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Edgar v. Mills

Supreme Court of South Dakota

March 15, 2017

THOMAS G. EDGAR and ELIZABETH J. EDGAR, husband and wife, Plaintiffs and Appellees,
v.
BOYD D. MILLS and MERLYN J. MILLS, husband and wife, Defendants and Appellants.

          CONSIDERED ON BRIEFS ON FEBRUARY 13, 2017

         APPEAL FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT FAULK COUNTY, SOUTH DAKOTA THE HONORABLE TONY L. PORTRA Judge

          ROBERT M. RONAYNE THOMAS J. COGLEY Ronayne & Cogley, PC Aberdeen, South Dakota Attorneys for plaintiffs and appellees.

          JAY R. GELLHAUS CHAD LOCKEN of Gellhaus & Gellhaus, PC Aberdeen, South Dakota Attorneys for defendants and appellants.

          WILBUR, Justice

         [¶1.] In this breach of contract action, the circuit court found a lease agreement ambiguous and considered parol evidence. The court concluded that the parties intended the lease agreement to be a lease with an option to purchase. The court ordered specific performance, compelling the owners of the real estate to execute a warranty deed in favor of the lessees. The owners appeal. We affirm in part, reverse in part, and remand.

         Background

         [¶2.] In 2003, Thomas and Elizabeth Edgar entered into a written agreement with Boyd and Merlyn Mills concerning land in Faulk County, South Dakota, legally described as the West Half of Section 26, Township 118, Range 71 West of the Fifth Principle Meridian, Faulk County, South Dakota (Section 26). The agreement was titled, "Lease Agreement." The Edgars agreed to pay the Millses $8, 641.20 in rent yearly on January 1st following the previous crop year. The lease agreement was set to terminate on February 28, 2013, and contained an option for the Edgars to renew the lease.

         [¶3.] The lease agreement contained a provision titled, "Right of First Refusal." That provision provided:

It is hereby agreed that should said land become subject to sale after completion of the crop season in the final year of this lease, that in such an event, the Lessee shall have the right of first refusal to buy said property at a price set by making the final lease payment as described above plus the additional sum of Seven Thousand Two Hundred One and no/100 Dollars ($7, 201.00). This first right of refusal shall be only during the term of this lease.

         The lease agreement also contained a provision requiring the Millses' written consent before the Edgars could sublease the real estate.

         [¶4.] Beginning in 2003, the first year of the agreement, the Edgars made a late lease payment. In the following years, the Edgars continued to make late payments and paid less than the full amount owed. The Edgars made no payment for the payment due January 1, 2007. Two provisions in the agreement concerned lease payments. Under a section titled, "Terms of Lease, " the agreement provided in part:

Further, should Lessee fail to tender payment as described above on any of the due dates described above, then within sixty (60) days this lease shall become null, void, and of no force and effect and the Lessor shall be free to obtain another Lessee for the above described real estate.

         In a subsequent section entitled, "Default, " the agreement provided in part:

If any one or more of the following occurs; (1) a rent payment from Lessee to Lessor shall not be paid when due and payable . . . then Lessor may, at Lessor's sole option, declare this lease forfeited and the term of the lease ended and the Lessor may reenter said premises with or without due process of law using such reasonable force as may be necessary to remove all persons or chattels therefrom.

         It is undisputed that the Millses never declared the lease forfeited and that neither party considered the lease agreement null and void after the late payments.

         [¶5.] In 2012, Thomas Edgar contacted Attorney Timothy Bormann to prepare a warranty deed so that the Millses could convey the real estate to the Edgars. Thomas later testified that he contacted Attorney Bormann because he believed that he had an option to purchase the real estate at the conclusion of the lease term. Thomas claimed that the "Right of First Refusal" gave the Edgars an option to purchase the property so long as the Edgars made all their payments under the lease, plus $7, 201. Thomas presented Attorney Bormann a check for approximately $16, 146, representing the amount ...


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