Thunderstik Lodge, Inc. v. Reuer

2000 SD 84, 613 N.W.2d 44, 2000 S.D. LEXIS 89, 2000 WL 854341
CourtSouth Dakota Supreme Court
DecidedJune 28, 2000
Docket20966
StatusPublished
Cited by5 cases

This text of 2000 SD 84 (Thunderstik Lodge, Inc. v. Reuer) is published on Counsel Stack Legal Research, covering South Dakota Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Thunderstik Lodge, Inc. v. Reuer, 2000 SD 84, 613 N.W.2d 44, 2000 S.D. LEXIS 89, 2000 WL 854341 (S.D. 2000).

Opinions

KONENKAMP, Justice.

[¶ 1.] This case presents the question whether a land lease agreement violated our statutory prohibition against agricultural leases of longer than twenty years. Thunderstik Lodge, Inc. leased agricultural land from the Reuers for hunting purposes, under an agreement providing for an initial ten-year lease, with two ten-year renewal options. Because the provisions in the lease agreement were severable, we affirm the circuit court’s ruling that although the second ten-year option was invalid, the rest of the agreement remains intact.

Facts

[¶ 2.] In February 1987, the principals of Thunderstik Lodge, Inc. placed an advertisement seeking hunting land in the Chamberlain newspaper. The Reuers (Alvin and Elva Reuer and their son, LeRoy) responded. Following considerable negotiations, with both sides represented by attorneys, a lease agreement between Thunderstik and the Reuers was signed on May 6,1988.

, [¶ 3.] The lease contains two provisions significant to this appeal. The first provision establishes the time frames the lease is in effect, providing for an initial ten year period, followed by two options to renew for an additional ten years each:

The term of this lease shall run from March 1, 1988 to February 29, 1998 (original term), both dates inclusive. The Lessor and Lessee agree that this lease may be extended for two (2) additional ten (10) year terms, the first extension term to run from March 1, 1998 to February 29, 2008, the second extension term to run from March 1, 2008 to February 29, 2018, all upon the same terms and conditions set forth in this lease, except that the annual rent for the premises shall be increased to Thirty-three Thousand Dollars ($33,000.00) for the first extension term and Thirty-six Thousand Dollars ($36,000.00) for the second extension term.

The other significant provision is the savings clause:

If any portion of this lease is held to be invalid or unenforceable, the remainder of this lease shall not be affected thereby and such remainder shall be valid and enforced to the fullest extent permitted by law.

At the same time the lease was executed, Thunderstik signed a purchase agreement, buying five acres of land from the Reuers for $1,500. Thunderstik Lodge, a “first class hunting lodge,” was constructed on this acreage.

[¶ 4.] The relationship between the parties began to deteriorate in 1996. See Thunderstik Lodge, Inc. v. Reuer, 1998 SD 110, 585 N.W.2d 819 (Thunderstik I)1 Le-Roy was fired from his position as a guide for the lodge, and the Reuers accused Thunderstik of illegal hunting practices on [46]*46the leased land.2 N.W.2d at 820-21. CR 00 cn £ lO

[¶ 5.] The controversy now before us arose from the Reuers’ claim that the provisions of the contract create a thirty-year lease, void under South Dakota law. In a declaratory action, the circuit court ruled that the second of the two ten-year options was invalid, but severable, leaving the remainder of the lease intact and enforceable. The Reuers now appeal, contending (1) severance of the contract was improper; and (2) SDCL 43-32-2 mandates voiding the entire lease. Contract and statutory interpretation present questions of law reviewable de novo. State Farm Mut. Auto. Ins. Co. v. Vostad, 520 N.W.2d 273, 275 (S.D.1994); Farm Credit Serv. v. First State Bank, 1998 SD 13, ¶ 6, 575 N.W.2d 250, 251.

Analysis and Decision

1. Severance of Contract

[¶ 6.] The trial court found that the second ten-year lease option was an agreement separate from both the original lease term and the first ten-year option now in effect. It also found that the second ten-year option could be severed from the rest of the lease without voiding the remaining agreement. The Reuers assert that the lease violates SDCL 43-32-2, and therefore it cannot be severed. Citing Hedges v. Dixon County, 150 U.S. 182, 192, 14 S.Ct. 71, 74, 37 L.Ed. 1044 (1893), they argue that a void instrument cannot be reformed. We believe, however, that the proper approach is to consider first whether the agreement’s terms can be severed and then move to the question of whether the lease is invalid under the statute. 1st American Systems, Inc. v. Rezatto, 311 N.W.2d 51, 56 (S.D.1981) (“so long as an illegal covenant is divisible, the remaining legal covenants are enforceable.”) (citations omitted).

[¶ 7.] Under South Dakota law, certain contracts are divisible: “Where a contract has several distinct objects, one or more of which are lawful and one or more of which are unlawful in whole or in part, the contract is void as to the latter and valid as to the rest.” SDCL 53-5-4. In Commercial Trust and Sav. Bank v. Christensen, 535 N.W.2d 853 (S.D.1995), we set forth the requirements of a severa-ble agreement: “(1) the parties’ performances must be separable into corresponding pairs of part performances and (2) the parts of each pair must be regarded as agreed equivalents.” Id. at 857 (citing E. Allen Farnsworth, Contracts, § 5.8, at 382 (2d ed 1990); Restatement (Second) of Contracts § 183 (1979)). Additionally, “the agreement must not be an integrated scheme to contravene public policy,” and “the party seeking enforcement must not have engaged in serious misconduct.” Id. at 857 n. 2. A court may divide a contract into “corresponding pairs of part performances,” and then enforce only those parts which do not “materially advance the improper purpose” of the agreement. Farnsworth, supra, § 5.8, at 381-82. See Russell Miller Milling Co. v. McLean, 48 S.D. 198, 203 N.W. 498, 499 (1925) (illegal penalty imposed under parties’ agreement was separable from rest of contract and did not render entire contract void).

[¶ 8.] In Christensen, the parties contracted to lease agricultural land. 535 N.W.2d at 855. At the time, SDCL 43-32-2 prohibited leases of agricultural land for periods longer than twenty years, just as it currently does. Id. at 856. The lease spanned ten years and included an option to buy the property, exercisable by the tenant before the lease expired. Id. at 855. When the lease had been in effect for seven years, the parties made another agreement (“Addendum”) restating the original lease terms, and giving the tenants the option to extend the original lease [47]*47for an additional twenty-year period. This “Addendum” also contained the option to buy the property, stating that it could be exercised any time before the expiration of the additional twenty years. This Court concluded that there was no distinct and separate consideration to support both the option to buy and the “Addendum.” Id.

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Bluebook (online)
2000 SD 84, 613 N.W.2d 44, 2000 S.D. LEXIS 89, 2000 WL 854341, Counsel Stack Legal Research, https://law.counselstack.com/opinion/thunderstik-lodge-inc-v-reuer-sd-2000.