Considered On Briefs February 17, 2015.
APPEAL FROM THE CIRCUIT COURT OF THE THIRD JUDICIAL CIRCUIT CODINGTON COUNTY, SOUTH DAKOTA. HONORABLE ROBERT L. TIMM, Judge.
THOMAS F. BURNS of Watertown, South Dakota Attorney for plaintiff and appellee.
EDWARD C. CARPENTER STEPHEN C. HOFFMAN of Costello, Porter, Hill, Heisterkamp, Bushnell & Carpenter, LLP, Rapid City, South Dakota Attorneys for defendant and appellant.
SEVERSON, Justice. GILBERTSON, Chief Justice, and ZINTER, WILBUR, and KERN, Justices, concur.
[¶1] Jermar Properties, LLC brought a quiet title action against Lamar Advertising Co. to determine whether Jermar
held title to real estate free of Lamar's claimed leasehold interest. The circuit court granted judgment in favor of Jermar. Lamar now appeals. We affirm.
[¶2] In 1999, James Stadheim entered into a lease with Flack Signs. The lease gave Flack Signs the right to erect three advertising signs on Stadheim's property, and it provided for a ten-year term, ending in February 2009. Thereafter, it " automatically renew[ed]" on a yearly basis. However, the " total of such extensions [was] not to exceed ten years[,]" and the lessee had the right to terminate the lease " at the end of any such yearly extension period." The lease was never recorded. Flack Signs erected two signs on the property, each approximately thirty-feet tall with sign faces of twelve by forty-eight feet. In 2002, Guy Carlson acquired Stadheim's property, but Stadheim retained the rights to the lease payments until 2009. Also in 2002, Lamar Advertising Co. acquired Flack Signs.
[¶3] Carlson first gave a mortgage on the property to Dacotah Bank in 2005. He gave other mortgages to Dacotah Bank over the years; all were cross-collateralized. In 2006, Lamar built a third sign on the property, similar to those previously erected. In 2009, Carlson, believing the lease had terminated, attempted to negotiate a lease with another company for increased annual rent. At some point he became aware of the yearly extensions and entered into a second lease with Lamar instead. Although the first lease would have automatically continued for ten years if Lamar did not terminate it, the new lease provided a term of fifteen years, and removed a clause which allowed the lease to be terminated if the lessor " erect[ed] a permanent, substantial building thereon, requiring removal of the lessee's sign structures[.]" It also provided that the annual rent would increase beginning in 2011.
[¶4] Eventually Carlson listed the property for sale with Al Engstrom. In 2012, Carlson defaulted on the mortgages to Dacotah Bank and entered into an agreement for non-judicial voluntary foreclosure. Either Engstrom or Dacotah Bank gave Jermar a copy of the 2009 lease. A member of Jermar testified at the court trial that the president of Dacotah Bank represented that the lease would be terminated upon foreclosure. A notice of foreclosure and of a right to redeem was mailed to and received by Lamar. However, Lamar chose not to redeem. Jermar purchased the property from Dacotah Bank. Carlson gave Dacotah Bank a warranty deed and Dacotah Bank gave a quit claim deed to Jermar. Both were recorded on October 19, 2012.
[¶5] After Jermar bought the property and asked Lamar to remove the signs, Lamar produced the 1999 lease and claimed it still had a leasehold interest. In response, Jermar filed a quiet title action alleging that the 2009 lease was a novation of the 1999 lease. The circuit court found that the 2009 lease constituted a novation and granted judgment in favor of Jermar. Lamar appeals asserting that the 2009 lease was not a novation, and therefore they continue to ...