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Terry Leonhardt and Cindy v. Delbert Leonhardt

October 17, 2012

TERRY LEONHARDT AND CINDY LEONHARDT,
PLAINTIFFS AND APPELLANTS,
v.
DELBERT LEONHARDT,
DEFENDANT AND APPELLEE, AND MATTHEW OSWALD,
INTERVENOR AND APPELLEE.



APPEAL FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT BROWN COUNTY, SOUTH DAKOTA THE HONORABLE JACK R. VON WALD Judge

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

#26208-rev & rem-GAS

CONSIDERED ON BRIEFS

ON AUGUST 27, 2012

[¶1.] Terry and Cindy Leonhardt allege that they entered into an oral lease with Terry's father, Delbert Leonhardt, which was to extend for the lives of Delbert and his wife, Ellen Leonhardt. They claimed the oral lease contained a right of first refusal that Terry could exercise after the death of both Delbert and Ellen. Delbert later entered into a written lease with his grandson, Matthew Oswald. This written lease encompassed some of the farmland Terry and Cindy allege was part of their oral lease with Delbert. Terry and his wife, Cindy, initiated a declaratory judgment action against Delbert, seeking a declaration that the oral lease and right of first refusal were valid. Terry and Cindy also sought specific performance of the oral lease and right of first refusal. Matthew intervened in the lawsuit. Delbert then filed for summary judgment on the ground that the oral lease and right of first refusal were invalid under SDCL 43-32-2, limiting leases for agricultural land to no more than twenty years. Matthew joined the motion. The circuit court granted the motion for summary judgment on the ground that the lease was invalid under the statue of frauds. Terry and Cindy appeal. We reverse and remand for further proceedings.

BACKGROUND

[¶2.] Delbert and Ellen Leonhardt owned approximately one thousand acres of farmland in South Dakota. In 1988, Terry Leonhardt, who is Delbert and Ellen's son, agreed to assist his parents in farming the land. Terry and his wife, Cindy, allege that they entered into a crop sharing arrangement with Delbert in 1989, under the terms of which Terry was responsible for half of the expenses associated with the farming operation. In return, Terry received one-third of the profit from the crop each year.*fn1 Terry and Cindy maintain that this arrangement continued until 1992.

[¶3.] In 1992, Terry and Cindy allege that they reached a new arrangement with Delbert. Under this new arrangement, Terry was responsible for all of the expenses associated with the farming operation. In exchange, Terry received twothirds of the profit from the crop each year. Terry and Cindy also contend that Delbert agreed to grant them a right of first refusal in 1996 or 1997.*fn2 As consideration for the right of first refusal, they allege that Terry took out a life insurance policy on Delbert.

[¶4.] In 2001, Terry and Cindy contend that the parties entered into an oral lease, which superseded the previous crop sharing arrangement. Under this new agreement, Terry and Cindy maintain that they leased Delbert's land "on a cash rent basis."

[¶5.] Delbert and Ellen divorced in 2010. As part of the divorce, Delbert was awarded approximately half of the farmland. Later that year, Delbert entered into a written lease with his grandson, Matthew. This written lease was to extend for three years and encompassed farmland that Terry and Cindy assert was part of their oral lease with Delbert.

[¶6.] Terry and Cindy brought a declaratory judgment action against Delbert, seeking a judgment that the oral lease and right of first refusal were valid. Terry and Cindy also sought specific performance of the oral lease and right of first refusal. Matthew intervened as a defendant in the declaratory judgment action.

[¶7.] Delbert moved for summary judgment. He argued that the oral lease was invalid under SDCL 43-32-2, which provides in relevant part: "No lease or grant of agricultural land for a longer period than twenty years, in which shall be reserved any rent or service of any kind, shall be valid." Matthew joined Delbert's motion for summary judgment.

[ΒΆ8.] During the hearing on Delbert and Matthew's motion for summary judgment, the circuit court inquired as to the applicability of the statute of frauds. Terry and Cindy noted that Delbert and Matthew had not raised the statute of frauds as an issue in their summary judgment motion. Nonetheless, Terry and Cindy argued that the doctrines of promissory estoppel and partial performance precluded Delbert and Matthew from invoking the statute of frauds. The circuit court rejected this argument and granted summary ...


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