Deadwood Lodge No. 508, Benev. and Protective Order of Elks of U.S. of America v. Albert

• Decision Date: 26 May 1982
• Docket Number: No. 13537,13537
• Citation: 319 N.W.2d 823
• Parties: DEADWOOD LODGE NO. 508 BENEVOLENT AND PROTECTIVE ORDER OF ELKS OF the UNITED STATES OF AMERICA, a South Dakota Corporation, Plaintiff and Appellee, v. William J. ALBERT, a/k/a W. Alberts, and Wabec, Inc., a South Dakota Corporation, Defendant and Appellant.
• Court: South Dakota Supreme Court

Page 823

319 N.W.2d 823

DEADWOOD LODGE NO. 508 BENEVOLENT AND PROTECTIVE ORDER OF ELKS OF the UNITED STATES OF AMERICA, a South Dakota Corporation, Plaintiff and Appellee, v. William J. ALBERT, a/k/a W. Alberts, and Wabec, Inc., a South Dakota Corporation, Defendant and Appellant.

No. 13537.

Supreme Court of South Dakota.

Argued Feb. 22, 1982.

Decided May 26, 1982.

William L. Severns, Deadwood, for plaintiff and appellee.

Reed C. Richards of Richards & Richards, Deadwood, for defendant and appellant.

HENDERSON, Justice.

ACTION

William J. Albert, a/k/a W. Alberts and WABEC, Inc., (appellant) appeals from a judgment of the trial court which awarded Deadwood Lodge No. 508 Benevolent and Protective Order of Elks (appellee) $1,050.00 stemming from a bench trial over a dispute between the parties concerning the renewal clause of a lease agreement. This judgment also awarded appellant $7,797.17 for the reasonable value of an air conditioner purchased and installed by appellant but which remained on the leased premises after appellant had vacated same. Pursuant to this appeal, appellee filed a notice of review. We affirm.

FACTS

The parties to this appeal entered into a lease agreement whereby appellant would lease from appellee a building previously known as the "Ben Franklin Store" located in Deadwood, South Dakota. This lease was for a period of five years (commencing on May 31, 1975) providing for a $400.00 monthly rental. The main issue on appeal concerns the following provision in the lease (emphasis supplied):

Lessor [appellee] specifically agrees that Lessees [appellant] shall have the option to renew this Lease for an additional Five (5) year period from and after May 31, 1980 upon all the same terms and conditions, except for the rental consideration which the parties agree to negotiate a mutually acceptable monthly rental.

During the course of this lease, appellant made several thousand dollars worth of improvements and renovations to the leased building, which appellant used as a retail store. These improvements consisted of In February of 1980 appellee informed appellant that the rent would be increased to $1,000.00 per month commencing at the expiration of the present lease. This being unacceptable to appellant, negotiations incurred but the parties were unable to reach a mutually acceptable agreement for renewal. The negotiations continued until the latter part of May 1980. A finding of fact was made by the trial court which specifically stated that the parties had negotiated in good faith.

paneling, carpeting, refurbishment of display areas, new air conditioning and shelving.

A notice to quit was served upon appellant by appellee on June 3, 1980. Due to the presence of inventory in the building, however, appellant was not able to vacate until June 30, 1980, six days after appellee filed its complaint praying for $30,000.00 in damages to the property, possession, and $1,600.00 rent for willful holdover. Appellant filed an answer and counterclaim for damages in the amount of $85,000.00 for loss of good will, lost profit, moving expenses, business losses and additional rent incurred plus $21,000.00 in damages for loss of fixtures.

ISSUES

I.

Did the trial court err by ruling that the option to renew provision contained in the lease was unenforceable? We hold that it did not.

II.

Did the trial court err by not entering a judgment by default against appellee due to the failure of appellee to file a reply to appellant's counterclaim? We hold that it did not.

III.

Did the trial court err in its valuation of appellant's air conditioner? We hold that it did not.

IV.

Did the trial court err in not awarding appellee double damages as per SDCL 21-3-8? We hold that it did not.

DECISION

I.

Appellant contends that the trial court erred by holding that the aforementioned option to renew was unenforceable. It is appellant's position that when, as here, the parties cannot agree on the amount of rent for the renewal period, the judiciary should intervene to determine and provide a reasonable amount of rent based upon current market conditions. The rationale of this position is that the parties to the lease intended, at the time the lease was entered into, to use a reasonable figure to effectuate the option to renew and, when the parties are unable to agree, a reasonable figure will be determined by the courts. By providing this figure, argues appellant, the courts will be preventing the lessor from not allowing the lessee to renew the lease by offering him an unreasonable amount (which is refused by the lessee) and then claim that the option to renew cannot be enforced due to vagueness. Appellant does not deny, however, that he is advocating a position adopted by a minority of the judiciary. ¹

In holding that the option to renew clause was unenforceable, the trial court adhered itself to the majority school of thought which, in essence, promulgates the view that it is not a function of the courts to fix the terms of a lease for the contracting parties. ²

This court in Engle v. Heier, 84 S.D. 535, 173 N.W.2d 454 (1970), was confronted with a situation where the parties had allegedly reached an oral agreement to enter into a written lease. In Engle we upheld the trial court's summary judgment that there was no oral agreement for a lease between the parties because there was no showing that the terms of the alleged oral agreement were ever settled and agreed upon. In reaching our decision, we stated:

If it appears that any of the terms of the future lease are left open to be settled by future negotiation between the lessor and lessee " 'there is no complete agreement; the minds of the parties have not fully met; and, until they have, no court will undertake to give effect to those stipulations that have been settled, or to make an agreement for the parties respecting those matters that have been left unsettled.' "

Id. at 537, 173 N.W.2d at 456 (citation omitted).

Here, the lease provides that the parties negotiate "a mutually acceptable monthly rental." The parties, however, could not agree upon a mutually acceptable monthly rental. The trial court expressly found that "the parties negotiated in good faith, but were unable to reach an agreement for renewal." We are not disposed to say that this finding was clearly erroneous. See In re Estate of Hobelsberger, 85 S.D. 282, 181 N.W.2d 455 (1970).

We believe that Engle v. Heier, supra, is dispositive of appellant's contention. Furthermore, an agreement to agree does not fix an enforceable obligation. It is indefinite, vague, and uncertain. An agreement must be sufficiently definite to enable a court to give it an exact meaning. See 1 Williston on Contracts Sec. 37 (3d ed. 1957). Accordingly, we hold that the trial court was not erroneous in ruling that the option to renew contained within the lease was unenforceable and, by so doing, we align ourselves with the majority view.

II.

Secondly, appellant contends that the trial court erroneously denied his motion for a default judgment due to appellee's failure to reply to his counterclaim. Appellant did not move for a default judgment until the day of trial when, upon inspection of the trial court's records, he discovered that appellee had not filed an answer to his counterclaim. It is undisputed that appellee did not file an answer to appellant's counterclaim. See SDCL 15-6-12(a).

The trial court entered the following finding of fact with regard to this issue:

That [appellee] did not reply to [appellant's] counterclaim, but that both parties were aware of where they stood on the issues. That a pretrial conference was held and that depositions were taken. That [appellant] moved for a default judgment on the counterclaim on the morning of the trial, but that [appellant] did not comply with the provisions of SDCL 15-6-55(b). ³

A trial court's findings of fact will not be overturned unless they are clearly erroneous. SDCL 15-6-52(a); In re Estate of Hobelsberger, supra.

Appellant's position is grounded in SDCL 15-6-8(d), which states (emphasis supplied):

Averments in a pleading to which a responsive pleading is required, other than those as to the amount of damage, are admitted when not denied in the responsive pleading. Averments in a pleading to which no responsive pleading is required or permitted shall be taken as denied or avoided.

In accord with SDCL 15-6-8(d), then, appellant's counterclaim for damages was not necessarily admitted due to the failure of appellee to make a responsive pleading.

Moreover, provisions similar to SDCL 15-6-8(d) have been construed in other jurisdictions so as to not, ipso facto, cause every lack of responsive pleading to require a default judgment on the issues raised in the counterclaim. See Verlinden v. Godberson, 238 Iowa 161, 25 N.W.2d 347 (1946) (lack of responsive pleading not fatal since the issues between the parties were held to be sufficiently clear); Dinkel v. Hagedorn, 156 Neb. 419, 56 N.W.2d 464 (1953) (failure to file a reply to an amended answer held not fatal due to both parties treating the affirmative defense as being denied); Pleiman v. Belew, 360 Mo. 219, 227 S.W.2d 733 (1950) (averments in counterclaim held not admitted due to failure of the defendant to timely move for a default judgment).

The causes of action listed in appellant's counterclaim cannot be considered meritorious (even if the averments therein are taken as true) in light of the trial court's ruling that the option to renew was unenforceable. The lease had expired by its own terms. Appellant's claim for damages is founded, essentially, upon wrongful eviction. Our holding on ISSUE I, supra, negates the hypothesis of wrongful eviction. Furthermore, the trial court actually tried matters within the counterclaim such as pegboard, attachment, shelving removal and remodeling expense. Upon consideration of the above authorities, the specific state of the pleadings in this case and the...