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Buffalo Ridge Corporation v. Lamar Advertising of South Dakota

January 26, 2011

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

The opinion of the court was delivered by: Konenkamp, Justice

CONSIDERED ON BRIEFS ON JANUARY 10, 2011

[¶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 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.*fn1 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 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.*fn2 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[.]"

[¶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.*fn3 At the conclusion of the trial, the court 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[.]"

[ΒΆ11.] 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 ...


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