet, for tender to be unconditional, it must be “‘the actual production of a sum
not less than the amount due on a specific debt or obligation.’” Berbos v. Krage,
2008 S.D. 68, ¶ 22, 754 N.W.2d 432, 438 (quoting Adrian v. McKinnie, 2004 S.D. 84,
¶ 10, 684 N.W.2d 91, 96). Here, at the time Buffalo Ridge tendered its payment, the
parties were disputing the current replacement value of the billboard materials,
which meant that Buffalo Ridge’s tender was conditioned on Lamar accepting
Buffalo Ridge’s valuation. See Dougherty v. Beckman, 347 N.W.2d 587, 591 (S.D.
1984) (tender must be for full obligation). Buffalo Ridge’s tender was also
conditioned on Lamar accepting its own previously issued checks as payment, as the
tender included over $35,000 in uncashed rent checks issued by Lamar to Buffalo
Ridge. The court did not err when it ruled Buffalo Ridge’s tender conditional.
[¶20.] Buffalo Ridge lastly argues that the court erred when it failed to award
any damages for Lamar’s continued occupation of the billboards after the leases
expired. In particular, Buffalo Ridge claims it is entitled to contract damages at a
rate of $750 per month, per lease after expiration, reflecting the lease terms offered
to Lamar if Lamar continued to lease the billboard sites. Buffalo Ridge
alternatively requests restitution for unjust enrichment: it conferred a benefit on
Lamar (use of the billboards); Lamar was aware of the benefit (Lamar knew Buffalo
Ridge was not cashing the rent checks); and it is inequitable to allow Lamar to
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retain the benefit of using the billboards without paying Buffalo Ridge. See Hofeldt
v. Mehling, 2003 S.D. 25, ¶ 16, 658 N.W.2d 783, 788 (citation omitted). At the very
least, Buffalo Ridge contends that the court should have set off the value of the
uncashed rent checks issued by Lamar to Buffalo Ridge against Buffalo Ridge’s
obligation to pay Lamar the current replacement value of the billboards.
[¶21.] In response, Lamar maintains that simply because it continued to use
the billboard sites does not mean it owes Buffalo Ridge $750 per month, per lease.
It avers that Buffalo Ridge prevented Lamar from vacating the leased property, and
therefore, cannot now claim that it was damaged because Lamar failed to vacate.
Lamar also claims that Buffalo Ridge is not entitled to restitution because it acted
with unclean hands: it “created the situation in which it found itself” by not
allowing Lamar to enter the property and remove the billboard structures.
[¶22.] The issue of what damages Buffalo Ridge is entitled to, if any, is not
developed in the record. It is clear that the purpose of the October 2009 trial was to
address the issue of the current replacement value of the billboards and Buffalo
Ridge’s damages. However, it was not until the conclusion of the trial that the issue
of damages was specifically addressed. The court directed the parties to present the
damages issue by way of proposed findings of fact and conclusions of law. Lamar
proposed that “Buffalo Ridge shall recover no damages from Lamar.” As support, it
argued that Lamar’s receipt of advertising income from the billboards for almost
three years was a “fortuitous circumstance for Lamar arising solely from the neglect
or failure of Buffalo Ridge to either permit Lamar to enter and remove the billboard
materials, or to notify such advertisers that Buffalo Ridge now owned and was in
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control of the billboard structures and any leasing or advertising arrangements
needed to be made with Buffalo Ridge; or to remove the advertising faces from the
billboards once Buffalo Ridge had possession and control of the billboards upon
expiration of the leases.” Buffalo Ridge objected to these findings and conclusions
and set forth what damages it requested and for what reasons. The court refused
Buffalo Ridge’s proposed findings and overruled its objections.
[¶23.] From our review of the record, the court erred when it failed to award
Buffalo Ridge money damages or restitution for Lamar’s continued occupation of the
billboard sites after the leases expired. It is undisputed that Lamar continued to
use and occupy the billboard sites after the leases expired. Indeed, it paid Buffalo
Ridge $250 per month, per lease, but Buffalo Ridge did not cash the payments
because of the pending litigation. That the court erred when it failed to award
damages occurred in part through its erroneous declaration that Buffalo Ridge
exercised its option to purchase on November 1, 2006. Many of the court’s findings
incorporate and rely on the November 1, 2006 date. We remand for a proper
determination of damages or restitution.
[¶24.] Reversed and remanded.
[¶25.] GILBERTSON, Chief Justice, and ZINTER, MEIERHENRY, and
SEVERSON, Justices, concur.
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