THOMAS G. EDGAR and ELIZABETH J. EDGAR, husband and wife, Plaintiffs and Appellees,
BOYD D. MILLS and MERLYN J. MILLS, husband and wife, Defendants and Appellants.
CONSIDERED ON BRIEFS ON FEBRUARY 13, 2017
FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT FAULK
COUNTY, SOUTH DAKOTA THE HONORABLE TONY L. PORTRA Judge
M. RONAYNE THOMAS J. COGLEY Ronayne & Cogley, PC
Aberdeen, South Dakota Attorneys for plaintiffs and
GELLHAUS CHAD LOCKEN of Gellhaus & Gellhaus, PC Aberdeen,
South Dakota Attorneys for defendants and appellants.
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
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.
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.
lease agreement also contained a provision requiring the
Millses' written consent before the Edgars could sublease
the real estate.
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.
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.
undisputed that the Millses never declared the lease
forfeited and that neither party considered the lease
agreement null and void after the late payments.
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 ...