United States v. Turley

• Decision Date: 28 December 2017
• Docket Number: No. 16-7090,16-7090
• Citation: 878 F.3d 953
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Richard Elbert TURLEY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

878 F.3d 953

UNITED STATES of America, Plaintiff-Appellee,

v.Richard Elbert TURLEY, Defendant-Appellant.

No. 16-7090

United States Court of Appeals, Tenth Circuit.

FILED December 28, 2017

Ron Wright, Wright, Stout & Wilburn, PLLC, Muskogee, Oklahoma (Reid E. Robison, and Mark D. Spencer, McAfee & Taft, P.C., Oklahoma City, Oklahoma, with him on the briefs), for Defendant-Appellant.

Michelle Windmueller, United States Postal Service Law Department, Washington, D.C. (Douglas A. Horn, Acting United States Attorney, and Robert Gay Guthrie, Assistant United States Attorney, Muskogee, Oklahoma, and Stephan J. Boardman, United States Postal Service Law Department, Washington, D.C., with her on the brief), for Plaintiff-Appellee.

Before LUCERO, BALDOCK, and HARTZ, Circuit Judges.

HARTZ, Circuit Judge.

Richard Turley appeals from a summary judgment granting the United States, acting on behalf of the United States Postal Service, specific performance of an option to purchase real estate from Turley.¹ The purchase option was contained in a lease of the premises that the Postal Service had renewed on several occasions.

Turley makes three arguments against enforcement of the purchase option: (1) the lease had expired when the Postal Service attempted to exercise the purchase option because he had not received notice that the government was exercising its final option to renew the lease; (2) even if the lease was renewed, the Postal Service did not properly exercise the purchase option because it continued to negotiate for a new lease after it purported to exercise the option; and (3) equity precludes enforcement of the purchase option because the Postal Service attempted to use the purchase option as leverage to negotiate a better lease agreement. We are not persuaded. The lease-renewal option was properly exercised when the notice was delivered to the proper address, even though Turley refused to retrieve it. And Turley has presented no legal or equitable doctrine that would forbid a party who exercises (and is bound by) an option to purchase from pursuing an alternative arrangement.

I. BACKGROUND

In 1964 the government entered into a 20-year lease with Turley for property in Henryetta, Oklahoma (the Property) to be used as a post office. The lease provided options to renew for six additional five-year terms and included an option to purchase at the end of each renewal term. Written notice of renewal was due 90 days before the new term began. Notice of the option to purchase was due a year before expiration of the lease term.

Because the last five-year lease term was set to begin on November 15, 2009, notice was due by August 15, 2009. In February 2008 the Postal Service sent its renewal notice by certified mail to Turley at a New York City post office box. The certified mail was returned with a stamped notification stating, "RETURN TO SENDER/UNCLAIMED/UNABLE TO FORWARD." Aplt. App’x Vol. 2 at 331. Although in district court Turley had suggested that the notice had not been sent to the correct address, Postal Service records showed that Turley had cashed lease payments sent to that address both before and after the date of the certified mail. Unsurprisingly, Turley does not dispute on appeal that the certified mail was sent to the correct address. His argument is that the notice was not effective because he did not personally receive it. For the same reason, he says that he was not bound by a notice purportedly sent by the Postal Service by regular mail the following month. His response to a request for admission said that he did not remember receiving a renewal notice.

In any event, the Postal Service continued to occupy the building and pay rent, and Turley continued to provide services required by the lease. Turley claims that he allowed the Postal Service to stay only as a holdover tenant.

During 2013 the Postal Service was considering negotiating a new lease with Turley upon the end of the last renewal term in November 2014, but its internal emails suggest it was also considering the purchase option. The deadline to exercise the option (assuming that the lease had been renewed in 2009) was November 15, 2013. In October 2013, CBRE, a company retained by the Postal Service to negotiate leases on its properties, sent Turley a proposal for a new lease to begin after November 15, 2014. On November 7, 2013, however, the Postal Service sent a letter exercising its option to purchase the Property, and Turley acknowledges that he received it on November 8. This did not stop CBRE from continuing to contact Turley about leasing the property. The parties disagree about whether CBRE was authorized to continue this negotiation. Claiming the Postal Service could not and did not properly exercise the purchase option, Turley refused to participate in two closings to sell the property to the Postal Service, causing the Postal Service to file this suit in the United States District Court for the Eastern District of Oklahoma.

After the parties filed cross motions for summary judgment, the district court granted summary judgment in favor of the Postal Service for specific performance. Turley appealed. We have jurisdiction under 28 U.S.C. § 1291 and affirm the summary judgment.

II DISCUSSION

A. Standard of Review

We review summary judgments de novo, applying the same standards that the district court should apply. See Camuglia v. City of Albuquerque , 448 F.3d 1214, 1218 (10th Cir. 2006). "When reviewing a grant of summary judgment, this court must examine the record to determine whether any genuine issue of material fact pertinent to the ruling remains and, if not, whether the substantive law was correctly applied." APC Operating P'ship v. Mackey , 841 F.2d 1031, 1033 (10th Cir. 1988) ; see Fed. R. Civ. P. 56(a).

B. Applicable Law

"[O]bligations to and rights of the United States under its contracts are governed exclusively by federal law." Boyle v. United Techs. Corp. , 487 U.S. 500, 504, 108 S.Ct. 2510, 101 L.Ed.2d 442 (1988). But federal law may adopt state-law rules. See O'Melveny & Myers v. F.D.I.C. , 512 U.S. 79, 85, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994). Thus, "knowing whether federal law governs ... does not much advance the ball." Id. (internal quotation marks omitted). Indeed, there is a "presumption that state law should be incorporated into federal common law." Kamen v. Kemper Fin. Servs., Inc. , 500 U.S. 90, 98, 111 S.Ct. 1711, 114 L.Ed.2d 152 (1991). "Displacement [of state law] will occur only where ... a significant conflict exists between an identifiable federal policy or interest and the operation of state law or the application of state law would frustrate specific objectives of federal legislation." Boyle , 487 U.S. at 507, 108 S.Ct. 2510 (citations, brackets, and internal quotation marks omitted). We agree with the Ninth Circuit that state law should apply in the present circumstances because "[l]ease contracts for the postal service do not inherently implicate clear and substantial interests of the National Government, which cannot be served consistently with respect for state interests." U.S. Postal Serv. v. Ester , 836 F.3d 1189, 1195 (9th Cir. 2016) (ellipsis and internal quotation marks omitted); cf . Powers v. U.S. Postal Serv ., 671 F.2d 1041, 1045 (7th Cir. 1982) (setting forth reasons to apply state law to decide Postal Service’s rights under a lease).

Because Oklahoma is the state where the Property is located, we conclude that Oklahoma law should govern this dispute. See Denney v. Teel , 688 P.2d 803, 806 (Okla. 1984) ("Disputes concerning interests in real property are properly governed by the law of the state where the land is located."). We determine what that law is in the same manner that we resolve questions of state law under our diversity jurisdiction. See generally Bryan A. Garner et al., The Law of Judicial Precedent 598–616 (2016). We must follow the latest holdings of the state’s highest court. See Wankier v. Crown Equip. Corp. , 353 F.3d 862, 866 (10th Cir. 2003). In the absence of a definitive resolution of the legal issue by the highest court, our task is to predict how that court would rule. See United States v. DeGasso , 369 F.3d 1139, 1145 (10th Cir. 2004). There are various tools at our disposal for making that prediction, including decisions by lower courts of the state. See id. We are bound, however, by precedents of this court construing state law, absent an intervening decision by the state’s highest court or a legislative change. See Wankier , 353 F.3d at 866.

C. 2009 Lease Renewal Option

Turley’s chief argument against the judgment below is that the Postal Service never renewed its lease for the term beginning November 15, 2009, and therefore the purchase option was no longer valid when the Postal Service attempted to exercise it in 2013. He contends that the 2009 lease-renewal option could be effective only if he received notice of exercise of the option, but he never received the certified mail containing the renewal notice. We are not persuaded.

We have a controlling precedent. In APC Operating Partnership , 841 F.2d at 1032–33, a lessee of mineral rights, in exercising its option to renew a lease by tendering the designated sum, mailed the required checks by registered mail, postage paid and return receipt requested, to the lessors at their addresses. See id. at 1033. But the lessors failed to claim the mail and it was returned. See id. Applying Oklahoma law, we held that the exercise of the option was effective. See id. at 1035. "There was no error or fault on the part of the lessee, and payment would have been made but for the failure of the [lessors] to collect their mail, an intervening factor beyond the control of the lessee." Id. at 1036. Although there was no evidence that the lessors intended to avoid receipt of payment, that was "immaterial." Id. ; see id. at 1034 (refusing to "effectively give the lessor the power to revoke the option—a power inconsistent with the very...